Real Estate Private Equity Interview
I have an interview with a real estate private equity firm for an analyst position and I would like suggestions on how to prepare. I have three years of work experience in the real estate consulting group for one of the Big Four. I know a ton about the valuation side of things. I don't have much transactional experience though. What else might they expect me to know? Coming from a consulting role, what worries might they have about me? How can I kill this?
i would imagine they are very interested in understanding your experience in modeling...be prepared to talk about your modeling skills, as well as why you will be successful in getting up to speed...
Do you think it would be sufficient to demonstrate competence in excel, or to need to be able to explain/build an LBO model (which from my resume it is obvious I have zero experience with)?
Demonstrating modelling skill will be essential but not corp LBO modelling. You need to be able to build a leveraged investment model for a property or portfolio of properties...i.e. forecast operating performance of the property, build a debt waterfall and price the residule CF to equity less any other costs. Many firms have some program for modelling property CFs so you prob will need to be fluent in RE operating theory more than you'll need to be able to model lease level cash flows.
Some firms are more RE fundamentals focused and others are more financial engineering focused (in terms of culture/background, and approach) and your interviews will likely fit the character of the firm. One indicator would be the background of the juniors. If they are all former M&A guys or CDO structuring guys (very different, I realize this) then it will be very quant in culture/approach but if there are many guys from valuers, accounting backgrounds, developpers, etc. then the focus is more likely to be on the real estate. You probably wouldn't have gotten the interview if the former was true.
Focus on what you know and you should be OK.
Demonstrating modelling skill will be essential but not corp LBO modelling. You need to be able to build a leveraged investment model for a property or portfolio of properties...i.e. forecast operating performance of the property, build a debt waterfall and price the residule CF to equity less any other costs. Many firms have some program for modelling property CFs so you prob will need to be fluent in RE operating theory more than you'll need to be able to model lease level cash flows.
Some firms are more RE fundamentals focused and others are more financial engineering focused (in terms of culture/background, and approach) and your interviews will likely fit the character of the firm. One indicator would be the background of the juniors. If they are all former M&A guys or CDO structuring guys (very different, I realize this) then it will be very quant in culture/approach but if there are many guys from valuers, accounting backgrounds, developpers, etc. then the focus is more likely to be on the real estate. You probably wouldn't have gotten the interview if the former was true.
Focus on what you know and you should be OK.
I'd have to disagree with you, LeatherPantz1. I had an interview today with a repe firm with M&A / bankers as directors and the interview was ALL real estate based. No modeling whatsoever.
Maybe but the culture of the firm and they way they do deals will be different than if it were a bunch of former valuers..,
This is great advice, thanks.
Former "valuers"??
I would love to see a shop that has a sole type of middle/senior management. Most RE firms have a pretty eclectic group of backgrounds. Ultimately, regardless of the views of senior management, if you are buying equity positions in single properties it will be RE focused. You can lever something up 99% but if the RE does not make since it will fall apart.
Real Estate private equity interview Questions (Originally Posted: 04/15/2013)
hey guys, i was just wondering if anybody with interview experiences with REPE firms can share some insights, I have one second round on-site PE interview coming up, it is with a medium-sized opportunistic fund (about 5bn AUM), i have no previous experience with PE interviews except for a few 1st rounds, i was hoping that someone could share some information regarding what type of questions will be asked, what type of technical knowledge i should be fluent in, what type of valuation models id better be familiar with
my previous experience is in equity research and banking, quite fluent in DCF and have worked with lbo models before as well, but no experience with leveraged property financing (dont even know if this is a thing, i think i saw this from an old thread about REPE)
any input will be highly appreciated! thanks guys
http://www.wallstreetoasis.com/forums/real-estate-private-equity-interv…
Second Round Interview for REPE firm (Scenario excel case) (Originally Posted: 11/02/2012)
I have been accepted to come back for a second round interview with a boutique REPE firm. The position is for a commercial real estate analyst in the acquisitions wing of the firm. I have been told that there are only 2 other candidates who have been accepted to the second round of interviews.
I currently work at a CMBS special servicing firm as an analyst and have about a years worth of experience in the CRE industry.
The interview is set up for next Monday and I'm looking for some help with the scenario case model they are expecting me to build, analyze and discuss with investment decisions. Here is the description of the scenario that I was given:
We would like to invite you to come back either this Friday the 2nd or Monday the 5th of November for approximately 2 hours. You will be given a scenario to model in Excel. The case study will revolve around your developing a cash flow model using set data for a commercial (retail) building and you will be given variable lease options (one NNN recovery and one gross lease). You will be asked to pick and demonstrate the best lease option for the investment as well as demonstrating correct cash flow and investment return outputs. You will be asked to present the returns at different times in the investment hold period. Questions are welcome throughout the process.
My excel skills are pretty good so I don't think I will have a problem with building the model. I have some knowledge with lease/tenant rollover analysis in my current job but not to the extent they are asking. I'm pretty new to the investment analysis part, as far as understanding IRR and NPV, which might be a problem for me.
Can someone shed some light for me on ways I can go about practicing/understanding ways for me to analyze and discuss this model? Or maybe someone can just tell me how to go about doing this.
Thanks
Do you have any specific questions related to NPV / IRR? The concepts are relatively straightforward. IRR represents the prospective returns of an investment, based on a given purchase price and other assumptions. NPV is essentially the additional amount over the given purchase price that you could pay to generate the given target return.
In the case study you've outlined, the simple question is which lease alternative will result in greater net operating income (NOI)...greater NOI will provide greater interim cash flows (positive to IRR and NPV) as well as likely a higher terminal value since you will probably capitalize the next year's cash flow to calculate exit price (again, positive to IRR and NPV).
