Development Analyst (affordable)

I'm in the final stages of two interviews for big affordable housing developers. One of the things I am worried about is the potential for this to get pigeonholed into only affordable? How are the hours at the analyst level? Pay seems pretty low compares to PE, is this typical or does it progress nicely? Is the work pretty stimulating/fun in affordable?

Thanks

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Apr 28, 2021 - 7:49pm

east.coast.cre

I'm in the final stages of two interviews for big affordable housing developers. One of the things I am worried about is the potential for this to get pigeonholed into only affordable? How are the hours at the analyst level? Pay seems pretty low compares to PE, is this typical or does it progress nicely? Is the work pretty stimulating/fun in affordable?

Thanks

Let give some quick thoughts on these....

- Pigeonholed - This whole concept is silly (and seems to only live on WSO...) - NO you will not be "piegonholed" based on an analyst gig, no matter what it is. 

- Hours - This varies by firm, culture and hours are firm dependent. Doubt affordable will be any worse than any other developer on average. At analyst level, hours can be shitty, but at a lot of development firms, every one leaves by 6pm and weekends are rare. Development is just not that "fast" of a business, you can only really do so much in a day (exceptions around closings and deal heat moments, which for many is just a few times per year)

- Compared to Private Equity, pay of anything will seem "low" - wrong frame, pay in PE is just really high (and so are the hours/stress, it's all trade offs)

- Does pay progress? Of course, with experience and promotions you get paid more, all depends on you (still, don't expect to keep pace with PE world, totally different industry)

- Stimulating/fun - totally personal, it may not be as cool as skyscrapers or large master planned mixed-use developments, but it is still development, but not the "sexiest" side by some people's opinion (but really, who cares about that, if you like this field, you can make tons of $$$$ in it and it is valuable to the community/society) 

Apr 28, 2021 - 8:06pm

Mostly agree... but the "pigeonhole" also implies you wouldn't take your years of experience with you were you to lateral to a different vertical. If you did affordable dev for three years and tried to recruit as an associate at an office developer, you'd have trouble. However, if you did three years of investment sales (across all asset classes) at a top shop, you'd be more able to make associate within any asset class. Thus you're less pigeonholed. 

Apr 28, 2021 - 8:37pm

maestro_

you wouldn't take your years of experience with you were you to lateral to a different vertical

So this is all extremely Your Mileage May Vary..... but I think your above statement is really universally true! If you "lateral to a different vertical" you take the risk of not getting full "credit" for time in grade. I mean, why would  you expect that? Clearly the person who was doing the role within the same vertical is theoretically "closer" to promotion. ALL ELSE EQUAL (and people are never equal).

Perhaps there are some firms that would pick the IS analyst as a new associate, but that sure doesn't feel right to me as a universal principle. I can 100% say at my firm the development analyst of any type stands a far better shot than any IS broker/analyst. (in fact, we recently hired a person to work on office projects whose background was multifamily).   

These things are all unique, personal. I've "jumped" verticals from consulting to development with a major promotion (in fact, ahead of peers by age/seniority as a result). Clearly, that is not universally doable or easy, but I don't think jumping verticals ever will be. Yet appraiser become developers, lawyers become acquisitions officers, accountants become asset managers, etc.. 

So, I'd say a Development Analyst of one asset type can become a Development Associate of another asset type, easier than an IS broker/analyst... again YMMV! 

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Apr 29, 2021 - 10:53am

maestro_

Mostly agree... but the "pigeonhole" also implies you wouldn't take your years of experience with you were you to lateral to a different vertical. If you did affordable dev for three years and tried to recruit as an associate at an office developer, you'd have trouble. However, if you did three years of investment sales (across all asset classes) at a top shop, you'd be more able to make associate within any asset class. Thus you're less pigeonholed. 

