CRE Development - Deal Making/Structuring
What's the best way to break-into the deal-making/structuring side of CRE development, rather than the execution side?
My background is in civil engineering, previously worked for a large top-10 general contractor, and currently working for a top-3 real estate services firm's development management arm...so I'm well suited to join a developer and help with actual development management and execution of a CRE project. BUT, I'm more interested in the front-end deal making/structuring and capital raising side of things.
I'm assuming these types of jobs are more geared towards someone with a finance/IB background...would I need to get an MBA? If I'm sinking six figures into a top MBA program, will I be making *that * much more out of school than I am now?
It sounds to me like you are in a perfect position to network with some of your clients. Why not just ask them their advice?
Great point, but pretty much all of the guys I interact with are more on the "execution" side, with similar backgrounds as myself.
From what I've seen, by the time the execution/management guys from the developer are on board, the deal makers are already on to the next deal or more involved with chasing tenants than actual building of the project.
I am in a smaller market, but I have honestly never met somebody who works on deal structuring and sourcing at a developer who isn't a principal/sponsor. Maybe start looking at funds that invest in LP interests in developments? You could probably bring a lot to the table from an underwriting perspective. Perhaps a family office with its lack of formal structure could give you the exposure you are looking for.
This is exactly what I do, just on the analyst level. I suspect every developer is different in how they handle the deal structuring and syndication, but in my experience (at my firm, and others) typically there is a project manager who oversees all the front-end due dilligence and feasability analysis of the project. However, it's the principals/partners of the firm who go out to raise GP capital (which appears to be what you are most interested in). Then a broker will help source debt and any equity required to complete the capital stack. The same "pre-dev"project manager will simultaneously take the project through entitlements and hand it off to a "construction" project manager at groundbreaking. Once complete, the project is then handed off to an asset manager.
My point is, the actual syndication is handled by the developer or partners of the firm, but the project managers are heavily engaged. With a civil engineering backround, you would be well-qualifiedto enter into a project manager role if you work a lot on the entitlement/pre-dev side of projects (though since you said you work for a contractor, I am not sure how involved you are on that end). Alternatively, you might be interested in brokerage, focusing on ground-up debt and equity placement (but those kind of deals are rare, you would have to branch out to other deal-types).
Thanks CRE_Erector...so what career path would your current position follow at your firm? From what I've seen at development shops, there are the PMs with engineering/architecture backgrounds that handle the execution of a project, and the analysts/finance types that are the ones that put the deals together. Is that typical, or a wrong understanding of the industry?
I'll give you context for how we do it where I work. The analysts are straight out of undergrad type people who are underwriting deals, yes. They do not have a comprehensive understanding (yet) of the actual asset and market dynamics, leasing and so on. They are not 'putting deals together'. The MD/Associates in the local market offices source the opportunity and risk. They are the ones with relationships with the local brokers getting OMs or sourcing off market opportunities. They then give an analyst all of the Inputs they need to model the investment (hence spreadsheet monkey). We are IRR driven so Analyst works out IRR based on various inputs, acquisition prices, lease rates, terms etc. These analysts after 3,4,5,6 years eventually grow into a more dynamic role. After underwriting 300-400 whatever deals they now have great fundamental RE finance knowledge but now need more 'street' time actually walking buildings and understanding brick and mortar side of things at an asset level. Being able to model an investment on a spreadsheet is not the same as being able to have complete conviction to sell an investment based on all other fundamentals to an investment committee. You need to learn how to tell a story. Over the years they become more independent and start sourcing and submitting their own deals for investment committee approval.
To clarify - are you talking about being a guy who handles high-level stuff like fundraising/finding deals/developing relationships (not really getting involved in any particular deal) or are you talking about being a project manager type role where you take a new deal and manage the process - running entitlement/underwriting/hiring consultants/lining up financing/getting GC bids - and then you hand it off to the "land guys" and your involvement from there on is limited to site visits and loan draws?
I realize that was a really long run-on sentence but you get the point.
More of the former, not the latter...I know I can get into the PM side with my background. I'm more interested in the front-end high-level stuff. The guy that sees the piece of land, understands the market, and decides to develop a mixed-use property on that parcel. And I realize it's not one guy who does that, and I'm way oversimplifying, but that's the type of role I'm more interested in.
I'm assuming you need a strong financial/modeling background for that type of role, since a typical CRE development can boil down to upfront capital needed to build something that will lead to future cash flows and ROI. Again way oversimplifying, and maybe I'm completely off the mark.
Well that level of decision-making you're describing right there, guys that can just create a deal where one was not, is pretty much gonna be limited to principals at a GP, which is basically the end game for most people in development. An LP guy can pick up a deal and run around with it, but at the end of the day they need a partner to execute. Either way, it's really only senior people who usually have their own money up who can look at a deal and make it happen.
There are certainly people at big developers who only worry about the finance side of things. CFOs and capital markets / investments teams who are more worried about the company's fund(s) at a higher level. Raising capital, analyzing investment performance, managing risk, driving larger strategies. How involved they get in underwriting new deals probably varies drastically by firm. These are more pure finance jobs. But whether it's the finance guys or the development guys finding/analyzing/putting together new deals, they're just sending it up to an investment committee who makes the real call.
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