Judging Companies By Their Size

Hello All,

So I wanted to get some advice on how to evaluate the scale of RE firms based on their relative portfolio size. We always hear RE/PE companies say "we are a $20B firm" or some other number with a B, etc. In your opinion, at what amount what you could consider a firm to be elite, upper tier, middle market, and bottom. Like would a $75B firm be considered elite? Would a $25B firm be considered bottom? Help me understand how to put these numbers in perspective. Thanks in advance. 

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Comments (11)

  • Developer in RE - Comm
Apr 28, 2021 - 4:53pm

My guy. AUM is relative. Some smaller firms have close ended opportunistic funds that regularly get disposed so their AUM is generally "smaller". But these smaller funds have low head counts and big promote/incentive fees to split to small group of people. Bigger firms have seperate accounts/open end funds/evergreen vehicles that are never sold thus higher AUM, but these vehicles are rarely opportunistic in risk profile. Higher AUM equals higher AM fees but it also take tons of overhead expenses to run these companies.

If your purpose is to compare AUM and use that as a bragging right (yes, that happens all the time in our industry...), compare x firm to the big boys AUM (BX is 370B, AEW 70B, Brookfield 211B) that are all listed on their website. Use the Rhodes Associates comp guide as a ruler - under 2B, 2-5B, 5B+. Not sure if that does any good if you're talking to people in our industry, but it sure does get your bumble date wet (or hard) down there.

Someone in the RE forum is going to come in and say blashphemy for your use of the word "elitism" in here, but I won't. Generally, I consider smaller, but active opportunistic shops or high AUM shops to be "elite", whatever that means...By that I mean, they usually have folks with Ivy education in senior management, if that is "elite" enough.

At the end of the day, who cares how big is the AUM if they pay you big USD...Hope that helps.

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  • Associate 1 in RE - Comm
Apr 28, 2021 - 5:44pm

AUM is not a consistent term in RE. Owner / operators will use total asset value. PE funds will use total capital commitments (aka only the equity in their deals). Some owner-operators will include their property managed assets. Some giants have large open ended funds that never sell, some are constantly selling and raising new capital so their aum doesn't grow as much.

AUM is not a great way to group companies 

Apr 28, 2021 - 6:32pm

So, there is an old adage in real estate that essentially says "it's not what you own, it's what you control".... and thus the secret is OPM = Other People's Money....

So what are you measuring...

Equity investments

Debt Investments

Total Investments (Equity + Debt)

Gross Assets

Net Assets (i.e. Value - Debt)

Market Capitalization (like with a REIT)

Assets Under Management (direct funds? Discretionary funds?) - What about Separately Managed Accounts, where do they fall??

or how about

Gross Leasable Sq. Footage

Number of Properties 

Acres of Land, etc.

Total sq. feet developed

The point is, good luck trying to make this meaningful. Size is not a great metric of comparison. To that end, the IREI 150 list is about as "definitive" as I am willing to represent (with the PERE 100 being decent for measuring private equity fund raising activity). Still, I don't really respect a "Top 10" more than a "Bottom 50" firm, or would want to work for one vs. the other based on that at all. I wouldn't choose which to work for, invest in, or do deals by that metric (and neither would most of the real world).

So, what's the use of using some "tier" system if won't solve any problems..... (like who will pay you the most...)

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