Loan Workout/Asset Management Analyst?
Hey All,
I was recently contacted about an "Analyst (Loan workout/Asset Management) position at a "leading real estate investment and management company focused on distressed real estate asset investments, asset management, and workout strategies."
The position is based in the southeast and the description of the role I received mentioned analyzing loan structure, underwriting of new acquisitions, research/analysis of collateral securing the loan, guarantor's condition, borrower capacity, processing creation of SPEs (in the event of foreclosures), assisting in workout process, etc. Also sounds like a good bit of modeling.
Now, I have very minimal real estate finance knowledge (outside of some academic knowledge) and I think I understand most of the description, but I'm pretty clueless about the industry in general.
Does this role sound like a decent entry level CRE opportunity? I know a lot of the description deals with loan analysis and whatnot...something I'm not too familiar with. I had never really considered real estate finance as a career path before. Can anyone sort of break this job down for me? What might exit opps be down the line? Would it be possible to go into REIT ER?
Thanks for the help, guys...really appreciate it. Sorry if anything was unclear/stupid...as I said, I'm pretty unfamiliar with CRE.
No idea what the company is?
Yeah, it's Rialto Capital Management - the real estate investment/management subsidiary of Lennar. Not really sure why I didn't mention the firm's name in my original post.
Let me just give you a word of warning on what Workout Analyst could mean - These guys are basically just glorified repo men. When a loan becomes nonperforming, it gets given to the "workout" team, which works with the borrower to restructure the loan, or to foreclose and "resolve" the situation.
The problem with the job is also that you're essentially working yourself out of a position. The better you are, the faster you burn through problem loans, and the sooner you run out of stuff to do...
Thanks for the input, that actually helps a ton.
Would the knowledge and skills from such a role (loan analysis, real estate financial modeling, etc) translate to other areas of finance? What about the asset management part of the job ("underwriting new acquisitions")? I know it's real assets not equities but there has to be some relevancy of those skills to other areas, right? The salary + bonus seems decent, especially considering it's in a low cost of living city.
seems like sev ppl on here got contacted by that HH
Loan analysis is worthless, but the other skills could apply.
Rialto seems like a "resimercial" company though. I'd be weary of those. Some of the senior employees seem to have pedigree though.
Thanks. I assume "resimercial" means the firm is a combination of commercial and residential real estate investment/management? And is that a negative because residential real estate finance firms generally have smaller deals, etc than commercial?
Yeah, some of their senior management seems pretty good. There are also a couple alumni from my school (semi-target in the southeast) there at the Analyst level.
I currently work at a firm that regularly competes with Rialto. I am on the acquisitions team. Loan workout will be largely non-performing loans i.e. the borrower stopped paying the payment. It is a pretty simple concept: When you take out a home loan your home is collateral. The bank kicks you out after non-payment and has a home now. But they are not RE managers so they sell them in a portfolio. Same goes for CRE portfolios.
The main issue with AM is that the acquisitions team really does all of the valuation to put in a bid on the portfolio. They build the models and just hand them over if they win the portfolio.
"Would the knowledge and skills from such a role (loan analysis, real estate financial modeling, etc) translate to other areas of finance?"
What about the asset management part of the job ("underwriting new acquisitions")? I know it's real assets not equities but there has to be some relevancy of those skills to other areas, right?
Generally, asset management and acquisitions are split up, especially for this type of role. I would get very clear on whether you are underwriting.
Underwriting looks like this: 250k sqft retail center in San Diego. Major tenant just left, building is 60% occupied. Borrower is an ex-developer and made interest only payments until Jan 2013, then stopped. Personal financials show he had $100MM in real estate equity in 2010. Loan is for $10MM. You have 10 days to give a legally binding purchase price for the loan.
Possible scenarios: - Get very comfortable on RE value because you do not think the borrower will ever pay again and you will get the real estate keys. Everything is confidential in the process i.e. you cannot talk to property management
You think the borrower has value and will pay you off if you offer a payoff of $8MM.
You build a model the shows adding 20%+ in value through potential redevelopment In either situation, you bid based on what you think the outcome is.
Let’s say you win it. Generally, you will never see the asset again. Your thesis goes to AM and they manage the relationship by either getting the RE and trying to get the price acquisitions thought it was worth, or working with the borrower to payoff. Of course, there are other situations where say the property is tied up in a REIT that filed bankruptcy, or maybe the borrower burned down 20% of the building, collected insurance and left. Lots of legal issue in troubled loans.
"it gets given to the "workout" team, which works with the borrower to restructure the loan, or to foreclose and "resolve" the situation."
“The problem with the job is also that you're essentially working yourself out of a position. The better you are, the faster you burn through problem loans, and the sooner you run out of stuff to do...”
If you work for an aggressive shop (rialto is one of those) I guarantee you will not run out of things to do. Some are vanilla Resi homes and sure, those are easy. But average resolution is 6-18 months for any loan. Generally AM people are compensated with “carry” as a % of collections. If you worked through all you loans, you would have good money and a good track record. Pretty sure Oaktree just picked up a $250MM non-performing loan portfolio of 150+ pieces of CRE, Resi, and consumer loans. I am sure they would hire a superstar workout manager.
“Loan analysis is worthless, but the other skills could apply”
I would disagree. This is distressed debt, where understanding the legal jargon of a loan is very important. I doubt it is just building am schedules.
