Debt and Structured Finance Brokerage Exit Opps
I am currently about 6 months into my first full-time role working as an analyst on a debt and structured finance brokerage team in a major metro area. The group has relatively robust deal flow and my day-to-day responsibilities include performing due diligence on potential transactions, as well as modelling out various sorts of loan structures (mezzanine financing, term loans, construction financing, etc.)
I am wondering what sorts of exit opps might be possible from a role like this? Is it realistic to transition to the principal side of the industry, either in a development, or acquisitions capacity?
You kidding. Yes, of course...where else do they hire from?
With 2-3 years in this role you can transition into an acquisition or asset management analyst/sr analyst. It's extremely transferable, maybe the most transferable for a junior role.
C.R.E. Shervin My concern mostly stems from the fact that I've found debt underwriting to be quite a lot simpler than running an acquisition model (i.e. you may cap a cashflow in Year 2/3 once it's stabilized instead of looking at a full DCF). As a result of this, I feel that I'd be at a disadvantage to anyone working in IS/Valuation, who might also be looking to switch to the buy-side.
so practice discounting your year-3- cash flows and model return metrics around that? There is literally no difference in a 10-year DCF and a 3-year DCF, just a lot of more copy paste.
Waterfalls will be trickier, but I don't think more than 50% of shops make you build one from scratch, i.e. they are templates.
But you will be able to say you've worked on more deals than these acquisition folks, except maybe mega funds.
Bump - any other opinions on this?
CRE professionals with significant deal experience - whether IS/Pure acquisitions/debt/et al - are not as easy to come by as you may think. Never overestimate your competition. You will easily be able to transition to the Principal side and assuming you're pretty smart, garner interest from many interested firms.
When you want to transition bring it up to your broker superiors. They can help place you and will gladly do so for obvious reasons.
Just confirming, you suggest bringing it up with your broker superiors that you're looking for another job? The idea being that they'll help you to have a good relationship with someone on the principal side?
You replied to a 5-year old comment but I happened to be scrolling this thread today as well so to answer for the other guy - yes
Bumping this for interest - can anyone speak to their personal experience making a similar transition?
I currently work on the development side of things...yes, yes, yes you have many opportunities. In my group, we use your products to develop energy infrastructure and often look for people just like you to join the team. I'd say that your DD work on the lending side is very useful to the developer, particular those w/o built out financing processes. For us, we have many folks capable of building DCF project models but not many who holistically understand the financing process and optimizing the capital structure for new projects. In energy, I see big opportunities for folks like you in LNG and renewable project development. These projects are typically highly leveraged and have high capital costs, so very interesting on that front.
Thanks I appreciate it. Any insight from CRE REPE God The Duke of Wall Street MonkeyWrench ?
Are you working across all asset classes? If so, that's probably the best first job you could have in RE.
Not the same kind of brokerage I was in, my man. It's always possible to transfer from one role in-industry to another though, just comes down to your connections, capabilities, and someone taking a chance on you.
Cue the GSE guy talking about how they do $100 trillion dollars in volume annually.
But short answer yes, this and investment sale brokerage analyst/underwriting work probably gives you the most flexibility of what you can do after.
As MonkeyWrench alluded to, the beauty of Investment Sales roles and Debt & Equity Placement roles is the volume of UNIQUE deal flow that you see in a particular year. Assuming you're a generalist in either group, in the course of a year, you will see a variety of deals that will expose you to the following:
Principals / Ownership Groups
How Principals consider financing their deals.
How Lenders think about risks on deals they lend on and how they protect themselves
General esoteric aspects of deals that expose you to deal scenarios that you may encounter once every few years. However, if you understand how to price risk into a unique scenario you'll be able to price deals differently if and when you are on the acquisitions side.
Learning Takeaways: (1) You learn the landscape of ownership groups, (2) You are likely to interface with your Debt Capital Markets team to providing financing guidance for potential buyers. You'll learn what types of buyers prefer which types of debt and why. You'll also learn how lenders view the risk profiles of various deals and which sort of loan covenants they create to protect themselves for various risks.
Note - I just typed a long memo for a deal we're pursuing so my brain is lagging.
+1. Now that I'm on the acquisitions side, I'm usually put on the most complicated deals on my team (i.e. deals with weird tax situations, complicated financing structures etc.) because I have the most generalist background whereas the rest of my team has much narrower experience. Even though I just got to my shop, I am basically in charge of all industrial and NYC deal flow because these are newer markets/products for us and no one internally knew the intricacies involved with those markets. If I ever manage to start my own shop, I will definitely hire former brokers for junior roles.
Thanks for the great replies guys! Any other views on this?
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