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Understand the Difference Between Manager and Administrator of a Real Estate Investment Fund
- The fund manager is responsible for managing the portfolio, involving decisions on buying, selling, and improving real estate assets within the fund. Part of their work includes property marketing, prospecting new tenants, and pricing rent
- On the other hand, the administrator is responsible for handling the bureaucratic and legal aspects, ensuring the smooth flow of the REIT
By: SiiLA News
12/01/2023 The real estate market, especially real estate investment funds, attracts thousands of investors seeking diversified opportunities to allocate resources and ensure good returns. Two fundamental roles in this context are played by the manager and the administrator of a real estate investment fund. But what is the function of each?
To delve into the subject, the REsource team consulted Arthur Moraes, partner, and professor at Clube FII, who explained the main similarities and differences between the administrator and the manager of a real estate investment fund.
"The administrator may accumulate the roles of managing and administering the fund, but often a financial institution performs administration, and another institution, not necessarily financial, performs management," he explains.
Basically, the manager of a fund is responsible for making strategic decisions to maximize returns for unit holders. Their central responsibility is portfolio management, involving decisions on buying, selling, and improving real estate assets within the fund. Part of their work includes property marketing, prospecting new tenants, and pricing rent.
"And what is the administrator's part? It's the more bureaucratic and legal part. They are responsible for the contracts for the purchase and sale of fund assets, for example, but are not responsible for expressing an opinion on whether it is a good deal or not," says Moraes.
To illustrate, the professor uses a Shopping Centers fund as an example. The manager, after analysis with their team, communicates that they will make a commercial asset purchase that fits within the fund's regulations. "Here, the manager's role is to ensure, after the studies, that the purchase decision aligns with the rules governing the fund," he explains.
And, in this situation, "the administrator has to check all the legal issues, all the documentation, see if the seller has the power to sell, check for restrictions, etc.," adds the executive.
Managers vs. Administrators
A company that acts as an administrator can also take on the role of manager in another fund. Cases like these are common, such as BTG Pactual, which, in addition to having the position of manager in funds like CNES11 – FII CENESP and BTLG11 – FII BTG PACTUAL LOGÍSTICA, also acts as an administrator in funds with other managers, as is the case with BROF11 – FII BRPR CORPORATE OFFICES, managed by BRPR Consultoria, and LVBI11 – FII VBI LOGÍSTICO, managed by VBI Real Estate. However, in both cases, BTG is responsible for administration.
How to Avoid Conflicts of Interest? Moraes explains that in situations like these, it is up to investors and unit holders, who in a general meeting dictate the choice and the next steps for the fund.
"Situations that can generate conflicts of interest between the parties involved in a REIT are always submitted to approval in a general meeting, which, in general, will require votes in favor representing at least 25% of the units. So, if one of the parties involved is studying an action in which there may be a conflict of interest, they need to first submit the proposal for approval by the unit holders, with a qualified quorum," he clarifies.
Another situation that may occur is the hiring of a service provider from the same group as the controller, a situation also considered a conflict of interest. In these cases, funds usually call meetings and request "continuous approval" for the conflict, meaning that once approved by the unit holders, the fund does not need to consult investors further on the matter. Continuous approvals, however, cannot include decisions of significant impact on the fund and its profitability, such as the purchase and sale of offices.
Although the manager and administrator of a real estate investment fund have distinct responsibilities, it is crucial to recognize the complementarity of their roles. Effective collaboration between these professionals can result in more assertive strategies, greater operational efficiency, and ultimately, better returns for investors.
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