Open to any questions from whoever is interested in Private Equity Real Estate or Real Estate in general and is based in the UK/Europe.
Background:
Recently joined as 1st year associate at US "Megafund" in London, previously spent 2.5 years as analyst/associate at a middle-market London REPE fund and off-cycle analyst for the merchant banking division of a BB. BSc and MSc in Finance from european target school.
Non-traditional route to PE (no summer internships, no IBD experience) having interned/worked only for buyside RE shops. Vast experience in dealing with London headhunters having secured both FT roles (and a number of other offers) through them. Vast experience in interviews/recruiting processes with REPE funds of any size in London.
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I wouldn’t say that networking was a huge part of what ultimately got me the role or any offers. Maybe it’s more a European thing but most of the recruiting happens exclusively via HHs. Teams on average are really small (like 4-20 people max) so they mostly recruit if someone leaves or they increase headcount (typically when they raise a new fund), there is no “on cycle” recruiting to network in advance for unfortunately.
Moreover, teams being small means that if you cold-email someone at a certain fund asking for tips on the interview/process, they are likely going to be your interviewer so they’re not going to tell you a lot or they would give you unfair advantage compared to others. But you might be lucky.
One last point is that REPE MF/UMM analyst/associate pool in London is small, maybe 100 ppl overall, so I think it is easy to spoil your reputation if you network too aggressively becoming “the annoying LinkedIn spammer”. Even worse, you don’t want to reach out to a person who is a friend of your boss and might tell them you reached out bcs you’re looking elsewhere (happens).
That said, for me the most important part was keeping good contacts with people you worked with in the past. Maintaining that kind of network helps a lot when you get calls from funds/teams you don’t really know well and reaching out to your network of old colleagues can provide you insights on the track record, people, culture etc. and you might even get a referral if they know each other well. Also useful to get intel about dodgy small HFs and 3-ppl shops (a lot in London) that you might want to avoid even losing time interviewing for.
Thanks for doing this! Curious on what your comp is like as an Associate and Analyst (current and previous funds)?
From MF REPE, how common is it to go into corporate PE either through an internal transfer or to another shop in Europe? Assuming the MF does everything from single assets, portfolios, company transactions, etc.?
Do you regret not going IBD before REPE? If so, what would be the biggest one, comp?
Is networking directly useful at all for Associate MF REPE roles, or is the route of a headhunter more recommended? What is the process like, and what sort of modelling tests have you had to do (time, type of transactions, etc. the more details the more useful!)?
Thanks!
At the previous fund (REPE MM), comp was in line with pre-covid banking so think £50k + 70/100% bonus and £60k + 70/100% bonus for the second year going up to £80k + same bonus % as an associate. Since first-year IBD salaries have gone up to £65k most small funds have struggled to compete so it might be a bit at discount now (~10% for starters and even ~20% for associates). The MF pays something like ~£100k base + 125/175% bonus and goes up significantly going forward. No carry.
I would say the move to corporate PE is uncommon but not impossible or unprecedented. Probably easier if you are in a diversified shop and you ask to move teams (permanently or on a "rotational" basis maybe) but you'll need to strongly motivate your request. As said London teams are small and you moving to another group might mean the REPE team to lose 20% of their junior workforce (which takes 2-6 months to replace) so they might not welcome it.
PERE is a bit of a niche of its own, rewards you handsomely money and career-wise but can be difficult to pivot somewhere else, especially after 3+ years in the industry. Part of the reason for joining the MF was that I wanted exposure to their other teams as well (even just coffee chats in the cafeteria) to find out if REPE is where I want to stay long term or maybe try a move to Corporate PE (LBOs or Growth), Credit, Infra etc.
Limited regrets about not having done IBD. Probably the biggest one is never having been part of a large pool of analysts that after a couple years are spread everywhere in the industry and make a great network. It is also less fun, with no "camaraderie" feeling, when you grind your first 12/18 months as analyst working late nights pretty much alone in the office. Also I have never done ANY training whatsoever so all learning had to come on the job which is good if you are pro-active but can seriously slow your growth if you don't actively ask for the right projects and get staffed on Excel/PPT-moneky tasks only. The positive has been that I developed modelling skills (albeit pretty REPE-related only) much earlier and faster than most IBD peers, also massive responsibility at junior level in funds means you develop soft-skills faster but is also very stressful.
