NAREIM Legal & Compliance meeting

November 17 and 19, 2020

There’s been increased communication to investors about the performance of assets – but is the quarterly in-person site visit by management teams still required during Covid, given health and safety concerns?

The NAREIM Legal & Compliance meeting discussed how managers were dealing with pre-Covid asset check requirements when travel was so challenging.

Members agreed that waivers for in-person checks by management teams were being allowed to protect employees, with institutional investors mindful of the challenges. Site inspections were typically being done by property managers.

It was revealed though that some investors were considering extending their waivers for in-person site visits by managers – while one public pension was currently discussing whether to make the waiver permanent.

The NAREIM Legal & Compliance meeting also focused on how managers were conducting investor and asset due diligence and deal negotiations while remote or hybrid remote. 

Download the meeting presentations here.

Key highlights include:

Keep alive the benefits of remote working

Conducting negotiations, due diligence and manager-investor meetings has become much more efficient during Covid, allowing more people to be brought into the conversation, ensuring junior members extend their learning, and giving firms the ability to split discussions across several days, particularly due diligence sessions that can typically last eight hours and be crammed into one day.

The result is that discussions are deeper and more detailed than they have been in-person.

• Breakout groups: Members recommended the use of breakout groups for due diligence challenges as well as deal negotiations, allowing issues to be dealt with in the moment rather than one, two or three days later. One attendee, discussing investor due diligence said the fact everyone had access to their systems during a call, meant answers, and documents, could be found instantly. Answering in real time should therefore be something that continued post-Covid.

• Best practice idea, post-Covid: One idea to embed greater flexibility was to allow employees to add work from home days onto their vacation so they could work from places other than home or the office, for instance when staying with extended family.

• Best practice idea: Continue to be a part of other functional area meetings. Use the ability to video into meetings to understand what’s happening in other departments. Ask outside counsel to also be your eyes

Recording Zoom and Team calls?

Member also discussed whether there was a need to record all video and conference calls by employees or to restrict recordings to training sessions, with most agreeing recordings were limited to training discussions.

How digital should you go?

One question was raised about the use of packaged videos for investors and the value of such a tool. Most institutional investors and consultants want to ask questions as quickly as possible and dive into diligence, meaning the value of prepackaged marketing materials could be diminished.

As members look to the long-term implications of Covid, and how we’ll all be working over the coming year even with the distribution of a vaccine, it was agreed online meetings would remain a part of deal and fund execution. Investors and consultants agreed they would be much more open to an online meeting in the future than previously.

Drones and facetime

While prepackaged video may not be as valuable as The use of drones and facetime/video tools to conduct real-time asset tours and site visits was embraced by the Legal & Compliance group, for investors, managers and tenants.

Top predictions from the US election:

With economic, regulatory and taxation experts presenting their top 3 impacts from the 2020 U.S. presidential elections, we present the NAREIM Legal & Compliance top 7 issues to watch:

• Individual tax rates increase, with expiration of break

• Capital gains is taxed at the same rate as ordinary income

• Provisions within the CARES Act, particularly around interest deductibility, are extended

• Gary Gensler becomes the new SEC chair

• More changes to the Reg D solicitation rule and amendments to the custody rule

• The incoming administration has to deal with the pandemic because it has an outsized impact on the economy and consumer spending. It could mean greater testing and tracing and coordination of vaccine and treatments.

• The Federal Reserve is low on ammunition, but fiscal policy – or spending and investment bills – could be a focus for an incoming administration

Download the meeting presentations here