Have heard many examples on WSO wherein supposedly top tier firms are brought up and various experiences have led to users being basically unimpressed / think people at certain shops really don’t know their shit that well. Curious some examples of what leads one to arrive at that conclusion / instances where staff at well known shops showed lack of understanding on a certain topic / deal.
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1) Worked on a very large deal with a megafund sponsor. It was shocking to see them repeatedly send over incorrect historical operating statements. They blamed it on someone else, but still you should always be checking your # before sending over stuff on a large deal like that.
2) Worked on a portfolio with another megafund sponsor. It wasn’t that their numbers were wrong and had a wrong thesis or something else. They just seemed unimpressive to me compared to the stories you hear about them in the news or through the grapevine. They’re just regular dudes who benefit from being a brand name shop. No shade to them. Just trying to tell people not to worship anyone in the industry, even if they are uber successful.
1 is fair, but I guess 2 is what I'm looking for more clarity on because it's mentioned pretty frequently here by only those I can assume are GPs.What exactly is not impressive / "normal" these guys are doing that you didn't expect? Like, they're not quants..they weren't hired to run insane, complex algorithms on tenant lease-up risk or anything…of course they're normal people in a normal job. Idk, just seems like the answer is always pretty arbitrary / leads nowhere when asked for further details so it sounds like it's more often than not just whining / a way for some scrappy GP to come online and complain at why these guys are getting paid double what he is, lol.B/c FEES! And I wouldn't say the megafunds should always correlate to hiring the "smartest" and "sharpest" you've ever seen. The benefit of being at a firm like that is that you can afford the ability to hire "whoever you want" and if it doesn't work out, you really aren't affected in the least.
To clarify on unimpressive, it had nothing to do with quants, pay, or any of that. I’m pretty well paid so no jealousy here. My conclusion came from conversations we had with them pertaining to deals. When we would ask questions, they never directly answered anything. They’d just deflect and left us to figure it out. They’re actually just finance folks, not real estate at all. All they really cared about is proceeds and rate. They didn’t seem to care much about stuff that really makes a deal - leasing, market risk, etc.
If anything the people at huge shops often tend to be less impressive in RE. It's not rocket science and the more resources you have the less you have to figure shit out yourself and the more you can just forward an e-mail to the specialized person in your group who deals with that issue. I'm talking about little stuff like existing model formats where you just drop in a couple variables or pre-fabricated slide decks to big siloed stuff like having a dedicated person who all they do is order and review diligence reports to, having an in-house attorney who takes the lead on all legal negotiations, having a debt capital markets team who all they do is place debt, etc. etc.
Now the people running big shops are often still superstars, whether they're the true first-gen real estate entrepreneur who built the business, or they're an incredible fundraiser, or in the case of a more mature shop, they can effectively "manage a business" and provide high-level strategic decision-making while navigating the politics of a larger corporate entity.
Fair reasoning
To add to this, the higher you go in the scale the further people can be from asset level RE knowledge. If you're at the likes of BX taking down granular logistics / multifamily portfolios, you'll know the sector fundamentals inside out, but you'll likely have a more limited knowledge of asset level issues given you can't be close to the detail on these elements by function of their sheer size. They're great investors / capital allocators, but not great at asset specific issues compared to someone at a smaller firm focusing on individual property or single digit portfolio deals. People in RE can get pretty opinionated about this.
No different than what goes on at developers or owner/operators and they’re consultants - it’s a trickle down effect of the same behavior.
Developers may not know the nuts and bolts of A&E but more often than not they’re trying to keep the project in check to the best of their ability, same thing with Capital allocators keeping their developers in check.
It's generally one of two things for me...
1. Sending out wrong numbers and then defending them or claiming their obvious mistakes don't matter. I've had somebody send me a consolidated model for a mixed-use deal where the cash flows didn't tie to the detailed asset-level models they circulated with it. When I asked the associate told me "oh its close enough it doesn't matter, won't make a material difference to returns". Well, yes, it does matter regardless of impact to NOI, I need to be able to vet how those numbers were generated and also be able to drop them into a fundraising package (in which we like to present individual asset cash flows alongside the consolidated) and be able to defend them to investors. So fix it.
2. Trying too hard to seem more sophisticated than you are. So many PE guys start throwing out this verbose language and unnecessary data points that just makes them sound pompous, particularly when they don't apply them correctly.
Every time I work on a deal Citi is leading
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