Real Estate Forum - New forum

RE_Banker's picture
Rank: Gorilla | 599

Patrick,

I wanted to say I'm a big fan of the site and it often keeps me entertained on slow days.

The number of posts regarding real estate investment banking and REPE have started to increase and I think it is time to have a new forum for Real Estate in general. It will likely get me posting a bit more often as well.

Thanks,

RE_Banker

Comments (51)

Mar 13, 2010
RE_Banker:

Patrick,

I wanted to say I'm a big fan of the site and it often keeps me entertained on slow days.

The number of posts regarding real estate investment banking and REPE have started to increase and I think it is time to have a new forum for Real Estate in general. It will likely get me posting a bit more often as well.

Thanks,

RE_Banker

REBanker,

from your profile picture I assume you are in london. I was curious to know what European business schools or programs place well into the real estate development field?? Any particular programs are known for producing big real estate professionals.

Mar 14, 2010
welcome2nyc:

REBanker,

from your profile picture I assume you are in london. I was curious to know what European business schools or programs place well into the real estate development field?? Any particular programs are known for producing big real estate professionals.

I am in London. I'm not sure what programs place well into development, but the programs that place well into Real Estate finance are LSE Real Estate Economics and Finance, Cambridge Real Estate Finance and to a lesser extent the Cass real estate program. A lot of these students are also looking to go into development as well. I'm not sure about European schools. To be honest, a lot of guys that I meet in the real estate have general business backgrounds.

Mar 14, 2010
RE_Banker:
welcome2nyc:

REBanker,

from your profile picture I assume you are in london. I was curious to know what European business schools or programs place well into the real estate development field?? Any particular programs are known for producing big real estate professionals.

I am in London. I'm not sure what programs place well into development, but the programs that place well into Real Estate finance are LSE Real Estate Economics and Finance, Cambridge Real Estate Finance and to a lesser extent the Cass real estate program. A lot of these students are also looking to go into development as well. I'm not sure about European schools. To be honest, a lot of guys that I meet in the real estate have general business backgrounds.

Thanks for the reply.

Do you feel that RE i-banking is the best way to open doors both on the finance side and development side?? What are the hours like in Real Estate I-banking?

From a european perspective, do you think MBA is more highly respected/valued than a specialized Real Estate program?

Any insight into how competitive the LSE and Cambridge Real Estate programs are? I can't seem to find admission statistics on the websites?

Mar 13, 2010

Hi,

I had two questions about RE

  1. What BB's are known to have good RE groups?
  2. If I wanted to eventually own my own hotel, co-op or other form of lodging, could I use RE as a means to prepare myself?
Mar 14, 2010
ibdreamer:

Hi,

I had two questions about RE

  1. What BB's are known to have good RE groups?
  2. If I wanted to eventually own my own hotel, co-op or other form of lodging, could I use RE as a means to prepare myself?
  • In the UK the BB's that are currently working on big deals are UBS, BAML, MS and Rothschild. Someone else will have to chime in for US and Asia
  • While hotels are usually grouped in with RE groups, they are a slightly different animal to traditional commercial RE. The reason is because they are so operationally intensive (as are other alternative RE sectors such as senoir living, student accommodation, self storage, motorway service areas etc) and they use completely different metrics. You need to define a better what you mean by wanting to own a hotel. For the larger hotels, the owners of the real estate lease them out on operating leases to chains like marriot. I've also seen traditional leases used, but on smaller hotels. To answer your question though, yes, you will likely learn a bit about financial side of hotels, but I would say you need to spend a bit of time in the hotel industry understanding how to operate one.
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    Apr 14, 2015

    (US) bulge brackets with strong real estate practices: MS / BAML / JPM / GS. Then, resonant with the vernacular most are familiar with, you have your 'boutiques' geared towards real estate IB / advisory, as well as PWP, Lazard, Moelis, Guggenheim etc. that house re practices.

    Mar 14, 2010

    Patrick,

    I agree with this. We do need a separate RE forum, there's little transparency about the types of RE Finance jobs out there and a sub-forum would help.

    I think Patrick's on vacation right now so don't expect him to respond right away.

    Mar 15, 2010

    LeatherPantz makes good points, I was more speaking to strategy of different real estate investors, but understainding their funding sources is very important to understanding the strategy. You can't really describe the whole sector in a single post.

