Should I switch from REPE to traditional PE?
I am currently an associate in real estate team of a top private equity firm. Should I switch to traditional PE? Real estate is ok but I am not that interested in it.
I am thinking about this in several aspects:
1, Pay in traditional PE is higher.
- I am not sure how much higher, but from what I heard, total comps may be 30% higher. That make sense to me because, as you may know, most REPE's IRR is around 20%. In comparison, IRR for traditional pe is much higher, top PE could hit 40%-50%. When you make more money, you get more. Make sense. (would be better if you guys could quantify the comps difference)
2, Broader exposure and sense of accomplishment in traditional PE.
- In traditional PE, you can feel you are really helping a company to grow, rather than just earn your return. You talk with the entreprenuer, you think about strategy for the firm to grow. But in REPE, we (our fund) are acting just as a financial investor, earn the 20% return, and that's it. It's very project-based, and no need / also no expertise to help RE firms to grow.
3, However, hours for traditional PE is a question. I know KKR/Blackstone's hour are really bad, but some other top PE firm seems ok. By "OK", I mean 9:00-20:00 average. I know some people in top firm go back home at 5:30PM everyday.....what's a happy life....
4, But, sometime I do think that maybe I could have a better career in real estate, if later in my career I could focus more on the Asset Management side. Many buildings are operated in such an inefficient way, and this may be an opportunity. Generally speaking, I feel there is less competition in RE than in traditional PE. (am I right? there are so many traditional PE firm chasing for a few good deals), so less competition means existing opportunity if you dig deep down and work hard.
So, what do you guys think? Would like to hear your advice!
Note: I could switch to traditional PE if I want. I have some connections.
It sounds like you're in another country, possibly even a developing country?, so I'm not sure what comp or returns are like in your market, much less the firm you're at. But you mention Blackstone, for example. Obviously it depends on how the market is doing, but in '07 Blackstone reported higher returns from their real estate group, over a decade or two, than in PE. I'm also pretty sure pay is just as high and hours just as bad in their real estate group as on their buyout team. So it really depends.
Blackstone RE... best of both worlds for you
All other things being equal, do what interests you and what you feel motivated about.
Personally, I couldn't care less if I am "adding value" to a company/asset or if I'm getting involved in operations or asset management for the sake of it... I'm more concerned with the bottom line as an investor and making money personally. "Adding value" only matters to the extent it helps me achieve this.
REPE works for me in this sense. However, I have had colleagues who fall in love with buildings and have had guys who get excited about different types of companies they invest in. I'm not like that. Don't get me wrong, I like to do a good job and think there are many opportunities to improve real estate or company's operations, but I'm not kidding myself. Ultimately, what matters is that we (read "I") have to get paid. You seem like you care more about "adding value" for the sake of it than I do.
If I were you, I would take the opportunity you have now to learn Real Estate, but also transition into Corporate PE. Just make sure your PE experience is with control investing, or at the very least significant minority/growth investing. You don't want to be in PE and be far removed from actual deal making (e.g. co-investments & LP investing). In your first 5 years of your career you are building a skill-set and a basic network / reputation with your peers. It make sense to develop both areas if you can. It will give you options in the future and will help you mature as an investor.
RE in major markets like London and New York is extremely competitive. You're not just competing with some wall street guys, you're also competing with RE families, REITs, RE companies, Sovereigns, institutional investors and entrepreneurs... most of those guys, apart from the entrepreneurs, have a lower cost of capital and some have better expertise on the asset side... in better times you even compete with the debt/refinancing markets... In corporate PE you compete mostly with other PE firms, strategic buyers and the IPO market. Different kinds of competition. Maybe corporate PE guys can give their opinion on this.
The asset management / portfolio management sides of REPE and PE don't pay as much as acquisitions / investing roles. So, this kind of conflicts with your first point focused on compensation.
Totally agree. Many entities have a lower cost of capital than us, and may require a bit lower of return. That's why I don't see we are in a growth mode, and why I am concerned about the pay growth in the future.
Thanks for your advice Relinquis.
PE Real Estate to Traditional PE (Originally Posted: 11/03/2016)
Hey all,
Super new to the website but once I found it I couldn't stop reading all the forums. Lotta juicey posts.
