Development Vs Acquisitions Insight

I do know that both of these career paths offer great compensations, more than a lot of careers. Which path would you say has the best lifestlye? Which path have members found most rewarding or fulfilling. My girlfriend is a Physician and gets so much joy out of the work she does to help people. While I could never work in healthcare, I do envy this here.

 
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I'm not sure where to start. Having done both i can say they are very, very different. At a high level, I view acquisitions as more volume-driven. Constantly networking to find deals, moving quickly to get them underwritten, approved, and ultimately getting them under control, financed, and closed. Then it's onto the next. For every deal you win, you will lose 20+. Due to this, it's a bit more macro-focused and all about volume.

Development is much more hands-on at the property level. You are quarterbacking designers, GC's, landscape architects, ADA consultants, local planning authorities, MEP engineers, structural engineers, civil engineers, lawyers, parking operators, marketing consultants, the guy that won't stop calling you about some new keyless doorknob technology, the lady that owns the adjacent parcel that is threatening to sue you. The list is endless. Like acquisitions, the "next deal" is important and always in the back of your mind, but you are way more focused on the project at hand because one fuckup could cost you millions.

I'm in my late 20s and still trying to choose which one i want to do long term myself, both are rewarding career paths.

 
promoteseeker:
At a high level, I view acquisitions as more volume-driven. Constantly networking to find deals, moving quickly to get them underwritten, approved, and ultimately getting them under control, financed, and closed. Then it's onto the next. For every deal you win, you will lose 20+. Due to this, it's a bit more macro-focused and all about volume.

You're spot on -- acquisitions can be exhausting.

 

I'm looking at jumping into acquisitions and a friend that's a broker was telling me some guys might keep pushing off looking at deals - What are your thoughts on an acquisitions guy who says he's busy and he'll respond by x day on deals brokers have sent? Follow up on x day multiple times and nothing, keeps pushing it off.

How much of that is last minute work and how much is he has other deals to look at so doesn't care if the broker stops sending him anything?

And how do more senior guys at the acquisitions firm see this, is this the norm and expected or are analysts expected to look at almost every deal? Does this only get back to the seniors if guys at the brokerage know them and reach out for a response?

 

I have heard of acquisitions groups that are understaffed or so busy looking at other deals that they have to pass on some.

Typically the way it works is the broker will be in contact with more senior level people and not junior level (maybe some smaller firms are different, I don't know)

The broker will have a call for offers on a certain date. If your group didn't underwrite it by the call for offers date, the broker will probably move on to other interested groups (unless there are not a lot of groups interested in this deal)

 

Having been in multi family acquisitions for almost 3-years now, from my experience not getting to one particular broker’s deal(s) mostly comes down to my deal pipeline already being relatively full and the deal(s) the broker is presenting aren’t attractive enough in terms of our specific acquisition criteria to push one or more of the deals already in my pipeline to the back of the list. 

 

If you are sending deals to an analyst, it may be because the analyst is swamped with work or is prioritizing deals that the seniors guys tell him to underwrite. Now if you are sending deals to a senior person and they are not looking at it or giving you the time of day, then it likely means they are not interested. I do this all the time. Brokers send everything to me. Even after I tell them my exact criteria, they still send everything to me because they just want to throw everything at the wall and see what sticks. I can eliminate 99% of these deals right off the bat and tbh I don't tell them I eliminated the deal because I get sent shit deals daily...the senior guys you are dealing with can also do this. We know what we want. But when you send that one deal that hits all my criteria, I will notice it and respond immediately. My attitude and demeanor is completely different. You have all my attention. I will actually text you back. It's sort of like dating the right person lol

 

I think on the matter of 'lifestyle', you really cannot say much too broadly between the two. I think it is really up to the firm, the people, and even the market/asset class. You can be super busy in either case, and at times have lulls and slow periods. Also depends on your exact role.

There is a reputation of developers being more 'chill' than 'acquisitions' but I think that has more to do with the fact that many REPE shops are driven by 'finance bro' people and culture. Development has plenty of stresses, but often external vs. internal (I mean, can be the case).

I personally find development far more intellectually challenging, interesting, and thus rewarding. You, your team, firm, are literally changing skylines (or could be at least). This is highly personal, so just my opinion.

 
redever:
There is a reputation of developers being more 'chill' than 'acquisitions' but I think that has more to do with the fact that many REPE shops are driven by 'finance bro' people and culture. Development has plenty of stresses, but often external vs. internal (I mean, can be the case).

