Q&A: REIT Acquisitions Associate

larry david:

MBA wise, what made you choose Fuqua? Did you consider Kenan Flagler? Just asking because while Duke is obviously ranked higher, KF has a great RE program. Also, what were the backgrounds of the others who worked with you in acquisitions at RMR? Thanks for doing this.

The acquisitions team at RMR while I was there consisted of more senior people (Director and up). In fact, I was the only junior-level employee on the team. Everyone came from a acquisitions/Asset Management background. None came from banking.

BobTheBaker:

I do not understand why people do these AMA's without intending to discuss compensation, it is a relevant consideration. With that said, did you start in the after your MSF? What do you intend to do post-MBA? Did real estate not prove as good as other "high finance" jobs in MBA applications? How respected is acquisitions experience at a REIT compared to at a REPE firm?

2) After the MSF, I worked at EY in the Banking & Capital Markets audit practice. After working there for a year, I switched over to acquisitions at RMR.

3) Post-MBA, I am hoping to stick in real estate, although on the investment banking side.

4) For MBA, you are not grouped in the IB/PE group of people but rather in the RE group (which is relatively small for all MBA programs). I came from a non-target school, okay GMAT, with no "brand-name" RE experience. I only applied to two programs: Fuqua and Kellogg. I was accepted at Fuqua and WL at Kellogg.

5) I assume you are talking in terms of MBA? Because real estate is a pretty niche industry and not a ton of people in RE go top programs, I don't believe (my opinion) most admissions teams really know how to distinguish between a REIT and an REPE firm.

REPE8:

Thanks for doing this.

What made you decide to go back and get a MBA after already getting an MSF?

Could you explain the jump from analyst to associate? How did your responsibility and role change with the climb up the ladder? Also what made you move firms?

2) The analyst and associate are basically doing the same thing, except the associate will have more responsibilities and more trust. The associate is expected to run the underwriting and due diligence with basically no oversight whereas as an analyst you will have people constantly double checking your work.

3) The move was mainly personal. My in-laws were supposed to move to DC and so we were moving there to be closer to them. The final push was RMR went through some turbulent times (search: "Commonwealth REIT and Corvex" to get a full background).

CX1988:

Thanks for doing this, I will check the offerings on your website very soon.

I'm also headed to a top MBA program this fall and was wondering if you could speak to some of the opportunities for career-switchers looking to break into real estate. I am coming out of the US military and am interested in acquisitions roles. I know you haven't started school yet, but do you have any insight into the compensation for someone who has no prior RE experience? Same as other associates?

Real estate hiring is very erratic and very few firm will ever come to campus. Therefore, you really need to hustle, especially if you have no pre-MBA experience. It is far from impossible, but you do need to hustle.

If you are gunning for acquisitions, I would also look at Asset Management roles as well to cast a wider net. It is not uncommon for asset management people to switch to acquisitions.

MIWP1989MI:

Thanks for doing this. Anyway you could give more in-depth on your background / timeline. Number of years at each job / when you graduated undergrad. Also if you are comfortable more background on your GPA / GMAT.

Also when did you start thinking / preparing to get your MBA? Did you take any of the GMAT classes?

Undergrad GPA was 3.5 and 3.6 from the MSF. My GMAT was 690.

I started preparing for the MBA pretty early. A year before I applied I went to a lot of info sessions, talked to many alumni, visited campuses, etc. All of that was in an effort to pick only the programs that fit for me.

I used the Manhattan Self-Study and supplemented that with Magoosh. I would highly recommend both.

smokay72:

How are you funding your MBA?

ISellMoney:

My parents invest in Multi Family (40 Units+) in NYC, but don't have the education that I will have once I finish graduate in May. I plan to get my MBA in a few years. However my ultimate goal is to create a real estate investment company that:
1. Invests in Multi Family Residential buildings in NY (using investors money as well as my own and charge a management fee)
2. Create a property management company that will then renovate these apartments and maintain them.
3. Also fund my cousin who builds multi million dollar custom homes in NY

What do you believe is the best route to achieve this... Should I go IB and eventually move into PE or try to move into commercial real estate at a commercial bank and get a masters in RE at a top MBA program?

