Can anyone tell what is involved in special situations? What exactly are they investing in? Is it really just distressed debt/pref equity positions? How transferable are the skills of being a real estate investment generalist (equity acq & asset management)? Is the pay generally higher than other groups?
Any insight would be greatly appreciated
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Working in RESS at the moment. It's basically just a very broad mandate to invest sector agnostic across the capital stack, in single deals and platform ventures. We look at a lot of mezz and equity deals at the moment. The name is really a misnomer
These groups aren’t really offering long term strategies, it’s a moment in time plan of action. Usually pref and mezz plays mixed with opportunistic acquisitions or buying risky debt. Shops will usually pull in specialists from their equity and credit teams to run these while relevant.
We have plenty of deals looking at 3-5 year business plans. A lot of mezz deals are 18-24 months but I would guess 60% of what we are looking at is longer duration plays.
For clarity, I'm not referring to the actual individual investment horizons, I'm referring to the teams themselves. Very few shops (if any?) have a special sits group that exists into perpetuity. Shops create special sits funds when, well, special situations arise (see: huge influx during COVID). They'll raise a fund with a mandate to capitalize on market dislocation/turmoil, execute, then usually those guys go back to their normal day to day, roll off into a more typical opportunity fund, etc.
Yep. Spot on
Not sure I agree with the above comments. When people say real estate special situations they’re often referring to verticals within broader special situations funds, which are absolutely sustainable business (check out Blackstone tactical opportunities, Apollo hybrid value, any sixth street fund, Bain cap special situations, Oaktree opportunities and principal strategies, SVP, etc). Mandates vary but typically it’s growth capital, minority equity, preferred equity, capital solutions, distressed for-control, and true corporate PE that doesn’t fit in these firms other strategies. You might do some REPE but you’ll also work on real estate adjacent private equity (e.g., oaktree rolled up a cold storage business (basically a real estate biz) and sold it to a public reit for a killing). Decent probability you’re spending time in public markets as well. Working on one of these teams will give you a broader experience than pure play asset level real estate private equity. IMO sounds like pretty interesting work and even if you don’t like it you can’t really go wrong (ie can definitely pivot) working at one of these MF teams as your experience is much more transferable than if you had only worked on direct/asset-level RE. On pay my guess is you make more than REPE because you get classified as a corporate PE investment professional.
Yes but those teams are not pure play real estate, if you're coming from an REPE/REIB background your chances of getting a spot on those teams are slim to none. They're hiring guys with M&A, restructuring, etc. experience. These types of teams exist 24/7 because you have a far broader range of potential investment targets/profiles.
My comment above was with regards to pure play real estate special sits teams, which are driven by cyclical events because the volume of that type of deal profile in real estate cannot sustain a team at all times. That's not an untrue or inaccurate statement, its just a fact.
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