Real Estate Investing is F*cked

plus the fact that i am drinking in the office and throwing around a nerf football with my peers when i should be working isnt exactly helping the re mkt. all the mds are still on 4th of july vacation.

Yeah, I work in CRE finance/lending. Things don't look so hot around here (no bonus this year). I'm looking to make a move into asset management soon--have an interview at a top asset management group this week. Asset management is a safe bet for the next 2-3 years, and that experience combined with prior experience will allow the asset manager to jump back into lending. I've seen some resumes come into my place in the last year or so, and I couldn't believe it! People going from loan administration/ops into full underwriting and associates back in 2003-2007--now, you have to have minimum of 5 years of direct financing experience to get those same jobs.

you know, i have been thinking about going the property/asset management route myself. i work in the acquisitions side of the business right now and deal flow just isnt there. honestly, the only 2 things holding me back is that i have a job right now and the fact that i would rather be working in acquisuitions. but my job isnt exactly secure given the current economic situation, and acquisitions is boring and pointless when you are not working on live acquisitions. i have been at my current employer for a yr and i have pretty limited transaction experience. and if i switch to asset management, i def wont have any acquisitions exp to leverage down the road. damned if you do, damned if you dont.

good luck with your interview, btw.

I am in the same boat as you.

I am fresh out of b-school and have been working in acqusitions for 6 months.We have gotten as creative as possible in deal structuring and as conservative as possible in underwriting.Deal flow just isn't there.I have worked on only two transactions so far not more than $25 million.I too am scared as to whats going to happen when the CRE loans become due in 2009.I think asset management is boring and I would rather prefer to stay in acquistions but survival is the question right now.

However,I am convinced that if we all can weather this storm,we will have plenty of great opportunites after 2-3 years.

What is the ideal career path for an acqusitions guy?How many years,how many transactions,worth of transactions would be good enough to make a move?I am expecting an answer on lines of 2.5 years.$100million,5 transactions,etc.

Good discussion.

I'm not sold on asset management yet (interview in like 10 hours--I'll update you guys, in case you're curious). I'm going to admit something here--I work at a GSE in apartment finance (so I'm kind of cheating because my company, thanks to the gov't, has cornered the market in multifamily), and while our deal flow has dropped off significantly (which is one of the reasons we are getting major bonus cuts--my $20k bonus was cut to about $1,700), it has by no means dried up entirely. I just got off work today around 11:30 pm! My statistics this year are 12 deals for a combined total of $82.66 million. Not bad for a 2nd-year analyst in an off year. Should be around 25 financings for about >$200 million if the Q4 2009 picks up like we hope.

I guess the reason I'm considering making the jump to asset management is, eh, a bit esoteric and very firm specific. Where I'm currently at (GSE), I have great job security, primarily because I'm one of the few people at the analyst level in the entire nation who has significant experience with the intricacies and mind-numbing complication of affordable rental housing. But I don't see myself making a career at this company because it is slow, bureaucratic, and I'm embarrassed to tell people where I work. In addition, business has been so bad that there is quite literally no room for promotion to the associate level--I could literally be an analyst indefinitely. But it would be foolish to move from finance with great job security to finance with terrible job security, but I want to get out of this company.

So, the asset management group I'm interviewing with is at one of the more elite banks (left standing) in America that works in a small office with a small group of top commercial capital guys. If I were to get on with this group, it would be a promotion to associate and I could make a career with this company, work in a role--asset manager--that has a lot of job security, and make an easy jump back into finance with a top group with top bonuses when CRE is back.

So, the POTENTIAL move to asset management is definitely a very calculated move. But I have no major hopes of landing this job--from what I understand, CRE job postings are getting hundreds of resumes per job.

So both of you work in acquisitions? Damn. Looking at the nationwide sales stats, at least in multifamily, I can't imagine how abysmal things are for you right now. Even if you had a target acquisition, you would be hard pressed to find ANY kind of comparable sale, if you could even find a sale at all. But theoretically, now is the time for you acquisitions guys--real estate is highly information inefficient and there are a TON of deals out there.

