BB IB vs. REPE

kenchan's picture
Rank: Chimp | banana points 13

I'm currently a senior analyst in a top BB investment bank and have a final round interview with a REPE (top 10 according to PERE's list). Would appreciate anybody's thoughts on the below questions:

1. What should my salary expectations for a pre-MBA Associate be (base + bonus)?
2. What is the work life balance in REPE generally? I'm doing 90+ hours a week currently... understand it depends greatly on fund, team, project, etc.
3. In the future, what flexibility is there to move between REPEs?

Any advice would be much appreciated! Thank you.

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Comments (56)

Oct 26, 2014

Was just wondering if anybody had any details or advice they could share? Anything much appreciated!

Oct 27, 2014

people don't tend to respond to REPE questions in this particular forum. Idk why. I had a similar question last week and no one responded here or in the real estate forum

Oct 27, 2014

really 90 hours a week? what's the quality by hour 60?

Was only with smaller sub $500 Eu firm now smaller but my quality goes down hill past 8 hour days- maybe 5-10 hours on a weekend because I want to or feel quality is going to be good.

I say who cares and get out. even at $185k a yr, which pre mba is very........ doubtful (could be wrong) but $39 dollars an hour you are making. plumbers make more. This is pre tax. at $90k is $19 bucks an hour. and you are near top tier tax bracket. for 19 bucks an hour.

and you never get back youth.

For me I went from trad. lower middle m&a to PERE and its way better- is so fucking easy and if you hustle like PE- you run circles around pensions, devs, and other small funds. way better. Have seen and have first hand- that if you are killer to the team you can structure a incorp. and have them pay that to mitigate/minimise taxation- all these little shells in RE and offshore PE are super common- you get bonus points for being savvy in structuring your own life
(think kenchan inc. ). and if they don't respect you for this, walk out the interview because its clear they want a slave.

This is my jaded take 10 yrs later.

Oct 27, 2014

bump

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Oct 27, 2014

If you don't have a passion for RE, don't do it. Shit, you could probably get into RE after just one year in the right IBD group (RE industry group, levfin, a few others).

Oct 27, 2014

On this topic,

What are your opinions on RE IBD at a BB vs. RE PE (either at a BB fund or somewhere else?)

Is the the RE IBD crucial for REPE?

Oct 27, 2014

rehopeful, what do you mean "is it crucial for REPE"? not sure what you're asking.

as far as RE PE vs RE IBD right out of college, I would definitely take the REPE job if it was a top fund. in fact, assuming it's a top fund, the only reason NOT to would be if you're worried about pigeonholing yourself.

Oct 27, 2014

What do you guys consider the "top funds"? Morgan Stanley RE? JPMorgan RE?

Oct 27, 2014

Any opinions on the original question?

Anyone here who works in RE that I can PM?

Oct 27, 2014

i don't think JPMorgan Asset Management, or any of the BB RE funds for that matter, has as good a reputation as MSREF.

obviously Blackstone would be one. Starwood. Apollo.

Oct 27, 2014

What are the assets under management for all of those? MSREF is 80b or so, JPM is 65B or so. Starwood and Apollo are obviously great, but assets under management? What are you basing it on anyway?

Oct 27, 2014

i'm basing it on prestige. also, these places have amazing returns. remember, size is not everything. there's no such thing as a big opportunity fund.

Oct 27, 2014

Obviously not. But each REPE group has several funds. MS, JPM, ING all have core and value-added funds with varying benchmarks.

Obviously MSREF is the TI. But prestige in this industry is too subjective, what are the returns for Apollo, JPM, MSREF for the more opportunistic funds?

Oct 27, 2014

sorry man, you clearly have an idea of how this field works, so your guess is as good as mine as far as the performance for each of those guys. i was just going by reputation.

Oct 27, 2014

This is something I'd be very interested to learn more about as well. I recently have been talking a lot with a VP at JPMorgan Real Estate Private Equity about a summer internship, who said the entire team just came over from Lehman to establish this business at JPMorgan. Does anyone know what an analyst in this group would be paid out of undergrad? Please PM if you work in this business or have knowledge about it.

