Real Estate Funds - Role of Fund Admin
Assisting in the papering of key events
Although lawyers and other professional real estate parties will be engaged by the real estate fund, the fund adminsitator may need to handle the logistics of papering the transaction by tracking down signatories, returning paperwork to other advisers and maintaining all originals for the fund's records
Transferring or receiving funds
The fund admin will typically control the bank accounts and so will need to ensure that monies are available and that payments are made on time
May include monitoring the receipt of rents, whether direct from tenants or through a property manager or making monies available for acquisitions of real or synthetic property assets
Bookkeeping
Ensuring that the books and records are maintained
Valuation
At cost
Desktop valuation
In the early days of investment, valuing the property at the price purchased may be preudent
Regard will have to be had to the state of the relevant market, as this may suggest whether a valuation at cost remains appropriate or not
A property fund will ordinarily hire a valuer form a Royal Institute of Chartered Surveyors qualified firm to provide a desk top valuation
This won't entail a full evaluation of the property bu will provide an indicative value based upon the nature and scale of the property relative to others of a similar nature or class
Such valuations may be relied upon in between formal valuations
In constructions
Assets in construction may be valued on the basis of what they are anticipated to be worth upon completion with discounts applied to the price to allow for the timescale until completion and inherent risks including the risk of the property never being finished or lengthy delays and the risk of the market value of the completed project never hitting projections whether due to the market in general or the ultimate quality or desirability of the property
Fair value
A RICS valuer may be engaged to undertake a full fair value of the property based upon its actual condition and progress against prevailing market conditions
Fair valuations tend to be provided to support the audited financial statements / valuation of the fund, with reliance on other methods in intervening periods
In order to perform the role effectively, the admin must know what the fund does by understanding the investment objectives, including any limitations or restrictions
The overarching principles of what will be included in a fund's objectives, restrictions and limits will not change from fund to fund however, fund admins could expect to find the following key headings
Nature of real estate permitted by type, geography and quality
Condition of real estate permitted, eg as a plot on which to build or an existing property to renovate
Concentration limits, meaning that the value of a single property will be limited to a maximum when placed in the context of the portfolio as a whole which avoids the risk of the fund not diversifying the assets
Whether leveraging is permitted or not and if so what is the