Deals underwritten/year
How many deals across different asset types and capital positions do you need to generally shoot for underwriting and seeing a year to develop a rhythm and be able to see the market more clearly. This is intended for medium stage or beyond professionals who have been in the business for a bit and from an investing or fund management standpoint.
Lately I’ve become pretty concerned with the amount of live deals I’ve worked on at a company. We execute a capital plan, but the reps are low and shared across a group that’s expanded to meet other business needs. Also within one asset class. For about 2 years I’ve was under the mindset that any position is a good position, it’s a good company, I’m new and there’s another opportunity to get more comfortable with the process. I’d been lucky to be involved on 1-2 transactions a year, for the same asset class, and they’re large deals, but a lack of reps. Also, the execution and being in the room for certain discussions by this particular group is done on a delegation basis, where the junior doesn’t get to hear the more seniors discuss deal dynamics unless they’re working on soemthing it’s specifically related to (basically you’re delegated to due diligence, except for highly sensitive touch points, but the door closes when actual deal strategy and navigation is discussed with counsel).
I’ve interviewed and it completely shows in my ability to talk with confidence about the risk return across asset classes, and knowing how things are actually trading, but I’ve always been candid that I don’t see the market regularly, know one asset class, and that my opinion on something that’s attractive is truly speculative, and it’s been appreciated by the interviewer. All that I can actually ascertain is via industry rags, not seeing any real deals or how assets look. I can make sense in broad terms and have pitched things out of what I think would be worth exploring during interviews, based on what they’d want to accomplish, when they ask for a few ideas and it genuinely has reflected well but my knowledge or general awareness for a career in re feels vastly unaligned with day to day work, and it’s been a huge push trying to supplement. Basically I’m wondering if (potential) deals underwritten per year will truly set you apart, or how far behind youd be from peers who have done it as part of their day to day in the first 5 years out of school.
Apologies for the great wall of words here
Frankly, I think most people just brag about total volume. I mean if you worked on $250 million in deals, is it really make a big difference if they averaged $50 million or $25 million or was just one $250 million dollar deal? From a business perspective, fewer but larger is often the most profitable business model. The higher up the food chain generally involves doing bigger deals, but fewer deals.
Residential mortgage brokers talk about number of loans closed in a month. Institutional real estate people talk about deal volume, assets under management, equity raised, etc. All else equal, I'd give more cred to the largest the deal, not the number.
And it's not uncommon for someone to specialize in one asset class, really don't think it matters early in your career if ever. Specialization usually pays off in the long-run.
Thanks. It’s helpful to know. I don’t get to see into the market on a regular basis, so it’s been difficult to actually understand what’s happening throughout cycles and build insights
Just read the various news sources, get memberships in the relevant trade organizations, sit in on all the webinars that are happening, and go to conferences when they start back up. Do all that, and you will be 'in the know' and not suffer any disadvantage. NOBODY sees it all or does everything.
What helped me is to reconstruct transactions in your own DCF. Some RE newletters contain transactions with yields or price. Do some little research regarding sqm, tenant etc.
It helped me to understand the dynamics of the market. Do they expect a lot of rental growth, what is the change in comparison to last year etc. Also, helped me a lot in building a simpel DCF in just 10 minutes.
This is something when I was an analyst affected me negatively, especially when there was an associate involved and the door closed when the associate and VP would discuss deal strategy. It affected my confidence in my role because I was on an island on certain aspects of the deal. I was dinged for that “odog808 needs to be more assertive” and I brought this up during reviews. Luckily for me, associate left for b-school so I got direct access and there was a restructuring of deal teams so I got more exposure to certain VPs and really got to understand their style.
Regarding deal flow, my pitch is get good:
Now you can’t always get it all. First the economic cycle could be in the shits and volume is down. It could also be like 2006-2007 and 2013-2016, where things are rocking and rolling. I agree with redever again that deal volume is only to impress (who ever you think would care).
If you are 5 years in; don’t worry. Not your fault. He’s my timeline:
2006-2007 booming 2008 things changing; looking at alternatives like buying debt 2009-2010 The Jungle; saw some incredible deals; met shady people 3Q2010 the beginning of the multifamily development boom 2010-2012 calm be fore the storm 2013 I thought would be the Trifecta for multifamily development 2013-2014 Trifecta continues; rises land values and costs but rents rising; volume great 2015-2016 further rising costs; rents starting to plateau 2016-2020 this is the period you are working in; it’s a different time; i pivoted most of my time away from development, but likewise acquisitions challenging
In the greater context, there’s a time to rally and there’s a time to just hang on. How many booms would I expect to see like 2006-2007 and 2013-2016 for the rest of my lifetime, I’m not sure. Also during those times, what firm were you with also dictates how you participate.
Sometimes I wished I was a few years older so I could have bought a house before things got too expensive. Sometimes I think I’m glad I wasn’t over extended during a recession. You are you and just stay in for the long haul.
Hope this gives context.
Thanks for the reply and really well thought out and candid thoughts. It's super helpful for reasons I'll mention later. The firm I'm at would've a different ride from the mid 90s to even mid 2010s, with one rough period in between. I'm trying to keep perspective on that versus letting disenchantment start to creep in. My conviction going in that this asset class being one of the best for investors, and wanting to contribute but it's tough and that enthusiasm has dampened/impacted me negatively. It's a really discouraging place to be when the only signs you can see from your perspective continue to push toward a not so casual leap of faith dropping $50-100K you don't really have on grad school, kicking compensation down the road.
Thank you for responding
Don’t think it matters. Just stay up to date on publications, market transactions etc. However, 1-2 deals a year is almost incomprehensibly low (UW to what capacity? a quicker look that doesn’t fit? a thorough bid that crapped out? closed deals?). Tons of deals (hundreds?) should flow across you/your teams desk... granted most will be tossed instantly... but you should still be able to get a feel for the market/should flip through any dead deals anyway.
We deal primarily on debt side, and this asset type trades are lower. So while I don’t get to underwrite many deals, any of the deals I do underwrite are to fully close, and so I go through an entire transaction responsible for marketing and closing diligence. The numbers you’re thinking are exactly why I’ve less confidence in knowing the pulse of the market or seeing the experiences of other assets and how their owners or operators execute. Also understanding all the capital parties involved and what the wants/needs and desires are up and down the capital stack
Sint exercitationem ad dolore voluptate explicabo eos officia porro. Tempore deserunt molestiae quos et facere aut. Quae voluptatem modi facilis doloremque. Occaecati id fugit illo voluptas consequatur a. Harum quis tenetur voluptatibus. Porro soluta ea blanditiis rerum nostrum aut ipsa atque.
Qui ut suscipit doloribus autem velit. Aliquam corporis est consequatur. Ducimus ducimus facere ad soluta itaque qui. Assumenda quae corrupti ut fugiat possimus ad sequi aut. Sequi assumenda facere quis aut asperiores sequi inventore. Architecto quo enim eaque qui dolores ea cum. Qui laboriosam tenetur quisquam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...