Acquisition Analyst at Invitation Homes
Hey guys whats the scoop on Invitation Homes? Can this potentially be a good opportunity to break into a big time REIT or PE?
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Maybe a REIT or RE focused PE fund. Not traditional PE.
Could be interesting. Different skillset from, say, office or retail, but could be a great opportunity. I'd make sure you're really interested in single-family, though, unless someone tells you that the experience would be transferrable to a more traditional REIT or real estate fund.
Work experience is better than no work experience, but all else being equal, no, this is not a path to PE or a REIT.
I've seen a lot of acquisition oriented positions advertised by these newly created SF home REITS. Learning the single family home business would be a valuable skill set to have if you wanted to invest on your own, but I just don't see how the work experience gained (searching MLS, visiting homes, and modeling renovations) would translate back into commercial real estate.
Analyst at CAH/Starwood Waypoint/Invitation Homes (Originally Posted: 11/13/2015)
Have a potential opportunity to join the capital markets team at one of the large private-equity backed single family rental players. Team handles M&A, secured/unsecured debt, equity issuance, and some investor relations work as well.
Given that my background is corporate finance, (I was able to tell a solid story about my interest in real estate finance) I don't really have a solid idea of what to expect. I'm curious just to hear any impressions people have on whether this sounds like a good opportunity to them. My interest was definitely piqued.
Team is a very solid but small group of people who come from BB RE Banking and megafund REPE.
Depends what you want to do in the long run. I'm sure it would be decent experience. Capital markets teams facilitate the financing for transactions once a deal is queued up. Think investor presentations, fund raising meetings, coordination of debt/equity financing. You are removed from deal making decisions, rather you are working on getting the deals funded. Hope this helps.
That market is going to blow up, I'd stay out unless it's your only option.
@sigan7 Why do you say that? I know the firms are highly levered and rely heavily on rent-secured debt streams, so is the worry that when the fed pushes rates up their interest payments spike and they can't refinance when their debt comes due?
...
Edit: accepted the position. Here goes nothing.
Good shit. Let us know how it goes. Single family intrigues me as I know only minimal information about it.
Very curious to know how acquisition analysis works? Do you roll up the cash-flow from the portfolio and really examine the outputs? Do you have to examine each house for capex investment that will be needed in 3 / 4 years? If these portfolios are all over the country, how does that work?
Also, very curious on pay. Don't need to be specific, but since these funds are within the mega funds, does pay match up with mega fund REPE?
Hi pudding, thanks for your questions. I'll address the underwriting and acquisition questions first.
Acquisitions are underwritten at the asset level. At high level, if you receive a data tape of say, 1,000 assets from XYZ fund, you drop the tape into your underwriting model. Then you model assumptions for gross rents, vacancy, bad debt expense, operating expenses, and recurring capex and figure out what the cash flow and NOI of the rolled-up portfolio is.
Because you are dealing with disparate assets across multiple states, neighborhoods, counties, etc.. the analysis is typically very granular. A lot of attention is paid to expense line items ($/home/month) and growth assumptions by market. Typically for very large portfolios that generally fit your buy box, you would underwrite the whole thing and have a disposition plan in place for the assets you didn't want to keep. For portfolios where maybe only 25% of assets fit your buy box (neighborhoods, rental rates, home value, home characteristics etc..) you might carve out that portion of the marketed portfolio and only underwrite and make an offer only on that portion.
For capex, we typically think about two different types of capex. There is initial renovation capex, which is the capex necessary to get improve a home to turn it into an institutional quality rental asset, and then there is recurring capex which is replacing items that just break over time from ordinary wear and tear (HVAC, roofs, etc..)
Initial renovation capex is factored into the price of a portfolio. If there is $5 million of renovation to do on a $100 million portfolio, that is factored into the purchase price negotiation. You pay what the homes are worth and you don't pay move-in ready prices for houses that aren't move-in ready.
Recurring capex is an underwritten at a number appropriate for that market/asset. It' s considered part of the cost to maintain the home much like operating expenses. The only difference is that it affects your cash flow and not NOI.
On pay I can't say a ton. What I can say is that that it is more in line with what multifamily REITs pay than a PE firm pays. That said, I think we pay competitively. Real estate is a small world and REITs of all sorts provide really, really, good experience. You are doing similar work to an REPE firm so you can move back and forth very easily between the two. If you are a high-performer you can move into managerial and executive roles fairly quickly. There are many directors/vps in their 30s and many SVPs/EVPs/C levels in there late 30s early 40s. Those roles tend to pay quite well.
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