Analyst Interview - Common Questions

Bodacious's picture
Rank: Baboon | banana points 148

Hi,

I have a partner interview with a large commerical real estate firm, and I was wondering if anyone had any insight into what type of questions I should expect and how to best answer them. I've been told questions will be mostly fit questions. Any help will be greatly appreciated, and silver bananas will be awarded.

I'm guessing:
"Why commercial real estate?"
"Why this firm?"
"Why not company XX?"

  • Bodacious

Comments (63)

Jun 29, 2016

It might be helpful if you let us know what sort of position you interviewing for. Analyst? On the acquisitions or PM side?

Jun 29, 2016
CRE-Finance:

It might be helpful if you let us know what sort of position you interviewing for. Analyst? On the acquisitions or PM side?

Acquisitions

Best Response
Jun 29, 2016

Others might disagree but regarding fit questions for CRE shops, generally speaking you're dealing with a demographically and culturally similar crowd as greater finance, so I don't think you'll go wrong sticking to the ground rules. If you're interviewing for a product-specific shop, their product is your favorite, i.e. for Simon, you love retail; for Sun Communities, you love mobile home parks and tramp stamps. Why commercial real estate? Because you like that it's tangible, you like the mix of analytical work and facetime/relationships (standard BS really you just want to blast around Culver City in an M5 sporting some wraparound Oakleys).

And this may have been covered elsewhere, but for fun, and without knowing anything about your level of knowledge, here are some light technical questions they might throw at you:

  • What is a cap rate?
  • All else equal, if your cap rate increases/decreases, what happens to price?
  • If your cap rate goes from x to y, by how much does NOI need to grow/shrink for value to remain the same? The answer is (y-x)/x. Typically asked where x is lower than y, probably followed by some ultra-dry conversation where you get to postulate on what will happen to real estate values if and when FOMC ever raises rates again.
  • What is the most volatile product type? Individual property idiosyncrasies aside, hotel generally displays the most volatility.
  • What is the least volatile product type? Generally speaking, multifamily.
  • What product type is the best hedged against inflation? Really what this gets at is, how fixed are your tenants' rent commitments. Obviously hotels and apartments reprice daily and yearly, respectively. That said, maybe all your shopping center tenants have annual rent steps with a CPI floor which might not be so bad. Maybe you worry about inflation if you have a single tenant, 15-year office lease with no rent steps; macro arguments aside.
  • What is one of your biggest immediate concerns if a shopping center anchor tenant blows out? Co-tenancy clauses.
  • Where do you see opportunities right now? Assuming you're interviewing for a national, product-agnostic platform, maybe cook up something like "I think assisted living currently presents an attractive investment opportunity for fundamental reasons, namely the huge aging demographic trend in the U.S. blah blah blah." If you're interviewing for a more local operator/developer, maybe it's more like "my uncle works for Exxon and knows Sharif who owns the Mobil station at Santa Monica and Vine and my ex-girlfriend's dad is a leasing rep for Starbucks and they want a drivethru there and blah blah blah"
Jun 30, 2016
Lizard Brain:

Sun Communities, you love mobile home parks and tramp stamps.

Amazing. SB +1

    • 1
Jun 29, 2016

Lizard Brain had a great answer but I'll just tack on a few additional points:

-They will definitely ask you about your past experience (internships), so even if your experience is not directly related to real estate I would still try to find a way to tie it to real estate.

-If you had $100mm to invest in real estate, how would you invest it? There is no 100% correct answer to this-just be mindful of macro trends and how they affect the real estate industry as a whole. Speak thoughtfully and knowledgeably about a particular asset class, market/submarket, and why you would put capital there (Your answer can involve equity and/or debt investments).

-They may ask you to walk them through a pro forma, so know the line items.

-What is the value of a property with $10mm NOI at an 8 Cap? NOI/Cap=Value, so $10mm/.08=$125mm (I was asked this in almost every acquisitions interview at larger REPE firms-Starwood, Blackstone, USAA

-How do you calculate Debt Yield? NOI/Loan amount

-Where do you see yourself in 5 years?

-Know the details of a recent deal they've done. Even if they don't ask you about a deal they've done, I'd still recommend trying to squeeze it in somewhere during one of your answers.

