Does REPE really favor REIB experience more than brokerage/acquisitions?

I know this is constantly mentioned in bits and pieces on this forum, but can someone explain to me why the consensus seems to be that going from REIB -> REPE as the favorable path? The way I see it, in the general sense REPE is investing in properties and achieving returns for investors. Wouldn't someone from brokerage (investment sales)/acquisitions, who knows how to value these properties, be viewed as a more favorable talent to have in a REPE group? I understand that brokerage guys underwrite aggressively in order to "sell the dream," but changing the assumptions isn't hard. I can see why regular IB-> regular PE would make sense, but not so much in the real estate world. Perhaps I'm completely misunderstanding something?

 
Best Response

There's probably more nuance to the response at higher levels or smaller shops, but the general answer for junior hires is easy. A post-REIB (true REIB, not mortgage banking) analyst is theoretically going to 1) have a more rigorous modeling and analysis background, 2) have a better better pedigree to show investors, and 3) be the grind-it-out-for-hours-in-front-of-a-computer type.

If you're a senior RE investor with a pool of capital and industry contacts, you don't need the young broker's market knowledge as much as you need the investment banking kid's detail-oriented nature and workhorse ability.

 
gatorman:

I know this is constantly mentioned in bits and pieces on this forum, but can someone explain to me why the consensus seems to be that going from REIB -> REPE as the favorable path? The way I see it, in the general sense REPE is investing in properties and achieving returns for investors. Wouldn't someone from brokerage (investment sales)/acquisitions, who knows how to value these properties, be viewed as a more favorable talent to have in a REPE group? I understand that brokerage guys underwrite aggressively in order to "sell the dream," but changing the assumptions isn't hard. I can see why regular IB-> regular PE would make sense, but not so much in the real estate world. Perhaps I'm completely misunderstanding something?

I think you might be misunderstanding brokerage. Brokers are salesmen, not analysts. A broker might have no idea how to value a property unless they're in investment sales, and even then their "analysis" is meant to get the highest sales price, not necessarily reflect reality. Brokers do minimal modeling, if any, and have a very different skill set than a banker or equity person would.

Commercial Real Estate Developer
 
CRE:
gatorman:

I know this is constantly mentioned in bits and pieces on this forum, but can someone explain to me why the consensus seems to be that going from REIB -> REPE as the favorable path? The way I see it, in the general sense REPE is investing in properties and achieving returns for investors. Wouldn't someone from brokerage (investment sales)/acquisitions, who knows how to value these properties, be viewed as a more favorable talent to have in a REPE group? I understand that brokerage guys underwrite aggressively in order to "sell the dream," but changing the assumptions isn't hard. I can see why regular IB-> regular PE would make sense, but not so much in the real estate world. Perhaps I'm completely misunderstanding something?

I think you might be misunderstanding brokerage. Brokers are salesmen, not analysts. A broker might have no idea how to value a property unless they're in investment sales, and even then their "analysis" is meant to get the highest sales price, not necessarily reflect reality. Brokers do minimal modeling, if any, and have a very different skill set than a banker or equity person would.

To clarify, i DID mean investment sales. Like you and @"StanCRE" mentioned, I would just imagine it'd be easier to transition from underwriting deals in a "get the highest sale price" way, to a "lets see if this actually makes a good investment down the line" sense. Considering many of the buyers that investment sales deal/have relationships with are REPE guys, would it not be easier to use those connections to break in to the buyside? While pedigree is always a consideration, I'd imagine actual modeling and deal experience from the other side would be just as favorable, no?

 

From my own experience, it is pretty easy to move over to REPE or anything buyside if you hustle as an analyst on an investment sales team. That pretty much is my story. I was an analyst in a major market at a big shop JLL/CB/HFF/Eastdil for about a year. Headhunter reached out to me because of a deal that i worked on with my current employer. U/w, putting together OMs, knowing markets/gathering market research are pretty similar to u/w on the buyside and preparing investment committee memos.

