Is Real Estate "Asset Management" Considered Back Office?
Just curious as Blackstone recently came to campus to recruit for the role. I did my SA stint at a Big 3 bank and will be going the Corp PE route out of undergrad, but I was just curious how sought after Real Estate Asset Management roles are?
It sounded relatively back-office, with an emphasis on accounting/reporting and cost control. Is there something I'm missing here?
A RE firm without an AM team will not be able to execute it’s business plan. Failure to execute a plan would result in poorly run properties and poor revenue numbers.
Just because you’re not going out and chasing deals and hustling does not mean it’s back office.
What exactly does "execute it's business plan" (wrong use of apostrophe btw) actually mean though? Doesn't that mostly just entail reading through leases, comparing results to the budget and stuff
Ah, another person who think that whatever their Excel model shows is all that matters.
Just because you have a "budget" doesn't mean your expenses are magically that number. It takes a lot of attention to the details of property management to keep your actual expenses in line with your budgets. That is what asset management is all about - keeping an eye on property managers, making sure they aren't being extravagant with their expenses, looking for opportunities to use scale to get better pricing, keeping an eye on arrears and bad debt, etc. It's a massively important job that gets overlooked because being on the dealmaking side is much sexier, but at the end of the day you'll sink an investment much more quickly and much more easily because you aren't asset managing effectively than because you overpaid on your cap rate rate by a few dozen basis points.
(You forgot a question mark at the end of "stuff" btw)
The answer to your question generally is not necessarily. I would define back office as not being a revenue center, and not having much external exposure. I have been at companies where "asset management" consists of FP&A, reporting, budgeting, etc. with no leasing/capital strategy responsibilities. That is - in my opinion - back office. That is also not asset management as far as I am concerned. Lots of discussions elsewhere on the forum about the imperfect distinctions between property, asset, and portfolio management, but I think that true asset management is executing on the business plans for your assets. That is going to involve capital/re-positioning, financing, leasing, and disposition.
Other variables that will impact AM roles are going to be product type (MF asset managers obviously aren't going to negotiate leases) and risk profile (core product is likely to require significantly less "asset management" than a heavy value add where you have to manage capital allocation, lease-up, etc.).
To your specific question about BX - my experience is that they are very actively involved with their assets (which makes sense given the "buy it, fix it, sell it" strategy). Not sure how much sourcing they do, but they are definitely active in their markets (external facing) and executing on the "fix it" portion of the strategy (revenue generating). Not back office, by my definition.
AM can be pretty exciting when it comes to value-add/re-positioning of assets. The GM of a family office with $130mil AUM is getting a new AM title and a lifetime appointment to the position. I've done 7 deals with this family in 18mo so I know them well. For the family office and even midsize companies it's definitely a shoe leather game still.
It's far more than reviewing leases and comparing budgets. For mid sized companies the head of AM could be managing the leasing team. This is critical. So much goes into AM including the shopping of refinance loans. AM is very broad-based department and roles.
He just renovated 200+ apartments across a dozen buildings and now is now renovating the commercial. Pretty fun job and he's inline for a big pay raise too.
I think it's harder to define FO and BO in real estate. Both acquisitions and AM are front office in some ways and back office in other ways. For example, in acquisitions, you're front office in the sense that you're generating deals to acquire and talking to sales brokers. But you're back office from the standpoint that you aren't interfacing with tenants, the leasing process/leasing brokers, service providers, etc. In AM it's flipped. Really the only time you're 'back office' in real estate is when you're doing something like admin work, accounting or anything not related to the RE itself.
Everyone covered the bases here.
Anecdotally, as a Fund Manager, the AM guys are a lot more useful to me in actually running a Real Estate fund than are the Acquisitions guys. Acquisitions guys are essential for putting out capital, but they largely are motivated by padding their resume and building their own connection network. The AM team is who I entrust to make sure the fund performs, which I would love to do myself, if my entire day wasn't spent appeasing potential investors and/or our C-Level team. One of our AM Associates just increased the value of an asset by $30mm due to a new lease he sourced with a repeat tenant of ours. He's the guy I count on to make sure everything doesn't go to shit while I'm dealing with the high-level stuff. He's the guy that's got to be tracking all major capital events or leasing activity and deciding where we can push value, where we should cut losses (dispositions), etc. They routinely brings cases in front of IC, predominantly for redevelopment/expansion projects, dispositions or other capital investments. In addition to that they're the local experts in their markets and the point-men for developing tenant relationships, which often leads to them sourcing acquisition deals or providing underwriting support. Our AM associates don't want to work in Acquisitions - they like what they do and are fantastic at it. Now that's just my shop - I'm at a value-add owner/operator with a large development arm, so naturally our AM guys are going to be WAY more involved than the AM guys at a super-core REIT that only acquire a few buildings a year.
Not trying to sound obnoxious here but of course AM isn’t a “back office” job. Such an essential part of operating the real estate. If AM is considered back office, are the acquisition guys the only front office people?
Shoutout to all the AM! They need more love.