What's been the issue for you guys? Lack of debt? Lack of equity? Both? Fear? etc.

yep yep i do work in acquisitions.

and the issue is the uncertainty that stems from not knowing where true valuations are, b/c there are so few sales in the market and lease rates are dropping fast. leasing activity has come to a halt as landlords offer concessions and lower lease renewals to existing tenants. banks dont know where true valuations are so that keeps them from lending with confidence. however, lack of equity is not as much of an issue.

meanwhile, banks are extending loan terms, which is good and bad; good b/c landlords/investors wont default (for now, at least) but bad b/c they may be just kicking the can down the road and possibly prolonging the inevitable. 'pretend and extend' is what i heard one guy describe it as. and without cmbs, there is no lending capacity to deal with the loans coming due in 2009, 2010, 2011...whats really disturbing is we are NOT seeing as many defaults as we expected.

i work for an industrial/office/flex RE investors/owner, we typically hold assets 2-10 yr, our strategy is long-term focused rather than 'grip and flip'. i am thinking that are aggregate portfolio dropped 20-25% in value.

and i wouldnt really say that there are a ton of deals out there. as banks extend loans, less product is becoming available, which means less opportunities fro acquisitions. its about as bad as it sounds. but maybe things are different for multi famly.

so how did the interview go?

How was the interview?When do u hear back from them?

I work in acquisitions with a REIT.We are trying to preserve cash and try to do only those deals where we can assume loan.Unfortunately,some of the banks are not interested in the process of loan assumption anymore.Really there are very good deals available if you have a lot of cash.But the questions is how do you under-write when half of your tenants could go bankrupt,what cap rates do you use?

The good thing is that some REITs have started deleveraging and raised equity to pay off debt.That is a positive signal.I think in the end,banks would not be left with any choice but to refinance or sell the notes.I guess a couple of years later banks would realize that they have no presence in the Real Estate markets and suddenly there might be a scramble to get back into the game.The sooner it happens the better for us.

Yep, as I suspected--few sales = market uncertaintly = higher cap rates = lower values = higher leverage = less debt available and so on. It's a vicious cycle. You may be heartened to know that CMBS is ticking (or COULD be ticking) slowly back to life. Freddie Mac issued a ~$1 billion CMBS deal to the market about a month-and-a-half ago that was WAAAY oversubscribed--it was their first CMBS deal ever with their new CME program. So I'm thinking--hoping--that we will see a resurrected CMBS market in the next 24 months (or God help us). By the way, mr1234, as bad as multifamily is, I can't IMAGINE how bad commercial/industrial is! It sickens me to even think about it! May the Lord be with you!

new_monkey, what type of REIT do you work for? I'm assuming it's also commerical focused. I guess I work in such a standard finance environment that I hadn't heard much about loan assumptions. I guess with the downgrade in credit and/or financial strength of so many potential borrowers, loan assumptions might violate numerous creditworthiness covenants of the lenders. As far as the deals, TELL ME ABOUT IT! It's insane! I wish to the heavens that I had the cash equity to get involved in this market.

BTW, you fellas should suggest to your bosses the purchase of Low-Income Housing Tax Credits (LIHTCs). Some of those suckers are selling at 70-80 cents on the dollar with substantial effective returns--assuming your investors/firms have projections of good long-term profitability, you can get a taxable equivalent return over 10 years of 9-10% with very low risk or volatility. Dead serious, if individual purchases of LIHTCs weren't prohibited, I'd purchase them myself and make them about 90% of my investment portfolio.

Oh yeah, the interview went really well. They told me that they would let me know by month's end. I'd say I've got a 50-50 shot, but as one might expect, they are inundated with qualified candidates. I think I've got a better shot than average though because we have a lot of mutual colleagues who I'm sure they will survey.

Yeah,I heard a couple of times that there are sign of revival for the CMBS market.The other day I heard some bank in California has got a new CMBS porfolio worth billions.

I work for a commercial REIT-retail,office,and industrial.Acquiring properties in 3 of the 5 largest cities in the country.I actually work in a group that has acqusitions as well as asset management.However,I don't know what asset management is all about.I analyze the impact of each lease on the entire portfolio-and i guess it is kind of getting to asset management.What is the nature of work at the asset management groups that you guys are talking about?Acquistions for us is all about acquiring physical properties-what do you guys do-acquire notes?

Well, first of all, I got a follow-up today asking me to come in Friday for a follow-up interview with asset management's operational manager. They asked me to bring references. So, surprisingly, it's looking pretty good.

