Development vs. REPE pay gap
I am in development and intend to stay within it. I have been in talks with an dev LP REPE firm (huge name ) and the comp is so much higher than what I make now (about double)
I don’t want to leave development, but curious, when does development catch up/ start to pay off. I know it monetizes much later on and Is always all deal economics dependent … but when did you feel it caught up
I am trying to keep my eye on the prize, lol.
Is your current company a "huge name" in development? I'd imagine firm size discrepancies being a bigger factor in W2 pay than some broader Development vs. REPE trends.
Try not to think about "playing catchup." If money is all that matters, there are better options than either. As always, development makes real money when you're doing your own deals or you're a MD or above at a big shop.
Current firm is big Multifamily REIT, equally capitalized.
Makes sense,yet put my head down for a while to earn those economics.
If you're at a REIT doing development, I would seriously consider the offer. There is still upside at senior levels but it's going to come in the form of stock vs. true deal equity participation. RSUs are less tax efficient and require vesting, and meaningful participation is going to be reserved for pretty senior levels.
I agree with this. Also at a public REIT, management is constantly fighting with the stock analysts about reducing development pipeline to less than 20% of the market cap. Therefore, there will be a ceiling on the size of the development arm (you move up due to someone else retiring vs the business growing).
The possible exception is if your REIT has a history of promoting from within, and they’ve made someone from development the CEO (and then promoting other development folks up). I’ve seen that happen, say at Alexander & Baldwin before they were taken private by BX.
I’d guess that for most people, it never does. You get value elsewhere like work-life balance, engaging work, and a skill set that can generate real money if you’re skilled and willing to take some risk. Especially once you factor in compounding, I have a hard time seeing the gap ever flip the other way for most developers. unless we get another crazy bull run. And that’s fine. You’ll probably end up financially successful either way, so just do what you enjoy
Take the job / money. If you’re ambitious and smart enough you’ll figure how to run your own deals eventually (or can hire people to fill in the knowledge gaps i.e. owner’s rep for construction/design). The two owners of the company I work for know far less about the nitty gritty aspects of developments than I do, yet can claim they’ve developed 1,500+ units… wonder why that is. Hint: it’s because of capital/access to capital. They both worked on the LP side earlier in their careers (large brand names), built nest eggs and developed capital relationships, which then allowed them to leave their W2s with enough runway to pursue their own deals and pay for their living expenses for 1-2+ years. Not possible if you don’t have the money.
Plus, at worse you can ride out the current storm, make some good money then pivot back to the GP side if you hate it, so once deals are in the money again you’re hopefully be in a position to harvest (ie. get a VP-level job with promote/carry).
This is great advice. How would you read it w/ role being 70% AM , 30% LP capital placement ?
Want to avoid rebranding myself as a non operator / invested by being in a heavy asset management role.
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