[Development] where does the real comp come from? What made you successful?
I’m a 1st year Development analyst at a major REIT - about a month in and don’t have any prior formal re experience besides coursework and curiosity.
I’ve got a few questions regarding how the career plays out. First off, I like the work - it’s interesting.
I want to know what makes guys successful as developers and what has to be done to lay the foundation of a successful career?
What is the trajectory? Right now I’m an analyst making about $85k (77k salary, $8k bonus). My firm does match 401(k) so total cash comp will be ~$90k. This is direct from UG.
Where can I expect to be in 5 years - compensation wise and career wise especially if I want to have a lucrative career in development and/or related fields?
Somewhere I saw that no one makes more than developers, but I’m curious how is it in REPE, individual investments, or what?
I’d love to really take advantage of this opportunity and set myself up for success so any advice is appreciated.
Comp varies but generally most firms pay a base salary + guaranteed bonus. At some firms you will also get a special bonus when your project finishes and the development fee is paid out by the firm. On a profitable project, this could easily amount to 2x-4x of your base salary in one payout. Now add in equity interest. Assume your firms GP slice of the deal is 5-10% of total equity and that you bring in an LP for the rest. You would get a certain number of points in the deal of the GP equity, either loaned to you by the firm or at others I guess you would have to find yourself—which makes it unrealistic for most people without a trust fund. If GP check is $5M and you’re 5 points, that’s $250k going in equity that is yours. If the deal returns a 4x promoted, you’ll hopefully see $1M come back, of which you’d pay off the loaned $250 and retrain the rest as profit. This is on top of base salary, guaranteed bonus, and project completion bonus. This is how you can make a ton of money in development. As your seniority grows, most shops give you more and more points in each deal. If you go out on your own, you could theoretically get most of this as well, but you’d split it with far less people in exchange for now have to do almost everything to run the project. The joys of entrepreneurship. With that joy comes the stress and lack of security but the potential to make a ton of money.
Do you know roughly how the base pay increases the next 5 or so years? Is it just a standard 2-3% raise annually?
At REITs, they do the deal participation or is that only in REPE?
One more thing - at what point does deal participation typically take place and are REITs a good place to make this kind of money or would REPE, dedicated developer be better?
No ide I’ve never worked public but others in the REIT space can hopefully comment
"no one makes more than developers" - i know experienced, independent developers in their 50s who have way less net worth than you would expect. meanwhile Jon Gray is worth billions. as someone recently said in another thread, sure you can make a lot of money as a developer but you can also make a lot of money doing other things.
Well yeah, of course. That’s why I’m asking
Agreed with prospie. Developers can make a lot of money. Real Estate Private Equity can make a lot of money. REIT C-Suite Executives can make a lot of money. Investment Sales Brokers can make a lot of money. This is similar to how there are sell-side investment bankers, private equity fund executives, hedge fund managers all clearing $15M a year.
What is necessary to make a lot of money via all those careers is to generate non-salary compensation and/or equity. The goal is to begin to generate compensation via non-W2 methods.
For REPE - this comes from: (1) Carried Interest in their fund and (2) Management Fees charged to Limited Partners.
For Development - this comes from: (1) Fees Generated, (2) Land Mark-Ups, (3) Significant Promotes off their LP.
For Investment Sales Brokers - this comes from: (1) Commissions they generate and (2) Commissions that people on their team generate that they get a piece of.
For REIT Executives - this comes in the form on stock compensation.
Please chime in on anything I missed.
To be fair, there are only a handful of Jonathan Gray types. There are hundreds if not thousands of very wealthy developers across the country. Obviously there is some selection bias, because developers who go out on their own and aren't successful you never hear about, but I'd bet the average developer is far more wealthy than your average person rising through REPE.
In basically any business, you have one correlation that almost always holds true: people who take more risk make more money. Developers put up their own money and their own guarantees in addition to time and expertise; they make commensurately more money than someone playing around purely with someone else's money.
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