One of the biggest trends across industries right now is the shift of artificial intelligence (AI) from experimentation to delivering a measurable return on investment (ROI). AI is a broad and complex topic that is impacting every sector, including the real estate fund industry. Rising expectations from investors and regulators for real-time, high-quality data and reporting have prompted funds to invest heavily in AI. The use of AI, when the changes associated with AI adoption are led across the organization, can help drive significant, positive cultural change by modernizing workflows and processes, while helping team members be more productive. This article takes a closer look at several ways AI can help improve operational efficiencies in real estate funds and, therefore, deliver ROI.
AI Applications in Real Estate Fund Operations
AI can benefit real estate fund managers by helping in several areas, including but not limited to the following:
- Investor Agreements, Operating Agreements, Loan Agreements, etc.
- Contributions, Capital Calls, & Distributions
- Compliance, Controls, & Regulations
Real estate funds operate in a fast-paced, complex environment involving initial capital calls, asset closings, final waterfalls, and distributions. Each step requires agreements to be in place, creating legal and logistical bottlenecks throughout the fund’s life cycle. Whether dealing with investor, operating, or debt agreements, a real estate fund’s success relies on efficiently and accurately closing deals. Implementing AI-powered tools for numerous types of agreements helps enable fund management to use models that can read, prepare, and extract provisions from documents, allowing teams to understand information quickly and make effective decisions. AI can help facilitate faster closings, reduce missed obligations, and improve auditability regarding how investor terms are incorporated into operations and reporting.
Once agreements are established and the fund is operational, management calls the committed capital, resulting in contributions from investors and subsequent distributions. Traditionally, processes like preparing capital call packages, tracking contributions and distributions, and calculating waterfalls have been manual and time-consuming. AI tools can help streamline these workflows. For example, AI can auto-assemble capital call packages using operating and investor agreements, and models can review and reconcile contributions for timeliness and accuracy, flagging delays, unmatched wires, or incorrect fee calculations. In addition, AI can compare distributions to waterfall provisions in agreements, check them against historical patterns and covenant requirements, and assist in calculating return of capital, carried interest, and other key metrics.
Adapting to Regulatory Requirements & Compliance With AI
Real estate funds face significant complexity, primarily driven by compliance and regulatory requirements. A strong internal control environment is essential for handling these challenges. AI models can leverage existing agreements and historical documentation to align investor and regulatory expectations with the current control framework, highlighting potential gaps. These models can continuously review transactions and activities throughout the year, as well as monitor changes in agreements and regulations, alerting management to potential control deficiencies. The use of AI can enhance the fund’s ability to have accurate and transparent quarterly (and annual) reporting to investors and regulatory agencies. By utilizing AI to track evolving regulations and requirements, funds have additional support to help manage their control environment effectively and remain adaptable in a constantly changing landscape.
While the positive use cases of AI are significant, organizations also need to recognize that we still operate in a “people” business, and to obtain the full value from AI, organizations shouldn’t just simply manage the AI wave, but they should also lead their employees through the rapid changes that AI is creating. Employees are wary of how AI might impact their roles, with many of them concerned that they will lose their jobs to AI; however, organizations that effectively lead their people through proper implementation of AI can help strengthen employee engagement, increase productivity, and play a positive role in their organization.
In summary, adopting AI as a practical toolkit for assisting in cleaning up agreements and data, modernizing cycles, and building investor confidence can benefit real estate funds amid ongoing changes in regulations, staffing, and investor expectations. Achieving a successful ROI from AI implementation requires disciplined integration across contracts, capital, controls, investor reporting, your resources, and more—with a keen emphasis on human judgment at every step of the journey.
How Forvis Mazars Can Help
For today’s leaders, it’s not about whether you use AI, but how fast you can make it work for your business. At Forvis Mazars, we combine in-depth industry insight with a tailored strategy to help you stay competitive. We can help coordinate your AI initiatives with your business strategy through a structured, secure, and scalable process designed for long-term impact. By working alongside you, our services are meticulously tailored to help meet your unique needs. If you have any questions or need assistance, please reach out to a professional at Forvis Mazars.