Key Takeaways from the Alliance and IREI Masterclass Series
INTRODUCTION & ALLIANCE GIVES BACK
The mission of Alliance Global Advisors (Alliance) is to expedite the growth of real asset investment managers through empowerment and the elevation of best practices.
At Alliance, we strive to contribute content and thought leadership to our industry. We believe in an environment where industry participants have access to information and commensurate education to improve the partnership experience. Through our Alliance Gives Back initiative, our team is committed to making a positive, lasting impact on the industry by participating in educational initiatives, professional development programs and mentorship opportunities. As part of Alliance Gives Back, in the Fourth Quarter of 2022, we launched the Alliance Global Advisors and Institutional Real Estate, Inc. (IREI) Masterclass Series. Partnering with Geoffrey Dohrmann, Founder, Chairman and CEO at IREI, and other thought leaders, the series featured a virtual six-session program focused on the latest developments in our industry. Over 70 industry participants, including Investors, Consultants and Investment Managers, took part in the Masterclass Series. Today, we want to share some of the key takeaways with you.
MASTERCLASS SERIES KEY TAKEAWAYS
Before we summarize the key takeaways from the Masterclass Series, we would like to extend a heartfelt thank you to our friends and family for your continued engagement and support. We also thank Larry Hass, Member of Difede Ramsdell Bender PLLC (DRB), Chris Cunningham, Partner at The Townsend Group, Brian Planey, Investment Officer at the State of Wisconsin Investment Board (SWIB) and Sam Spencer, Investment Officer at the Oregon State Treasury, for their time, contributions and insights to help make this Masterclass Series a success.
Each session focused on a topic to enhance one’s knowledge of the industry, investment universe and vehicle structuring. Please scroll through to learn more about each session and the key takeaways.
Institutional Investment Evolution Masterclass with Investor Discussion
We kicked off the series with the Alliance Institutional Investment Evolution Masterclass, followed by an interactive discussion with key stakeholders in the industry. As a significant part of asset allocation, institutional Investors manage nearly $10 trillion of the global real estate market. In the Institutional Investment Evolution Masterclass, Alliance provided a comprehensive review of the foundational elements of real estate investment and how the understanding of the real estate evolution can prepare you for the future. Panelists Chris Cunningham, Brian Planey and Sam Spencer led a discussion on the evolution of institutional investment, moderated by our Co-Founder and Managing Partner, Jennifer Stevens, and IREI’s Geoffrey Dohrmann. Understanding go-to due diligence questions, portfolio allocations and benchmarking non-core strategies were crucial elements of this discussion. What are the biggest risks and opportunities today? Traditional office appears to be the most significant risk; however, a number of exciting opportunities are present in data center development, housing, self-storage and other interesting niche sectors.
Key Takeaways
1. Real estate has a strong potential to continue delivering returns that exceed other asset classes in the long run and provide the following: diversification, inflation hedge, attractive risk-adjusted return premiums, stabilization of portfolio returns and long-term liability matching. It is an essential component of the investable universe
2. What are the top items Investors look for when evaluating a GP?: a strong commitment to ESG/DEI initiatives at the organizational and asset level, management turnover of less than 10%, co-investment in line with industry average, a track record that demonstrates successful execution of strategy and consistency and a Key Person provision that protects Investors in the event of investment team departures
3. What are common deal breakers for Investors?: strategy drift, poor performance, conflict of interest, legacy fund issues, Investor turnover, compliance or legal issues and poor communication
Sales Training: Creating More Effective Presentations & Pitchbooks
Geoffrey Dohrmann drew on his extensive knowledge to provide training on setting clear objectives and developing a more effective approach to building pitchbooks and formal presentations. Attendees should have left the class with a clear understanding of how to effectively design and pitch presentations to meet the needs of prospective Investors. Topics included best practice guidance on presentation structures, typical manager selection criteria, typical Consultant issues, presentation strategies and more.
Key Takeaways
1. There are three crucial steps in the institutional sales process: a) Discovery: Getting the prospective Client to disclose their needs; b) Presentation: Getting the prospective Client to agree to the case of your offering; and c) Closing: Getting the Client to agree to take - and then take – all the steps in the process required to close, from making the commitment to wiring funds
2. A presentation should always begin with a simple outline of what you are going to cover and end with the action you ultimately want the Investor to take if they agree with the basic premises of the presentation
3. When building out slides, always remember to support how your proposed strategy fits in a portfolio, how it will make money for the Investor and the reasons for selecting your firm to implement that strategy
Real Estate Investment Best Practices Masterclass
In the Real Estate Investment Best Practices Masterclass, Alliance provided a comprehensive list of industry best practices to help your organization elevate its performance. This Masterclass empowers your team to develop an understanding of industry best practices related to fund terms and conditions, educate staff on reporting standards, gain a thorough understanding of open-end and closed-end fee structures, provide insights on the importance of internal compliance, committee structure and internal/independent boards, understand the importance and responsibilities of a Limited Partner Advisory Committee (LPAC) and more.
