Development/Investment Role Without Acquisitions -> Worth Staying?

Hi everyone,

I am about two years into an analyst position at a London based developer. We are one of the largest players in Europe but are a bit of an outlier in terms of our structure and keep a pretty low profile.

During my interviews, my boss said that I would be 100% focused on modelling new developments. Fast forward two years and this hasn't been the case at all. I am debating moving on for this reason and I wanted to hear how the community views this experience. For context, my goal (like many in the RE forum) is to eventually be able to run a full development process myself, from acquisition to exit.

50% of my time is spent on our current development models (100% since Covid). This involves updates from the DM & CM teams, running lease scenarios, dealing with banks on construction loans and any other ad hoc analysis. Occasionally, I will be involved in forward sale or JV negotiations but my company really doesn't need the cash, so these never really go anywhere.

The other 50% of my time is spent modelling investments.... but on land that the company has owned for many years. On these projects, we still go through a typical investment analysis, business plan and IC process but the land is a set value in the model. No DD really but we get super involved in the design process. The buildings themselves are top of class - top 5 architects and stupidly large GDVs.

Is it normal to spend this much time on existing developments? Does my "investment" experience still sound beneficial given the land issue mentioned? Will it limit me in the future applying to acquisition roles or development associate roles for other developers? I am about 1 year away from a promotion to development associate and the company really likes me - but I am worried about ending up as an associate with no real acquisitions under my belt.

Thanks in advance.

 

To be honest with you, modeling doesn't mean fuck all after your analyst and maybe associate years.

No VP or MD got to where they are because they know all the formulas in Excel - if I were you, I'd start working on your sourcing skills as that is why our bosses get paid the way they do. As you get older in CRE, it's 100% sales.

Someone mentioned it here somewhere, but many young analysts here will be sorely disillusioned when they realize their obsession with modeling won't get them anywhere, and the fact that they have no true sourcing/origination abilities

 

On the development side there are a lot more areas that you need to become competent in beyond sourcing. On the acquisitions side I agree with you to a point. Too many people are obsessed with building the perfect model, but I have also worked with people who think the entire job in acquisitions is "relationships and sourcing". Your ability to chat people up on the phone means fuck-all if you can't effectively think like an investor and screen opportunities without wasting everyones time, you need to balance both.

 

Thanks for your comments.

It wasn't so much the modelling specifically that I was worried about, more the transaction experience - the process of sourcing, modelling, bidding, DD, etc. I have had a few awkward calls where a recruiter asks me to walk them through a few deals that we have completed and I have to explain that we have't bought any new land while I have been at the company. From the sounds of all the other comments, this is pretty normal for development.

Totally agree with modelling not being the key successes driver in the long run. maineiac42, great point on the balance.

 
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If you want to be in development this sounds like great exposure. Rather than just putting together bullshit assumptions and handing a deal off you are watching the financial impacts that changes throughout the development process will have. This will give you a much better understanding of the process and give you a much better grasp of what can happen on "new" deals you look at in the future. I wouldn't worry about the fact that you aren't solving for a land price. This is such a small piece of the puzzle. If anything this is a positive because you have a solid pipeline of land and you don't need to worry about your team going out and sourcing opportunities to execute.

If you dislike development andwant to be in acquisitions in the future I really don't think anyone will discount the analysis experience you are gaining. Sure, if you get the promotion and continue to focus on analysis and executing rather than sourcing for another five years, you might have trouble switching to a sourcing role down the line but that isn't necessarily a bad thing.

 

Great to hear your feedback. I feel like to many people at my experience level (2-3 yrs) are focused on acquisitions completed - this is such a nice counter perspective to have.

Overall I am really enjoying development and am pretty convinced that this is my long term direction. That said, it is reassuring to hear that the experience could be transferable to other areas if things were to change over the next few years.

 

Most developers don't spend tons of time on acquisitions, some moments are better than others to acquire land. We like to 'land bank' when possible. Sometimes a team may be on an 'acquisition binge' to solve for not buying stuff years prior due to being to busy on current pipeline.

