For development people - I am sure many of you have had offers fall in your lap given current climate of development going on. What is the consensus regarding letting someone buy you at the top of the market? Personally I have a fear of last one in first one out so to speak, even though you can secure some nice base salary bumps. Anyone else seen these types of offers but decided to stay?
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I recently took a job with a significant pay and bonus increase at a smaller developer/equity shop. Now I am basically fresh meat with 2 years exp but they came with the offer saying that they made a ton of money with 1 guy in 2008 when things were crashing. Now that things are what they believe to be topping they are hiring with the extra cash.
The role was sold to me as a role that is needed right now (Top of the market) because they want to be geared up for a pullback or lower prices and have it be well oiled in case things start hitting the fan, and capital needs to be deployed.
I think any reputable development shop would know this as well. If you are hiring now it is in the expectation that you will buy more in the future and need a developer ready to go.
Of course, this is all easier said than done.
IMO, no use fretting over things you can't control. Take the best job you can get to maximize your project experience right now...props to you if you can negotiate a higher pay package. If the market explodes we will all just have to ride the wave. Clearly, if you are an acquisitions associate making $200K in base salary, it is going to be far easier to justify letting you go if the market tanks than the $80K analyst.
It's a valid question though. I think it's helpful to ask...some firms are more willing than others to let their acquisitions guys pivot to asset management in a tighter environment, for example. No harm in asking.
I think the biggest take away should be to "Make hay while the sun is shining".
Would you feel safer as the only associate at a small developer or one of 25 associates at a large REPE fund?
Without a doubt, the reason is....Think of how essential that one associate is to the company. How hard would it be to replace you and the amount of time spent training your replacement. I'd reckon pretty darn hard and that gives you some security.
Even Large REPE shops would trim that pool of 25 associates to 3-5 if they had too in a downturn. Just the nature of the beast.
I've been getting hit up with opportunities I'm arguably not even qualified for. It's pretty dumb out there right now.
That said, I don't think there's any one response to any of this. It really depends on the company/the people/how you are in your current position, etc. First in / first out isn't some sort of iron clad rule.
Can you succeed at the top of the market? (Originally Posted: 01/27/2017)
WSO,
Can you be successful actively investing at the top of a cycle? For example, funds or shops that have to place capital in the current environment, will they be able to re-trade or refi at or above their current basis. Obviously no one has a crystal ball... But, what strategies have you seen work at cyclical tops in the market?
I would think core would be your best bet, or long-term hold investors can weather the storm if they've stretched their leases out long enough w/ proper bumps. You also have some investors literally just looking to "park" money cough asian cough, so they don't care where we are in the cycle they will purchase regardless. Would love to hear what others think or have seen working during market tops.
For myself, I view real estate investment as how can I actively make a property inherently more valuable and increase Cashflow. I look at the spread between Total Project Capitalization and stabilized value as I do light value add in a Core market. I Look to make High COC yields as I believe that if there is enough of a spread I will make money regardless of where cap rates/Rents go in the market. I'm about to go in on a small deal where we a projecting to double NOI in a year while only having to raise the Total Project Cap by 10%. This deal my partners and I feel very strongly about even in a Bubbled market. We have also started looking into buying land and assembling properties in a redevelopment district which has a large as of right FAR bonus after the lot(S) combine to a certain size. This type of deal we feel would work in a down market as our bases would Decrees significantly as we add more lots together and we add inherent value. But you right in a Scenes that institutional players will lose their shirts if they dont have long term Financing and a lot of people are investing and will lose money in this market .
Is that common in a lot of areas?
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