Question for experienced real estate people out there... If you're trying to start a new opportunistic REPE firm from the ground up and you're looking to pick up say 2 deal guys to help you and your 1 other cofounder get going, with their primary focus being on sourcing and executing deals, where would you look to hire?
Let's say you can offer a decent salary as well as a small amount of equity and a significant portion of carry guaranteed for the first several deals/funds, but you can't offer significant bonus prospects or high salary for the first several years. Let's say your strengths as cofounders include high-level industry contacts, academic and pro background at top schools/firms, significant deal evaluation experience, access to institutional and HNI money, etc., but that you are not necessarily the most connected with brokers or a savage on the ground deal guy that can claw it out to access off-market deal flow and the like... you need guys that can. Clearly hiring people from the likes of BX or Starwood is going to be tough given your financial constraints, and you don't necessarily care as much about their background from a prestige standpoint as you believe you already bring a lot of that which can help sway potential LPs... what you need is market access / deal flow at a reasonable price and guys that are hungry AF... they should have solid resumes that are worthy of throwing up on your website and in your pitch books, but this is second priority.
Where would you guys look? I'd be interested to hear what you think in both (a) US context and (b) Asia context.
haha, while I wish you the best, this not the first time I've seen you pose such a high-level question to a forum of 23 year old kids from Tufts.
I would like to make a suggestion for kicks, though. I would actually consider someone from the brokerage side. You didn't mention anything about hardcore underwriting skills or rigorous investment discipline. Nor do I think that should be #1 concern. Pipeline is everything. Without a pipeline you are just hot air and ideas. Excel skills do not create a pipeline. Just my (uneducated) 2 cents.
I think starting a PE fund is kind of a ridiculous idea. I know one guy who is doing this and he has been syndicating deals for 20+ years and he is sitting on 10 mil in cash. I would syndicate a ton of deals first before i orginize my group into a fund. If you can find some good deals the money is almost guaranteed to follow. There is significantly more capital then deals to invest in and its easy to raise money if you have good opportunities
Because it's stressful to have to worry if you will have money for every deal. A fund provides a capital base while you are deploying it. Also, surety of close..a seller may not sell to you if you don't have surety of close - and a syndicator, on the surface, has less surety of close than a fund which has a base of capital which it needs to deploy.
Capital is abundant for proven players with a track record. And "five years at Blackstone" isn't a proven player. Someone who has been out there and done a couple deals successfully without the kind of institutional support structure provided by basically any REPE firm, prestigious or not, is someone who has a track record worth investing in.
As you say, capital is abundant, but it isn't stupid (generally). Foreign money might be going into crazy condo deals or low cap rate plays, but a new firm isn't accessing those dollars.
Moreover, as Count_Chocula says (or I think what you're saying, just from a reversed perspective), the return profile that a bunch of syndicated investors are looking for is different than what a big REPE firm investor is looking for. If I'm investing my dollars on a discretionary deal-by-deal basis, I am going to be far more sensitive to the developer, to the project, to the risks, than I am if I'm in a giant fund with managers. Finding deals attractive to those players is much harder (assuming it isn't friends and family).
In other words (since those are contradictory pieces of advice), I think the best play is to keep your overhead low so you can sit around and wait for the right deal, instead of chasing every broker blast. Find one deal in which you think you have a unique value add, and kill that deal.
Once you can point to a potential investor that you're hitting 18%+ returns, or on your way to it, you'll have a far easier time raising capital. Instead of spending 100k+ on a couple analysts, pay yourself and allow yourself room to breathe in the market and not chase fees; exceeding expectations on your first couple deals is the most important thing. Ten years from now, people won't remember that it took you a year to find that deal, or won't care that you chase something and barely got their money out - they'll remember that you have a reputation for underwriting conservative, not getting into bidding wars on contracts, and returning better value than peers.