Do you see this financial downturn being serious and permanent enough to the point where real estate companies will be start to lay people off? If so, when will that start to happen? As a first year analyst at well-capitalized development shop, should I be worried? And what can I do to avoid the axe if layoffs start to happen? Start to work overtime and maximize my productivity? I would appreciate any general thoughts and input, especially from those who survived the last recession.
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Hi BrickandMorty, check out these links:
Hope that helps.
bump
Layoffs have already begun. Multiple threads started on this board about firms on hiring freeze. Usually starts with full stop on hirings, then you'll start seeing pay cuts, then you'll see layoffs. I believe we are currently in the pay cuts phase. Give it a couple more weeks and you'll start seeing layoffs. As far as your shop is concerned, its just hard to tell. I'll be honest with you, the analysts are usually included in layoffs, sad part is that analysts contribute a ton, but when the VPs ass is on the line, he'll pick up the slack to keep the job rather than be laid off. In short, analysts tend to be expendable. At this point, its too early to tell.
How steady are your firm’s development fees? Construction management fees? Property management fees?
That would keep the lights on.
As for you, you are a First year so think about how many analysts are there? If you were towards the end of an analyst program (Pre-associate) that’s a risk.
In a major prolonged downturn, development teams get decimated since cash flow is king.
Yes I’d second the comment I have already seen several groups start to lay-off people specifically more so from debt funds and developers. Just look up margin calls on real estate and you’ll see groups going under already and with many still to come likely.
why the layoffs if they aren’t in hotels?
Retail - tenants are being forced to close and aren't paying rent.
Apartments - people are losing their jobs. There was just a record number (3.3 million) of unemployment claims. People will not be able to pay their rent.
Office - people are not buying things. If your company loses revenue then you may close your ancillary offices and not pay rent.
That’s the high level reason why real estate will feel the trickle down effect. But I think there’s more to it. It really depends on how well capitalized the company is and how they get their fees to pay their overhead. For example, developers need development fees to pay their overhead to keep the lights off. Given the uncertainty I’ve heard from several developers that they are dropping the number of deals they are pursuing or expanding their LP equity pool of investors at this point in time.
Groups that have discretionary funds typically will get fees to pay their overhead through committed or raised capital. So they should be able to be patient and keep the lights on. Whereas you have groups in real estate that pay their overhead through acq fees so they need to do deals to light the lights on.
As for the debt funds there was a good article about what’s going on right now. You’ve already seen several debt funds close shop and I’m sure there will be more to come.
https://www.google.com/amp/s/www.wsj.com/amp/articles/rbc-seeks-fire-sa…
why are debt funds getting hammered the most? property owners not being able to pay mortgage? wouldn't they get property as collateral? aren't interest rates super low so they is business to be made? Is it that invesors are not gonna want to borrow?
There are debt funds thay make money by borrowing funds from banks at cheap rates and then issue higher yield debt such as bridge loans. When the value of these loans plummet due to the recession the bank puts in a margin call where the debt fund has to either put up more collateral or cash. The bank cares about the value of the loan because that is their collateral for providing the money to the debt funds.
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