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The consensus is that acquisitions, from a pay and exit op standpoint, is superior to asset management.

Ceteris paribus, wouldn't the best be a little of both (more eat what you kill style)? What do you think would be a good mix?

70% AM / 30% acquisitions sounds about right to me.

It seems most people exit to the VP/principal level at large (5B+) funds where they have the eat what you kill style shop rather than 100% splitting acquisitions and asset management. Would the exit ops be superior and more diverse with experience on both sides? Can you really get a top acquisitions gig without proving yourself on the AM side at some point?

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Comments (14)

  • Sweatingequity's picture

    From a fundamental standpoint it should be necessary to understand the firm's strategy and implementation (though AM) in order to be successful in Acquisitions. To me, it seems that just because a deal may look good (pricing wise) does not mean it will work out. You need to be able to understand how that deal will be followed through over the life of the hold and whether it fits with the fund's/firm's objectives. At the the same time I think if you are a good fit and have the right skills you can land a good gig at a top shop.

  • MogulintheMaking's picture

    Can you explain what you mean by an "eat what you kill" style shop? That sounds like fun to me, but all I have ever found on the buyside is that it feels very institutional and boring all of the time.

    And yes, many people at the top of acquisitions teams at the institutions are former acquisitions only people or even former investment bankers/brokers. Most funds will have it integrated enough so that the acquisitions team needs sign off and approval from the AM side, so you learn to know what they will be agreeable to. Acquisitions people are deal guys, not asset management. It is a very different mindset and there needs to be a little bit of a chinese wall in my mind, especially if the AM team is using discretionary money.

    Also, you get them to sign off on all of the leasing, inflation, accounting and tenants assumptions.

  • sk8247365's picture

    Eat what you kill is sourcing, underwriting, and asset managing assets.

    I am currently on a pure acqusitions team but it seems most of the institutional people I talk to do both.

    I have never delt with on-site asset managers, leasing brokers, tenants, capex and reserves, or actually implementing the value-add proposition of a deal. At some point, if you want to run your own shop these skills seem vital.

    Also, when you talk to someone about a deal, it seems hard to explain that you foresaw this huge tenant lease-up scenario...but you never actually saw that one through, and have never personally actually seen any of your scenarios through.

  • In reply to sk8247365
    prospie's picture

    sk8247365:
    Eat what you kill is sourcing, underwriting, and asset managing assets.
    I got what you meant. There was confusion because people use that term to mean performance-based pay. Which, by the way, I have in fact seen in acquisitions (I have a couple friends who either worked in or looked at commish-only acquisition positions. no deal close, no pay. Those would not be at very prestigious firms, though).

    Anyway, to your question ... maybe that's what you see with the institutional guys, but I've definitely seen the acquisitions/asset manager pattern a lot at small firms. Because you look around the table and you gotta ask, "Who ELSE is gonna be the asset manager on this deal?"

    Similar pattern at small debt shops. Source, underwrite, and then continue to 'manage' the loan long after it's closed. Very common.

    And your question about needing AM experience to get a top acquisitions job. I'd say hell no. No offense to asset management guys, because I know some very smart, very experienced guys in AM, but I've seen guys get a top acquisitions position without EVER working in AM. Should it be that way? I don't know, probably not, but you can't really argue with reality.

  • PF_CRE's picture

    I would say that's a great amount of % time to spend on Acq versus AM. As others have said you're handing deal of to the asset manager so management (Portfolio Managers, Committees, etc. ) will want buy in from AM pre acquisition.

    As to some of the other comments. I know Greystar is operating completely "cradle to grave" so they buy, asset manage and dispose. That's a lean run institutional operation and they rely on their property management for most of the property level decisions. There are also owner/operator shops that just , as some have said above, look around and are like "sh*t" ahhh someone needs to "asset manage" this. If you are a regional office buyer you might work on a Houston acquisition for 3 months and then the next month be working with the property management company/team on leasing updates/ ideas/ redevelopment , etc. for another building that the company owns. Just how it is.

    To another comment about AM never moving to Acquisitions. I know one top 10 ODCE Fund that takes the best junior asset managers they have and moves them into Acquisitions. I also know one top 10 Fund that never mixes so it really depends and sometimes it depends on the people in place at the shop.

  • REValuation's picture

    Our acquisitions platform has a similar model to Greystar in the respect that the acquisition manager stays moderately involved with the deal for the first year and there is a annual actual vs. proforma discussion that plays a large impact on that persons bonus. The asset manager handles all of the more granular operations/re positioning efforts, but the acquisitions manager must understand this process b/c he needs the asset manager to theoretically sign off on the underwriting. This is a common sense incentivization technique that ensures the acquisition team is compensated based on yields, not purely capital deployment.

