I've had a couple of people PM me about what I do in REIT acquisitions and what the deal process looks like. I figured I'd post this for people's future reference. I work at a fairly large REIT (>$10billion AUM) so this process may be different for smaller shops. We also exclusively focus on CRE:
This is how the process usually works (very simplified):
1) A Managing Director receives an OM from a broker. The MD will usually do the first glance through the OM and will make a judgement call whether to do a further analysis or not. Almost 95% of the time they will know by looking at the OM for 10min and talking with the broker whether the deal is viable or not. Assuming the deal is viable then...
2) MD gives me the OM, the lease (which is usually included with the OM), and the broker's Argus model. It is then up to me to comb through the OM, lease, and any other documents provided. I'll spend an 30-60min going through these materials. With the items I learned from the OM/lease, I'll update the broker's Argus model. The broker's Argus is always much rosier than it should be. As I'm updating the Argus, I'll talk to our debt guy to get a quote on debt and then input the debt assumptions into Argus. Also during this time, I'll reach out to the broker if I have any questions about their assumptions or to learn more about the real estate or market.
3) After updating the Argus, I'll dump the cash flow into our firm's cash flow model. From here I'll figure out the IRR, cap rate, accretion/dilution, etc. I'll also run some sensitivity analyses.
4) Next I'll research the top tenants to figure out their businesses and read through their financials (assuming they are a public company).
5) With a thorough knowledge of the real estate, lease, model, tenants, and market, I'll then go back to the MD and present my findings. I will make a recommendation whether or not I think we should proceed. The MD will usually either kill the deal or say we should proceed. At most places, only 1 out of 5 (or more) deals goes to the next step. If it does, the MD may have me tighten up the model, change assumptions, etc.
6) MD submits a Letter of Intent (LOI) to the broker. Usually there are two rounds of bidding: the initial call for offers and the best and final. With all the offers in hand, the seller will select 2-3 to the best and final (these are not always the highest bidder).
7) Once you've made it to this point, the MD will have a good idea of what is our max bid and what bid would get us the deal. Brokers will be pretty honest with you if you have a good relationship with them. After you up your bid, you submit the best and final offer. Assuming you win, the not as exciting part starts....
8) Most deals have a 30-45 day due diligence window and a 10 day closing window. During those 30 days you will be getting the purchase and sale agreement (PSA) figured out, appraisals sent off, property condition reports (if not done during the bidding), zoning, etc. etc. Every firm will have their list of items. At larger firms a special due diligence team will handle this and the acquisitions people will be on the sideline for support. At smaller shops, this will be entirely up to you and your deal team.
During stages 1-7, you will have investment committee meetings/presentations and endless conversations with your deal team, broker, lawyer, etc. Your job is to crunch the numbers and understand the details of the deal so the MD can make a more informed decision. Usually I'll be working on 3+ deals at a time and each deal will be at a different stage.
thanks for the thread! what do you think about the long term prospect of a career in REIT? and do your firms recruit MBAs ? curious how you broke into the industry.
Long-term career prospects in the REIT world is great, especially in acquisitions. My firm doesn't target MBAs, but if there is an associate position open, they will definitely accept MBA applications. Does that make sense? But we'd only take an MBA student IF they had some type of RE experience before (brokerage, lending, etc.). RE is not like most other realms of finance where an MBA is required. I think most places (including some of the tope REPE shops) would rather take someone with a bachelors + 5yrs RE experience over someone with an MBA and 2yrs RE experience. In this industry, experience/connections/reputation trumps degrees.
I got into REIT acquisitions after working in Big 4 audit. My route was not very traditional, but PM me if you would like to know more.
@AcquisitionsGuy there is some great information on this thread, thanks for posting. I actually just posted a topic this week in regards to getting into acquisitions. I'd be very interested to hear your feedback on it.
Insightful post AcquisitionsGuy!
Am curious if anyone has any comment about exit opportunities, and more specifically whether transitioning into the REIT sector narrows one's options later down the line (should one decide it's not where you want to be long-term).
Great post! I'm sure a lot of people will find that helpful.
Thought I would add my two cents from a slightly different perspective within acquisitions. Quick background, I'm an analyst in acquisitions for a developer/operator (>$20B AUM).
Basically everything is the same as you mentioned above, except during steps 1-7 the MD or SMD is usually reaching out to internal fund/portfolio managers to see if the deal fits in their bucket, and if not then to other potential capital partners including true REPE shops, life insurance companies (and their core funds), asset management firms (BlackRock, Invesco, etc), or sovereign wealth funds (we usually put up 5-20% of the equity in a deal assuming it isn't allocated to an internal fund).
Regarding step 8, our deal team does all of the due diligence with the help of outside legal counsel for reviewing the PSA (Purchase and Sale Agreement) and any other documents that have a lot of legalese (could never be a lawyer, that stuff is so dry). We also usually have to draft up a JV contract/document to formalize our partnership with our selected capital partner. If it's a development deal, then there are MANY more steps beyond step 8 mentioned above as you have to entitle the land, conduct additional testing/reviews, work with architects/GCs, get drawings finalized, plans submitted, permits pulled, build the building (and deal with related issues including budgeting), price, market and lease the building, manage it, and then eventually sell the thing.
Lastly, as an analyst I usually make minor tweaks to the underwriting but get most of the guidance from the associate on the deal first, and then we take it to the MD/SMD to refine further, before sending it off to capital partners and or submitting an LOI/first round bid. We tend to underwrite everything as you'll never know which capital partner may or may not be interested in a deal, so we look at tons of deals but the closing rate is low since we're not just a fund looking selectively at deals.
As for hours, generally 8-9am to 6pm with some days a little shorter and few much longer every now and then if IC memos or other important docs/deadlines are nearing (10-11pm). Overall usually 45-50 hour weeks, which isn't too bad in my opinion given the compensation.
