Quarter close is a structured process that ensures accurate financial reporting and timely investor communication. For a core institutional real estate fund the steps are consistent, but execution quality and timing matter.
Step 1: Property-Level Close
The process begins at the property level. Each property manager finalizes their books for the quarter:
Rent Roll Review: Confirm occupancy, rent collections, and concessions.
Expense Accruals: Record unpaid invoices, property taxes, and utilities.
Capital Expenditures: Capture improvements and major repairs.
Budget vs. Actual Analysis: Identify and explain variances.
This information flows into the fund’s accounting system for consolidation.
Step 2: Fund-Level Consolidation
Once property-level books are closed, the fund accounting team aggregates results into the general ledger. Key activities include:
NAV Calculation: Adjust for fair value of properties, cash, and liabilities.
Valuation Adjustments: Incorporate third-party appraisals or internal models.
Intercompany Eliminations: Remove transactions between related entities.
Expense Allocations: Allocate management fees and shared costs across entities.
The objective is to produce an accurate, GAAP-compliant view of the fund’s financial position.
Step 3: Investor Allocations
After the fund’s financials are finalized, allocations to investors are calculated:
Capital Account Updates: Reflect contributions, distributions, and income.
Preferred Return Accruals: Track hurdles and preferred returns.
Carried Interest (if applicable): Apply the waterfall structure for incentive allocations.
These calculations feed directly into investor statements.
Step 4: Reporting and Timing
Investor reporting typically occurs 30–45 days after quarter-end. Deliverables include:
Quarterly Financial Statements: Balance sheet, income statement, and cash flow.
Investor Statements: Capital account activity and performance metrics.
Supporting Schedules: For auditors and internal review.
Some managers target 30 days to demonstrate operational efficiency. At year-end, the timeline often extends to 90 days due to audit requirements.
Conclusion
Quarter close requires coordination across property managers, fund accountants, and investor relations teams. The process is predictable, but speed and accuracy are what investors notice.