Special Situations Investing (CRE)

Hi everyone,

So before I get monkey shit on my first ever post (after lurking for the past few years) I want to preface this by saying I have researched across this forum, Linkedin, various company websites, and private databases before posting. It would be appreciated if you could share your insights for my questions below so I can cross validate. Once I find out more information from industry sources I will update this thread to pay it forward for people in the future.

Context:

Special Situations Group at a broader commercial real estate fund (invests Senior Debt, Mezz, preferred & equity). Fund has $5 15bn AUM.

Questions

(1) How does this compare with the SSG  GS / Oaktree in terms of the scope and breadth of work for example?

(2) Would it be correct to assume that distressed debt wouldn't be a focus and rather more complex RE opportunities?

(3) What would exit opportunities look like; would one get a look in at some of the more prominent name brand firms having this experience? Specifically would ~2 years investment banking and ~1-2 years in this group be a profile of interest to get into Tactical Opportunities at BlackRock or SSG at Oaktree with a target undergrad?

(5) Compared to IB the base salary appears to be within the bounds of market with a lower bonus - how does total compensation change from investment analyst / associate / etc in this space for this fund size?

(6) What would the day to day look like in this role & what are the average weekly hours once you are up the learning curve?

(7) What resources would you recommend to hit the ground running (e.g., I have taken the BIWS RE course) for someone who doesn't have a background in RE?

(8) Worst case scenario is there anything stopping me from going back into IB if the role doesn't live up to expectations?

Thank you if you take the time to share an answer.

Comments (6)

  • Analyst 1 in IB - Cov
Jul 1, 2022 - 12:35pm

Current RE analyst switched to RE from IB. Also interested in Specials Situations. I like investing but hate being siloed into a single asset class or product.

Jul 1, 2022 - 12:51pm
Steam, what's your opinion? Comment below:

RE; (2) I believe is incorrect, but someone with better knowledge of these groups can correct me if I'm wrong. It's my understanding that distressed debt / debt investing is a major focal point of these "special situations" groups within RE..in facts it's almost always dealing with some portion of debt as opposed to what you'd see similar groups doing at like a Tac Opps for equity because there just isn't that many complex or unique equity RE investments to find.

Array
  • Associate 1 in PE - LBOs
Jul 1, 2022 - 2:45pm

I work at a standard RE investing shop, and we do distressed debt, pref, Mezz, high yield debt that can return us 18%+ IRR, equity, public securities, etc. across all property types and deal types.

Could easily call my team a "special situations" team but we don't. The name is kinda just a gimmick.

Distressed debt is also kind of a joke in RE. It's either 1980s vintage office that is genuine garbage that you wouldn't want to touch even if it was free, or it's a note sale of a solid asset that's temporarily dislocated that gets bought out at par or 99% of face value. And then you get a teeny tiny multiple because you're only holding it for 18 months. Distressed sounds sexy but given the amount of Capital in the space, true distress is so rare.

Just look for firms that do interesting deals. Don't worry about the title of the group.

Jul 1, 2022 - 8:17pm
apricots, what's your opinion? Comment below:

Assume mostly debt.. But direct acquisitions (equity), pref/mezz, non performing / performing note acquisitions, direct lending (senior and sub) and also likely CMBS / junior tranche etc … distressed / controlling class etc. Execution is getting control of the transaction … stepping in / DIL etc. I'm not at one of these but at a debt fund .. know many of these guys though. Sounds like a couple funds I'm familiar with. Feel free to dm. Would be great role… especially today / in near term. These groups are not "investing in shit deals" you're likely specifically targeting under performing deals that you want to get control and be able to influence / execute your strategy (ie stepping into a previously overlevered property via debt / controlling note class acquisition and DIL). Now maybe you have a fully reset basis / believe the prior owner was dog shit, you have a resuse plan for the asset, etc). Dumbing it down you're buying below par with a plan to get back/close to par. Groups usually have a lot of influence in the biz … why they can execute. Would be interesting…. And likely most asset classes, varying cap stack investments / types of strategies and risk profiles (surely some more straight fwd value add shit vs some real heavy distressed).

Could jump to larger names after a bit… the groups you named. Imagine not IB pay but PE. Call it 60-80 hrs (not very helpful but it depends… can't really tell what level this is/ Yoe)

Most Helpful
Jul 2, 2022 - 11:38am
redever, what's your opinion? Comment below:

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