For a student who is trying to make their way into the REPE world post graduation, are these shops a good move for a summer internship? I have a close connection to a well known regional specific developer.
Any thoughts would be great
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What is a boutique legacy developer?
A developer that is small and has developed some trophy level assets but has nothing in the pipeline in the near future.
This is incredibly specific lol
I think there are a lot of these companies around, actually. At a certain point they aren't really "developers" anymore. They just manage their properties and fade into the background. A lot of portfolios are built by one dynamic person who then moves on to other interests or dies, and once he's gone the company doesn't grow anymore but may run on autopilot for many years.
Especially in big markets like NYC. There must be a dozen, billion+ dollar portfolios scattered around owned by families no one has ever heard of, who have had these properties for decades. They're just sleepy and inactive and aren't interested in being developers or active buyers, they just take their insane cash flow and plough it into other things.
Also, most people won’t be able to pay the tax bill if you sell the assets you’ve owned for 75 years. So you never sell. It’s one of the major unspoken issues of the NYC family dynasties.
I mean, you can do a lot through a 1031 exchange. I don't doubt you are partially correct, but a lot of times these players can afford good tax advice, they just don't have the drive or desire to do anything. If you've got a two billion dollar portfolio spitting out eight figures of free cash flow every year, and you expect to refi out more cash every 5-10 years... well, if you don't have a strong desire to work, you don't really need to. Hell, it's enough money to go do something else.
How can they not cover the tax bill? Appreciate this sounds like a stupid question but I’m not familiar with NYC market / US taxes and intuitively this doesn’t make sense to me. Only way I could see this arising is if they’re very highly levered and the equity left after repaying debt isn’t sufficient to cover some insane capital gains tax from an ultra low carrying value? What am I missing here?
It’s more in the vein of nobody wants to write a $200MM tax bill and, yes it comes from the sale, but damn, who can afford that?? As in, it’s just a brutal bill you don’t want to pay.
Makes sense, thanks. Yes no point paying that when your portfolio is throwing off 8 figures p.a. and you can just chill.
I mean, you can afford it if the proceeds of the sale is $500m? Sure no one wants to pay it but it's disingenuous to claim they can't afford it.
In that case.. probably not great experience if you won't be working on anything
It’s an internship. It’s experience on the resume. Stop worrying. It’s 4 months of your life. Learn and see if you like it. Worry later.
Being a junior in real estate is about 2 things:
I would be skeptical that you will get much experience on the sort of execution work you'd be doing in REPE at a small developer. It might be helpful for your network, but you'd be much better off at a commercial brokerage or other place where you'd get lots of reps of evaluating / valuing opportunities.
If by "can you execute" you mean can you throw together a model and a memo lol
Literally anything is a good move when discussing a summer internship. No one will have expected you to underwrite a deal or be actively involved in a transaction/development project. You're dipping your toe in the water so that when you apply for a full time gig, employers know that you won't need a month of hand holding to understand terms and concepts.
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