As far as what asset managers do, this is what I gather (and I could definitely be wrong): they are like the actuaries of real estate--they assess risk. This group, for example, manages a portfolio of about 120 loans--they monitor the macro and micro markets, they analyze and audit property financial statements every quarter, they conduct site inspections on each property once a year (this is when they collect primary research information), they assist the underwriters and originators in determining the viability of refinances and supplemental loans, they offer suggestions (and sometimes mandates) for property-level improvement, and they monitor performance against past performance, against underwritten performance, and against market performance. Basically, asset managers are the most knowledgeable guys about markets, key market participants, and about historical and future trends (whenever we have these questions in origination and underwriting, we call up our asset managers).

I'm not gonna lie, I'm not that excited about the position (I'm a finance guy), but I'm excited about the group, which is a small group of guys who have a HUGE name and reputation (like top 10 MBA good). I also feel that getting down to the asset level for a few years will help me if, one day, I want to become an independent commercial originator, developer, or general RE entrepreneur (but those are kind of just excuses).

I think thats a very good development.Good luck with it.

I think asset management in our company is kind of on the same lines although not as sophiscated.120 loans is quite a big portfolio.We only have 40 properties!

So you guys know if there are any popular Real Estate Finance certifications on the lines of CFA?How much does having a a prof certification matter in the Real Estate business?I already have a top-25 MBA and some work ex in Real Estate Finance.Howevr,I would like to move to the banking side of it in two years preferably in NY.Any suggestions as to what should be done?Any suggesstions on recruiting firms for the same?

Sounds awesome, brother. I'd like to chat.

BTW, CBRE and Cushman Wakefield I believe both have finance groups. Not sure about Marcus Millichap. Maybe you can use some creative networking to break into those areas. There are offices of these companies all located within a few miles of me, so I have some background on them.

RE investment banking was my dream at one point (and I came THAT close to an offer 2 years ago in D.C.--thank God I didn't get it), but I guess I see a lot of money that can be made in many areas of real estate and RE IB is even more dead today than regular IB. Lots of RE finance groups that would take a guy with REIT experience. IF I join this group in the next few weeks, we should definitely keep in touch--I'm sure we could use a guy like you in our group, which I think has an office in Dallas.

first off, V tech, congrats on getting the job and i wish you the best of luck. sounds like a pretty good one, too. that news brightened up my dull morning.

newmonkey, to answer some of your questions: the only useful RE professional designation i can think of is the CCIM, certified commercial investment member. it was started by brokers and is broker oriented, but i dont think there is a more practical and useful designation for brokers/acquisitions guys, with MRED being the only exception. many big aquisition players started life as CRE brokers, which figures sonce the skillsets are transferrable. but i dont think it is a very prestigious designation. think of it like the CFA for CRE guys. its not required to do the job and it probably wont get you a job, but you should probably have it any ways so that you know what you are doing.

i STRONGLY advise against trying to get a job in RE IB. the business model has proven to be an utter failure. despite the fact that there were NO 'sub prime' type loans in cre, defaults are on the rise b/c of the lack of cmbs. re ib basically caused this bubble/death-spiral/cluster-fuck/rodeo-clown-shit-show we are seeing. on the level, i honestly would stay in your current position in REIT. what your doing will be in hi demand when the market finally corrects and returns to normal. if you really are not happy, try to lateral into asset mngmt in your current firm, or another REIT. otherwise, ill trade you jobs!

hope this helps.

Thanks so much,V Tech.Thats so nice of you :)

Lets keep this forum alive and keep discussing on a regular basis as to whats going on in the industry.

Mr1234,I agree with the CCIM comment.Thats the only designation i have consistently come across in this industry.

I really enjoyed the bubble/death-spiral/cluster-fuck/rodeo-clown-shit-show comment.

Actually,I am really enjoying my current job.I am doing some pretty good acquistions and some creative deal structuring.I am also responsible for asset management,so really not much can go wrong from here.However,to be honest,I got into this industry by accident,and just trying to learn more about exit opportunities after a couple of years.The pay here kind of sucks but its ok given the current market scenario and the kind of experience i am getting here.

So what does acquistions and asset management pay at REITs looks like?How are the bonuses calculated and what do they look like.My company right now has a freeze on hikes and bonuses so I guess i am gonna have to wait more.