Without knowing anything else, in general the gross lease will win. This assumes that in the gross lease example, your year one gross rent is sized so that NOI after operating expenses is equivalent to the NNN rent from the net lease example, and both leases have equivalent rent bumps. The reason the gross lease will win is that the annual rent increases will apply to a higher base rent, so gross income will grow faster, meanwhile the gross tenant (assuming a "full service gross" lease) will also be paying you reimbursement for operating expense increases over the base year, so your expenses will stay flat.
sounds like youre just going to be making a pro forma off a rent roll. i think you are overestimating how hard it will be. just study up on reimbursement methods and retail sales (and percentage rent in lieu)
Interview with top tier REPE firm - excel test (Originally Posted: 01/22/2016)
I'll start by saying this: I've been a avid contributor for the past 3 years under a different username. I tried to create a new account to post this question and saw that I had an account created with my old email from 4 years ago.
Fast forward 4 years, I've been at a smaller REPE shop in LA for 3 years. Was casually starting conversation with contacts in the industry and ended up interviewing for a top tier REPE firm in the LA office. Got invited back for 2nd round.
I stress top tier to hopefully get some insight from other people who have gone through a similar test at a similar firm: among other components to the interview, there will be a 1 hour excel test. I've worked in the industry for 3 years and have UW hundreds, if not thousands of deals. I am very confident with my UW abilities using excel...
But how in the world can there be a 1 hour excel test? (there are already multiple case studies)
I can put together any kind of model in my sleep... waterfall with multiple tiers, catchups, current income prefs, inv. multiple promotes, monthly, annual, etc.....
But a 1 hour long excel test....
If anyone has insight as to what this test will consist of it would be greatly appreciated. Any obscure functions and formulas that never get used but might be on this test would be helpful...
Even if you have no idea, just drop some knowledge.
Thanks guys.
PM as I have interviewed with some of the top REPE firms in LA and SF over the past few years and could probably give you some tips. But I am assuming it will be a basic P&L and 5 - 10-Year CF model with potentially a three tier waterfall with a few sensitivities.
A possible fringe (or not so fringe idea) would be to use REFM's personal coaching platform. Bruce Kirsch was the editor for Linneman and he is the principle at REFM. He has intimate knowledge of what each firm is testing on. If it were up to me, I'd spent $1000 in order to be properly prepped.
Just a thought.
Seems excessive but as you know an hour will fly by. Probably building a nuts and bolts model, testing how you present and format. Maybe some data tables? I've only had case studies.
Are you sure it's not "the limit on how long you can work on it is one hour" instead of "you will spend one hour typing nonstop until your fingers bleed?"
Just thinking you might be stressing out when you don't have to be
How was the excel test? Can you share any details?
REPE Interview / Modeling (Originally Posted: 03/19/2013)
Hey,
I'll be interviewing with a large Real Estate PE firm in a couple of weeks and I'll have to pass an excel modeling test. As of now, I don't have much RE modeling experience. Therefore, I was looking for some tutorials... any resources that you'd recommend?
Cheers!
send me a PM of the firm. i've taken a modeling test at a top 5 REPE fund and maybe I can help you
I can perhaps help you also. I'm a 2nd year analyst at a PERE shop. PM me if you like.
Hey guys, I have a modeling test coming up with a REPE firm in Chicago; would any of you guys mind sharing what I can expect? I'd PM you directly but I don't have enough posts yet.
Just out of curiosity what do these tests tend to be like? How challenging/extensive are they?
RJW, if you want to PM me go ahead. I took my test a bit ago and can give you more details if you'd like.
Hey guys, I don't know if you're still opening any mail from this thread, but I will also be interviewing with a large manager where I was told there would be an on-site modeling test. My background is actually in architecture and I just spent a year working in RE via a FoF, so I am familiar with industry terminology and the like. However, modelling is a different animal and I've taught myself as much as I can on a personal basis....would you guys have any advice to offer? I would PM but I don't have enough SBs :( Thanks in advance for the help lads, appreciate it.
I recommend taking one of Bruce Kirsch's seminars. www.getrefm.com
Good luck.
REPE Interview question (Originally Posted: 03/11/2010)
Hello all,
I had a finance interview today for a summer analyst position with a repe firm specializing in distressed investments. I am by no means a real estate expert and I haven't had prior experience in banking, PE or real estate, but the industry genuinely interests me and so I'm looking at getting some experience as an intern. I didn't expect the interview to be as focused on real estate as it was since my resume clearly shows I have no experience in the industry, yet they really grilled me on it. They asked me an open-ended question: If we told you to look into a 100-unit apartment complex in Orlando, how would you go about finding what it's worth, given you're not allowed to travel and you have no financials? What's a good answer here? Also, later in the interview they asked about what sort of expenses this same apartment complex would incur. My answer included taxes, general maintenance expenses and insurance. What else am I missing?
I'm sending a thank you letter tomorrow and I'd like to briefly address these topics because I feel my answers could have been better.
Thank you, MKballer
Just as a quick answer, RE is all about cap rates. There is a RE company in Orlando being restructured right now, so I wonder if that's the one they meant. You can google cap rates though to read more, but that's a basic valuation metric for RE analysis.
Also, I wouldn't address questions you didn't know in a follow up. Having been on the other side, it doesn't help me that someone was able to go find an answer to a specific question I asked. I want to see general thought process if they don't know the answers. Perhaps a higher-level statement about not being as familiar with the RE specific types of valuation, but eager to learn and translate the general princinples you've learned in your past experiences into the RE field.