See other reply for networking, I'd say it's not that useful and 90% of the roles are filled via HHs as far as I know. Process is generally first-round zoom interview with 2/3 VPs/Principals then modelling test with discussion/defense, another round of interviews (now likely in person) with most of the team including juniors and finally a round with partners. Modelling tests vary a lot from fund to fund and I'd say the difficulty is not always correlated to fund size. Typically you'll have 3 hours to do a single asset u/w but I've also done 6 hours modelling tests with large mixed-use portfolios that were a real nightmare as well as idiotic 1-hour elementary models. Some MF also asks for a case-study in addition to the modelling test, you'll have a weekend to prepare a sort of first-round IC paper (with u/w backed by another model) and you'll need to discuss/defend it with the team.
Probably one of the best posts I've seen in a while on WSO, extremely useful. Comp at your MF seems great, just wanted to ask a bit more on that. From what you've gathered through the recruitment process, HHs, and your network, is that the range for ASO pay in the MF realm for repe in London? Is ASO pay at your MF the same for all groups (repe, infra, credit, pe, etc.)? I've seen on this site that Silver Lake and BX ASO pay was 120ish base, not sure if true. Lastly, do you know if your comp is in line with your US counterparts? Heading to a large repe fund as well in London with 75k base for AN1 and wanted some data!
I saw you comment on HFs doing RE as well. Who would you say are the large/ well respected HFs doing RE? I've seen King Street, Davidson Kempner, SVP Global... any other ones? And would you say the jump from MF to HF for RE is worth it pay and WLB wise at these places?
I've always liked the impact RE has on cities and communities, the fact that you can take over a derelict building and transform it into a brand new hotel or office building bringing lots of jobs and new life to the area. This is probably also related to the fact that I've grown up in a city in economic and demographic free fall leaving a lot of post-GFC Detroit like scenery around that I wanted to change.
From the financial point of view RE is way more interesting than most think, it is essentially a mix of project finance, LBO, infrastructure and other. Very technical and sophisticated modelling will make you an Excel pro very fast. You learn a lot and often the same team plays across the capital stack so you see deals a number of points of view. The downside is that it is very operationally technical and you often need to source inputs (e.g. capex, architectural features) from third parties you can't really question because you do not possess the knowledge to do it. So you "take for granted" a lot of the really RE content of the job (but a lot comes with experience).
Career-wise, REPE in Europe is absolutely excellent. The industry is booming and the junior talent pool is really really small. You get at least a couple HH calls a week for the most interesting HFs or MFs even if you're not a top firm. If you interview aggressively (and obv you are extremely good) you can land 3/4 top offers and decide. You can grow very fast and comp is in line with Corp PE or IBD. You are also hard and expensive to replace so you can use that as your advantage (ask for WLB improvements, ask for additional resources or general "be kind or I'll quit" kind of behaviour).
Not sure if I’ll stay in the industry 10 years, for sure another 3-5 years. Haven’t been long enough at current firm to answer the second part of the question. In the longer term I’d like to do my own thing (small club deals with F&F etc).
This is extremely useful man - not only because you have the perspective of working at multiple funds, but also it's hard to find updated insights into London REPE - something this forum just doesn't have much of.
Thanks, I like to shed some light on a sector too often overlooked in Europe.
I would say top large REPE funds to work for as a junior in London could be:
-Tier 3: any other MM
Very much top of my mind, might have missed a bunch. This is mostly based on brand, track record and comp. Don't have a lot of intel for WLB and culture, I would generally expect IBD-like hours for Tier 1a and 1b. Explaining the detailed rationale for each one of them would take too long sorry.
PM if you want more intel on a specific fund maybe I can help.
1) Changing job always involves a meaningful amount of risk, especially if you are satisfied with your current role/firm. So make sure you are adequately remunerated for taking this risk with title, money, and "brand equity". Generally, 1 year is barely enough not to raise a "red flag" on the CV, but if you go from a no-name boutique to KKR, no one would raise questions about it. Usually, you want to do at least 2 years stints. Take the first round interview and try to get a feel of the team, strategy etc (use it a bit as a "reverse interview") then eventually say you're not interested in bringing conversations forward. Try to get a feel of expected comp from HH BUT don't rely too much on their advice (they have all the reasons to convince you to move and ZERO to do otherwise).
2) Yes lateralling from debt to debt can silo you a bit into debt but as you say can be mitigated by increased brand equity. But I wouldn't be too worried about this especially if you enjoy debt and you're very junior.
3) Yes likely you'll do the equity model and then at the discussion they'll ask you to look at the debt point of view (covenants you'd ask, peak LTV etc) as well as general comments on the deal). Usually in 2hrs you won't have to do a waterfall but you can expect a second line of debt in addition to senior (maybe a mezz with equity kicker).
