analyst on the debt/lending side of real estate

dinoRE's picture
Rank: Orangutan | 296

hey I was just looking to see if anyone can shed some light on what its like working as an analyst on the lending side of real estate. whether its a bank, mortgage reit or any other kind of lender. what are the exit ops for a analyst? can one transfer to the equity side easily? what does an analyst or associate position generally entail? how complex is the modeling? Would it be a good place to begin a career or go to with only a year or two under ones belt? im not very familiar with the lending side of real estate but am interested so any info is appreciated.

Comments (44)

Jul 13, 2017

I participated in a 2 year rotational program at a relatively small ($10-20b) commercial bank, and had a rotation in real estate. Day to day is writing up credit memos, participating on sales calls, and general portfolio management items. Exit opportunities are decent in real estate lending, but keep in mind the comp is great if you are able to be placed in a CRE group.

Many analysts at my bank left for the following:
-Investment Analyst Positions (mostly insurance companies)
-Capital Markets RE firms
- Other Asset Management opportunities

If you have any specific questions, feel free to shoot me a message. Happy to help.

Jul 13, 2017

so commercial lending/acquisition long term exit opps are typically the same?

Jul 13, 2017

They are similar because the credit analysis is pretty similar.

Jun 10, 2016

Day to day will differ substantially depending on what area you are in. My experience is with opportunistic lending think HF/PE. We were doing mezz on transitional assets and construction. Deal flow is a lot higher than equity due to the sheer number of sponsors trying to get financing. Underwriting was essentially equity underwriting except we don't care about equity IRR splits... More is this project sane, will we get our money back, what's our basis etc. After basic underwriting most time is spent doing diligence, learning markets, and making pitch books. Lmk if you have any more questions.

Jun 14, 2016

coming from a valuations role where I run dcap, dcf and sales comp analysis's among a few other responsibilities, how difficult would it be for me to get hired as a lending analyst and a good firm? would you recommend this as a good next step to take to open up more cre roles down the road? what kind of positions/companies would it open up for me as possible exits?

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Apr 11, 2019

what does Dcap mean

Jun 14, 2016

it sounds like one can expect to get a lot of experience modeling and underwriting properties. is it relatively easy to move to the equity side after a year or two... in particular acquisitions? what kind of opportunities are available after an analyst stint on the lending side? what would the career path look like if you stay on the debt side?

I'm currently a valuation analyst for a repe shop so i run dcap, dcf and sales analysis for all our properties. i don't know much about the lending side of the industry so I'm trying to figure out if it would be a good direction to pursue and how it compares to the equity side... especially long term

Jun 14, 2016

also what would this position be called?... Commercial real estate credit analyst, cre mortgage analyst, cre debt analyst, cre underwriting analyst, etc?

what title should i search for?

Oct 2, 2017

I work in CRE lending for a decent sized bank. My title is "CRE Credit Analyst." I just recently moved to a different market and and found my job by searching for "Real Estate Credit Analyst jobs X City" and "Real Estate Analyst jobs X City." I got my job through an indeed posting which according to this forum is pretty rare. If you're searching for these jobs on the internet, SelectLeaders is a CRE specific job board. I saw a lot of great openings on the site but got lucky with indeed.

I'll be watching this thread as I also want to exit to the equity side.

    • 1
Jun 11, 2016

At the bank I'm interning at, you are simply called an analyst, with CRE being the group that you work in.

"There are only two opinions in this world: Mine and the wrong one." -Jeremy Clarkson

Oct 2, 2017

I'm a debt analyst. PM me if you want to chat and I'll give you the run down.

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Jun 14, 2016

what would a typical career path look like on the debt side? what kind of movement job, company and career path wise would going into the debt side allow down the road? is it flexible or would you get pigeonholed in lending?

Jul 13, 2017

For Commercial Real Estate, it's typically Analyst, Associate (begin business development while transitioning out of underwriting), and then Relationship Management (Business development / portfolio management). I'm not sure how it is at CRE firms, but this is how it usually works at commercial banks.

Jun 14, 2016

what would the typical comps look like?

what general background or skills do they look for in hiring analysts? Do most banks or lenders train analysts or do they expect them to come in knowing pretty much everything?

