CRE Asset Management Learning Materials
Hi everyone, long time lurker and beneficiary of the information dispersed on this forum here. I've recently accepted a role as an Asset Management Associate with a lower PERE30 fund (think Angelo Gordon/Ares/Fortress/Cerberus) in NYC. The fund invests in all of the four major asset classes, as well as up and down the capital stack. Any advice on reports/books that would be helpful in getting up to speed for such a role? As my current job isn't very quantitative, I've been self-training with the BWIS/REFM, but I was wondering what else I'd be able to do to start off on the right foot. Any help would be greatly appreciated!
Bump
What’re your 4 years experience in? Would make answering the question easier
~1.5 years completely unrelated to real estate (operations at a small hedge fund) and ~2.5 years working for a small RE developer as a construction/development analyst
i don't see how BIWS or REFM will help you with asset management. those courses are kindof teaching you to be slightly average at Excel for the most part. and while Excel is a great tool, nobody with a company like that should be hiring you to BUILD their asset management platform in Excel.
personally, i prefer to see people stay entirely out of Excel when learning real estate analysis, but for this particular situation that recommendation is even more applicable. Excel has nothing to do with the position.
first off, if you have never worked with investment real estate (ie - not buying deals, but building them) and you are getting into asset management that involves leased investments (office, industrial, retail, STNL), i'd say you still have quite a lot to learn about that side of the business.
i suggest you really figure out leases. everything starts with the lease. and while you have several years of experience in development it is a whole different ballgame when you are buying a deal that has existing leases in place that you are contractually bound to honor. that means caring about renewal options, TI/LCs on tenant turnover, and all sorts of other ways that leases work together to either mitigate or compound risk in a particular property.
what you are trying to do with asset management is understand the interactions between properties in a portfolio or fund in the same way you would do with individual leases in a property. so learning leases helps you in this way as well.
then, i suggest you learn at least the basics of some standardized software that is used for asset management. argus enterprise does asset management, so does mri now that they bought cougar, and i think realpage is a newer entrant that has some software that does this. there should be basic videos on youtube or floating around the web for all the above. the reason i suggest learning on some standardized software is b/c by understanding the inputs and outputs, and getting your hands dirty quickly, you will kindof learn what is "normal" in that role.
to me, Excel just gets in the way of this whole process and people start focusing on coding spreadsheets and learning VLOOKUP and pivot tables instead of real estate.
Excel is a great tool, but for most it's like kindof "programming lite" where people can learn the basics of programming and logic in real time with some basic functions.
real estate math for underwriting and asset management is not complicated. there are no partial differential equations involved. there is no value in being "better at excel" IMHO, but there is a ton of value in understanding the principals of real estate and experience.
i feel like there are some books on asset management on PEI or somewhere on amazon that will help with the higher level concepts, i'll have to look a little bit later.
+1. thanks a bunch, very helpful. thanks for taking the time to type that. one reason i've been spending time getting more familiar with excel is because the company has stated that the role will be very excel intensive (the interview process involved 2 x excel tests, one 3 hr in person and another 72 hr take home) wrt updating models, doing monthly/quarterly valuations, etc. if you would be able to recommend some PEI/amazon books on asset management, that would be greatly appreciated!
i don't think they are testing you "on excel" but on the resulting decisions to be made.
excel is just the tool everybody has access to and everybody understands, so it's the format they use.
just like a case writeup isn't really a microsoft word test.
but i do feel like due to the fact that excel is so ubiquitous in the industry, it's kindof viewed as something that if you are "good at" then that's sort of a badge of honor.
i think everybody in the industry needs to be very good at excel b/c most of the time, the software or websites or whatever that you use will not produce the output you really need, or you need to combine data from two (or more) different systems that don't speak the same language.
but i do not think everybody needs to be building financial models. they should generally buy a standard model, hire a consultant to build one, or at bigger firms probably have one person as the anointed protector of the model. at least the base cash flow calculations.
but "being good at excel" can mean lots of things. it can mean you can create awesome dashboards and reports. it can mean you are great with lookups and text filtering. it can mean you are great with pivot tables.
taking to the next level could mean VBA, UDFs, or even the new tools like Power Pivot, Power BI, etc.