Thought I would write a forum to seek any advice people might have for transferring out of PERE and into a LMM/MM PE shop. Been here for about 1.5 yrs. I know with traditional PE your more working with lbo models and we don't really deal with those. What could I expect in an interview? Mock lbo model?
Trying to make the transfer so any advice is welcomed.
Cheers
how did you get on?
?
You should expect to be asked why you want to move from REPE to traditional PE, especially when it's completely different. What skills from REPE are transferable to traditional PE? What kind of detailed modeling, structuring, waterfalls, etc. have you done? How do you go from passive investing to more hands-on operational investing?
Personally, I don't feel challenged enough with what I've been seeing as an Analyst in REPE for the past two years. Perhaps it's firm specific, but I feel like I could have done my job prior to undergrad with the exception of a few corp fin classes. Feel like Traditional PE would be a step up in difficulty and something else to learn in order to broaden my expertise in investing (Envisioning eventually being a VP/Principal at a PE firm with RE arm and being able to straddle. Maybe I'm wrong, but there has to be a market for that type of expertise right?)
I'd say all the modeling is synonymous in REPE (we usually deal with NOI rather than EBITDA, but essentially the same thing: Income - OpEx = NOI - CapX - Debt Load = Before Tax CF (EBIT)). Calculating fund returns and equity waterfalls would be the the same minus some added tax sheltering for investors within a RE fund. Obvi, fund structure will vary depending on fund mandate, GPs and LPs, but I'd imagine one would approach purchasing different companies the same as properties (by asking where one can add value? either in a burgeoning market/location, through increasing operational efficiencies, potential value-add strategies, etc.) Research and macro level view of firm/property within a market/location would continue to be extensive - obvi not going to buy a firm/property without doing proper due diligence. But hell, what do I know...I'm sure it's completely different and it would be a steep learning curve at first, but what industry doesn't? Guess I'm just bored with what I'm currently doing and looking for other areas of investing that I can add value to.
RE PE to other sectors of PE (Originally Posted: 05/09/2017)
Hi all,
I graduated from a non-target in 2015 w/ an unrelated (Biology & Chemistry) major and have been working as an analyst in the cap market division of a real estate investment firm since. I have become obsessed with finance. Eventually could be interested in transitioning to healthcare, venture capital/small cap, or just growth PE. In general, is it easy to transition to other areas of Private equity from Real Estate Private Equity?
Thanks for the input!
bump
I am in the same boat with you, I've researched this a bit and this is kind of what I gather:
A) We're lucky, we got into PE out of undergrad. That does not happen, it just doesn't.
B) We're also screwed. IB experience is often the litmus test for a lot of these PE firms out here looking to hire analysts/associates.
C) RE is pretty niche, like consultants we either come from a successful career in a specific industry to work in PE or become industry-specific after a few years of working in PE... this is both on paper and in reality since very, very few companies need to go out on a limb for analysts with no experience in the subject field given the sheer amount of applicants chasing these jobs.
I think it can be done, but you either need to downgrade to a smaller firm that will give you that opportunity, find a mentor within your firm (if it has other investment divisions) who will take you into your chosen field or pivot during an MBA by getting a concentration in your new chosen field.
Yeah, this is similar to what I've realized through research. Wonder if it would be more attainable to go to an IB role and then back to PE... The major deterrent is time.
Non-RE PE exit opps after RE PE? (Originally Posted: 01/20/2018)
Hi everyone,
I unfortunately am being let go from my RE PE associate job in ~3 months and am beginning to explore other opportunities in the meantime. My background is 2.5 years MM RE IB and 3 years in my RE PE role in NYC.
I'm not positive I want to keep doing RE PE. What are some non-RE PE exit opps that I would be qualified for? I find that the "RE" bit turns off a lot of traditional PE exit opps (strategy, biz dev, etc.).
Thanks all.
Care to explain to us all how you fucked up your current opportunity so we can avoid doing what you did and being like you?
