Why investors in commercial real estate need a sponsor

Real Estate - Estate agent

Investing in commercial property can be a daunting prospect but knowing that you are not alone can make you feel much more comfortable, which is why investors need to have a sponsor.

A sponsor can be an individual or company that takes a project from a twinkle in someone’s eye to a fully-fledged development.  Sponsors own the property, take care of the day-to-day running of it, watch over the transactions, speak to investors to raise funding and are responsible for the bond on the property. They manage everything, essentially, so you need to make sure you pick well.

Sponsors, often called the general partner (GP), act on behalf of the equity investors in a project. The other investors are usually called limited partners (LPs), and their liability in the project is limited to their investment.

Sponsors’ responsibility covers finding the deal, negotiating the deal and purchasing the property, securing the financing, doing all necessary due-diligence tests on the property, arranging all marketing, and pretty much anything else that needs to be done. They put a lot of time and money into the deal, so an acquisition fee from investors covers costs and compensates the sponsor even if the deal is not a success.

The process begins with the sponsor buying the property and then they oversee the leasing, maintenance, and renovations, though this may actually be done by another company, the sponsor remains ultimately responsible. Financial reporting, payments to investors and tax returns are also placed squarely on the sponsor’s to-do list.

There is certainly a lot on a sponsor’s plate, but there are rewards too. They make money from the acquisition fee paid by the other investors, have ownership of the deal that ranges from 5%-10% of the total equity and receive an annual asset management fee. They are also assured of a full return of their initial investment, along with a return above a particular benchmark, or preferred return.

The success of any project hinges on the sponsor, so do your homework before signing up. You need to check that the sponsor is trustworthy, has a good track record, impeccable connections when it comes to financing, the necessary operational and management skills, and a thorough understanding of the asset class and market they are investing in, warns Scott Picken, CEO of online investment portal Wealth Migrate.

Your sponsor can really make the difference between enjoying the rewards of a successful project and nursing the pain of failure, so check that they understand how to market the project, have been part of a successful project before, can assess and deal with any risks that might become apparent and have a tried-and-tested management system to keep the project on track.

 

About Wealth Migrate:

Wealth Migrate - Real Estate

 

 

Wealth Migrate is a trusted global real estate marketplace that allows investors to safely invest internationally, in quality opportunities, thus achieving wealth preservation. They have members in 133 countries and have facilitated real estate investments of over $600 million USD on 4 continents with investors earning an average of 8% cash on cash in USD for the last 6 years and IRR’s of 13% to 20%. For further information please visit wealthmigrate.com

@Wealthmigrate #Wealthmigrate

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Outsourcing makes sense for multinationals

Outsourcing - Information technology

 

Payspace - Human resourcesAccording to Edmund Pohl, Head of Outsourcing at PaySpace, a leader in payroll and HR software, the benefits of outsourcing include increased efficiency, reduced risk associated with running costs and compliance, controlled costs, and access to world-class capabilities that might not otherwise be affordable.

Outsourcing, or the transfer of a business activity or function to a third-party service provider, is a solution gaining popularity throughout Africa. This leads to a more efficient allocation of roles and responsibilities, and an organization that runs well, performs well.

“At the end of the day, outsourcing should help make multinational organizations more flexible and agile, as well as future-proof, to meet the challenges of doing business in an increasingly competitive world.”

He says this is particularly true of payroll, as its model is within certain confines, a repetitive task, and lends itself to a BPO environment. “It is not a bespoke activity nor does it have a lot of variables to it; there is a fair degree of consistency month to month.”

Another reason why a good payroll outsourcing partner is ideal for multinationals, is because of the simplified process for an organization to venture into another region. All legislative practices, taxations, and the unique intricacies involved in paying their staff are done correctly from the start. “A good payroll outsourcing partner knows all of this information already, and will take the headache away by offering the customer a gateway to knowledge that is extremely difficult to obtain without feet on the ground.”

He adds that in terms of expense it makes sense for any organization with a global footprint to outsource. There are intrinsically lower rates associated with serving a multi-country environment with one price, rather than dealing with various providers in different regions.

