Am I Misguided In My Belief That I Would Rather Transfer out of REPE and Into Capital Market Brokerage?

ThrowawayUnit's picture
Rank: Monkey | 30

I've always really been interested in the financing side of real estate more than the operating/building /physical DD side of real estate. Brokerage sounds a bit sexier to me in that you spend more time arranging financing, building models, studying capital markets and meeting with clients without having to get into the dirtier side of examining an investment that REPE/REIT entails.

TL;DR - Here Are My Pointed Questions:

  1. My job in REPE is really cush. I have stability and a steady, high salary. I have heard that working in Cap Markets entails low salaries that can be hard to live on, with the majority of the comp from unpredictable bonus/commiss checks. Have also heard of draw arrangements where you basically get an advance. What's the general comp structure and loose range of salary at groups like Mission Capital Advisors, HFF/JLL, Cushman Wakefield in the solid debt/equity placement groups.
  2. What is stability/progression like in cap market brokerage as opposed to working for a REIT/REPE shop. You can be average and skate buy at a REIT/REPE. Is there a pressure to perform or get pushed out at cam market brokerages?
  3. I like finance more than real estate. One day I see myself maybe getting an MBA and trying to work for a bank's DCM/ECM group or a job in capital markets that extends beyond RE finance. Is capital markets brokerage in real estate better experience for future general financing job than working for a REPE/REIT is?

Comments (22)

Aug 1, 2019

Others will be more equipped to answer but I would be cautious leaving a cush job (and one where you have personal equity up) for a job that pays 0 with no deals this "late" in the cycle. I put " " because none of us really know where we are in the market or else we probably wouldn't be on here.

1) A draw is a soft loan, if you need it you need it then you need it but some shops (HFF/JLL) will give you a low salary plus tips which is more desirable.
2) Stability depends on if they want forever analysts. Progression depends on your ability to bring in deals.
3) If your REPE shop is well known then could you go for a MBA now to a higher bank job? The timing of when you're coming out of your MBA could impact job availabilty but timing is everyone.

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Aug 2, 2019

Also not super qualified but I can tell you what I've learned. Currently working at a national firm (JLL,CBRE,etc) in debt and equity capital markets. I feel similar to you in that I am much more interested in the financing side and talking to clients about big picture rather than the nitty gritty details. The head of my team is young 30s and in good years such as last year made over 500K. But the team is extremely lean (<5 people) and I believe our team director was fast tracked to the posistion he's at now due to a couple of different factors so progression might take longer than what he was able to do. Culture wise, it's very competitive and entrepenurual. Not quite as much as straight up brokers as the brokers in our firm are able to give us most of our deals but the client aspect of the job still requires a lot of attention. And things could go wrong with deals, I believe my boss is comission only so a bad year could spell trouble. But great years can be a mix of amazing and very interesting deals while making a lot of money.

Aug 4, 2019

Bonus range? And can you explain what it would take to hit different parts of that range?

Aug 5, 2019

Sorry haven't been working long enough to know

Aug 5, 2019

Every shop has different pay structures but general rule of thumb is that you take home 50% of fee production.

Example Math:
Smaller Deal Shop ($5MM average, larger deal flow):
20 Deals/year = $100MM in prod
Average fee: 1%
Take-home: $500k

Middle Markets Shop ($15MM average, average deal flow):
10 deals/year = $150MM in prod
Average fee: .7%
Take-home: $525k

Aug 2, 2019

Feel free to PM me for additional answers.

1) Generally I would say that every firm structures their commissions differently and typically, the higher the salary component, the higher the draw or the worse you are on the splits. On the more extreme side for example, I heard that Walker & Dunlop has a huge annual draw and they only start paying out splits after over $250k in net fees but salaries are typically over $100k. On the other extreme, I believe that there are smaller shops who operate commission only with better splits.

2) In terms of stability, I would only be concerned if you aren't a profitable employee (generating more in fees than their cost to keep you employed). Every shop has a different level of tolerance for under-performance however my shop put up with a junior guy for almost 3 years before he became profitable. He's already generated more than $1MM this year in fees. Being a "higher" level does not mean making more money, since time devoted to managing and operating the team takes away from doing deals which takes away from making money.

3) Hard to say. I would presume that the answer might be "yes" since being in this position and working with a lot of banks grants you a good peek into their operations (an astute D/E broker should understand the source of the lender's capital and should be able to estimate their cost of funds). With D/E Brokerage experience, it is natural for some less successful brokers to jump ship to go work for Life Insurance Companies, Debt Funds, CMBS shops, etc.

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Aug 2, 2019

If you want the stability of working for an investment firm but want to work in capital markets, why not try to find a capital markets role on the buy side. Many institutions don't use brokers to source debt and instead have in house capital markets teams. These teams are effectively the in house brokers - on a salary and bonus. Cushy job and no stress of living commission to commission. Your day to day will entail working with bankers / lenders to keep a pulse on the market and raise financing for your firms investments. Some capital markets teams may do more analysis than others, but many are set up that the acquisitions team does the analysis and the capital markets team comes back with the debt quote and structure, and than the acquisitions team does more analysis with input from the capital markets team to determine the best loan for the deal. This might give you the best of both worlds for what you are looking for.

