Anyone work for an LP or major capital provider in RE dev?

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What are your overall pros/cons of working that side vs. being at a standard operating partner/development company? Does it seem like you'd get the breadth of knowledge at the LP and depth at GP? Has anyone worked for both sides? I'm early in my CRE career and looking for any insight possible, not sure what I want to be doing long term yet.

Comments (22)

 
Sep 8, 2020 - 12:21pm

Just a quick observation, should be straight forward, but not easy to understand to those new to the industry....

LP = passive or semi-passive investor... thus the people making these decisions are really in "finance" heavy roles (not to say they don't understand real estate)

GP = Real estate operator/developer... these are true "real estate" people whose day to day job is running the deal/property/project

What confuses people are big firms that have arms or divisions that act as both LP and GP (or co-GP)

 
Most Helpful
Sep 8, 2020 - 1:04pm

It's not uncommon at all for people to move between firms like this. LPs need people with true real estate experience to help them underwrite and manage deals. I wasn't at all trying to imply that people cant' or don't move between them, just pointing out the obvious difference in the business strategies. 

 
Sep 8, 2020 - 5:10pm

I mean, I think just about all the really large household name types do both and have full real estate teams. Same deal for the pension/life co investment managers (PGIM, Nuveen, Clarion, etc.). 

Not all teams do both, sometimes roles are split by investment type. Sometimes by asset type, it's hard to really generalize. The big REPE firms are harder to define because they literally buy and sell real estate businesses as well as property assets and portfolios, so some times the direct real estate activities are handled by the wholly owned real estate subsidiary. Frankly, you have to just investigate each firm to figure out how they do business. 

 
Sep 8, 2020 - 4:33pm

been on both sides.  i'd say yeah you're probably not wrong about depth vs breadth.  i will say this, if you're looking to casually waltz your way into a non-entry-level hands-on operator role it might not be as easy coming from the capital side.  an astute headhunter might try to find you a 'VP Capital Markets at XYZ Developer' job instead of a job where you're really executing the acquisition or development or whatever.  probably can be overcome but a minor consideration.

having said that, the capital side is a GREAT place to learn and both paths can be awesome.  

as far as actual enjoyment, i found the capital side kind of lame in the sense that every deal i worked on i think i would've been having more fun on the other side of the table, regardless of pay (this comment strictly applies to jobs where you're just an LP/passive capital source, which might not be true everywhere as 'redever' pointed out above)

personally my goal, if i were in your shoes, would be to find somewhere where i could move up fast, period.  regardless of whether you're at a single-tenant retail developer or a massive PE fund.  that's just me, i tell everyone to GTFO of junior roles asap.  
hell you should get into hotels right now!  no joke!

 
Sep 9, 2020 - 3:20pm

DollarKeepsRaining

Good insights.

Curious which side you are on now? What prompted you to make the switch initially?

now on the operator side.  wanted something more entrepreneurial, more freedom. 
 
of course looking back if i had been climbing the ranks quickly at Ares or somewhere like that i might have chosen differently!  

 
Sep 9, 2020 - 12:43pm

I currently work at a firm that acts both as a self funded GP developer as well as does LP private equity placement and although by title I am a Development Manager I started on the LP side and still uniquely sit "on the fence" between these two business lines (vetting new deals, analyzing potential partners, etc). 

What everyone described above is accurate and keep in mind although these are both real estate oriented businesses they are fundamentally opposite (or should be in an ideal setting) in the level of engagement on the asset level.

The LP/JV business is essentially passive investment with the focus on placing and diversifying capital driven by the firm's geographic, relative investment size and product goals. From a junior perspective (depends on the reach/strategy of the firm) a lot of your work will be focused around market research, taking a high level look at how a city/region operates and how this asset/deal fits that story. These roles are typically more financial analysis oriented with more complex modeling (at least relative to the real estate world) vs a GP as your negotiations will eventually settle around partnership structures which leads to a lot more waterfall modeling, preferred equity/mezzanine debt structures, etc.