“In addition, we have noticed that global organizations prefer to minimize the number of contracts they have. Managing a situation where they have a vendor or BPO partner that is a standalone company in each country is an onerous task, and contract maintenance is an immense process when spread across multiple vendors. Outsourcing eliminates a lot of the hassle involved in managing procurement activities, as it’s easier to oversee a single contract.”

In terms of compliance, Pohl says security and audits are a big deal for multi-nationals as they are under greater pressure to be compliant. “Larger entities are always under the microscope, particularly those involved with utilities, financial services, and healthcare, as they all face various degrees of government oversight. A good outsourcing partner will ensure the organization is always in the know and that the vendor’s compliance will be demonstrable to all auditors involved,” he explains.

It is also problematic when dealing with certain governments, as there is a belief that multinationals have bottomless pockets, and are therefore penalized for even the smallest non-compliance. “We have had customers who get audited yearly in the countries in which they operate in the hope that a penalty can be imposed resulting in a hefty payout. They cannot afford not to be squeaky clean.”

Similarly, he says, there is an advantage when it comes to the time zone differential between the regions in which you operate and the location of your outsourcing provider. “Often the job gets done while your organization is closed for the day or the night, and you can go to the office the next morning and the service has been delivered. This is a unique advantage that gives you the advantage of round-the-clock business operations.”

Alongside this, an additional benefit of outsourcing is consolidated reporting. “All global organizations, at some point, have to add up their totals and it is a major exercise to consolidate the data, convert across currencies, and arrive at the end with a single report. Outsourcing does all this for you.”

Pohl concludes by adding another benefit: the centralization of a business activity with one hub servicing multiple countries. “Any multinational wanting to save money and remain compliant should be considering this. And, in times of stringency when cutting down is being demanded by shareholders and boards, outsourcing makes perfect sense. It’s not about scaling down activity, but rather about ensuring that this fundamental business practice is undertaken correctly across the entire organization.”

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Global Recognition for SA’s Best Business Bank Bank on the Global SME bank of the year!

Global Recognition for SA’s Best Business Bank

Bank on the Global SME bank of the year!

FNB’s market-leading approach to providing helpful and contextual financial solutions to support business customers has been recognised through the accolade of Global SME Bank of The Year at the Global SME Finance Awards Ceremony late in 2020. Managed by the IFC, the SME Finance Forum was established by the G20 Global Partnership for Financial Inclusion (GPFI) in 2012 as a knowledge centre for data, research and best practice in promoting SME finance.

FNB CEO, Jacques Celliers says: “To be recognised as the Global SME Bank in 2020, in addition to the Sunday Times’ Best Business Bank in SA for 7 straight years now, is an enormous achievement and carries humbling responsibilities. It is pleasing to see that our numerous meaningful innovations over the last few years aimed at simplifying our customers’ banking-related experiences are at the forefront of global best practice. I am extremely proud of our team’s efforts to support our Business Banking customers with modern solutions as they navigate the complexities of their industries during these incredibly challenging economic times.

As we head into 2021 our customers can look forward to even more support not only with respect to trusted, efficient and secure digital platforms and payment solutions, but also with ever increasing trusted, knowledgeable and experienced teams on the ground in local markets across the various industries our customers operate in. This is because we know that while methods of interaction are important, they are however secondary to the fundamental relationship between our customers and ourselves. As financial services are intangible in the sense that a bank enables transactions and financial management rather than the manufacturing of products, the relationship with customers built up over many years remains a fundamental driver.

Over our proud 182 years we have demonstrated that we are a bank focussed on using and developing the most modern tools to enable both our colleagues and customers. Exciting benefits derived from platform-based efficiencies continue to be reinvested into further enhancements of our value propositions across transact, credit, invest and insure activities. It is very important for us to ensure our customers are safely and conveniently in control of their lives/businesses 24x7x365 through our secure data-driven digital control panel with its fast maturing integrated communication platform.

Businessperson - EntrepreneurJust as we this year terminated the use of cheques, we hope to soon terminate the use of unsafe communications such as emails, sms, etc,” adds Celliers.