Oct 27, 2014

Not sure on specifics, but I know the CIO came over from Lehman Brothers RE (sell-side), who moved over there with the RE team from Salomon Brothers. I'm not sure if by saying "the entire team" you mean Lehman's entire team or JPM's... if the latter then it is not true.

From what I hear, JPM's business has been growing substantially since '99. Again, 68B in RE assets makes it clearly one of the top shops. My friend said their core fund averages 14-16%, which is as close to a risk-free deal in RE as you get. I can only imagine what their opportunistic, closed funds are doing.

Oct 27, 2014

Are you in the business? If you are, can I PM you?

Oct 27, 2014

Is it possible to get into Blackstone Real Estate out of undergrad?

Oct 27, 2014

mm44, I don't know about Blackstone specifically, but I know that there are comparable RE players who do recruit at the undergrad level. They don't take very many kids at a time, though.

Oct 27, 2014

PMs.

Oct 27, 2014

Prospie, can you name some of the groups that are comparable to blackstone that hire out of undergrad?

Oct 27, 2014

My friend said their core fund averages 14-16%, which is as close to a risk-free deal in RE as you get.

could some clarify that sentence? do you have some table/statistic/source i could read that supports that?
thanks

at the same time, i would like to know which is the best path to break into RE banking, but I am not undergrad. but have a master in real estate development, and seriously i fear is not something i can do anymore. I wouls also be available to work for free as intern

Oct 27, 2014

to answer krakauer's question:

At the Merrill Lynch conference, Schwarzman said that the real estate business had generated a 39 percent gross return since its 1992 inception. "The returns that we have had in real estate are really shoot-the-lights-out kind of returns," Schwarzman said.

from an article at www.privateequityrealestate.com

Oct 27, 2014

Karajan -

I'm not sure what you want me to clarify. Core fund meaning the core real estate properties, ie. stabilized cash flow with moderate appreciation expected. Properties that aren't in "green areas", but haven't reached peak value yet. Something like a building in SoHo, or a mall in the middle of a hip neighborhood in Seattle. Highly unlikely that it will depreciate unless a strong decline in the commercial market. 14-16% per year returns. The documents are always internal and for people invested in the fund, not typically in any sort of press release.

Prospie -

39% since 1992? In 15 years it has only had a 39% return?

Oct 27, 2014

krakauer, obviously that's a bit of a typo - i'm assuming the word "annual" is left out. blackstone hasn't raised the biggest opportunity funds in the world by getting 2% returns.

here's the link to the exact article. http://privateequityrealestate.com/Article.aspx?ar...

Oct 27, 2014

Yeah, I assumed. 39% is pretty amazing, but it is also an opportunistic fund. I'd be interested in knowing the returns of the opportunistic funds of the bigger real estate players like MS, ING, JPM, CS, etc. Their core funds seem to get the majority of the institutional clients, but they have some pretty strong opportunistic ones too (obviously MS and CS do).

Thanks for the article. Good read.

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Oct 27, 2014

bump

Oct 27, 2014

which ever one leads to a FT offer assuming the Ibank and PE fund are both similar quality.

Oct 27, 2014

first off, have you done IB yet? or are you straight out of undergrad? RE is much different than IB. The pay is random, and there are very few places that pay like IB. Some that do (a well known PE shop that has real estate as an arm: BX, Carlyle, Colony, etc)

I would look for other PE RE opportunities.

--
"Those who say don't know, and those who know don't say."

Oct 27, 2014

Thanks for the advice nutsaboutWS. I'm straight out of undergrad. I like you said, I recognize that other firms like BX and Carlyle have RE arms, rumor has it even other general PE shops are trying to get in on the action - KKR and TPG, while others are trying to get out or change direction - BAML and GS. I was just trying to get my general strategy squared away, then zero in on specific firms.

