Real Estate PE Exit Options
Hi,
I was curious to know what are the possible exit options for an entry level / associate at a real estate private equity firm. Some of the options that I've explored are as follows:
- IBD: Would it be possible to move into i-banking with a focus on sectors other than real estate?
- Corporate Private Equity: Would it be possible to move into corporate PE or maybe PE funds focused on related sectors (infrastructure, education, retail)?
- Others??
Any feedback is greatly appreciated.
Personally, I have never met anyone who has made the move from REPE -> Corp IB/PE. Of course, that doesn't mean its never happened. I have met a number of people who made the move from Corp IB/PE to REPE. Actually, a lot of REPE's like ex-IB employees because the skill set is transferable.
Also, Corp IB/PE is much more sophisticated than REPE from a financial modeling perspective, so the skill set you learn is not as applicable. Remember, you wont be looking at B/S or modeling LBO's in REPE.
Basically, your exit options will be RE related.
I just recently attained an offer for an internship at a private equity firm from from a real estate investment background.
To be honest, I think any sort of finance experience is good to have, but a lot of factors come into place such as educational background. Do you have a bachelor's degree? If so, what is it in? Or are you working towards one, if so what is it in?
I hate to belittle real estate, particularly since I just left it but it's a very different ballgame in comparison to analysis of a company's financial information. I would think you'd need to be very strong in accounting in order to attain a full time offer. I don't want to discourage you, but you need to think to yourself "what value could I bring?" and then accentuate those points as well as grow on them.
I hate belittling real estate, too. But the truth is that real estate analysis is unsophisticated.
That's you're problem, you want it to be complicated
Anything is possible... In the past 6 months, 5 analysts from my firm have left for opportunities outside of REPE. 1 went to Carlyle's corporate PE group, 1 to Goldman's M&A group, 1 to UBS's equity capital markets group, 1 to Highbridge Capital's long/short fund and another left for a competing fund's corporate REPE group.
While it's generally easier to lateral within the industry, it's not impossible to shift career paths entirely while you're still young. Augmenting your knowledge of your target industry and networking on your free time can go a long way when you decide to make the jump.
That's really unusual. I am assuming those analysts did not have any prior exp. corp IB/PE, is that correct?
You wouldn't happen to work for LIM, would you?
lol
major options are:
Thanks all! Actually, I'm shortly due to join an REPE group and from the answers that I've gathered my best move would be to get an MBA and then move to corp PE. Does REPE count as good transaction exp or would IBD be preferable for corp PE jobs after MBA?
i've transitioned out of real estate PE. You basically need an angle (e.g. engineering degree moving over to VC, lots of distressed and restructuring experience in RE moving to a credit HF, MBA + other experiences, etc.). Even with an angle it is extremely hard, and it's nearly impossible without one. As others have said though, real estate is a big space
This might work if you're at a more corporate-leaning REPE firm (Blackstone, Colony etc.). It'll still be an uphill battle but those experiences are probably better than pure IBD experience pre-mba for a post-mba corporate PE position. If the REPE shop you're joining though isn't that big (IBD is a better route to make the post-MBA transition.
IBD in a non RE group (in particular in Levfin or M&A, etc) would be HIGHLY preferable to REPE (even if it was at a top firm like blackstone) if you wanted to go into standard PE. I try to get everyone to understand this... when you're in REPE you area Real Estate guy more than a PE guy. At the REPE firm I work at we hire no one who hasn't worked in RE before... even if they were at goldman TMT and then BX... they'd have less of a chance than someone with 2 years experience at your run of the mill JLL or DTZ. It's the exact same thing the other way round... you could be at MS in RE and then go to Carlyle RE and you'd have 0% shot at getting a job in Carlyle corporate IB... 0%. Someone working in IBD at a random boutique would have an infinitely higher chance.
Not sure if I would go that far. You really think the Blackstone associate that worked on the EOP or Hilton take privates has less of a chance than someone who has only had BB IBD experience for corporate PE post-mba positions? BX/Colony associates have basically no shot at megafund corporate PE post-mba (and neither do people with only IBD experience), but IMO they would have a better shot at top middle market shops than guys with only IBD. Hard to prove either way because both are very difficult roads.
yes - hard to prove either way I guess... but we both agree on the main point: it would be an uphill battle in either circumstance. Working on 20 billion dollar deals (hilton, etc) at BX REPE, etc, MIGHT help one get their foot in the door of a corporate PE firm... but it's certainly not the path of least resistance.
