Offered a job as COO right out of Grad School, not sure what salary I should aim for
I need to try and keep this anonymous, but I'm an MBA at an Ivy League University, and have been offered the role of COO at a real estate firm. This firm had a $1 Billion plus portfolio in foreign markets and was bought out a few years ago. The partners have since started over in the US. They are currently building up their portfolio in three different secondary markets with residential acquisitions and a number of ground up developments. They plan on moving into other secondary markets in the near future. They are looking for a COO to manage their employees in the US, stabilize the portfolio, search for new deals and take over development, basically take over the entire US operation. The partners want to allocate the majority of their time to investments in foreign markets hence the need for a COO. I have been interviewing with this firm for the past 4 months and we are now at the point where we are going to start negotiating a contract. I have a unique background and resume and it fits what they are looking for like a glove. If I consider supply and demand, their chances of finding a similarly qualified candidate in their market is best to zero. They told me this outright. I was explicitly told that I should pitch them a number/compensation package. I should state that I have 6 years work experience prior to my MBA and other academic degrees. I literally have no idea what numbers I should pitch as this is a small firm, albeit with deep pockets and this is a COO position right out of grad school. Any ideas what numbers I should consider? I will be located in a secondary market and will have a lot of responsibility, this isn't a 9-5.
Thank you.
not sure, but I don't think the COO of a $1Bn aum fund should take anything under $150k at the minimum
I was thinking 180K at a minimum.
Heavy carry
Tell them to hire me since their Ivy League MBA candidate with multiple degrees and 6 years of work experience (which is an average amount at best) has to come to WSO to ask the question of how much to get paid.
jealous much? sheesh.
He's right. This is dumb.
How small is it
In terms of employees? Portfolio?
That's a bit personal isnt it?
For something as serious as this, you should consider contacting a compensation consulting firm. You could negotiate a salary that is 200k+ off of market and have absolutely no idea. I'm not sure such a firm would work with you (they normally advise companies), but you might have some luck and someone may even give you advice for free.
I second this as a good idea, im sure there are some boutques
This is a fantastic idea. Great advice thank you!
If you have a contact at Ferguson Partners, reach out, they do a lot of these for real estate firms including small ones
Interesting. I would say the base salary should be of little concern. You need to focus on how you are compensated through the bonus structure. Are you going to be an equity partner in the deals? If so, how do you buy in? Or do you get a 'commission' based on performance hurdles across the portfolio?
Bottom line, is you want to demand that you are an equity partner. You want to have as much skin the game as they will give you.
Your base should be $200k salary (whatever; this is small potatoes compared to what a shop like this should be making you). And then you should tell them you want 10% on the GP equity. So, on a capital stack that is 60% debt 35% PE and 5% Dev Equity, you are .5% of the whole deal. On a $50M deal, you are $250k in on the deal with the upside of the GP IRR + promote structure. With a $1B portfolio, .5% is $5M. You want that equity given to you now on some sort of forward loan basis. You should be making no less than 30% of that back annually too (I am seeing triple digit IRRs on spec deals on the industrial side right now at my shop; that at the GP equity level, not deal level BTW). So year one, you have $5M of equity (which you have not yet earned, but is in your name until you have spent X number of years at the company or have achieved X performance results) and are making $1.2M/Year at the current expect rate of return.
Real Estate is not about salaries. It's all about return, and the only way to do it is to be in on the equity. At my shop, everyone gets the same base of $175k. No more. Not even the partners. But no ones says s**t about the salary because everyone gets paid on the disposition of the assets.
Exactly the reason I posted on WSO. Super helpful thank you.
Some advice from someone who was in your shoes (different industry)
First: Location. NYC/SF/Chicago or Jacksonville/Indianapolis/Sioux City? This is the number one item to determine. $500k in NJ suburbs is MUCH worse than $250k in Indianapolis. MUCH.
Second: Equity, Equity, Equity (or Carry/Carry/Carry). This is #2 on the list. Which is better? (and it is a personal choice) $500k in NJ with no equity or $175k in Sioux City with an X% equity stake?
Third: Reach out to your network and ASK. Literally, ask. If that doesn't provide clarity, ask a Headhunter or two. Or hire a consultant.
Fourth: "Must Haves" versus "Like to Haves" versus "Negotiation giveaways". What do you REALLY want. 30% salary over market? 4 weeks vacation? Cadillac Insurance plan? 5% carry?
Fifth: Decision authority. Will you have it? Or do you have to go back to the bosses in Europe for any approvals. Trust me, getting approvals at 3am EST (8am GST) is awful. At least 8AM Beijing time translated decent to the US (8PM EST).
Sixth: Small firm discount. As a corollary to #2, #4 and #5. How much of a discount are you willing to give to have equity, most of your must haves and decision making authority?
Just some ideas to help out.
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