How to Excel as a CRE Fund Operator

By Rene Velasquez

January 20, 2023 – In today’s uncertain market, investors need a partner that will not only bring their investment prowess to the table, but a successful real estate operator platform to accompany it. While many successful fund managers abound in the marketplace, surprisingly few have been able to build the crucial infrastructure needed to maximize results. Creating such a platform has proven to generate positive business impacts including stronger execution, efficiencies, and higher returns. Institutional investors who want higher quality assets and greater safety measures when making decisions about placing capital into commercial real estate should look favorably on fund managers with proven experience already in place for this product type.

When fund managers approach commercial real estate assets with an ownership mentality, both as a fund manager AND an operator, decisions are made from the lens of an owner rather than a passive investor. The fact is commercial real estate is a resource heavy endeavor – requiring significant people and technology – and because of that, there is a compelling case to partner with an operator that understands the market, the business, and the asset class inside and out.

For the value-add, multi-tenant light industrial asset class, having a vertically integrated operator platform is especially important. The high number or spaces and tenants that come with this asset-class requires a local team capable of managing the volume. To put that into perspective, BKM’s team executes roughly 2.2 leases per business day or an average of 575 per year, and delivers 2.1 speculative move-in ready units per business day or an average of 550 per year, while adjusting rents every 90 days.

A Local Approach

Successful operator platforms tend to be anchored by a few key ingredients. It starts with local experience and local teams. Real estate is by nature local, even if a manager operates a portfolio of assets across multiple markets. Thus, a “boots on the ground” approach helps with acquisitions because that’s where relationships are initially built, target assets are unearthed, and deals are ultimately executed. Top performing operators must first understand the nuances of the multi-tenant industrial property type. Real value can be created when they also bring a clear understanding of a local market and its competitive set, which helps produce properly focused exposure and delivers deeper market insights.

BKM’s local approach extends to a full suite of in-house services including leasing management, and property management that are coupled with industry-leading technology. At the operational level, property management aides in efficiently facilitating a wide range of activities involved in owning and operating a real estate asset. That includes budgeting, maintenance, market rent analysis, marketing, rent collection, leasing, tenant relations, and contract negotiations, to name a few, all of which helps to showcase a proven track record.

BKM has found that having an in-house construction management team allows it to implement property upgrades and tenant improvements quickly and efficiently. Its cutting-edge technology leads to efficiency in management, which in turn leads to lower costs and higher returns.

Experience Matters

When tackling lease administration and tenant life cycle management aspects of a portfolio, an experienced team holds an advantage. BKM has been operating industrial real estate properties at a high level since 2013 and is experienced in dealing with the intensive management of a tenant base that turns over quickly with shorter-term leases. Effectively managing this turnover allows rents to be aligned with market rates, bringing additional value to the property.

ESG Focus Drives Cost Savings

Commercial real estate presents a unique set of environmental and social challenges to both owners and managers. As significant users of resources, and the place where many people spend most of their working hours, commercial real estate has both the opportunity and the responsibility to develop and apply practices that reduce the impact of these demands while providing a productive and healthy workplace for building occupants. Increasing regulations, growing demands on owners to accurately report outcomes, and new expectations from occupants all require a new focus on ESG standards. At the property level BKM promotes a program of energy and resource efficiency, and manages each asset to a set of sustainability standards that guarantees full compliance with all requirements.

When selecting an investment manager, investors today need to look for a partner that brings deep experience with their specific investment portfolio. It is also wise to consider the reach and relevance of the investment managers’ platform and operations team. Partners must deliver a broad enough reach to leverage insights and learnings across multiple markets while having the local relevance to ensure an investor’s competitive advantage remains focused.

BKM has built an operating platform and team for small-bay, and light industrial assets that pairs well with an institutional investor’s needs. With that proper infrastructure in place, the fund manager is able to maximize results and provide the level of experience and comfort investors need today when allocating capital into commercial real estate assets.

Rene Velasquez is Managing Director of Asset & Property Management at BKM Capital Partners.

This article is featured on connectcre.com.