Leaving a BB Analyst Program for Boutique RE Investment/Operating Firm?

I'm nearly finished with a 2-year analyst development program for the CRE group at a bank. I've been getting contacted for interviews via linkedin and the like for smaller RE Investment firms... for an acquisitions type role (more of an overall analyst role... firms seem rather small to break out the job functions). My goal is to move to the equity side, but I know I can move into a permanent role at the bank/progress here after the program... and I'm worried that moving to a small investment firm might be somewhat of a step back? Think 500MM to maybe just under 1.5B in a major metro.

The teams are also small... around 10 people. I researched the firms and the leadership has excellent experience (partners/MD at major funds/PE that are creating their own) and great assets in all property types/investment strategies... just relatively few of them.

Pay would probably be around the same or slightly better I'm assuming, but job security makes me hesitant.

Any insight on this is greatly appreciated. Thank you.

 

So first off, you need a reality check:

  1. You are an analyst, not an MD with 25 years of experience and billions in transactions under their belt.
  2. They are inviting you for an interview, not flat out offering you a job.
  3. 500mm to 1.5B is not chump change. I understand that you work at a bank so those numbers seem small, but they aren't.

Now that all of that has been said. The next question is : Why the hell would you turn down an interview? If you get an offer and decide you don't want it, all you have to do is politely turn it down. As long as you do it professionally, then all you've done is spend a few hours interviewing/prepping and you've gained contacts/broadened your network and figured out something else that you don't want to do. And if you accept the job, then you have a new job you want. That is what we call win-win.

 

What do you mean by "a step back?" Less panty-dropping internet prestige?

Either you prefer to stay in your current job, due to culture, money, hours, exit opps, etc. or you prefer to leave for a new job. We can't tell you what you want to do.

Commercial Real Estate Developer
 

Do you know how much 10 guys at a 1bn shop are making? Assume 50% leverage, that's 500m of deployed equity that they take 2% of. That's 1m per employee. That's not even taking into account the many other (likely more profitable) ways they're getting compensated, that's just the management fee. But ya, a shop that's pulling in a minimum of 1m per employee is definitely beneath you...Too funny.

 

I agree with a lot of what you wrote but the per employee numbers are way off. I'm at a shop at has 750mm in assets and 12 employees and the owner of the firm is filthy filthy rich but that does not necessarily trickle down to the rank and file. I really wish it did.

giddy up
 
KramerTheAssMan:

I agree with a lot of what you wrote but the per employee numbers are way off. I'm at a shop at has 750mm in assets and 12 employees and the owner of the firm is filthy filthy rich but that does not necessarily trickle down to the rank and file. I really wish it did.

I hear you, but his numbers are not off; he calculated revenue per employee correctly. Revenue per employee is a common metric and it's not something that should be shrugged off simply because the ceo makes more. $1m/employee is more than Evercore.
 

I've never said I'm not going to the interview, I usually always go even just for practice/experience... and in this case I am. The point of my post was to gain advice.

Taking a position at a firm with 5-10 employees and probably a handful of assets/interests that total around $500MM, give or take.... seems risky to me in terms of job security, benefits, recognition etc.

Maybe I'm being foolish, still any advice is helpful, thanks.

 
Apricots:

I've never said I'm not going to the interview, I usually always go even just for practice/experience... and in this case I am. The point of my post was to gain advice.

Taking a position at a firm with 5-10 employees and probably a handful of assets/interests that total around $500MM, give or take.... seems risky to me in terms of job security, benefits, recognition etc.

Maybe I'm being foolish, still any advice is helpful, thanks.

You actually probably have better job security at a small firm that's doing well. Big banks follow the economic cycle--hire during booms and layoff during recessions.

Array
 

I don't know if it's a matter of being foolish or not, because your concerns aren't irrational (outside of "recognition" I'd say), but it's more we can't tell you what you want.

I have a friend who would never work anywhere that wasn't a huge corporate entity. To him, the structure, security, clear progression, defined roles, etc. are all a plus. Me? I would hate that. I love smaller companies because you get more exposure to things outside of your specific role, have more access to management, can make a clear impact, etc.

You seem to be worried that a company with 5-10 employees will fold. I think that's silly on it's face, as they could be lean on purpose (plenty of RE companies are), could possibly pay more, could give you a better title/role, and because I'm naturally biased toward small companies, but I could either be wrong on every point or I could be right and it still wouldn't fit your personality.

Only you can make that call.

Commercial Real Estate Developer
 

All of the above is good but to add, if you get to the point of an offer ask around how their fundraising is going. You can tell the stability and growth prospects of a smaller firm/fund based on how their last raise went or their current raise is going. Hell, you can tell the same about big firms-even some of the big boys haven't had the easiest time raising money over the past few years. It's probably not a bad idea asking around before the interview even because if they're doing well, mention it. Based on your post it sounds like they're newer ("partners/MD at major funds/PE that are creating their own") and it's great if you can get in on a rising star.

Like @[object Object]" I'm biased towards smaller firms in general for the same reasons but if that's not your bag, make the decision on your own. Get a feel for the firm and figure out if you'd like the culture of not always having clearly defined roles and less support in general. For example, if you're putting a book together for debt, not only are you going to put the book together on a computer, but you most likely don't have a production team that you can email it to and have it on your desk so you'll be printing and binding shit on your own. That's a small thing but it will go across the board-there's probably not a real HR department if you have any issues, you'll book your own travel, etc.