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Aug 7, 2019

Does this role actually exist? What would the title be? That sounds almost too good to be true.

Array
Aug 7, 2019
Jmrunk:

Does this role actually exist? What would the title be? That sounds almost too good to be true.

Yes they exist. My firm has it and I understand starwood has one too

Aug 7, 2019

Brookfield has one as well

Aug 7, 2019

I have also heard that Related does all of their financing in house

"The three most harmful addictions are heroin, carbohydrates, and a monthly salary." - Nassim Taleb

Aug 2, 2019

If you move into Debt/Equity Brokerage you would move in as an analyst. If you want to move up and get commission splits you'd be an originator. Originations is all about networking and finding and building relationships with customers.

As an originator you have to hunt for the deals, it's probably easier in a place like CBRE or HFF/JLL where there is a pipeline of sales. At Mission, Grandbridge, Northmarq, etc there's not a pipeline from sales brokers.

Others can comment on REPE vs D/E Brokerage, but one benefit of going D/E brokerage as an analyst (if you don't want to be an originator) is you'll meet a lot of borrowers from different product types and investment strategies and a lot of capital providers ie, Banks, CMBS, Life, Debt Funds.

I would recommend talking to as many people as you can about what you want to do. Can you get more involved in the D/E where you already are?

    • 1
Aug 2, 2019

You know what you like and what you want to do.

Sure, you'll take a step back moving to a brokerage shop but passion is invaluable.

A JLL type shop (in most markets) will be salary + bonus and lemme tell you, they'd love to have you. From experience, the D/E analysts at my previous shop we in the $80-$110 range (major coastal market)

2 is a harder question as there are so many factors to consider. Stability is better than you might think. You're low man on the totem pole, cheap and if good at your job, will have staying power. Once you move a producer role that obviously changes. Dead weight don't last long.

3 - probably but your experience is what you make of it. In my gig I'm assisting w/ debt solicitation (we have in house cap mkts team)

World is your oyster man. Going REPE --> cap mkts is a walk in the park (maybe not that easy but you get it). Having the idea of where you really want to be is the hardest part.

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Most Helpful
Aug 2, 2019

Financing side is definitely value add but it can be a tough space until you have clients or relationships that bring you into their deals on a consistent basis. Investment sale brokers will push you down on fees because they don't want to show their client 1% fee. Also, some owners will push you down on fees because they have other debt lenders calling to do deals at 50 bps or some other ridiculous number. All depends on if you are a volume guy or an advisor that brings value.

On the debt side, you will hopefully do REFIs during a downturn but I think it's a very tough space as it's an even bigger commodity than investment sales.

anything is possible if you join the right team in real estate! if you can network your way to a top producing team with ethical folks who don't want to pump and dumb, GO FOR IT! people make money in good times and bad times in CRE, it's all about working with the right folk to help you learn and put your career in the right trajectory.

even though it's the financing side, SALES STILL MAKES A HELL OF A DIFFERENCE! you have to be able to push folks in a consultative way to use you.

start going to a lot of networking events if you want to make the jump!

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Aug 2, 2019

Really well said. SB

Aug 2, 2019

Thoughts,

  • You would be a tremendous asset to the cap market world if you found the right group. Coming from an investment fund gives you an immediate pool of investors to leverage when pitching placements. The switch would certainly not be tough for you.
  • Beware of Grass is Greener. I personally relate to your affinity for the financing side of real estate and some of the bricks and mortar aspects don't exactly like me up. That being said, don't kid yourself that d/e brokerage doesn't have its less illustrious aspects as well. Lot of cold calling and pounding pavement. Every finance job comes with mind-numbing/boring work that you have to deal with too.
  • If what you really want to do is work in Cap Markets at a bank or other advisory shop, I don't think you would need to use real estate brokerage as a seguay. Get some great deals on your resume, emphasis the aspects of your job that involvee financing activities like comparing debt/equity term sheets for investments, re-finances, etc., and you could probably have a solid base of experience to pitch to a CM group at a bank or smaller financing/advisory firm. Could even go into genuine REIB if your heart so desires. PERE is a legit background to come from if you're working on serious deals.
Aug 3, 2019

Based on what I'm reading, you may enjoy working for a debt fund. One of the funds that has the ability to get creative with their financing packages. I believe if you're on the origination team you spend more time structuring / chasing deals and less time on asset management, property tours (AM and underwriting group would handle this).

At these places, you may be able to maintain your pay and prestige associated with being at a fund while also scratching your financing itch.

ACORE, Benefit Street, Mesa West, Goldman Sachs (broad street credit partners), Terra Capital Partners, Related Fund Management, Brookfield, BXMT, Apollo CRE Finance, TPG RE finance trust, and dozens more.

There was a commercial mortgage alert issue that listed almost all of the RE Mezz lenders in the US (there were probably 150 names on it). I will try to dig it up later

    • 3
Aug 5, 2019

I believe this is what you're looking for.

    • 2
Aug 5, 2019

Yes sir thank you

Aug 7, 2019

ditto

Aug 6, 2019
Comment
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Jan 5, 2020
Comment

No pain no game.