Comparables, especially of recent trades. These's lots of activity in FL with these ~100 unit subdivisions. Lots of busted condos.
100 units in Orlando is about 10 - 25mm depending on condition, neighborhood. Assuming its finished/built, find active brokerages in the region (HFF, CBRE, Marcus Millichap, ARA, call them up and ask to speak to person in charge of the area, ask for his/her opinion, recent transactions. They are all called something similar to "National multifamily housing group" Do that with all the brokerages around. Assuming you know the size of the units, you'd ask about how much each would rent for, as a unit or psqf, don't forget local brokers/agents, find out what's the typical vacancy, plug a reasonable number for bad debt. Essentially you just need to do some research of the local market by calling people who would know the best, and piece together the information.
Expenses can include, payroll, service contracts, management fee, admin, professional fees, repair maintenance, supplies, fuel/electricity/water.
Get an idea of cap rates, cap rate trends, use the I&E to get a NOI and then get a price. GL
To answer the question I would look at average rents in the area for the 1 and 2 bed apartments for similar product($1000 / month) and also look at the cap rate that properties are trading at (6%). Look up what a competitive operating margin is for apartment blocks (75%). Note: I estimated the number, I really know nothing about Orlando...
NOI = 100 units x $1000 / unit / month x 12 months x 75% = $900k
Rough Value = $900,000 / 6% = $15 million
The above poster covered most of the expenses.
All, Thank you for the timely, though-out responses- greatly appreciated!
@Mandava: You are exactly right in mentioning that they want to know your thought processes. The way they worded their questions during the interview, and their responses to my answers, I could tell they wanted to see my thought process.
Received an email today explaining that they'd like to move forward with the interview process. I need to send them a 3-hour time slot that I'm free to complete a case study. Should I expect something similar to what we've been going over in this thread?
Regards
assume you're going to have to build a leveraged investment model of some sort.
cap your net operating income then deduct transaction costs. Depending on how the rent/quality compares to other properties in the market you can adjust your cap rate higher or lower...
what firm is this or where is it located. I had a similar type of interview a few days back in baltimore, asking some of the same questions and a case study follow up.
If you have more than a week before your next interview, I would seriously consider finding peter linneman's book at the school library and reading it completely. I would say it is the best book on real estate investing.
http://www.linnemanassociates.com/textbook.html
Thanks for the info. I'll definitely look into Linneman's book.
@moneymaker, I'd rather not reveal the name of the firm at the moment.
Regards, MKballer
Preparing for Analyst Interview at REPE (Originally Posted: 04/12/2015)
I have an interview for an analyst position on the acquisitions team at a REPE coming up. What should I know going in to the interview?
My Background: IB internship at boutique investment bank non target undergrad Top tier MSF
What questions should I prepare for the interview? This is an area where I generally struggle in interviews.
Depends on what the reps specializes in
Multifamily value-add in secondary markets
Modeling skills are always a given. MF Value-add is all about feasibility. Think the scope required to achieve expected yield on costs, market acceptance of renovations (rent delta) and Capex budget review. PM me if you want further details (I work in multifamily).
Megafund REPE interview (Originally Posted: 03/14/2016)
Hi guys, I have a REPE case study coming up and was wondering whether I could get some help. I know the case study will be on a pre-sale residential asset. I know the questions would be 1) would you invest in equity or debt, why? 2) how much would you need to pay to get 20% IRR 3) build a DCF model.
Since I have no industry background knowledge, it would be most helpful to get thoughts on:
how does pre-sale residential work? (deposit as cash flow? assuming rest of the payment due in construction completion? pre-sale means actually selling flats? so chunk sale proceeds and no rental revenue afterwards?) - any background on the possible situation, background.
things to consider specifically when forecasting future cash flows
what discount rate would you use for DCF model?
Any help would be much appreciated. Thanks!
1) All I know is that you have to assume a pre-sale velocity of how many units sold per month. I know for condos you only model sales in the reversion year.-not sure this helps.
2) to figure out a good investment return rate for debt it would probably compare to what cmbs/banks are looking at for debt yield so anywhere from 7% to 8% on debt. Equity discount rate depends on if pref equity of JV, 15% for pref and maybe 30% for JV not sure. I hope someone who does this all day can lend a hand.
There was a condo development thread a couple months back that was pretty good. A running theme there was whether or not the developer would be paying association dues for the project on unsold units, but there other discussion is probably very pertinent to your question.
you basically have three variables: delivery pace, settlement pace, and deposits. delivery pace will tell you when the units come to market (6 units/mo..or whatever). you get 0 revenue from the units delivering, but this is important because there are usually HOA fees that need to be paid on these units once they are delivered, and if units are on the market (aka delivered) but haven't been sold, you as the owner have to pay those fees (recorded as a cost) until they settle. also, the delivery pace will probably impact when your capitalized interest for development costs turn off. settlement pace is when the units actually sell (assume 6 units/mo or whatever..), and this is when you realize the $$ and when your HOA fees start burning off. For deposits, just use an assumption like 1 mo before settlement, and have it hit your revenue line then. Once everything is sold, you're done. no rental stream.
wouldn't be surprised if they throw in parking/storage unit sales, in which case you could match that with the % of units sold each month (for example if there are 300 parking spots selling for $1,000/space, calculate the % of units settled during any period and apply that % to 300*$1000...or some other assumption you can think up). also, you have to pay commissions for each sale, so you have to record that as a cost or contra revenue account (3-5% of sales price, but it depends). also, need to take into account taxes, entitlements, and all the other fees you get caught up with, which will help you derive your pre tax and post tax profit. assume that's 30%? not entirely sure how that's calculated.
