I recently secured an entry-level development job for after UG graduation. The job is with an established, well-respected development company in a major market, and focuses primarily on the qualitative aspects of the development process (i.e. managing architects, GC, consultants, VE, design vision) - like a project management role but more big-picture. I understand that this role is different form most entry-level development roles, which focus on underwriting and are very modeling heavy. Can anyone speak to how this role will set me up down the road in my career? Am I missing out by not starting out in a modeling role? Are there any advantages or disadvantages of starting out in my role? Thanks.
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Hey BrickandMorty, sorry about the delay, but are any of these useful:
I hope those threads give you a bit more insight.
Bump!
Same exact type of situation...smaller, well-respected resi development firm in a big market and we honestly do some cool projects around the state. I'm in an Acquisition AND Development role 1 yr out of undergrad but 70-80% of my time is spent doing "development" tasks. These are the things related to getting approvals once we've already underwritten and contracted on a deal so things like submitting to/dealing with regulatory agencies, managing architects/engineers/other consultants, etc. There is a modeling component but the reality is that a deal either works or it doesn't and a quick BoE calc can usually tell you....toying with the waterfall or loan structure isn't going to make or break a project.
My degree is in finance and I just started looking to switch jobs to the investment side of CRE after a shitty bonus on an already really shitty salary at a firm where I'm the youngest by 18 years....told myself the experience is all worth it :).
Does anyone have any thoughts on this or a similar transition? Will employers value the qualitative skills that I've learned here? How will my prospects be down the road? What types of bias should I be prepared to face in an interview?
Not sure who told you this, but it's exactly the opposite. Modeling and underwriting is the smallest and least important part of the job description at most development shops. If you're in a straight acquisitions role then maybe not.
Frankly this kind of experience should be far more valuable than an role focused more on Excel. Developers get paid because they get shit built (or rehabbed), not because they put together fancy models, and managing the architects, engineers, etc is a huge part of that. It's also super easy to take a couple weekends and learn how to model; only experience can teach you the qualitative parts of the role.
Agreed. My experience in development was 50% choreographing multiple parties, 40% putting out fires, and 10% doing math. Development is much more qualitative; being able to communicate efficiently and get up to speed on an issue as fast as possible are much more valuable skills than knowing how to run excel macros.
Example: I get a call from our architect saying - according to his guidelines - water closets need to be 16" from the both walls and our engineer/consultant is giving him shit and refusing to sign off because - according to engineer's guidelines that take precedent - water closets need to be 18" from both walls. I didn't even know what a water closet was before that phone call.
I am a numbers guy and love to learn modeling etc.
But I’m going to be frank here with no biases.
RE, especially development, is a “people person” industry. You learn from being on the field and that is something that I envy. Excel is only as good as the numbers you put in. It’s mostly BS since modeling construction is almost impossible due to unexpected activities.
In order to actually succeed in this business is to bring value on the development side - hence if you want to be an entrepreneur.
Learning the ins and outs can only be done with experience on the jobsite. Learning how to speak with people and dealing with all the traits sounds amazing.
I definitely don’t want to spend the rest of my life behind a screen plugging in numbers.
Word of advice, "RE modeling" is extremely overrated. This sentiment is also expressed in other comments here, so my take is not unique. I find that college kids have this idea that real estate finance is all about using some complex financial engineering and all analysts are expert modelers who spend their entire workday on excel and can use excel blindfolded without using a mouse. This is a huge misconception and is not at all based on reality. I strongly believe real estate finance is a lot more real estate than finance and being good at excel is not the be all end all and. Being just good enough at excel definitely takes you a long way imo. However to be clear, there is a very small % (something like 5% or so) of the industry that would require you to be expert financial modelers and it will be a major part of your work every day.
Let me give you a real life example- Before my first real estate finance job, I was also scared shitless about my excel capabilities and thought my financial modeling is not as good as I would have liked. Plus, I was entering an underwriting role on the debt side and my idea of underwriting as a newbie was that it was all about numbers and spending time on excel all day. The reality was that I would spend maybe 5-10% of my time max on excel. The rest of my time was spent:
After a few months I learnt what underwriting was all about, If I had to describe underwriting in one word, I would not say modeling or excel or finance, I would say minutia and a lot of minutia is very qualitative.
I would imagine most of this would also be done on the acquisitions side. As you can see a lot of this is very qualitative and like you I had the idea that doing something quantitative definitely would make you seem "smarter" but that could not be farther from the truth. The modeling that you seem to want to do is very often outsourced to third party firms like Situs now. Its grunt work and it's mind numbing. It's work that can be outsourced because you have a lot more people who are good at modeling and can plug and chug numbers in excel than there are people who know the in and out of the local zoning process, entitlements or how to manage the transaction from start to finish. These are all qualitative and it's very desirable and valued.
SB'd
Agree with pretty much everything the others have said on this thread. Only nuance is that at some point you will have to learn the financial/underwriting side of it, but not for the sake of 'knowing how to model'. There are three main activities which you will have to learn if you want to go out on your own, over and above the actual, physical development side of the business:
1) Site selection. You need to be able to understand the economics of a given site and how much potential money you will make on the site, and potential $ pitfalls/risks of the site at both a macro and micro level. Your experience actually developing/managing these properties will help immensely, but you'll still need to be able to quantify this and be able to articulate it, since it's a huge part of point 2. Not to mention you'll have to go through (or manage) the DD process during the acquisition process at some point once you get to the upper tiers of the career track.
2) Capital raising & partnership structuring. You can have a lot of experience actually managing the development process, but at some point at the upper echelons of this business you're going to need to convince people to give you money and trust that you're going to earn them an attractive return on their investment. To do this, you'll need to be able to articulate your strategy and quantify things, and portray sophistication. You don't need to be a PhD in real estate economics to be able to do this, but you will need at least an intermediate understanding of both the local market economics and broader capital markets. You'll also need to be very savvy on the financial side in order to structure a partnership agreement that is airtight and makes you money. I've seen a lot of JV agreements go sideways because one party on the LP or GP side did not read the fine print/failed to understand the nuances of the agreement. There are a lot of ways to structure a waterfall, especially if you're dealing with varied capital sources/partners. It's critically important to understand the difference. You'll also need to be able to do this to potential lenders on the property.
3) Performance monitoring. This seems like an obvious one, but you'll have to have at least a baseline understanding of asset management/portfolio management and how the P&L flows through from property revenue all the way to CFAD, so you can track the cash flow disbursement accordingly. Being able to speak effectively to returns (both positively and negatively) will be a huge help in keeping investors in the loop and simultaneously prepping for another round of capital raising.
So TL;DR version is that you have a great gig in front of you, you won't be 'missing out' on anything by taking the gig, but you will have to learn the financial side down the line, but it's not rocket science. With a little time and effort you'll be able to pick it up, but it is a necessary component of the job, especially if going out on your own. Most development shops have multiple people that compartmentalize many of these tasks, but it's important to at least be minimally versed in all of them.
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