How does a Financial Analysis/UW role differ from an Acquistions/Marketing role at a REPE shop?
This thread is solid. Thanks AcquisitionsGuy.
I do aquisitions for a HNW family real estate portfolio (5B AUM but we own 100% of the equity in all of it) and we run very similar to this.
Great thread. Thanks for posting.
Thanks guys. Any links or info you could provide on structures for IC memos? That's probably something REPE shops will ask you to do along with a case study in an interview, no?
Great overview of the process. I work in a smaller shop and it is pretty much the same. We focus more on development/redevelopment than stabilized properties, so there's minor differences. In addition, our role is a little more expanded. I go through OM's and pass them along to our VPs if I think it's worthwhile, I have contact with the brokers, put together LOIs, etc. Sometimes we also identify properties we want and I'll track down the owner to make them an offer. I also have contact with tenants and help negotiate terms and coordinate drafting of the leases.
We invest nationwide, so there's a bit of travel involved. If the property is close (~5 hours), then I'll drive out with the VP and maybe SVP/President to look at it, otherwise we'll fly out to see it. Our owner provides all the equity, so I haven't had a chance to see equity raises yet. Overall, it's a good mix of computer work (Argus, LOIs, leases, market research, OMs, misc tasks for projects) and getting out and seeing the properties, meeting with sellers, buyers, brokers, current & prospective tenants, various EDC's and other city/state staff. Just to put a little different prospective on the process at a smaller shop compared to the larger shops above.
@"AcquisitionsGuy" - You place debt on each property as a REIT?
It is pretty rare, but we do put property debt every once in a while (REIT will usually buy a property using their revolving line of credit so they can quickly close a deal. Remember that REITs don't produce much cash flow after dividends are paid out. So, in order to pay down the line of credit, the REIT will do one of the following: 1) Raise more equity; 2) Issue long-term unsecured notes; 3) Place property level debt (more common for smaller shops that cannot raise unsecured notes).
What’s do you mean issue long term unsecured note?
Curious then what are the benefits of a REIT? They’re paying out a lot of their cash flow to shareholders and in order to pay current debt service they’re raising more equity or using more debt. Not to be a pessimist, but isn’t that a recipe for disaster?
Also, how does paying executives work? I’m assuming that’s before paying out shareholders and there must be something I’m missing because you have large REITs like SL Green or Vornado.
Good thread, interesting to hear about other's experience in similar roles. I'll share a bit too. My experience is similar in some respects, different in others.
Me: senior associate, been with current firm for a little over 2 years. Company: small public REIT, $1.1bn balance sheet, owned properties are financed at the asset level. I'm not sure what you guys mean by AUM (total mkt value of assets controlled or total value of equity positions?) but whatever. We are a REIT in structure but our deals are more similar from what you'd expect from fund guys. Very small, flat, and CEO-centric deal team. We buy assets fee simple, originate mezz loans, buy existing loans, and put out preferred equity.
Deals come in the door mostly in one of a few ways:
-On-market - brokered by one of the large brokerage houses.
-Semi-marketed - small regional broker/banker - usually this is for preferred equity or mezz.
-Off-market - comes in from an existing partner, direct from seller/borrower, or its something we target by calling sellers/borrowers/servicers directly.
On market stuff all goes to and gets looked at by the junior team (currently me and an analyst, used to be another guy above me but he left recently). We read through all the email blasts / field calls / etc. and download OMs for deals that look interesting. Every week we give our CEO a pile of deals and he picks a few out and gives back to us. From that point, we talk to the broker and do some basic underwriting. If we think we have a shot at the deal we'll dig in deeper (comps, talk to local sources, dig into #s, discuss assumptions with our management team, visit property). Our CIO will review our underwriting and we'll put it back in front of our CEO. He'll give us a #, I'll write up an LOI and submit, same in best and final if it gets there. If we win the deal, on to DD as AcquisitionsGuy described. Sometimes the deal team runs that process, sometimes our Asset Management guys do. Deal team handles legal, but our lawyers are effectively in-house so its not too difficult to manage. For deals over a certain threshold we need to go to IC, in which case the junior team prepares a memo which the CIO edits for CEO approval.
Semi-marketed is the same. Junior guys are responsible for finding and saying in front of the small shops to make sure stuff comes are way. Since these deals are selectively marketed, if we pass on the deal we call the broker to explain why, to maintain the relationship. Some of these shops have relationships with our CEO or CIO and just call them direct.
Off market stuff usually comes to our CEO or CIO directly, through established relationships. Some of this is just restructuring/recapping deals we are already in, or deals that our partners in other deals are in. We have done some outbound marketing for deals which involves shudder cold calling, which the junior team handles. Not fun and often not productive, but very rewarding when it works out.
At my level I am responsible for setting up meetings with all kinds of potential deal sources, which I usually attend with our CIO. We do this not just in hopes of finding deals, but to stay connected and have 'friends' in different places that we can call on for info. Always easier to make a call to someone (for any reason) when you dropped by their office a few months back just to shoot the sh-t.
My hours are not bad, come in between 9-9:30am, leave at 7-8pm if we are busy, a little earlier if not. Of course the occasional late night happens when in deal mode. I worked for a BB bank out of undergrad - hours were awful, pay a bit better, but much happier now.
Great posts everyone! I'm glad others have chimed in to talk about their roles. Also, when I say AUM, I mean the balance sheet book value of the RE.
The REIC (>$20B AUM) I worked at would place debt at the property level unless it was a portfolio level deal where they wanted to place portfolio level debt. This would generally start to require recourse, which is why they preferred property level.
I think part of this was a desire to not dilute investors with new equity and the focus on isolating risk at the property level.