If it's a shitty and risky location/deal, start off with 9%+. If it's a good location/deal, start off with =
also, congrats on the interview
thanks everyone for the help. So from what I gathered so far, the equity/debt injection is not so structured as they would be in a traditional LBO scenario. You have equity getting injected when there is negative cash flow (construction/development costs > deposits from pre-sale).
With this uneven cash flows for both equity and debt, you can work out what the IRR would be for both. But then how would you make a case for which is a better investment?
REPE Interview Help: Modeling and Periodicals (Originally Posted: 05/07/2015)
I'm interviewing for an REPE position in two weeks. I just have a few quick questions. -Where can I get up to speed on real estate market trends and recent deals? Is there a website or specific news source (preferably something free and online)? -What are the main ways to value a property? From what I've gathered, you can 1) use a cost-based approach, 2) use NAV, or 3) look at precedent transactions. Would you also use a DCF? If so, would you just use NOI as your free cash flow? Are there specific DCF nuances in RE? -If you have an LTV of 75%, a cap rate of 4% and a 3% interest rate, what is your ROE?* -Do you have general advice for these sorts of interviews? It's for an entry-level role. I already checked other parts of the forum, but was wondering if you might have any new insights.
Thank you very much!
*Attempt: NOI is 4% of the property value. Interest expense is 2.25% (75% * 3%) of the property value. ROA = 4% - 2.25% = 1.75%. ROE = 1.75% / (1 - 25%) = 7%.
1). Biznow is good, you can register for free and select the market(s) you are interested in.
2). NAV is used for valuing REIT stocks and not property level deals. If you are talking about a property level deal you will likely be using the income approach (direct cap or DCF) and the sales approach as you mentioned. You should also look at the replacement cost (cost approach) of the asset as well...Regarding DCF vs. direct cap - direct cap is basically like the P/E ratio for a stock it just divides the NOI by a cap rate. The cap rate that you use is just like using a multiple to value a stock. Direct cap is good if the property is stabilized (fully leased). If the property is not stabilized or if there will be large cash outflows in the future (below the NOI line) for rehab, leasing (TI/LC), etc then you should use DCF. You really should use DCF no matter what and direct cap as a dumby check. To do a DCF you have a have an exit cap rate which means you need to have a feel for current cap rates anyway....Regarding specific DCF nuances for RE compared to corp fin like I said you are using the cap rate vs. the exit multiple and the discount rate for RE is more market driven than just simply using WACC as the discount rate in corp fin.
3). To answer your quiz question yes the "ROE" you have would be correct at 7%. Good job.
Hope that helps.
Agree with everything in the above except with the exit cap on a 5 year DCF you should assume some cap rate expansion to be conservative because it's not 100% right to assume that cap rates will be the same in 5 years. We tend to pick a certain bp increase per year and add that to current cap rates.
Thats a solid question for a repe interview..do you have any more? is there a resource out there that has similar style questions for repe?
I found it in the company profile section of WSO. You can filter the interviews by group, so I just searched for "REPE" or "real estate."
Just to pile on a little bit - "precedent transactions" are called comps in RE. Also, to answer your question about DCF, you would discount your cash flow (NOI less capex) not NOI
Yeah I totally agree and was just trying to say you have to know current market cap rates anyway as a baseline for your exit cap.
Thank you very much everyone! Your answers were very helpful.
An SB for you!...
I suggest you pitch a product type in a particular region (or submarket if they're local players). You want your answer to align with their investment strategy. It gives them the impression that you're passionate about their style of investment and will not bolt as soon as better opportunity comes up (even if that's your intention).
Check the websites of your market's (or other markets' if you are interested or think they're relevant) big commercial brokerage firms. CBRE, JLL, Colliers, etc. A lot of times they'll post free quarterly market reports or you'll be able to provide your email address and receive them.
I just started a pre-grad school internship with a REPE shop. I studied excel and the market like crazy leading up to it and stressed over everything. Interviewed with the company president and he talked to me about my background...and then talked to me about fishing and bee keeping. He wore jeans and has every day since. My advice is that it's never as difficult or as stressful as you think it will be. If you have an interview, they already like your resume. Your job is to not mess that up, be yourself, and hope they like your personality.
what kind of technicals should I expect for REPE interview? (Originally Posted: 03/29/2010)
So i have an upcoming 2nd round interview with a PERE team of a BB. I had a BBA in a non-english speaking country and am now doing my Masters in hard science in US. Because of my BBA I assume there will be technicals, but since I learned all the stuff in a different language, I sincerely need to get familiar with the terms in English. Could anyone provide any thoughts on what kind of questions should I expect? Many thanks.
Use the search function.
Comprehensive resource on REPE technical interview questions? (Originally Posted: 02/13/2015)
Does anyone have a comprehensive resource on technical interview questions for REPE? I'm currently trying to make the transition from a small owner to a bigger REPE. My resume is getting traction but on my last 2 interviews, I felt my technical answers weren't as rock solid as they couldve been. Preparation is key so does anyone have a website or a resource they refer to when its interview time?
What stumped you? Examples of questions? Was there an excel or model test? There's a ton of reading on REPE on the internet alone. The more you create and support REPE excel models and the more you read, the more you will inevitably understand. There no dictionary to memorize. Short answers are the worst answers IMHO. Always expand your answers to ensure the interviewer believes that you know your stuff. Its about fluid conversation regarding past and potential deals etc.
My 2 cents at least.
** PE Real Estate Interview.. How to be fully prepared? ** (Originally Posted: 11/01/2009)
Hey guys. I have a PE RE interview coming up and was wondering what are some things I NEED to know for the interview. I'm an undergrad at USC with real estate development/finance background. Thanks.
forgot to say its full-time analyst position. i'll be graduating this may.