    • 4
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Jun 30, 2016

I once interviewed for a position and when it was over I was to meet with one of my possible colleagues. So I sit down with the nice Indian guy in nyc, young...well younger than I am as I broke in later in life. So we chit chat for a bit and in my mind I'm thinking great I can finally get a less BS type of interview and maybe I can ask more direct questions without having to couch every damn answer. (E.g. "why do you want this job?")Me:"well your company is great....blah blah blah" instead of "I like not starving and being homeless". So this guy proceeds and it appears our conversation is about to get real candid until he says: "well I guess I have to ask this question, what is your greatest strength and your greatest weakness?". I look him dead in the eye and say "are you serious?". He retorts yes, I absolutely love this question. It was right then that I realized I did not want to work for this company and next to this guy as I was likely to want to murder him after one too many long nights.

So, I would say be prepared for "what is your greatest strength and weakness?". I would also be prepared to walk out of whatever interview has asked you that question.

Jun 30, 2016
C.R.E. Shervin:

I once interviewed for a position and when it was over I was to meet with one of my possible colleagues. So I sit down with the nice Indian guy in nyc, young...well younger than I am as I broke in later in life. So we chit chat for a bit and in my mind I'm thinking great I can finally get a less BS type of interview and maybe I can ask more direct questions without having to couch every damn answer. (E.g. "why do you want this job?")Me:"well your company is great....blah blah blah" instead of "I like not starving and being homeless". So this guy proceeds and it appears our conversation is about to get real candid until he says: "well I guess I have to ask this question, what is your greatest strength and your greatest weakness?". I look him dead in the eye and say "are you serious?". He retorts yes, I absolutely love this question. It was right then that I realized I did not want to work for this company and next to this guy as I was likely to want to murder him after one too many long nights.

So, I would say be prepared for "what is your greatest strength and weakness?". I would also be prepared to walk out of whatever interview has asked you that question.

Why should someone walk out?

Jun 30, 2016

Lack of respect for someones time and intellect. It is possibly the most BS question anyone can ask in an interview. Also, and this is personal, I wouldn't want to work for/with anyone who thought that was a great question to ask.

There are a thousand other questions related to tech or fit that would better assess someones candidacy.

Jul 4, 2016
C.R.E. Shervin:

I once interviewed for a position and when it was over I was to meet with one of my possible colleagues. So I sit down with the nice Indian guy in nyc, young...well younger than I am as I broke in later in life. So we chit chat for a bit and in my mind I'm thinking great I can finally get a less BS type of interview and maybe I can ask more direct questions without having to couch every damn answer. (E.g. "why do you want this job?")Me:"well your company is great....blah blah blah" instead of "I like not starving and being homeless". So this guy proceeds and it appears our conversation is about to get real candid until he says: "well I guess I have to ask this question, what is your greatest strength and your greatest weakness?". I look him dead in the eye and say "are you serious?". He retorts yes, I absolutely love this question. It was right then that I realized I did not want to work for this company and next to this guy as I was likely to want to murder him after one too many long nights.

So, I would say be prepared for "what is your greatest strength and weakness?". I would also be prepared to walk out of whatever interview has asked you that question.

Strengths/weaknesses is a really stupid question, but walk out? Interviews are pretty damn hard to come by for the non-well connected. But if your interviewer is a dink or the body language is obvious that you're not getting the job, I could understand walking out in those cases, especially if you're already happily employed elsewhere.

    • 1
Jun 30, 2016

Never walkout, that part was hyperbole in the story. I hope nobody is ever that rude in an interview, and I was just venting my frustration.

However, there is a point when the interviewer can see your eyes rollover in your head when he asks that question. After that the interview is technically over.

Jun 6, 2018

I know a guy who did something similar.

He had just graduated from an Ivy League law school and was being interviewed by large firms all over the country, so he had plenty of options. He had an interview w/ a large firm in Boston, which he described as "the snottiest firm w/ the most pretentious pricks in an industry full of snotty firms populated by pretentious pricks." The interviewer apparently took a deep breath, generating a protracted pause, and asked, "Mr. Smith...what is your greatest weakness?" To which he replied, "An intolerance for stupid questions." The interview ended shortly after that.

