Career Advice: Acquisitions vs. Development
Hi all,
I currently work as a Market Research Analyst for a large CRE company and am looking to transition into a Development or Acquisitions role. I have been working here for over 3 years and love what I do, but feel like I'm ready to take the next step in a year or so and work for a RE Development or Acquisitions firm, but want to do my due diligence and see which role is the right fit for me. As for my background, I have an MBA and a little over three years of experience in the real estate world doing market research, analytics, and consulting projects for clients (feasibility studies, due diligence, etc.) including big REITs and REPE firms.
I have spoken to many people, including clients, about this and most say it just depends on what you want to do. One developer told me that if I love to crunch numbers and act as a financial analyst, acquisitions is the right job for you. If you like a little more variety and enjoy crunching numbers as well as negotiating and being at the forefront of deals, then development is more ideal. I took this with a grain of salt, since he is a developer and has a bias. I would love to hear from both developers (analysts, associates, etc.) and acquisitions analysts or associates to get a good idea of what the day-to-day is for each job. Also, what skills would be necessary for each role? What are the pros and cons of each? Who would succeed and fail in each role? What is the career path for each? Keep in mind I would apply as an analyst or some type of entry level positon and want to focus on multifamily or office. Any insight would be great!
Thanks!
I think your mentor was pretty spot on with his description of acquisitions vs development. I've described it the same way to people who have asked me your same question.
I can tell you what I know from being a developer. I know just enough to be dangerous when talking about acquisitions so I won't say too much about it.
Generally speaking, as a developer you'll see fewer deals and gain a broader knowledge of the nuts and bolts of real estate (design, construction, entitlements, partnership agreements, financing, legal/title, etc.)
Great developers need to be good leaders/people managers to bring a team of stakeholders together to reach a common goal. They also need to be great sales people to drum up new clients and convince land owners, governments/constituents, and investors to buy into new projects. Finally, they need to be entrepreneurial in the sense that they are comfortable with assessing and taking calculated risks (pursuit costs, lease up, macro).
I've never worked in acquisitions but have many friends who do. In my opinion, their job sounds extremely repetitive and monotonous (even though they enjoy what they do). Similarly, many of those same friends look at my job and wouldn't want to deal with all of the people and nitty gritty real estate stuff that I do. Different strokes for different folks.
Thanks a lot for the response, it was very helpful! I guess it basically just comes down to preference and whether you want to be the numbers guy or wear multiple hats and cover the nuts and bolts of real estate.
Did a stint last summer in acquisitions and one this summer in development. Acquisitions is more focused, has more depth when it comes to financing, and is more "hands off" where as development has much more breadth, is more of a coordinator role, and is much more "hands on." It also is usually riskier and thus, brings better returns.
One way to consider this distinction is how you feel about real estate. Do you love that it's an alternative asset class and a useful way to park capital? Or do you love that you're building structures where none previously existed and crafting a community by force of will? Do you want to acquire and dispose of large portfolios based on analytics? Or do you want to focus on a project from the beginning and see it through to completion?
Honestly, there's a ton of overlap too, so even the answers to the above won't be perfect, but knowing whether you're a finance person vs. an interdisciplinary person is a good start. In my time, I learned that while I can massage a proforma until it takes me to dinner, I'll never be a financial wizard. Plus, I care about architecture, construction execution, and "placemaking" far too much to ever analyze a deal on a purely financial basis.
Thanks a lot! It's nice to hear the perspective of someone who did stints in both.
Totally agree after spending a summer in acquisitions and 3+ years in development
Do development roles get away from the computer more often than private equity type gigs where you're doing fund acquisitions or development capitalization? Being a CIO would be cool as you're not the one modeling 12 hours/day but it takes forever to get there. In regards to development, how do you pass the time when the cycle isn't condusive to doing deals? When you are on a live project, do you get bored with working on one deal for years? Lastly, I've been told its more difficult for young people to make an impact in development because the more senior guys/gals all get the promote and have all the relationships. Would love to hear opinions on this as I'm not sure if I want to do REPE or development post MBA. $$$ potential is very important to me and I know both can do well but is one > the other for paying bills if you're not an entrepreneur with your own shop?
Unfortunately, the answer to a lot of your questions is, very truthfully, "it depends," and it will depend on firm, role, etc.