Good post. The investment process you laid out here is pretty standard for not only RE investment firms, but many PE firms as well, just substitute broker for banker, OM for CIM and talking to tenants with talking to clients/suppliers, etc. albeit there are more variables and considerations involved when buying operating companies as opposed to properties.
Do you only use Argus for modelings or excel files as well? Argus are great if one is doing standard analysis but if the deal structure is more creative and requires customization then one still needs to build things up from scratch in spreadsheets.
If it's a simple deal like a single tenant industrial building or something, we'll probably just use Argus. If it's a complex deal, we'll model the leases/get to NOI in Argus and then manipulate the data, model the debt, and maybe make some changes to some other items such as development costs in excel. Sensitivity analyses are also usually run in excel. Most of our deals get exported to excel and then tweaked from there. I think Argus is great for entering leasing information, etc, but altering the pro-formas in excel is a must in a lot of cases. We also use different return metrics than Argus, so all our returns are calculated in excel.
Spot on
In a position now that has been working on a lot of acquisitions lately. We're a regional developer starting to buy up stabilized assets. Not being large, we don't have Argus. This different hurts us in the modeling of leases. Especially when you have a shopping center with 30+ tenants whose lease-up periods are all different and face different assumptions on their rents and if you can get a bump or not. Just a lot of convoluted data when you put it in Excel. So having Argus is great for that aspect. Definitely understand why you'd want to model the capital stack in excel though - so much easier to manipulate. Great posts all around here.
What is the average comp for an analyst and post-mba role (associate?)?
Comp obviously varies quite a bit, but from personal experience and what I've gathered here on WSO analysts generally range in the $60-$80K base range (with 15-20%+ bonus) and post-MBA associates are in the $110-$130K+ range with potentially much higher bonuses. Definitely depends on the shop and location though. Also seen pre-MBA associates in that $130K base range as well and know a handful of senior associates without MBAs making closer to $250K all-in or slightly higher (not necessarily the norm). Lastly, the general trend seems to be that true REPE shops/funds pay slightly better than developer/operator shops, but the latter group can also rake it in with promotes and other advantageous terms in JV deals with capital partners (i.e. 90/10 in, 80/20 out).
thanks.
As someone who just re-entered the job market after 4 years working with some family friends and their fund, what are good channels to access these jobs? Headhunters? I never really had to put myself on the market before, so it's pretty new to me.
what type of sensitivity analysis are you guys talking about? I've seen simple data tables with 2 variable sensitivity such as exit cap vs. purchase price, irr vs. rent psf, irr vs. cost psf, etc.
What other methods of RE sensitivity analysis are you guys using?
@"sdb5057" SelectLeaders.com is a surprisingly good place to find real estate jobs, as are Indeed.com and LinkedIn, especially amongst big firms. Other jobs you have to network your way in as openings are rare but generally most big, reputable firms post to the aforementioned sites. Good luck!
@"inspiredanalyst" Pretty much spot on. We usually just use them in regards to purchase price versus exit cap rate, LTV, and hold period. Overall they're helpful but at the end of the day the exit cap rate, LTV, and other metrics are dictated by what you can get in the market/what your research suggests. It would be awesome to use a higher LTV sometimes but if you can't get that type of debt in reality then it doesn't matter.
Yes, I think those sites along with networking are your best bets. Every bigger city will have a few RE networking groups. In the Northeast there are even groups specifically for RE professionals under 40. These are invaluable as you can learn about job openings before they are put on Indeed, etc.
OP, I currently work at a small real estate brokerage as their Analyst. Our clients and buyers are mostly high net worth individuals and family offices. What are the steps if I want to break into a REIT or REPE after 2-3 years? Is it better if I make a quick transition to bigger real estate brokerages as an Analyst(CBRE, HFF)?
Thanks!
I hesitate to give you too much advice here, but I can tell you that the two guys on my acquisitions team that came from brokerage, came from the bigger houses. But, that can be a function of more people working there. Once again, in real estate, experience will usually overcome brand name (excluding top REITs and REPEs). I'd personally take the job that would give me the broadest exposure, most deal experience, and most responsibility. Being at a CBRE or HFF is not always better, but sometimes it is.
What are the current top plays in the REIT market in your opinion looking out 10 years or so?
Great information in here, thanks for all the posts.
how tough would it be to break into a buyside real estate gig after 3 years of corporate generalist middle market IB experience? I have had significant deal experience with infrastructure/engineering and construction types of companies so I think I could spin that. I know I could learn the modeling basics as I have normal modeling down and can purchase a BIWS or similar RE focused course. Are REITs and development firms looking for candidates with solely RE experience?
Agree with @"prospie", I've seen many people w/ only IB experience break into RE. RE companies will appreciate your modeling skills and ability to underwrite the tenant (which is more important for RE groups that don't invest in investment grade tenants). RE is not terribly difficult to learn. The biggest thing, as most people have already said in other posts, is to stress in your interview your interest in RE.
Sounds good. Any good books you guys would recommend to get up to speed on CRE investing, REITs, developments, etc? I have the RE component to the BIWS course I bought back when I was in undergrad, so need to go through those modules as well.
@"SHORTmyCDO" Agree with the above posts as well - a lot of guys at my shop have come from IB backgrounds and are doing quite well for themselves.
One good book that I haven't read myself, but which others have recommended is "Professional Real Estate Development: The ULI Guide to the Business" which is published by the Urban Land Institute (ULI), a major real estate/urban development think tank/organization.
Also, I'd recommend getting your hands on a trial version of Argus DCF v15 (free on their website, only for PCs) and fuss around with it. If you know people in the industry see if you can get their training manuals from them to practice modeling out a property or two, or better yet ask them if they can pass along some acquisition and or development models for you to look over.
