I have an upcoming on-site interview with a healthcare-focused REIT for an Acquisitions Analyst position. The interview will include several case studies to test RE finance knowledge and obviously interviews with the acquisitions team.
Could someone in the REIT or healthcare REIT space please weigh in on what I might encounter in the case studies and what to know for technical questions besides calculating NOI, debt yield, knowing different segments of rental income, ect.
Also, it would be great if someone had input on what exactly to know about several of their recent investments to bring up during the interview.
Thanks everyone,
Congrats on the interview. Couple of things from my experience: (1)* From a modelling perspective, REITs are generally going to be a little more simplistic. By that I mean that they generally go at acquisitions alone (so there is no JV promote/equity waterfall calculation), and they generally avoid secured debt (so you are generally modelling unlevered returns, more or less solving for a desired yield). Calculating NOI is going to be important; understand different expense reimbursement structures. At this point in the cycle, they might be developing too so understand return on cost. You should also be familiar with IRR, NPV, equity multiple, (and maybe some basic IRR waterfall calcs if they partner with a developer for any development), since they may run you through your paces in the interview, but from my experience, the metrics that will actually be focused on aren't the complicated ones. (2) Lots of different niches within the healthcare RE space - MOB, senior/assisted living, hospitals, life science, etc. which have varying management intensity, lease structures, tenant needs, return profiles, etc. The big healthcare REITs have exposure to most or all of these - not sure how their acquisition teams are structured, but I would imagine that you would get experience working with all of them. I haven't worked much with most of these asset types, but I would understand the basics of whichever ones this company focuses on. (Specifically lease/management structures, recent deals in the space, etc.) You can probably get some useful information about how this company views their investments from investor presentations/supplemental financial filings. *(1) assumes that this is a big public REIT
Nice thing about public REITs is that they publish a ton of information on their investments and how they would like shareholders/analysts to look at them. This information can help you understand how management is looking at current and future investments. This info should be helpful for your last question. Depending on the size of the REIT and of their recent deals, they may have specific press releases, investor presentations or public filings (8ks) related to their recent acquisitions. I would make sure to look into these, and look for any news on these deals (local business journals, globest, wsj/bloomberg if its a big deal) and try to see if you can get an understanding of the strategy behind the deals. For an entry level position they aren't going to be expecting you to come in with useful insights on their investment strategy, but its a good way to come up with some questions to ask them about it to show that you did you research, have an interest in what they are doing, and can (and want to) understand the bigger picture. The analytical/modelling skills aren't terribly complicated, and I would rather have an analyst who's 90% of the way there on the modelling front but can step back and thoughtfully evaluate and explain an investment opportunity than someone who is an excel/argus guru but doesn't understand the investment beyond the metrics.
Hopefully this is somewhat helpful - happy to help if you have any more specific questions.
Thanks for the very helpful response. They will also have me interviewing with the portfolio management team for an analyst opening there.
I would rather be on the Acquisitions team but i'd prefer to be well prepared for both interviews. Any input on what kind of questions I might be asked in the PM interview?
Probably pretty similar, but it is hard to say since portfolio management can mean different things at different firms. I've seen it vary from Asset Management type duties (lease negotiation/capital and property strategy) to financial reporting and maybe even financing/disposition. If you have any clarity before the interview what bucket(s) it falls into, that would be helpful, but from an asset management side, probably pretty similar to acquisitions, but depending on the asset class a deeper understanding of management/lease structure (investor reports should have some high-level info on this). If it's more financial reporting related, understand how they segment their business, and what are some of the key metrics they use to report performance to investors (typical REIT accounting metrics like FFO and its variants, leverage ratios, etc. and anything specific they use, same store NOI growth, rent growth, any sort of segment analysis they do in their investor reporting). If you do your homework and read up on them, it will show.
There are benefits of both positions and they can both be good learning experiences. From my experience, one of the biggest benefits of working in acquisitions is the exposure to upper level management at an earlier level. This is obviously firm/culture dependent, but it can help you get a bigger picture view of the way the business works.
Is your role for generalist acquisitions across all product types, or division specific? The major healthcare REITs invest in senior housing (including skilled nursing), medical office, life science, and hospitals. Each space is vastly different - for example, it would be helpful to have knowledge of ARGUS if your role involves working with medical office, but you won't need to know it at all for senior housing.
Bolo Up's post gives a good overview. Here are a few more notes:
Healthcare REITs do RIDEA JVs in the senior housing space. The RIDEA structure involves placing the property into a "PropCo", which owns the property and leases it to the "OpCo." The OpCo must be managed by a third-party manager, and the operator will generally put up 0-20% equity. Usually, the REIT will fund the acquisition by issuing stock and unsecured debt, although the JV may get secured debt to create additional leverage for the partner's promote. They also do leases with operators/tenants in all of the asset classes, so I would understand the basics of how those leases work.
I would also try to get a copy of recent equity research reports from reputable firms like the major banks or Green Street. They will usually give you a good overview of the valuation drivers.
For recent transactions, I'd try to stay high-level - look up a few recent major sales, know the general price range and cap rate/lease yield, and any nuances of the deal structure. Look at the recent 10-k and see management's commentary/reasoning for the sales, and try and get a general feel of their overall strategy. For instance, the big three REITs are trying to rid themselves of exposure to skilled nursing facilities (HCP and Ventas spun off their SNF assets into a separate REIT, while Welltower sold around $4B worth of assets in 2016, including a lot of SNFs).
For the model, I imagine that you will have to build out annual cash flows, an S&U, and return metrics with sensitivity tables (IRR, equity multiple, profit, cap rate, cash on cash yield). The more time they give you, the more detailed you can expect it to be - one hour is typically the standard for the tests.
Good luck!
Thanks for the great response - so to clarify, this RIDEA structure you mention is similar to the ownership structure of hotels where there is a Propco which owns the Hotel and then a management contract is signed (by say a Marriott) as a "lease" over the property?
Thanks again for the info. The role is senior-living specific, if you have any additional input given that information it would be much appreciated.
Would you mind clarifying what S&U is?
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