Moving Across CRE Asset Classes

Hey Everyone,

I am look for advice on how to prepare to move from a niche asset class into other asset classes, but am worried that I need to clean up my modelling and valuation skills for the asset classes I have not practiced. Currently I work in Hotel Private Equity, but I would like to move into a position where I can evaluate all asset classes and wanted to see if anyone has advice on the best way to prep for interviews and modelling exams without prior experience.

Eat your Wheaties

Comments (7)

May 10, 2019

So it is really tough actually. I've attempted to move to more generalist roles in the past and the fact of the matter is they will choose a generalist candidate over you 9/10.

Coming from Hotel PE I think the move will be even more challenging. Do you know ARGUS, understand intricacies of leases? Have you read a lease, etc.? not trying to be a dick but these are obstacles for certain that you need to address.

The answer is really just time dude. Prepare one or two case studies for recent deals of different product types. Walk in the door and impress them.

Getting in the door is a challenge in and of itself.

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May 10, 2019

Thanks for the insight man. I have done a few case studies for generalist advisory firms but they are very simple where they give you a revenue growth projection and outline expense projections and growth and have you determine simple metrics (IRR, Levered COC, Levered Multiple). Do you think doing any of the certification programs like Adventures in CRE or anything like that could help?

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May 10, 2019

For you, a slow transition could be to go into senior housing since it is largely an operations focused asset class, much like hospitality. Different, but similar revenue metrics like ADR and RevPAR that you should be well aware of from hotels.

From there, you will get exposure to leases and other more "general" intricacies like market rents etc. While working solely in Assisted Living and higher levels of care would also help with a transition, finding a shop with true Independent Living facilities would also give you exposure to more of a multifamily type asset.

I imagine being in PE you understand waterfalls/modeling/JVs, so your experience isn't useless. There are certainly differences in the way asset classes are underwritten, but maybe Hotel--> Senior Living --> a blend of Senior Living + Multifamily is a viable option for you.

Can't speak for office or industrial but that's my two cents. Plenty of shops out there who focus on that mix of asset classes because of the similarities.

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May 10, 2019

Is it true senior living RE models are far more complex given you have significant other operations like nurses, etc.? I've heard if you do Senior Living it's pretty easy to transition anywhere since if you could figure out that space, the rest should be relatively easy to pick up.

May 10, 2019

Sure, you could say that. Any asset class has it's nuances but yes. With Senior Living you have nurses (in house care or agency partnerships), house keeping, culinary staff, concierge/drivers, cosmetics (barbers/beauticians)...it's very much a business oriented asset class like hotels depending on the level of care and the operator's offerings. That all rolls up into a P&L or DCF the same as any other revenue/opex/NOI would, just the calculations behind the scenes are different.

Then you have additional cash flow stream which makes it a bit more intricate: for true Independent Living, you're most likely not dealing with Medicare/Medicaid. However, once you start getting into higher levels of care where Medicaid is accepted, you're talking about getting government reimbursement (which can be a whole separate accounting nightmare for aged receivables/collections), you'll still have your private payor, other types of insurances etc. It's not rocket science, just definite differences. One could say it has a parallel intricacy to affordable housing in which your cash flows are subsidized by government funding, but being an expert in AH does not make you an expert in senior living, and vice versa.

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May 10, 2019

Try and find a firm that does multiple asset classes including hospitality? You can pitch them on your knowledge obviously with hotels but looking to expand your knowledge. Might be tougher to find those firms depending on your market but most likely plenty out there.

May 12, 2019
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