How tough would it be breaking in to REPE after a couple of years as an appraiser? Would the valuation skills using Argus and Cash flow analysis and diversity of property types be looked at as solid underwriting experience?
and on that same note while we use all of these valuation methods at times, sometimes together, i've never actually heard anyone say these terms: cost approach, sales comparison approach, income approach
Right, you'll hear return on cost, cash on cash, IRR, NOI, NPV, stabilized yield, comps, replacement cost, equity multiple, and so on.
hey man what's your 5-year levered CoC(k) ??
This thread was a great read with plenty of knowledgeable folks providing insight on the acquisition side of CRE and awesome questions.
I'll try to add a little more flavor to the mix. I work at a REIT as a Sr. Associate (>$7B AUM) in the Corp Fin group. We are very much intertwined with the acquisition group as we work on the underwriting aspect of the transaction while they focus more on the sourcing side. At the end of the day, it's ultimately their deal, we just provide support.
As most have said, we work from the Argus/OM stage through diligence and closing really fine-tuning our models to make sure we capture everything correctly. We run all of our models through excel, mainly b/c it allows us to create dynamic summaries within the workbook tailored to that specific deal. The beauty of an acquisition is that no two seem to be the same, which makes the job a little more fun (challenging). There are standard items the execs would like to see, but the variations could be whether the project has debt, a development project, an anchor tenant that may or may not stay, etc.
Another large component in our process are investment memos. These are basically comprehensive "books" outlining the deal's financial impact, benefits and risks (more qualitative in nature), market characteristics (comps), tenant analyses and sexy pictures (if sexy)...These memos are used for decision making in meetings with the executive team and sometimes the board of directors.
Being in corp fin. also allows me to be exposed to the capital structure. As AcquisitionsGuy noted, yes, typically a REIT will fund a transaction on a line of credit. Secured debt (mortgages) try to be avoided mainly b/c of certain leverage metrics and having to deal with the likes of S&P and Moody credit agencies. Although, there are many owners who have in-place debt on a project and it would be very costly to payoff early (if you are even allowed to prepay).
Be happy to answer any other questions.
If you have made it this far (thank you), I have good news for some of you. We are very close to posting an ad for a new analyst in our group. Send me a PM with questions and/or your resume and I will share with my fellow colleagues.
Is it realistic for a T10 JD/MBA with 2-3 years of pre grad school finance work experience (FX hedging, not RE), and 3-5 years of real estate transactional/land use work experience in a law firm to transition in at the VP level? If so, what would comp look like hypothetically? Thanks---this has been a highly informative thread.
jagpaw, are you asking about VP - Acquisitions at a REIT? I cannot speak specifically to that because I work at a mid sized (>$5B AUM) privately held owner/operator, but that sounds like a hard transition. I did about 3 years of Acquisitions here, a 2 year stay in another area and then the past 3 years in Asset Management. Firms generally expect acquisitions guys at the VP level to be bringing deals, especially off-market deals. Any analyst or associate can cold call 100+ brokers to find every on-market deal in the country, but your group is going to get emailed about those regardless and dozens of firms are going to bid on it. VPs and above should be finding off-market stuff that you have a much better chance at actually buying. You need to generate business, and if they hire you and you are unable to, your stay may be very short. As far as VP level compensation at a REIT, I have heard $150-$200 base with a 25-50% bonus, for my own search. Acquisitions guys who are getting deals done, however, are going to make more, especially on the bonus.
thanks baamboo. Just from browsing on Linkedin I've seen some guys make the transition to an acquisitions VP role with small to mid-sized developers and/or REPE shops. I'd imagine the qualifications differ with a REIT, but I've seen that avenue explored as well. Because there's so much legal due diligence and litigation risk in any development endeavor, I'd imagine a jd/mba skill set may be more valued there, but I could be wrong. I've heard those guys value land use knowledge as well, but that's obviously gonna be a hyper local skill set.
Hello, Thanks for sharing your experiences. Your post shows that working in acquisitions company is not an easy task.
Thnks.........
This thread is very much spot on. I dont have much to add, but I can say to anyone who's interested in REITs, listen to what's being said in here.
One of the best threads in a while
Very helpful thread, interesting to see how the process works at different types of shops. I work for a family office development company as a manager in acquisitions/development. The focus is primarily redevelopment/ground up construction for a mix of uses in major US cities. We try to focus on off-market deals as much as we can. We do not purchase any stabilized assets. While I am considered a junior guy here, I lead the sourcing of development opportunity which I really enjoy.
1) Internally research the city we think we want to enter. Have an ongoing list of top cities based on a ton of different economic points. The company also has stabilized assets in a number of cities, so we know the next batch of cities we want to enter. We pick the city, say Boston. Review the office market (rents, values, total square footage, density), retail market, hotel ADR/Occupancy/RevPAR,, pull comparables for what development sites are selling for, speak to a a land use attorney to start understanding the zoning code, etc. Spend a lot of time upfront vetting the city and then getting the approval from the partners to move forward. Assuming we like the city, we make some phone calls to brokers, introduce the company, what we are looking to do, get on distribution lists, etc.
2) Outline a very tight map of where in the city we want to be located. Use this map to really focus on this area. We usually like to try to find a smaller brokerage group (not the CBREs, Cushman, JLL, etc), and some guy who is hungry to knock on doors or line up a meeting for us with ownership groups.
3) Assuming we identify a property we think fits the box (location, size, etc) we can gut renovate/add floors to/ re-purpose, tear down, build ground up, etc, I add it to my prospect list and run some initial research on the property. Look up tax records, ownership information, etc.
4) Reach out to the broker to see if they can get in touch with the ownership group and set up a phone call.