However, beyond that I cannot give much more advice since I am still in the lower-end of experience. Check out a speech Stephen Schwarzman gave to Harvard MBAs last February. He had great advice about starting to venture out too young in the finance industry (I'd include real estate in that). He said:

"If you look at something like my industry, which is finance, which is very much an apprentice business, it takes a while to develop the skills and perspective to know what you should be doing when. The biggest mistakes that I’ve seen is when someone has some technical ability and, after a few years, decides to go off to build their own business when they’ve never really been responsible for anything, not managerially or any other way. They get confronted by the real world that doesn’t want to back people like that or [face a] market situation or change that they’ve never seen before and [are] unfamiliar or [have] an overestimation of a group success compared to their success."

"Typically, when you embark on that endeavor and fail, you very seldom get back on the track in the institution that provides you with the shelter or the continual learning. You’ve gone out, you’ve failed. And failing isn’t like getting a D on a paper. Failing is losing other people’s money. And most people are quite unforgiving about you losing their money when you told them you were highly capable and competent and it turns out you’re not."

Mr_Coffee:

Thanks for doing this. I work in REPE and had a couple questions.

1. Do you underwrite in ARGUS entirely, a mix of ARGUS (through NOI) and excel (layering on debt and return metrics), or purely in excel?
2. What returns are you targeting on a levered and unlevered basis? Do you feel cap rates will continue to compress in primary markets or are we at/near the peak?
3. Can you comment on sourcing - are most deals you work on widely marketed?
4. What metrics do you consider when evaluating private company credit when initially evaluating a deal (with no financials available)?
5. What do you estimate comp to be for VPs, and what % is bonus vs salary?

2a) Because we are a REIT, our the levered returns we are seeking are lower than REPE. We typically target a 12% levered return.

2b) I think cap rates have hit their peak, as least in the space we play in (core / core plus). When talking to peers at other REITs, it seems that most companies are throttling back on acquisitions (some by as much as 50% from last year) and are now net sellers. Supply and demand would say this will drive cap rates up.

3) About 70% of our deals are widely or semi-widely marketed and the other 30% are from personal relationships our MDs have with brokers (i.e. off-market deals or deals only being marketed to a handful of firms)

4) We will talk with industry experts who are familiar with the tenant's company to gauge the its strength in the market. We'll also hire an outside firm to perform an in-depth study of the industry to see the future outlook of it. However, in the end, if the tenant cannot provide us some form of financials during diligence, we will not do the deal.

5) This is speculation since I am not a VP, but I would imagine that base would be around $125-$150k with a 65%-75% bonus.

bolo up:

This is some really interesting information, thanks for doing this.
Couple questions:
As an associate, are you expected to source deals or do you mostly just work on deals brought to you by higher-ups?

The switch to acquisitions from AM sounds pretty common, but how have you seen it in practice? Are asset managers generally taking a step back in title and/or compensation with the switch? (for example, would an associate in Asset Management be able to make a lateral jump, or would it be more likely that they should look for analyst/senior analyst roles?)

Thanks again.

There is no "typical" path people take when switching from AM to acquisitions. Some people are able to make a direct lateral (a couple of people on my team from RMR did that) while other will have to move down a level. In general, compensation for acquisitions will be higher than AM (when comparing similar levels).

If I were in an associate-level AM position but I really wanted to be in acquisitions, I would take a senior analyst acquisitions job all day long. Once you're in acquisitions for a bit and gain the skill set, a whole new world of job opportunities opens u. It would not be terribly difficult to move from a company focused on multi-family to a company that focuses on office. It would not be terribly difficult to move from a REIT to REPE. And so on.

littleflipper:

Would I have a shot of breaking into acquisitions from commercial real estate banking? Looking to make the move soon.

luv2speed:

Thanks so much for doing this! This is extremely timely for me because I have a final interview for this very position on Monday with a large REIT. A few questions...
1) How negotiable is the salary offered? When pressed for my comp range in the initial interview, I gave a range below market (60-80k) so now I'm worried they'll try and stick me with that. Your comp feedback above was very helpful in this regard, thank you.
2) Do you have any suggestions for a really intelligent question to ask the interviewers at the end?
3) Do you have any insight into the final round interview? It's with the president and director, so I assume it will be primarily fit, but if you have any insight as to what I can expect, that would be great.
4) How many deals do you work on at once and what is the average timeline for each deal?

Congrats on your success and thanks again for doing this!