Wow, thanks so much for all your insight/advice/details. That really did help a ton.. A couple quick questions, if you don't mind (I might also just pm you for other questions):
I know you said acquisitions, not AM, typically does underwriting and then AM decides what to do based on acquisitions' valuations. The description I got for this Analyst position specifically mentioned "underwriting of potential new acquisitions by utilizing the 2-pager model." Any idea what that means?
From a competitor's perspective - any insights on Rialto as a firm? Your view on the "resimercial" description it's gotten?
I know you said (distressed debt) loan analysis is important. Any words on how the industry generally views loan workout analysts (pay scale, lateral/vertical opps)? Seems like there'd be a lot of legal knowledge involved - is it generally less finance and more law? I don;t necessarily want to begin a career that pushes me more towards the legal path than the business path.
Again, thanks a ton...your info has been really helpful.
This is the industry standard for loan acquisitions. Take the $250MM non-performing portfolio mentioned above. It had 150+ pieces of collateral, 100+ borrowers (relationships), and ~200 loans (1st and 2nd liens). You have 14 days to value each relationship, roll it all up, and put in a bid. The two pager is used so when you present to your investment committe you can show them two 80-100 hour weeks of info in 2-3 days. It is used to get them and likely a JV partner comfortable with the values. It has the following: Borrower description, collateral description, loan status, payment history, cashflows, appraisal, broker price opinion, base/upside/downside case, return metrics, etc. The exhibit book will have all of your backup info, including any financial models.
[/quote] From a competitor's perspective - any insights on Rialto as a firm? Your view on the "resimercial" description it's gotten?[/quote]
This is because they will look into residential and commercial pools. Most are one or the other. You do not want to be on the Resi-only side; it is terribly boring. But being able to chase both is a great thing. I would not read in to it.
Rialto is absolutely a top firm in the space. This from their website:
"Rialto acquired the assets from eight financial institutions for $345.9 million. The loans have an aggregate unpaid principal balance (UPB) of $843.6 million. Rialto paid 41% of UPB for the assets."
$350MM is a huge number; the industry rule of thumb is 10-20% bid/win rate, so they underwrote $2.5B and probably preliminary bid on much more (8B+?). That said, expect VERY long hours. But being on the acquisitions team at Rialto opens the door to pretty much any distressed RE shop. I would have no issue saying exit opps include Oaktree, Carlyle, distressed HFs etc in their distressed group but would also say that Rialto likely pays in-line with them anyways.
[/quote] I know you said (distressed debt) loan analysis is important. Any words on how the industry generally views loan workout analysts (pay scale, lateral/vertical opps)? Seems like there'd be a lot of legal knowledge involved - is it generally less finance and more law? I don’t necessarily want to begin a career that pushes me more towards the legal path than the business path.[/quote]
It is absolutely finance. Imagine doing any work on the distressed side whether RE or corporate; in the end you will be well versed in the bankruptcy process, debtor in possession (DIP), potential legal recourses, etc. But it is very technical and highly risky (35-70% IRR business) so you have to have a strong understanding of finance. You will be versed, but still won’t know shit as most of the nitty gritty legal is outsourced or done by an internal legal team. You still have to understand it though. You would never really be able to exit from distressed acquisitions to a law firm, but it would be great to have an MBA that worked at a law firm on your acquisitions team, if that makes sense.
The title "loan workout analyst" is very poorly worded and I would suggest modifying it a little on the resume if you take the job. You are doing distressed debt (RE) acquisitions from the sound of it. I would expect a shop like this as an exit op:
http://carvalinvestors.com/asset-classes/loan-portfolios/
If you get tired of the hustle at Rialto and want to exit to a smaller non-performing debt group as an workout AMer, expect ~$200k - $250k all in pay and 40 hour weeks. It can be hard to break this number because your pay competes with the economics of outsourcing to a special servicer.
If you reach top levels at Rialto in the acquisitions group, I would guess $500-800k. $300-$400k at smaller shops. Both with hours 60-100.
what are some of Rialto's competitors? This space sounds interesting, but I am not familiar with it.
Off the top of my head Carlyle Colony CarVal Fortress Cerebrus
There are a ton.
This is usually meant so one can be a dick, but, here:
http://lmgtfy.com/?q=non+performing+loan+acquisition+asset+management
[quote=sk8247365]Off the top of my head Carlyle Colony CarVal Fortress Cerebrus
There are a ton.
This is usually meant so one can be a dick, but, here:
http://lmgtfy.com/?q=non+performing+loan+acquisition+asset+management[/…]
Looks like their is still substantial opportunity in this sector considering almost 1 out of 10 banks are still holding NPL's, 5 years after the financial collapse. These smaller regional banks are likely betting on real estate values to appreciate in order to minimize losses before their notes mature. This could be a big year for NPL portfolio acquisitions..
http://problembanklist.com/number-of-banks-on-fdic-problem-bank-list-re…
I bet if you are able to bring up the industry terms that sk824 brought up such as: 2 pager example, asking about their bid/win % in relation to the amount of loans they are actually underwriting, price paid compared to face value of loans, liquidation strategies, etc... You should have an edge over other potential analysts.
E & Y's report was a good read, anyone else have any other information pertaining to this topic?
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