Couple of questions about CRE Development

@SponsorPromote"’s comment has some good content and insight

Currently working at a small firm ($1BB in asset value) that initially was PE but we since have pivoted and built out our development business. Primarily this includes ground up apartments built via a GC and I’ve been involved since day one in acquisitions, project management, underwriting, exit, etc.

1. Relative to other subsets of the industry I would say yes but even in small development offices there are specialized capacities. At a minimum this including front and back office staff but in even a slightly built out operation you’ll have those who handle acquisitions, entitlement, asset management, construction management, etc. depending on the firm’s strategy (do you self perform, do you only do entitlement work, do you prefer to long term hold or sell initially, etc.). When a recession immediately occurs the first to suffer are acquisition teams because no one (usually) is looking for new development deals if capital markets dry up. This actually creates an opportunity however for those with experience in emergencies in project or asset management and specifically those with experience interacting with banks. Just like any other industry, “down” periods may harm some subsets but they benefit others on a short to medium term basis.

2. The key words here are doesn’t pay well for the “risk involved”. This is straight up incorrect and a laughably overarching statement to put all developers in one category. Although the multitude of risks associated at any time with a development project are the same and far outweigh other subsets of real estate, the real magic and way an individual company handles those risks are what define great versus doomed developers. To go as far as to say that all development doesn’t pay well for the risk involved does a major disservice to those of us who spend hours and millions of interactions to know a market, product type or best execution practices and those who have built empires doing it.

   A potentially true statement might be “doesn’t pay well for effort involved.” Although most developers do it for many other reasons than money (tangible results, feeling of accomplishment, always unique problems to solve, etc) development at the end of the day is the most glorified form of adult baby sitting. It involves literally hundreds to thousands of people each watching the other one beneath them doing often a very simple task and many more small little issues that are often at best laughable but at worst absolutely time wasting. Some of the interactions you’ll have with onsite trades, city officials (especially) and even your own team will make you question how limited a resource rational thinking is amongst us sapians. That being said, all these challenges give you an amazing reward and end result when everything goes right but that is hard to put a money amount to.

3. Someone else will have to weigh in as I work at a smaller development firm but I will say when you start making real money in real estate is whenever you get carry. Equity is what matters and building that passive cash flow is a major advantage that many industries don’t offer. Getting too caught up in salary figures is playing the short ball game, having long lasting investments and cash flow will substantially grow your wealth.

4. Absolutely not. There are actually some interesting organizational theories on this that states that everyone rises to their highest capacity and eventually taps out but the “rat race” isn’t for everyone. As a leader, anyone who does and continues to do their role exceptionally well in my organization will continue to have a place - whether or not they would like to move up. In fact, moving up is the wrong decision for many as it adds stress, change and increased responsibilities that are tough to handle.