5) Assuming they actually have interest in selling or entering into any type of deal (very low likelihood to even get the phone call in the first place or find a distressed, vacant or under-performing property) we will try to set up a call. If the location is a bulls-eye and it seems like it would be beneficial, we meet face to face with the group to show we are serious. If things go well, we will submit a Letter of Intent (LOI) to the broker. As this deal is off-market we usually have an agreement with the broker to pay them a fee as the seller might not.
6) Negotiating back and forth over price, terms, etc can take up to a few months. All the while, we are running economic models to project the redevelopment of the property. I put these together and send up the chain.
7). Assuming we agree, we give ourselves whatever is customary in the city for due diligence, say 30-60 days. We make sure we can confirm all of or as many of our assumptions in this time frame prior to closing. We speak with our land use counsel to review the plans the architect put together for the property. We have engaged engineers at this time, consultants, really studied the market for whatever use we intend to put on the site. Travel to the city, make sure we conduct environmental studies, traffic, etc.
8). Once the deal is closed and we are going through the entitlement process or if the property can be redeveloped as of right, the project is mostly handed off to one of our senior project managers. I stay involved but usually someone with more experience overseeing all of the local consultants heads it. I then move onto another city. Tend to focus on 2 cities at once, as its hard to find these type of off-market deals.
I left a lot of information out as it depends deal by deal. Company aims to do 1-2 deals a year so we tend to identify the city we want to be in and then go all in on finding the opportunity.
Happy to chat with anyone about our process. PM me.
Thanks.
Awesome post, thanks for sharing this info.
Great insight thanks for this. Also welcome to the forum, always great to have new folks with new information and opinions.
what are benefits like in small shop? As in 401k, health and timeoff? Do many small shops not offer? And how many vacation days do you guys in small shops get? ( small as in like under 20)
No 401k match. Good health plan. 3 weeks vacation. Pretty relaxed atmosphere. Ability to work from home every once in a while, say once a quarter.
Stuck in NYC Acquisitions (Originally Posted: 03/02/2016)
Hi, I'm currently a Senior Analyst at a REPE shop in NYC. I made the mistake of jumping the gun and took this job about 4 months ago. It turned out to be everything I hoped it wouldn't. Searching aimlessly for dream deals that do not exist in NYC. Was just curious if anyone else isn't happy with their NYC-focused acquisitions role. I've learned over time this industry is full of so many bs artists and generally I have been keen on spotting them. Unfortunately, I got myself into this situation and am not sure how to get myself out. Any thoughts would be appreciated. Thanks.
Are you a millennial?
Let me guesss... your acquisitions job is really a cold calling job? Its happened to me on more than a few interviews.
I am 28 years old and luckily got out of a previous canvassing job. This job feels like all im doing are excercises and I may learn new things here and there I do not feel like im growing. All other employees are leaving due to how picky the principal is. We haven't closed a deal in 2 years yet there is a false sense of urgency. Really feel i am just spinning my wheels here.
The easiest way to get out is to realistically look at what you want to do, what transferrable skills you have, update your resume, and start applying. Target what you are truly passionate about (or what can get you there as an intermediate step) since it sounds like this just isn't the right fit for you. Even if someone is having a great time in that type of role it will not make your personal experience better.
Realistically, you should have a professional resume reviewer read and update your resume to satisfy your target roles once they are identified. You are early in your career and may not have full visibility into the types of experience different roles target. There are experienced professionals who review resumes for a variety of roles on WSO but you may be able to find cheaper alternatives via Google if you don't mind a potential drop in effectiveness.
Whatever you do, don't take the shotgun approach applying to anything and everything before accepting the first job which makes an offer. That is the #1 way to end up miserable all over again. It may take some time but there is always a way to transition from a role you don't like into one which you do. Good luck!
How are you stuck? Find a new job if your current job sucks.
I have roughly 3 years of exp. I was fortunate enough to be a development analyst in my first role and that is where I truly hammered down my modeling skills. I ended up leaving there after 18 months as most of our equity was tied up in a large site that we could not dispose of. I ended up taking an acquisitions position with a group down in Fidi which ended up being a total waste of time. I was basically hired to run around the city for the principal as a deal chaser with criteria of 2009 prices. I slowly fizzled out of that role and was out of work for two months before ending up where I am now. I've been here 4 months now and I just get the feeling my CEO is on an EB-5 Visa and has no intention of closing any deals. My day consists of being forwarded every on market deal in NYC and having to underwrite and present to the Principal. After we look at a deal, we never speak of it again and just move on to the next one. Maybe I just need to give it time but as it stands we have two great deals and we refuse to bid up for them. I would love to transition to a bigger company as I am craving corporate structure and have not had it for a year now. I would obviously want to stick with acquisitions/development as that is my bread and butter.
My main problem is that I am a Senior Analyst and make $55k per annum annually. This is what irks me and I was sold on the promise I will make up to 130k with bonuses on closed deals but clearly this will not be the case as I am getting the gist that I am wasting my time.
Holy bejesus - let me get this out of the way then I'll shine some light on your situation.
The bad: 1) 3rd year analyst in NYC making $55k? How do you feed yourself? 2) You are clearly not at a REPE shop. More like a very shitty small "private investment shop" that seems to do anything but invest. 3) Sounds like a string of 3 poor choices, have you re-evaluated your decision making skills? Why do you keep going for these same terrible "acquisitions" jobs. You should not care about prestige of acquisitions title or working for a "REPE" shop, but rather the experience you'll gain executing live deals (AM, PM, dev, acquisitions, etc.). Seems like you're doing anything but working on live deals.
4) Do you need help identifying what makes a good job opportunity at a small real estate investment firm? 5) How big is your current firm? I can probably guess which shitty conman you're working for. NYC RE is very small world.
