RE Interview Question
How would you answer the following question for a REPE role:
If you have $100M of capital in a 5 year fund, what deals would you invest in to earn your investors a 15% unlevered IRR over the hold period? (It can be multiple assets, product types, geographies, etc.)
I've been asked this question, or similar questions, in numerous processes for associate level investment/acquisition roles. Curious what some of y'alls thoughts are.
I think it's more about understanding the market now so for example for those returns maybe a pref equity investment in multifamily for example. Shows what you know you about what's going on and understanding of the capital stack risk/return metrics. I've usually said something like that as a general answer. Pref equity in multifamily in the Sunbelt - targeting a little under 15% but shows you know the market, also add because were seeing distress with xyz that needs rescue capital. It's usually a quick 30 second answer then they say ok and move on lol.
I think they’re trying to gauge your understanding of the risk/return spectrum for real estate.
So probably not core plays (Class AA office, multifamily, and industrial) and more of towards redevelopment and heavy value-adds? Development LP pref. equity perhaps.
Whatever you answered was probably correct if you have 2-3 years in experience.
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