Oct 2, 2017

A lot of commercial lending groups are straying away from real estate lending altogether. If you can find a group that banks investor real estate relationships, then go for it. Otherwise, you won't get much real estate experience in a generalist group.

Your colleagues are correct that you will learn to become diligent, as lending is a long, drawn-out process that requires you to understand the process of debt financing.

Oct 2, 2017

I don't know about jumping straight to development, but I do agree that if you can handle the underwriting and due diligence involved in, say, a $10m business loan, then real estate financing would definitely not be out of the question.

Oct 2, 2017

I guess it depends on where you want to end up in real estate. It's true we work very closely with lenders and they diligence all our deals-- so yes, you would get a good understanding of the diligence process, how to manipulate models, market research, valuation etc etc. In addition, you'll see the banks investment committee process and see how they are vetting deals/making decisions.

My experience (and it may only be me) is that lenders are lenders and I haven't seen laterals from there into Development/Acquisitions/REPE etc. That being said, I know a lot of lenders that make great money-- so if that's your goal it may be a good lead.

One great thing about being a lender is you'll meet a TON of people-- everyone wants to borrow money, so you'll be a popular guy pretty quick. Perhaps provide some more detail on where in RE you want to end up.

Oct 2, 2017

I want to end up in development/acquisitions/REPE. I also want to get an MBA down the road, assuming that I can get into a worthwhile program. I think I would use that as my bridge into the asset management/ownership side of things.

For now, I just need a start, and the more and more I speak with people, the more intrigued I become by the merits of banking and lending.

A follow up question-with real estate lending, ARGUS is still heavily used? I am an undergrad student, and considering getting certified.

Oct 2, 2017
wbsgn12:

I want to end up in development/acquisitions/REPE. I also want to get an MBA down the road, assuming that I can get into a worthwhile program. I think I would use that as my bridge into the asset management/ownership side of things.

For now, I just need a start, and the more and more I speak with people, the more intrigued I become by the merits of banking and lending.

A follow up question-with real estate lending, ARGUS is still heavily used? I am an undergrad student, and considering getting certified.

--

If you want to end up in development/acquisitions I'd look into working as an analyst for a development shop-- for instance I know that CIM Group still has analysts (pre-mba) and my assumption is other shops like that (LOWE, HINES, Trammel Crow, tischman, etc) probably have similar positions for folks coming out of undergrad.

If you want to end up in REPE I might lean towards banking.

Ultimately though you can always work for a few years, go back and get an MBA, and then get recruited into a shop where you're doing X.

If you want to end up owning and managing assets I'd go into development rather than REPE as the training and experience you get will be much more applicable to owning/managing real estate.

Argus is definitely used, but our shop doesn't use it and I know lots of shops out there that don't either-- so its a mixed bag. I think training is a couple grand so if you want to throw your money at that certainly it would be something to put on the resume that might help, but certainly not a must have.

Oct 2, 2017

Hey @wbsgn12 I wrote a guest blog post in early 2010 on "The Role of the Real Estate Financial Analyst" that's still relevant today -- check it out here http://bit.ly/WYyTG0.

Regarding your question if Argus is still used, yes.

The key is the Argus is the industry standard and it's not going anywhere anytime soon. It makes the underwriting process so much smoother than if you were working in Excel. However, Argus does have limitations, and it is important to note that most people use it to quickly/efficiently build a 10 year cash flow projection. Argus stops there though, and you should build your returns model in Excel where you can tweak debt, capital events, pref distributions, and waterfalls in a more fine-grained way that is also not a black box.

The biggest thing that annoyed me when I took the official Argus training in 2007 was how long the class was and how (looking back) most of the material they taught is never actually used by an analyst. While Argus isn't rocket science, it is a black box and difficult to learn at the outset. Especially when you have to answer to your manager (and worse - investors) in the event of any mistakes, you need to be fully confident in how the software works.

