Life at smaller firms
I see a lot of postings on LinkedIn and Select Leaders for boutique investment RE firms. Not your big PE places, I guess small shops based in NYC with what I assume small teams. Experience wanted isn't crazy some just asking for undergrad or 1 year exoerience and then some preferred quals. Had 6 months experience at small shop now first job out of school in corp RE and would like to try and make move to a small shop after year.
1) how competitive are these? Can you land an interview by just applying?
2) Ballpark of comp at a small one?
1.) I think it depends on what they are looking for which varies each place, some could only want banking/prestigious shop experience, while others could care less if you came from a no-name shop. Yes, why else would they post on SelectLeaders if they don't plan to interview people who just apply.
2.) Depends, varies by firm. Some pay way under market while others are competitive.
Life/comp/deal flow/ experience at smaller shops can vary wildly. Some smaller shops are made up of former big shots from high profile firms. Check out Tryperion (ex Canyon Capital), Acore (ex Starwood). The pedigree of the partners should tell you a lot about what kind of shop you are walking into. Better small shops with have employees with degrees from top UG and MBA schools and strong brand names on their resume. Those kind of shops will pay very well and you will have a great opportunity to learn directly from some very smart and experienced people. Given their former positions a lot of these guys have access to a pipeline of high profile deals. This can be a great opportunity to gain a lot of experience.
On the other end of the spectrum there are small shops made up of people without strong brand names on their resume and lower tier schools. Those shops will likely pay less and you will likely work on smaller/less interesting deals. This can still be a great experience, but it will certainly be different than what I have described above. At a small firm you will be involved in every process and will learn a ton.
Smaller shops can be wildly different from one another. I would say the first type of shop I described would be very selective on their hiring process and the second type much less so. The upside of working for a smaller shop is you can usually get a piece of the firms investments (co-invest, carried interest, etc.) much sooner than at larger shops. This can quickly become lucrative if things are going well.
I agree with...both of you...
You need to work for people who are tied in enough to successful raise capital and execute deals and you need to fit in well because there's nowhere to hide when it's a 10 person office.
I've worked at a huge public RE services firm and a "small" private developer/builder. I would take the culture and structure of the smaller firm over the big one every time.
If you find the right small company, your exposure to deals and management is significantly greater than at the big shops. Less politics and bureaucracy too. That means you get to spend more time learning. No matter what you paid learning is what's important in your early years. And, if you land at a good small firm the pay will be competitive with any of the large firms. It's a win-win in my eyes.
Interned at a MM shop. They don't take anyone without at least one year of IB or related experience.
Starting all-in comp for a fresh H/W/S MBA was around 200k. Hours are insanely good though. 45-55 hr work weeks with no weekend work 95% of the time. I'd say recruiting is a 50/50 breakdown between head hunters and internal networking/having a prior relationship with one of the partners.
Edit: Referring to corporate PE.
^^^^^ Not sure if you can compare corporate private equity with real estate private equity in terms of comp.
But I agree with picklemonkey. Definitely look at the background of who you will be working under and what the firm is currently doing. You will definitely learn in mind much faster and a wide variety of skills at a smaller shop just due to the resources available on hand.
Not talking corp PE. Talking about small investment firms. Not even sure difference between a RE investment firm and REPE.
Differences are small. You can argue its all private equity. Depends on what gets your pickle going. Are you a RE guy? Or do you want to get into high finance that invests in real estate assets. Blend of both?
REPE - fund level (mostly LP but you do get cool shops that can throw weight who act as gp/cogp) Private investment firm - project/asset level (mostly gp, coGP but you do get some shops that can raise like its nobody's business so they can collect fees by doing nothing and placing passive capital into LP opportunities)
A REPE shop is a private investment firm. A private investment firm invests in real estate private equity.
I work at a small shop (with huge AUM, so to speak). With a sample size of 1, I can say that "fit" and basic ability are much more important than pedigree. If you're only hiring Harvard-type guys then you're drastically reducing your pool of "personality fit" candidates. If you have to work 40-50 hours a week in a small office with people, you'd darn well better like your team personally. My hiring was 90% "fit" and 10% ability. I'm sure this will vary from place to place.
Im a RE guy.
Not really the high level finance unless it's rekative to RE. I want a pure RE focused investment firm.
Everyone can say they're an 'RE' guy but no matter what you still need equity to do your deals unless you got your own cash. So even 'RE' guys are finance guys at the end of the day in the sense that they can pitch their RE execution ability to capital partners. Unless it's an off market deal, lowest cost of capital almost always wins.... And that's finance...
Hoping to get into a pure RE firm after putting in one year of FT exoerience. Seeing a lot of small firms postings. Have to network too.
Will say this - when the iron's hot and capital is flowing like strippers at Nascar events these smaller firms are hiring. When capital dries up like grandma, these firms are the first to go. Think of it like the IWB vs SPY. Bear market we short the russel.
Also thinking on doing GETREFM multi family /apartment modeling course not sure if worth it or not but I'm sure firms will want me to know to model regardless if it's for a PM AM or acqusition role
Bump
You should be able to model a simple pro-forma in excel at the least in my opinion. If you understand how the financials work and have basic excel understanding, you should be able to model it out without any formal training.
Example: 100-unit apartment building. Rents are $1,500 per unit. OPEX are 40% of EGI (or maybe they give you specific OPEX). 5% vacancy rate. Debt terms are 75% LTV, 4.5% interest, 30-year amort. Cap rate of 6.00%. General inflation of 3.00%. Create a 5-year pro-forma.
You should be able to model the revenues from the lease rates and the OPEX to get to NOI. Assuming they aren't asking for any CAPEX to be included in the model, you'd then just model the debt service and subtract from NOI to get cash flow. They'll probably also expect you to be able to model the disposition based on some reversion assumptions. Then you can discount the cash flows to get a PV. Or run IRR if there's purchase assumptions.
Depending on the firm you'll be applying to, you may need to be able to model retail/office/industrial leases with reimbursements, absorption/turnover vacancy, market leasing assumptions, etc, but I'd start with being able to model a simple apartment building confidently.
Having said that, I never had a modeling test for my current gig in acquisitions/development at a smaller firm, so it all really depends, but I wouldn't have wanted to go into my interview not knowing the basics.
Thanks for advice.
Did you go into your current gig fresh out of school? Did they train you at all on modeling?
I spent two years as a financial analyst at a MM bank in their CRE lending group (worked on loans from $10-$50 million for the most part). We created simple stabilized models, so I had the basics down, but taught myself actual modeling with BIWS, google, & trial and error mixed with some logic. If you understand what's going on and what should be/what you want to happen in your model, all you need to do is figure out which formula in excel will do what you want. Although I purchased BIWS and it was helpful, mostly self-taught through googling how to do whatever it is I was trying to get the model to do, piece by piece.
SB to you good sir. I work in debt placement and the Excel test I took when I was in the interview process consisted of almost the exact Multi-Family ProForma you mentioned. Slightly different variables, but almost identical. This is fantastic advice, if you can understand this concept, any other modeling will be a breeze.
I will echo the point of understanding how to model all the different property types, as the reimbursements are different for each. I would recommend looking into how to factor in percentage rent for retail assets, as this comes up very frequently in my day-to-day life.
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