You also need to figure out if you definitely want to go to the buyside regardless of your ability to land at a Blackstone level firm.

 
Dingdong08:
You can tell the stability and growth prospects of a smaller firm/fund based on how their last raise went or their current raise is going.
Tru dat. This is probably more important than any of the qualms raised above - each fund has a life, and for all we know, this one is winding down in 16 mo's and you're out on the street again.
 

Not sure why everyone is jumping all over this guy but rather than dwelling on that, I think the fundraising advice is a good suggestion and would also try to get a hold of someone who has previously worked there if possible. Might be difficult to do since its a small place, but someone who has lived it day in and day out and no longer has a vested interest is probably going to give you a more realistic idea of what to expect than anyone you interview with.

 

For me it was the comment about about moving to a small investment firm being taking a step back. I will always fight the stereotype that you have to work at Blackstone, JPM or somewhere "large" for it to matter. You can make money in every part of real estate - from mobile homes to billion dollar developments, saying that only the "big" stuff matters is ridiculous.

I actually work at one of the large life companies but it isn't because I was chasing prestige or institutional status - it was because I seriously loved the team of people that hired me, I thought what they did was interesting and I wanted the job.

I was just at a young leader conference event that had about 40 people at it from various RE companies. Most were originations/acquisitions but there were a few AM people too. Being a new to the party acquisitions guy (was AM previously) it was interesting to watch everyone pretty much filter themselves into sub groups based on perceived prestige of their company (and the hiearchy seemed to be based loosely on transaction size, volume and flashiness of deals from the last few years).

It sort of makes sense because you hang with the people who are your everyday competition since you know them best, but this event was specifically held so you could meet the other people you normally wouldn't meet, not the people you already know. There are a million places for me to to meet the guys that also work in core, Class A $100+MM transactions, but very few places for me to meet the guy who specializes in the $5MM deals and learn how that process is completely different.

The whole hiearchy stuff that I saw is bullshit so with people who are younger/newer to the industry, I always try and explain why the sun shouldn't rise and set on the "big" firms. We all know that the company specializing in the $5mm space isn't doing it for free, and in some cases, their returns are crazy in relation to the "big" guys.

 

Only reason I said that is because it seemed like he expressed the 'step back' as a concern, not a foregone conclusion, and started the thread to get some feedback. I think you make some valid points about deal size / shop size - its not a question of right or wrong its a personal preference. I would just add that my perception is that its probably easier to move from a larger shop to a smaller one than the other way around. My last post suggested thorough due diligence because there are crappy firms to work for and good ones, no matter how big or small they are.

 

About a month or two ago I had a conversation with an Exec VP at a major REIT--semi pitch, semi not. He asked me why my team wanted to represent his company in selling a $100mm-$500mm office tower/suburban office park for 40 bps rather than concentrate on (what he viewed) as our bread and butter ($5mm-$75mm transactions for 200-500 bps). He went on to tell me how when he was in investment sales, he would take a prestigious listing for obvious reasons but would make most of his money buy selling gulf gas stations at 900 bps fees. Its all relative.

We make our money on the smaller transactions and only use our larger transactions for marketing purposes. "We just sold xyz tower-- a record sale in the CBD, you should let us sell your class B secondary low rise". We do the major deals for "street credit" and do them for discounted fees.

*Obviously referring to brokerage and not the buy side.

 
Best Response

Apricots - a few points:

1) Much like jumping from a bank to a HF or traditional PE firm - the buyside/principal/equity side (whatever you want to call it) is generally made up of much smaller deal teams, less administrative and overhead. Each member carries weight at these firms. You won't be getting 21 vacation days.

2) Real money is made in real estate through ownership, fees and carry. you'll see a piece of this action at smaller firms at more junior levels (generally and assuming the guys you're running with aren't dicks). You may also get to invest your own capital in deals. If offered a job at these smaller firms, inquire how this works at their firm.

3) The success of these smaller firms are based on the following, understand these points before making a decision: a) Executive leadership - you will learn the business from who you are working for and with. This is HUGE. b) Ability to raise capital quickly and consistently - lifeline of execution c) Historical performance realized by investors - affects B d) Relationships and deal flow - the game. execution.

-Research and inquire about all of this. Figure out the quality of this opportunity on your own. If you want second eyes or need help in evaluating the firm feel free to shoot me a PM.

4) Smaller firms will give you exposure to the real business of real estate. Not just 1 small part, i.e modeling acquisitions. Depending on your end game this is huge. If you want to just make high salary and bonus then find a larger firm. If you are a real hustler and real estate player at one point you will head to or start your own 'smaller firm.' I will say, it doesn't hurt to get a larger firm's acquisition group on your resume.

5) I feel like I'm losing flow here. Been interrupted by brokers twice while writing this. Huge learning curve at smaller firms. Make sure you are the guy who is a self starter and can learn on your own. quickly and effectively. no babysitting at these firms.

Good luck


Just realized this thread was from 8 months ago. Eff me.

 

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