In theory, yes, they will be on site more, but it depends. Planning for the next cycle because you want to break ground at the right time and deliver at the right time. Also, cycles are different in different markets - a world changing event like the great recession isn't regular. Just because somewhere is slowing down or is getting overbuilt does not mean everywhere is. No. Unless the project is MASSIVE, you're probably not just working on one deal. Even then, what you do in month 3 is very different than month 13.Young people can make an impact at either and don't make the big money at either. REPE probably pays more starting out. Both are absurdly lucrative if you start your own shop and find success.
"Who would succeed and fail in each role?" using broad brush strokes here, but i would say that a highly transactional 'broker' type of personality would either not enjoy or not be great at development because it can really test your patience and can be such a hopeless grind. by the time the thing is built, you might HATE the deal!
That's a good way to look at it, thanks for the insight!
It's a difficult question to answer, partly because I'm not sure your question really shines light on what you're curious about. In some respects I think what you're really digging at is the difference between working at an operator/developer vs being a capital parter at a REPE shop.
For example, you could work in acquisitions for a REPE shop in a core group (where the job would be much more repetitive in the sense that you're evaluating investment opportunities to park cash and earn low yield) but you could just as easily be at a REPE shop in their opportunistic ground looking for development deals where every deal is very different from the next and the job role is much more varied.
Also, you could work for an operator or hands-on PE shop and acquire value add properties that require years of rehab work and aggressive repositioning, which would require you to deal with the city, contractors, and other parties very similarly to what you would see in development.
Again, comp is very competitve at both if you're successful, start your own shop or rise to the top of an established firm. On the operator/developer side, you start making your money once you can put dollars in on the deals and in REPE it's all about carry (worth mentioning that some firms pay out very well at the junior levels here too but its not ubiquitious)
I have friends who work at large REPE shops in both capacities and, to answer one of your earlier questions, the job can be very unexiting when you're on the developement side doing large scale projects, where you're much more focused on day-to-day detail, as opposed to exploring new markets, evaluating new acqusition opportunies, securing new financings, etc.
So to that extent, you could have a much more "boring" experience in development than doing core acquisitions at a REPE shop.
It all really depends on what shop you end up at and what their culture is. Certainly the first step is trying to figure out if you want to be on the operator/devleoper side (equity) or the capital side (equity or debt?). Then what type of product (office & industrial or multifam & retail or varied, etc.). Then what market? Then figuring out what type of role you want. Ideally you can end up somewhere where you crank numbers for a few years, then move to a position where you're indientifying and sourcing new deals while devleopeing relationships with brokers and equity/financing relationships, and keep going from there.
At the end of the day, real estate firms are so unique and culturally different that you really need to do your research on each different shop to get an idea of what you'll be doing and what your career potential is. Working in the real estate investing world is the complete opposite of doing a stint in banking where, for the large part, everythign is automated and analogous across the industry.
Thanks, Yakehito! My main thing is that I would like to transition from one to the other at some time during my career if I needed to. Would it make more sense to transition from a development role to an acquisitions role or vice versa? My thought is that since you know the nuts and bolts and get experience with cash flow modeling, waterfalls, and sensitivity in development, then you could transition to acquisitions, whereas in acquisitions it might be harder since you're used to crunching numbers and don't have the nuts and bolts down. I'm sure it's much more complicated than this, but that's one way to look at it. Any thoughts?
Kind of in same boat now.
Thing with me is, working with devolpment interests me more however for my own future goals, investing and starting my own portfolio interests me more of acquisitions. I don't have interest in being a developer.
Not to hijack your thread, but can anyone comment on the hours for an analyst in development vs acquisitions? I would imagine devolpment more?
Hijack away! That's why I started the thread.
My impression is that, again, it really depends on the shop. For the most part, development shops have pretty lax hours (45-65/week) compared to finance. In acquisitions, I would expect it to generally be pretty similar, but the more 'institutional' the shop is, the longer the hours.
What about weekends for analysts?
Someone once told me that being a developer is like being a symphony conductor. You make sure that the performance is humming along at the correct pace and that everyone is eye-to-eye with what their duties are in relation to the building project.
Acquisitions is more rigid and definitely more of a number-crunching job.
Both have their faults and pluses. Everyone will probably disagree on what they are.
Now what about acquisitions for a developer? The best or worst of both worlds?
Acquisitions for Real Estate PE vs. Development (Originally Posted: 07/19/2014)
I have 2 years M&A IB experience and recently completed a MSRE program. While in the program, I interned for real estate PE firms. In the long run, I'm not sure whether I want to be in real estate PE or development. I received an offer for an Acquisitions position from a regional development firm that is active across all real estate product types and has well known PE and Insurance company financial partners. If after 2-3 years in this role I felt it was not for me would the door still be open to go to PE?
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