Am I Misguided In My Belief That I Would Rather Transfer out of REPE and Into Capital Market Brokerage?
I've always really been interested in the financing side of real estate more than the operating/building /physical DD side of real estate. Brokerage sounds a bit sexier to me in that you spend more time arranging financing, building models, studying capital markets and meeting with clients without having to get into the dirtier side of examining an investment that REPE/REIT entails.
TL;DR - Here Are My Pointed Questions:
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My job in REPE is really cush. I have stability and a steady, high salary. I have heard that working in Cap Markets entails low salaries that can be hard to live on, with the majority of the comp from unpredictable bonus/commiss checks. Have also heard of draw arrangements where you basically get an advance. What's the general comp structure and loose range of salary at groups like Mission Capital Advisors, HFF/JLL, Cushman Wakefield in the solid debt/equity placement groups.
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What is stability/progression like in cap market brokerage as opposed to working for a REIT/REPE shop. You can be average and skate buy at a REIT/REPE. Is there a pressure to perform or get pushed out at cam market brokerages?
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I like finance more than real estate. One day I see myself maybe getting an MBA and trying to work for a bank's DCM/ECM group or a job in capital markets that extends beyond RE finance. Is capital markets brokerage in real estate better experience for future general financing job than working for a REPE/REIT is?
Feel free to PM me for additional answers.
1) Generally I would say that every firm structures their commissions differently and typically, the higher the salary component, the higher the draw or the worse you are on the splits. On the more extreme side for example, I heard that Walker & Dunlop has a huge annual draw and they only start paying out splits after over $250k in net fees but salaries are typically over $100k. On the other extreme, I believe that there are smaller shops who operate commission only with better splits.
2) In terms of stability, I would only be concerned if you aren't a profitable employee (generating more in fees than their cost to keep you employed). Every shop has a different level of tolerance for under-performance however my shop put up with a junior guy for almost 3 years before he became profitable. He's already generated more than $1MM this year in fees. Being a "higher" level does not mean making more money, since time devoted to managing and operating the team takes away from doing deals which takes away from making money.
3) Hard to say. I would presume that the answer might be "yes" since being in this position and working with a lot of banks grants you a good peek into their operations (an astute D/E broker should understand the source of the lender's capital and should be able to estimate their cost of funds). With D/E Brokerage experience, it is natural for some less successful brokers to jump ship to go work for Life Insurance Companies, Debt Funds, CMBS shops, etc.
Financing side is definitely value add but it can be a tough space until you have clients or relationships that bring you into their deals on a consistent basis. Investment sale brokers will push you down on fees because they don't want to show their client 1% fee. Also, some owners will push you down on fees because they have other debt lenders calling to do deals at 50 bps or some other ridiculous number. All depends on if you are a volume guy or an advisor that brings value.
On the debt side, you will hopefully do REFIs during a downturn but I think it's a very tough space as it's an even bigger commodity than investment sales.
anything is possible if you join the right team in real estate! if you can network your way to a top producing team with ethical folks who don't want to pump and dumb, GO FOR IT! people make money in good times and bad times in CRE, it's all about working with the right folk to help you learn and put your career in the right trajectory.
even though it's the financing side, SALES STILL MAKES A HELL OF A DIFFERENCE! you have to be able to push folks in a consultative way to use you.
start going to a lot of networking events if you want to make the jump!
Based on what I’m reading, you may enjoy working for a debt fund. One of the funds that has the ability to get creative with their financing packages. I believe if you’re on the origination team you spend more time structuring / chasing deals and less time on asset management, property tours (AM and underwriting group would handle this).
At these places, you may be able to maintain your pay and prestige associated with being at a fund while also scratching your financing itch.
ACORE, Benefit Street, Mesa West, Goldman Sachs (broad street credit partners), Terra Capital Partners, Related Fund Management, Brookfield, BXMT, Apollo CRE Finance, TPG RE finance trust, and dozens more.
There was a commercial mortgage alert issue that listed almost all of the RE Mezz lenders in the US (there were probably 150 names on it). I will try to dig it up later
I think you are somewhat misguided. I have worked at two top 5 capital markets brokerage firms and am currently in REPE. Capital markets brokerage is a GRIND - people don't understand how many pitches, BOV's, and free analyses are done to get a single assignment. Also, the competition has gotten very fierce and fees are decreasing as a result.
If you have a huge network and are certain you can win assignments, it can be a great place to be. If you think that "arranging financing, building models, studying capital markets and meeting with clients" is an accurate representation of the space, you will be sorely disappointed. Being the junior person involves a painstaking amount of Argus, Excel input, pitch creation, and offering memorandum creation. At the highest level, the packages on the IS side are often 50 pages+ and involve tons of hours of tedious work. Then, you will get a tiny piece of the pie for doing the brunt of the work. You will become frustrated at the amount of leverage network gives the top producers and how even though you grind hard and get the work done, you are the one replaceable at the end of the day.