PM if you want to discuss in detail.
Generally you can divide the AN/ASO work in Asset Management and Acquisitions (some shops have separate functions, meaning you'll only do one):
Work doesn't change a lot between AN and ASO. As AN you have more responsibility than you should have (stressful), as ASO you get more shit intern tasks than you should get (boring and soul-crushing). Unless you have an analyst staffed on the deal with you (never happened at the MM and MF doesn't have analysts lol). At the MM as ASO in general you got even more staffing as your need much less guidance than an analyst and Principals don't want to spend time explaining stuff to analysts. You have to try diverting the shitty "never going to happen" deals to analysts (you can smell them a mile away after a year or so) saying you're overstaffed etc.
Hours at the MM were on average 70 hours (but shop was very understaffed) with peaks of 90 hours and relaxed weeks of 55/60 hours. A couple of dead weeks in August. Weekend work common during live deals and BP session, towards the end of my tenure that meant 3 weekends a month (just 6/8 hours a day tho). At the MF I am grinding 80 hours weeks at least but I have started a few weeks ago, I still need understand how that normalises. At the MM holidays were not disregarded completely but you were never totally off. You still needed to check emails 2/3 times a day as there is no one to take care of your workstreams while you are away, if you go for a boat trip with no signal you want to flag this to your VP/Principal. Happened multiple times to have holidays disrupted for deals going suddenly live (again, no one availble to step in if you are away). Seniors apologised profusely but they really didn't give a shit. No holidays taken yet at the MF so idk, I think same...
Most junior people live near the office (for some "in the office" is more accurate), seniors often leave a bit far as they like large family homes in Chelsea/Kensington/Fulham which are not affordable/available in Mayfair/Marylebone even for them. I hate public transport in the morning so I always try to live within walking distance the from the office. You have to fetch your own lunch (order or take away and eat at desk 99% of the times), you can expense dinner and uber home if you work late.
With £50k you'll most likely have to flatshare with someone if you don't want to live in Zone 3, rent a 200-sf sardine can or have an extremely thin budget (~60% of monthly income in rent). You can think about living on your own at ~£70k imho (avg 1-bed decent apt is ~£2k in Zone 1). That said, £50k is ~£3k net monthly so if you flatshare (try spareroom or go with friends) at ~£1k per month that leaves more than enough to have fun, eat decently etc. But you're not rich as AN1 (at least until bonus).
Which city and asset class is very hot in Europe right now? I'm assuming industrial but not sure where. Also, do you have a pick of city/ asset class that you think is contrarian, maybe an alternative niche asset? Things like student housing in London, which is hot right now. Curious since you've been in the game for a few years now!
Also, best resources to read up on European real estate news (not city specific like a CBRE London office report) for someone without access to major sources?
Industrial (particularly multi let light industrial) is extremely hot and clearly in a bubble right now in the UK, Benelux and Germany (still frothy but less so in other countries). Blackstone led the charge on this asset class starting in 2013-2015 when it was early days (and made a shit ton of money) and a lot of other managers followed buying in at crazy valuations (see Mileway recap). In most of the outskirts of London, industrial capital values are now multiples of the residential capital values. Most of the spec developments ongoing in these regions are underwriting ~3% exit cap rates in 3 years from now based on 20% rental growth from current levels.
Resi for rent is also very hot everywhere, also here lots of managers are buying/developing schemes at ~4/5% YoC (assuming unaffordable rents at like 60% of tenant income) hoping to flip an aggregated portfolio at 3% in a couple years. This rental crazyness is driven by unaffordable home prices at 10x household annual income in large cities, when this bubble pops also rental will be affected.
Given how fast rates are moving up right now I think most of these strategies will backfire hard and we'll see a lot of repricing in the next 12-24 months. You have already seen the repricing in growth stocks, including Amazon saying it's become "too big and taken up too much space" and this is going to pass on hyper-growth real estate sectors with a lag of a few months. Equity and banks/debt investors (including my old and current employers) are balls deep into these sectors (particularly industrial) and it'll be fun to see how this ends up. Would consider moving to an HF if there will be a blow-up.
What's a good right now I think is everything operational and hotels in particular where you can pass on inflation to customers (hoping cost inflation will not outpace revenue growth) and asset values are generally not that crazy. I would buy some dominant retail at 7/8% yield (~15% CoC) with inflation indexed rents. Also life science has very strong tailwinds but very difficult to find something reasonably priced. Maybe you can bet on secondary markets.