Worked in PE and IBD covering another sector but always wanted to jump to REPE
But it seems to me that REPE pay is slow that even FoF pays higher.
Many REPE charges 2/20 or 1.5/15 and it seems to me there are lots of REPE with >5b AUM. Why the pay seems so much lower when I was browsing other posts on WSO? Is it mainly because pays for juniors in REPE are skewed down or is there many opex in REPE that drags down the profitability of the business?
| +52 | Leave brokerage to be GP | 12 | 2d | |
| +49 | New Comp Database - Google Form (Now with Data Validation) | 24 | 2d | |
| +24 | Seeking Career Guidance in Real Estate Development Post-Graduation | 3 | 3d | |
| +23 | Going out on your own | 4 | 2d | |
| +23 | Spreads over SOFR/UST | 8 | 6h | |
| +22 | REPE/Development GPA | 15 | 5d | |
| +22 | Real Estate = complicated + underpaid | 15 | 2d | |
| +20 | High achiever that doesn’t want to work weekends | 12 | 15h | |
| +17 | Fisher Brothers | 6 | 2d | |
| +15 | Can you exit from Fund to Asset management or Investment in Real Estate ? | 22 | 20h |
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Because we get to have a life outside the office
if you want the same pay and hours as corporate PE or IB join a MF
RE doesn’t pay less at the megafund level, if it does it’s probably marginal…could be better WLB, however I have a buddy on the BX team who works nonstop (he’s making bank though I’m sure). I doubt the guys doing entity level transactions at TPG, BX, etc. are making less.
The reason you see REPE numbers look small around here, is because guys who are associates at PGIM call themselves REPE associates (they aren’t wrong) and at a place like that you’ve just got a a better culture/WLB, slower pace, etc. they just pay less on average. Development firms like Hines, Related, etc. also pay less at the junior level because the money is in big promotes once you’re Director/VP.
Another thing, AM fees cover overhead of junior employees. The real money is in carried interest as you become more senior. I’d be curious how returns/carry compares at Blackstone funds for real estate vs. other PE strategies.
yup same goes for the re debt funds
Iirc BX RE funds have been their highest returning product since inception, ~16% net IRR accross all 10 funds which is crazy.
The deal sizes on average are much smaller. Think about how many billion dollar companies there are versus how many billion dollar real estate transactions. Lots of real estate transactions are in the $50M - $100M range which I think is much smaller than size of typical PE deals. The Blackstones of the world are the ones doing the big real estate deals, thus they have more fees to pay more money to their employees who are also working a lot more than most firms.
*Most* real estate is less complex than PE. What I mean by that is sure, it is very complex and difficult to go through a development process, but think about all the REPE shops where you're focusing just on one product type. You're a multifamily guy or an industrial guy. How many apartment deals can you underwrite/acquire in the sunbelt before you know what assumptions to use in your sleep? Valuing, for example, the acquisition of a tech business for a PE firm is going to be more complex in nature. I'm using a broad assumption here as there are RE shops where you're doing a lot more variety or complexity than just buying multifamily in the sunbelt, but in general a lot of RE is like that.
Adding that in my experience, typical management fees for a fund are closer to 1.5% of fund size. There are a lot of $500M - $1B funds out there. That's $7.5 - $15M in annual fees to cover office rent, overhead, and all your teams salaries and bonuses. Think about how many people that needs to feed to get $1B in equity out the door and properly managed. You're talking principals (while their upside is in promote, they are still clipping a healthy salary to keep their bills paid), several acquisition executives, several asset management executives, accounting professionals, a team of analysts/associates, and probably more that I'm not thinking of. There just simply isn't enough money for every VP with 7 years of experience to be making $500k a year in cash comp, paying associates $300k a year, etc. unless you are at a big fund and your team is on the lean side in comparison to the amount of capital you're overseeing (thus equating to long hours).
The RE forum specifically has a larger share of people at smaller shops, which generally pay less. Start up funds usually have worse economics as you’re charging lower management fees and don’t get to participate in as much of the upside while you’re building a track record. If you look through some of the compensation threads, most of the RE forum work at smaller shops.
At the $20B+ AUM level, you’ll see a slight discount to tech buyout PE but there shouldn’t be a discount to the other coverages like infra.
You aren't getting IB pay because you get to have a life. Thats fair to me.
Its funny to me that the majority of the people here who obsess about REPE pay/prestige etc first need to get an offer. Do that. Get a return offer/FT role first, because without that you aren't even in the game yet
p.s. what i am trying to ask here is not exactly about junior's pay but more from a fund economics perspective
The fee is similar or perhaps slightly lower at 1.5/15. The aum for some are pretty big like 5-10b.
But comparatively speaking even LMM seems to pay more than such PE.
Do they have much higher overheads? Or do they just pay less to juniors with seniors actually taking home a much bigger slice that is comparable to corporate PE? Otherwise it is difficult to understand where did the money go
As others have mentioned, RE funds are generally smaller than their true private equity counterparts. Much smaller. $500mm is a pretty good sized RE fund, but that is the kind of money that a mid-30s something senior VP might be managing for a traditional private equity fund. More overhead and fewer fee dollars means a smaller slice of the pie
Seems to be a lot more popular to start your own RE firm than in other branches of finance or consulting. Maybe because more credibility is tied to you as a person than the firm name, it is a relationship business above all else. This leads to a lot of small shops with a couple equity partners and a few juniors who are probably already planning on opening their own shop with their college buddy or whatnot so their check as employees is less important than the deal experience they get when they ultimately start their own shop.
Well, thats just hypothesis. More likely is that RE pays juniors less because they actually have reasonable wlb.
So I guess at top level the pay is not much lower vs corporate pe
But most firms knowingly lowball their employees knowing many of them are willing to get less pay for better wlb and in the long run they are leaving to start their own shop anyway
So difficult to say, especially for a junior such as myself. I have heard some absurd numbers from/about seniors in development who slamdunk some massive project and can retire themselves and their children lol but I have no idea what the average is and even if someone does, the variance is large enough to make any estimation irrelevant. The only thing that matters is whether it be RE, Corp, infra, etc they all earn more than enough. So the question of which one do you want become an equity owner in is already answered, any of them. The real question is where can you as an individual reach the top?
I personally know several non-founder finance guys working for developers you’ve never heard of who have had $10 million+ years. You’re not going to get rich on salary in real estate, unless you’re an attorney.
How do these non-founder employees get such a hefty payday? Are we talking C suite at a small firm cashing in a large promote + co-invest? Also, what do you mean by "finance" guys? Capital markets guys, acquisitions guys?
Idk about leftcoastlenny, but it's not unheard of for non-founder developers to get 5% to 10% and even up to 20% of the developer's promote in a deal.
You sell enough deals at those numbers (realistically one home run and a couple doubles) in a year and they add up quick. Maybe not 2023, mind you, but 2020? 2021?
Yea its low in RE. Feel free to move on to other sectors.
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