CMBS opportunity - need some insight
I currently have an opportunity at a fully-integrated commercial real estate finance company that provides financing solutions to the real estate capital markets. The company originates underwritten fixed and floating-rate mortgages and mezzanine loans secured by different asset types in most major US markets. Essentially they originate, securitize, and sell these pools of CMBS's. It's a newer group that has strong management, and appears to be growing nicely since every analyst I talked to seemed very excited about the year to come after having a very successful year.
Alittle about myself, I'm coming straight out of undergrad and have done internships in pwm and ibd. I'm not exactly sure what I want to do other than make good money, and become specialized in an area. Real Estate does interest me, I know the cmbs market isn't what it was in 2007 (1.0 vs 2.0), but cmbs' are clearly products which aren't going anywhere. My main concern is future opportunities, one of the analysts I spoke to said the PE side is always an option but are HF's?
I'd love to hear some opinions on CMBS, preferably from guys in/around them. Maybe some stories of guys who were in CMBS pre-2008 and where they are now... Anything that may help me make a decision (my other option is MSF at a top program) would be greatly appreciated!
What will you be doing in the group?
The only problem I have with working on the debt side is that you probably won't be running DCFs and the analyst level work might be kind of simple.
I've never worked in CMBS though, so hopefully someone else could expand.
I'd be on the origination side of the securitization process. I find this interesting as from a valuation perspective, obviously this is very different than corp fin. This is kind of my dilemma, IBD offers a base level of skills and knowledge tangible for many paths higher. My thinking is once I go the CMBS route I need to figure out where I'm going with it quickly and 1) move to a different field (banking most likely) which could be difficult or 2) focus on moving forward with CMBS/real estate which is my main questions, what opportunities are there?
Origination is, in my opinion, the most fun part of the financing business and it is definately the most lucrative (some of the guys make serious cash). It is fairly sales oriented however and your underwriting (if any) would be limited to legal due dili issues and doing costing/direct cap techniques on the properties. The guys who make it big in origination do it because of the relationships they build. I suppose you could go onto the fund management side somewhere out of this role as well.
If you were to take the role and jump out into something else, I would look to do it quickly (
Thank you Mogul, I appreciate the insight. I'm definitely considering it, but this decision is tough as I am from a state school which has minimal exposure/reputation in finance. The opportunity to study for my master's of finance at a top program / target school is also intriguing.
Anyone have more insight on CMBS and exit opps?
I don't think the masters will be extremely beneficial to your career. You can take this opportunity, then get an top MBA and move to a reputable REPE shop. I've seen it done from part time (kellogg, booth, NYU) and full time MBAs...
Thanks for the insight maddux. I don't have my heart set on RE, but I do have my heart set on working in ibd or banking like role if I see fit (ex. this opportunity). As for the MSF v MBA that's another debate I'm having with myself. Although I never really thought about a pt mba, thank you for that.
I say go for it. The CMBS business is about to really start to grow, in my opinion, and I think you have good exit opportunities to credit hedge funds that like to buy CMBS. In general, it's one of the areas where a small group of people (and you're looking to be one of them) can generate a huge amount of P&L. Just start wherever you start, and work your way toward understanding the deal structures, how they tend to price out in new issue, which buyers like what, how things trade in secondary, etc and start to find your niche. Do you prefer secondary trading or CMBS conduit banking? What property types are your favorite? Do you like huge, low margin trades in "Dupers" or do you like small trades with huge 25% yields in F-tranches? You'll figure that out within two years. If you have questions, fire away. I'm only about 15% of a CMBS guy, the rest of my skills are in RMBS and ABS, but I have done a fair amount of CMBS investing and I see myself doing more in the future. It's a great sector and it offers a lot of reward for those who dig deep.
Thanks for the insight Jake, I PM'd you a few questions.
When people talk about making a ton of money originating loans in CMBS, what skill is it exactly that they are good at? Are they good because they have relationships and are able to find opportunities to lend? Or are they good at some part of packaging and selling the pool? Or are they good at determining appropriate terms of the loans (i.e., they're pros at evaluating the risks of lending money)? Or a mixture of all (though I have a feeling it is the first query, but then my question would be--does that mean the loan market is not, technically speaking, economically efficient?).
I wouldn't say that the market is inefficient though. Rates are very competitive and the reason for doing business with a particular lender does not always rest on the rate they give you. Service and ability to close on time and without any hiccups make a huge difference. Mortgage originators make pretty big commissions, not sure how they are paid exactly (maybe someone else can comment).
Some of the best originators that I know of can make 7 digits in any given year and did not even go to university. It is pure relationships and sales. They all need an analyst or two for some underwriting work though, which is what I believe OP is applying for.
Jake_F seemed to think that it was on the CMBS management and structuring side, so OP might have to clarify.
Mogul - I would be an analyst under a few originators, I'm unsure how much underwriting I would actually do due to the structure of this group
thanks for clearing that up Prospie
Anyone else care to throw their opinion/experience out?
I don't know if you have seen the top ranked HF list this year, but at least three of the top guys are MBS arbitrage shops. Might be skating to where the puck WAS, but if you like debt, figuring out how to go to these guys might be worth your time:
http://www.bloomberg.com/slideshow/2013-01-04/the-20-top-performing-lar…
I know I'm bumping an old thread, but it seemed relevant. What kind of hours should one expect from a role similar to the OP?
I would for a commercial mortgage brokerage - I live in a market where valuations for real estate are rather rich. I can close an acquisition on a 12,000,000 dollar apartment building (going in cap rates are 4.5-5%) and charge 90,000 for my services (not including what I negotiate with the lender). But this business is very competitive and cut throat, relationships are everything.
Is it common/reasonably possible for someone who starts in CMBS originating to move into CMBS market making at the bank?
Is it common/reasonably possible for someone who starts in CMBS originating to move into CMBS market making at the bank?
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