Development Career Progression
Currently at a small shop (6 people total), and we have a pipeline of $450mm of multi/BTR under construction.
Currently a Development Associate who’s main responsibilities are UW, LOI/PSA execution, debt/equity raising, and submitting draw requests. I came from a large equity shop doing transactions, so I’m viewed as the “finance” guy.
Question is my next role a development manager type of position where I’m handling architects, zoning/entitlement, or do bigger developers typically split up the acquisitions team and zoning/design execution team? I am not sure which side is more important at a larger firm.
I can't speak to MF, but we are a regional developer with about $2B pipeline of the same product type and we bifurcate "finance" and development. From an analyst role they are funneled towards managing the UW process, contacting D/E brokers, deal sourcing, etc. while on the development side is where they coordinate architects and entitlements side of the business.
I'm not sure how your firm will handle your career path given the size and amount of people, but lateralling to another developer you would probably have an easier time getting into the more finance side. There isn't a "more important side" given that developers need both equally. The development managers won't be released to do their work if the project is terrible financially and you can crunch numbers all you want but need development managers to get the project off the ground and realize those numbers. I wouldn't worry about what side of the business you are on in regards to what is more important and just focusing on what you want to do moving forward.
Thanks for the response!
If I stay in the finance side of the shop, how would my career progression typically look? What is the next role/“title” I should be looking for, and how would my responsibilities shift as I further progress in my career? All I’ve really seen are development manager roles on job postings that require entitlement/design work.
Really appreciate your help and this forum. Super helpful.
At a smaller shop the titles are kinda broad and all-encompassing so titles at your current firm will probably not match the big name firms. You'd see Asset Management Analyst/Associate/VP/Director/etc. and Acquisitions Analyst/Associate/etc. as they are so big that they need to split up responsibilities accordingly on the finance side of things. I know of a couple local developers who go by titles like "VP of Finance" and the guy does everything from UW, Capital Markets, Asset Management, and literally everything finance related. As I'm sure you've seen a million times on here, titles don't mean too much in Real Estate (as frustrating as that is when looking for new jobs and what to search for in Linkedin). If I were you, I would look for just Real Estate jobs and look for the job description that matches what you want to do.
If you stay on the finance side of things, speaking only from experience so not the blueprint by any means, is that you progress from the strictly UW and back office side of the business to more sourcing deals from Broker's and off market deals as you get better relationships with the companies and Broker's you work with. Depends on how your current company is set up, but you might then be the one that goes out to the capital markets and raise the debt and equity yourself. Basically, as you move up in title on the finance side you will be doing less "in the weeds" type of job functions and focus more on the macro and public-facing facets of the business.
How did you personally decide between the finance vs development side of things? Are there more finance or development people at your shop, and is it standard to have more finance or development people at a bigger development shop?
Also, is there a pay difference for same level of experience on those sides of the shop?
A lot to unpack there so bear with me.
1. I prefer to model deals and deal with numbers so it wasn't a hard choice between that and endless calls babysitting engineers and kiss up to local politicians but that's just me. Some people don't enjoy staring endlessly at spreadsheets and prefer people managing so that's all personal preference.
2. We run rather lean on the finance side compared to the development team since you would need more people for each phase of development and we have in house architects, civil engineers, and construction arm. But I'm not sure how common all that is for smaller shops to have. Anyways we have about a 1.5:1 ratio of development to finance, but we are an upper middle market developer and not a Hines-level player so that might vary.
3. The pay that I've been exposed to is substantially higher on the finance side. Whether its development, REIT, or REPE you'll always find acquisitions teams making some of the highest salaries at the shop. Asset management and capital markets will be lower than acquisitions but still slightly better (from what I've seen) than development roles. It should be noted though that once you get to VP/Director roles the pay is very good regardless compared to the average 9-5.
Why is it that the acquisitions role typically makes the most?
Rightly or not, it is perceived to be a harder job to go through the process of modeling out deals accurately and successfully navigating the deal process from beginning to end than to keep the property managed correctly. Compensation across all fields is boiled down to perception of difficulty and willingness to do the job. To someone UW a deal and coordinating DD might be extremely easy, but its not universally seen as an easy job so companies pay more for a job that not many would be able to easily do.
I can see how acquisitions when compared to property management is clearly more difficult. What surprises me though is comparing it development management.
It just seems like the actual modeling and acquisitions process would be easier than executing through the entire process of entitlements, design, permitting construction and lease up.
It’s so funny too, at least for me - because I’ve done acquisitions and now do development. Development and actually working through issues is significantly harder, in my opinion, than acquisitions, underwriting, finding deals , etc.
The the reason I believe acquisitions gets paid more - without acquisitions there are no properties. No properties means no fees. No fees means no income. Which means no one gets paid and the company will cease to exist. Acquisitions is sales and drives revenue.
Got it, and do you mind sharing what your exact day to day responsibilities look like?
Also, I came from a large real estate equity manager ($90bn +) working on the acquisitions team, and I think my responsibilities haven’t changed all that much besides LOI/PSA execution and managing lease up once we get that far in our deals.
As a result, my hours are a lot better (40-45 vs 60-70). My pay is pretty much the same if not a bit better at my current role. Is that pretty standard for a finance guy at a development shop to have better hours and pay vs a large equity provider? Obviously not true PE like Blackstone/KKR which pay much more, but you’re working 80+ hour weeks.
Day to day changes depending on the life cycles of deals. If we are in the middle of a refi I spend a lot of time looking through terms sheets and coordinating with our legal team on redlines to negotiate and running proformas with the updated debt terms in our forecasted models to see where we need to be for our returns to stay at acceptable levels. If we are heavily involved in dispos/acquisitions I'm spending a lot of time coordinating DD and running waterfall models on dispos to see what final returns are looking like and on acquisitions its endless proformas modeling variations of capital stacks based on where we think capital markets are at. And then if we are in the later stages of a development its refining proformas based on updated construction costs and market research to see where rents are at and demos in the area to make sure the returns are staying in an acceptable range.
The hours in development are typically better than working for an LP, but like any deal-focused role the hours fluctuate depending on deal flow. I would say that at junior levels the pay is slightly worse at development shops than REITs or REPEs (not drastically but think dev making $70-80k and the others in the $85-95k range depending on market for analysts) but then at Director and VP level the pay scale evens out if not moves more towards development as they get carry points or co-invest at a GP level.
The WLB in development from my experience is worth the slightly less pay (typically) and higher upside in the future.
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