Capital Markets in Real Estate firms–What do they exactly do?

calibre5's picture
Rank: Chimp | 12

Hi, I was wondering what exactly a capital market division in a big real estate firm (i.e. Newmark Knight Frank, CBRE, etc) would do. Do they perform similar functions to Capital Markets divisions in IBs like MS or CS? I am trying to learn about this industry, and it would be great if someone could explain what capital markets division in these real estate firms would usually do.

Comments (16)

Mar 22, 2020

From experience in Australia, the capital market teams at CBRE and Knight Frank typically are the facilitators/brokers between capital transactions, i.e when a vendor sells an asset, they represent the vendor to interest parties.

Mar 22, 2020

I see, so they share a similar role to that of CM divisions in IBs, right? or is it different?

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Mar 22, 2020

Different. - Capital Markets in IB tend to focus on raising debt/equity capital. - work with REITs to raise capital for new acquisitions

I guess its more like M&A analyst who are given a directive by a PE firm that they want to sell an operating company in their fund. Running an auction process, data room access etc. Except real estate acquisitions are considerably less complicated than acquiring a firm.

Funniest
  • VP in RE - Comm
Mar 22, 2020

Are you familiar with a real estate broker, this is literally the most professional way of calling.

Calling RE Brokerage as Capital Markets, is like calling a Bank Teller a Liquidity Services Coordinator

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Mar 22, 2020
VP in RE - Comm:

Are you familiar with a real estate broker, this is literally the most professional way of calling.

Calling RE Brokerage as Capital Markets, is like calling a Bank Teller a Liquidity Services Coordinator

Harsh but true

Mar 23, 2020

Made me LOL

Mar 24, 2020

LOL

Quant is life.

Mar 24, 2020

Especially when we're talking about Knight Frank...

Mar 22, 2020

There are two main types of Capital Markets Divisions within a Real Estate Investment Bank, also referred to as a Commerical Brokerage - Investment Sales (IS) and Debt/Equity Placement (D/E). IS are the brokers responsible for selling an asset and the D/E brokers are responsible for facilitiating the financing transactions with either debt or equity providers. Another more detailed-oriented subset is also Mergers and Aquisitions of real estate firms, however that is more commonly (95%+) handled by investment banks (BB/MM) or large RE Capital Market Brokerages/Investment Banks like Eastdil Secured, HFF/JLL, etc.

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Mar 23, 2020

JLL isn't a RE investment bank and you can't claim brokerage houses are RE investment banks either. Investment sales is not true capital markets. Debt & equity guys are more so capital markets than IS, but still not truly there. Look up to see what anon VP said about RE brokerage, it's on point.

True capital markets in CRE are the guys involved in the securitization of mortgage bonds, trading them on the secondary and knowing how to price those bonds. That's true capital markets, not "brokerage" aka sales.

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Mar 23, 2020

Think what he was more referring to the fact that JLL does have an actual IB/M&A division. Even more so after their acquisition of HFF.

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Mar 23, 2020

If you don't use Bloomberg terminal, you are not in capital market, it is that simple

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Most Helpful
Mar 23, 2020

What is/isn't "investment banking" and "capital markets" is usually a dick measuring contest for corporate finance hardos/analysts who have convinced themselves that IB only gets done at the bulge bracket banks. In reality, their job description is very similar to an RE cap markets analyst. You will work for a lead banker/broker/producer whose main job is to bring deals in the door and make a market (connect buyers with sellers and capital sources with capital users).

In both jobs, you'll spending a ton of time making meaningless pitch books in powerpoint that no one will read, underwriting deals in excel, running due diligence and coordinating closing. The only difference is really the "asset" that is transacting. Investment Bankers are brokers too in the purest sense of the word.

While the securitizing of loans doesn't happen at RE brokerages, book-running doesn't happen on the deal teams at Investment Banks either, and neither of those positions are particularly sexy or financially lucrative. Whether you're actually the firm packaging securities or not, that piece of the puzzle is still getting "outsourced" in a way.

The barriers to entry in real estate capital markets are generally much lower. Those that call RE Cap Mkts not true capital markets are more defending the culture of high brow finance than the content of the actual work itself.

There are certainly tiers in RE Cap Markets - Eastdil, HFF/JLL, CBRE,
followed by: Walker Dunlop, Cushman, Berkadia, NorthMarq
After that, I would say that the sophistication level has a pretty steep drop off, much steeper than your typical Investment Banks - but generally speaking, at the top level, the work is similar with the biggest differences being the asset that is marketed and probably the hours expectations/size of the analyst pools.

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Mar 24, 2020
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