Long time reader, first time poster, huge fan of the site.
My question is this: I know at the Junior level that the work can be similar at times. However, as someone who wants to stay in CRE long-term, I am curious as to the major differences in day-to-day work as you climb the ladder, and just in general, everyone's opinion on the best place to cut your teeth as a young analyst in CRE.
I originally applied for DP, and am now being told that IS may be the more immediate need, but I am not sure I want to make the move if it is IS instead of DP. Any insights are greatly appreciated! Thanks guys.
I am coming up against these same questions and would like to hear some feedback from the forum as well. To add... what differentiates modeling for Debt / Equity Placement vs. IS?
I recently met with a couple brokers at a major shop to talk about an analyst position in Investment Sales. The job description included modeling in excel / argus, market research, developing and defending assumptions, working with marketing team to put together offering materials, answering buyer questions and doing just about all the legwork that it takes to get a deal up to close.
In my (limited) experience: - modeling for I/S involves underwriting to NOI and capping it - modeling for debt involves the same steps + constraining the debt on the terms of offer (DSCR vs. LTV/C vs. Yield). Different lenders (CMBS vs. GSE vs. Bank) underwrite differently so there's some variation there and if you get to see different pieces of the cap stack, there's more variance in structure.
As far as marketing is concerned it's very similar. Research comps, market data/trends, do market tours, call for information to update OMs.
In terms of modeling, DP will provide a more varied experience, as you look at various cap. stack structures, pref. equity slugs, etc. Depending on what you want to do in CRE long term, an IS analyst and DP analyst at a big shop will be terrific experience regardless. I would say that if you're trying to get into PERE, DP will be better experience, where as IS experience may correlate better to certain departments in a development company.
dcremonkey hit the nail on the head.
hey man- bumping this b/c i'm curious about your last point. Why would you say DP is better experience in getting into PERE than IS? Thanks!
On D/E side the exposure is great not just in terms of the property types/geography, but also in terms of the parts of the capital stack that you touch. Which is all of them. You get tons of reps/deal flow. You get to interact with tons of equity guys and lenders and literally get to know who does what types of deals quickly.
You learn how to look at a deal from everyone's perspective. Lender. Mezz/Pref provider. JV Equity. In terms of the analyst level skill set, it's the most transferable to the principal side, especially if you are interested in the LP side. You learn how to model everything, especially if you work on more complicated deals.
You don't really get to see that on the IS side, though one place where IS experience definitely wins out is you get to see how the PSA gets negotiated and how a marketed bidding process works which is a crucial skill for acquisitions roles. On the D/E side though, you get to negotiate term sheets for JVs and debt/mezz, which is also important.
I think both D/E and IS experience is helpful to have on the principal side, and both are transferable.
I disagree. In debt placement, much of the time you are just using the clients model and dropping it into a template that shows debt metrics. You don’t really have any input and don’t spend time creating assumptions or delving into their rental assumptions or exit, etc. the IS side was significantly better at understanding how to value real estate and understanding what equity players do what (since you interact with 20+ each deal who your and ask questions vs. 1 client in debt). You are diving into the leases themselves, CAM recs, etc. and utilizing debt assumptions to solve for levered returns on value add deals you are valuing.
It depends on the deal flow of the IS team you are joining, but as someone with experience on both teams who has moved to the principal side, I would say IS is much more relevant to the principal side.
Sounds like you were on a shitty financing team bud. We constantly battle our clients on all their assumptions especially on equity raises and we build new models for most of our deals because none of our deals are cookie cutter (why would people hire us for easy deals)? Our job is to think like the capital we are placing, so we spend a lot of time thinking about all the assumptions and where the market will be concerned in order to figure out how to preemptively quell their concerns.
The most important factor on the sell side is the SHOP and the TEAM, because this will determine how strong your experience/deal flow is as well as what you learn. I know many people from both D/E and IS brokerage that went on to a wide variety of principal side roles at top shops.
There are good and bad D/E and IS sale teams, but both provide strong transferable experience to the buy side. Pretty brash to generalize based on your anecdotal experience. Sounds to me, as an example, like you're comparing debt brokerage experience at Meridian to IS experience at CW. I could draw the same conclusion in reverse if I compared investment sales at Besen to financing at HFF. Pretty ignorant comparison.
Sounds like you have a lot of experience with DP and IS. For an undergrad going into a DP/IS internship with a top brokerage firm (think JLL, CBRE, CW, HFF) in a major city, would you suggest staying where I am, gaining experience and transitioning to the buy-side later? Or should I be trying to leverage this into a REPE or development role right out of college? Would an MBA be in the mix? Thanks!
I think IS and D/E ON A STRONG TEAM is one of the best places to start in the industry. The exposure and experience you gain at those shops as an entry-level analyst are hard to beat. I just accepted an offer with a $5bn+ AUM REPE, and I've had interviews with GP operators, developers, and lenders as well. It was super easy for me to interview with all types of different shops because I've worked on every asset class, deal type and capital structure out there so your exit opps are vast if you are a good networker. That said, if your goal is REPE or development and you can land it right off the bat then just do that. Getting into brokerage is generally easier than the other way around. Brokerage is an excellent place to start if you are not sure what you want to do and if you can't land the REPE or dev job that you want straight out of school (or transition into the industry as was the case with me).
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