Hi,
I have a partner interview with a large commerical real estate firm, and I was wondering if anyone had any insight into what type of questions I should expect and how to best answer them. I've been told questions will be mostly fit questions. Any help will be greatly appreciated, and silver bananas will be awarded.
I'm guessing:
"Why commercial real estate?"
"Why this firm?"
"Why not company XX?"
- Bodacious
Others might disagree but regarding fit questions for CRE shops, generally speaking you're dealing with a demographically and culturally similar crowd as greater finance, so I don't think you'll go wrong sticking to the ground rules. If you're interviewing for a product-specific shop, their product is your favorite, i.e. for Simon, you love retail; for Sun Communities, you love mobile home parks and tramp stamps. Why commercial real estate? Because you like that it's tangible, you like the mix of analytical work and facetime/relationships (standard BS really you just want to blast around Culver City in an M5 sporting some wraparound Oakleys).
And this may have been covered elsewhere, but for fun, and without knowing anything about your level of knowledge, here are some light technical questions they might throw at you:
What is a cap rate?
All else equal, if your cap rate increases/decreases, what happens to price?
If your cap rate goes from x to y, by how much does NOI need to grow/shrink for value to remain the same? The answer is (y-x)/x. Typically asked where x is lower than y, probably followed by some ultra-dry conversation where you get to postulate on what will happen to real estate values if and when FOMC ever raises rates again.
What is the most volatile product type? Individual property idiosyncrasies aside, hotel generally displays the most volatility.
What is the least volatile product type? Generally speaking, multifamily.
What product type is the best hedged against inflation? Really what this gets at is, how fixed are your tenants' rent commitments. Obviously hotels and apartments reprice daily and yearly, respectively. That said, maybe all your shopping center tenants have annual rent steps with a CPI floor which might not be so bad. Maybe you worry about inflation if you have a single tenant, 15-year office lease with no rent steps; macro arguments aside.
What is one of your biggest immediate concerns if a shopping center anchor tenant blows out? Co-tenancy clauses.
Where do you see opportunities right now? Assuming you're interviewing for a national, product-agnostic platform, maybe cook up something like "I think assisted living currently presents an attractive investment opportunity for fundamental reasons, namely the huge aging demographic trend in the U.S. blah blah blah." If you're interviewing for a more local operator/developer, maybe it's more like "my uncle works for Exxon and knows Sharif who owns the Mobil station at Santa Monica and Vine and my ex-girlfriend's dad is a leasing rep for Starbucks and they want a drivethru there and blah blah blah"
Lizard Brain had a great answer but I'll just tack on a few additional points:
-They will definitely ask you about your past experience (internships), so even if your experience is not directly related to real estate I would still try to find a way to tie it to real estate.
-If you had $100mm to invest in real estate, how would you invest it? There is no 100% correct answer to this-just be mindful of macro trends and how they affect the real estate industry as a whole. Speak thoughtfully and knowledgeably about a particular asset class, market/submarket, and why you would put capital there (Your answer can involve equity and/or debt investments).
-They may ask you to walk them through a pro forma, so know the line items.
-What is the value of a property with $10mm NOI at an 8 Cap? NOI/Cap=Value, so $10mm/.08=$125mm (I was asked this in almost every acquisitions interview at larger REPE firms-Starwood, Blackstone, USAA
-How do you calculate Debt Yield? NOI/Loan amount
-Where do you see yourself in 5 years?
-Know the details of a recent deal they've done. Even if they don't ask you about a deal they've done, I'd still recommend trying to squeeze it in somewhere during one of your answers.
Lack of respect for someones time and intellect. It is possibly the most BS question anyone can ask in an interview. Also, and this is personal, I wouldn't want to work for/with anyone who thought that was a great question to ask.
There are a thousand other questions related to tech or fit that would better assess someones candidacy.
I've gotten most of the above, as well as...
-What is the cap rate on the building were in/explain cap rate? -Explain why the terminal cap rate is higher than going-in? -Walk through a DCF, debt table? -What's going on in the market? I've gotten both in the local sense ( speak on our markets rents, deals, etc.) and also more macro (nationwide RE trends, rates, etc.)... stuff like how foreign investors or oil affect CRE... or how the growth of tech hubs/widening of Panama Canal affect CRE. Stuff like that. -Pitch a market and/or asset type? -Where do you think we are in the cycle? I've seen this one pretty frequently recently.
"Sky's the limit, sir. You'll definitely need more people around the office."
Honestly, I'm struggling to even think if I have been asked a technical question in an interview. I think there's an assumption of competence that comes with getting an interview, however maybe at the analyst level without any experience you'd get more of a "test."
All of my interviews, even when there have been multiple rounds, have been fit based. Questions are typically:
"Walk me through your resume." "Which skills are you strongest at and which do you need the most improvement on?" "What interests you most about real estate?" "What are you most passionate about in real estate?"
Since a lot of these places have different teams and roles, I'll also get a lot of
"What product type do you prefer and why?" "What would you prefer spending your time doing?"
At most, when talking about a past deal, they'll ask for a difficulty that it overcame or an exit cap or talk about a market I was in. Be able to speak intelligently about these things and you'll be fine.
1.) Cash on cash return. 2.) Why would a sponsor take 12% mezz financing on a deal? 3.) You have two buildings right next to each other they have the same everything including irr. Why are the multiples on invested capital different? 4.) Where do you think is the most attractive area of the cap stack to invest $150 million today?
how to study for a lending analyst position interview (Originally Posted: 01/10/2017)
how should i study for a lending analyst position interview with a mortgage reit like Ladder capital, Arbor realty trust etc?
I don't have a background in the lending side of real estate so im not quite sure what to study. im coming from the equity side. i assume i should learn the different lending products first.
job description includes..
analyze loan opportunities for multifamily and recommend financing options for Fannie, Freddie, FHA, Bridge loans, and other structures. (not very familiar with the different programs and loan products)
-analyze financials and data to model debt structures in excel. ( I would say i have very solid equity modeling skills) - perform credit review (not sure how to do that) -DD of borrower (not sure how to do that) -coordination with originator and other departments.
Sounds like a position at Hunt or W/D. Lender modeling for multifamily lending is going to be pretty straightforward (likely a template you just plug into to size a loan tbh). If you know how to do equity modeling, you should be fine.
In terms of the concepts themselves, just know how to size a loan based on DSCR, LTV/LTC (depending on whether it is a bridge/acquisition or refi) and Debt Yield. In terms of the various structures, those will be learned on the job for an analyst position, I don't expect you will be tested on more than the basic sizing concepts I just described. More so than modeling, you will be spending your time underwriting loans by digging through the borrower provided operating statements and making sure everything is kosher, while making your own adjustments to the numbers based on the market, quality of the property etc.
If they happen to do construction loans, perhaps you will be asked to demonstrate that you know how to build a draw schedule that draws down the loan based on a cost schedule.
Make sure you understand all the line items on a multifamily operating statement so you can speak to those if asked.
Credit review is likely referencing the review of a borrower's financials to determine their net worth and liquidity. Liquidity is how much cash/marketable securities a borrower has on their balance sheet. Basically, you will be reviewing their financials to determine if they are broke or if they have sufficient NW/L for the lender to chase if shit hits the fan. This is something that will be taught on the job, I wouldn't expect them to test you on this, maybe they will just see if you understand the concept.
DD of borrower is basically digging into the borrowing entity, making sure the sponsor is not a crook, making sure the borrowing entity owns the title etc. This should be taught on the job.