To tack on the answers to OP's question:

  • Walk me through the purpose and mechanics of a waterfall distribution structure in a JVA
  • If you were entering a JVA, what deal points would be important to you and why?
  • If you have a property w/ $8M in NOI, senior debt of $40M, junior debt of $20M, and the cap-rate is 10%, what is your LTV? What if the cap-rate increases to 12%
  • If the senior debt and junior debt in the last question are IO, with the senior debt at 5% and the junior debt at 10%, assuming you bought the property for $50M and there no cap-ex, what is your cash-on-cash return?
  • What is an important point of diligence that should be done before acquiring any property?

I come from down in the Valley, where Mr. when you're young, they bring you up to do like your daddy done.

    • 1
Jun 30, 2016

I mean, that is exactly the kind of questions you should be asking an analyst associate in an interview. Once they nail these then you start with fit, personality questions. Like do they in fact have a personality. Although I've been dinged for too much personality in an interview.

Jun 30, 2016

I've gotten most of the above, as well as...

-What is the cap rate on the building were in/explain cap rate?
-Explain why the terminal cap rate is higher than going-in?
-Walk through a DCF, debt table?
-What's going on in the market? I've gotten both in the local sense ( speak on our markets rents, deals, etc.) and also more macro (nationwide RE trends, rates, etc.)... stuff like how foreign investors or oil affect CRE... or how the growth of tech hubs/widening of Panama Canal affect CRE. Stuff like that.
-Pitch a market and/or asset type?
-Where do you think we are in the cycle? I've seen this one pretty frequently recently.

    • 2
Jun 30, 2016
Apricots:

Where do you think we are in the cycle? I've seen this one pretty frequently recently.

"Sky's the limit, sir. You'll definitely need more people around the office."

    • 24
Jun 30, 2016

Haha this is money

Jul 8, 2016

LMAO +1

Jul 12, 2017
CRE:
Apricots:

Where do you think we are in the cycle? I've seen this one pretty frequently recently.

"Sky's the limit, sir. You'll definitely need more people around the office."

this is gold

ET

Jul 2, 2016
Apricots:

I've gotten most of the above, as well as...

-What is the cap rate on the building were in/explain cap rate?-Explain why the terminal cap rate is higher than going-in?-Walk through a DCF, debt table?-What's going on in the market? I've gotten both in the local sense ( speak on our markets rents, deals, etc.) and also more macro (nationwide RE trends, rates, etc.)... stuff like how foreign investors or oil affect CRE... or how the growth of tech hubs/widening of Panama Canal affect CRE. Stuff like that.-Pitch a market and/or asset type?-Where do you think we are in the cycle? I've seen this one pretty frequently recently.

+1.

Jul 12, 2017

Hi! on the second q, why is the terminal cap rate higher?

I am newbie, but I would think that that with capital improvements to the property or appreciation, isnt thre a chance that the asset value will be higher at the end than at the beginning thus lowering cap rate? Thank you!

Jun 30, 2016

Depends on what the hold period is, but generally, it is prudent to underwrite a higher exit cap for a few reasons:

  1. Real Estate depreciates over time, so if you buy a stabilized property today for a 5 cap, all else equal, 10 years from now the same building will be older and less competitive compared to newer assets that have been built in the market, so it will trade at a higher cap.
  2. In the rising interest rate environment that we're in today, cap rates are either flatlining or already starting to expand and this is expected to continue going forward since interest rates are correlated with cap rates.

TLDR - if you buy at a 5 cap and plan to resell the same building for a 5 cap ten years later, you are likely to be disappointed.

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Jun 30, 2016

Honestly, I'm struggling to even think if I have been asked a technical question in an interview. I think there's an assumption of competence that comes with getting an interview, however maybe at the analyst level without any experience you'd get more of a "test."

All of my interviews, even when there have been multiple rounds, have been fit based. Questions are typically:

"Walk me through your resume."
"Which skills are you strongest at and which do you need the most improvement on?"
"What interests you most about real estate?"
"What are you most passionate about in real estate?"

Since a lot of these places have different teams and roles, I'll also get a lot of

"What product type do you prefer and why?"
"What would you prefer spending your time doing?"

At most, when talking about a past deal, they'll ask for a difficulty that it overcame or an exit cap or talk about a market I was in. Be able to speak intelligently about these things and you'll be fine.

    • 2
Jun 29, 2016

Love it. Preferably wearing a bolo tie when you say that

Jul 3, 2016

I like lizards post. But also don't be afraid to say your motivated by money (if that's true ). Similar to a sales gig they love hearing that cus it means ur hungry. That's what I said, and they ate it up

    • 1
Jun 29, 2016

Thanks guys! Really appreciate it.

