Stability / Job Security during a downturn...?

Count_Chocula:

Depends on how well capitalized the group is and how permanent their capital source is.

+1

Back office ops, traders, ER, advisory in that order. Traders tend to suffer the most though, since their skills aren't usually transferable.

Good investment sales brokers will continue to do work, although will likely make considerably less than their previous years due to prices falling and owners not buying or selling as much due to decrease in values however in a downturn some owners need to liquidate to fulfill other obligations. Good leasing brokers will have a tougher time as fewer new companies will be looking for space and established companies will not be moving around. New, average and subpar brokers will likely be looking for a new career.

Acquisitions people will be laid off if their firm is not actively buying assets since their main function is analyzing new deals. Asset managers will be ok however will be under more pressure to cut costs and deliver some type of profit. Bad asset managers will be let go if they cannot work their buildings on a bare bones budget.

I was just beginning my career in 2009 and I can say that my first year in the business provided a ton of turnover at the brokerage company I was working for.

In 2008, I was working back office for a lender. The lender I worked for ended up selling off about 1/3 of their portfolio over about a 3 year period, but even then, nobody in my shop was let go. The valuation team that I had just left (in late 2007) stayed intact since the principals had court/litigation experience (former Arthur Anderson guys) and were seeing tons of new business go their way.

All of the other lenders that we worked with (including the life co that I work at now), kept their senior guys - the ones with the Rolodexes/major relationships - and moved them into hybrid workout/origination roles (they slowed their new origination to a trickle, but never fully stopped). They tried to keep junior people by moving them into other roles if possible, but anyone they couldn't absorb somewhere (either into a workout group or a ops group) was let go (only a handful of people). Once all of the books were clean and mini origination programs were complete, everyone just went hard on loan surveillance. The advent of quarterly financial document submission is due to too many originators having too much time on their hands during the recession (a few lenders did quarterly surveillance before this, but not many in the life co world).

In the two groups I've worked with so far, I hear that workouts and restructuring are common areas to go into. It's pretty cool stuff too if the players and portfolios are big or high profile, imo. Essentially solving problems to help a group or firm get out of a their bad situations. Examples could be, working out a banks portfolio, like Lehman Brothers which was huge, or maybe a large PE firm needs to restructure large deals they're involved in which could mean tossing an old asset strategy for something new to meet market demand/changed economics/financial environment... then again the work could be boring as hell who knows, these are just stories older guys have told me. Also, a few of the guys were former Arthur Anderson people.

Although not considered to be the most sought after division in a private or public real estate firm, valuations/appraisal is one of the more stable. Financial reporting of the firm's real estate asset values is a GAAP requirement and done on a quarterly cycle.

Workout at a bank or any other lender is great experience. A lot of the big distressed debt buyers -- lone star, oak tree, Fortress, etc, took down massive portfolios from banks during the downturn and hired a ton of asset managers to work out debt, foreclose on assets, pursue guarantors, etc.

If you're in an investment sales or debt placement role at a national brokerage, I would highly recommend trying to join the loan sales team.

There's money to be made in all parts of the cycle.

Loan sales teams aren't just for underwater properties. Sometimes lenders sell a loan because they are leaving a market/cutting a line of business, have too much exposure to a sponsor/asset type, or are going through a strategy shift/portfolio rebalancing (either global asset allocation or RE asset allocation).

During the downturn, the life co I work at was pretty active in selling loans (even well performing ones) because there was a Global Asset Allocation shift that was being implemented by the top of the house. When your CIO tells you to liquidate mortgages, because he wants the cash to support asset classes that are illiquid, then you do it (even if it pisses you off now because you see how much $ you left on the table by selling). We obviously picked lower performing mortgages to sell first, but to get the best pricing, we had to throw some good stuff into the pools. However, there wasn't enough of the underperforming stuff in our portfolio for us to shrink to the size management wanted, so when we got to 2nd tier properties, we were still selling good stuff, that now would be classified as excellent in the market.

In the last 4 years, we have opted to only pursue a loan sale when we couldn't work something out with the borrower directly (DPO, loan rebalancing/refinancing or something similar). We've done two sales, one in 2012 and one in 2013, since the 2008/2009 sales.