That's why I decided to make a training DVD (demo clip here http://bit.ly/ArgusDemo) which teaches all of the essential Argus elements without teaching extraneous information. It teaches how to build an Argus model from scratch without ever having prior Argus experience. Even better, the DVD can serve as a reference guide in the future should you need to leverage a less used facet of Argus. Check out http://bit.ly/ArgusDCF for the full list of topics covered, and be in touch with any questions.

Oct 2, 2017

I'm a RE lending analyst at a BB and have had a great experiance. People from my group have moved on to MM REPE, debt funds, developers, etc. Our group does a lot of institutional deals and the contacts are great.

Good things about lending:
- It is very easy to differentiate yourself if you are smart and hardworking
- You will see more transactions in one year than most do in three
- Transferable skill set (excel and argus)
- Assuming your group is active and institutional, you get contact with a lot of people you may want to work for down the line

Bad things about lending:
- Lenders are generally viewed by the market as dumb
- The pace of work tends to be slower
- You most likely will not have a peer group of analysts to hang out and network with

Anyway, just my thoughts.

Oct 2, 2017

Working as a lending analyst early on in your career will serve as good work experience for the majority of positions throughout the real estate industry. Assuming you're in your twenties, this is a great route to take early on for a couple of reasons.

You need to look at the broad perspective and realize that you likely have 30-40 years of work ahead of you. With that being said, there is time to work in a number of specialized sectors, but some sectors don't "allow" lateral transitions from others (prerequisites skill sets may vary).

It would NOT be difficult to transfer from a lending analyst to a development analyst, but transferring from a development analyst to a lending analyst is not very common (IMO). Commercial banks normally put their younger guys through credit training which is good education, but is also a pro b/c it shows that other companies are willing to invest in you.

I would take a hard look at the companies repeindc mentioned b/c learning from the best is important for your personal knowledge as well as the prestige. I don't mean to sound pretentious, but working for a well respected company will continue to open doors.

Oct 2, 2017

I was going to expand a bit on this thread, but the bases are well-covered. Nice job guys.

Oct 2, 2017

Why are lenders viewed as dumb?

I'm a VP Relationship Manager at a small Regional Commercial Bank ($2B Assets). While I'm a generalist, I have significant transactional experience in CRE. My biggest deal was a $16MM construction mini-perm credit facility for a 175 unit hotel. Along with various CRE Retail, owner-user Industrial, etc in the $3-5MM range.

I have a MBA (non-target). Is the common opinion that I couldn't lateral into a REIC or REPE because I'm a dumb lender?

Oct 2, 2017
gregt14:

Why are lenders viewed as dumb? Is the common opinion that I couldn't lateral into a REIC or REPE because I'm a dumb lender?

I wouldn't say so. Note that even the kid above who said lenders are seen as dumb mentioned that his colleagues often move to the principal side. He was making a broader statement about the herd mentality of the credit markets. I would also undersatnd the argument that getting a loan is a pretty standardized, commoditized process and there's not as much creativity involved.

Oct 2, 2017
gregt14:

Why are lenders viewed as dumb? Is the common opinion that I couldn't lateral into a REIC or REPE because I'm a dumb lender?

Not sure if this is an actual question or rhetorical. Depending on intelligence, experience, contacts, and luck you can do whatever you want with a lending background. As noted above, I know lots of guys that went from lending to the buy side. I am a lender and have turned down several buy side positions, because I'm moving up faster on the lending side than I would on the equity side (partially because I have less competition). At my level, pay is comparable.

However, you're kidding yourself if you think that the debt side is as smart as the equity side (in general). Equity guys take the first lost positions and earn 12-25% IRRs. Senior debt guys take last loss position and put out 2-3.5% money. I can tranche my loan eight ways to Sunday to mitigate downside risk, but in the end my downside is easily identifiable. Equity guys are making much more specific assumptions.

Oct 2, 2017

You think a $16MM construction mini-perm credit facility is a standardized product?

A lot of mid-market deals I get involved with are very far from a standardized process and involved a ton of creativity on structure.

Sure there are best practices in place. But I don't think people understand the complexity there is when doing mid-market transaction in Commercial Banking.

Oct 2, 2017

^ that makes sense. And no where did I say "debt guys are smarter than equity guys". I think you may have missed the point.

