Skip navigation
online-Investment-processes.jpg Sasin Paraksa/Alamy

Private Real Estate Firms Continue to Streamline Online Investment Processes

Shopoff Realty Investments is the latest private real estate firm to move into online by forging a new partnership with Alternative Investment Exchange.

Shopoff Realty Investments recently took a big first step into the digital arena. The real estate investment firm has forged a new partnership with Alternative Investment Exchange (AIX), which will allow its Shopoff's investors to subscribe digitally through registered investment advisor (RIA), independent broker dealer and director investor channels. The AIX platform is able to connect with Shopoff Realty’s transfer agent to deliver a seamless end-to-end experience.

Shopoff Realty is the latest example of how private equity real estate sponsors and fund managers are embracing technology to expand digital channels to make it easier for investors and their financial advisors to buy, own and sell real estate investments online.

AIX, based in Philadelphia, creates customized systems that connect wealth managers with sponsors of alternative investments. These systems create a process that includes the transfer agencies that work with the sponsors and the custodians used by many wealth managers. The system guides users through the regulated processes of signatures, documentation and compliance needed to make investments.

“With the move to work from home and hybrid office schedules over the past few recent years, utilizing digital channels has been a natural progression for the industry,” says Jo Merriman, vice president of operations & investment services at Shopoff Realty Investments. “It’s not only important, but necessary to provide clients the flexibility digital channels provide, and I see this becoming the standard,” she says

Shopoff Realty expects the new platform to reduce time spent on paperwork, increase accessibility and speed in funding and elevate the overall investment experience for both advisors and their clients. “These added benefits help enhance our presence in the industry, with the goal of making us a company that advisors want to continue to partner with,” adds Merriman.

Over the past five years, the investment alternatives marketplace has made significant progress in embracing technology to transform real estate investment from what traditionally had been a manual process. In particular, there has been a lot of momentum around automation and straight-through digital processing with a tremendous amount of work and effort that has gone into the front-end process or client-facing sales experience.

Fintechs such as AIX, CAIS, Altigo, iCapital and RealBlock are among those companies helping to streamline front-end engagement with investors by providing solutions such as digital subscription documents and then moving those documents through the pipeline all the way to the custodians and clearing firms, notes Anthony Chereso, president and CEO of the Institute for Portfolio Alternatives. “Where we really have work to do is on the last mile—the account maintenance and back-end liquidity end,” says Chereso.

Digital platforms continue to evolve

Privately held real estate investment alternatives are still working to catch up with the broader investment marketplace in which investors can easily buy and sell publicly traded stocks, mutual funds and ETFs from their smartphones. Private investment firms have faced different speed bumps when developing those end-to-end digital channels, including regulatory and legal hurdles that had to be addressed, as well as getting different stakeholders to invest in systems that could work together, notes Chereso.

All of the different phases of the investment process in terms of distributing documents and collecting signatures have to move through the pipeline to get to a fund's transfer agent. “There are various steps along the way that have been very paper intensive in nature and manual,” says Phil Graham, executive vice president of strategic relations for Inland Securities Corp. What firms are doing now is providing digital solutions to streamline that process, make client experiences much better and reduce errors, he says.

Inland has a diverse product platform that includes non-traded NAV REITs, securitized DSTs, Qualified Opportunity Zone funds and also Reg D private offerings. Traditionally, investing in any of those products has been paper intensive. Inland engages with a variety of tech platforms to provide solutions in a more seamless, digital basis. In the past, there may be some financial professionals that have shied away from using alternatives because the digital channels weren’t available, notes Graham. “On behalf of the entire industry, we’re continuing to look to improve the entire experience and the process itself,” he adds.

Some observers credit crowdfunding with helping to push more tech-centric sales channels across the broader commercial real estate investment industry. “We really saw a tipping point in the summer of 2019 where we started to see a lot of the larger sponsors recognize that digital syndication did not necessarily replace what they were doing, it was an extension of what they were doing before,” says Tore Steen, CEO of CrowdStreet Inc. CrowdStreet launched its crowdfunding marketplace in 2014 followed by the introduction of a “white label” software product that allowed sponsors to move fundraising and investment management online.

The shift to digital was further accelerated in the summer of 2020 and 2021 during COVID when everyone moved online out of necessity. “It opened the eyes of many of the biggest developers and operators across the country. They recognized very quickly as things all moved online that their ability to raise capital for projects and manage investors also had to be online. They had to have an answer for the online paradigm,” says Steen.

Improving “last mile” processes

Technology streamlines the process and reduces the time it takes to get capital invested from the point a decision is made to invest to when capital is placed in an investment. It also significantly reduces errors. “We have seen significant benefits from the advancements that we have seen in the space so far, and the flow of investment into technology solutions has continued to accelerate,” says Chereso.

Where the industry is still working on improving its digital processes is the “last mile” – the account maintenance and liquidity piece, notes Chereso. For example, if an investor wants to change a dividend distribution from automatic reinvestment to a cash dividend or initiate a redemption, that is still a manual process. Those liquidity related functions are still manual and need to be digitized, he says. “The upfront technology solutions to streamline onboarding and the sales process is really what has significantly improved capital flow to alternative investments,” says Chereso. “As we start to see platforms involving liquidity options for alternative investment strategies on the back-end, I think that will drive another level of growth and capital flows to alternative investments.”

First look to funding can all be done online and very quickly. The part that has yet to transform is liquidity on the sell side as private real estate is still a very illiquid asset, agrees Steen. “That was part of our vision when we started CrowdStreet, and we want to be part of making that happen, but you need to bring everyone online first before you can do that,” he says. So, the more sponsors that start using the online syndication model, and the more assets that will be digitized creates a brighter future for bringing technology to bear on the sell side, he adds.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.