Can anyone please provide some color on the major (less obvious) differences between development roles at a REIT vs. private firm? Assuming one moves from Development Associate -> Director/VP -> ?, is there a significant difference in comp working for a REIT (assume one of the largest in this case) vs. at a private firm? I'm led to believe cost of capital for the REIT is always going to be lower which would lead to greater spread flexibility vs. private shop that raises capital on a deal by deal basis, so theoretically less disruption to doing deals at the REIT, BUT is job security really that much different on the public side? Any downsides that I should be aware of before going to a REIT as opposed to the private firm? Is the potential upside at the REIT just as high as on the private side? Thank you.
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I don't think you will get a lot of good answers on comp, it varies wildly firm to firm. Generally speaking, I would expect a private equity firm to comp its development folks a bit higher than a REIT. Also, you may get the opportunity to co-invest, get a slice of carry on the deal, etc. whereas in my experience REIT compensation is more consistent with a traditional job.
Important distinction for developers--a lot of REITs self-fund their development without needing construction financing (they just issue debt with a much more favorable cost of capital). This is huge and allows a REIT to be a lot more insulated to market fluctuations. For example, construction financing in my market is drying up fast, which is putting a lot of development deals on the back-burner. If the REIT fundamentals are good, they have an easier time proceeding with a project since they aren't as sensitive to construction financing terms that can nuke a project (ie LIBOR ticks up or spreads expand).
Ricky Rosay you hit on exactly what I had though was the case; you can't go wrong borrowing unsecured at L+.8% lol Would this be a great place to learn? I think acquisitions at a REIT might not be dynamic enough for me (buying core/A quality stuff all day with little to no leverage) but for one interested in development long term (and eventually doing own deals), this seems like it could be a decent gig (and more insulated than a private shop) no?
It could be a great gig, but again depends on the REIT. Is it public or private? Since REITs are largely measured based on occupancy, smaller REITs tend to have less appetite for development exposure, while a REIT like Vornado is so huge that it can afford to have to a significantly larger development pipeline.
Some REITs treat their development teams like the favorite child. If a REIT has a few development assets and the rest of the business is buying core deals at 4 caps, it can be the main profit center for the company.
Ricky makes a good point about access to capital, but just keep in mind for a REIT-based development professional. most are internally managed so payroll can be a direct hit to earnings per share - and if they need to cut costs, they will. if they capitalize development team payroll into each project cost, you are at risk in that case as well because if dealflow dries up, there won't be a project to pay your salary.
having said that, there's risk in everything ... it'd be a great job if you could find it.
If you want to do your own deals down the line, better off private so you can build relationships with capital sources.
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