Surviving the headwinds of a turbulent CRE market means being resilient and adaptable. To help forward-thinking GPs prepare for the new year, Heather Fernstrom Border and Jennifer Stevens, co-founders & managing partners at Alliance Global Advisors, sat down with Juniper Square’s Brandon Sedloff to outline several strategies to help GPs stand out in an increasingly competitive landscape.
Here are three takeaways from their conversation:
Be clear, concise, and straightforward
Fernstrom Border and Stevens pointed out that transparency and clarity become even more critical to building and maintaining investor relationships during challenging market conditions. Further, communicating and explaining problems to your investors–not just the successes–can help strengthen trust.
“It's important for you to put yourself in [the investor’s] shoes,” explained Fernstrom Border, “and figure out how they're using the information to make decisions further, how they're looking at their portfolio today, and how they envision their portfolio going forward.”
They also offered a few ways GPs can develop more effective LP communication strategies:
Understand their unique needs. Do your homework to understand a new investor’s needs before engaging with them. Demonstrating your knowledge of their preferences, strategies, and constraints can help them make more informed decisions and build trust in your expertise.
Be proactive. Underscoring the importance of direct communication, the panel stressed the need for managers to proactively reach out to investors with updates, changes, or portfolio information.
Be honest–even about challenges. Stevens warns GPs not to “underestimate the intelligence of your investor base.” Rather, be honest, concise, and transparent about portfolio challenges, providing concrete examples. Acknowledge the difficulties of evaluating performance during times of uncertainty.
Build your reputation on the high road
It’s easy to underestimate “how much investors talk to one another–not just about the underlying assets, but about a manager and the way that they behave,” as Sedloff noted. And those conversations are formed by everything GPs and their teams say and do–even about competitors.
It’s important to avoid making disparaging remarks about your competitors. Instead, acknowledge the competitive nature of the industry and differentiate your fund and firm on positive attributes. Position yourself as a solution provider rather than engage in negative tactics.
Underlining the significance of reputation, Stevens explained that “consultants and investors aren't calling the references you provide. They're calling those who didn't re-up, their friends in the industry they know invested alongside you. Those informal reference checks are taking place by prudent investors every day.”
Strive for operational excellence
Operational excellence can help firms stand out in a crowded market to attract investors–and employees. Sedloff noted, “One of the attributes of great companies is they provide tools for their employees to do their job more effectively. Nobody wants to work for a company using antiquated tools and antiquated technology.”
Achieving operational excellence is also an iterative process. To that end, Fernstrom Border suggested that as you adjust processes and policies, “it's also important to stop and do a look-back analysis and test these new elements that you're incorporating.” Did they deliver the intended outcome? What unexpected side effects are you now contending with? What’s the next most impactful opportunity?
The panel offered these tips to help maximize operational efficiency:
Optimize your tech stack. Integrating technology is an essential part of real estate operations, and the emergence of PropTech means more tools are available than ever before to help optimize operations.
Be open to outsourcing. Instead of spreading your team too thin, Stevens suggested leveraging external expertise for functions like compliance, fund administration, and accounting.