The good: 1) You have a job, it's way easier to find a new one while your employed. Don't waste time. Figure out where you want to be and what you want to be doing. 2) the market is "hot" a ton of legitimate firms are hiring - gear your resume to the role you want and make sure your technical skills and investment acumen can be demonstrated. 3) If you need help with resume, PM me I'll be more than happy to help.
Listen to this man.
I'm interested in hearing your advice regarding #4 as I plan to look in future for job at a small firm.
Here ya go, just pulled this from another topic I posted in.
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) 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.
I understand your frustration. With that said, this isn't exactly a market many firms are purchasing in. However, with your acquisitions skill set, I don't see why you cannot attempt to move to a different firm. Try reaching out to a few of the headhunters or use your contacts.
The fact that you aren't closing deals is the most concerning part.
Every acquisitions guy looks at a 1000 deals that never materialize but if you guys aren't actually buying and closing there is no way to learn and grow.
Get out.
Acquisitions analyst position good experience? (Originally Posted: 07/31/2012)
I have a career dilemma.
I have been offered a full-time position in multi-family acquisition. I am wondering if this kind of experience is complex enough to land a job in real estate private equity several years down the road?
I am currently finishing my second year at a fund of hedge funds (that do not invest in RE assets). This was my first job out of undergrad. During undergrad my only RE experience is a 6 month part-time internship at a multi-family acquisition firm doing some basic components of underwriting.
Am I mistaken leaving a fund of hedge funds/ giving up more capital markets experience or should I dive right into the brick-and-mortar acquisitions job now?
Or am I a fool and need to give up all of these and go look for a RE investment banking gig? Also thinking about an MBA possibly.
My end goal is to work with a private equity company that funds development.
Any and all input helps friends!
I had a somewhat similar thought, but was going to ask more fun a curious angle rather than a declarative one. but
For someone not as well-versed on the industry as others on here may be, what's the major difference between the job the OP is asking about and working as an analyst in REPE on financing of multi-family acquisitions? I'm guessing the answer is the OP's job is more focused on cash flow modeling, gathering of market data, etc; while the REPE job would be more focused on financing structure of the deal? But wouldn't the REPE's first goal be to have a thesis on the PV of the property, meaning that it would get into the weeds on the CF modeling, etc?
Technically-speaking, "private equity" in real estate can encompass any number of real estate investors, ranging from high net worth buyers and local operators to big pension/money managers to the opportunity funds and megafunds that most people think of as private equity (high return strategies, Wall Street money, institutional shops that pay better).
Obviously there is a lot of private capital that buys multifamily, but you are right that the asset class is fairly simple and there are not a lot of great value-added opportunities (outside of some repositioning and development plays) in the space. If you're selling a small apartment building, the best buyer will often be a local high net worth investor looking for some cash flow, and the larger buildings tend to sell to REITs, pension funds, and other "core" investors. I work at an large opportunity fund, and we rarely/never (especially these days) see apartment deals that make sense.
On the other hand, if you are focused on getting into real estate, you need to start somewhere. The reality is that you will not likely find a route into one of the major opportunity funds, since they tend to hire analysts from real estate investment banking programs as pre-MBA associates. RE PE funds tend not to care about the MBA nearly as much as generalist PE funds, but those that do will look for MBAs with pre-MBA RE PE experience.
So with that said, if the opportunity is decent, the team has a good track record, and the pay is okay, you might think about getting into real estate through this opportunity and look to parlay that into something more interesting to you further down the road.
Amazing post, wish I can give you a SB if I have enough credits.
OP, just curious how many rounds of interviews did you have for this multi-family analyst position?
re-ib-ny, so basically the take away is that the REPE has more exposure to different types of deals, while working specifically as an acquisition analyst would be doing many of the same duties as the REPE gig, it would be limited to that space?
Many real estate deals are done in the form of JVs where there is a capital partner (RE PE fund, institutional investor, sovereign wealth fund, pension fund, high net worth investor, etc.) and an operating partner or asset manager (often a local group with strong operating experience).
The role of the operator is to know the market. A good operator has strong relationships with local brokers and owners and ideally may have access to off-market opportunities. The operator has a good idea of what tenants are looking for space (such as other buildings' tenants whose leases are expiring), the competitive landscape (what terms other landlords are offering), and an eye for properly positioning a project for the market. A good operator should also know how to maximize cash flow in a project by managing expenses and maximizing ancillary revenues (like parking, storage, signage, etc.), and if there's a repositioning component, they should be good at keeping construction on track and on budget.
In an acquisition where I'm working with an operating partner, I'll rely on the junior guys at the operator to provide me a lot of the local market intel. They can tell me what they think tenants like about a property, and what some challenges are that need to be addressed. They have a view on rents and expenses, ways to increase income, and where money should be spent. The operator usually puts together an Argus and some preliminary cash flow runs. I'll rely on some of that information, but work it into my own model to see how returns look. I see it as my job to understand the risks and downside scenarios, where I think operators often only look at the upside (or, at their worst, some operators just care about the fees they'll get paid).
When doing a real estate deal, I think the model is a smaller part of the equation than people on this forum think. It's really not that hard to model cash flows; the challenge (and the rewarding part) of being a capital partner is to understand the risks to the business plan and "how" money is being made (a great model helps you to visualize the moving pieces more readily). If your model is saying you'll hit a 20% IRR...how much of that is driven by rent growth? cap rate compression? leverage? What's most likely to go wrong--and how likely is that? Working on this side of the business, I think I've learned a lot about how to look at the numbers and decide if I think the story behind them makes sense. When working on distressed deals, there are often complicated legal aspects to the situation--weird leases, weird debt, weird litigation, etc.--and so on many deals I also spend a good deal of time working with lawyers to understand what's going on. At the culmination of the process, it's my job to put together memos and materials and present part of them when my deal team take a deal to investment committee.
re-ib-ny, great post. I work on distressed deals. Your points were spot on. Everything from JV's with operators to understanding and analyzing the risk associated with "complicated legal aspects" playing a larger role than modeling.
