Advantages of being in a "REPE" firm over real estate-specific investment firm?
First off, apologies if this is a dumb question but:
Just my observation, but it seems like everybody I know interested in real estate private equity are interested in targeting general PE firms with real estate arms, but are disregarding real estate investment firms that are not household PE names. (Think Blackstone/TPG/Bain vs firms on the bottom end of the PERE 100 list) Aren't most real estate functions the same regardless of firm (generally speaking, an acquisitions/asset management role at, say, Blackstone would not be that dissimilar at a RE-specific investment firm or even a REIT)?
I'm assuming that it is the combination of name brand recognition/career progression prospects/pay that makes "REPE" firms so much more attractive, but is there something else I am missing here?
You're missing a few things.
What some of the people on the RE forum refers to when they say REPE (albeit it's a term coined by children on this website as no one in the industry call it REPE), are firms that do high risk profile (ie value add/opportunistic) deals with oftentimes close-end fund structure (which enhances returns). This, supposedly, allow the firm to charge higher AM fees/more complicated promote structure with crazy catch-up clauses due to more labor intensive nature of the deals, yields high return investments, subsequently higher bonus for the employees. A true REPE firm like Blackstone have fund structure set up for them to buy a large portfolio of assets or flat out a RE company if they want, and differs from a RE-specific firm you eluded to.
Some RE investment firms (large AUM but not corporate PE shops) handle only Core/CorePlus deals and thus less lucrative fund structure. May be just a simple 20% over 7-8% with no catch up and no where close to a 2% for AM Fees. Some of these guys make their money elsewhere, like having a property managment company or their development arm (ie Hines) that pull in tons of fees as well.
Some other lower grade RE investment firms have no funds, and do deals on a one-off basis with high net worth/non-institutional investors. Sometimes, some of these guys get away with finding a niche market (ie. MOBs/Industrial/Self Storage whatever hot sectors out there) and kill it on the fees and returns - their play is usually compiling a large portfolio of properties in a hot sector and sell it off to the Blackstone of the world for a profit. Sometimes they're just mom pop shop that do a couple deals a year. It's really a mixed bag.
REITs are generally the least lucrative of all, as they operate on recylced cash and RARELY have any "PE"-style deal structure with promotes/catchup clauses in them.
So yes, you're missing a few things. And not everybody on here is targeting Blackstone of the world. I'd rather get in a niche small shop doing MOBs, get a sweet carry deal with my shop than to slave my life away at a Blackstone type firm. Most people don't get into RE to want to work at Blackstone, and I think I speak for most people on this forum by saying that.
Good luck.
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Thanks this is helpful. I completely forgot about the fee structure/investment flexibility aspect of real estate.
Also to clarify, I meant my colleagues when I said people I know, not people on this forum. Ironically, I’ve gotten a lot more useful information on real estate from this site than I have externally, and it has helped me understand the industry in a more detailed level (like this comment).
Great post! I also think people miss that "private equity" isn't even how firms like BX describe themselves anymore... they are "alternative investment managers" or something like that. The reality is that big capital firms run/manage multiple fund strategies from the traditional opportunity funds and core/core+ funds to specialized REITs (non-trade) to separately managed accounts and more.
Hence the big mess up is confusing "firm type" with "business strategy/fund type".. A firm can do many things (like PGIM and BX overlap way more than people realize, even if each has distinctive traits that are very different), and even change/evolve over time. This context gets so lost on this site.
Couldn't agree more with this. I work at RE specific investment firm. There's a major difference between working at a REPE shop that invests in RE funds and actually working at a RE fund directly buying assets.
I had opportunities to go on either route and chose the one I'm on. In short, if you want to legitimately learn RE and make bank long term, go work at a real estate firm where you will actually learns the ins and outs. If you care about "Prestige" and making a larger base pay early on, go work for a BX style firm. The distinction is that one group doesn't care about prestige but moreso learning about RE while another group views RE as another "Alternative Asset Class".
The peeps at BX get a 10,000ft view while I get a 1000ft view and am able to talk to everyone from the asset manager, to construction, to property managers and learn an immense amount of knowledge and hopefully be able to do my own deals in the future. But that is my goal, yours may be different. If you plan to switch to another group within PE, a firm like BX is better for you, but if you're committed to RE, then that is simply not the way.
What are you talking about? BX is not a "fund of funds" - they invest OUT OF a fund structure and oftentimes into single asset or portfolio deals on the asset level. Nobody is talking about fund of funds here - in both REPE and GP/Owner/Operator you are investing in actual real estate.
The distinction OP is inquiring is about being at a firm that invests in the LP equity position or the GP equity position. Nobody is talking about investing into funds lol.
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