Since we don't do very many of them, the team that handles dispositions is part of the AM team at large. However, they have experience in loan sales from working in that area during other downturns.

i think the thing to remember is that just because the economy is recovering, doesn't mean that every property owner has capital/desire to spend capital on every project. So even during the upswings in the economy, there are still projects that go bad, just not as many.

The residential loan sales market is crazy big (both the securitization side and the whole loan side).

The buyers all have different strategies. Some are just YTM players, others buy mezz/sub debt with the intent on trying to own the property. Some buy Just so they can do a workout and earn the fees.

If you are good and work for a good analyst, you should be fine. However, if you don't work for a good analyst, even if you are good, you could face the chopping block. ER is a lot smaller than IB or S&T. Usually they hire very few junior people, comparatively speaking. Plus, ER doesn't bring in revenue like IB or S&T, even though it does make money for the firm. This means that when they're looking to make cuts a lot more people are on the line.

This is the way I understand it, but I'm just a student who is interested in ER and been talking with ER guys.

Agree with D M. One other thing that I always bring up is the importance of how much banking business your coverage companies are doing during the times of low trading volume. If it's a sector that's active in the capital markets, your job would be relatively safe compared to other sectors. This is just based on my experience and what I've learned from my senior analyst.

We had a few younger analysts let go in the past couple of months. If you are covering a sector that is competitive (i.e. many other analysts out there covering the same stocks), you might be under a lot more pressure. You could be replaced by one of those many competing analysts if you don't do well with II votes. If you are an associate for one of these analysts, you might be given a notice as well or the departing analyst could bring you along (given he/she has somewhere to go).

These are just some of the factors to consider. Other than that, I don't think you will really see any substantial cut backs because ER is already lean.

Job loss between equity and debt are fairly closely aligned when it comes to downturns because If there are no acquisitions going on, then debt people don't have any new deals to lend on. However, keeping your job as a lender might be slightly easier as many lenders need people to deal with defaults/workouts and will move originators/underwriters into those roles.

During the downturn, my company didn't slash anyone in the debt group. We still had a small lending program so some people stayed to work on that, and others worked on distressed assets. The equity group had a couple of cuts in acquisitions. Those cuts were mostly mid/lower level because the bosses wanted to keep the senior level people have all of the relationships knowing that they would be harder to replace down the line.

I would say significantly more secure. Yes folks move into workout but people also need to refi no matter the market. Just my $0.02

A lot of people move to workout and eventually come back to lending role once the market recovers. That has been the case here.

Asset Management is also a good go-to during the downturn. Several RE companies have both development and asset management departments, so when development begins to slow (read: the next 18 months), they can put more focus on their asset management without suffering too much of a loss, and then start looking at developing again in cities that pick up quickly after the downturn.

From the Economist:

GIVING ADVICE IN ADVERSITY Sep 25th 2008

Wall Street's woes are yet another headache for the consulting industry

WHEN even consultants suggest that companies might want to spend less on consultancy, you know the industry is in for a difficult time. A recent article in the McKinsey QUARTERLY argues that Wall Street's ailing banks could slash up to $2 billion each from their bloated overheads without damaging employee morale. The authors, who work for McKinsey, a leading strategy-consultancy, highlight several areas that bankers could cut--including fees paid to consulting firms. Presumably this includes McKinsey, which has advised most of America's once-mighty investment banks at one time or another.

Convulsions on Wall Street and elsewhere are grim news for the global consulting industry, which boasted $309 billion in revenues last year, according to Kennedy Information, a research firm. Financial institutions are some of the industry's biggest customers. But revenues are also under pressure in other areas. The credit crunch has cut the number and size of deals by private-equity firms, which are also big consumers of consulting services. And a decline in mergers and acquisitions means there is less demand for the nitty-gritty work of combining computer systems, a mainstay of some consultancies.

Consultants say they have fared pretty well in the first half of 2008. But consulting revenues are not immune to a downturn (see chart). The impact may simply be delayed because firms such as Accenture (which was due to unveil its latest results as THE ECONOMIST went to press) and IBM (which earned 55% of its $98.8 billion of revenue in 2007 from consulting-related services) have multi-year contracts that protect them from sudden slumps. But consultants will feel the pinch next year, as clients cancel or delay projects.

