Beyond Outsourcing: The Rise of Back-Office Lift-Outs for Institutional Real Estate Investors

Lift-outs are transforming the way real estate firms manage sophisticated fund accounting operations by transferring fund accounting and administration teams to third-party providers. As a strategic alternative to traditional outsourcing, this approach ensures team and workflow continuity and safeguards institutional knowledge, while redefining cost structures and turning fixed expenses into a more flexible, scalable solution. Ultimately, lift-outs reduce operational complexity and enable management to focus on core business activities.

In this Viewpoint, we explore the business benefits of a strategic lift-out and offer 10 best practices for assuring long-term success. These findings are based on wide-ranging conversations with real estate experts and practitioners from Tishman Speyer, PwC, RXR Real Estate and Kirkland & Ellis, as well as other large global real estate managers.

A lift-out is an outsourcing strategy in which commercial real estate accounting personnel, along with their responsibilities, are moved to a trusted third-party provider. One major benefit is continuity: The team remains intact and continues to work on the same portfolios and tasks, preserving institutional knowledge, operational processes and established lines of communication. While the location of the work and the reporting lines change, this approach minimizes disruptions to business operations by retaining deep knowledge, familiar workflows and long-standing trusted relationships. Additionally, a lift-out converts fixed overhead costs—such as staffing, training and operational expenses—into flexible, variable costs that can be more efficiently charged to funds and managed in alignment with business goals.

Successful lift-outs follow a set of best practices.

They require careful planning, strong leadership involvement and clear, empathetic communication to minimize disruptions and ensure long-term success. Having the right partner to whom work is outsourced is a prerequisite for any successful lift-out, as they can ensure the transferred team has the optimal work environment and career opportunities.

CFOs and COOs in real estate investment management are reshaping their fund operations by relying on third-party specialists to manage the growing complexities of delivering sophisticated data management, reporting and administrative support for asset and portfolio managers and, ultimately, investors. Outsourcing allows firms to reduce operational complexity, capitalize on evolving technology capabilities and enhance data capture and risk management while enabling management to focus on the core business (for more on these issues, see our November 2021 report, The Real Estate Back Office of the Future).

Going beyond outsourcing, a lift-out offers a more employee-centric approach by enabling staff to continue in their existing roles at a new, third-party organization. Keeping teams, processes and workplace culture intact has been shown to reduce a transition’s risk. The benefit is further strengthened when senior management transfers with the team, providing consistent leadership that significantly increases the chances of overall success. This approach assures business continuity, maintains institutional knowledge and preserves key relationships.

Lift-outs offer scalability, help companies achieve fixed-cost reductions, retain specialized talent and optimize business processes without disrupting operations. They can be more attractive than standard outsourcing when managing complex, long-dated funds and operational models, where historical knowledge and relationships are critical. Lift-outs can accomplish desired outcomes with less disruption.

A lift-out may also align with a business transformation. As firms grow and acquire new capabilities, they are challenged to integrate different fund accounting systems, markets and ESG and regulatory environments. The COVID-19 pandemic also forced many companies to rethink their business practices. “We executed what we called the pandemic pivot, recognizing the changes the pandemic brought to real estate,” says RXR Realty President Michael Maturo. “The lift-out [of our accounting team] was part of our broader organizational transformation to align with those shifts.” In the recent slowdown phase of the real estate cycle, many businesses have sought to manage fixed costs. The desire for scalability led to the decision to lift out certain business functions to streamline operations and to allow leaders to focus on growth and core business activities. For fund sponsors that are public or considering going public, reallocating overhead costs through a staff lift-out will improve the multiple.

Lift-outs allow investment managers to manage their core business. By offloading non-core and non-brand-defining responsibilities—such as project, property and complex fund accounting activities—management’s focus shifts from day-to-day operations to developing strategy, overseeing results, driving growth and enhancing investor relations. This is particularly valuable in the complex domain of large commercial real estate fund managers. Finally, a lift-out can be a strategic lever for quickly implementing improvements across multiple areas, including operating models, technology and resource allocation. With deep expertise in the complexities of real estate operations and technology, the third-party provider can perform specialized processes with greater speed, cost-efficiency and precision.

The U.S. and European markets differ in their approach to investment management: European firms historically outsource fund accounting operations to a third party, often due to regulations. This approach is now increasingly adopted in the U.S., says Rene Paulussen, Alternatives Leader at PwC Luxembourg. Outsourcing to dedicated teams can enhance reporting consistency and quality, while offering the added assurance of an independent supervisory perspective. Benjamin Briggs, Senior Investment Funds Partner at Kirkland & Ellis, agrees: “Many investors believe that third-party administrators provide additional oversight and accountability (on top of that provided by auditors) and will request that funds utilize a third-party administrator.” This preference is particularly relevant in real estate, where the complex nature and nuance of reporting demands a high level of oversight and accountability.

Ultimately, asset managers can convert fixed costs—such as fund operations staffing, technology and operations—into variable costs by transferring these functions to a third-party specialist. With this, administration costs become transparent and can be allocated more effectively among funds and investors—as is done widely across other asset classes.

One of the main benefits of a lift-out over traditional outsourcing is the ability to retain entire teams, workflows, skillsets and institutional memory—critical knowledge that is essential in today’s increasingly complex real estate landscape. This ensures minimal disruption to operations and allows businesses to maintain strong client relationships while transitioning to a more lean and efficient operational structure. Art Lowenfish, Chief Accounting Officer and Head of Corporate Finance at Tishman Speyer, describes the shift entailed in a lift-out: “The same people are dealing with the same people. It's just that people have different hats on. The key difference now is that instead of managing accounting people and processes, my focus is on managing results.”