In this business you do not expect to be the expert on the asset level as this is the GP/Operator's job - you do however need to vet your partner's experience and ability to execute very thoroughly however and ensure that incentives are aligned. This is best done through the negotiated partner structure and capital stack (how much equity do they have in the deal, what's their split, how likely that they hit their hurdles, etc.). So expect more broad market and less asset oriented knowledge, particularly on the other sub-industries within real estate (how property management works, marketing, brokering a deal, entitlement, construction, etc.).

GP/Operator life is about living in the weeds and the big advantage is that you'll gain much broader knowledge on how real estate works on both the asset level and as a whole. You'll have to raise money, hopefully land it then manage your LP relationship (which is an art in and of itself) while also leading other processes to move the deal along. If you enjoy the physical real estate itself and want to stay close to the "sticks and bricks" this a better option for you and is best for those who enjoy new challenges/a broad skill set vs becoming an expert in a more defined field.

Overall either area is an excellent place to start your career in and the more important element for you to gauge for new opportunities is how involved you can get/how fast you can progress as a younger team member.

Working at an LP you get an inside edge on capital structure and high level market analysis while also seeing a range of Operators and how they handle not only your relationship but the deals and the operational challenges that present themselves. Those who work at Operators will get great broad exposure to how real estate works as a whole and if you're lucky you'll also get to watch/learn how your LP's view the world and structure their partnerships with you to align incentives.

That about covers it broadly - let me know if you have any specific questions, happy to help/give further perspective. 

 
  • Associate 3 in AM - Other
Sep 10, 2020 - 1:55am

Worked at a SE Asian LP with $300bn+ in AUM up until this July. Prior to that, I worked in financial advisory. I personally haven't worked on the GP side, but had good amount of experience working with private equity guys during my advisory years. Most of my colleagues at the LP, however, were from the GP side(RE PE) with prior experience in IB. 

Being on the LP side definitely puts you on track of becoming more of a generalist. You no longer go out to source new deals or put together projects. Rather, you are mostly "invited" by GPs, developers or some strategic partners to review investment opportunities that they've put together. To be fair, greater part of my work was around reviewing fund and SMA investments and their re-ups (vs. analyzing individual projects). Within the development space, I'd say SMAs were more common. You will also spend a good amount of time conducting due diligence on the asset managers/developers/JV partners. Such "manager due diligence" includes going over their track record, operations, legal & compliance, etc. This process could last a lot longer and dive much deeper than one might think -- ILPA(dot org) has some good readings on this topic on their website if you are interested. 

Work tends to be more "high-level" as others have already mentioned. I've seen a handful of guys return to the GP side because they wanted to be more hands-on the deals, so there's definitely a preference for everyone. Becoming a generalist also has its upsides as well. I've seen many guys move around within the firm and gain exposure to different asset classes (e.g. RE to Infra or PE to VC, etc). It all depends on how good of a relationship you have with the respective teams. You will still spend many hours on Excel and PowerPoint to create memorandums for investment committees and internal reporting. They won't be as bad as in banking where you get endless emails from your VP and D to fix format or add more color. But just keep in mind that moving to the LP side does not mean saying good bye to PPTs.

Hours are great. I'd say 50-55 hour/week was the norm at my firm. All-in compensation was lower than IBD/PE. Most LPs don't give carry, and bonuses are around 30-40% of base. Base was equivalent to IBD or slightly less -- 125-150K for associates, 250k for VPs, 350-500k for MDs. We didn't have a team specifically dedicated to development, and as I mentioned above, most of our RE team guys had traditional IB backgrounds. But I did hear from guys at other LPs including ADIA that compensation for pure-development professionals, most of whom are from non-IB/PE backgrounds (e.g. developers, construction engineers, etc.), is usually lower.

Other perks included regular GP-hosted(and paid) LP events (e.g. AGM aka vacation), people always being nice to you, flexible work hours and job security (most LPs in Asia give tenure). Hope this helps. 
 

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