Wow, I totally forgot about the CCIM. Yeah, actually, that is a fairly well known designation. Good call.

BTW, I'm taking the job because they increased salary by 14% and offered me a sign-on bonus. The money still isn't big but the group is incredible.

If I had to guess, asset management at a REIT would pay between 65 and 90k, depending on the level (assuming we are talking non-management). In Texas, closer to the 60-75k range probably. I think even entry-level asset management requires at least 2-3 years work experience in the industry. We'll see, but I like the idea of asset management for a few years because of the face time with big time borrowers. But you might get more of that at a bank and less of that contact at a REIT.

Wow, I totally forgot about the CCIM. Yeah, actually, that is a fairly well known designation. Good call.

BTW, I'm taking the job because they increased salary by 14% and offered me a sign-on bonus. The money still isn't big but the group is incredible.

If I had to guess, asset management at a REIT would pay between 65 and 90k, depending on the level (assuming we are talking non-management). In Texas, closer to the 60-75k range probably. I think even entry-level asset management requires at least 2-3 years work experience in the industry. We'll see, but I like the idea of asset management for a few years because of the face time with big time borrowers. But you might get more of that at a bank and less of that contact at a REIT.

Guys,

I need some help.We are looking at acquiring distressed real estate notes and none of us here have any experience in valuing those.Can you help me out with some pointers,books,articles,valuation models,spreadsheets,etc?

Thank you so much

whoa, chief. what kind of debt are we talking about here? structured/unstructered? whole loans? first mortgages or mez debt?

distressed debt is a tricky fucker, not to mention complex. if your reit has noexperience in distressed debt its best to forget about it. there are not as many opportunities to make money as you might think.

btw, our group is soliciting funds for ditressed opportunities. one of our major equity co-sponsors - CalPERS - will not be investing in our next fund. that SUCKS.

That's sad.Why are they not investing?Equity invstments drying up is not a good sign for the economy.

We are looking at acquiring distressed notes.So the idea is to buy those notes,negotiate with the property owners,or enforce a foreclosure and then takeover the management of the property and kind of turn it around.

I just don't know where to get started as far as valuations are concerned.How can i get started?

CalPERS just defaulted on a $150 MM CRE loan. they are not feeling the CRE love right now.

and with regards to distressed debt investing...so the idea is to buy bad loans, negotiate, reposition and sell..then hopefully turn a profit? sounds easy right. believe you me, its not easy. cant really emphasize that enough. i mean, some of these distressed projects were just stupid. stupid investors taking out stupid loans from stupid banks, then investing in stupid projects in stupid markets. i mean, some of these so called 'distressed assets' can not be feasibly worked-out in the next 2, 5, maybe 10 yrs with out SIGNIFICANT equity capital investments, given today's debt markets. and finding a project/asset that can be turned around is like finding a needle in a stack of needles. regardless, you still hear this term 'distressed debt investing' term being thrown around like its the next hot shit, 'everybody is doing it, it must cool, right?'. thats why i say, dont bother unless you know what you are doing. ESPECIALLY DONT FUCK WITH DISTRESSED STRUCTURED CMBS DEBT OR MEZ DEBT.

but if your reit wants to invest in an unclusterable cluster fuck, if you guys want to dance with the devil...costar property has some creative functions that can help you sniff out troubled loans.

Interesting you say that, mr1234, since every day I read about a new fund raising $800M to buy distress (and no one has bought it yet).

Undergrad here. Other than investment banks and brokerage companies, who in the real estate realm hires undergrads? REITs? Opportunity funds?

hmm funds are definitely being raised, but i think $800 M on a daily basis is a little bit of an exaggeration? and yes, there is a good reason why those funds are on the sidelines.

check this out:

http://www.bloomberg.com/apps/news?pid=20601206&sid=ao8sd0ZascRo

http://www.forbes.com/feeds/reuters/2009/08/10/2009-08-10T210429Z_01_N1…

bummer.

to answer your question, uva guy: i dont know whats what with respect to other investment co.'s, but we are in a hiring freeze fro all positions. i dont think anybody is hiring out of undergrad. nobody, i know anyways. even for staff accounting positions, most employers are requiring min. 2 yrs wokr exp.

its too bad this discussion just died....