    If you want to own your company one day, working in Asset Management for a period of time would be wise. If your looking to get out on your own and have no interest in being an asset manager, then at least educating/staying involved on asset management/corporate management side of the business would seem logical

  • In reply to prospie
    makecents's picture

    prospie:

    sk8247365:

    Eat what you kill is sourcing, underwriting, and asset managing assets.

    I got what you meant. There was confusion because people use that term to mean performance-based pay. Which, by the way, I have in fact seen in acquisitions (I have a couple friends who either worked in or looked at commish-only acquisition positions. no deal close, no pay. Those would not be at very prestigious firms, though).

    Anyone know of any shops that do this? Sign me up

    I had a flair for languages. But I soon discovered that what talks best is dollars, dinars, drachmas, rubles, rupees and pounds fucking sterling.

  • In reply to makecents
    prospie's picture

    makecents:

    prospie:
    sk8247365:

    Eat what you kill is sourcing, underwriting, and asset managing assets.

    I got what you meant. There was confusion because people use that term to mean performance-based pay. Which, by the way, I have in fact seen in acquisitions (I have a couple friends who either worked in or looked at commish-only acquisition positions. no deal close, no pay. Those would not be at very prestigious firms, though).

    Anyone know of any shops that do this? Sign me up

    Probably going to have to find an opportunity like that through personal networking. I'd say it's worth cold-calling smaller private developers and owners.
  • baamboo's picture

    At our firm, it is definitely two separate and independent groups that work together. As it happens, I worked in acquisitions for four years and then moved into Asset Management for the past three. None of the acquisitions guys that we currently or previously employed ever had asset management experience. The more junior acquisitions guys never have any interaction with Asset Management. They are hitting the phones, sniffing out deals, and doing due diligence. Once we are near inking a deal, however, and when it is under contract and in the due diligence period, the lead acquisitions guy for that deal will work closely with us. Mostly, it is breaking down expense and revenue analysis to see how much hot air is baked in to sellers' numbers, and to see what kind of upside can actually be realized through cost cutting, leasing, etc. An experienced/great acquisitions guy will know a good amount up revenue, expenses, and leasing but not quite enough to make a buy/pass decision. Sure, he may know that there are some below market rents in a retail deal. But he probably does not know exactly how much TI needs to be put in to combine three spaces and get a good tenant. Or that our firm could cut the security expense by 30% by adding the property to an existing portfolio wide contract, etc etc.

    If you eventually want to run your own investment business, having experience in both would be extremely valuable.

  • In reply to prospie
    GentlemanAndScholar's picture

    Agreed with @"prospie" on this one. This is common for boutique developers & boutique owner operators, they have small teams that handle the whole investment cycle and serve as a "Jack of all Trades" from sourcing the acquisition -> entitlement / redevelopment -> asset re-position / stabilization -> asset disposition.

    Typically deals are structured as a JV with the developer acting as the General Partner and the capital partner acts as the Limited Partner - usually a REPE firm, one in which it would not be uncommon to have independent acquisitions & AM teams. The developer's job is to manage the project as a whole, ensuring that everything goes as close to the business plan as possible. The LP oversees every step of the process and has to sign off on major decisions depending on the JV structure.

    I over simplified the process, however, I just want to point out that the smaller developers & owner / operators are the one's that "eat what they kill". It's uncommon for the larger REPE shops to do that.

  • In reply to prospie
    makecents's picture

    prospie:

    makecents:
    prospie:
    sk8247365:

    Eat what you kill is sourcing, underwriting, and asset managing assets.

    I got what you meant. There was confusion because people use that term to mean performance-based pay. Which, by the way, I have in fact seen in acquisitions (I have a couple friends who either worked in or looked at commish-only acquisition positions. no deal close, no pay. Those would not be at very prestigious firms, though).

    Anyone know of any shops that do this? Sign me up

    Probably going to have to find an opportunity like that through personal networking. I'd say it's worth cold-calling smaller private developers and owners.

    Well I guess I'm already doing this in brokerage. Ideally...you find the deal-double end it and sell it to a shop you have a good relationship with so you can roll your fee. Then they go in and add value at the asset level or develop the site from the ground up. They exit in x-amount of years and let you list the deal on the back end for bringing it to them. Your fee turns into a nice sized check.

    I had a flair for languages. But I soon discovered that what talks best is dollars, dinars, drachmas, rubles, rupees and pounds fucking sterling.

  • In reply to makecents
    prospie's picture

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  • In reply to prospie
    makecents's picture

    I had a flair for languages. But I soon discovered that what talks best is dollars, dinars, drachmas, rubles, rupees and pounds fucking sterling.