if they are testing you on Excel, it could also be one of those things where they are just making sure you can do the basics well and they are fine teaching you the rest.
like when you are comparing two new college grads with no work experience, it might be that GPA is really all you have to go on.
at any rate, i just like to make sure people don't lose focus, b/c there is a ton of value in understanding real estate deals, capital structures, underwriting metrics, etc.
i have never seen a Microsoft Excel MVP go on to run a real estate fund.
i have also never seen one bidder beat another on a deal b/c their 10yr CF model had a more elegant index/match method.
however, what i have seen is a fund that overbid on a huge amount of real estate over many years b/c they were double-counting the revenue growth in a model that was mistakenly modified by well-intentioned and smart people who were working quickly and didn't go through the proper testing to ensure the model was soundly built. but i'm sure the formula that did it was cool.
for honing pure Excel chops, i have always liked chandoo, mrexcel and peltier as my top 3 resources.
i hope the test goes well. good luck!
ps - i took a look at amazon and PEI, i don't see the book i was thinking of...
I'm in a similar position - taking on a new role as an investment analyst at the investments & asset management group of an AM/developper/investor in the institutional world.
I spent just under two years in the audit division of a big 4 firm so I have very limited experience in RE.
I bought a book called the real estate game to start off with and will be self-studying using BIWS & REFM to get things going.
I will be required to use AE as well as part of my job, so I'll get on that once I'm done with the self-study or maybe focus on that first?
Any other guidance would really be appreciated here.
my recommendation for learning real estate analysis is as follows:
1) read a ton of leases and abstract them. get an abstract form online somewhere and learn how to extract the important info. this teaches you the foundation of value in all investment real estate, which is the lease. understanding how the relationship between landlord and tenant works over a long period of time is crucial. to understand how you can make money, you must understand what can go wrong. that also means things most people never think about, such as how two leases can affect each other, even if the tenants have no formal relationship, with co-tenancy or occupancy clauses. if you don't have any leases, look some up on SEC EDGAR.
2) learn to use argus or some other standardized underwriting software. this can be a standardized excel template, if you can find a good one, but the key is to NOT CHANGE ANY FORMULAS. do not try to "build a model" b/c you won't even know what's in it. you should know how to ride a bike before you go out and design one. just learn to underwrite deals. the deals can be fictitious. take your abstracts from #1 above and enter them into a fake model, pretend they are in the same shopping center, for instance. what happens over time? do lots of tenants expire at the same time? do you get saddled with a lot of cap ex at once? throw some debt on the deal. what does that do to it? do you go cash-flow negative at any point? how would you solve that problem? where is your profit coming from, appreciation or cash flow? how does that mix affect the certainty of your returns? what is a reasonable going-in cap or exit cap? why? think through this as if you had to actually own it.
3) along the way, you will need to use excel to do cool stuff. but most of it will be doing stuff with the outputs from a standardized model. or manipulating data from another system into a standardized model. and by the time you are doing really cool stuff you won't need someone to tell you how to do real estate stuff in excel, you will need general excel chops that you, through your experience, apply to real estate. a good exercise is to build an argus model and then build it in excel and see if you can get them to match up. my favorite excel training/solution sites are chandoo, mrexcel and peltier tech.
if you already have the job, dig into the real deals your company is doing. find the most senior analyst accessible to you and make them your very good friend. offer to get their AE models started for them. everybody hates setting up the models, entering rent rolls, etc. it's very time-consuming and allows them to hit the ground running but you will get a lot of experience understanding the key things that you need to care about as an analyst. see if you can underwrite a deal separate from them and compare notes.
Thanks a ton for all the detailed info!
Hi! Have you had a lease abstract template that you have found online and used previously? On that note, have you also found any tenant rollover analysis or lease expiry schedule template?
Secondly, have you underwritten new development/construction? I am learning about draw schedules and its much more complicated than underwriting stabilized acquisitions. Do you have any templates or any pointers about underwriting construction?-interest capitalization, draw schedules, etc. Thank you so much!
great post. My one question for you would be what are the most important clauses to look at for in a typical lease? Anything that particularly stood out to you in your career?
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