Do the majority of RE funds or REPE use in-house asset management?

Property management is outsourced, for sure. Asset manager usually in-house, but I have seen it outsourced.

It varies from company to company, and the function varies from company to company. For those that do it in-house, you could search Select Leaders for the Asset Management position that have been posted the past couple of months. Some funds and REPE firms have asset managers who basically function strictly in a financial analysis/reporting/portfolio performance capacity and are completely hands-off. Some firms have asset managers who still do financial analysis but are completely hands-on, dealing with the property managers, leasing departments, brokers, and property accountants on a daily basis. It can really vary a lot.

What is your opinion on pros and cons of in-house management? I work on the debt side and I haven't seen many distinguishes between in-house or outsource. However, I talked to a guy and he said at his bank, he uses lower management fee for in-house management vs outsource in underwriting (2% vs 3.5% of gross revenue for example).

Second question is do you know if top REPE, such as Blackstone, Lone Star, Starwood, Carlyle, Oaktree, Fortress, Angelo, use in-house (and how hands on are their inhouse team) or outsource the management function?

Thanks

Thanks baamboo. I checked with that guy and he told me that company has a very large AUM (I guess 10b+). So I guess they are able to leverage the economies of scale.

Everyone I have worked with (from Blackstone to small owners) have some form of in house Asset Management. As mentioned above asset management roles vary based on size, culture, etc.. Most major REPE funds do not have property management arms, the ones that do typically own or buy a subsidiary management company to run the actual properties

Thanks REValuation.

Agreed with the above that REPE shops utilize in-house Asset Management. BX is a little different as they run extremely lean for real estate. For Financial Planning & Analysis, Asset Management, and back office responsibilities, BX utilizes an affiliate - Equity Office Properties (BX bought EOP in '07 for the largest LBO recorded at that time... $39b i believe).

I've worked with ~10 larger REPE firms (couple billion to $10bn AUM) based primarily on the West Coast. Vast majority (~80%) have in house Asset Management. Those that don't operate as capital allocators, brining in local operators at 2.5%-20% of the equity to run the project. About 50% of the total are vertically integrated with in house leasing and construction.

The larger ones will have Asset Management in house.

In Asia almost everyone seems to have inhouse Asset Management.... particularly in China. Japan I've seen some that out source it, but still not common. Not sure about USA.

As with everything else, it really depends on the shop. Where I work, the transaction managers on the investment team underwrite new deals and then handle the Asset Management responsibilities for those deals that close. Not sure how common this is, but I find value in being able to round-trip deals and see how they actually perform from closing through exit relative to how we projected they would perform during our initial underwriting.