Top-level partners in REPE
Hi all,
I’ve heard that REPE compensation tends to be a little lower than other PE. Can people confirm? Do the partners in REPE still make millions? How does compensation at the top compare to “regular” PE?
thanks!
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You have to understand that once you get to more senior levels, incentive-based compensation (e.g. carried interest, co-investments, etc.) becomes a larger part of your income. At the partner level, it can be the majority of your income depending on the performance of the vehicles that you oversee, along with the size of the funds and how many partners and other employees are splitting the carried interest pool. This is the same in both general private equity and real estate private equity; a partner in either field will make millions if the funds are successful. How many millions will depend on the aforementioned factors: as one of a handful of partners at a small but growing firm, you could make the same as the dozens of partners at a large firm. Sure, there are some things working against real estate private equity (e.g. there are fewer "mega" funds in the space, real estate as an asset class must, in theory, return less than general private equity, etc.) but your aim should be to position yourself to maximize your chances to be a leader regardless of what sector you're in, because there are many paths to riches once you get to the top.
Piggy-backing off of this: if you want some proof, go look at the most highly compensated executives that Bloomberg just put out. Granted he's at BX which is one of the largest RE funds, Jon Grey's salary was just $350K... however with carried interest and bonus- a cool $50m. Same can be said for other REPE partners (although its not going to be as much as Jon's making).
hm not bad. I guess ill just become a top level highly compensated executive at a repe firm then
Sorry, could you explain this statement? I haven't heard this before and couldn't find anything on Google. Esp on the opportunitistic side, REPE and corp PE have similar liquidity, leverage, etc.. so I would think they would have similar returns in theory, no? Just curious.
In real estate, you're generally confined by the physical: you have a finite amount of space. In a very basic sense, you can lease up vacancy, increase rents, add ancillary sources of income, improve margins, and do a few other things to enhance revenue and profitability. Materially growing revenue (2x+) is very challenging though. Sure, you could take a REIT private, grow it over time, and take it public again, but you're still constrained by the bricks and mortar.
In contrast, traditional private equity investments can be much easier to scale (depending on the sector): you can enter into new domestic and international markets, launch complementary product lines, etc. There are greater economies of scale with many enterprises.
Lmao you act as if entering new domestic and international markets and creating new product lines is easy. That's probably the most difficult thing you could do. Versus in real estate I can just go hire a better leasing broker and slap on a quick and easy face lift.
It's significantly easier to achieve consistently good returns in re, you see a shit load more fuck ups and shit returns in corporate pe, but you also see cases of 1000%+ returns.
Real Estate is lower vol and much more consistent while still hitting 15%+ annualized returns depending on strategy versus in corp pe one fat investment that goes sour could blow up an entire fund or make everyone involved multi millionaires
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