CRE Lending Careers
I have had a hard time finding reviews of the different commercial real estate lending platforms so I am asking here and hoping we can build this out to be pretty inclusive of the different opportunities: (Let's take major PERE funds out of the picture for this)
Is it better to be at a BB than a MM? What about special purpose lending groups like Torchlight etc.?
Is it better to focus on CMBS or balance sheet or both?
What are the pay, hours, and exit opps like for the different variations of CRE lending?
Is this a roller coaster career path?
Thanks in advance.
Is it better to be at a BB than a MM? Conventional wisdom would dictate that you'd always be better off working on bigger loans.
Is it better to focus on CMBS or balance sheet or both? Usually CMBS lenders make more, because of the gain upon selling/securitizing those loans. I remember a local banker wistfully hoping outloud that they could start doing more conduit deals, because bonuses would be higher. Even at the analyst level, comp seems to be higher doing CMBS in NY than, say, balance sheet lending at a life company.
What are the pay, hours, and exit opps like for the different variations of CRE lending? I would argue that hours are pretty easy unless you're on the CMBS side, especially in New York. I think all-nighters do happen sometimes in that business, according to someone I talked to a couple months ago.
Is this a roller coaster career path? Yes, like a lot of things in commercial real estate. One caveat, however, that can soften the downturn is that even if transaction activity is nonexistent, you'll always have existing debt out there that can be or needs to be refinanced.
As someone who has worked in on both balance sheet and CMBS loans, I can provide a little insight.
With regard to the BB vs MM, I wouldn't say that larger loans are the better route to go by default. It really depends on what you are looking to get out of it. CMBS is a very volatile industry, and once you get to the really large deals ($75-100MM+) its even more volatile. On the positive side, the larger deals will get you credibility within the industry because they will be recognizable. But when things turn bad, the large loan market turns worse. This is all assuming that you are referring to origination/securitization/underwriting roles in CMBS. Servicing and special servicing are completely different.
Balance sheet is much less volatile and bonuses are not as good. But job security is less of an issue. As prospie said, you will always have to manage your own portfolio of debt, and thus it is less volatile. In CMBS, if you are on the origination side, you do not manage the loan after you make it. A servicing shop will pick it up and take over once the securitization has closed.
From an exit opp perspective, CMBS will give you more street cred than BS lending, but not as much as REIB on Wall Street. CMBS is a very high volume business where you get to review tons of deals. This lets you learn about many different product types and markets. Balance sheet lending has lower volume. It requires lots of analysis of the guarantor in addition to the real estate since most loans being made are recourse. You get deeper "into the weeds" in balance sheet lending because you manage the same deals for years. Thats not to say you don't do deep analysis in CMBS, but you learn more about individual deals in balance sheet lending because there are fewer deals, and you manage them for a longer period of time.
My impression has been that people with CMBS experience have less street cred because CMBS underwriting is more formulaic and less intensive than balance sheet UW at a bank.
Why do RE PE shops target RE IB'ers? I feel like all RE Ibankers do is help REITs raise capital via ECM/DCM. Valuable experience for sure, but how is this relevant experience for property level investing at places like lone star or apollo?
Thanks MBARealestate.
Can you shed some light on typical salaries for CMBS vs. balance sheet associates and VPs? Assuming that CMBS will recover back to around, say $70-100Bn in annual issuance, what kind of base/bonus are you looking at if you jump in at the associate level and work your way up?
I think that to a large extent, this depends on the firm. Some CMBS shops still haven't fully built out yet and don't have VP's. For associate level I would guess that salaries would be in the range of $80K-100K depending on the culture of the company (i.e work hours) with bonuses at 50% to 75% of base. The salary level could be higher if you are hired out of some sort of post mba associate program that pays street associate salary ($120K I think), but most shops haven't gotten to the point where they are recruiting MBAs.
I'd say that for balance sheet associates are probably $70-80K with a 10-30% bonus.
I haven't followed real estate much since I graduated in 08, but looking to get into the industry so please excuse the noob type question.
Who are the major players these days in both CMBS and Balance Sheet lending?
CMBS - mostly Ibanks - DB, GS, RBS, Barclays, BofAML, UBS etc.
BS - banks, lifecos, lending co's - Prudential, Met Life, GE Capital, PNC, BofA, Wells, etc.
do these companies also have a strong presence in the mezzanine space or is that a different group of key players? if so then who are they?
These guys are few and far between nowadays - a bunch of mezz sources closed their doors after the crash - and are extremely picky, so I don't think there's a lot of deal flow right now. I do think some deals are getting done in multifamily.
I'd be curious to hear about others, though.
Of those i know Prudential, GS and GE all have a RE mezzanine program.
You can also add Redwood Trust to the list of mezz players...
In the mezzanine and high-yield debt space, you've got a couple of categories of major players. You've got shops that specialize in high-yield debt and raise private equity vehicles to buy it. These are firm's like Five Mile Capital, Mesa West, Prime Finance, H/2, RCG Longview, etc.
Then you've got the major PE and REPE sponsors who either buy high-yield debt through their straight equity fund, or have side funds that focus on debt. Blackstone, Lone Star, Rockwood, and Colony all do a lot of debt work (Blackstone, has a group called "BREDS" that focuses on high yield debt). Some of the big real estate asset managers have high yield debt arms or are trying to build them. Prudential (PREI) started a mezz team a few years ago; RREEF has been active here for a while I think.
Also, the debt REITs typically do a lot of mezz lending. Firms like Northstar and Annaly have been in this space for a while. Then many of the private equity firms like Starwood and Apollo got into the space a few years ago and launched their own debt REITs.
Great overview of the different firms. Thank you
If anyone knows how to get into the above, please let us know (ie. campus recruiting, lateral moves out of ib, etc.)
If these are the types of companies who buy the high yield/mezz debt, who are the originators? Also, is this set up as a correspondent type relationship?
Well, the megafunds with RE debt arms (Blackstone, Lone Star), opportunity funds (Rockwood, Colony, Starwood, Apollo), and the PE-esque debt funds like Five Mile are all more or less looking for RE IB analysts.
The institutional investor / asset manager groups like PREI and RREEF sometimes hire on campus and tend to be less picky about taking RE IB analysts. That's also because they're not willing to pay to hire people from those backgrounds, so comp is lower.
Don't know too much about debt REIT hiring.
Any comments on working in a FHA multifamily origination/underwriting group? Skills acquired, comp, etc?
bump
Currently an FHA UW'ER @ $120k all in w/ bonus. Can be mundane and repetitious at times, depends on the deal(s). Nothing to complain about 40-45 hr work weeks. I see alot of LIHTC deals, market rate stuff, section 8, etc., some of which can get complicated (221d4's). Origination pulls in the big bucks but seems to be a hard niche to create. My previous boss said CRE is like surfing, catch a wave and ride it. I'm beginning to think the FHA wave has crested and am keeping my options open. Hope that helps.
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