Development to REPE - Feasible?

Hi all, I'm a December graduate that will soon be joining a development firm among the likes of Hines / Greystar in the coming month or so in a major Tier 1 market. I am wondering how easy it is to make the transition from development to REPE if I don't happen to enjoy development due to the timely nature of projects, limited deal flow, etc. I am going into this role with an open mindset hoping to be a sponge and really seeking to nail down the fundamentals before anything else. However, I am just curious as to how possible the transition to a top REPE fund would be, if I ever decided I wanted to make such a jump. If I were to move towards REPE, I still would like to play in the opportunistic space.

The team I will be joining is a soup to nuts development team that handles the transaction from acquisition through stabilization. 

I've seen many posts where people discuss the transition from REPE to development, but not many that discuss the transition from development to REPE. Thanks!

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Comments (14)

  • Analyst 2 in RE - Comm
Nov 26, 2021 - 12:07am

If by "top fund" you mean Brookfield, BX, or Starwood, it's probably not as likely to be able to transition directly from development to these funds. But will be able to transition to other funds for sure with a little bit of either networking, or head hunter hit ups. But you'll need to be as good/sharp as ppl already coming from other funds and other large AM firms

Nov 26, 2021 - 2:15am

Why wouldn't I be just as competitive? Just a bit confused as I, or any other development analyst, has direct real estate experience and should, after 2 years, be well versed in modeling, finance, and also have developed somewhat of an understanding of other considerations (entitlements, construction, etc).

  • Analyst 2 in RE - Comm
Nov 26, 2021 - 9:46am

As far as I know, development is different skill set than straight acquisitions and an investment manager. I do not think you're cranking out models everyday and writing memos everyday getting super familiar with looking and seeing a bunch of different property types, risk spectrums, and markets. Yes you will know real estate but the skill set is different. If you were looking for a development analyst, you'd lean to the person who worked in development for the last two years. Same goes for acquisitions. People still make the switch but they know their shit for sure 

Nov 27, 2021 - 12:05pm

If you're at a Hines/Greystar/Trammell Crow/etc. you'd still have a shot at a top fund, but its less likely than someone who did the IB route. Those are pure play finance roles, so while you'll still have finance experience and likely some limited transaction experience, it's not the skillset they'd be targeting.

At the Associate level they're going to be looking for someone who understand the transaction process in and out. You'll have a good grasp on risk and potentially underwriting, but at a large dev shop you're unlikely to have much if any transaction experience (they're so corporate and siloed that they typically have a separate team for acquisitions).

Not to say you can't go to REPE, but getting into a BX or Starwood would be tough.

Most Helpful
Nov 26, 2021 - 7:47am

You have a great opportunity so run with it. Yes, you can transition to the LP side, but more importantly, why don't you see if you like development before you think about jumping ship? Development is the end game for many real estate folks because it is the ultimate entrepreneurial game. If you like the game nothing else will suffice. As you work with associates on the investor side, see what kinds of questions they ask and how they look at deals, etc. You'll realize you have all the information, they are just sorting through it, checking boxes, making assumptions, etc. You are actually executing the business plan, they are simply the bank. After a couple years of relationship building, moving over to REPE could just start with a phone call to an investor that knows you and has worked with you before. So my advice is: get good at what you are doing now and you'll build a strong network as a result - and if you decide you want to go to REPE after a couple years, you will already have people who will go to bat for you. That's generally how this business works, in my experience at least.

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  • Analyst 1 in RE - Comm
Nov 27, 2021 - 9:31am

This is great insight and more importantly, a great mindset to approach this role with. Thanks for sharing your perspective. I hope to make the most of this opportunity nonetheless but just wanted to understand optionality.

Nov 26, 2021 - 1:12pm

Earlier on (first five years) a jump from development to REPE is certainly doable. After that, it gets a little bit more challenging but has still been done many times over. You'll need to be pretty sharp at the financial aspect of real estate (equity structures / legal / etc.), but I think a lot of REPE firms would value your knowledge.

That being said, know that many people in REPE want to eventually end up in your shoes. Sounds like you have a great opportunity there, so I'd give it your all and 4-5 years at a minimum to see if you like it. As others have said, many people get into real estate to eventually jump into development. I made the jump and haven't regretted it for a moment. I miss some things about REPE, but the sense of purpose you get from development is damn near impossible to replicate elsewhere. WSO, because of its finance bent, can be a little bit slanted towards thinking REPE is the end all be all of our field. But in reality, the end game in our field is development. I remember reviewing the financials of developers no one had ever heard and laughing because they were worth 2-3x what the owner of my REPE firm was worth. And my REPE firm was very well known. 

  • Analyst 1 in RE - Comm
Nov 27, 2021 - 9:35am

I, too, hope to eventually pursue development on my account someday but understanding how difficult that can be, it sometimes seems as if REPE has the potential to be more financially rewarding as an employee than does development.