Some consultancies are already sounding cautious about the rest of this year. "I would expect the second half of 2008 to be slow," says Shumeet Banerji, the head of Booz & Company, a strategy consultancy. Industry observers agree. "Consulting firms will be anaemic for a while," reckons Christopher McKenna of Oxford University's Said Business School, who is the author of a history of consulting.

This month Monitor, based in Cambridge, Massachusetts, cut almost 20% of its staff. It laid off consultants in its main business, shut a unit that produced customised software and closed down another that provided consulting to start-ups. It also spun off e-learning and merger-advisory activities, in which it is keeping a small stake. And it closed several small offices, including one in Milan.

Joe Fuller, a co-founder of Monitor, says revenue is up on the previous year, but that it is "anticipating a demanding and tough market in the short term". In response, Monitor plans to invest some savings in promising regions such as the Middle East, and in new areas such as its defence practice. Other consulting firms are coy about plans to reduce costs, but in the past the industry has dealt with slowdowns by recruiting fewer new staff and encouraging surplus consultants to seek jobs elsewhere.

Might tougher times lead to consolidation? Rumours of link-ups abound. One company that has considered a merger in the past year is the Trinsum Group, which is itself the product of a union in early 2007 between Marakon, a strategy consultancy, and Integrated Finance, a financial- and risk-consulting company that includes Robert Merton, a Nobel prize-winning economist, among its founders. Jim McTaggart, a co-chairman of Trinsum, says neither of the firms that it talked to about a combination was an ideal fit. In the meantime, Trinsum has shelved a plan to create a private-equity-style fund because of the chaos in financial markets. "It's been a challenging year," says Mr McTaggart.

One consultancy that has been on an acquisition spree is Oliver Wyman, part of Marsh & McLennan Companies, an American conglomerate that also has insurance-broking and human-resources businesses. The consulting firm, which has a huge financial-services practice, has seen revenue growth slow this year, but its advice on financial restructuring and regulation is in demand. John Drzik, Oliver Wyman's chief executive, says the five purchases it has made in the past eight months have bolstered its presence in fast-growing areas. In August, for example, it snapped up ChapterHouse, a health-care consultancy.

As some consultants have tied the knot, others have divorced. In July, Booz Allen Hamilton (BAH) split into two separate companies--one focused on defence and government consulting and the other, Booz & Company, focused on corporate clients. Rivals claim that the split was inspired by BAH's government partners, who were bringing in most of the money at the combined firm, and that the split disrupted Booz & Company. But Booz's Mr Banerji argues that the commercial arm is better off now because the split freed it from legal strictures associated with BAH's government work. He says the separation was fairly smooth because the two sides were already operating independently.

All consultants agree that emerging markets such as China, India and the Middle East offer the best opportunities for the future. But they accept that most of their business will come from the developed world for a while yet. So the industry badly needs a "Big New Idea" that it can sell to clients there. Previous consulting booms were built on ideas such as "total quality management" and re-engineering. But at the moment consultants have no successor to such money-spinners.

Even so, one corner of the industry is thriving. Companies such as FTI Consulting and Huron Consulting, which advise firms and boards on litigation, forensic accounting and many other issues, have never had it so good. FTI Consulting has been busy helping firms caught up in the financial crisis; its revenues shot up 41% last year to just over $1 billion. On September 18th it was appointed by Lehman Brothers' unsecured creditors to defend their interests. Demand for FTI's crisis- and risk-management services is soaring too. To cope with demand, the firm hired 50 new staff in August. "Unlike strategy consultants, we're very tactical," says Dennis Shaughnessy, the firm's chairman, who jokes that firms such as FTI are "bad-news bulls". Given the troubles in the banking world--and the deluge of hearings, investigations and lawsuits it has triggered--he and his colleagues have plenty to be bullish about.

I've also heard that LEK is shutting down their Asian offices.

Trading can have the highest, if you are a rock star and never loose money. It really all depends on the group/firm.

Eh ok. I'm really interested in PE vs HFs.