 
StanCRE:

From my own experience, it is pretty easy to move over to REPE or anything buyside if you hustle as an analyst on an investment sales team. That pretty much is my story. I was an analyst in a major market at a big shop JLL/CB/HFF/Eastdil for about a year. Headhunter reached out to me because of a deal that i worked on with my current employer. U/w, putting together OMs, knowing markets/gathering market research are pretty similar to u/w on the buyside and preparing investment committee memos.

Would you say you enjoy it more on the buy side? My point being, as a current sell side guy (similar to you - analyst in investment sales at one of those mentioned big shops in a major market), I don't plan on being a broker forever. REPE is a goal for me, and it's discouraging to hear that the only way anyone could break in is by doing REIB first. Would it not be possible to break into a mega fund at some point by transitioning to a well-known buyside shop at first and then moving up to the big boys from there?

 
gatorman:
StanCRE:

From my own experience, it is pretty easy to move over to REPE or anything buyside if you hustle as an analyst on an investment sales team. That pretty much is my story. I was an analyst in a major market at a big shop JLL/CB/HFF/Eastdil for about a year. Headhunter reached out to me because of a deal that i worked on with my current employer. U/w, putting together OMs, knowing markets/gathering market research are pretty similar to u/w on the buyside and preparing investment committee memos.

Would you say you enjoy it more on the buy side? My point being, as a current sell side guy (similar to you - analyst in investment sales at one of those mentioned big shops in a major market), I don't plan on being a broker forever. REPE is a goal for me, and it's discouraging to hear that the only way anyone could break in is by doing REIB first. Would it not be possible to break into a mega fund at some point by transitioning to a well-known buyside shop at first and then moving up to the big boys from there?

You can break into PE from an investment sales position - have you ever looking at PE analysts profiles? The normal trend is IB, investment sales, and development.

 

As people have mentioned it is highly dependent on the shop. If the REPE focuses on core+/value add single asset deals than investment sales at Eastdil/CBRE would be preferable while if the REPE focuses on LBOs or portfolios then REIB experience is preferable. The larger firms like Blackstone, Starwood, Lone Star, Colony, etc tend to focus more on purchasing firms or large portfolios thus REIB experience is preferable.

Robert Clayton Dean: What is happening? Brill: I blew up the building. Robert Clayton Dean: Why? Brill: Because you made a phone call.
 
goodL1fe:

As people have mentioned it is highly dependent on the shop. If the REPE focuses on core+/value add single asset deals than investment sales at Eastdil/CBRE would be preferable while if the REPE focuses on LBOs or portfolios then REIB experience is preferable. The larger firms like Blackstone, Starwood, Lone Star, Colony, etc tend to focus more on purchasing firms or large portfolios thus REIB experience is preferable.

Excellent point. How possible would it be to start out at a more asset-level shop and then transition in to the likes of Starwood, Colony, Blackstone, etc?

 

I broke into REPE on the west coast out of college with no relevant experience, a non-target school, and a shitty gpa. I consider myself extremely lucky (it took me 7 months to land my current role), but hopefully me mentioning this will give you a less discouraging feeling about breaking in with your current experience. You just have to always keep looking and something will eventually come up. Best of luck to you!

 

I actually came from a corporate banking background, with years of experience in RE lending as well. Heavy capital markets and deal underwriting focus. I also was completing my MBA at the time via a part time program at a top 20 school. Very non-target background here so I may be an exception. Although i know someone with a similar background without an MBA and less experience who took an analyst position at Fortress. The majority of the folks at my firm are from IB or PE, specifically REIB and REPE, but it can be done without that background as long as you have industry experience.

Direct investing certainly can't hurt. I think with RE specifically, industry experience in whatever form matters. So get as much exposure as you can.

 

I tell mba's trying to break into the close knit real estate world (REPE, development), especially from international backgrounds, to really try to familiarize themselves with the local market, follow the deals, etc. An investment sales analyst would understand the relative value of properties and their respective attractiveness to capital. I think that's an excellent skill. Brokerage occurs internally within REPE acquisitions, so selling is shouldn't be "below" you. The knock on brokers is they try to BS you and you can't trust their numbers; however, I've come across some pretty thoughtful property level underwriting.

