I am currently deciding whether to go into investment sales vs. being a debt/equity broker. If you could be as specific as you can, what are the differences between the two. Comp., time it takes to break out, exit opportunities, what are some companies to start for NYC (except the big ones), or anything else relevant.
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As with most questions related to a brokerage role, much of it comes down to the team you will be working with and how much volume they do. The roles are similar enough that seeing plenty of deals to cut your teeth on is the most important thing.
Holding the above equal, I would give a slight edge to debt/equity. Unless you are doing just agency apartment lending, you will (likely) see multiple property types and capital structures as opposed to investment sales who typically carve out one specific product (office, retail, industrial, etc). Some would say debt/equity is more in the weeds on their analysis than IS as well, although Im sure there are plenty of people on here who would contest that.
Base comp will likely be similar in both. Total comp will depend on the specifics shop bonus/commission structure. Again, much of that is based on how many deals they are closing.
Not local to NYC so can't really help on names besides the larger guys.
Echo that the team (deal volume & average deal size) is most important.
I would disagree with the nod towards debt/equity unless you’re with a team that consistently does JV equity placements or large amounts of mezz stuff. If your team is mainly doing debt placements, the work you do is less valuable than IS (from an exit op standpoint. In real life, a deal doesn’t mean shit if you can’t finance it/capitalize it). Debt guys focus on repayment capacity. Sophisticated IS guys put together multi year cash flows and value properties/investment returns. IS is like M&A on a property level and debt/equity is like DCM/ECM on a property level. The M&A guys are always first pick for buyside jobs...
Source - I work in debt and it’s been tough trying to switch to REPE. Everyone I interview with wants to see experience modelling NPV, IRR and equity waterfalls. I’ve taught myself a lot of the modelling which has helped.
There has been extensive arguments on this exact subject on multiple threads. Do some poking around the site for additional info.
Disagree. What you're missing that's arguably more important than volume is the BREADTH of the transactions you work on in a strong D/E team. I went from D/E brokerage to REPE, and I find my previous experience invaluable to my current role. Deep rolodex of contacts I can call on from info/comps/discussion, understanding of all property types, and mastering capital structures for all deal profiles (from construction to perm). I learned how to model and understand even most fucked up of deals with hairy cap structures. Sure if you're working multi brokerage at Berkadia, good luck going to an opportunistic shop that invests across the cap structure. If you're on a strong team that gives you an excellent background and baseline knowledge then your exit opps are anything you make them. I intereviewed for debt, development and REPE before I chose this role. Above all however, is the overall STRENGTH and REPUTATION of the team.
Work in I-Sales and would have to strongly disagree on the notion that D/E is more in the weeds. Institutional I-Sales almost always runs a full DCF whereas d/e many times are just sizing in-place/pro forma NOI to appropriate yields. Obviously if you on a D/E doing heavy equity placement this is not the case but for the vast majority of the time I-Sales is more in the weeds. I didn't see any delineation between middle markets I-Sales and Institutional so you may be referencing the middle markets world where on average D/E is much more in the weeds.
I will say that both D/E placement and I-sales are not really getting in the weeds. Sure, there might be outliers and a ground up deal might require a bit more in depth analysis, but those are exceptions. Both are good roles and they do serve a purpose, but in my view they get in the weeds to just about the same level. A full DCF is really not getting in the weeds imo, its almost the bare minimum. I dont get in the weeds too as I am a production analyst in the direct lending side, I consider my role similar to I-sales or debt placement. To be fair, it's really not our jobs though to get in the weeds and over analyze deals. That is the job for underwriters on the debt side and acquisition and asset management professionals on the equity side.
Brody92 makes a very good argument which, as someone that is on the acquisitions side now, I totally agree with. You're missing the point _Axelrod when you're thinking of what you consider to be in the weeds. Your argument on the DCF "being in the weeds" shows that you're missing the true point of DD and it's definitely not modeling the deal. I modeled equity waterfalls and crazy development deals all day in D/E, but that doesn't have anything to do with the DUE DILIGENCE that is really required on the equity side. Half the questions I ask sales brokers they do not have answers to, which right off the bat shows how much they are not thinking of the small details it is our job to think about. From my experience on the D/E side, I did not come close to digging this deep on any deal and I know sales guys don't either because as someone mentioned that isn't their job. This is what differentiates equity from other roles - you really need to dig deep into every aspect of the transaction. Understanding every aspect of the tax implications. Understanding the assumptions of the misc. solar income you are buying. Making countless calls to brokers and contacts to really get comfortable with your assumptions. Nitpicking every detail till you know the deal like the back of your hand- that is the difference. As for those considering the switch to REPE, it's very achievable to jump from brokerage, lending etc so don't listen to those that tell you it's very difficult. I've seen it countless times. Folks just need to learn to sell their experience better.
Could you expand a little bit on your comment about working multi-brokerage?
100% agree
Investment Sales - Dealing solely on the property level and reporting to the current seller
Debt & Equity - Dealing on the property & investor level and reporting to the new (to be) owner(s).
Comp - Similar on both to start, then depends how your team does
Time to break out - All depends on how your team is / who you are learning under
Exit ops - Depends on what you want to do. If you work on a good I-Sales team with a lot of deal flow, many PE shops/operators find this valuable because of how sharp I-Sales analysts have to be on the property level (the most important part). I'd worked in I-Sales for 2 years before going to the principal side and felt my time in I-Sales was critical for learning. Same goes for equity teams and for debt teams, if you see yourself doing lending, it's a great place to start.
Reading the comments above, it's interesting to see multiple perspectives on this. I work at a well-known boutique firm that does both IS and Debt and Equity. From my experience, I've learned the most from Debt and Equity due to the granular nature that's required i.e., modeling cash flows to determine what a lender's take-out would be, understanding multiple cash flow structures and how a lender may be willing to refinance the the property from a LTV/LTC/Debt Yield/DSCR perspective, but wouldn't feel comfortable with the deal at that leverage due to the Borrower's actual cash basis. There's a myriad of other examples I could go into -- We're working on a deal now where we were originally looking for a pref equity or mezz piece behind a senior loan we procured, but are now diving into a rabbit hole of creative structures with lenders including, doing a pref piece into the Borrower's borrowing entity that manages the SPE, with a mezz piece behind the senior loan in the SPE to round out the capital stack and let the pref equity lender feel comfortable that even if the mezz pieces forecloses, the pref equity player is still made-whole by the additional collateral of other cash-flowing properties in the Borrower's main entity.
In addition, we're working on a recapitalization of a real estate company by doing a capital raise with either institutional or private equity funds, and then leveraging that equity raise with a credit revolver. We're also doing an M&A transaction where a real estate debt fund wants to acquire a private equity fund because its REO portfolio is has done so well in the last 5 years they'd rather grow the business than sell-it off.
What it comes down to is your team. A couple of responses have already highlighted that, but its imperative to have a team that's not only smart and well connected, but can also think creatively. Being able to work with lender's/owner's and their counsel to mark-up term sheets and rewrite entire loan docs when necessary is so important.
In regards to exit ops, if you're looking into the lending or capital markets side, exit ops are great. I've had headhunters and private debt funds reach out, as well as REPE companies looking for someone with capital markets experience. In regards to acquisitions at REPE, it's going to be only slightly uphill due to the underwriting-heavy nature of those positions, but to say that you don't get a ton of experience at a debt and equity brokerage going through argus models or detailed underwriting models for construction loans to understand every cell in the model—and then completely rewrite the developer's models (when necessary), is an understatement.
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