So, it's really super normal part of the development business. I would not jump 'two years in', it sounds like a good gig overall. At my firm, I don't think too many people two years in get to work acquisitions, that's a more senior role (in fairness, we don't hire people without exp. very often). Generally that comes when people rotate off a finished project.

We do have some associates who are more 'general analysts' for modeling but I'm not sure why you would want to jump that direction if trying to gain seniority in development.

Stay the course, if you want to jump, do it in a few years, and with a real promotion and advancement.

 

Thanks for your thoughts, appreciate all the advice. Great point on waiting to jump later on in my career - I noticed you helping other folks in the forum out with similar advice and think this totally makes sense.

What kind of background to the people that handle the acquisitions have at your company? Do they come from a traditional development background?

What direction would you try to focus on to gain seniority? The current path is Analyst 3 yrs -> Associate 2/3 yrs -> DM.

 

Hmm, let me think...

  1. At least at our firm, teams tends to focused front start to finish on a project. So step one is acquisitions, then transition to design/pre-con/entitlements, then onward.. So there is no specific background. Those with more financial skills are likely to do analytics while others may focus on legal matters/entitlements, etc. The really high level tasks like negotiations are at the VP or EVP level with input from the team. We do have some VPs who primarily focus on acquisitions at not really assigned to projects, they will have use (partial time allocation) of an associate/analyst to assist (usually one with a more financial type background). We tend to let people be project focused generalists (in truth, acquisitions is not a 'preferred' task in our firm), so its just a mix of skills/desires on how tasks are given.

  2. As to direction to focus, well, I guess the answer is wherever you can grow and develop and deliver the most value. I.e. can you be awesome at X, whatever X is. When we hire, its often because someone is really good in their domain. So, focus on whatever you think you can be the best at doing (I like to say that is like an intersection of 3 item.. 1. What you like 2. What you can be the best at and 3. What is in demand by market (i.e. pays).

Good development teams have diversified skills, backgrounds, and types of people. So really, be the best in your own category, don't worry about any specific tracks. Senior people or entrepreneurial developers often come from all backgrounds like finance, legal, brokerage, architecture, construction mngt, and even govt/planning. I don't think it really matters, being good is what does.

 

seems like you’re at a great shop really learning the development process. why give that experience up to learn modeling?

 

This sounds like standard procedure for a development role - how many new projects do you think your firm can handle at once? And why would you need to buy new land if you have existing vacant/excess land to take advantage of that makes sense to develop?

You're getting exposure to the whole process which is great. Sounds ideal to me if you're genuinely interested in development. But from what you're talking about it sounds like you're more interested in the acquisitions side.

 

what would your responsibilities be like with the promotion? I would vote to stick it out at least until you get the promo and feel it out. I work for a small development/investment shop and more time is spent on current deals than sourcing new ones. deals change a lot and sometimes they look completely different a few years down the road. if you have a good relationship with your boss/know they like you, it’s worth bringing up your concerns to someone. don’t say you’re jumping ship, but maybe in your next performance review or serious convo, bring up the areas you want to focus more on or learn more about and I’m sure they will get you exposure to it. I’ve job hopped a lot and one thing I have learned is to be vocal with what you want, if an employer values you they will do their best to make it happen. try to connect with some people who work in acquisitions and see what their day to day is like, maybe it’s better or worse than you are expecting. also, networking in general is good to see what others in the industry are doing and see what peaks your interest.

 

Depends on what you want out of your career. I am in a similar position and while we have some development people that manage the RFP process we don't have a dedicated acquisitions team. Every project at a mega developer is usually high profile so its not like you're sourcing off market deals. You're usually going through a formal process that involves a lot of parties. All of the other responsibilities of your job look like they align with your long term goals. If you can underwrite and execute a development deal don't worry about the acquisition and disposition part.

In the world of development there isn't a lot of acquisition activity as you spend most of your time actually developing. If you know how to underwrite a development solving for a land value is just one extra step that tells you how much you can pay and still hit your target returns. You should honestly already being doing this to see if you are able to generate a land residual above market, aka is the land worth more to you than you could buy a comparable parcel for, we do this with all of our existing parcels as part of the underwriting process to determine if a project is profitable.

 

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