Oct 27, 2014

How much debt do you have and how far below street is your all in pay?

Oct 27, 2014

Real estate IB is a joke. The business model is illogical and is in the process of dying. Except for maybe the bulge brackets (e.g. BAML) and some boutiques that work with municipalities, most RE IBs aren't doing much business, mostly because equity investors are staying on the sidelines and traditional debt is extraordinarily cheap, not to mention that sellers aren't selling at drastically reduced prices and no one will lend for construction. I really truly think you'll regret moving into RE IB, and that's assuming any firms are even hiring. I say stick it out in your gig or try to move to another firm. Also, keep in mind that anything real estate related, generally speaking, does not pay particularly well until you get to the more senior levels. RE PE/IB will generally not pay, say, $80k base plus 100% bonus to analysts like Goldman Sachs would to its IB analysts. It just isn't happening. If you want money, make the switch to traditional, "Wall Street" finance.

Best Response
Oct 27, 2014

I think making the switch over to RE IB is a possibility and something you should explore. I have been working for a little more than two years as an analyst and now associate in RE PE and I started to consider moving into RE IB a few months ago.... primarily because I am considering moving back to the U.S. from China, but also because I wanted to get exposure to other property types, and hopefully broaden my experience in general... the pay I receive here is close to street, but it's still slightly less (and yes, hours are 1/2 of IBD).

Anyways to get back to your questions:

  1. yes. you are more marketable now and probably have a good chance of getting interviews in RE IB (I haven't had much problem - though I did go Ivy League and i think you said you went to a non-target, but still)
  2. yes. I think it's a good idea for you considering your financial situation - pay in RE IB is the same as any other IB analyst-- very high.
Oct 27, 2014
International Pymp:
  1. yes. I think it's a good idea for you considering your financial situation - pay in RE IB is the same as any other IB analyst-- very high.

In the United States, this is straight-up incorrect in 2010 unless you're talking about the top 5 RE IBs on the street.

Oct 27, 2014

V-Tech: perhaps it is incorrect, I could be wrong... I was making my statement from only two data points, one a top elite boutique (where I had an interview a few months ago) and another one a top BB (where I also interviewed recently)... I didn't get the offer from the BB so I guess I don't know for sure what they were paying but the headhunter i worked through said it was street. I know for a fact that the elite boutique was paying the same as there other analysts... they offered me second year analyst

Oct 27, 2014

Elite firms will pay their analysts the same for different industry groups (industrials, retail, mining/minerals, real estate, etc.). But the vast majority of real estate IB is performed through firms that specialize in real estate, e.g. Perseus Realty Capital, Northmarq Capital, IRR Corporate & Public Finance. Assuming the OP is not going to get one of the coveted entry-level analyst spots at BAML, Goldman Sachs, etc., he will probably be targeting the banks that are purely RE IB. Those firms pay well, but they aren't paying life altering money. Something like $60k base and 50% bonus, depending on the market. And from what I've seen, those companies are dead in the water for their legit RE IB practices.

Oct 27, 2014

Im an analyst in a BB REIB group and make 70 base. im a 1st year so cant say what my bonus will be but last year our top bucket analysts got 100% bonus. our group historicaly pays above street average. Additionally our group is swamped with work right now so dont generalize.

Oct 27, 2014

porter, I will quote to you what I said:

"In the United States, this is straight-up incorrect in 2010 unless you're talking about the top 5 RE IBs on the street."

UNLESS YOU ARE AT A BB RE IB, which would be a top 5 RE IB. This is not generalizing. You're at a bulge bracket IB. The rest of American RE IB is not BAML. I was just quoted under $50k in the mid-west with about 40-50% bonus potential, and that bonus was far from guaranteed. The fact is, you would be generalizing if you took BB RE IB comp and work flow and tried to apply it to the rest of the firms nationwide. The OP would be wise not to assume he'll end up at one of the top REIB firms on the planet when making life-altering career decisions, that is, unless you want to help him get an interview at your firm.