Jul 3, 2016

1.) Cash on cash return.
2.) Why would a sponsor take 12% mezz financing on a deal?
3.) You have two buildings right next to each other they have the same everything including irr. Why are the multiples on invested capital different?
4.) Where do you think is the most attractive area of the cap stack to invest $150 million today?

Jul 26, 2016

1) Levered return dollar amount
2)Tax-Deductible expense bringing it down to a more preferable rate. Allocation of risk.
3) Different Capital structures??

correct?

Oct 5, 2016

If anyone can validate those answers above that would be great, since curious as well

Jun 6, 2018

In regards to #2, a higher interest on mezz financing is most likely due to the fact that it's unsecured

Oct 13, 2016

Great thread. Saved

Dec 14, 2017

If IRR = 20%, what's the Equity Multiple?

Dec 14, 2017

You'd have to ask how many years they held the investment, right?

Dec 14, 2017

Yes. Typically, if brain teaser, investment period will be two to three years, maybe up to five. Don't forget to compound.

Jan 15, 2018

How can you solve this without additional information? the same IRR could correspond to various equity multiples, as far as i know

Dec 19, 2017

For the inevitable "why real estate?" question, I would say not to use the industry-favorite "I like real estate because it's tangible." Literally every hopeful analyst ever has used this response.

You can say you like it "because its a real, physical product," but "tangible" is just so grossly overused now because everyone googles "how to answer X" and boom..tangible.

Jan 15, 2018

You might be able to stretch your corporate finance background into corporate realty advisory. Some larger firms like JLL and CBRE advise/represent large corporations for one-off transactions and portfolio mgmt. JLL has been hiring analysts for their newly launched "Integrated Portfolio Services" business line which might be a good entry point for you.

Jan 15, 2018

I made a similar transition from a semi-related field to advisory/brokerage. Advisory/brokerage is probably your best bet or maybe Asset Management. I found that interviews were a mix of technical and non-technical. The REFM course prepared me adequately for the technical portions.

Jun 29, 2016

"I need to improve my modeling and get some more hard skills"

I think you nailed it right there. You aren't planning on telling them they're a stepping stone, are you? Interviewing at a big shop, coming from a small shop, shouldn't raise too many eyebrows

That said, whether or not it's a vital step before going to development/acquisitions is another question, but I can't answer it in good faith as I've never been a broker or been in acquisitions. Maybe someone else can shed light, or it's probably been discussed around here previously

Jan 15, 2018

I guess that's a worthwhile question as well: does anyone think a role is attainable with a reputable regional or national developer, REPE firm, or REIT straight from a short stint as an small-shop investment broker? From what I have gathered so far, a year or two as a big-firm analyst is a for likely progression.

Jan 15, 2018

Welcome to the real world. The 5 years after you graduate will fly by quickly.

Was there anything about JLL that interested you or was that and Cush just from your immediate unfiltered thoughts?

Let me know.

Jan 15, 2018

Thank you for the warm welcome! The first 3 certainly have.

That very old post was from 1 year ago, so what may have interested me at the time about JLL (and LIM) isn't really relevant anymore. Started in a new role very soon after posting that last feb.

Jan 15, 2018

I give you credit for acknowledging that you need the "hard" skills in order to succeed on the development-side. I agree with the above comments that going from a small brokerage to a big brokerage makes a lot of sense and no one will question that. Most brokers think like this "I need someone to learn the ropes quickly and start valuing properly in less than 2-3 months." When I was interviewing, most brokers were honest and told me they didn't expect me to be there after 3-4 years (JLL, CBRE, Newmark, Cushman). The exception is HFF. They try to organically grow their own brokers. HFF told me that the success/hit rate is like 20%. I didn't get the offer from HFF because they felt I didn't want to be a broker and bring in business enough. Now, I work for a great IS team at one of the other big firms. Most big-time brokerages aren't expecting you to stick around. Be honest and be yourself. That's the best advice I can offer. Good luck.

    • 1
Jan 15, 2018

anyone?

Jun 30, 2016

Sounds like a position at Hunt or W/D. Lender modeling for multifamily lending is going to be pretty straightforward (likely a template you just plug into to size a loan tbh). If you know how to do equity modeling, you should be fine.

