I've been around WSO for a while, but newly active. I have always been curious about how large commercial real estate brokerage firms start their separate investment funds and REIT's (ie. CBRE Global Investors, JLL Investment Fund, etc) without wrecking havoc with their fiduciary responsibility to their clients. My understanding is that they consider themselves different companies internally.
I want to explore this as a career opportunity, but need to have a better understanding and the market stigmas.
So here are my questions:
1) What are the conflicts of interest 2) Where are these firms sourcing their investment dollars from? 3) Would you recommend working for one of these firms vs 1) working at a boutique/middle market REPE. or 2) vs BB REPE firms
Bump
It's a good question and requires a lot of detail for a full answer, but suffice it to say, there are certainly several conflicts of interest. However, what's crucial is that the senior principals of the investment firm are not typically compensated based on the performance of the parent company, so theoretically they don't have any incentive to bolster the parent company's earnings (it's not always true cause they may have stock in the public parent in some instances and so on... but theoretically). Also what you'll often find in the LPA for a fund managed by the likes of a CBREGI is that if the GP wants to pay a brokerage fee to CBRE (for disposing of an asset, for example), they need to consult and get the majority approval of an LP advisory committee, which is composed of senior investment professionals from larger LPs. This does happen, but the GP would have to present a good case why they chose to use their own firm' guy for the disposition (i.e. he's a market leader, has knowledge of the asset, pricing for disposition fee is competitive, etc.).
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