    You are correct to say that REPE is involved in development, but only from a funding perspective. Most REPE funds partner with local operators (read: developers) in order to carry out a strategy. So if you want to be a pure developer REPE is not the way to go.

    Mar 15, 2010
    RE_Banker:

    LeatherPantz makes good points, I was more speaking to strategy of different real estate investors, but understainding their funding sources is very important to understanding the strategy. You can't really describe the whole sector in a single post.

    You are correct to say that REPE is involved in development, but only from a funding perspective. Most REPE funds partner with local operators (read: developers) in order to carry out a strategy. So if you want to be a pure developer REPE is not the way to go.

    I'm correct, yes but more to the point, your post was not. The nature of funding is the primary distinction between a RE focused private equity fund and other real estate investors and strategy follows funding (i.e., bc REPE have term locked equity and debt financing, therefore have few MTM constrains, they can make aggressive investments into the most illiquid assets that other investors can't do bc they're constrained by asset-liability mismatch issues).

    Further, not all REPE funds are focused on opportunistic strategies. Some buy core assets and target lower returns and some are in the middle, buying core assets in non-core markets or turn-around plays of core assets/core markets. The headline grabbers tend to make opportunistic investments but in Europe over the 2005-2007 that really meant buying the crappiest portfolios in Germany. Now, almost everyone in that space is debt-focused.

    Mar 15, 2010

    I agree my first explanation wasn't great.

    REPE is a diverse industry, which is why I said it's a broad brush term (and it's different from regular PE). At a high level a private property fund is a collective investment scheme that invests in real estate (either directly or indirectly).

    You can have core, core+, value-add and opportunistic funds as LPantz mentioned. However, these funds have various legal structures such as Unit Trusts, Open-ended Investment Companies or Limited Partnerships, meaning that some investments are more liquid than others. The one thing in common is that they are set up for private investment. I think LPantz just focuses on Limited Partnerships (closed ended funds) for his explanation. As well, the lifespan of the various funds differ with the average being around 10 years. The funds can be balanced across sectors or specialise in a particular sector.

    Core funds typically buy low risk low yielding property and use limited leverage. Value-add funds typically invest in situations where active asset management is required with a minor development / reposition strategy. Opportunistic funds go into development, large scale repositioning strategies, or complex situations which often require more than just property expertise, but also financial expertise. And as mentioned in a previous post, opp funds will often partner with local operators, unless the fund itself is run by a specialist operator. All the funds collect some sort of asset management fee as well as a performance fee, although the performance fees are much better for the opp funds.

    Hopefully this is a slightly better explanation about real estate funds.

    Mar 15, 2010

    Again, I think you're confusing different concepts or at least confusing the audience. Investment Strategy and Fund Structure (open ended, closed ended--pe, whatever a hedge fund is...) are different concepts. Any Fund Structure could theoretically pursue any investment strategy its managers liked. The point I made earlier is that the further from super core an asset gets, the less liquidity and the greater the risk asset-liability mismatch risk. Since PE funds have long lock ups, they can pursue higher return strategies with greater uncertainty and lower liquidity because there is greater visibility around when capital needs to be returned and less risk that the fund will have to sell assets when it doesn't want to. Of course, in reality, due to massive leverage PE funds use, Sponsors have had much less control than they anticipated and in lots of cases (e.g. MSREF) are turning assets over to lenders or losing free cash flow to banks.

    RE_Banker...how much of your life is spent considering/modelling accounting concepts? My view is that in RE (esp. in Europe) you make relatively few accounting adjustments in models compared to other industry groups. Can you please expand on this?

    Thanks.

    Mar 15, 2010
    LeatherPantz1:

    Again, I think you're confusing different concepts or at least confusing the audience. Investment Strategy and Fund Structure (open ended, closed ended--pe, whatever a hedge fund is...) are different concepts. Any Fund Structure could theoretically pursue any investment strategy its managers liked. The point I made earlier is that the further from super core an asset gets, the less liquidity and the greater the risk asset-liability mismatch risk. Since PE funds have long lock ups, they can pursue higher return strategies with greater uncertainty and lower liquidity because there is greater visibility around when capital needs to be returned and less risk that the fund will have to sell assets when it doesn't want to. Of course, in reality, due to massive leverage PE funds use, Sponsors have had much less control than they anticipated and in lots of cases (e.g. MSREF) are turning assets over to lenders or losing free cash flow to banks.