Nov 27, 2021 - 3:25pm

Just a salaried employee, yes - an employee at a REPE firm will on average make more than an employee at a development firm. But once you start to introduce carry into the equation, that math can flip very quickly. A typical closed end fund will have a fund life of 8+ years and will be diversified over many investments. That's great if you are a large capital allocator, but for an employee, I'd much rather have carry in one-off deal promote stuctures. A development shop might do 2-3 deals a year and those deals, if timed right, could produce huge levels of promote. A REPE fund could also be a home run, but it might take 8-11 years to pay off and the deal returns are averaged out (which reduces outlier returns). Every year is another year that a recession could destroy every single dollar of fund promote.  Plus you need to stay at the company for a certain period of time for your entire interest to vest. Meanwhile, a merchant developer that builds and sells after stabilization will monetize your carry every 3-4 years. You don't have to own your company, you just have to have a piece of the pie. My wife's cousin rode the wave as a mid-level employee at a MF developer in the 2010's and can retire whenever he wants (mid-40's). 

Nov 26, 2021 - 1:25pm

So pretty much all "Can I go from X to Y" type questions within real estate can be answered yes, this one is no exception. Just matters what your goals are and if you manage your career/skill development to align as such (then of course network/apply correctly).

An interesting observation... this question "development --> REPE" always seems to get asked by people looking at/considering development or not yet started, like the OP, much much rarer by people actually working in development. The flow tends to be the opposite most of the time (meaning "REPE/invest mngt" to development). For most who go work in development, it is the ultimate end game, they are not using it for "exit ops". 

So, to the OP, only you can decide what you want to do long-term and what you like/dislike... I would just make sure you motivations/desires are clear. If you want to work for an equity fund, many like to have people who understand development as often invest in developments (that is where you will get most play after a good set of years in development). If you are asking this because you are fixated with some notion of brand prestige around "REPE" (the above commenter is probably right... lots of luck with BX/SW, really tough at any/all levels)... you will have a far better career the faster you realize that stuff is only valued by undergrads and on WSO. Taking an early career lateral out of development to equity/investment management could easily be one stupidest career moves one could make. Development takes time to get good, trusted, and capable (i.e. up to the level where the big $$$ are), and hitting "reset" (the likely occurrence if you jump at any form of analyst/associate level) could result in higher pay right way, but actually stunt your career long-term (at least with respect to development, clearly you could love/perform well in the "repe" world, in which case this is not a meaningful thought). Bottom line, not saying not to jump, or that's not smart... just be really clear why you are doing and be strategic about it. 

Nov 26, 2021 - 3:58pm

I was an Analyst at a similar developer and transitioned to REPE as an Associate. The fund I'm at mostly invests in special sits credit or direct equity development projects. Having a background in development was viewed as hugely beneficial during the interview process as I knew how to DD development projects and the various risks not present in built assets. I also had a good insight into how developers approach projects which you don't get coming from IB or similar (I'll preface this by pointing out I was in IB prior to development).

It absolutely is possible to move to REPE, but factor in if your experience is in development you'll be dealing with single asset deals focused on ground up. This doesn't make you a good fit for doing P2P's of $BN REITs at BX, BB IB analysts are a much better fit here. You'll be a much better fit for REPE funds focusing on the same risk profile as what you'll have experience in. For what it's worth, P2P of REITs or buying large portfolios of Core+ product with 50+ assets with little value creation potential left would bore me hugely. Dealing with a smaller number of higher risk assets is far more interesting if you like real estate.

As an Analyst you'll most likely be focusing on underwriting new opportunities with the experience being comparable to an REPE Analyst, while also working on live portfolio projects whereas an REPE Analyst would do less here. Where it mostly differs is an REPE Analyst can be running 10 opportunities in different levels of detail at any one time (i.e. screening 5 / assessing 3 in detail / actively pursuing 2). If they go to IC on the opportunity, the quality of the analysis will likely be far higher and the assumptions will require significantly more support to justify them. As a Development Analyst, you'll probably working on max 2-3 new opportunities at any one time whilst also working on 1-2 live portfolio projects too. ICs at developers from what I've seen have a lower bar and are easier to get through. Open to correction on this from others who may have different experience of both. The REPE Analyst will have a lot more closed transactions, whereas you'll have a much better understanding of the various facets of development - notably entitlement and procurement.

Nov 27, 2021 - 9:28am

Thank you for sharing - this is all very helpful. I am going into this role with an open mindset and really do hope I love development, however, it is helpful just to understand ones relative value. That being said, I had a couple questions about your experience. Why did you end up moving from the developer and how many years of experience did you have with them? Do you enjoy your role in REPE more than development and if so, why?

If I were to transition to REPE, I, too, would like to be in a position where equity capital is being deployed into individual, riskier assets rather than portfolio level deals.

Nov 27, 2021 - 2:56pm

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