First off, to confirm: The progress is Analyst - Associate - VP/Director - MD or whatever. Is that right?
At what level do you get carry and what’s the average percentage point?
And what’s the average timeline for these promotions? Are they structured like consulting/IB?
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Title-wise, that is generally the path, but it can vary wildly by company and role to the point that there is no set progression or timeline. Titles in real estate are one step above "utterly meaningless." While some of the larger, more institutional firms on the LP side are leaning more toward a structured wall street style progression, the vast majority of firms are not. I know associates with more responsibility and compensation than "directors."
Similarly, your receipt of carry, equity, %pref, %ownership, opportunity to co-invest, etc. also varies wildly from firm to firm and from role to role. Compensation in real estate is truly all over the place due to how differentiated companies are, roles are, deal performance is, and company owners' theories on how compensation should be structured.
This probably isn't the answer you're looking for, but the reality is "it depends."
Thanks for the response! Would you happen to know the average base salaries at the various levels then?
I’m not in the US but targeting NYC/LA/SF markets.
This is another “it depends” answer. CRE salaries can be all over the place. I’d take a look at the real estate comp sheet for some data points.
Any shop big and established enough to have that kind of pre-determined ladder of promotions is also probably not a place you'll get meaningful carry. Maybe on a project by project basis, but also probably only a couple bps.
Definitely not structured like IB. The whole point of being in development (in my opinion) is to do something entrepreneurial with it, or join a small shop for a large-ish piece of carry and do it there. The whole "here's your professional career for the next 15 years laid out in front of you, after which you'll be earning 7 figures" that you see in banking doesn't really exist in real estate. Few firms have the size to commit to that, even in spirit.
I disagree with some of what you are saying. A structured firm like Blackstone, Carlyle, etc. you may only get a few bps of carry but that could be worth hundreds of thousands of dollars or even millions of dollars due to fund size. If you have a $5BB fund and for simplicity sake it hits a 2x equity multiple. The carry pool is 20% of $5BB. So there is $1BB of carry to distribute. If you get 10 bps of carry, that’s worth $1MM. That’s pretty significant for being a cog in a wheel.
Well, first off, that math isn't quite right, we should acknowledge off the bat. You'll have a waterfall in there and a catch up and all that.
Second, how many people are getting 10 bps of carry at the fund level? Maybe some senior guys, but that isn't coming down to people in their 20s or likely even 30s.
Third, you're likely spending years working on deploying that fund and executing at the asset level. Even with your numbers, that exceptionally generous 10 bps of carry is maybe $200,000/yr. Great money, but that's what bonuses look like in IB as well.
The overall point I was making is that it is exceptionally rare in the real estate world to get insanely wealthy working for someone else. The big dollars come when you own your own shop and you're talking about have 10% or 50% or 100% of the carry, not 10 or 50 or 100 bps.
The guy did ask about development though
I think getting to total comp of at or above (or close enough not to complain) $1m (under the 1/3 Salary, 1/3 Bonus, 1/3 LTIP model) at large firms is reasonable for "above average" performance at the 15-20 year career mark is very possible in institutional real estate (equity shops, debt shops, development shops, etc.). There will clearly be some needed careerism moves and some luck (but luck is just repeated attempts really = persistence).
Clearly, some are better struck to go "entrepreneurial" but I'd push back hard on the concept that is the only way to high income/riches is the CRE world. This is extremely YMMV, and for some doing the "corporate ladder" will make them far richer than if they went on "own" in any generic sense. But it's an irrelevant question at the end of the day... all opportunities need to be evaluated independently whether entrepreneurial or "corporate". As are certain skill sets/personalities better adapted for each.
Couldn't agree more than an entrepreneurial route isn't for everyone. Or that you can make a seven figure income working for someone else. And sure, pulling down $1mm/yr is a massive amount of money, enough for anyone to be set for life and to make sure their kids are set up, assuming they're intelligent about spending/investing.
But that isn't generational wealth, or a route to becoming UHNW, which are terms I see a lot on these boards. That isn't the kind of revenue that will allow you to retire at 60 and live whatever life you want on the back of passive income.
And of course you're right that many people who go out on their own end up failing, or having a middling success that puts them right where their corporate colleagues are in terms of income, but with more risk. But if you want to have 9 figure net worth.... that is almost certainly not happening if you work for Carlyle for 25 years. You have a much better chance of making that kind of money when you own your own shop.
I feel like I'm being influenced by the never-ending slew of posts on topics like "should I leave IB for CRE", and from a pay perspective it's a really bad idea unless you want to go out on your own. Obviously there are many, many reasons beyond the pecuniary to embark on a specific career path, but from a pay standpoint, I think it is hard to argue that real estate is at the top of the heap if you're a wage earner
Do you even want carry? I would take part of CM fees or something before carry in Dev deals.
Yeah. I wanna shift from CM to development
So, the above is "correct" for those that follow the finance/banking (extends to RE brokerage generally as well) title convention.
The "corporate" title/rank structure is also pretty common at a lot of development firms (mine included), that is...
Analyst/Associate --> Manager --> Director --> VP/SVP --> EVP --> C-suite (with Senior or even Asst. added sometimes, and some devcos don't use analyst as a title tbh).
As to timeline... I woudn't even begin to guess "averages".. I'd generally guess one would need at least 5 yrs of true development exp. at the level of the firm's projects to make Development Manager, and about 10 years to cross to the Director/VP level (these are "averages" could be more or less). Senior level roles (which could count at VP under under the corp structure) are subject to needs/funnels... so one could be waiting a long time if no slots open (why some people jump firms tbh).
"Carry" (which I would speak more generally as Long Term Incentive Programs, aka, LTIP) is really really hard to estimate or speak in averages, it's super dependent on the firm's structure/capital structure. There can be actual "shares" or percentages of a GP per deal/fund or even for the firm that can be awarded (as I think you are asking about with the "average percentage point"). There can also be "carry pools" (which is just a term for a profit sharing pool) where the mgnt allocates portions of the profits made (typically from promote/carried interest structures, but also from fees potentially), and you can be awarded "points" in this pool (usually subject to vesting). There can also be "restricted stock units" (RSUs) if your firm or its parent are publicly traded (or have an active private share/unit market).
All that said, the "bigger", more corporate the firm the longer it takes to get meaningful levels of LTIP. This is in part due to the fact that smaller, more entrepreneurial firms use "carry" as a cheap form of inducement because paying bigger salaries/annual bonuses are cost prohibitive (i.e. if you are getting offered carry at a junior level... it may be a shitty deal in all reality...). Under the "finance" structure of titles, I'd guess LTIP is potential around VP/Director, and under "corporate", Director (some dev mngrs may get, wouldn't try to generalize that hard).
There are a lot of other factors... such as what "performance" (deal, fund, firm, personal, etc.) determines awards, what is the vesting period, is it cash-out able before deal conclusion, are cash co-investments possible (or required) and are those "financed" by the firm, what degree of deal/firm/fund "risk" is measurable (i.e. can prior year awards get wiped by bad deal, bad year, not just firm BX which almost always wipes the slate).
Soooo.... do what you will with all this.... I personally don't think making broad generalizations will get you that far.
Carry doesn't mean sh*t until you understand where you sit in the capital stack for that carry. I can promise you 5% carry and still screw you if I make the carry only on the capital we put in than the promoted interest if you are the sponsor. I have seen numerous deals that managing partners are getting $5M a piece when you look at all in ecomomics but they 5% promised to the associate ends up only being $50K. Also, are there any BS clause that you lose your carry if you leave the company, etc. Find a team of good folks that you know will treat you well in good or down cycles, the rest will take care of itself!!
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