1) My view is, salary is always negotiable to a degree. My approach (which someone else can chime in if they have a better approach) would be: a) Try to find a few comps from friends in a similar role. Feel free to PM me and I can provide a few from people I know. b) When they extend an offer, I'd thank them for the offer, express your interest in the company (don't say they "are you #1 choice), and say you need a day or two to mull it over. c) When you get back to them, tell them you would love to accept the offer but you would like to counter the salary to be $xx,xxxx. You came to this number after talking with a few people at different companies and feel this is market base. d) Since they extended an offer, they clearly want you. Therefore, they will meet you either all the way (if you are asking for a small amount like $5,000) or somewhere in the middle.

2) The best questions you can ask are questions that are going to help you make a decision on whether or not you would want to work for that company. Here are a few suggestions: a) How many live deals do analyst typically work on during a year? b) What responsibilities are given to the analysts? Is there room to gain more responsibility outside of the typical "analyst" position, or are the roles and responsibilities fairly set in stone? c) What is the typical career progression within the group? d) How open are senior members to mentoring the junior employees? e) What are some things you do not like about working with this company?

3) At the senior level, it will almost 100% be fit questions. They will be asking you about your past experience, why you want to work at this firm, what is driving you to switch companies, why you are interested in real estate, why you interested in that particular asset class (assuming the company only focuses on one asset class), and where else you are interviewing. If you made it to the final round, I'm assume you already passed the technical questions.

4) Usually I am only working on one live deal at a time. Maybe two if I am in the initial phase of one and closing the other. Each deal will be take about 60 days to complete from start to finish (from initial underwriting to closing).

BubbaBanker:

Thanks for doing this. I have a few questions:
1. What made you want to get a MSF and MBA? Would you recommend getting both or just one?
2. How was the transition from big 4 to your role at RMR?
3. I'm about to graduate undergrad and looking for acquisitions analyst roles. I go to a non-target. I have a mentor, working on dev and acquisitions deals so I'm getting more of a grasp, but I haven't been exposed to ARGUS yet and the certification course is out of my price range at the moment. Do you have any suggestions on how to be a better candidate for roles?

2) The transition was great. I did enjoy learning the financial statements while auditing and seeing different companies, but besides that auditing was not the most fun. Mainly because I was not interested in it.

3) If you have time, try to get a part-time internship (even if it is unpaid) at any real estate company near you. Don't worry too much about the Argus training if you don't have the $$. I would recommend you take some RE modeling training such as Breaking Into Wall Street. Start grabbing coffee with as many real estate professionals as you can. If you are not already, start reading market reports on the markets you are interested in. All the major brokerage houses (JLL, CBRE, C&W) put out these quarterly reports for free.

Let me know if you have any other questions I can help with!

wdav66:

Great read, thanks for the post.

One question: Your thoughts on Masters of Real Estate programs? For acquisition analyst roles, do you think this degree could open doors?

Looking to make a career change from construction project management, currently working for a major developer in NYC. Looking to gain finance skills but not overly enthused with the time/$ commitment required of an MBA. Recently accepted at Columbia and NYU programs.

Thanks.

You can get an acquisitions position out of NYU. Recruiting at NYU is very hit or miss though. I would look carefully into Columbia's recruiting to make a decision. PM me for more info.

wdav66:

Great read, thanks for the post.

One question: Your thoughts on Masters of Real Estate programs? For acquisition analyst roles, do you think this degree could open doors?

Looking to make a career change from construction project management, currently working for a major developer in NYC. Looking to gain finance skills but not overly enthused with the time/$ commitment required of an MBA. Recently accepted at Columbia and NYU programs.

Thanks.

In my opinion, you situation is 100% why someone should get a MSRE/MRED degree. You have experience and insight in a similar field, a solid name on your resume, need to sure up a specific shortcoming in your skillset, and you don't want to drop big money over two years to get a generalized degree. Not trying to blow smoke up your ass, wdav66 but I think you're a prime candidate.

QatalystV2:

Looking back, if you had the choice to work in the big4 right out of college, would you still have done the msf?

fsujlinc:

Thank you so much for this AMA! I'm graduating in December, had an IB internship last summer (RayJ) but have my heart set on REITs/REPE. After reviewing the previous form posts, most of my questions were answered previously, but I have one left: do you see any value in the CAIA certification, or do you see any of your colleagues with it?