Sorry to steal the spotlight, but are your opinions on an analyst gig for a firm that specializes in Fannie Mae /Freddie Mac financing for multifamily products?
If I ever meet this re-ib-ny guy I'm buying him a beer, at the very least
Another SB for re-ib-ny, great information.
I concur on the excellence of the post as well.
Acquisitions- Hired to be Fired? (Originally Posted: 05/30/2015)
I work at a small real estate investment shop as an asset manager. We have 17 buildings in major and secondary markets along the east coast, probably around $750mm AUM. I started here about 8 months ago along with an acquisitions guy. He was formerly an analyst at a major player and left a pretty good career to join our shop. A few days ago I was shooting the shit with one of the principles of the firm and he was talking about firing the newer acquisitions guy (we currently have 2) because we just finished a major buying phase and his services were no longer needed. He said this is how they always do business once they finish up a major purchasing round.
This startled me a little and I brought it up in conversation with our office manager who I feel I can trust and she basically told me that this is how they always conduct business and they don't tell the acquisitions people that they are basically coming on as a temp employee and then can them once the buying round is complete.
Is this normal throughout the industry? I guess it makes sense from a company perspective if the firm is not actively pursuing multiple deals at once. Ethically I feel like they are completely fucking this guy since he left a solid job and career path to join what he thought was a better situation for himself.
Junior guys in acquisitions are the first ones to go during a downturn. We're not in a downturn (at least not yet). So is this normal? Not sure. Am I surprised? Not really. People in RE are shady - as I'm sure you're learning. If I were you, I would start questioning your firm's senior management. I'm under the impression they're not too fond of analysts, and see them as a liability. In RE you have to run a clean (and ethical) shop. Your reputation is on the line. Blackstone rewards high performers (regardless of their position) and the results prove it. Everyone wants to do deals with them. American Realty is in hole right now and everyone is overly cautious.
Sucks for your friend though. Don't get sucked in to that poisonous environment and become a scumbag. Remember, you're not safe either.
It's common to staff up while in an acquisitive phase and some smaller places will hire knowing they're going to cut back in the future, but not for an 8 month gig. I've seen it more along the lines of a multiple year plan so the person hired knows there's a good chance in 2-3 years it'll be done, but not 8 months. Or I've seen more senior people join a friend/former co-worker's shop knowing it will be a short term gig to deploy capital but the employee knows that they're more of a consultant and it's just a bridge for them. The key is that they both know it's most likely not a forever job.
Doing it to a younger person still trying to establish a career is shitty. I'd start looking for another job. Like stated above there are some shitty characters in RE but there are scores of good ones, and not only at the Blackstone level. Look for ones with a decent rep in the industry. Typically people who fuck over employees are also the ones willing to fuck over everyone else.
We need unionized labor people
Mabye (hopefully) it was some kind of bad joke about firing him. If not I would probably bail.
Sounds like a horrible work environment.
Seriously. Leave this shithole asap
It's not the best work environment but the pay increase was worth the switch. I spent the last 3 years at CBRE which in my experience is a super ethical company so this was a little bit of a shell shock to see this going on. I plan to stay here a couple years and gain some buyside experience and move on elsewhere. I don't think I'm on the chopping block as I currently oversee the Asset Management functions at all of our buildings so there really isn't much of a slow down for my department as opposed to acquisitions when we're not in a buying phase.
Kramer What were you doing that led you to overseeing Asset Management? I'm interested in a similar path.
Nthdegree I worked in construction management out of college, then moved into commercial property management at CBRE, then an associate at CBRE working on an investment sales team, then to Asset Management (been out of school for 6 years)....It's not rocket science but you do have to understand a lot of different things in the industry. You need to understand leasing principles, building management, construction management, customer service with tenants, dealing with brokers on a daily basis. Its a great position to be in to get a total understanding of the industry, however, you are rarely a master of anything.
@KramerTheAssMan cool path. Seems PM--->AM is a huge jump and can be hard to make. Do you recommend getting PM experience to start?
That actually is a cool and inspiring path. Now Kramer is in AM making money like he's "Postto be"
Nthdegree if you can get property management experience at a big firm then I would say that is a good starting point. Asset Management is a hybrid of property management, brokerage and development. You need to understand basic principles of all 3. We have 17 different buildings and each building has a property manager from CBRE/DTZ/JLL so having that background gives me an understanding of their daily tasks, cost/contract estimates, normal building/tenant issues, how to work with vendors. I'd say half of my time on a daily basis is spent talking or emailing these managers to discuss what is happening at their buildings and how we are going to resolve it.
Personal opinion is do PM as a last resort. There are many success stories including a old boss of mine who started as a PM out of college eventually got into AM and eventually an exec at Goldman...however in my opinion still a last resort.
Why not just use a temp agency? It's awful for these guys leaving solid jobs for something they think will help they grow/develop, only to be screwed over. At least let it be known so there aren't surprises... I feel bad for the guys that'll get let go.
Your firm sounds very short-sighted. They'll get some karma when interest rates rise / liquidity decreases and inflated property markets in 1st and 2nd tier markets correct (NY, Chicago, Miami, Houston). Markets such as NY NY did not correct sufficiently during the crisis - significant downside imo over the medium-term once the liquidity spigot tightens and foreign money slows.
How does that type of Karma/problem correlate to firing acquisitions employees who were seen (quietly) as temps? It seems like that you went off on a tangent here. I don't see the connection between firings and the future correction--unless you're saying that this particular firm purchased too much over the past 9 months and will pay for doing so in the near future.
