Mod note: Click here to see all of our q&a's and interviews
So the deal I have been working on won't close by the end of the year. This means I'm going to have a few slow weeks heading into the holidays and will need something to do. I've been getting a lot of PMs about Real Estate lately and thought it would be good to get a good Q&A going on RE.
Ask anything you want about RE or RE finance and I'll do my best to answer. International Pymp, Mr1234, VT4ever and the other RE focused monkeys can also chime in to help.
Thanks,
RE_Banker
The best jobs for learning how to build your own real estate portfolio will be smaller private REITs/REOCs and possibly working for one of the brokerage firms that deal smaller assets. Unless you have a few million you are going to start by buying small multi-family residential or strip malls. The skill sets you want to learn are asset and property management skills. The small REIT/REOCs will give you those skills i.e. they will teach you about finding the right tenants, setting up the leases, basic due diligence, and bank financing while the brokerage experience will give you local contacts to help you source deals. I spent a summer in my early university years working with a well know brokerage firm in the small retail team ($1-15mil assets) and basically they called their friends first to see if they wanted the assets and if not, that is when they would do wider marketing. In terms of specific firms - it depends on your location. Remember RE is very local, especially when you are dealing with smaller assets.
Best RE firms - it gets very specific on geography and sub-sector focus. In the US, the top REITs include Vornado (Diversified), Simon Property Group (Retail), Brookfield Properties (Office), ProLogis (Industrial) (this is a good list http://en.wikipedia.org/wiki/List_of_public_REITs_in_the_United_States). In Europe there are a bunch of good REITs like Unibail-Rodamco (continent) and Land Securities (UK). In terms of REPE - Blackstone Real Estate is tops. PERE puts a list of the top 30 firms http://www.perenews.com/resources/PERE%2030/PERE_30_2010.pdf. Some of the firms at the top are struggling like Whitehall and MSREF, but others are doing really well.
In terms of best compensated, again it is Blackstone, although Colony, AREA, Carlyle, Starwood, Beacon and Lone Star pay really well too. What is also starting to happen is that some of the big PE firms are starting to build an RE presence and I have heard rumours of pretty good comp packages. To give you an example, TPG wants to buy ING REIM and KKR was in that process as well. Apollo just bought Citi Property Investors.
This is not an easy question to answer. I've done my best. People can add to it.
Real Estate Finance 1.i. Real Estate Investment Banking - usually these guys cover M&A, ECM, DCM, Fairness Opinions etc 1.ii Real Estate Corporate Banking - basically relationship lending on RE using the banks BS and also syndication partners 1.iii ABS/Structured Products - i.e. CMBS, RMBS, CDOs.
Brokerage 2.i. Property Brokerage - brokering asset deals (either single assets or portfolios) 2.ii. Leasing Brokerage - filling empty space for clients who have vacancy (or the flip side of advising companies on leasing strategy).
Property Management and Services - there are the nitty gritty property services. i.e. Tenant management, repairs and maintenance etc.
Valuation - there are the RICS valuers (while they work at same firms as brokers, there function is very different).
Development
REITs / REOCs - different roles in these companies as well, acquisitions, asset management, financial planning and reporting.
Asset / Investment Management 7.i Core / Value-add funds 7.ii REPE and Asset bank hedge funds that have an RE focus. 7.iii Family office RE investing 7.iv. Sovereign wealth funds / Pension funds
Other random 8.i. Multinational companies in their RE strategy team - think about retailers or accounting firms with large real estate requirements globally. They all have in house RE experts.
I'm sure there is more. The roles can be super focused on sector and region (i.e. NYC office leasing brokerage) or your role can be broad i.e. hedge fund with some RE allocation that will invest in anything (i.e. the D slice of a CMBS that has hotel, office and industrial assets across Europe as collateral).
@RE_Banker Thanks for the great thread and continuing to answer questions.
Other than having a good "Why RE" answer, what do you look for when talking to a student in an interview or networking session that will impress you? What kinds of questions/topics should one be able to talk about when discussing a deal?
It's awesome that RE Banker is still here giving advice, thanks. I don't have the same amount of experience as he/she does but I maybe I can help give some perspective here. I work on an acquisitions team for a West Coast REPE firm, and I think that what separates people in the interview process is who is genuinely excited to work on CRE. Show enthusiasm, people appreciate the earnestness… unless your would-be boss is a cynical prick, in which case you wouldn’t want to work there. Also understanding what/why variables affect returns on cash flows, and opining on what metrics you think are helpful (NOI Yield, COC, Return on Cost, etc.) definitely helps. I would argue, however, that at a “networking event” young people are not there to talk cap rates and the 10-year treasury nonstop. I actually treat it more like a mixer (caveat: be able to handle your liquor if you do this). It’s not rocket science, I think people just want to work and do business with people they like – obviously this is true for ANY industry, but I think it especially applies to RE where academic pedigrees are less important than other areas of finance.
Actually here, just watch this: http://www.hulu.com/watch/40972