Oct 27, 2014

There are a few other groups besides BB's that have strong RE IBD and pay full flight... like Lazard, as one example

But yes - I understand you V-tech... those specialized REIB firms definitely pay less than BB and other boutique IBD that pay street... that's very true. Personally - i just never considered joining anywhere other than the best... but I should probably keep that in mind when giving generalized advice.

Oct 27, 2014

I'm going to go ahead and say that there is a pretty big difference between RE IB firms that do advisory work (M&A and corporate finance advisory) and RE IB firms that do brokerage or pure capital placement (both debt and equity).

There are quite a few firms that pay at IB street level, but they are the ones focusing on real estate M&A (or once upon a time securitization). They are generally within BBs or MMs, but there are a few RE focused advisory boutiques. The firms mentioned by V-tech say they are REIB but they are either brokerage firms or capital raising firms for single asset deals.

To give you an example. There are a lot of REITs that will need REIB coverage. If the REIT wants to sell single assets they will hire eastdil, northmarq, CBRE, JLL etc. to sell those assets. If they want to acquire another REIT they will go to a RE advisory team. Both RE asset level skills as well as corporate finance skills are required for the corporate acquisition vs. only asset level skills required for the single asset brokerage deal. If you work for a brokerage firm you will make less money than if you were at the advisory firm because 1) the deals are smaller 2) you are using a subset of the skills that the advisory firm is using and 3) there is much less execution risk on brokerage deals. I'm not saying you will find less qualified people at a brokerage firm, they will just be providing a different service and their commissions are in line with the service they provide.

Oct 27, 2014
RE_Banker:

I'm going to go ahead and say that there is a pretty big difference between RE IB firms that do advisory work (M&A and corporate finance advisory) and RE IB firms that do brokerage or pure capital placement (both debt and equity).

I feel like this comes up in every real estate thread. Please do not be confused by the shops that call themselves "real estate investment banks." Two examples that come to mind are northmarq and eastdil. The other night I was out with some friends and this guy from South America said that he and some buddies have a "real estate investment banking" firm on the side. When I pressed him for an explanation, he explained (in so many words) that he is a broker.

If you really want to be technical about it, they are lying. Investment bankers issue securities, such as MBS, to Wall Street. If you are arranging a loan for a portfolio of properties, you are a mortgage broker. If you arrange a loan for a manufacturer to buy a large piece of equipment, does that make you an investment banker? No.

Now, if you are arranging equity at the property level, that is more like investment banking. But it is still more reminiscent of (for example) a placement agent who helps you raise a private equity fund than a genuine investment banker who does REIT IPOs. I know guys who have taken a fee to line up JV money for multimillion dollar real estate deals and they do not go around calling themselves investment bankers.

Oct 27, 2014
RE_Banker:

I'm going to go ahead and say that there is a pretty big difference between RE IB firms that do advisory work (M&A and corporate finance advisory) and RE IB firms that do brokerage or pure capital placement (both debt and equity).

Yes, and this distinction should be underscored.

Most of the time you hear 'real estate investment banking' thrown around, it means 'sourcing capital.'

I lump reib into 2 categories: 'sexy' (they do large protflio and loan type deals that tend to be complex and hard to close) and 'boring' (they do single asset transactions and investment sales).

Neither tend to pay 'street' because you work far less hours (nowadays especially). Traditional IB pays so well because you work insane hours, its like working 2 jobs. This is rarely the case for ANY other career, including reib.

You may think you want to work in a 'sexy' reib, but I want to illuminate something that may make a difference in compensation...When you work for a 'sexy' reib, you will close transactions with less frequency then if you were to work at a 'boring' reib because the transactions are larger and more complex. So a 'sexy' reib may make the newswire on Bloomberg, but it wont be often. More closed transactions = Bigger bonus + you should learn more. Something to keep in mind.