What about sectors like infrastructure? Isn't it relatively easy to move into infra PE funds such as 3i? Could that possibly be an exit route to corp PE?
bump
Ya i am also curious, moving to a large PE infrastructure fund, exit ops?
Bumping old thread for any new updatse
My plan was to accept an REPE offer as an investment analyst at a mid size firm, learn as much as possible for 3-4 years, pursue an M7 MBA, then shoot for IBD post-MBA. Does this seem reasonable?
On this board, everyone seems to make the point that once you're in RE, it's extremely difficult to get out, but I'm hoping with an MBA to break up my experience that I can branch out to traditional banking and PE.
PE Real Estate : Is it dead? + Compensation & Exit Opps (Originally Posted: 02/28/2011)
Hi All,
I am considering Private Equity Real Estate as a first job for three reasons (I don't know if they are good):
Now a few questions remain:
What about salaries in the long run? Stupid Example: Can a MD from REPE make as much as one from normal PE? I guess this is all dependent on the future performance of this asset class, but I am also looking for some advice on this point. I don't think LPs are going to accept high performance fees on REPE funds for the time being as these funds burst during the crisis. Or maybe it is the time to go there because nobody wants to do so.
A senior BX executive recently said BX's best product was real estate PE. He said there were less competitors now that Wall Street banks such as LEH had stopped their RE investments. What do you think about this? Isn't he just trying to reassure investors after the huge losses faced by all the BRE, GS Whiteall (-98%!!!) and MSREF funds during the credit crunch? For me it just sounds as he's trying to dump is old REPE shit while fundraising. Also, these PERE funds don't just compete against each other but also vs the rest of the RE market such as REIT, Developers, Insurance companies... What distinguishes them from the others is their use of leverage, but they are buying the same underlying. Therefore I don't see his point when he says banks stopped PERE (which may not even be true) and that there is less competition.
Can you switch from REPE to other strategies such as normal PE, distressed or a fundamental HF for instance? As many distressed loans are linked to the RE sector, I guess distressed HF might be looking for someone with PERE experience.
Sorry for this long post, which mixes interrogations about the future of REPE as an asset class and career choice.
Cheers!
I have a question for you - What do you really want to do?
Not what do you think is the best route / magic pill providing the best money/hours, but what do you actually want to do? I wouldn't worry too much about the salary at the MD level if the only reason you're going to try PERE is because you think you'll get as much money as the other monkeys while working less.
Salaries in the long-run? For MDs? That's so far away for you that it shouldn't even be a consideration today.
On BX - they really are the only game in town right now. Just look at their recent deal with PLD and the just announced Centro deal. There a lot of PE shops out there in CRE, but very few have the size to pull off BX-type deals. I think this is what the BX executive was referring to - the banks competed with BX on the megadeals (see LEH and ASN) but now BX is really the only one that can write the big check these days. That said, more and more money is being raised and the CMBS market is ramping again ... we're probably headed toward better times for the private side of CRE. REITs lead the private market and they have have had to great years in a row.
"- Less hours than M&A" Yes.
"- Same pay as M&A" I assume you're talking junior level here. Not usually. I remember hearing that the associates/analysts at Blackstone RE were making as much as the LBO guys, but that is the exception. At a typical real estate fund you are not going to make $290k all-in your first year out of b-school. Suppose you had the option to go work in the Sponsors group at Credit Suisse or the real estate investment arm of Credit Suisse, right out of school. I can guarantee you the guy int he sponsors group will take home more his 1st year.
"- An easy way to get into 2%/20% buy side without doing m&a first (more easy than normal PE or fundamental HF)" Yes, it is easier, but there are many other 2&20 "alternative asset" classes out there that are easier to break into than the LBO funds or long-short funds.
"What about salaries in the long run? Stupid Example: Can a MD from REPE make as much as one from normal PE?" Certainly possible. This is just me regurgitating another rumor, but I think Jonathan Gray is worth hundreds of millions.
