Artificial intelligence is transforming workflows across real estate investment management; regulatory examinations continue to test the strength of compliance programs, and a challenging fundraising environment is complicating longstanding conflicts of interest.
These themes shaped NAREIM's Legal, Compliance & Risk Meeting, where members exchanged practical approaches to navigating evolving responsibilities, protecting investor interests, and balancing innovation with effective oversight.
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Across discussions, one message emerged: The role of legal and compliance professionals is expanding beyond reviewing policies to helping shape how investment managers operate, adopt technology, and make decisions.
AI Moves From Experimentation to Execution
AI adoption has accelerated over the past year. During live polling, 57% of respondents reported regularly using AI across multiple functions, while another 22% said the technology was either embedded in core business and legal processes or becoming a strategic differentiator.
Only 20% indicated deployment remained limited to select workflows, and none reported still being in the evaluation and experimentation stage.
Members described a growing range of applications, including comparing limited partnership agreements (LPAs) with term sheets, analyzing fund documents, preparing marketing materials, and automating compliance testing.
One participant described using AI to compare multiple fund agreements and generate a draft LPA and private placement memorandum, complete with a redline and supporting explanations for suggested changes. A process that previously took approximately a week was completed in a fraction of the time.
"Questions that used to take 20 minutes take a second," one attendee said.
Members identified research and information retrieval (39%) as AI’s most valuable application, followed by contract review and analysis (24%) and drafting and document creation (22%).
Additional opportunities included automating expense allocation testing, evaluating regulatory registration requirements and improving monitoring frequency.
Looking ahead, 45% were most excited about autonomous AI agents, while 32% selected workflow automation across business functions.
Despite the enthusiasm, members raised questions about costs, access, and implementation. Firms are increasingly evaluating which tools best serve particular functions, how to manage usage-based pricing, and whether internally developed solutions can replace specialized vendor products.
The priority is determining where AI delivers measurable value without adding unnecessary costs or risks.
Navigating SEC Scrutiny
SEC examinations remain a key area of focus for members, with 72% of pre-meeting survey respondents expressing strong interest in the topic. The results highlight demand for practical insights into examiner expectations and recent experiences.
Members who had undergone examinations described extensive document production, repeated supplemental requests and particular attention to valuation procedures, expense allocations, investment approval processes, and books and records.
Several shared recent interactions as more collaborative than in previous examinations, although experiences varied by examination team and regional office.
An attendee described maintaining a dedicated examination preparation folder, regularly updating documentation in anticipation of future requests. The approach helped the firm respond quickly and reduced disruption when an examination began.
Examiners may need additional education about real estate investment structures, valuation practices, and fund-specific considerations, participants heard.
One member recalled a constructive examination experience, including an examiner's assurance that the team was not there to “beat you up.”
Participants emphasized documenting not only compliance policies but also the testing, decisions and corrective actions that demonstrate their effectiveness.
Fundraising Pressures Put Conflicts of Interest Under the Microscope
A prolonged fundraising cycle, delayed realizations and longer holding periods are complicating how investment managers balance competing investor expectations.
Attendees discussed how the growing number of investment vehicles, including sidecars, co-investments and successor funds, is making conflicts harder to identify and manage.
“Conflicts can't be eliminated,” one participant noted, emphasizing that firms must demonstrate how they address them.
Investment allocation decisions drew particular attention, especially when opportunities could be appropriate for multiple vehicles with different return objectives, investment periods or liquidity requirements.
Participants cautioned that underwriting assumptions can influence how an opportunity is classified and subsequently allocated.
Consistent criteria, documented rationale, and compliance involvement were identified as important safeguards.
Co-investments present additional challenges. Investors increasingly seek access to opportunities alongside larger fund commitments, creating questions about outreach, timing, eligibility, and equitable treatment.
Members also considered continuation vehicles and extended fund lives as managers face pressure to avoid distressed sales while addressing investors' liquidity needs.
In certain situations, participants reported managers continuing to oversee assets beyond the original fund term without additional management fees.
Other scenarios involved different client vehicles holding debt and equity positions in the same investment, potentially creating competing interests during restructurings or workouts.
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