    RE_Banker...how much of your life is spent considering/modelling accounting concepts? My view is that in RE (esp. in Europe) you make relatively few accounting adjustments in models compared to other industry groups. Can you please expand on this?

    Thanks.

    I think we are on the same page. Opportunitistic closed ended funds can pursue those "hairy" strategies because of the locked up capital. And yes, at the moment they all see value in investing through the debt and working through it by trying to force a situation where they take control (which can get ugly) .

    As for modelling adjestments for accounting concepts you need to be a bit more specific, but I'll take a stab anyway. It really depends on what you are modelling. In terms of valuing an RE asset or portfolio, you are using NOI and not FCF, so you aren't really making adjustments as NOI is fairly straightforward (its calculated before interest, property revaluation, taxes, D&A etc). In the event that you are buying a REIT you really have to pay closer attention accounting adjustments. In doing the DCF valuation, you are using FCF so adjustments matter. Of course, there are other valuation methods for REITs (i.e. looking at the NAV and comparing it to the stock price). On the whole though, I don't have to think through the accounting that often.

    Mar 15, 2010

    re banker,

    Can you talk a little about your current position, firm hierarchy and promotion schedules between positions, pay, responsibilities, pros/cons, and potential exit opportunities?

    Mar 15, 2010

    LeatherPantz, can you expand on the following comment a bit more: "The point I made earlier is that the further from super core an asset gets, the less liquidity and the greater the risk asset-liability mismatch risk."

    Why exactly are more opportunistic investments less liquid?

    And to ibddreamer, to answer your question about what banks have good groups... Morgan Stanley and Goldman have traditionally had the best RE IBD groups. Morgan's PE model has really taken the heat from the market downturn (I suppose this can be said about most funds). Do a search to find a post that discussed their current status in a bit more detail

    Mar 16, 2010
    bankerchic:

    Why exactly are more opportunistic investments less liquid?

    Take a development for example. Developments are opportunistic and are less liquid because you can't sell a semi completed development (well you can, but it will be at a loss) so you have to hold it the length of the project. So your investment will be around 4+ years if you are going to stabilise the asset (generally opp funds will take on developments with minimal pre-lets so stabilisation takes a year or more post completion).

    Another example would be investing through the debt. If you are buying a portfolio of non-performing loans at a massive discount to par with the idea of taking control of the assets and selling them, then the process can be long and drawn out and require an army of loan servicers.

    In both scenarios you need to know that your financial backing will not be pulled. However, attached with that is the fact that you have to deliver a premium to your investors, which is why opp funds need to target 20%+ IRRs.

    Mar 16, 2010
    bankerchic:

    LeatherPantz, can you expand on the following comment a bit more: "The point I made earlier is that the further from super core an asset gets, the less liquidity and the greater the risk asset-liability mismatch risk."

    Why exactly are more opportunistic investments less liquid?

    And to ibddreamer, to answer your question about what banks have good groups... Morgan Stanley and Goldman have traditionally had the best RE IBD groups. Morgan's PE model has really taken the heat from the market downturn (I suppose this can be said about most funds). Do a search to find a post that discussed their current status in a bit more detail

    Like other asset classes, liquidity in real estate investment markets varies over time and is somehow a function of the market's perceived risk. In shitty markets, capital flees riskier investments for safe havens, like gov't bonds. In RE the same is true to a relative degree, when things are bad, investor interest in riskier assets (assets with shorter lease terms, higher vacancy or cap ex requirements, hotels, etc...) wanes the most (usually) so a seller would go to the market and have time selling an asset at a desired price. As a result, the bid-ask spread on riskier properties blows out and transactions just don't get done unless sellers accept prices below expectations. This tends to be more or less exagerated depending on the risk level--as the market got really bad, yields on all property blew out but the more core the asset (generally) the smaller the movement. This is all a function of (or for that matter defines) liquidity. For a fund who's equity can be withdrawn with little notice, you can't own assets that will be impossible to sell if/when the market turns because you'll be forced to firesale. PE's lockup mitigates this and allows PE funds to invest in assets where liquidity is likely, hence valuations are likely to be volatile over the life of the investment and as long as debt LTV covenants aren't too tight, the investment can survive a MTM valuation problem if fundamental value is OK and by the exit the price recovers.