According to Gordon Little, CEO FNB Commercial, the Bank’s specific and unique value propositions across segments continue to result in both more entrenched clients as well as record levels of new account growth. He says the dedicated focus is especially effective in solving for each business’ unique needs such as assisting to transform informal or underbanked businesses, digitising activities for those still reliant on outdated banking methods or finding unique ways of enabling the wider FNB networked ecosystem to support businesses to grow.

“Customers in the SME sector are seeking a range of both financial tools and advisory services. As a result, our world-class transactional, credit, invest and insure capabilities allow us to extend valuable benefits to customers across a range of solutions to enable them to run their day to day affairs. On the advisory side, we provide a range of helpful solutions such as the recently launched marketplace on our digital platforms all the way through to the Fundaba suite where SMEs can get holistic business education from incubation, starting, running and ultimately growing their business. Other support includes free SME thought leadership content such as Business Talk, the Business Toolkit that assists businesses to cope through COVID-19, as well as accounting, invoicing and payroll support,” concludes Little.

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Holiday Spending – Get your finances back on track

 

Finance - Personal finance

 

2020 is officially over! To compensate for what was a challenging year to say the least, many of us took to the holiday season like it was our last, leaving our finances floundering. Considering the pandemic and its economic knock-on effects are still likely to be with us for some time, the start of 2021 is a good time to come to terms with the holiday hangover and embrace a new year and a new financial you.

According to Momentum financial planner Janine Horn, the road to recovery off the back of a tough 2020 is going to be tough for South African households. The 2020 Momentum/Unisa Consumer Financial Vulnerability Index for the third quarter of 2020 revealed that consumer financial desperation levels were still very high as of September 20209. In fact, the Index shows that these were at their second lowest level since the Index’s inception in 2009.

 

“Regardless of your financial situation, if you went a little overboard with spending over the holidays, you can still get back on track! Being mindful of this and taking steps as soon as possible to course-correct is important.”

 

Horn shares her tips on how to get some momentum back on your journey to success with these financial staples:

 

BUDGET, BUDGET, BUDGET

According to Horn, budgeting is like the dieting of the financial world – everyone knows they need to do it but not everyone is willing to commit. “January is the month where most households tend to begin the budgeting process. With the current economic crunch, this is the year for all of us to get serious about our household budgets and truly commit as it is likely going to be a life raft for your household in the year to come.”

 

Horn’s advice is to follow these four simple step when planning your new year budget: 1) Determine your income; 2) Be hard on yourself and cut the fat of things you don’t need; 3) Put more money into paying back debt if possible; and most important of all 4) Keep doing your budget every month to track your spending.

 

TACKLE YOUR DEBT

When it comes to household finances, Horn says that debt is the enemy of success. In fact, according to the 2020 Momentum/Unisa Consumer Financial Vulnerability Index debt servicing vulnerability also declined as the index score increased to 40.8 points in Q3 2020 from 32.1 points in Q2 2020. This means that households have been more easily been able to pay off their debt thanks to lower interest rates and flexible payment plans.

 

“With the interest rates being what they are, now is the time to start paying off your debt. Whatever you can afford to put into those repayments, you should do it. The less debt you have in the future the less burdened you will be when the unfortunate happens and you are left financially compromised,” says Horn.

 

SAVE FOR A RAINY DAY

The rainy day may not be here for you now but as life has taught us, it is always around the corner. A broken down car, a bed bug infestation, a robbery – these are all things that nobody plans for and there are 100 000 other things that can go wrong when we least expect it. Many of these disasters come at a massive cost and not everything will be covered by insurance (if you even have insurance).

“Saving is difficult because too many people make themselves do it manually every month. If you treat saving like an expense, you can just set up automatic monthly transfers from your bank account so that at least 10% of your income is moved into a savings account. You won’t miss that money as much if you never see it in the first place,” advises Horn.

 

DON’T LOSE SIGHT OF YOUR DESTINATION

As we are all embarking on our personal journeys to success, Horn says it’s up to us to take responsibility. “This is your life and your life choices will affect the outcome. Discipline is the key to success. But beyond that, a good partner can help guide you when you have been led astray. While a trusted spouse or a loved one may give you solid money guidance, there is no substitute for impartial, professional financial advice, especially in such precarious times.”

