REIB After IS if goal is to have own REPE firm in 8-12 years?
I’m currently working in IS at a top 3 brokerage (think CBRE, JLL, Eastdil) and am thinking about my future after doing my analyst years.
My long-term vision is to have my own real estate firm (think 8-12 years from now). I’m not sure if that will be a development or private equity firm.
I started two businesses while in college. One was successful and one wasn’t. The successful one was a franchise. As such I’m thinking I’d rather buy an existing business with some systems already in place and add my own twist rather than start something from scratch.
Initially I was thinking I’d transition into REPE after my IS years. However now I’m considering doing two years in REIB before switching into the buy side (for acquisitions and asset management experience) so that I understand how to value companies.
Has anyone in this group gone from Brokerage to entrepreneurship by buying an existing real estate business? If not, what are pros and cons of doing REIB before switching into the buy side vs going straight there?
If you want to buy and sell real estate companies, go to real estate banking. If you want to buy buildings as your business, do investment sales. Honestly, valuation is valuation, it’s just learning the nuances of each sector. Sure, I can’t go value a reit like my friends who invest in them for their day job, but I can still discuss the macro factors and ask the questions - what’s the assumed portfolio NOI at this share price, what’s driving growth for the firm over the next 3-5 years, how do we think they will continue that growth, what’s capex, it’s all the same. And than once we dumb it down to a cap rate, you can begin to say, well, yeah, I wouldn’t buy an office reit for a 3% cap rate, and move on. My point being, it’s all pretty similar don’t worry about the minutiae.
also, I’m not so sure what type of real estate business you are thinking of ‘buying’ - unless it’s a services business - brokerage, appraisal, mortgage bank. I would be very cautious with those businesses as if you don’t get along with the staff, your producers, and therefore the revenue you just purchased, walk out the door. Most acquisitions of brokerage companies don’t go so well. Look at what happened with Cushman - tons of the top producers they purchased from Massey Knakal walked out the door within 3 years. Was that worth a $100M’ acquisition? No clue, but having no longevity to revenue isn’t exactly a great thing.
As someone who just left REIB, be careful. REIB is the least entrepreneurial sector of the real estate world.
The vast majority of the “businesses” you value are just large pools of real estate assets - that’s all REITs are. It’s not hard to leave REIB, but if you want to do REPE, you will generally be the 2nd choice candidate behind the guy who already has REPE experience.
REIB is great. You’re guaranteed to see big / complex deals, make great money, meet some important people, work with bright coworkers, etc. But if you want to do REPE, just do REPE. Don’t wait
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