    Mar 20, 2010

    RE_banker,

    This may be a bit off topic, but I think you might be able to shed some light.
    A family friend of mine is in the hotel business. So I did some research into many hotels, and most of them have cap rates between 8-10%. This came to me at a great surprise. Why would anyone take on the additional operational efforts of a hotel, and additional risk, all for a mere 8-10%cap?? In addition, from my understanding most hotels can't raise their revenue year to year like other types of real estate, especially because of internet competition, thus it makes it really hard for hotels to increase profits over time, let alone catch up with inflation.

    thus I'm hoping that I'm missing something in this analysis, maybe some unique tax benefit beyond that of typical real estate assets (office/apartment). Or is 8-10% considered a great return for hotels?? I remember reading that hotel rooms are the most expensive real estate in the world, since you are paying comparatively a huge sum of money to occupy a very small amount of space for such a short amount of time....I'm hoping you can add some color into what is wrong with my analysis or perhaps something I'm leaving out? ( I thought (imagined) that the hotel business would be providing cap rates of 15-25%, without considering the depreciation and interest tax benefits. Afterall you are running a full 24hr/365day business)

    Anyone else with knowledge or expertise on this, please feel free to comment.

    Mar 20, 2010

    cap rate is not any kind of return. it is simply the NOI/Price. therefore the higher the cap rate the lower the price of the asset. ie if the hotel has an NOI of $100,000 and a price of 1MM, the cap rate would be 10%

    Mar 21, 2010
    porter9900:

    cap rate is not any kind of return. it is simply the NOI/Price. therefore the higher the cap rate the lower the price of the asset. ie if the hotel has an NOI of $100,000 and a price of 1MM, the cap rate would be 10%

    This is true, however it is also true with all other real estate assets. I guess another way to say my question is what incentive does hotels offer over traditional forms of real estate, to compensate for the additional operational efforts and additional risk?? Shouldn't cap rates and NOI be tied to risk and how complex operation/maintenance of the property is?

    Mar 26, 2010

    Cap rate is not IRR/yield.

    Cap rate does reflect the risk in assests, but it is not a direct measure. Hotels - lets call it a risky investment -are trading a few notch below10% in NYC, core+ multifamily - safe investment - is trading closer to 5% in NYC.

    I saw a definitionof cap rate as the amount of return (forget discounting) you get on your original investment per year - the price is the capitalization of the NOI.

    Now cap rate is calculated NOI/price, move the numbers around and you see that if a hotel has NOI of 100k, a 10% cap means it is trading at 1mm. For a core+ generating the same NOI at 5% cap, it will be trading at 2mm. So here the riskier investment that is the hotel, while generating the same NOI is trading at far lower than the core asset. The risk in the hotel is due to how quickly revenues can be affected if the economy shifts, if traveling trends change, if you have a bed bug outbreak, etc. So the higher cap means no one is willing to realize the full value of the NOI because in a few weeks the NOI might not be there anymore. Also it takes a lot more effort to operate a hotel. On the other hand, NOI of the core is very stabalized, US can go into recession for a few years and it's revenue will not be impacted nearly as much, all you need is a doorman and a super, and the cashflow will steadily come in.

    Cap Rate is not the same as investment return. I mean if you hold everything else constant, and cap rate trends down, you are making a return. But most people invest based on what they can do to the cashflow of an asset. For value added, that might mean taking an apartment renting at 500 each unit, doing some serious renovation, and then rent it at 1000 each unit. That increases your NOI and drives your irr.

    Also i think there is a lot more nepotism in real estate than other fiance fields. Lots of successful developers are second/third generation in family. NY is essentially owned by many powerful families. Donald's dad was already in real estate, now his Ivanka is also in it. Tishman Speyer, Hirschfield, AREA list goes on, it's all family businesses. But there are also guys who start from scratch.

    Mar 21, 2010

    higher risk=higher return. I dont get the question. Yes, hotels are riskier than other assets like multifamily or office. therefore hotels generally have higher cap rates than other assets (but certainly not 25% as you said earlier).

