Moving firms during downturn

Currently considering my options as I feel I'm approaching a fork in the road a bit more quickly than I had initially planned. Looking particularly for some insights from the more experienced folks on this site relating to timing around a switch

I started my career in CRE debt, got a lot of great deal experience, and after a few years moved into a production role. Have found some success here over the last 4 years or so and have a clear path forward. I am the most senior on the team outside of my MD and he's a die at the desk type, so the future is there if I want to stay long term. WLB and pay are both great, but we have a pretty specific product type and I feel myself getting bored

I always wanted to work for a buyside firm but had trouble getting there out of undergrad and had a lot more connections in the debt space. The plan was always to stay in a production role until my early to mid 30's and go work for a mentor who recently started as a developer. I worked for him early in my career and we've been planning this for 4-5 years, I currently work for him on a consulting basis

We recently did a weekend trip with some friends and got some time to actually talk. I mentioned to him that I'm pretty bored where I am at, and wouldn't mind working on more complex transactions

The conversation turned to me potentially going to an owner operator or developer for a few years before joining him, which wasn't something I'd expected him to suggest. I hadn't seriously considered this as an option in the past, because I've spent my entire career on the debt side and anticipate a pretty big pay cut if I were to make a switch. This is one of the reasons I had the desire to jump to the buyside as a principal, once I had some real money and had done a few deals of my own

So my options as I see them:

  • Stay where I am, keep my head down and keep running this business for probably 3 more years and then jump ship to work at the new growing development shop
  • Brush up on my modeling skills and try to land an Associate role at a Developer or Operator in the middle of a downturn and learn some complimentary skills for a few years before going to the new growing development shop (I would ideally be working on a variety of projects in numerous markets, as opposed to one product type in a more restricted set of markets like I am now)

Personally I am leaning toward the latter, but want to make sure I make the decision slowly and know all of my options before talking to anyone. My desire is to be on the investor side of the business long term vs the lender side, I had just always planned for this to begin later in my career. While I'm well aware we're experiencing a slow down, I also know of a number of strong shops that have had issues keeping good talent for more than 1-2 years at a time, and feel I could potentially pick up on of those spots. I'm just not sure if making this move now, or in a year, would be the better decision considering where we are in the cycle

Comments (6)

2mo
a-basic-name, what's your opinion? Comment below:

First off- you're in a great position! Based on what you've shared, I'd have no doubt that whatever path you decide on will lead you to success (congratulations! You're killing the game dude).

From my perspective, based on your "end goal" of being an investor, taking time to get experience at a dev shop/operator prior to joining your mentor's firm would be your best bet. 
The reps you get on the debt side will help you identify quality opportunities, risks, mitigants, execution strategies, etc. But, it doesn't give you the necessary exposure to the day to day of executing on your investment theses. It's one thing to look at a deal, and know you can make a 15% IRR by performing some value add, and maybe adding in a few new units to increase revenue. It's another thing to look back in 5 years and have actually hit that 15%.

Similar to how your deal reps make you a great lender, your reps on the sponsor side will make you a great operator who will truly be able to "protect" an investment. 
How will you handle tenant issues, how will you address budget overruns, or a permit denial that sets your timeline back one year? Those who can effectively mitigate these situations will be the ones who consistently make the best returns- this is who an LP would want to invest in.

For you, if you can enter your mentors company with BOTH perspectives: the deal-junkie, strategist one from the debt shop, and the operator, risk mitigant one from a sponsor, you'll be a sure in success.

Admittedly, there's something to be said for testing yourself and just going to your mentors shop without the prior experience. A bet on yourself is probably the best you can ever make- but that also comes with more risk. Maybe you sink, maybe you swim- only you can evaluate that option.

Interested to hear what you end up pursuing- like I said, regardless you'll have great success. Good luck!

  • Associate 3 in RE - Comm
2mo
a-basic-name

The reps you get on the debt side will help you identify quality opportunities, risks, mitigants, execution strategies, etc. But, it doesn't give you the necessary exposure to the day to day of executing on your investment theses. It's one thing to look at a deal, and know you can make a 15% IRR by performing some value add, and maybe adding in a few new units to increase revenue. It's another thing to look back in 5 years and have actually hit that 15%.

Similar to how your deal reps make you a great lender, your reps on the sponsor side will make you a great operator who will truly be able to "protect" an investment. 
How will you handle tenant issues, how will you address budget overruns, or a permit denial that sets your timeline back one year? Those who can effectively mitigate these situations will be the ones who consistently make the best returns- this is who an LP would want to invest in.

Exactly. We do a ton of transactions but obviously no where near the level of depth as a sponsor. I wouldn't mind drinking from a fire hose at a new shop for a couple years before moving over or even to another firm, if for whatever reason it doesn't work out as planned (as redever mentions below). Primary concern is timing... Thanks for the comment!

Most Helpful
2mo
redever, what's your opinion? Comment below:

Great post and interesting question!

My random thoughts on the matter...

- If you are bored, you are bored. Even if 100% legit, I would remove the whole "go work for this guy in a few years" thing from the analysis, and then decide if you really want to stay in the debt shop any longer. After 4 years, you get it and know what's up about that world, so you should be able to clearly figure out if you want its future. To that end, being in a role/industry that pays well, has good WLB, and is relatively secure is nothing to dismiss.... but that is not nearly enough to keep one around if bored (I've been in similar spot, I decided to jump, and it was 100% worth it to me). 