 

DON’T LET THE NEXT HOLIDAY CATCH YOU UNPREPARED

It may seem far away or less of a priority right now as you start the New Year with immediate needs, but before we know it, it will Easter holidays and you want to be ready. Horn says it is a good time to start thinking about what you may want to do – whether it’s travel or lunch at home with friends, you need to budget for that. She advises to think about the costs attached to your plans and start a savings account sooner rather than later. “You don’t want to be back to square one in terms of your savings when the time arrives to be able to enjoy your holidays,” she concludes.

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Small business resolutions to boost your cashflow in 2021

By Viresh Harduth, Vice President, Small Business, Sage Africa & Middle East

Heart of Darkness - Reading

 Running a business in what we assumed would be a post-COVID world this year has turned out to be a continuous challenge, taking on various strains from last year’s pandemic. A common denominator for many small business owners is steady cashflow throughout the year.

Staying in the green has always been a priority for small business owners. Now, more than ever, you need to take control and manage your finances to ensure long-term growth and sustainability.

To make the most of 2021 and increase your cash flow and profits, here are six ways you can do this:

  1. Introduce subscription sales
  2.  Do you sell a service or product people buy and use several times a year? You might be able to sell it as a monthly subscription. For example, rather than charging customers each time they need a pool or garden service, you could put them on a monthly contract. They benefit from predictable costs, and you get cash flow each month while securing their business for the year.

        2. Consider invoice factoring
    Invoice factoring supports the cash flow of smaller businesses that struggle to offer their customers credit terms of 30 days and more. It’s basically a form of credit where a third-party financier pays you an advance based on an agreed percentage of each invoice you issue. As you receive the money, you pay back the advance and a modest fee.

    If you are not number savvy, there are technologies that can help you gain insight into exactly what is coming in and what is leaving your business account. This will help identify where you can streamline operations and save money. Conduct a break-even analysis – a calculation of the sales targets you would need to meet to cover fixed and variable costs – and identify areas where you can cut costs.

    3. Speed up delivery
     If you get paid cash-on-delivery, look at ways to speed up production and delivery. For example, a new courier company might be able to ship your goods faster than your existing one. This might also cut your expenses if you find that the new supplier has better rates.

    You should also look at getting rid of unwanted office equipment that keeps you from getting things done quicker. Rather than allowing old inventory or obsolete machines, PCs, and office equipment to clutter your premises while depreciating in value, sell them. Remember that selling inventory below cost may produce a tax loss, in addition to giving you a cash injection. Selling old equipment may produce a capital gain, especially if it’s fully depreciated.

    4. Evaluate supplier and service provider contracts
     If you’re in a long-term partnership with a vendor, take the opportunity to re-negotiate payment terms or discounts when contracts come up for renewal. Also, go through the contract to be sure you’re not paying for any services or extras you don’t need.

    You should also review your payment terms. If your credit terms are 60 days, rather keep the money in an interest-bearing account than pay early. Don’t be late with payments either. This harms your relationship with vendors to the extent they will no longer give you credit. You may also be asked to pay interest.

    5. Cut costs
     Always look for opportunities to reduce wastage and inefficiency, whether that means moving out of your plush offices or cutting back on printing costs. Today, almost everything can be done remotely and online. Using cloud-based accounting solutions, for example, can help you and your team get work done no matter where you’re based.

    6. Reward prompt payment, chase outstanding debts
     You should have a credit control process that focuses on ensuring your debtors pay on time. Send invoices to customers promptly, and chase overdue bills. Be clear about your payment terms. Incentivize clients to pay on time with discounts for early settlement and penalties for late payment.

    Alongside this is taking control of the cash that comes in, in a more assertive manner. Many small businesses know the feeling of waiting for a corporate client to pay them after they’ve dedicated most of their team’s hours for the month and settled third-party supplier bills. Likewise, someone making custom furniture is spending time and materials on each order. As a small business, it’s reasonable to ask for a 50% deposit upfront for big jobs that could hurt your cash flow.

     

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