Currently in real estate credit investing and at a crossroads in terms of career paths with potential opportunities in RE DCM or a Credit FO.
I don’t see myself as wanting to become an originator in real estate credit long-term; have a hard time with well over 95% of efforts spent on initial deal screenings that from the beginning have almost 0 probability going anywhere. I would ideally like my next move to be meaningful and to stay there long-term.
I am at initial stages with a top tier fund for their RE DCM team. The benefit there would be that they have many exisiting positions that need to be refi’d/optimized cap stack throughout the term + additional new executions. In a sense over 95% of all the work will be on deals that have to happen as opposed to try to make it happen but fails. I think I would enjoy it but the obvious downside for me is that the role is then fairly pigeonholed and would be doing very little modeling in comparison. So any decent back-up exit would be complicated, albeit there would be a brand name.
In parallel I’m at a final round soon with a family office with a pretty flexible credit mandate - had a case study on an investment topic outside of my usual domain in RE but model and presentation went well and having a last interview soon. The base pay would be lower than the DCM role (similar to current role) and unclear on bonus / % of PnL structure if any. The upside to my current role would be more flexibility and less repetitiveness than RE Credit but downside of job volatility and not a target name.
Would very much appreciate any thoughts on the above!
Tough choice. Cap Markets(I wouldn't call it DCM, that makes me think of bonds) Is a good spot, especially with a big fund operator. I'm sure the comp isn't close to the acquisition folks, but if WLB matters, could be a good spot. I think an exit would be to a smaller credit firm in asset management or even originations. Maybe a smaller CFO role at a RE operator.
I would wait for comp. Also, family offices are tough, if it is one, make sure there are no other family members working there presently or in the future. You don't this type of office politics.
Appreciate the insight. In terms of WLB I don’t expect it to be any better than my current role (if not worse) but I can handle it. As you said will need to see final comp numbers if the processes do end positively - though less focused on relative numbers in the short-term.
For the FO it’s seeded by an UHNWI with no involvement whatsoever in the operations - lean team, but would be analysing any type of credit and would be interesting in terms of exposure. The capital markets role would be undeniably great for contacts. I suppose I’ll see the different outcomes and go from there; specifically for the FO I feel the comp would need to offer a potential ton of upside for it to be worth the risk.
From my somewhat limited experience seems funds are getting crushed even on the debt side with existing investments. Had a case for a debt fund in NYC that underwrote a current position and today the deal would be terrible and they wouldn't recoup their investment probably losing $20/$160mm of it. This was ~2 years ago so it likely has gotten worse.
I would go with the family office because it's certain (you're close/have an offer in hand) and they have the stability to weather any cycle especially with a lean team. Only downside is I've worked at a family office for a billionaire and they controlled everything even to where people that worked there for 15-20 years could not give definitive answers to MDs on strategies because the principal was very last minute on decision making. We worked on a strategy for months all for the C-suite to say we have no idea what direction (asset, return, $ invested) we want this to go so us at the junior level were just doing reps for months for no reason. So only caveat there, but the family office role seems like a dream from the decent comp and WLB, plus relationships. If they're well known in the RE world it can open so many doors as they are casual friends with xyz big names and get interesting opportunities funds could only dream of. There are also employees who have been here 20-30 years and are treated well in terms of perks and pay. But if it's not for you after 5-10 years you can leverage this to do your own thing and maybe be seeded by this individual or someone high up on the team.
Have to think these funds are taking investments from these HNW/UHNW individuals and it's the only way they have the capital to do any deals. They have no real capital unless the founders have done well and are beholden to how their last fund did. They could do amazing fund 1 and fund 2 which was these past few years got crushed. The family offices have the real control, they literally have a blank check or close to it for interested credit investments which is over the next few years.
That’s really helpful thank you! It’s a shame I’m not at the same stage for both to directly compare. I agree with the overall package for the FO. The firm isn’t known at all but everyone in Finance has heard of the UHNWI.
My real focus in a sense is not being bored through an environment that offers a huge learning curve and flexibility later on. Assuming I don’t underperform at the FO (which is one of my key concerns) and get fired within a few quarters for lack of thesis generation/execution then there really is a ton of upside careerwise. I’ll be in a team of less than 5 and the most junior at associate level there so the question is whether I could negotiate (for either now or short term on good performance) for a small % of PnL assuming the others all have points.
I agree the RE market is dire overall but there’s definitely trades to be done depending on how flexible your capital is. The cap markets team is not going anywhere / firing anyone with too much work on their hands so it would be a safer pick especially with the brand name. In any case I’ll keep you all posted on the processes. As a general observation, I feel the recruiting market has started picking up recently vs last few quarters, which is good news!
I think you work there for 6-12 months+ before even asking for a small profit. From an outside POV, assuming you're young risking no capital in deals why would the UHNWI share profits with you? Maybe long term, but coming in why.
Also, seems if it's a real FO, maybe there's opportunities outside credit as well long term if the UHNWI is doing well.
May I ask that do you think of the situation in Europe?
Given the comp will be the same as your current role (and seems to be the same role itself?), and you don’t want to do lending long-term, what exactly is the question here?
Obviously try for the cap markets role and if you don’t get it, nothing lost.
I will note from personal experience, cap markets at the institutional shops is an extremely high visibility role both due to the lean size of the team as well as the fact that real estate is such a leveraged industry so debt is extremely important.
They're different roles - I'm currently on the lending deal team (with all the modeling, DD, and execution that comes with it) as opposed to cap markets for the equity side where they focus on placing the debt and be the counterpart on the documentation negotiations and then optimising the cap stack through the cycle either to IPO or sale. So essentially the nuance is the role is pretty much in execution mode at all times whereas I mostly spend time on deal screenings and a minority of the time on executions when terms are accepted. I'm also seeing more openings now on the RE equity investing teams that I'll try.
Correct - from what I gathered it is very lean with 10s of billions of debt to manage and centralised operations as a result.
Admittedly it's an open question and will depend on offers but it's either going for a purely execution role in RE or leave RE and do general credit investing with an open mandate at the FO. There's definitely pros and cons to both. The latter is low profile but maybe has potential exits with the HNWI and will have a very good WLB for the same comp (my understanding is finishing at 17:00 or so, which is nuts to me compared to now), but it will be volatile and I assume would always need to deliver on PnL.
Update: didn't get the capital markets role. Still in the run for the FO role (process got delayed by a week, should know more about next week). Shame that the feedback is strong interview performance but not enough deal reps...which is the main reason why I'm leaving in the first place with few executions going on so not much I can control in the short term. Oh well.
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