    Mar 26, 2010

    With leverage, it's possible to take a hotel with an 8-10 yield and get to a 15-20+ IRR... But for a non-distressed/ron-reposition-able asset I think higher IRRs that that are uncommon.

    The hotel business is a niche real estate area and hotel investors are (or should be) hotel specialists so hotels are not perfectly substitutable for other types of real estate.

    Mar 26, 2010

    i'll be possible again when all the speculation comes back hehe

    Anybody read about condo arbitrage? guy buys 20 condos cash, sells immediately after for 200k more. Sounds like stock trading with condos lol

    Apr 17, 2010
    RE_Banker:

    Patrick,

    I wanted to say I'm a big fan of the site and it often keeps me entertained on slow days.

    The number of posts regarding real estate investment banking and REPE have started to increase and I think it is time to have a new forum for Real Estate in general. It will likely get me posting a bit more often as well.

    Thanks,

    RE_Banker

    RE Banker,

    I was wondering if you could possibly describe the career progression/promotion schedule for REPE, (my understanding is that MBA is not a BIG deal in REPE, primarily because real estate valuation is very different that traditional valuation methods that are taught in most b-schools.)
    ...Can you describe the career track, how many years its takes at each level, and finally how your responsibilities change over the years. And if you know compensation, i'm sure everyone would be curious to know about that as well. and Maybe even give your insight into the lifestyle as far as hours& travel& culture at each level.
    .... I feel like all this information is something many people are really interested in understanding, and it seems as though you have the most insight/experience regarding it.
    thanks.

    May 31, 2010
    PapaJohns:

    RE Banker,

    I was wondering if you could possibly describe the career progression/promotion schedule for REPE, (my understanding is that MBA is not a BIG deal in REPE, primarily because real estate valuation is very different that traditional valuation methods that are taught in most b-schools.)
    ...Can you describe the career track, how many years its takes at each level, and finally how your responsibilities change over the years. And if you know compensation, i'm sure everyone would be curious to know about that as well. and Maybe even give your insight into the lifestyle as far as hours& travel& culture at each level.
    .... I feel like all this information is something many people are really interested in understanding, and it seems as though you have the most insight/experience regarding it.
    thanks.

    Career progression is not as defined as the traditional 2 years IB -> PE. Certainly that is one way to go and is the route I'm taking, but the following are other ways I've seen people end up in REPE (keep in mind that I work in Europe):

    1. Directly to REPE from undergrad/MS RE starting as an analyst - usually you have to be at a good school and have a decent understanding of real estate. A few REPE shops that hire students are Colony Capital, Blackstone RE and Tishman Speyer.
    2. Chartered Surveyor for a few years -> REPE Analyst - I think this is more relevat in Europe. People who work at CBRE and JLL definitely know how to value real estate and understand market fundamentals, what they usually lack is investment acumen (i.e. picking investments that are good).
    3. Real Estate Tax specialists from one of the Big 4. Definitely a good skill to have in RE. Someone with 3-4 years experience will usually start as an associate.
    4. RE Law specialist. Useful especially for something like a distressed CMBS/debt purchase.
    5. REIB -> REIT Acquisition Analyst -> REPE Analyst/Associate. At a REIT you are essentially doing the same things as at an REPE firm.
    6. Analyst at a developer -> REPE Analyst. Like a REIT analyst, you might need some RE IB or surveyor experience first.
    7. RE Commercial Banking -> REPE. This is usually more relevant at senior levels. If you have strong debt sourcing relationships you will be highly valued (especially today)

    One thing I should note is that larger REPE firms have acquisition teams and asset/portolio management teams. Acquisition teams originate and execute deals (either single assets, portfolios, development jont ventures, corporate acquistions, or debt deals) and Portfolio management teams run the assets and make sure they are well let, in good condition, track development progress, refinance then when necessary etc. It is a lot easier to get a job on the asset management team, but it's boring and the pay is usually less.

    I wouldn't rule out an MBA entirely. I did a real estate focused masters program, but I'd still consider going somewhere like Wharton to do an MBA where Linneman is a professor. If the program has RE courses, then you can learn RE specific valuation as part of an MBA.

    Years at each level - depends on how good you are and on the firm's structure.

    Pay - depends on the shop. There is a huge range.