On CMBS: it will not play a significant factor as a source of debt funding going forward. Debt sourcing is trending towards more traditional than 'sexy'. So far the only solution to the massive and imminent cmbs shit-storm is 'extend and pretend...indefinitlety.'

man made the money, money never made the man

Oct 27, 2014

Thanks for all the responses. I think based on my situation and the advice above, I will wait it out until I have worked at my shop for at least a year. That way I can find out if the raises really are low/high, get a little more experience, talk to some head hunters, and so it doesn't look sketchy (as opposed to leaving in less than a year). Meanwhile, I will still keep looking around just to see what is out there. To talk to V-Tech and RE_bankers' points, I would leave my current job to take position at a top IB advisory shop (LAZ, GS, etc), but not a brokerage shop. I would also consider working at a better paying PE firm-(BX, Carlyle, etc) or a hedge fund with a real estate arm (you would be surprised how many there are).

To speak to the debt - its not killer, a little more than 30k. Although my parents didn't tell me about an extra 10k that I owed and didn't know about until a couple days ago. That sort of stressed me out (more like I shit a f***** brick), since my grace period is pretty much over. I just don't like non collateralized debt that is bankruptcy-proof hanging over my head.

Guess I'll suck it up and start pregaming with a Four Loko or two as opposed to Jack, which should save a couple bills.

RE_Banker, I'm surprised there hasn't been an uptick in securitization. According to Commercial Mortgage Alerts some deals are finally starting up again. Also, isn't there a shit ton of CMBS that is going to mature in the next few years? And what about re-remics, etc?

My last questions - would a top advisory shop still take me as an analyst after a 1 year? And if so, would I start out as a newbie or experienced hire?

Oct 27, 2014
funkyrealestatemonkey:

RE_Banker, I'm surprised there hasn't been an uptick in securitization. According to Commercial Mortgage Alerts some deals are finally starting up again. Also, isn't there a shit ton of CMBS that is going to mature in the next few years? And what about re-remics, etc?

Well it is starting. There has been some activity in the CMBS market. There aren't many ways to refinance bank debt if they are all cutting off supply, so it has to come from somewhere...

Oct 27, 2014

There are exceptions to the not working long hours thing... I heard first hand that analysts in REIB at Lazard work as hard as anyone on the street... 100+ hours for 51 weeks per year.

Oct 27, 2014

I agree with international pymp. In my group 80-100 hrs is the norm. I dont get why people think REIB groups work less hours and make less money. At a BB its the same as any other coverage group except we cover REITs instead of industrials or tech or whatever. Clearly theres a big difference between brokerage and banking and I would assume most people on this board would take real estate investment banking to mean just that (ie- not brokerage).

Oct 27, 2014
porter9900:

I agree with international pymp. In my group 80-100 hrs is the norm. I dont get why people think REIB groups work less hours and make less money. At a BB its the same as any other coverage group except we cover REITs instead of industrials or tech or whatever. Clearly theres a big difference between brokerage and banking and I would assume most people on this board would take real estate investment banking to mean just that (ie- not brokerage).

I was just reffering to reib capital sources, not reit coverage groups. I didn't clarify that.

But from my knowledge, re coverage groups tend to be very small bc the reit business is pretty small...which means less opportunities. Am I assuming wrong?

man made the money, money never made the man

Oct 27, 2014

real estate ib is a joke. a real group is like consumer or healthcare or energy

Oct 27, 2014

@ prospie and mr1234

Yeah, I probably should have mentioned about half the stuff I work on is corporate hotel deals.

I know everyone hates on jefferies, but even they are building a real estate and lodging team now. In Europe they just poached a few BAML people. I think there is anticipation that the players in the RE space with strong balance sheets will end up acquiring the players suffering from debt problems i.e. Brookfield acquiring a huge stake in GGP. Now that they have shown that the CMBS can be sorted out (although it took a very long time), more companies will try to restructure their CMBS out of court and this will lead to a decent pipeline of corporate deals from 2012 - 2017.

Oct 27, 2014