Career advice: Ideal role for becoming a GP
Hi guys,
I am seeking some career advice from some more experienced folks on here. I'm currently working for a fairly reputable PE firm doing AM - Angelo Gordon/Cerberus/och ziff size/level firm. I enjoy the work we do - although we're usually the capital partner in deals, we are largely pretty hands-on and drive the process albeit thru a local operating partner. however, I doubt any of the MDs in my group are pulling in 8 figures a year - maybe $1-2 mil max. this is sort of in line with what I've read on here thru the years, namely that you can only create true wealth as 1. a shareholder 2. a GP operator - unless you're the guy that sourced Hilton/EOP and drove the process for those deals at BX. although I grew up poor, I do have friends whose parents have mentioned to me off the cuff that if I wanted to start my own firm down the line, they'll throw me a few million to put to work for them. as a GP w a few million and partnering with a capital provider + levering up the cap stack, purchasing power could be quite large
So I've been thinking: what's the best role for becoming a GP or starting a development firm down the line? I understand that developers are effectively jack of all trades type guys - you know a bit about everything and how to manage a process rather than just doing one of underwriting/entitlements/construction/etc. all day long. but from what I've seen at the large dev firms (say Hines or related) it seems like everyone is relegated to a silo and encouraged to specialize for their careers.
The flipside is working for a small mom and pop developer that will allow you to dabble in all areas - but then that carries significant downside in exit opps, no partners respecting your credentials, the firm going under, focusing on SFHs rather than commercial assets, etc.
Therefore I'm confused as to how to find the right balance - would it be to put in time at an extell/silverstein-sized developer? where it's not thousands of employees yet they still have dealflow/track record/brand that would assist in raising capital and more hands-on than PE
Sorry if this post is all over the place. any help would be greatly appreciated!
My .02, work at the Capital partner where you can make more money as an analyst, associate, vp etc. Save cash. It’s expensive to raise funds and do deals. Once you feel you’re ready to go out on your own, you start, but staying at the Capital partner will mean a larger income, savings, and money of your own to invest alongside the Capital you raise. You’re learning how to underwrite and find a good deal, you’re making connections, and you’re learning how the process works in terms of entitlements etc via watching your GP partner.
are you referring to the capital partners at the development shops? Like how trammell crow has crow holdings?
Trammell Crow Company is not affiliated with Crow Holdings other than in name.
thanks for your input. what about if pay weren't an issue? headhunters have recently reached out to me for roles at NY developers like silverstein/extell, and the overall pay quoted has been comparable to my current. my concern is that while we have weekly calls w our GP partners and are involved in all the happenings, but i'm scared that it's not the same as actually being out there making the connections with GCs, tradesmen, architects, etc - just like bobby said in billions, watching a few kung fu flicks doesn't make you bruce lee
My .02, work at the Capital partner where you can make more money as an analyst, associate, vp etc. Save cash. It’s expensive to raise funds and do deals. Once you feel you’re ready to go out on your own, you start, but staying at the Capital partner will mean a larger income, savings, and money of your own to invest alongside the Capital you raise. You’re learning how to underwrite and find a good deal, you’re making connections, and you’re learning how the process works in terms of entitlements etc via watching your GP partner.
The best role is working for a GP or a Development Firm...
thanks for the input. would you advise against hines/related (due to the size) in favor of a smaller yet still reputable firm?
Perhaps it is different for each office, but my understanding is that a Hines or Greystar or Related has a relatively small local office. For example, we were working on a large deal with Hines' Southwest Team. I believe there were about 3-4 people on the team handling the day-to-day and the rest was outsourced to Hines's HQ in Houston. In a scenario like that, I think you're getting very good boots-on-the-ground exposure while still working for a very reputable shop.
Note - I've only working on one deal directly with Hines and that was my experience. Perhaps its different in other office or for other firms like Related / Tishman.
I'm in a development/construction management role..very hands on..zero exposure to capital side, I don't deal with banks or lenders even. As far as the finance side, I really only look at basic yield analysis of the deal - the analysts do the full u/w but I still 'get it' and can cash flow model my own deals to throw off IRR's if I had to. My goal is to eventually partner up with someone more exposed to capital side and spin off eventually..maybe do a few deals while we keep day jobs first obviously. That is like the dream right there and how I have read a lot of groups starting that way. In an ideal world, 2-3 guys who specialize in their own areas (development, capital raising, for example) can go do their own thing at the right time in their careers. I don't think many guys are spinning off on their own once they get to an MD level.
I started with a smaller fund/operator on the development side and then transitioned to a much larger fund/capital partner after approximately 2 years. I think having previous nitty gritty development experience helps me in my new role when evaluating deals, but honestly I find the volume of deal flow on the capital partner side teaches me more than through the incredibly detailed steps of a single development on the operator side.
I have similar aspirations to you. My strategy is to focus on what I’m good at, which is more of the finance/deal sourcing side and bring on experts in the other capacities. Principally at the project management level.
Working for an operator, I met extremely capable project managers - generally with eng backgrounds - who would be the first people I called if I was thinking of starting something. Like any business, it’s importnant to understand what you’re good at and then assemble a team of folks who are very good at what they do. I don’t think the jack of all trades approach is more effective than being able to assemble a team of elite professionals in their respective domains.
This post is a good and accurate observation. There are few MD roles out there so few guys make it to that level, and even if you do, you are still working for "the man" and have capped upside.
I disagree with Demencia. The role that will best set you up to do your own deals is a generalist role with an operator. This should be a cradle-to-grave role, where your day-to-day includes acquisitions, asset management, development, leasing, etc. Just make sure the firm is one that is OK with delegating responsibilities well to junior folks, which isn't a given at an operator shop. Also make sure that the firm has financially savvy leadership.
Spend some time flipping through founder bios of top operator and see where those guys came from... should be helpful.
Becoming a GP (Originally Posted: 12/10/2016)
Monkeys,
Curious of your thoughts on this. How many years of REPE experience do you believe it takes to build the knowledge/skill set to start doing your own deals? I am referring strictly to the ability to properly u/w, model, finance, close/oversee 3rd parties. For the sake of this post, please put aside all of the thoughts on capital raising and deal sourcing and focus strictly on the capability to run all other aspects of the deal.
Just to clarify - I'm not talking about doing your own SFR flips. I'm referring to acquiring (and at some point developing) 100+ units MF assets, 100+ key hotels,100k+ sf office buildings, etc.
bump
I don't know how you expect us to give you an answer on that. It would be different for every person, in every market, on every product type, etc.
There are successful investors and developers who have 0 years of REPE experience. Hell, if someone wins the powerball that's really all they need to close a deal.
I knew I was on the right track! Time to go buy a ticket.
If you have to ask then you're not ready.
jesus chrsit when did "REPE" become synonymous with "real estate"?
because private equity is sexy man
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