Asset Management at RealtyMogul.com
In the real estate investing industry, originating, underwriting, and raising capital many times receive majority of the hype and attention. However, the work does not end when a deal gets funded and the property is purchased. This is when the Asset Management team steps in and oversees all activities related to an investment until it goes full cycle.
Asset Management at RealtyMogul.com entails multifaceted responsibilities, but they all boil down to one principal: Investor Protection. Investor protection is one of the pillars of RealtyMogul.com’s core values as capital is raised from the crowd -- who rely on us to protect their interests in each investment. This cornerstone is uncompromising and we would like to think that it is one of the main qualities that separate us from other platforms.
Before jumping into Asset Management’s responsibilities, it is important to first touch on the team and the structure of a RealtyMogul.com investment.
The Asset Management team at RealtyMogul.com brings over 100 years of collective experience across all property types and markets nationally. The team comes from diverse backgrounds that include real estate private equity, lending and banking, property management, legal, and accounting. These various backgrounds enable us to tackle issues with multiple viewpoints in a collaborative fashion. Maybe most importantly, this team has experience in managing transactions in various economic environments and stages in the real estate cycle – the “good times” and the “bad times”.
When investing in RealtyMogul.com equity investments, investors purchase a stake in a Special Purpose Entity, or SPE. The SPE, typically organized as Limited Liability Company, invests as a Limited Partner in the entity that holds ownership to the underlying property. A Limited Partner, commonly referred to as an “LP”, is limited in its control of operating the asset.
The property is operated by the Sponsor, or General Partner (“GP”), who oversees management, leasing, constructions, and all other responsibilities of managing a property. The Sponsor’s control of managing the asset is the main reason why before even considering an investment opportunity, RealtyMogul.com thoroughly underwrites the sponsor and validates its capability to complete the business plan.
The structure of responsibilities between the GP and LP varies deal to deal and will be outlined in the entity’s Operating Agreement.
Lastly, the Asset Management team represents the RealtyMogul.com SPE as one investor, which is the basis of the “Power of One” benefit that investors can enjoy by investing through a real estate crowdfunding platform.
In RealtyMogul.com debt investments, the Asset Management team is accountable for servicing the loan. In some instances, a loan servicer is assigned and acts as the main liaison between the lender and borrower. Regardless of the loan being serviced in-house vs. outsourced, the Asset Management team at RealtyMogul.com is ultimately responsible for ensuring that the loan remains performing and investors are paid on schedule.
What We Do
The following are the primary responsibilities of the Asset Management team:
- Question Sponsors – While we thoroughly vet the sponsors we work with and see them as partners, we still try to verify all details provided by them for a transaction independently. By doing so, the team aims to reduce risk of errors and increase investor protection. It is essential to not blindly accept the sponsor’s resources, calculations, and claims, but rather verify them using third party data sources and even a site visit.
- Ex. Performing our own internal research to confirm a sponsor’s asking rents.
- Report Review and Analysis – Sponsor reports are provided periodically and are investors’ best resource to track the performance of their investments. As such, ongoing review of these reports is key to successful asset management. This includes ensuring the reports are complete, analyzing the financials and balance sheet, comparing the property’s financials to proforma, and more. Oftentimes, we find ourselves asking the sponsors follow-up questions that come up as a result of this review.
- Ex. Why did the staff payroll increase 15% in Q3?
- Investor Communication – At RealtyMogul.com we’re big believers in transparency, which makes investor communications a very important piece of the asset management puzzle. Communications include “communicating down” (to investors – sponsor reports, property operations updates, distribution and tax updates, etc.), “communication up” (communicating investor questions up to the sponsor or borrower), and anything in between.
- Handle Distributions – The results of investments are measured through the financial returns they generate. Therefore, ensuring that sponsors and borrowers disburse cash to RealtyMogul.com entities on time and according to plan, and understanding variance from projections, is crucial.
- Ad Hoc Items – Occasionally, there will be one-off items that require action. A couple of examples for such items:
- Sending a RealtyMogul.com representative to perform a site visit to check on the status of construction at a funded property.
- Entering discussions with a sponsor about the possibility of selling a property if RealtyMogul.com feels that a sale will serve its investors’ interests.
The Asset Management team at RealtyMogul.com has various duties but ultimately, investor protection is the main obligation. While a Limited Partner is limited by nature, having an experienced asset management team cannot be discounted and can make a big difference for investors.
Real estate investing, like all other investments, do carry risks and we understand there is no guarantee of returns of any kind. Thus, whether it’s analyzing reports, visiting a property, or taking a proactive approach with a sponsor, the RealtyMogul.com Asset Management team works hard on the investor’s behalf to ensure there is as much transparency as possible.