PE Funds that Invest in Developments?
Who are the main LPs funding development deals? Would love to go work for a group that handles development but from the LP equity side
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Most major LPs invest in development deals (or at least in development-focused funds). It's pretty standard to see large LPs diversified across risk profiles in real estate.
What makes you interested in getting exposure to development through the LP side instead of getting your hands dirty at a GP?
Higher deal flow, exposure to more markets, exposure to multiple pieces of the capital stack.
Is there that much of a difference between the two at the senior level? Both are ultimately “deal guys” who have construction managers / project managers oversee the day to day?
Depends on the firm - at a lot of GPs the senior guys are very involved in the development process. Regardless, the senior guys at a development-focused GP are much more typically people that came up through development management roles and have experience running the whole process, not ex-LP investors. Need to be able to talk the talk and truly understand the process and potential risks in order to sell your LPs on a deal.
I'd say on the GP side you are going to get far more exposure to the nitty gritty of development - the entitlement/permitting process, budgeting/budget management, forecasting/monitoring construction timelines, working with consultants (this is a huge part of senior roles at a GP - leveraging your network of consultants on a project), etc.
In my experience, LPs take a much higher level view and don't get as deep into the details. You have a much less specialized view of the deal process, and it would be rare to find an LP that is truly specialized in development - more frequently you'll get exposure to investments in all sorts of types of deals, so you'll be less specialized.
I'm not saying an LP isn't an excellent route to go. If you're more interested in capital allocation strategy, structuring a portfolio, and the actual deal/investment process then it can be a great choice. If you're more interested in "true" real estate and want to get your hands dirty, be close to the assets, and get a truly deep understanding of regional markets/the long-term process, then the GP route is the way.
There is an enormous amount of difference. Construction management is incredibly time consuming - the reason you get all that additional exposure on the LP side is because you do almost nothing at the asset level during construction. I'm not at an LP fund, but from my interaction with our investors, an LP project manager is checking in every so often to make sure everything is on budget and on schedule, to discuss market conditions and projections, or later on lease up/sell out. Generally speaking, they have little to no involvement in the day to day; in fact, we make a point of making sure our LPs have no say, that's a recipe for disaster.
In general, common sense dictates that the more deals your seeing, the less involved you are in any given one.
In multifamily, the two most active are Carlyle and Pru. Both are absolute machines in terms of doing development deals, they've got that shit down to a science and have a stable of developers lining up to do that shit with them.
Agreed! Work at pru!
Ares
Nuveen has been very active in funding developments. Clarion, AEW, Beacon, JP Morgan, Oxford, MetLife, BGO, Manulife/John Hancock, Prologis are ones I can think of off the top of my head to co-invest as LPs or do developments directly. I mean I think pretty much any investment manager will do JVs in LP formats with developers within their opportunistic allocations. Honestly, not that rare.
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