"For me it just sounds as he's trying to dump is old REPE shit while fundraising." It's possible, why not? That is part of what they do. one thing that he IS right a bout, though, is the decrease in real estate investment activity coming from the BBs.
"Can you switch from REPE to other strategies such as normal PE, distressed or a fundamental HF for instance? As many distressed loans are linked to the RE sector, I guess distressed HF might be looking for someone with PERE experience." Yes for that specific example, but otherwise you are pretty much limited to real estate.
I used to think like you, so I know where you're coming from, but I'm gonna have to go with the previous poster on this. Yes, it is possible to go into real estate and make awesome money while not pulling all nighters. But like I tell everyone else here, RE is rather specific and you have to make sure your heart is in it before you make the jump, because it's easy to get pigeonholed, as I said above.
I agree with most everything that prospie said although I think for the last response it should be clear that it's almost impossible to go from REPE to "normal PE". Distressed debt / HFs are very possible for exactly the reasons you mentioned though (it's RE related).
Also it should be noted that REPE is in no way dead. Blackstone just announced a 9.4 billion dollar deal for Centro (australian RE firm) today.
Great questions OP and great answer prospie, gave me some more perspective on the REPE world
Thanks guys for your frank answers!
depends on sector for repe --> corp pe...e.g. if you were pre-mba at BX working on EOP and hilton, huge "real estate" companies with significant opco aspects, you could definitely get a look at a fund that had any kind of big practice in logistics, transportation, infrastructure etc.
e.g. silverlake making big push into data centers, guarantee they brought on a few RE guys to help run that play
also you need to remember that after a couple years at any big pe shop you're gonna get pushed into a vertical doing deals only in one sector, so the whole "versatile" thing only applies when you're very junior.
jonathan gray is a bit of an extreme to pick as he was head of bxRE pre-ipo...but yeah he's around half a $bn.
your lateral options will also depend on how varied your experience is in repe, like if you're only working levered single-asset office deals in a defined geography, you're probably stuck except for moving down the real estate supply chain to a developer or multi-strat like TS. if you're looking at opco/propco take-privates, fund recaps, dev deals, industrial / value-add plays (logistics etc.), distressed debt, esp. if across geographies, then you'll always have potential outs to an AG, oaktree, etc. (if thats what you want / they're available)
hope that helps
Exit Opportunities W/ REPE - Interning at a full time real estate PE (Originally Posted: 05/17/2013)
I am interning full-time at an real estate private equity firm this summer and also doing part time work with a boutique investment bank. My ultimate goal come full time recruiting season is to move into MM/BB investment banking. As far as the private equity work goes, does anyone have any insights or prior experience as to if any work in REPE spins pretty well into IBD? Would focusing on breaking into a real estate investment banking group give me so much more of an advantage as opposed to applying for another industry (industrials, tech, etc)?
I would not put yourself in a corner when you are applying. Different schools of thought on this but by only focusing on a certain area, your resume will go to a smaller subset of people and you have less of a chance of someone picking something out and pulling you into the process. You are still young and teachable. Everything you learn in an internship will go out the window anyway once you get in.
At a family PERE shop....where to go next? (Originally Posted: 06/11/2014)
Hello fine folks of RE Epiphany! Hoping you guys could give me some feedback as I'm quite stuck at the moment.
I've been an associate at a family shop for 2 years now... I started as an MBA intern and stayed on after graduation. I work only with several partners and the CEO, but I don't honestly see a role to grow into; just adding to my current role with little to no salary growth. I realize that I'm underpaid compared to my peers and I'm in an area of the country that's rather remote (though willing to move).
We really behave more as a structured buyer for our transactions, which exposes me to many different angles of the industry. We look at the core plus, value add and single tenant deals, but my role aside from managing deal flow is to study the CMBS markets extremely closely and heavily scrutinize rating agency underwriting before executing our strategy (could get into it more via PM).
An ideal next move would probably be another structured buyer or CMBS shop, though I really don't have much of a plan at the moment.
I've considered moving to a rating agency for a 2-year or so stint to better understand CMBS. Is this necessary to break into a CMBS originator? Or would my basic-moderate understanding be enough to get me in the door at say, a Ladder, Rialto, or Jefferies?
Any feedback much appreciated..big thanks in advance. Please PM with any detailed questions!
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