Key Takeaways
1. Industry leaders and regulators continue to develop and refine reporting standards to support Investors' desire for increased transparency and comparability to enhance decision-making. The four industry-wide guidelines include: the Generally Accepted Accounting Principles (GAAP), Global Investment Performance Standards (GIPS), NCREIF PREA Reporting Standards (Reporting Standards) and Global Data Standards for Real Estate Investment (GDS)
2. Institutional Investors rely on indices for asset allocation purposes, benchmarking purposes and comparison amongst peers. Most indices are expressed in three components (income, appreciation and total return) and data must be in a uniform format
3. A highly functioning and effective board will have a diverse set of views held by industry leaders in varying fields to promote diversity of thought through unique perspectives – with the fields of expertise and type of members driven by the type of board formed
Sales Training: The Art of Delivering Bad News
Delivering bad news is never easy, and let’s face it, with a looming recession and the state of the marketplace today, it may be inevitable regardless of what happens in the future, whether it be portfolio write-downs, disappointing returns or key personnel resignations, you will eventually have to deliver it. In the second sales training, Geoffrey Dohrmann provided guidance on the dos and don’ts of delivering bad news. Below we identify a few key takeaways viewers should have gained to help ease this tedious process.
Key Takeaways
1. When delivering bad news, identify key steps in the process: plan the communication, handle your own emotions, conduct the interview and follow up
2. The Dos: acknowledge your own feelings and handle them, involve a high-status messenger in delivering the message, rehearse communicating key points in an unscripted fashion, deliver bad news in person whenever possible and empathize, normalize and validate emotional responses
3. The Don’ts: delay unnecessarily or rush the process, deliver bad news in a public space, communicate bad news virtually, allow or respond to interruptions, attempt to sugarcoat or minimize, be blunt or brutal, dramatize or exaggerate, be defensive, hide behind jargon, overreact to reactions or the severity of the situation and talk too much
Update on Recent Legal Trends in Real Estate Fund Formation
Larry Hass’s informed insights on recent legal trends in real estate fund formation shed light on the new Securities and Exchange Commission (SEC) marketing rules, hot-button issues in fund terms and side letter issues. Viewers should have left with a better understanding of the application of the rules to PPMs and marketing decks, prohibition of materially untrue statements and material omissions and the required fair and balanced disclosures of benefits and risks.
Key Takeaways
1. In December 2020, the SEC adopted amendments under the Investment Advisers Act of 1940, updating rules that govern investment adviser marketing. As of November 2022, these rules now require compliance. These new SEC marketing rules apply to the rules of PPMs and marketing decks; apply to fund marketing materials delivered by fund sponsors, placement agents and finders; prohibit materially untrue statements and material omissions; and require fair and balanced disclosure of benefits and risks
2. Key hot button issues in fund terms include: operating expenses, management fees, property-level fees, co-investments, key person events and recaps
3. Side letter issues include: most favored nation rights, LPAC membership, confidentiality exceptions, use of name restrictions and investment restrictions
Environmental, Social and Governance Masterclass
The series wrapped with a deep dive on the topic of Environmental, Social and Governance (ESG), accompanied by Katie Orr Sharp, from our strategic partner, Lebec Consulting. Organizations must incorporate ESG factors in their strategic decision-making, transformation, reporting and assurance to remain successful.
Key Takeaways
1. The key drivers of ESG momentum include: increased Investor demand due to the return potential from substantial investing, Investor expectations for alignment with ESG reporting initiatives due to increased regulation and adoption of a framework around the UN Sustainable Development Goals (SDGs) as companies move toward investment in People, Planet and Profit
2. Due diligence in the property lifecycle includes ensuring that the appropriate ESG policies and associated structures are in place at the Fund level, as well as ensuring attainment of the right accreditations and certifications at the asset level. It is therefore important to have a strong ESG monitoring and measurement framework in place
3. The real estate industry accounts for 40% of global carbon emissions, putting the industry in the spotlight and committing to ESG principles a necessity for all players. Some practical steps a firm can take include: taking inventory of existing practices (at the corporate, asset and portfolio levels); reviewing ESG and DEI policies and enhancing them for best practices; performing ESG materiality assessments; creating implementation and integration plans; collecting utility bills on the existing portfolio and developing a reporting dashboard; and establishing a list of consistent ESG and DEI questions for Investment Committee meetings
CLOSING REMARKS
The Alliance team is committed to empowering the real asset investment community by providing continued education on the industry and a diverse perspective of where the marketplace stands today. Although Alliance Clients receive much more detailed and customized versions of our Masterclasses, we hope the sessions provided a glimpse of what it could be like to work with our team and a training tool for your organizations. We hope you found this wrap-up beneficial, and we look forward to continuing our outreach in 2023. To learn more about the Alliance Model and additional educational pieces, we invite you to connect.
ABOUT ALLIANCE GLOBAL ADVISORS
Alliance Global Advisors (Alliance) is a women-owned consulting firm focused on developing strategic growth solutions for real asset investment managers. Advising clients with over $450 billion in assets under management (AUM), Alliance partners with organizations to provide an informed, independent perspective, continued education and an innovative approach to attracting capital in a competitive market environment. Our experienced team is committed to empowering the real asset investment community to elevate best practices. Our partnerships allow senior management teams to focus on what matters most: diligently managing Investor capital, creating value and delivering exceptional returns in a performance-driven market.
Disclaimer: This blog was originally published in February 2023 and will be updated periodically to reflect changes in the industry. The content may contain or cite personal and/or professional opinions that differ from the views of Alliance.