I could not disagree more strongly with this sentiment.  I know that when we look at folks coming from investment sales, we ascribe practically no value to that experience.  If you want to come in at a very junior level as a 26 year old coming from JLL, all well and good.  Most of the developers I know (who are overwhelmingly in the MF space, both affordable and market, so take this with the usual metric ton of salt) would prefer someone from almost any other real estate-adjacent background.  Yeah, the IS guys can hustle.  They can build a pitchbook.  They have absolutely zero skills in the places that matter.  I suppose that since few dev shops hire straight out of undergrad, you can make a strong argument that investment sales is a good road to go learn a little, make a little money, and then start at the bottom with the folks coming out of B school or an MSRED program or wherever, but that's about it.

Apr 28, 2021 - 8:16pm

Affordable shops will likely pay slightly less and work slightly less. This depends on a number of factors, of course. Pay will be much lower than PE and lower than REPE. I would say the work is less stimulating/fun in affordable because the deals take FOREVER. If you are working with FHA for financing, doing LIHTC, or any of the state/city programs, you will have a lot of DD and paperwork to do. Depending on the setup, you may do essentially zero modeling because the rents are guaranteed by the government, so no need for comps etc. From the banking side, the affordable divisions are always the biggest snooze fest. However, there is a lot of money to be made if you can successfully navigate the bureaucracy (for the investors).

You will be able to exit to regular MF fairly easily, however the longer you stay, the harder it will be to exit to a non-affordable MF developer. If it is a well known shop, you will have better exit ops, but if it is a not well known institution, you'll be more pigeon-holed than if you worked for a well-known bank/broker working across all asset classes. You won't be pigeonholed to the point that you MUST do affordable or the rest of your life, but it may be difficult to lateral and have your previous years of experience count towards your title at the new firm. 

Apr 29, 2021 - 10:41am

I wouldn't worry about being pigeonholed, or at least any more than you would be anywhere else.  As someone mentions down-thread, if you want to transition to building office buildings, you might find yourself at a competitive disadvantage with someone who had been doing that for the same amount of time - but the reverse is true, too.  That's life.  From a high level standpoint, any development experience is a net positive and will position you better than being on, say, an investment sales team, for almost any role (other than IS).

Hours are pretty easy.  Once you get right up against a closing, especially a construction closing, you'll get jammed.  Those weeks you might be working til midnight for a handful of days in a row, but other than that it's flexible.

Pay varies on shop (obviously, not as standardized as banking) and is probably worse at a junior level than PE.  Not entirely sure what junior folks in REPE make.  The major upside is that development shops, by the nature of their chunky cash flows, are often eager to offer carry pretty early on in order to reduce biweekly overhead.  Also, in affordable in particular, you have a very easy and very quick (relatively speaking) route into starting your own firm.  It really doesn't take much to go out on your own, the barrier to entry isn't capital but relationship and regulation oriented.  Generally speaking, I'd advise that choosing a starting point in real estate based on pay is an extremely shortsighted move.  Your goal should be to maximize carry in the medium to long term.

I think the work is fascinating, and frustrating, for all the same reasons.  Affordable housing is by far the most complex asset type to finance (bar unique projects) - you've got to combine a number of sources which just don't exist in other asset classes.  Our projects routinely have several layers of debt, a couple different types of tax credits, some form of equity, etc.  And because all of this is tied into federal/state/local regulatory oversight, the modeling is actually fairly complex.  Far more so than what I see my peers at funds working on, for all that their underwriting models look more professional.  Beyond that, you deal with city officials, local electeds, community boards, you need to be at least conversant with the architects, engineers, subs, etc.  You need to be silver at everything, not gold at a few (a phrase I used somewhere else and still like lol).  That range means there is always something to learn, and frankly, that stuff is widely applicable within real estate.  Knowing how to model AFR into your debt tab is great, but as mentioned, an office developer won't give a shit if you want to transition.  Being able to read construction plans and at least follow along as your team value engineers a set of construction drawings?  That's a value add in any real estate development shop.

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