Pulley vs. Carta for Keeping Property Stakes Off the Firm's Table

The management company's cap table should show ownership of the operating business: who owns the firm itself, and any equity granted to senior managers as a retention tool. Property-level interests, a manager's stake in a specific building's ownership entity, belong in that property's own ownership records, entirely separate from the firm.

A manager can reasonably hold both, equity in the management company and a stake in one or more properties, but the two need to live in different places, tracked against different performance metrics, with different documents behind them.

A management company's cap table that includes scattered property-level interests becomes unreadable to anyone trying to understand what the firm itself is actually worth. An investor or lender evaluating the management business needs a clean answer to that question, not one tangled up with the performance of individual buildings the firm happens to manage.

The reverse problem is just as real: a property's own investors deserve a clean ownership record that is not cluttered with management company equity that has nothing to do with that building's performance or eventual sale.

For the management company's own cap table, Pulley can work if the firm is a single entity with a straightforward ownership group and wants to issue equity or options to senior managers, with a 409A valuation for the options.

It has no role in tracking any manager's separate property-level interests, which should be recorded through each property's own ownership documents instead.

Carta becomes the stronger fit once the management firm has grown into a larger, more institutional structure, perhaps with outside investors in the management business itself, or wants to benchmark manager compensation against comparable roles in the industry.

It is also useful if the firm is preparing for acquisition by a larger property management platform, since a buyer's diligence process will expect a clean corporate cap table clearly separated from any property-level interests individual managers hold.

Create a simple, regular disclosure where every manager lists any ownership position they hold in a property the firm manages, along with the approximate stake and the property. This is not a cap table exercise, and it belongs in a compliance or conflict-review process rather than in Pulley or Carta.

Review the disclosure for conflicts, particularly cases where a manager's personal property stake could influence decisions they make on behalf of other property owners the firm serves, since that is where undisclosed property interests create real risk for the firm's client relationships.

A workable disclosure process for property-level stakes should do the following:

• Ask every manager to list any ownership position in a property the firm manages, including the property and the approximate size of the stake.
• Keep the disclosure in a compliance or conflict-review process, not inside Pulley or Carta, because it is not a cap table exercise.
• Review each disclosure for conflicts, especially where a manager's personal interest overlaps with decisions made on behalf of outside owners.
• Record property-level interests in each property's own ownership documents, separate from the management company's equity records.

Say a regional manager holds a small stake in a building their team also manages under a standard fee agreement with outside owners. If that manager recommends a capital improvement, the outside owners deserve to know the manager has a personal financial interest in how that decision plays out, even if the recommendation itself is entirely sound.

Disclosure does not mean the manager cannot make the recommendation. It means the other owners get to weigh that recommendation with full information, which protects both the client relationship and the manager from an accusation of self-dealing that a documented disclosure would have prevented.

There is nothing wrong with a manager holding both kinds of stakes at once, firm equity as a long-term retention tool and a property interest as a separate investment. The two simply need separate paperwork, separate tracking, and a disclosure process that keeps the firm's clients informed about the property side.

A firm that tries to simplify by keeping only one record ends up with neither record actually being reliable, since firm ownership questions and property ownership questions require different information from different people at different times.