You’ve definitely already thought of this, but you’re right at the business school age. You could change industries that way
Even though I’m not much help I’m curious about your situation. Is this one of those shops that typically hires associates and lets them go after 2-3 years? Or did something go wrong
Nothing I did wrong, it's a headcount thing. They're just cutting staff. This wasn't the plan, but they are giving me a few months heads up to find something else. I'm not set on leaving RE PE, but am just wondering what potential options could be.
Care to explain why you're leaving REPE? Is it just because you failed out of the industry?
Have you reached out to any recruiters to see if traditional PE (in addition to strategy, Corp dev, etc) is an option? The RE part might make it harder for strat or CD, but not impossible.
The other thing is to see if there are some profiles on linkedin where someone went from REPE to something different. You are at the right age for an mba... but unfortunately a lot of the 2nd rounds at top US schools have likely passed and 3rd round is generally advised against because it’s so difficult (unless you have an amazing story, or you have no choice timing wise).
Real Estate PE into PE (Originally Posted: 10/25/2006)
Situation: Age 29, Current franchise business owner wanting to jump into PE now that franchise operation is set up and pieces are in place.
Credentials: Davidson College, CFA, buy-side trading experience with inst asset mgmt firm, started own business with hopeful exit strategy in 5 years.
Interviewing for Assoc at tier 2 PE shop.
My question: If I do not get Assoc position with LBO shop, would an analyst position with a RE PE fund (where I would supposedly gain solid transaction experience) for 1.5 years (before going to B-school) be solid enough experience to move into Assoc position with LBO shop after school?
Depends on what type of RE you're doing--if you're doing pureplay RE (e.g. apartments, condos, development), it might be a tougher spin; however, if you're in a more general RE (REITs, lodging, gaming) then it won't be too tough since the valuation and LBO logic is effectively the same corp fin as a non-RE experience.
All of the major opportunity funds look at both REITs (corporate-level privatizations, JV's, etc) and smaller assets/portfolios. You could use this experience and spin it to you advantage.
I'm currently an analyst at a REIT and we just had someone leave to go to Carlyle (in their RE group).
Does anyone know how the comp in the RE groups at the Tier-1 PE shops (i.e. Carlyle) compares to their normal PE operations?
I'd like to know this as well.
Real Estate PE to tradtional PE or Distressed credit (Originally Posted: 11/18/2014)
Hi everyone,
Would really appreciate if members of this forum working in PE/Distressed credit would comment on key considerations for someone working in real estate private equity/structured finance wishing to transition into traditional PE or distressed investing. How difficult will it be to make this move?
To provide some background/context, I am currently working as an analyst looking at structured finance opportunities, primarily in real estate (though will opportunistically invest in other industry opps as well). My company considers opportunities across the enitre capital stack including senior debt, mezzanine, preferred equity and equity positions. Investments are highly structured and bespoke, depending on the asset coverage provided by any pledged collateral (LVR), debt serviceability from available cash flows (ICR, DSCR), sponsor strength and exit strategy.
Aproximately 80% of the deals I look at are in real estate, though we get the odd private company approaching us for growth capital and will look into some special situations or distressed opps. I have not closed any of these PE/distressed debt deals however, even though deal structuring and execution is a big part of what I do. I am also a very adept at financial modeling and comfortable with LBO analysis as well as building operating models (previously worked as credit analyst buying leveraged loans and as an equity analyst). Would not having completed PE/distressed transactions to talk about count heavily against me, even with strong modeling and execution capabilities?
I have come to taken a keen interest in the transactions that shops like Oaktree, Apollo and GSO Capital Partners get involved in and would give my left arm to work at any of these institutions. Would having a background in structuring and documenting credit facilities, intercreditor/suboridnation agreements be considered favourably for this line of work?
Best regards,
^Bump
interested as well
How Difficult to go from Real Estate PE to PE? (Originally Posted: 03/13/2007)
So I was wondering how easy it is to go from a Real Estate PE experience out of undergrad (good name brand) to regular PE in two years? I know that RE bankers often get typecasted into "real estate guys". Is this the same for Real Estate PE? For someone who's not sure if RE is the path they want to take, would you recommend BB banking experience at a top tier firm or RE PE?
Just curious, do you have an offer from a RE PE firm ?
bump
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