What does REPE actually do?

Hi all, just to caveat before my post, I don't/have never worked in a pure REPE function. I work mostly in portfolio companies doing M&A/corporate development and the REPE is normally our GP. 


Now onto my question, what do REPE firms do to earn the promote? From the outside it honestly looks like being inside the REPE is an awesome gig where you get the largest salaries and don't have to get involved with the portfolio apart from a review here or there. This might just be my setup/setups I have seen previously, but as I am looking for another role, I keep hearing that it will be hard to land a REPE role. I think that the legitimate answer is that I don't have the correct background and the market is so competitive currently that someone with REPE experience will always get a spot over me. However, it did make me wonder what the fundamental differences are. 


So the major difference between my role and a REPE role (I believe) is initial acquisition, fund raising, JV partnership negotiation etc. These conversations are normally held between the REPE and LP. I am normally informed about the structure/changes/promote details rather than being part of those conversations. I would love to be part of those conversations but obviously I wouldn't be involved. 


The rest of the role I start to question what else the REPE is supposed to do vs what the portfolio company does. For instance, my role/team cover:  

  • All acquisitions/sales are run by my team, and we do cradle to grave (initial valuation to SPA completion + transition). Every aspect is covered by our team (UW, diligence, financing, legal, LP equity requests). The REPE will help review the UW and IC materials that we provide to the LPs once we're ready to send but all production and relationship management sit in my team. We liaise directly with the LP and manage all queries/comments etc. The REPE from our perspective is more of a tick box exercise before moving onto the LP. For example, my team sends the materials over to the LPs and then we work with the LPs to get them comfortable on the acquisition/sale without the REPE being involved. 
  • All financing sits with our team. While the REPE holds the relationship with our preferred bank my team produces all analysis, agrees term sheets/facility agreements etc and we take the lead on any financing that is not with the preferred bank/lender.
  • Outside of M&A: Asset/Portfolio monitoring everything you can think of from board materials, valuations, refinancing, promote calculations etc is produced by my team. If it involves the portfolio company, or any of our assets, it is covered by our team. Again, the GP normally receives this information from us alongside the LP and doesn't contribute to the process. 

As the REPE is not really that involved in the management of the portfolio, my guess is that the REPE basically covers multiple funds/portfolio companies so they can't get involved in acquisitions/board materials/capital calls/LP queries/board meetings etc. I guess the role is much more about looking for new investors for new funds/existing funds and agreeing those initial agreements to keep expanding? Then once the equity is vested using the materials produced by portfolio companies (my team) to help produce materials for their investors? From my perspective, in our structure the REPE is basically another LP. I'd even go as far as it seems like the REPE is a gatekeeper for more LP money that we're having to pay a huge price tag for. 


If this is the structure across the whole market, then it makes me think that the returns are incredibly asymmetric. Fundamentally, wouldn't listing always be the better option for portfolio companies? Your inorganic/organic growth teams are all in-house. You remove one very expensive shareholder and replace them with a cheaper source of equity, and nothing changes apart from who you report to. One caveat I can think of that could destroy value for smaller portfolio companies is the burden of quarterly investor reporting/public reporting. I am guessing then the GP/REPE basically acts as a barrier to this. But is it really that beneficial just having one very expensive shareholder rather than having to produce publicly available reporting? This then begs the question, when does a portfolio company become large enough to become public? 


I might just be in a unique situation, but it feels a bit like being in the REPE is a great way to earn money but fundamentally, after a certain size, having a REPE/GP is ultimately just a drag on returns for the portfolio company.


With all this being said there is obvious motivation to get into a REPE as who wouldn't rather be reviewing/negotiating, earning more and potentially having less of a workload. 

 

For REPE or for my role? 

REPE, I honestly don't know.

My role, you will normally require an extra professional qualification on top of any education. I'd expect a business/econ/legal degree followed by a qualification (CPA/qualified lawyer) with operational/strategic experience (not just IB/consultancy) who has worked on M&A. Although, it is easier to take a qualified professional and teach them M&A than it is to take someone from an IB background and teach them to the standard you'd expect from a CPA/lawyer. This is especially true in a lean team where you will have to perform multiple functions. From the other responses below, it does seem that my role might better fit in a traditional PE investment rather REPE which I think might explain the confusion on my part. 

 
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Is this even related to real estate...? REPE (real estate private equity) firms have little to nothing to do with "portfolio companies". I'm rather confused

 

Most of the structures I have worked at have been in niche real estate where there is an operationally intensive business. Rather than just renewing leases on a building. It means, like traditional PE, you need a skilled management team/portfolio company to grow the business.

I am guessing that as this concept seems foreign that potentially my career sits more on a borders of both REPE (what we receive financing against) and PE (how we run our business). This would make sense to why our GPs, traditionally REPE, might not be as involved as they're not geared up to help but are useful in receiving financing as a large part of our financing comes from property backed loans. 

 

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...but is it REPE?

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