- If you have "buyside" ambitions, you could come to kick yourself if you don't try. If you don't like, get washed out by a recession, or just need a change later... the debt world will probably welcome you back with open arms, the time spent in 'client' land will only enhancing. So, I actually see your situation as less risky than others. 

- So, I guess I think I'd try the jump if I were you! With the risk of recession/slow down ahead..... yeah, gotta factor that with any firm you could join. Tbh, risks are probably higher, but in general firms don't seem super over leveraged or over hired. Assets and project still need management, there are deals to do, but it will certainly be harder in some markets and some asset classes. Best advice I'd give is focus on larger, safer firms with operating portfolios and good capital backing (i.e. more than "some guy"). That is not a perfect recipe for safety in a downturn (no such thing tbh), as many large firms could do cost saving layoffs and decide to can 10% of the workforce, and just use the "first in - first out" method of deciding who stays and who gos (not sure if that's all that common, but it could happen).

- But here is the thing, I was young and in the biz when 08-GFC hit, it was wild rough (firm I was with evaporated and shifted my whole career, story for another day). I know TONS of people who got laid off, forced to shift gears, or just sat in boring roles with no bonus that used to exciting with great bonuses. It is part of the world, I'd honestly say it is not something to live in fear of. Keep your personal finances tight, have plenty of excess liquidity, avoid stupid debts (like car payments of $1000 a month), and you can take risks as needed to really get ahead. After all, what do you have to lose???

  • Associate 3 in RE - Comm
2mo

redever

Great post and interesting question!

- If you have "buyside" ambitions, you could come to kick yourself if you don't try. If you don't like, get washed out by a recession, or just need a change later... the debt world will probably welcome you back with open arms, the time spent in 'client' land will only enhancing. So, I actually see your situation as less risky than others. 

This is one of my main concerns - Not making the move and regretting it down the line. I'm feeling like it'll be more and more difficult to move over once I've been in the debt world for 10+ years, since doing so in my late 20s still seems late. 

- So, I guess I think I'd try the jump if I were you! With the risk of recession/slow down ahead..... yeah, gotta factor that with any firm you could join. Tbh, risks are probably higher, but in general firms don't seem super over leveraged or over hired. Assets and project still need management, there are deals to do, but it will certainly be harder in some markets and some asset classes. Best advice I'd give is focus on larger, safer firms with operating portfolios and good capital backing (i.e. more than "some guy").

That is not a perfect recipe for safety in a downturn (no such thing tbh), as many large firms could do cost saving layoffs and decide to can 10% of the workforce, and just use the "first in - first out" method of deciding who stays and who gos (not sure if that's all that common, but it could happen).

This makes sense.. I wasn't so concerned with firms being overleveraged since anyone hiring right now is hopefully in a good position. I was however concerned with activity. If I'm able to get hired on in an Acquisitions role and opportunities really dry up due to supply & rate environment... I may not be needed and eventually let go if the more seasoned employees can handle the acquisitions pipeline. Since I am on the debt side I am not too familiar with how these firms staff/manage their teams in a downturn

- But here is the thing, I was young and in the biz when 08-GFC hit, it was wild rough (firm I was with evaporated and shifted my whole career, story for another day). I know TONS of people who got laid off, forced to shift gears, or just sat in boring roles with no bonus that used to exciting with great bonuses. It is part of the world, I'd honestly say it is not something to live in fear of. Keep your personal finances tight, have plenty of excess liquidity, avoid stupid debts (like car payments of $1000 a month), and you can take risks as needed to really get ahead. After all, what do you have to lose???

As you mentioned the only thing I really feel I have to lose is financial security, which is obviously a real concern. I guess if I take 3-6 months to network and map out potential avenues while saving I could mitigate some of this risk. Easier said than done though, considering our production is less than half what it was this time last year lol

As always, appreciate the insights redever

2mo
redever, what's your opinion? Comment below:

A few reactions to your thoughts (glad it helped)...

- Making a move in late 20s is not late at all...... some don't even start in CRE until then (so you are still super young in a career, just doesn't feel that way)

- Activity level falling is a legit reality, but the firms that do hire probably are not in that situation. Still, learning how to invest and manage assets in a downturn is a great skill. Nonetheless... worth making sure any position offered to you is "needed". And yes, a slowdown in activity may make this "jump" much harder due to reduced hiring needs. Hard to impossible to generalize, but logical thought.

- As to financial security, while I don't know your personal condition (i.e have a family, etc.), if you are in your 20s... if you "wipe out" via job loss and have to wait tables until a real gig comes along.... this is not that big of a risk and frankly one that I doubt would impact your actual lifetime earnings/wealth. I was in mid-20s and experienced this in the 08-GFC, I mean like everyone did, and it was much worse.... tbh, many people I knew who were in their 40s then are fine today, and probably wealthier than before. Unless there is something unique to your situation, I don't think this is that big a risk. Still... be smart... bank up a lot of CASH (i.e. not just stocks), pay off car, keep fixed expenses/debt low.... make it easy to live to cheap... that is the risk you can control in this! 

- Still, all in all, you maybe should "bunker down" at current firm and wait for a "recovery" exit point.... you are very young in all relative reality, you have years to do this, so don't feel like time a pressure. Networking and mapping it out now is great, but really zero rush to execute. 

  • Analyst 2 in RE - Comm
2mo

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