    Lifestyle - 12 hour days are typical but they can be longer at the height of a transaction. Travel is definitely part of the gig because asset tours are an important step of the due diligence process. Culture really depends - a shop run by ex-bankers will be hardcore hours and IB culture. Traditional RE guys from CBRE and JLL or REITS and Developers drink heavily and like to have fun (in my opinion). They usually work less hours.

    Apr 22, 2010

    great posts. all info is pretty much bang on. silver bananas all around.

    man made the money, money never made the man

    May 29, 2010

    so large banks that have asset management divisions for real estate are not using leverage at all? JPM/GS/MS etc. I know JPM has $45 billion in their global real assets group under investment management, so they probably buy properties from 100MM-1B. I find it hard to believe they dont use debt. Even without taxes, im sure JPM gets taxed someway.

    can someone please help explain this.

    --
    "Those who say don't know, and those who know don't say."

    Jun 1, 2010
    nutsaboutWS:

    so large banks that have asset management divisions for real estate are not using leverage at all? JPM/GS/MS etc. I know JPM has $45 billion in their global real assets group under investment management, so they probably buy properties from 100MM-1B. I find it hard to believe they dont use debt. Even without taxes, im sure JPM gets taxed someway.

    can someone please help explain this.

    Yes most banks have large real estate asset management divisions, but the way they are broken down varies.

    You mention that JPM has $45 bn of RE assets AuM. I know that in Europe they have a few different funds that span the whole spectrum of RE investing. In the Life UK Property Fund they buy core assets (i.e. shiny new office buildings) with limited debt searching for 5-8% returns. They also have a more opportunitic fund which looks at developments (usually with a partner) or more distressed RE situations where they can add value. The leverage used will likely be higher for these investments. They also have a real estate fund of funds (I think) where they just allocate money to REPE funds. I would say well over 50% of the AuM they have is in the core asset bucket and so the overall amount of leverage they use should be below 50%. Because they have many funds with different objectivs, I would say the JPM probaby focuses on investments in the $25m - $200m range and anything above that is out of the norm.

    MS or GS also have RE units - MSREI and Whitehall. They focus much more on opportunistic real estate plays with lots of leverage, but they still do have a few income producing funds.

    May 31, 2010

    RE Banker, can you answer my question please? It's the third to last post. Thanks.

    --
    "Those who say don't know, and those who know don't say."

    Jun 7, 2010

    for anyone who may be interested:

    Wells Fargo Securities Research Commercial RE Outlook, 2010 Q1

    http://www.scribd.com/doc/32677792/Wells-Fargo-Com...
    saw this a couple weeks back. thought i would share it. its pretty broad and isnt really new news. basically, it states we are in the 'belly of a U-shaped recovery' for CRE. the big take-aways are:

    *CRE probabaly has hit a bottom in terms of valuation (obvious, imo)

    *recovery will probabley be anemic (not so obvious, imo)

    ...which is bad news for investors trying to recover losses from the CRE price crash, and are hoping to regain those losses by betting on the fact that CRE valuations will 'rubber-band' back to where they were pre-recession levels.

    man made the money, money never made the man

    Jun 8, 2010

    @mr1234: nice one.

    for the prospective monkeys - being able to talk through the fundamentals in that report will definitely give you props in an interview.

    Jul 17, 2010

    alright, in an effort to turn this post into a learning excercise:

    Torrance Tech Park

    http://team-pv.com/listings/invite.cfm?inviteID=10...
    its a property presentation prepared by a couple of brokers, this was spam emailed to me the other day. its a small property, but the analysis is bang-on. you can get your hands on the brochure, the full presentation, loan docs, and a decent argus model (if you have argus).

    2 things i want to highlight:

    *analysis of the mkt, with respect to both tenant mix and location
    *analysis of the financials (noi, cap rate, operating statements)

    if you can get a grasp of the analysis behind those 2 concepts, then you would be well prepared for an entry-level job in cre investing.

    man made the money, money never made the man

    Jun 9, 2010

    in fact, i just thought of this. i think it would be a good excercise to try to figure out if that park is a good investment. or at least what would be a good offer ot make it a good investment. i might go through that analysis just for the fuck of it.

    man made the money, money never made the man

    Jun 10, 2010

    yeah so actually, the portfolios at JPM/GS/MS all have different funds that they use to buy properties with. for example, Fund ABC looks for 70-85% leverage, IRR > 20%, opportunistic, etc.