It also sort of goes to the nature of the roles. As promoteseeker says, acquisitions is in large part a volume game. Yes, there is money on the back end, but in the short term a lot of acquisitions shops need fee revenue to pay overhead, so there is pressure to keep closing. Which means you're always somewhere in the cycle of buying an asset, which means probably slightly longer hours and a little more stress in general. By contrast, developers spend years on a single project, and so when things are going well or going slow, it's a quieter lifestyle. When things get fucked up, it becomes a hell of a lot more stressful a hell of a lot more quickly.

 

"Best" lifestyle is subjective.

These are TOTALLY different careers outside of the fact that they both have to do with real estate. What type of work are you interested in?

Are you more interested in the financial side of things, do you want to be a deals guy, constantly focused on transactions and bringing in/closing the next deal? Go for acquisitions. It is faster paced and you'll see more volume and have more variety (in terms of the number of assets/types of deals you look at, not in terms of the actual work you're doing).

Are you more interested in building something from scratch and seeing a project through from start to finish, and being able to walk through a building and say "I built this"? Go for development. In development, you're less focused on the numbers (its still important, but its a smaller part of the job), and more focused on the big picture, from planning, to architecture, to dealing with the political side of the business, to project management. You're going to be focusing on one or two projects for a LONG time because you're seeing them through from beginning to end (for reference, sometimes something as small as a 50 unit townhouse development might take up to 5 years from concept to lease-up depending on how complicated things get). You'll be doing all sorts of different things day-to-day, but you still need to have the patience to see one project through over a long haul.

Another point regarding development - it's tough to get into straight out of undergrad, and many firms don't actually look to hire finance degrees, they look for engineers, planners, and architects, particularly at the analyst level.

Think about what YOU are really interested in, don't trust a bunch of internet strangers.

 

So I want to make sure I have this right -

If you want to jump from say brokerage into development you can start as a development associate/project manager (titles may change based on shop). Also, at the same development shop you can also be on the acquisitions side looking at potential deals for the developer.

You can also do acquisitions at many other places besides dev shops as an analyst.

Correct?

 

For some, yes, but promoteseeker is right in that most true "developers" don't really have a true acquisitions team.

That being said, there are plenty of firms that have their hands in every basket. Lots of companies have a dedicated development team and a dedicated acquisitions team if they are involved in both development and traditional acquisitive investing activities.

Under that type of structure, the development team might be entirely focused on the qualitative side of a project outside of approving the numbers, while the acquisitions team underwrites both potential development projects as well as traditional acquisitions of assets fitting the firm's investment strategy (opportunistic, value add, core, etc. etc.). Some other firms may have a pure acquisitions team that doesn't handle anything related to development, and their development guys handle that type of underwriting.

It's all dependent on the firm, what they do, and how they structure their teams' responsibilities. Only way to find out how it is at a given firm is to talk to the employees.

 

What can be most lucrative in the long run? Let's say you work an a solid developer doing mixed-use institutional level deals vs the typical PERE 100 firm? My understanding is that the promote if you work at a small shop with a few people could make you millions personally if you get a slice of the pie. However, if you're in traditional acquisitions at one of these PERE firms, do you have to work many years to start making the big bucks?

Honest question. I am in acquisitions at a top PERE, but been approached by a developer in Florida that would pay me more and I would get a small % of promote as an associate. That % can grow with time and title bumps. 

 

I hate to break it to most people, but there tends to be this thought process on here that MD is the holy grail and you make millions. I have no idea if this MD at Hines is middle class or not. I will say spending patterns are not a good indication of how much someone makes. With that said, the majority of employees, even if you hit MD, will fail to get their cash compensation above $750K, unless you hit executive management. $750K is a boatload of cash and companies know they have you in golden handcuffs. Shit..most people on this board won’t reach $500K. It’s just statistics. And I know I’m going to get a ton of monkey shit for this. But MD does not equal millionaire. Now..you may get carry worth a few million dollars in each fund. But that’s going to take years on years to pay out and you will need to sit in your seat long enough (read: 20-30 years). Why? Because your moving up the ranks to MD over the first 15-20 years of your career. Slowly building carry. Than finally, you hit MD. So you start getting larger pieces of the pie, but only in new funds…which means…you need to wait 10 more years to start getting paid (if this fund is successful). My point being, it’s a long road to a lot of money that the majority of people statistically won’t actually ever see or make. 

 

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