Seeking Sanity in a Process Rife with Inefficiency?
As a commercial real estate professional, you know how important it is to issue payments to your investors. They’ve entrusted you — and in reality, invested in you more than the property — with their capital and are expecting efficient, reliable, and accurate returns. To meet those expectations, you’ll need a payments platform for asset managers.
Why a payments platform? Well, unlike other aspects of the commercial real estate (CRE) industry, innovation when it comes to issuing payments to investors has been on a caterpillar-like pace. ACH transactions and wire transfers are largely the preferred methods for issuing distributions to investors, but even these processes have inefficiencies:
- Reviewing and updating spreadsheets for accuracy
- Verifying calculations based on the deal structure/type
- Potentially navigating more complex waterfall structures
- Preparing multiple files to be used for the ACH transfer
- Investor accounts and payment preferences must be known
- Doing all of the above eats days from your team’s capacity
And of course, there are firms that still prefer to manually cut checks — and deliver them in person. While this can be viewed as a relationship-building approach with investors, which do you think they would prefer more: seeing you once a month/quarter for a check handoff, or knowing that you’re dedicating that time to maximizing revenue (and thus their returns)? It’s ultimately the call of the GP, but our money is on maximizing revenue.
- One-click efficiency: Learn more about the power of automating distributions.
How a Payments Platform for Asset Managers Adds Value
Pay According to Deal Structure and Ownership
How a CRE deal is structured reflects how returns are distributed. For example, in a pro rata structure, each investor receives returns based on his or her percentage of ownership. In a waterfall model, certain criteria and thresholds must be met before profits are distributed. Either way, managing how much investors receive in their distribution requires careful attention and time. Now, multiply that time investment by the number of investors and assets under management. With a payments platform for asset managers, these structures are set up once. Afterward, issuing payments to investors, across all assets and structures, can be done in a matter of clicks.
Reduce the Risk of Human Error
We’ve touched on the difficulty of using manual processes (even the front-end of ACH transactions requires time) to issue distributions and make payments, but one thing your firm cannot afford is mistakes. Dealing with spreadsheets, NACHA files, and other manual processes increases the risk of mistakes significantly. That risk increases as deal structure complexity increases, such as with waterfall structures. As an investor, imagine receiving incorrect returns because an employee in the firm mis-clicked or accidentally hit a different key. Your trust is eroded and will take some time and effort from the GP to regain — not to mention time researching the payment to figure out what went wrong.
Increase Transparency and Simplify Reporting
Closely related to the above is the fact that using a payments platform for asset managers enables greater transparency in conducting transactions with investors. First, distributions and payments can be tracked — creating a record of those transactions over time. Second, such platforms provide reporting capabilities — allowing GPs as well as investors to filter and sort transaction data to understand performance of specific assets, amounts received, certain types of transactions made, and so on. All information is made available in a single location, and investors can self-service to find the information they need without requiring time and effort from your team.
Ready to Find the Right Payment Platform?
While there are a number of tools available for CRE professionals today to manage their assets and the plethora of financial and operational tasks associated with them, only one combines real estate asset management with banking: Covercy. Built by experienced CRE experts for GPs, syndicators, and those they work with, Covercy provides a complete range of solutions that streamline asset management, banking activity, and much more:
- Fundraise for your next deal and conduct capital calls
- Automate distributions to investors in a matter of clicks
- Open, manage, and fund bank accounts right from the platform
- Provide investors with complete self-service reporting
- Simplify investors’ work with an intuitive investor portal
- Earn strong interest on capital in your Covercy Wallet
We’ve only scratched the surface, and there’s more to come with Covercy — the leading commercial real estate investment management platform. Sign up for a private demo of our tool today and experience the difference that Covercy can make for your firm.