I had an interview for the same type of gig a few weeks back. It was essentially all behavioral other than talking about some related coursework and my interest in real estate. This was only first round so it may not be relevant to you, but I was pretty shocked as to how focused it was on fit rather than technical.
hm ok. yeah it is first round as well. ive been on interviews where it was 100% technical and others where it was 100% behavioral. trying to figure out what exactly PERE firms ask....
for technical
they might ask you DCF..
for real estate appraisal 1. cost approach 2. sales comps 3. income
1st round for an undergrad hire likely to be behavioral. unlikely you'll need anything beyond what you've learned in re classes at usc (program has a great rep). if anything, "technical" questions will likely test your knowledge of basic industry metrics (cap rate, yield on cost, debt constant, etc.). in office visit might get a little more technical, but i don't know of many pere shops that give an excel test or case study.
ditto pretty much what everybody else said.
def show a passion for real estate, thats VERY important out of undergrad as you cant get too technical on a guy who's enrty-level.
know the basics to valuation, and dcf in the context of an income-producing commercial property.
you wont need to know this, but just in case:
*cap rate and how/why its relevant *debt-service coverage ratio *loan-to-value *and know how these ratios relate to each other
read stuff in ca real estate journal, globe st, costar, any re publication. research the firm and know their recent activity. know what trends are for the product type and area the firm is investing in.
thats about it, good luck!
just noticed this thread is kind of old, oops. how did the interview go?
went well. i interviewed for a internship for the spring semester as well as a full-time position. mostly behavioral. only question i got was walk me through an investment opportunity and why our firm should invest in it.
Real Estate private equity interview (Originally Posted: 07/10/2009)
Anyone know the technical aspects behind real estate. I did banking before but I know real estate PE interviews are a lot diff. Can someone elaborate who has been in them?
Very interested in this as well, was about to ask the same question regarding a PE Real Estate/REIT fund.
I work for a mid-size PE real estate firm. In our interviews we look to see if you have an understanding of cap rates (reverse PE ratios), the different types of easements and an understanding of property rights (surface rights, subsurface rights, etc). Other than that, you are mostly judged on your understanding of financial concepts and fit.
Hope this helps.
what PE firm is asking you to explain easements lol. That an op partners job
Agree. We have a massive RE portfolio underlying our existing operating portfolios and if I were interviewing you for a position I would question your knowledge of industry trends (increasing cap rates, higher vacancies, reduced rents, etc.). I would expect you to be familiar with how to value a property so for example,
say i own a retail center with 300,000 sf and I think on a highest and best use basis I could rent it out for $9.00 psf at a 7 cap...I would expect you to say ok, total market rent would be $1.8M on 300,000 sf at 9 bucks...the net property value equals the market rent $1.8M divided by 7% (the cap rate) or approximately $25M. I would then ask you what your perspective is on LTV for this type of property based on current market terms (i.e. 65% LTV). I would be familiar with the CMBS market (or lack thereof).
ha note i did the calc based on 200,000 sf friday give me an fing break have a good weekend
hmmm rental revenue doesnt equal Net Operating Income, remember that for your interview.
cap rate = noi/property value NOT cap rate = rental revenue/property value
some key ratios:
loan to value = loan amount/property value
cap rate = (above)
debt service coverage ratio = noi/ annual debt service
where i use to work, we would have guys put together cash flow statements from scratch using rent rolls and a few assumptions, though i dont know how entry-level of a position youre interviewing for. good luck, im surprised PERE is even hiring entry level. just curious, why go from ib to pere? pere is in the dumps right now and will be for a while.
In my case, I'm in S&T not IB, so it's even more of an unusual jump. However, the fund I am interested in, is my cousin's fund, and they have a lot of dry powder.
Anyone else?
Also, it's for an internship, so I don't know if the interviews are different. Just became interested in RE after working on some deals.
well it sounds like your applying for a really basic, really entry level type internship since you dont have any re background. i dont think your interviewer will expect you to know much. so if you demonstrate that you know the economics behind the ratios above and you can explain what re trends are doing today, you'll be good.
Are there any good websites out there than can give you an overview of the industry and that go into the minutia like the cap rate etc. ?
Also, how transferable is the skill set from RE PE to traditional PE or hedge fund work?
look at my old posts, you'll find all kinds of useful stuff.
also, the skill sets do not tend to be transferable at all. from my expereince, i have not heard of anybody moving from repe to vanilla pe, BUT i have heard of people doing the opposite.
Real Estate PE interviews (Originally Posted: 09/30/2007)
Hey guys,
I have been fortunate enough to be able to interview with the Real Estate Private Equity arm of a BB. Does anybody here have experience in REPE in general to be able to give me a good idea of what type of questions to expect for an interview?
Thanks guys.
Is this with Morgan Stanley? I have that interview coming up this week on Thursday. From what I have heard, it is mostly behavioral compared to I-banking. Having that said though, I have also heard that having a good knowledge of products and of RE is pretty vital.
Good luck with the interview. Btw, do you know what pay packages in REPE are like relative to IBD?
Possible Interview Questions at a Real Estate PE Firm? (Originally Posted: 05/19/2011)
Hey Guys!
First off, thanks everyone who has helped me out so far my attempt to get a Private Equity internship.
Secondly, I have another few questions to ask you all.
I have recently been in the process of trying to secure an internship at a small (5 man team), Real Estate PE firm. So far I've simply been communicating with one of the employees via e-mail, and now he wants to set up a meeting at a local coffee shop by his office. I should also mention I'm a junior in High School.