I started off reading this discussion out of curiosity about RE careers, but I jumped in because of the assertion that the Chicago RE market is in a bubble. Downtown prices have been creeping up but are still below their 2005-2008 levels.
I don't care where Chicago is in the cycle, I would be very hesitant to invest there, specifically in multfamily. The pension issues are not going to go anywhere. They will have to raise property taxes. That said, my firm recently completed a multifamily deal in chicago.
Hey, how much can be expected in comp as an Analyst 1st year at a major metro REIT,
Analyst in Acquisition/Development
This type of firms are not uncommon. Acquisition is not an easy job. From day one you need to develop your core competencies, e.g. skills and/or relationship, or you will be likely to let go in a downturn.
But the OP's example has nothing to do with a downturn.
He is totally screwing this guy if he wasn't up front about the temporary nature of the position. As others have mentioned, there are a lot of shady firms and characters in real estate that don't care about anyone/anything but their egos and profits. Sounds like you may have ended up working for one of these types. Personally, I would start looking for a new position elsewhere - if he's so nonchalant about screwing someone else over I would never feel at ease working for him.
that sucks. leave a review on glassdoor.com to let prospective monkeys know these guys target practice on their junior guys with live ammo. if it was me i would look for ways out as your ass might be on the sling next.
Echo everyone else's sentiment that this is pretty messed up. What strikes me most is that they would just casually mention it in conversation to you... seems like poor form
I agree with the above that this is shady, if you think it's legit/imminent you may want to have a chat with your friend. I suggest you buy the first (and most likely several following) round(s).
Exact. Same. Thing. Here.
Much easier for an experienced junior person to find a spot in the market at the moment.
Short sighted for sure. Is the firm not raising another fund or trying to extract value from earlier vintage assets for reinvestment opportunities? If you have that talk with your colleague you may want to suggest that he be more aggressive with lining up capital and developing a pipeline.
The fund is changing into a less complex, lower target yield & long hold format. Less hard-core underwriting & valuation required...
.
What's your background, out of curiosity.
What's your background, out of curiosity.
If your goal is to manage your own RE portfolio, I would assume working closely with the partners would be your best option in terms of learning. Just my thoughts...but I obviously have no experience with these types of scenarios.
Tagged.
Where in the "South".
I think what's most important is the type of deals you will be working on (size? complexity?) and where exactly do you want your career to go (next 2-5 years; a lot of different paths can lead to starting your own fund). Tell me about those two factors and I can give you my opinion. Also, what's your exp like?
Acquisitions. JLL/CBRE are great and you'd be fine there, but I've thought about this scenario before and personally my final answer would be the no-name firm doing acquisitions. Besides, those are not even necessarily small deals; $10 MM and up is a pretty nice range.
Acquisitions for sure. The hands-on stuff that you'd learn there is a lot more applicable to running your own portfolio one day. I might consider otherwise if your other offer was at a buyside shop and not a brokerage/consultancy - but given those two options the acquisitions skillset is far more valuable. Also, the dealsize you would be targeting is definitely around the institutional pricepoint - so if everything goes to hell, what you learn will still be transferable to a bigger firm.
Acquisitions: Strategies and How to (Originally Posted: 02/21/2013)
I just broke into the industry,have been working for a few months as a commercial mortagage banker and love it. I see a lot of deals, know how they get financed and see do the valuations/underwriting from a lenders perspective.
I dont get to see many of the developer/investor investment decision models nor do I get much insight on the acquisitions business models that they're using.
I'm most interested in learning about the distressed opportunities, value-add and opportunistic plays (what's the difference between those anyway?), and the investment and turnaround strategies that companies are using. Clearly, there are many potential business models and ways to turn around the property but I'm in the early introductoin stage and want to know what current thinking is.
Can we discuss here the different acquisition strategies? Also can someone point me to some good reading specifically on strategic acquisition strategies?
Distressed, value-add, and opportunistic have flexible and overlapping meanings as they apply to real estate. Value-add and opportunistic are often used to define the return targets of PE funds. Opportunistic implied a very high return target (think 20%+), core implied a very low target (sub-10%), and value-add was somewhere in between (~15%). As different strategies have come in and out of favor and yields have fallen, sponsors have started to blur the lines of separation.
At the same time, these terms also tend to imply a certain strategy, particularly the term "value-add." The notion of that strategy is that the value-add buyer is buying some sort of transitional real estate that needs some improvement/lease-up. It often implies that one is turning an under-leased property into a stabilized, core asset. "Opportunistic" implies that a buyer is targeting unique and special situations that yield underpriced assets...note that there's no reason an "opportunistic" acquisition can't require a good deal of "value-add." However, buying a vacant land parcel for entitlement/development or making a momentum bet on a market (with no intent to do much work/leasing) could be opportunistic, but probably wouldn't be called value-add investments.
As for distressed opportunities, I generally define distress in two categories: financial and operational. One tends to beget the other, and often they create a vicious circle. A vacating tenant, weak market, obsolescent space, or structural flaw are all causes of operational distress, which can lead to a borrower unable to pay debt service or a decline in value of a property below the balance of debt. When a property is in financial distress, a non-recourse borrower has little incentive to put more money into the project, which can lead to more vacating tenants, deterioration of quality, and operational distress. Distressed buyers will attempt to remedy the situation by taking control of the property at a discounted basis (perhaps by buying the debt, recapitalizing the partnership, or through a foreclosure or short sale), curing the financial distress, and invest the necessary capital to solve the operational distress. Ideally this brings the project to a condition that is attractive to core buyers with a lower cost of capital.
Stumbled across this old thread, thanks for the detailed answer.
I'm bumping this thread.
Thanks for sharing!
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