    Fund DEF looks for 10-30% lev, IRR 5-8%, etc.

    these funds DO acquire distressed RE, and DO have high leverage in alot of their deals

    --
    "Those who say don't know, and those who know don't say."

    Jul 6, 2010

    The striking feature is the nature of funding. In a typical PE fund, funds from third party investors has agreed to a mandatory period of lock-up for 5-7 years. The manger of funds to contribute capital of its own and invest with LPS in the fund as general partner. The leader typically earn management fees based on AUM, a tax incentive based on performance and return on investment GP.

    Jul 8, 2010

    Glad to finally see a forum for real estate professionals... been trying to bounce some career path ideas off friends but most of them work in non-real estate related ibanking/pe/hedge funds so lacking some depth in understanding this sector which as you all know is a bit unique. Would love to get your opinions on how experience at a major commercial RE brokerage firm (think the GS of re brokerage) would be viewed by a RE opportunity fund or RE hedge fund. Would experience at a top tier brokerage firm where one would see transactions across the capital stack (e.g. equity to mezz debt) on all product types (e.g. office to hotels) be more valuable than an acquisitions role at a core or even value add fund that only invests in the four traditional re asset types (no mezz debt, hotels, etc.)? The trade off may be that brokerage will see more transaction types but lack the depth in understanding the transaction (from investor perspective) and acq role at non-opp fund would be limited to the vanilla transactions. Thoughts?

    Oct 12, 2010
    Smuggler:

    Would love to get your opinions on how experience at a major commercial RE brokerage firm (think the GS of re brokerage) would be viewed by a RE opportunity fund or RE hedge fund.

    Depends on the RE Opp fund. If they buy single assets or portfolios then you have a shot, if they are buying companies they will typically want some IB experience.

    Smuggler:

    Would experience at a top tier brokerage firm where one would see transactions across the capital stack (e.g. equity to mezz debt) on all product types (e.g. office to hotels) be more valuable than an acquisitions role at a core or even value add fund that only invests in the four traditional re asset types (no mezz debt, hotels, etc.)?

    Again, depends on what you are looking for. If you don't want to do fully let on long leases office deals then don't go into a core fund. Also, don't let the brokerage firm trick you into thinking they do amazingly complex deals - most transactions that involve multiple slices of the capital stack involve investment banks....and the brokerage firms usually only provide a valuation opinion on the property...

    Smuggler:

    The trade off may be that brokerage will see more transaction types but lack the depth in understanding the transaction (from investor perspective) and acq role at non-opp fund would be limited to the vanilla transactions. Thoughts?

    That's right.

    Oct 12, 2010
    RE_Banker:

    Again, depends on what you are looking for. If you don't want to do fully let on long leases office deals then don't go into a core fund. Also, don't let the brokerage firm trick you into thinking they do amazingly complex deals - most transactions that involve multiple slices of the capital stack involve investment banks....and the brokerage firms usually only provide a valuation opinion on the property...

    Then again, those really complex transactions with multiple levels of debt don't really happen nowadays.

    If you're a young person starting in the CRE business, then working for a broker that works on institutional investment transactions will probably be the best experience you can get because:

    *Most likely you will be working on transactions that don't have complex debt structures. Those days are over...for now.

    *You will be working in a market segment that has a higher transaction turn-over. Those $100MM note sales close once in a blue moon but $10-50MM single-asset transactions close more often. And you will see a higher volume of transactions.

    So if you do get the opportunity to work with a broker that handles institutional investment CRE deals, jump all over it. When you're young, you want to learn a lot. Brokerage services is the best place to do it.

    man made the money, money never made the man

    Oct 11, 2010

    whatever happened to this thread? Any luck with a real estate forum?

    Oct 12, 2010
    ToBeOrNotToBe:

    whatever happened to this thread? Any luck with a real estate forum?

    I guess this is the RE forum....nothing has been dedicated to RE that I know of.

    Oct 12, 2010
    Comment

    man made the money, money never made the man

    Oct 12, 2010
    Comment

    --
    "Those who say don't know, and those who know don't say."

    Oct 20, 2010
    Comment

    man made the money, money never made the man