I was wondering: what kind of questions should I expect from him? I'm assuming mainly fit, but specifically what kind might he likely use? Also, if there are technical, what should I try to read up on? Will he likely bring my resume so that I can walk him through it?
Any advice in addition to answers would be very much appreciated, thank you.
You're a junior in HS..?
He probably wont ask you much other than...why real estate and where do you think it's going...
.. kids get internships in HS nowadays? kudos to you
Advice for REPE Interview (Originally Posted: 03/02/2014)
Hi all. I'm a senior in undergraduate and I have a second round interview for an analyst position with a firm involved with real estate private equity (consulting and some Asset Management). I was told there would be no formal testing but I should be familiar with how real estate properties are valued at a high level. I've taken a course in real estate that dealt in part with investment but I was wondering if anyone could direct me toward some more study resources on the topic (aside from obviously googling it). Also, I know it's a bit harder to find news on the industry (as opposed to the stock market for example) and any suggestion on some relevant news sources would help. I'd really appreciate any help with either topic. Thanks.
Actually decided to start a blog that discusses some basic real estate finance concepts. Only has a few posts so far, but will still help you out in your interview. basicrealestatefinance . blogspot . com /
there is actually a lot of news that covers REPE and real estate in general. The WSJ has a real estate section as well (you definitely should be reading some form of literature to stay up to date on world events)
costar.com/news perenews.com
you can start off with those. best of luck on the interview.
Not much help here, but I would love to be in your position. If you dont mind me asking, what were your previous internships/ how did you get this internship?
Real Estate private equity interview Help (Originally Posted: 11/02/2011)
Guys, need a little help with this upcoming real estate PE shop in NYC. They are hiring for an entry analyst and looking to do 2-3 rounds of interviewing without an excel test. I was wondering what type of questions they would be asking. I really want to be well prepared for this interview. I'm assuming the classics: take me through a DCF, what are the 4 ways of valuing RE, what is a cap rate. Anything else? Do a BOE calculation?
What firm if you don't mind me asking? I recently interviewed for a REPE firm and was asked mostly behavioral questions. Biggest advice I have for you: make sure you have a solid (and unique) answer for why RE. I can't emphasize it enough.
Assuming you're interviewing for entry-level, you shouldn't expect a lot of technicals. Know:
*Cap rate *IRR and NPV *NOI and how to calcualte it *Argus, download the trial version and play with it
Fez is right, have a thoughtful answer when they ask you "why real estate"?
What if their definition of entry level is 1-2 years. What would I need to know then?
At 1-2 years experience, you still need to know:
*Cap rate *IRR and NPV *NOI and how to calcualte it *Argus, download the trial version and play with it
Fez is right, have a thoughtful answer when they ask you "why real estate"?
+
Find a way to demonstrate real-estate excel experience. What kind of real estate do they focus on?
You need to know the strategy and capabilities the firm has that you are interviewing with. Once you know their strategy then you can familiarize yourself with the type of lingo they want to hear. You should be knowledgeable about their previous transactions (assuming they are public or you can find press releases), get an idea of how they are valuing real estate, their source of capital, other relevant transactions in the marketplace, etc. good luck
REPE Interview (Originally Posted: 05/21/2012)
Hey All,
Question for some of you that has been through interview/are in there now.
Have been through two phone interviews and modeling test. Going for superday on Wednesday.
One of the MDs I spoke with mentioned that one of the plays they were looking at are "office rescues". Assume this is taking under-leased office assets and giving them some refresh capex. How would you go about thinking about this? I haven't ever modeled an office deal, but would assume you look at what pro forma occupancy you could drive and figure out a payback period and returns. Anyone have any pointers on how I can sound intelligent here?
Fund is smaller (one sub-$1 billion fund, closing on $1b fund shortly). Think more FoF style investing, but MD thinks this might be a play.
Any other general office modeling pointers appreciated as well. Assume unlevered cash flow is NOI less TIs/LCs and capex reserves (on top of intiial capex in above scenario). Do you amortize TIs/LCs? I would think you could capitalize the TIs but not LCs.
Anyways, thanks in advance.
Not sure how in depth they will want you to go? What is your background? If you are RE IB they will expect a much more detailed analysis, are you straight from UG?
Office rescues are a pretty common strategy in the opportunity fund space. The idea here is that a fully-leased, institutional-quality building with little to no deferred maintenance will normally trade based on cap rate to a REIT or "core fund" that is buying for yield. Falling fixed income yields have driven a lot of traditional yield buyers up the risk curve, so there's a lot of demand for stabilized, relatively low-risk real estate assets seen as a good substitute for fixed income.
The strategy as an opportunity fund is to buy a broken office building with "good bones" in which a prior owner has failed to make adequate reinvestment. Often this follows financial distress: the value of the property has fallen below the value of the debt, so the prior owner has no incentive to spend new money on tenant improvements and leasing costs, and as a result vacancy soars and the building falls into disrepair. This presents an opportunity for a private equity fund to buy the building (often through the debt), invest in modernization and repositioning (which are often called "market-ready improvements"), and then offer TI packages and broker bonuses to lease up the vacant space.
One important metric to evaluate is yield on cost, which is essentially the NOI you believe the property will generate once you have completed lease-up divided by the stabilized basis (which is your purchase price plus all the capital and leasing costs required to stabilize the asset). What you are trying to arbitrage is the gap between a stabilized yield on cost and a core cap rate. Simple scenario: if core buyers are typically pricing stabilized assets to a 6% yield, but you can buy this vacant asset and stabilize it to an estimated 9% yield, you can make a ~1.5x multiple excluding interim cash flow. Payback period would not typically be something you consider during your hold as a PE fund.
