Real Estate Equity vs Debt

It depends. It can be lower it can also be higher. There are more debt transactions than equity. So if are Comp’d based upon deals done, your comp can be higher. I can name a few funds that have both equity and debt investment teams. At a few of these firms, people who want to stay try to switch to debt as there is more flow and compensation is based upon production which means compensation is higher in debt. I think people need to realize that just because a firm is targeting a 20% IRR: 1) doesn't mean they get it and 2) doesn't mean compensation is higher. 

You could very well have a $100MM debt fund targeting 9% returns with promote over a 5% or 6% hurdle and than a $100MM equity fund targeting 15% returns with a promote over an 8% hurdle. Both have the ability to get into the promote and the question you need to understand is: what are the splits above the promote and what is the promote pool size? On top of that, the volatility at a debt fund is probably lower, making it more likely to get into the promote, or at least hit your target meaning you'll survive to raise another fund. On the other hand, volatility on an equity fund is much higher, which means it is harder to hit that promote.