A successful lift-out can not only improve operational efficiencies but also help maintain business continuity and the team’s established culture, which is key to ensuring smooth operations. Ensuring a cultural fit between the destination enterprise and the lifted-out team supports long-term collaboration and success. RXR Realty’s Mike Maturo points out that his company treats its employees like a tight-knit family: “We were very focused on keeping the team intact,” making a lift-out preferable to a traditional outsourcing arrangement.

Finding a lift-out partner that offers the right cultural fit for the transitioning employees is critical to talent retention efforts. Ideally, the cultures of the former and new employers would share similar characteristics and feel familiar, minimizing the amount of perceived change in environment. Moving real estate accountants to a CRE specialist not only provides a sense of familiarity but also opens professional development opportunities. Employees gain exposure to new skills, work on a variety of projects and funds and can take on expanded responsibilities that may have been limited in their previous role. In their new environment, they may find fewer barriers to growth and encounter fresh perspectives, best practices and skills. By contrast, a custody bank typically does not offer real estate-specific professional development opportunities, which can limit the growth and engagement of specialized talent.

Case studies from two large global real estate managers highlight how lift-outs have enabled commercial real estate firms to address complex growth challenges, maintain team culture and ensure seamless transitions.

For many real estate firms, rapid growth—whether by acquisition, adding new asset classes or entering new geographies—can outpace existing operations' ability to keep up. Partnering with a third-party expert helps companies respond to new opportunities without being constrained by internal resources, efficiency or service-quality concerns. “Real estate firms want to grow their business but not necessarily with more people. Everyone is looking to see how efficiencies can be created,” says PwC’s Paulussen. Using a third-party also facilitates scaling down the administrative load when funds are contracting.

In addition, competitive and high-cost markets such as Luxembourg, New York and Singapore can present hiring and retention challenges. A lift-out helps mitigate this risk by allowing firms to expand across regions and access talent without the staffing constraints in certain markets. “The lift-out allowed us to manage our growth across Europe, the U.S. and Asia-Pacific,” said one Head of Fund Finance for a global real estate manager.

For firms using different models across jurisdictions and seeking to standardize their processes, a series of lift-outs across multiple locations to a global third-party provider can help streamline operations and ensure standardization and consistency of reporting. “Asia-Pacific is quite diverse as there are lots of countries, languages and individual localized systems,” observes one Global CFO. “For real estate, that's quite problematic because you don't have consistency in underlying platforms. That's one big benefit of having a global provider.”

Real estate is a cyclical industry, and the past several years have seen a readjustment phase. In market downturns, a lift-out presents an ideal opportunity to restructure and reallocate resources, allowing businesses to build a leaner organization while reducing balance sheet costs. This move enables leadership to prioritize driving value for investors, even in a challenging market. “A lift-out is about creating efficiencies and allowing leadership to focus on value-added activities,” says RXR’s Mike Maturo.

Corporate real estate professionals are embracing technology to enhance decision-making processes. A lift-out can allow management to reduce technology commitments and reallocate their capital expenditure budget to other priorities.

At the same time, investors demand better, more detailed information, including comprehensive data on investment and property-level activities. They now expect real-time insights across assets, asset classes and geographies. This puts a premium on collecting, cleaning and transforming data to ensure quality and compatibility. Accounting brings a lot of value, observes Tishman Speyer’s Lowenfish, but getting it right takes a considerable amount of strategy.

Many organizations face challenges getting their technology investment right. New technology infrastructure requires scale and a substantial budget, while taking time and attention away from the investment management’s core business functions. A lift-out allows these companies to reduce their technology commitments while benefiting from the third-party administrator’s investments in cutting-edge technologies, which are optimized and shared across a broad client base. This approach allows companies to reallocate their budgets to focus on growth and performance-driven goals, enhancing overall competitiveness.

For businesses who have already invested in complex technology platforms and integrations, a lift-out offers the opportunity to maintain their existing tech stack while outsourcing other functions. This approach can mitigate the risks of data migration and help ensure a smooth transition while maintaining operational continuity. RXR Realty’s Mike Maturo chose this approach: “We kept our existing system in place. However, CBRE’s ability to invest in complementary software and provide better training allowed us to benefit from new technology efficiently without disrupting operations.”

A lift-out should be seen as a long-term partnership, not just a short-term solution. “Management should envision where they are and where they want the business to be,” says  Barry Johnson, Senior Managing Director and Head of Americas, IA&R, CBRE. “If you only look one or two years out, you're too shortsighted.”

Accordingly, finding the right partner is critical. It’s not about offloading employees or slashing costs; it’s about finding an enterprise that aligns with your values and ensures your team remains invested. For real estate firms, transitioning to a partner company that is deeply rooted in the real estate industry ensures employees stay engaged and contribute effectively post-transition.

While cost efficiencies are a benefit, the true value of a lift-out lies in its ability to transform an organization’s operations and strategy, especially during market downturns. By transferring critical accounting and administrative functions to a trusted partner, businesses can access world-class expertise, technology and resources that allow them to refocus on core activities that drive growth and innovation.

In addition to improving operational efficiency, a well-executed lift-out fosters team continuity, enhances employee engagement and strengthens the organization’s ability to scale.