real estate private equity vs. real estate development
What are the main differences between these two? It sounds like both buy real estate property, improve, and sell at a higher price. Besides use of leverage / LP structure (REPE $ comes from pensions etc. and charge 2/20 while developers use own money) aren't they really similar?
There is a huge difference between the two, having done both in a past life.
Think of REPE as primarily capital allocation - buying income-producing assets directly, buying operating platforms, funding developments for developers, etc.
RE development is the actual down and dirty real estate process. The capital allocation decision occurs early (deciding to go forward with a project) and is a relatively small part of the process. The bulk of the process involves obtaining entitlements, design, and then actual construction.
There is a continuum between the two ends, though, with many companies somewhere in the middle doing a mix of both.
Big difference. jqbuyside sums it up nicely. Development is the much more nitty, gritty side of real estate investing. It requires somewhat of a different skill set than the classic pension fund advisory work of acquiring stabilized, core assets w/ low leverage.
What are the different skill sets and what are good experiences to get involved with either?
In terms of development, I think the best way to look at it from high level is managing a group of other professionals and actually "developing" whatever you are building.
Buying a parcel of land and planning to build an apartment complex....need to make sure you are working with the right professionals/and local people...engineers, architects, lawyers and have a good read on the area. If you need to get the land rezoned and entitled for a different use, i.e - getting the land rezoned from single family use to a higher density....could get tricky....
The PE side seems to be more so evaluating deals and could have a structure where you back a developer in their projects. Development firms can be backed by private equity to fund the majority of the equity needed for a project.
Let's say a project cost 100mm and the bank will only lend 75-80MM, developer still needs 20-25mm to fund the project. They can use their own money, most teams will look externally for a private equity source.
PM for more details.
hows comp for both?
I can speak for the Development side if anyone wants to PM me.
i agree with everyone above. Real estate development firms - think Related, Extell, Rockrose. Real estate PE firms - think Prudential, Metlife, Blackstone - big institutional firms with big institutional money. To really drive the nail in the coffin, majority of the time, PE firms give institutional money to development firms so they can build their legacy and pet buildings.
i agree with everyone above. Real estate development firms - think Related, Extell, Rockrose. Real estate PE firms - think Prudential, Metlife, Blackstone - big institutional firms with big institutional money. To really drive the nail in the coffin, majority of the time, PE firms give institutional money to development firms so they can build their legacy and pet buildings.
i agree with everyone above. Real estate development firms - think Related, Extell, Rockrose. Real estate PE firms - think Prudential, Metlife, Blackstone - big institutional firms with big institutional money. To really drive the nail in the coffin, majority of the time, PE firms give institutional money to development firms so they can build their legacy and pet buildings.
i wouldnt consider pru, met your typical REPE firm but yes i see what you're saying
youre right in that aspect..not your typical REPE firm because pru, met are life-insurers. although they are the largest in the biz (5+ billion $$ funding each year), most of their dozen funds are consists core A+ stabilized properties. you can't blame them for seeking stabilized cash flow albiet conservative deals
in other words, many PE firms will have a less conservative approach to investing and that means properties that need redeveloping, refinancing, and possibly conversion rather than a cash flow play
^ right, and that's why when i think REPE i think more opportunistic/value-add firms but really REPE really just means an investment shop that has/raises funds
so considering careers at a capital partner (LifeCo/Core Fund/REIT/PE) vs the operating partner/developer (like a Hines/Tishman/Related/Forest City Ratner/etc), is it common to switch between the two? if so, is it more likely to happen one way vs the other? which one would you guys choose for a long term career and why?
EDIT: i'm assuming that these would be the two partners on development/ownership of a property so there is some natural overlap. factor this into the switching between them question.
I am not sure about the difference between both the terms. I have an experience with a company in Loreto Baja California. The company is named as Outpost Realty. They are the Loreto Real Estate agents providing the different properties to rent and sale. As I am living in Loreto, I have been searching for houses for sale in Loreto Bay Homes, I found Outpost Realty. I don't know if they are a Loreto real estate private equity or a Loreto real estate development. But overall, I found it as the best service providers and real estate agents.
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