As for your modeling questions, when you evaluate returns you care about cash. Amortization of capital items is an accounting concept, and something that you always attempt to reverse when you perform a DCF or IRR analysis (not just in real estate). Capex, TIs, and LCs should be registered as a negative cash flow in the period where the cost is paid.
re-ib-ny, you should really start a CRE blog.
Great feedback from re-ib-ny... SB + 1 for you.
Good to see other RE guys on WSO.
How did the interview go?
PE Real Estate Interview (Originally Posted: 05/02/2013)
I have an interview coming up next week with a private equity real estate firm and I barely have any knowledge of real estate.
This is a very entry level position so they might not be expecting me to know much, but nevertheless I want to be prepared because I need to get this internship.
Can anyone give me any suggestions what I should learn for the interview?
Thanks in advance guys!
Try to get a handle on the real estate valuation process, Sales Comparison approach, Direct Capitalization(understand cap rates in general), Cost approach, DCF. Express your interest in real estate, make sure you come across as wanting to work in the real estate industry. Firms can sniff out the kids who are more interested in interviewing at traditional PE, Hedge Funds etc.
Yep, this. Word to Jeezy
Thank you so much!
Also, I am probably stating the obvious but depending on what this firms strategy is you should look into what types of product they invest in, is it multifamily, retail etc. and get a feel for that market.
Will do, it's multifamily.
NPV, IRR, cash on cash, discount rate, wacc. On the non-technical side, be specific and enthusiastic about why you want to be there. I know it sounds obvious, but many people don't do this when interviewing.
NPV, IRR, cash on cash, discount rate, wacc. On the non-technical side, be specific and enthusiastic about why you want to be there. I know it sounds obvious, but many people don't do this when interviewing.
+1 to above
Because Real Estate is such a relationship-driven industry, firms are looking for someone personable who's actually excited to be there, it doesn't take a quant phD to do back of the envolope calculations. My last part of the interview was, "Oh and I guess we didn't bring this up earlier but you know about waterfalls, JVs, IRR, and cash on cash returns right? OK Cool."
This 100%. Just wrote a blog entry about it. Silver nanner for you
CRE - what's your blog? I'd like to check it out
hah, it's nothing big. Right here on WSO
http://www.wallstreetoasis.com/blog/129571
There are 4 whole postings right now
I come to America to make party, yes?
How'd it go man?
Interview at PERE Firm (Originally Posted: 10/09/2017)
Junior chimp in need of help.
I have a 2nd interview at a PERE firm. Required to buildout a RE DCF model within 30 minutes. They will provide assumptions. My background is not in RE but I am hoping to make a transition. Does anyone have an example that I may review to prepare for the interview?
Much appreciated!
adventuresincre.com
Real estate PE interview project: proposed price for single-family homes (Originally Posted: 08/21/2015)
I studied science in undergrad and self-studied CFA/finance, but I have no experience in the industry. I'm interviewing with a real estate PE, and the project prompt is to calculate an offer price and explain the calculations behind the price based on a given address. I know that for commercial real estate, I would do a DCF, but would I also do the income approach to value single-family homes? Should I also use the sales comparison method? What calculations/models would PEs typically use in this case? How complicated are the models?
Any help would be greatly appreciated!
Is this to buy or sell
The only correct answer is comps. Anything else is BS to make it more complicated
If it's an income producing group (development) of SHF's then there is much more to it than comps. Get the noi and expenses and do the dfc (this is 1 of 2 income approaches-the other being a straight cap). Yes get comps. Connect these 2 findings (income approach and comps) and narrow the price gap to something in between the two (justify with common sense and market knowledge). If it were me I'd find construction numbers for the cost per pound approach as well. Call brokers, call developers, costar it, registry of deeds if you don't have costar or a good lookup software, call a gc to discuss the cost per foot of those style homes. Go above and beyond.
Top PERE Interview - Worth the risk? (Originally Posted: 09/24/2013)
Hello ladies and gentlemen,
I currently work at a commercial real estate brokerage firm, and it’s only been about 1-2 months since I started. So last weekend, when I was home doing nothing, I just dropped my resume at few places on my school’s career website. Luckily, I just heard back from the top PERE shop saying they want to set up an interview with me.
It’s a standard OCR, but it’s with the 3rd party recruiter, not with the analysts from the shop.
Since it’s my first time interviewing with 3rd part recruiter, I'm not so sure what to expect from this interview. Could you guys shed some light on how the interview is like with the 3rd party recruiter? is it legit? And do you think its worth the money & risk(a day off is huge in my team)?
Also, I would really appreciate any general insights on how to prepare for REPE interview.
Thanks much for your help!
I've done these interviews before. It's really nothing, the recruiter will ask you a few basic questions and throw your resume into the stack. I wouldn't take time off for it, ask them if you can do the interview on a Saturday morning or a weekday after work.
That's exactly my thought too. Do you know how much power they have in the recruiting process? Also, I have to fly down to my college (Midwest) for the interview, which makes me think that they are some what serious since they are making some investement for themselves as well.
You should do it. Do a search (top right) for REPE/PERE interview threads
You can usually get a sense of whether the recruiter is worth talking to very quickly after getting him/her on the phone... you'll know immediately if they have substance/power or are just fishing... from my experience.
If they're paying for it, take the day off and do it. If not, don't waste your time.
Do you think it's waste of time? The interview is not some flimsy phone interview, but going to be held in the career center at my school. I was curious to know how common it is for big companies to outsource their recruiting efforts.
It's uncommon to outsource OCR, yes.
