I’ve done a few informational interviews in the past with recent college grads and friends of friends that want to know the commercial real estate world so hopefully I’ll be able to answer anything that comes up.
My background:
I’ll keep my background brief. Economics major with a decent GPA while playing collegiate rugby. I, like many others, graduated into the bottom of a down cycle but I’ve been doubling my comp with every jump. 3 years at a regional boutique real estate investment and private equity shop as an analyst. This firm is backed by a wealthy family office so I saw a ton of deals including operating businesses, value-add investments, opportunity funds, international marinas, huge master planned communities, commercial development and venture capital. 2 years at a multi-national land investment group that used securitized offerings. I oversaw multiple regions, backwater farm land, home builder communities, and industrial land development. 3 years currently at a national commercial developer and investment firm that focuses on office and healthcare opportunities. I have a few roles here but focus on acquisitions, capital markets, investment structuring, and project management.
Ask me anything
I’m happy to answer pretty much anything. Give my take on the market cycle, compensation, why deals die, creative wins, how to get into real estate, what and who are time wasters, CRE Tech from a user perspective, or anything else that sounds interesting for the community.
Getting to go/no-go is a process that begins with establishing some clarity around where we want to go, how, and when we want to get there. What needs are we trying to solve for in a portfolio? What parameters are we bound by in our agreements with our sources of capital?
I have a hard time pointing to "best," without asking "best for whom?" If we're hunting stabilized low-yield cash flow with a long hold time, the answer will look different than if we're hunting for big pops in equity in 12 months.
Determining what a firm will look at and how they run their numbers is often a function of who they are serving. The best opportunistic deal could be completely off-limits to an organization beholden to pensioners that demand stabilized low yield cash flow.
Numbers don't tell the whole story. Good operators can turn bad deals into good ones. Bad operators can turn good deals into bad ones. No metric makes sense if the people flying the plane can't land it.
Market conditions influence the go/no-go criteria as well. A no-go in February might become a go in April when an announcement is made that General Motors is moving a plant into the area.
Go/no-go criteria are best agreed upon well before the hunting and analysis begin.
As a bonus for those interested in making more money and improving opportunities over time: it's not a bad idea to cultivate relationships with people who serve other types of clients. What may not work for the clients you serve might net a little extra income or goodwill through referral to someone that serves that type of client. Handing off a good fit show's you're aware of the bigger picture and may even return deal flow or job offers to you when your new friends decide to return the favor.
With my current knowledge i'd be comfortable doing a development but I'd lean heavily on my mentors and peers when the inevitable challenge is presented. There is so many moving parts with development deals.
I've done value-add investment deals on my own because i'm comfortable with the numbers, understand the market, and know how to be an asset and project manager. When it's your own cash, every detail matters.
Sure. The most current deal that I just sold was a smaller multi family value add. It was partially a mix of deferred maintenance and improvements to raise rents and sell it. For smaller deals that I'm able to get into without outside investors, I want to get in, improve the property enough to warrant rent bumps to where market is without over improving, then sell it to get a 1.5-2x ERM. I try to do at least one of these a year because the cashflow just isn't worth my time to hold it longer term unless it's a property that has something cool about it. If I get into a development it'll be either in unique creative office, healthcare or 5+ unit multifamily. For these, since there is no existing cashflow, I'll use outside investors so I'm not tapped out.
A) I started looking while I was still with my first boutique group which helped me understand the market at a different level to what the firm looked at. I continued looking and learning until I got into my first deal about 4-5 years after getting into the industry.
B) Secondary market with my own cash. I put in about 50k and was making around 80k at the time. Most of the time an IRR is much less important because the dollar amount just isn't worth your time even though it met a 15% threshold. "Wow 15% IRR but it's only 10k pretax annual with a ton of risk and unknowns"
C) Connections are all post college. Most of the people I met in college are spread out across the US now either going back to where they grew up or a job took them into a different area.
D) This is more of a fun question. So a side deal is typically anywhere from a little to a lot different from what your firm looks at due to scale/non-compete/and all sorts of reasons. I primarily do office/healthcare yet a lot of side deals are in multifamily because the cashflow and financing. Sourcing is similar but using different connections or just on my own trying to hunt offmarket. Once you find the deal, it's a matter of looking at your bank account and seeing how much you can put in as either the entire amount needed or as the sponsor. That's why it's important to always drop it into conversations that you do deals that use a few investors before you need them. The operation part is pretty much the same except there are no meetings to attend to discuss this or that so you're way more nimble but you better be making the right choices. I'll try to ping a friend or two on anything major but it's all based on your own skillset. The sale is pretty much the same. While there are nuances for larger more complex deals, but the path is pretty much the same regardless. Most larger deals can only be done by larger companies because of financing and dealflow.