How do we rate our experience in CRE? If someone in acquisitions has worked on $1 billion of asset acquisitions, let's say in 5-years is it a lot? What about in 10-years? If someone has "transacted" on $5 million square feet is it a lot?
Where does the MF experience trickle down to the middle market? How much does GP principal experience count compared to brokerage? Brokers see 10-20x the amount of deal flow, but don't know the details as intimately.
How does one know they have good experience, and what metric do YOU use to compare yourself to others in your field
Interested in this answer. I’ve got a broker I’m looking at working for who’s done around $750m in retail deals - considered good?
There really is no metric...the man/woman who has done 15 deals at $5MM per deal will probably know more than the person who has done 2 deals at $37.5MM. Measuring by dollar value doesn’t really help. A deal is a deal is a deal and a small deal takes just as much time and the same work to close a large deal. Now..is the larger deal more sophisticated - maybe - or we just tell ourselves that. But you can’t really use a yardstick.
On top of that, the person who’s done 1 or 2 deals at a developer but also built those buildings, probably knows a ton. If you look at an institutional man/woman - they will probably have bought tons of buildings. If you look at a person sitting at a developer - they probably did 3-5 deals in 5 years. But I bet you both people know the same things. What I’m trying to say is you can’t really look at it like this. It’s about what can you speak to and prove you know and have done. I know people that have done over $2BB in deals across 20 deals and have never negotiated a PSA themselves - they’ve only analyzed the financials and spoken to them in committee. There really isn’t a yard stick though people love to boast that they’ve done some large dollar value of deals.
I agree, so maybe it is the size of transactions. Say....100k sf min? But the guy who buys 100x $1 million dollar deals, probably just isn't sophisticated to do those $50-$100 million dollar deals. So maybe it's a billion dollars of transactions(development/acquisitions/asset management)? That seems like a fair amount of experience for 10-years of work no?
I'm honestly not really sure it can be classified. It is person dependent - the person doing 50, $1MM deals may be doing that for a reason - it could be their niche, and they can probably step up to larger deals if they want. It might not be a $50MM deal overnight, but it could be $10MM. Real estate isn't the most sophisticated asset class (although we like to pretend it is). The business was built off of mom and pop investors maxing out credit cards and doing back of the napkin math to figure out if they could purchase an asset.
Regarding the $1BB in acquisition/asset management experience in ten years, I also don't know if that is a good yard stick - personally, I've done over $1BB in transactions in the last 24 months. An analyst/associate at a Life Co could easily do $2BB in one year just due to sheer size of the deals the firm looks at. This doesn't make them sophisticated. It just means they work on large deals - but I bet they didn't do the legal doc negotiation - they just analyzed the financials and wrote a memo. From experience, I can tell you it is significantly easier to get a $50MM-$100MM deal done than a $5MM deal. The brokers are better/have more information and the sellers are willing to provide better information and just, have better information - like true trailing historical financials in an organized fashion. On a bit of a tangent, but the returns in the sub $10MM space can be so high due to the inefficiencies of many HNW individuals who can buy in this price range (and they do) but than run their asset to the ground or don't have good accounting and financials. Additionally, brokers aren't always as strong in this space or don't provide OMs which are as ticked and tied, which creates opportunity for those who play in this area with an institutional mindset. There are some institutional funds who focus on the lower middle market space due to these efficiencies and they knock it out of the park.
So my answer will probably not excite many (maybe piss off some) and make others feel "good"... but here goes..
I'd "measure" a person's experience based on what they actual did, and what occurred as true result of their effort/work.
This leads to a shit ton of subjectivity, but welcome to the real world.
Thus, is "modeling" a $100m deal that different than a $500m one? I'd say, your 'experience' is modeling, not "doing deals". Clearly, that's a needed part, but claiming to be a BSD from that is delusional.
I think real experience comes from being at some point of 'risk', those who legit 'sign on the line' have a lot, regardless of size/scale. Those who have earned big positions at well known firm get theirs from fighting the battles and winning (i.e. different form of risk taking). So, what wars you had to fight, challenges solved, that's what makes the difference to me.
Nothing wrong with measuring volume or deal size/number, but to me that is only so so in actually assessing one's true level of experience.
100% the first part of this sentence.
"Experience" is great, but there is a vast gulf between the experience of having performed a task, and having performed that task knowing that you stand to make or lose thousands of dollars on any given decision. I am sure there are exceptions, but the person who has "value engineered" (I hate that term, hence the air quotes) a building in which they are the Sponsor has a vastly different way of looking at value engineering than the person who was told to do it on behalf of their firm
On my resume I list # of transactions, sum of the purchase prices, and roughly speaking the land & buildable square footage.
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