I would say not worth it. It is not worth missing a day of work, spending the day flying out to your college, and spending countless hours just to meet a recruiter who is representing this REPE firm. There are more efficient ways of conducting this first "weed out" interview. Phone screen, skype, etc. You are literally wasting money if you fly out to meet a recruiter this early in the stage (or any stage for that matter). I would say the only way it would be worth flying out there would be if the company itself was interested in you & wanted to meet you. Then ask yourself if the opportunity cost is worth the potential outcome. I would only do it if you were further along within the hiring process.
Intro/Advice for meeting with REPE director (Originally Posted: 06/04/2014)
Hi guys,
I'm fairly new to WSO, I enjoy reading through the forums here but decided to introduce myself today. I'm going into my second year of business school and I'm very interested in real estate. Right now I have a portfolio of residential properties that I rent out but I want to get more involved in the game. I don't know what aspect of real estate I really want to get into but Im trying to learn through WSO and some books. Currently. I work at an investment management firm right now on the legal side (boring) so I would love to make a switch to a real estate firm next summer and do something that doesn't make me wish time went by faster when i'm at the office. lol. With that being said, I contacted an alum who is the Director of Investments at a REPE in a week for coffee and wanted any advice you guys could give me on what I should be trying to get out of this meeting. I'm not expecting to get a job at his shop or anything spectacular like that but I definitely would love to get his help on getting my foot in the door to any other potential firms as I have no connections in real estate whatsoever.
Any advice would be greatly appreciated! Thanks :)
Et modi occaecati vel quos. Eos ea officiis voluptatem nisi. Modi dolor quisquam repellendus cum eaque. Non ab beatae voluptas quo possimus eum voluptate. Numquam ex minima et. Ducimus neque hic eum aliquam laborum itaque tempore.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Aut voluptates velit iure quaerat est. Voluptatem quis mollitia beatae corrupti quae hic architecto. Assumenda et consectetur consequuntur rerum expedita.
Et quia ut maiores ut voluptatem. Magni reprehenderit est deserunt sit dolor numquam delectus ullam. Nesciunt suscipit rerum nam et quibusdam. Voluptatem nisi ipsa voluptas aut sed. Consequuntur ut laborum et officia inventore libero est omnis.
Mollitia aliquid omnis eos officia alias. At in voluptatem facilis odio aut iure esse. Vitae animi id repellendus molestiae libero dolores ut.
Similique eveniet veniam a vitae sed sed recusandae error. Aut omnis autem ut eius eaque. Sequi velit modi odit debitis deserunt. Sequi sit architecto optio qui quisquam qui odio. Harum ducimus accusantium non iusto earum aut quia repellendus. Quia molestiae nemo numquam in molestiae id. Atque rerum excepturi explicabo occaecati laborum vitae.
Exercitationem adipisci dolorem quia distinctio facilis error. Vel et libero et. Quidem odit numquam quo corporis voluptates eum. Eaque qui eaque ratione aspernatur necessitatibus consequatur.
Tenetur labore corporis voluptatem rem. Impedit corrupti amet sit recusandae odit laborum qui.
Distinctio asperiores beatae rerum rerum sint placeat a. Voluptatum occaecati commodi quia quia culpa. Quo officiis totam suscipit modi repellendus.
Saepe est cupiditate debitis officia iusto ex. Vel quis dolor eum id vero numquam. Praesentium iste qui impedit exercitationem repellendus consequatur. Et necessitatibus quod temporibus ratione consectetur modi et dolorem. Reiciendis earum itaque praesentium ipsum inventore ratione quos. Cum voluptas nulla sunt molestiae veritatis exercitationem aliquam.
Cumque non id iste. Accusamus sint porro nihil inventore saepe quis libero.
Qui omnis ea earum dolorum. Vel quidem et aliquid nobis. Labore provident qui sit deserunt magnam quod autem.
Qui eum dolor non quo. Modi atque perspiciatis rerum corrupti vero. Ipsa voluptas veniam ullam ea sit omnis.
Sit dolorem qui odit doloremque. Maxime deleniti numquam expedita quos sed repellendus quia ex.
Assumenda necessitatibus ad quo cupiditate dolorum eligendi ducimus. Sit est qui dolorem quaerat ut. Soluta eaque tempore quam est soluta. Qui beatae ut unde accusantium alias laboriosam ex. Adipisci quo voluptatibus eos libero sunt dignissimos.
Ipsa veritatis assumenda facere omnis. Eveniet ut eius et aliquid hic aspernatur.
Sequi corrupti voluptas odio culpa soluta. Animi porro ut ut qui. Consequatur aut et id suscipit.
Sit cum accusantium omnis et dolor. Ut numquam magnam aut amet assumenda excepturi eligendi repudiandae. Magni tenetur labore ipsa nemo.
Amet maiores rerum fuga eos aperiam. Rem aut consequuntur unde repellendus fuga asperiores. In consequatur animi odit eos. Architecto quia voluptatum sit hic. Sint delectus et molestias rerum nostrum. Vero error suscipit velit et ut ipsum nihil cum.
Quaerat ratione culpa voluptates pariatur pariatur quis nobis ad. Quos sit quisquam incidunt laudantium enim consequuntur libero. Molestiae tempore atque ab est saepe possimus voluptas. Rem ut dolorum nulla qui vitae omnis. Eum explicabo necessitatibus et voluptatibus voluptas dignissimos quaerat.
Rerum mollitia soluta omnis possimus. Occaecati in molestiae ullam mollitia eos consectetur soluta non. Doloribus culpa in voluptates accusantium quod nesciunt.
Illo quidem qui quos aut eligendi est. Et quas accusantium quibusdam est. Ratione omnis perspiciatis nam.