I think some debt/equity brokers have some pretty cool work and they get commissions and can even invest alongside their client. That seems like a path to working for your own accounts. The other negative perception is when the economy tanks these jobs dry up.

Have compassion as well as ambition and you’ll go far in life. Check out my blog at MemoryVideo.com
 

take my comments with a grain of salt. Since i work in Manhattan it might not be applicable to you guys in smaller markets. NYC brokerage has gotten extremely competitive and "institutional". Some of our last hires are TOP MBA grads; etc. I am a debt broker at a major firm. Think JLL/CBRE/C&W/Eastdill.

I came into this thinking the same. Learn the business, get contacts, leave for REPE or similar in 2-3 years. But I actually love it. Many people don't realize being a good broker can be a great career path and gives you A LOT of options. I love it now, and most likely want it to be my long time career path. Hours are flexible (still put in 60+ hours though), pay is great (if you are good), and career path has a lot of options.

I am a full broker, but I work with the associates all the time. In a place like Manhattan, if you are placed on a good team, you will become pretty damn good at modeling. You will learn argus if your team does any office. Most importantly you will learn the assumptions that are actually realistic. You can be the best @ modeling, but if your assumptions are flawed (like I see all the time from these analysts) your modeling means nothing. Some of our analysts/associates are awesome at their jobs. When/If they move on they have been able to pick their future jobs. A lot of them stay and become brokers or move up within their teams, which I think says a lot. Not like ibanking where many people want to leave after 2-3 years.

IMO, brokerage won't hurt your chances if you are good. It will be your job to sell your self to your next prospective employer. Yes CRE is a lot of sales. But thats not a bad thing IMHO. Every career path to make $$ has a part of sales involved in it. Analytics will only take you so far.

Real Estate, even REPE, is a small world. Everyone knows each other one way or another. The amount of contacts you gain in brokerage (especially since networking is your business) is enormous. It's not to hard to call friends we have over at all the major Banks, RE Developers, Hedge Funds; etc.

 
YoungBiz:

take my comments with a grain of salt. Since i work in Manhattan it might not be applicable to you guys in smaller markets. NYC brokerage has gotten extremely competitive and "institutional". Some of our last hires are TOP MBA grads; etc. I am a debt broker at a major firm. Think JLL/CBRE/C&W/Eastdill.

I came into this thinking the same. Learn the business, get contacts, leave for REPE or similar in 2-3 years. But I actually love it. Many people don't realize being a good broker can be a great career path and gives you A LOT of options. I love it now, and most likely want it to be my long time career path. Hours are flexible (still put in 60+ hours though), pay is great (if you are good), and career path has a lot of options.

I am a full broker, but I work with the associates all the time. In a place like Manhattan, if you are placed on a good team, you will become pretty damn good at modeling. You will learn argus if your team does any office. Most importantly you will learn the assumptions that are actually realistic. You can be the best @ modeling, but if your assumptions are flawed (like I see all the time from these analysts) your modeling means nothing. Some of our analysts/associates are awesome at their jobs. When/If they move on they have been able to pick their future jobs. A lot of them stay and become brokers or move up within their teams, which I think says a lot. Not like ibanking where many people want to leave after 2-3 years.

this is good stuff. not enough senior guys outside of wall street who can defend the brokerage path on this board.

i cant prove this, but i have a sneaking suspicion that the vast majority of kids on here who keep asking which boxes to check off to get into repe will never make as much money as a typical successful (major mkt) broker. there are more prestigious jobs, yes, but those guys have a lot of power.

 

+1 to YoungBiz and finance majors often miss out on this. In an illiquid market like real estate you'd better have a network and integrity or you'll be on the outside.

Fill the unforgiving minute with 60 seconds of run. - Kipling
 

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