EQT to buy Stockbridge - thoughts?

It's wasn't as cheap as it appears: $10B of $17B of their AUM is SMA. The largest S.A is Korean (funded through Blue Owl) and Stockbridge has a large Korean LP in their ownership.  That SMA could be at rick once the Korean equity is cashed out of the ownership stack, resulting in $175 MM earnout. These cultures will clash HARD...polar opposites. 

The number of bios of the leadership team on the website got depleted quite a bit.  

 

First the Yes! promote and now this. Senior management (eg, PaineWebber folks) at Stockbridge making out like first-400 Anthropic employees 🤪

bump

Makes sense strategically. EQT has clearly been trying to build more scale in US real estate, and Stockbridge gives them a much broader platform rather than having to build everything organically.

”Feel bad for the mid level people”

That’s what I’m saying about making substantial money in this industry (at least $2MM accumulated long term capital gains carry on top of salary over two cycles). 

Unless you are an early co-founder with platform equity (name as a member on the partnership docs), as someone growing the firm, you are going to rely on project level promotes and bonuses.  

But to get the promotes (several over time of properly specific or a couple if for funds), you need to survive decades on the job.  That means getting to drive the “vehicle” and staying on for the ride.  “Stacking carry” ($100K here, $500K there, etc).  Survive corporate politics.  Economic downturns.  

And, here is an example of a divergence of interests: a takeover acquisition where the members cash out and everyone else hoping for a long ride on the “vehicle” gets displaced; and in CRE most takeovers are for assets, not people for the most part. 

What I’ve seen is change is inevitable, and it’s happening faster and faster.

At least in companies that are venture backed, there might be an equity pool for workers, so a win for the members is a broader win.  Or an IPO. 

Here’s an observation. Since 2013, I’ve helped four companies grow substantially (two I owed part of the GP).  Only the two gave me residuals. The other two, nothing (growing from Regis offices to entire floors of buildings).

Here’s a pink slip as you enter a crap labor market. Thanks for helping us sell the firm. 

While it can be claimed that as workers, we don’t take risks. As an investor of your time and efforts, and as a business person, you should look for asymmetric upside. That to me is the best scenario.

Hard work, resourcefulness during the early part of a company lifecycle is hardly ever remembered at mid-cycle. The only remembrance is if you were given shares early on.  That’s the only thing you can count on. 

But if you look structurally the closely held business model that most CRE firms have, is not favorable to workers.  Even the incentive of promote has a lower expected value than you think when you have to stack carry to accumulate.  That other types of industries provide better wealth creation incentives that is inherent (RSU, vesting), that is if you are already someone who is going to grind and do what you can to make the company succeed. 

Even people who work at commercial banks can accumulate lot of equity.  For example, my banker at First Republic (lost everything, but accumulated several million). 

It’s disheartening to see this over and over in our industry (pattern recognition).  Better to grind somewhere else and win when the team wins as the consolation prize even if you get synergied out after the buyout.