In terms of the concepts themselves, just know how to size a loan based on DSCR, LTV/LTC (depending on whether it is a bridge/acquisition or refi) and Debt Yield. In terms of the various structures, those will be learned on the job for an analyst position, I don't expect you will be tested on more than the basic sizing concepts I just described. More so than modeling, you will be spending your time underwriting loans by digging through the borrower provided operating statements and making sure everything is kosher, while making your own adjustments to the numbers based on the market, quality of the property etc.

If they happen to do construction loans, perhaps you will be asked to demonstrate that you know how to build a draw schedule that draws down the loan based on a cost schedule.

Make sure you understand all the line items on a multifamily operating statement so you can speak to those if asked.

Credit review is likely referencing the review of a borrower's financials to determine their net worth and liquidity. Liquidity is how much cash/marketable securities a borrower has on their balance sheet. Basically, you will be reviewing their financials to determine if they are broke or if they have sufficient NW/L for the lender to chase if shit hits the fan. This is something that will be taught on the job, I wouldn't expect them to test you on this, maybe they will just see if you understand the concept.

DD of borrower is basically digging into the borrowing entity, making sure the sponsor is not a crook, making sure the borrowing entity owns the title etc. This should be taught on the job.

    • 4
Jan 15, 2018

I worked for a REIT fairly recently (office space, corporate finance). That's an interesting role if they're less diversified - larger tenants may require some modeling for cash flow generation over rental requirements.

If it's diversified then that sounds like a lot of opening financial statements, calculating rental coverage rates and certain debt metrics which would be tedious and repetitive.

I'd ask about their tenant diversification, typical KPIs when looking at a tenant, possible scenario analysis for tenants' strategic direction (and according future space requirements, rental rates), whether it involves analyzing peer REITs and external research analyst reports

Jan 15, 2018

Hours and pay for 1st year analysts are location and firm dependent, can you give us any more information?

Jan 15, 2018

Located in Atlanta and the firm is Stockbridge if that helps

Jan 15, 2018

Located in Atlanta and the firm is Stockbridge if that helps

Jan 15, 2018

Initially hours may be long i.e. 8am-8pm as you'll want to show your enthusiasm and willingness to put in the hours and learn the job... However, in my experience real estate gigs offer a pretty good work/life balance as there's rarely any deadlines that can't wait until the morning. My typical hours are 8.30 - 6pm and out of the office by 4pm on Fridays.

Analyst positions involve a whole lot of financial modeling and data mining as well as chatting to property managers, lawyers, insurance companies and consultants to firm up your assumptions. You play an essential role in formulating and proposing a purchase/sale price for a property or portfolio that may be >$100M. Starting salary for an REPE firm is likely to be $70-90k plus bonus.

If you've done your research on this site you'll know that Argus skills are essential as well as being able to write and speak well. In real estate you need to have a keen eye for detail and have confidence in your convictions.

Getrefm.com is a great place to start if you want to learn on the job skills. Good luck.

Oh and I'd avoid telling any prospective employer that you've only just begun to consider this career path, tip - come on with a 'this is why I love real estate' story prior to your call or I highly doubt you'll get a follow up call.

Jan 15, 2018

Thanks for the input. I actually had the call last week and heard today that I have an interview on Friday. I basically read everything I could find on the internet relating to it. I will definitely check out that website as I prepare for Friday. I told them that I have had a personal interest in real estate investment and would love to learn how to do it professionally and that I love how real estate is not just a number. Looks like this position has the benefit of contributing to both portfolio management and acquisitions so I get the best of both worlds. I am very excited

Jan 15, 2018

wshopeful19, When you wrap up the interview on Friday perhaps you could walk us through the kinds of questions they asked, etc as it could be useful to future readers. Congrats!

Jun 30, 2016

Congrats and good luck with the next step. I just managed to switch industries into RE finance, and I would say the most important thing is to demonstrate that you are passionate about RE, and are excited to learn and work hard. It seems in this industry your hunger and passion can take you a long way. I don't expect you would get a modeling test in your first onsite interview, but if you do well you may get one in your next round. Definitely familiarize yourself with the basic RE concepts and metrics.

Jan 15, 2018

careful when quoting firms. re is small industry

Jan 15, 2018

careful when quoting firms. re is small industry