But I'm in the same boat as you. At my level in lending and Banking, I'd have to take a pay cut to go the REIC route. I'm staying put just was curious as to what the industry thinks of lenders.

Oct 2, 2017

The issue with lending is that you essentially do a whole bunch of due diligence, for what, 240 bps over libor? I mean why go through all that for such a measily return.

Oct 2, 2017

^ cuz on an hourly basis, I make just as much as investment bankers.

In all seriousness, Commercial Banking isn't sexy and the ceiling is a lot lower once you get into Sr positions.

But as a 31 year old, I'm pulling close $200K a year. Not bad for a 40 hr a week gig in a small market where cost of living is cheap.

Oct 2, 2017
gregt14:

^ cuz on an hourly basis, I make just as much as investment bankers.

In all seriousness, Commercial Banking isn't sexy and the ceiling is a lot lower once you get into Sr positions.

But as a 31 year old, I'm pulling close $200K a year. Not bad for a 40 hr a week gig in a small market where cost of living is cheap.

Greg,

I used to be in commercial, I agree its not sexy but for the salaries, the work-life is amazing. Your on the relationship side so your salary is based on deal flow. I was referring to underwriting solely. Either way, money is good in lending, the deals are just not as sexy though.

Jun 14, 2016

anyone else have any thoughts?

Best Response
Jun 23, 2016

On the front office debt and lending side for real estate, you really have two camps that you can get a job in.

The first is the investment banking world where you issue bonds and equity for funds. This is more like your traditional investment banking job. The hours are long and tedious (not to say mine are not), and you spend a lot of time making pitch books for your MD. Based on my conversations with my IBD colleagues, you rarely ever get to meet the clients decisions makers as an analyst. Moving to the equity side from IBD is generally easier; this is logical given that you are exposed to the equity side.

On my side of the bank, the lending on actual assets, as an analyst, the work depends on what type of lending you are performing. I would say unlike traditional investment banking there really are two positions, originator and underwriter. As an analyst, the work will entail entering rent rolls, reading leases, reviewing operating statements. Depending on the type of loan execution, the modeling can be extremely complicated or very dull. CMBS loans are generally more straight forward given that they are on properties which are generally stabilized, so there is less modeling; I think it is the same thing at life insurance portfolio loans.

Bridge loans (portfolio and securitized) require a substantial amount of analysis/modeling given that they require you to make defensible assumptions about the future market rents, leasing timeline, and leasing expenses. To perform this accurately and well, you need to perform tremendous amounts of research on the market and target tenants. Performing this analysis makes it much easier to move to the equity side.

On the portfolio lending side, you also have the added "fun" of possibly asset managing the loan, and CMBS lending requires that you deal with the securitization aspects of the business. Trust me this is boring, not sexy, and often times can be confrontational. You will spend a lot of time in ARGUS.

I cannot speak about construction or mezzanine lending, but I know for a fact they perform a lot of modeling.

There is a marked difference between the lending and equity view points that are extremely important to understand. As a lender, you will always have a slightly more skeptical viewpoint about any transaction. Why? Because lenders do not capture any of the upside potential of an asset, and while they are often times the first mortgage, they are the ones who have to deal with the property if it fails. Therefore, your viewpoint is often "if things stay the same, how much protection from losses do I have?" As an equity player, your job is looking to at what can be, so you naturally look at the upside potential in assets' markets and tenants. As a result, moving to the equity side from the lending side is slightly more difficult, but by no means is it impossible.

If you like real estate, I would recommend lending at a bank as an analyst or associate because you get to see so many different assets and types of transactions. A few of my analysts have left the bank to join REIT's and PE shops.

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Sep 27, 2017

this is an excellent thread and a really insightful comment, so thank you IronChef. As someone who works in debt/lending but in a vanilla/dull (as you said) aspect of it, this provides some clarity for potential next moves for me. What are your thoughts on working on more complex lending (mezz, bridge, contruction) for a debt brokerage vs. doing it at a lender?

Sep 28, 2017

bump

Jul 13, 2017

can anyone share the experience working on the lending side at LIFE INSURANCE company? thx

ET

Jul 13, 2017
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Jul 13, 2017
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Sep 28, 2017