Managing Director of Top Multifamily Developer Compensation
Anyone know what to expect for compensation at the Managing Director level for a firm like Alliance or Wood Partners in the Sunbelt?
If memory serves, $200k-$300k + promote which is where you make the real money, obviously.
CRE may have some better intel for you.
Curious how much promote an MD at the level OP mentioned could get
Not sure of the exact splits, but it can be a good slug if you were the one finding the land, putting the deal together, executing the development, etc. Those guys are all eating pretty well. Find the guys who are in the chair now, go pull the tax record on their houses, and you'll get a good context for what they're pulling down (assuming it isn't all from family money... which it often is).
Also, folks really shouldn't underestimate how lucrative it has been to invest in sunbelt developments as an LP as well, and doing it so while paying no fees and no promote has been a really good bet. Been a great cycle for those folks.
The math is complicated. It's not as simple as collecting a base + bonus. When you work on a development deal you will see there are a dozen different ways to capitalize the deal, structure the promotes, structure the development and acquisition fees etc. There are promotes from the actual cash flow of the deal and then also the fees (development fee and acquisition fees) that go to the principals and then there are the costs of running the company and paying employees. There's just no way to give you a standard number for all of these factors... other than letting you know that it can be a lot.
One development deal I recently worked on... The principals put up $5mm and if they were to participate in the deal on a parri-passu basis (eg just participating in the deal without any promote structure) and it performs as underwritten, they would make $11m profit. But with the promote structure, their total profit will be $22mm. So essentially they are being paid a $11mm bonus if they hit their underwriting. But keep in mind they are putting up $5mm.
I would worry less about the actual dollar amount and figure out how you are going to put yourself in a position to put $1mil+ down on a single deal
I am curious if anyone has any "solid" info on this. So assuming you mean an MD/EVP type that is running an office/market/region, I'd guess that "comp" is really going to depend a lot on how the firm and deals are financed and structured.
I've heard of some situations where the "MD/EVP" are effectively full equity partners with their own wealth tied into the firm and deals (sometimes from "borrowed" capital from the firm/family that owns and sometimes from literal cash buy-in) and may even add personal signature on loans. Others that are just jobs with promoted-interests, shares, etc. along with traditional base+bonus features (i.e. more "corporate").
So, like a lot of real estate, pay is a function of risk, and at these levels I'd expect that to be what really sets the pace.
Curious about solid info on this as well
Cannot speak to any kind of base or bonus, but having looked at all of the same deals (in my market) as those two groups, and done the math on the returns at the time of sale, I know that their deal's upside--and by extension the MD running the deal--is limited. Those guys get well-located deals in proven markets but do so by paying up in a big way to get the time needed to close with zoning, site plan, SDP etc.
Part of the reason they do this is that both groups are capitalized by a large, public company. Wood is CB Global, Alliance some AZ pension or retirement fund (can't remember exactly). Of course they both have/make plenty of money, but they are usually doing 95/5 deals that are by-and-large de-risked by the amount of time they get on their contract and the submarket they're in due to the nature of their partnership and parent company.
So, in a crowded MF dev game with compressing yields, and a 95/5 cap structure (especially when some of the 5% isn't yours), you're not making *that* much relatively speaking. Of course this is offset by the volume, but point being a lot of shops like this have evolved--intentionally or not--into more of a fee biz than an upside biz. Conversely, a founder-led shop with in-house capital can (or more accurately, is forced to) take on a little more risk, closer way quicker and enjoy more upside, albeit in lower volume, so just a tradeoff.
All that said, while I know how the shop is capitalized and the basics of their deals (how much it cost, how much it sold for), I can't quite put a finger on the comp at the individual level in terms of base or points in a deal. They may very well give these guys a bigger base to offset the lower upside, or maybe fee sharing.
And most importantly...if you're a young guy, def do not let this turn you off. The big shop will give you more reps and at this stage and that's what its all about.
A lot of what you're saying is true, but Wood hasn't been owned by CB Global for like 5 years (management recapped them out with Sarofim). Neither they nor Wood have a programmatic equity source. They have partners they've done a bunch of deals with (Carlyle, Pru, etc), but each deal is capitalized individually.
Those folks are all doing well. Are they flying private everywhere? Probably not, but some are and they all generally make a great living at those shops... sort of 6 of one half dozen of the other type thing.
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