<span class=keyword_link><a href=//www.wallstreetoasis.com/finance-dictionary/what-is-alpha>alpha</a></span>.beta:

Thanks for doing this.

1) How did you manage to transition from EY's audit practice to RMR acquisitions?
2) Did you in prepare in advance through networking etc?
3) Was it a difficult/easy process to transition over?
4) Any advice you have to offer for someone who is potentially trying to follow the same path?

2) I spoke with a lot of people in the RE industry before I started interviewing and applying to jobs. I wanted to make sure I knew they type of role I wanted and was knowledgeable about the RE industry. I also took a RE modeling course just in case that ever came up in an interview (which it did not). Additionally, I tried to touch any parts of RE as I could while at EY (asked specifically to be on the RE loan portfolio of a bank I audited).

3) The process was not easy by any means but not incredibly difficult either. I had to apply to a lot of places and work simultaneously with multiple headhunters to get the job. Ultimately I got interviews at 3 RE firms. 1 said "no", 1 said "maybe" and RMR said "yes". The transition is very doable, just be prepared to do a lot of hustling.

4) a) Start networking w/ as many RE professionals as you can. Do this by grabbing coffee/lunch. If you don't know anyone, reach out to people on LinkedIn. You'd be surprised how many people are willing to connect and have an informational interview with you.

b) Take a RE modeling course. I personally took Breaking Into Wall Street's course and found it useful. After you take the course, put that on your resume. If you have the resources, also take an Argus training.

c) While in audit, try to get on a company that touches RE. If you cannot, try to get into the RE valuation group.

d) Join a RE association in your city and take an active role. Be sure to highlight this experience in your resume as well.

e) Start applying to jobs and talking w/ headhunters.

Let me know if you have any other questions!

Make sure you network like crazy before and during school too. MRED programs don't have the OCI base and typically don't hold your hand through your job search.

Off the cuff, I should yes.

As it is technically illegal to ask or judge a candidate based on age companies will do it anyway. So you can doctor your resume by taking off your graduation date, and then appropriate irrelevant work experience. This is not dishonest if you can do the job.

There is always an outlier, but that person is probably not you.

PonderingWhileSquandering:

I have a question about age. Is it rare for someone to get into REITs either on the analyst side or trading/brokering side in their early to mid thirties?

Thanks!

Midwest86:

Great read. I started out in audit at one big 4 firm and switched to TAS at another when I could get an acquisitions position. After a year, I have decided to put my name out there. I have been talking to a fund about an Asset Management position, fund isn't small but not public or huge on staff. Should I hold out for the acquisitions? Or just bust my ass and hope for the best? Big 4 sort of ruined my trust in moving around internally.

Also, many real estate companies are decreasing their acquisition volume substantially in 2016. There is a fear in the RE world that the market is getting too frothy. So, in light of that, I would not expect acquisitions jobs to be as plentiful as they were in the last few years.

Let me know if I can answer any other questions!

littleflipper:

How much travel is required/necessary for someone in an analyst/associate acquisitions role at your firm?

You would typically look at comparable trades on a per unit/key/sf basis and throw in a number as a placeholder. Then you'd run a DCF and solve for a PP price that enables you to meet your discount rate. If this is substantially below indicative pricing, so be it.

indexmatch:

Thanks for making this. I am confused about one step in the acquisitions underwriting process, and am hoping you can expand:

I know most OMs are sent out w/o much price guidance. What process(es) do you use to internally determine price so that you can solve for your IRR? Is it less scientific (aka using in-place NOI and applying a market cap rate and then adjusting accordingly based on how badly you want the deal)? Or, is it more scientific (aka doing a full blown DCF so that you determine value, and then using that figure in your IRR cash flow analysis)? My gut tells me the former, but I'm not in acquisitions so I really have 0 clue.

Even though OMs many times are sent without guidance, the truth is, if you call the broker, they will give you guidance. They will never say, "Put in an offer to what you think is best!" Instead, they'll say, "We are expecting the deal to trade in the mid-to-high 6.0% cap range". From there you can run the low end of the guidance range through your model and see how this compares on a per SF and cap rate basis to other comps in the market. You can also see how the returns at the price high range work for your company's return threshold.