I have been working in RE investing, but its not an analyst stint at a bank, GSE or REIT. In another thread Vtech broke down all the entry points into RE, and I would fall into the "small RE investing firm" category. Pay's not great but I know I'm learning alot. I'm curious as for a more normal acquisition person and on a decent year, what is the typical pay and bonus? V-tech mentioned he used to get 20k for bonus (at a GSE unless i'm mistaken), is that high low or normal? At REIT asset management, if one can fetch 65k -90k, is acquisition similar but with more carry?

As for distressed investing through buying senior notes to close out all the subordinates and go through foreclosure, I know it's more complicated than just buying a normal property, but shouldn't the valuation be the same? Acquisiton cost = what you pay for the notes + extra lawyer fees, and a good chance of being held up in court. But wouldnt you still value the deal according to how much income you expect the building to generate. As for how long the deal gets held up in court, maybe because of bankruptcy or bitchy subordinates, that just takes some extra due diligence to figure out how long exactly. I could be wrong, but i see opportunistic investors starting to come out of their slumber and eyeing everything distressed, and i think it's those who arn't afraid of getting their hands dirty (but not retarded) that are going to come out making the big bucks.

Since I'm at a small firm, i get to do a lil bit of everything, which is what makes it a good learning experience. I know larger places always divide work down functionally. So for you guys who work at bigger firms, what kind of work are you guys mostly focused on? Are you underwriting acquisitions? valuing exisiting portfolio? What kind of people do you usually meet?

with regards to compensation, it varies. like a lot. its not so much what size firm you work for; your specific role, experience and location will be determinants of compensation. at least as far as i know, i could be wrong?

with regards on valuing distressed deals, like i said, distressed assets are a tricky fucker. especially complex structured notes. thats why i think whole loans are more popular distressed investments over mez and structured debt. whole loans are relatively simple. and i wouldnt doubt the opportunities in distressed investing. lba realty picked up maguire's debt on one of maguire's class a office buildings in oc. but i doubt lba was the only firm trying to pick up that debt, and deals of that quality only come once in a blue moon. like i keep saying, distressed deals arent hard to find, but hi quality distressed deals that can also be feasibly worked out are.

and i work for a large investor based in socal, 100-250 MM in assets(dont want to get too specific). we invest in core/core+ type assets, holding 2-10 yrs, very low key/low risk/low return. we had one very opportunistic project in oc that seriously just blew the fuck up and our operations team is scrambling. i underwrite acquisitions for our industrial team, sometimes i underwrite office deals. i eat/breathe/sleep/shit argus and excel models, basically. i dont really meet people, although i do sit in on meetings where several i banks and pe firms pitched us some distressed deals. and i started last sept so take everything i say with a grain of slat.

personally, my ambition is to just acquire and invest in re for the rest of my life.

btw,MR1234,I got Argus certified even before i had any practical RE experience.I hate the crazy balckbox.I love excel and we use excel all the time.

haha 4 cap, i thought it was a buyer's market, imagine the irr if you can buy a building and flip it for that. As much as argus is a black box, larger office buildings are just too complicated for excel. But I like excel more too, maybe it just takes more time to get used to.

For your firms, 100 - 250m assets, is that considered big? My firm falls in that range too, but only have a couple of people. Residential and office focused, we like core but also interested in anything with value. The industry seems very scattered to me, and I don't exactly have an idea of what is big for a typical investment firm. I see the largest REITs in the billions, then there are REPE funds from 1b to 10b+, but there are also countless smaller REITs/REOCs around. Then even big deals you have a 10b investor alongside a .25b operating partner, like a basketball player dating a midget. Is there a place/website where you can find maybe a list of firms dedicated to RE?

How do you guys describe your experience resume wise, do you mention all the large deals you look at, or only go in-detail about transactions that actually go through. Do you list deal experience similar to what ibankers do with their transactions? I have been looking at things from 10 to 100m+, but most of them won't end up happening.

And lastly, sorry for all the questions lol, are RE anaysts expected to go back to get a mba? If anything, i want to learn more about urban development and architecture than yet another corporate finance class.

the biggest transaction i have worked on was about 20MM. but the things is, i have only worked on two transactions that closed. the biggest transaction we have had since i started was about 40MM. so ya, we are slow over here.

i hear ya when you say that sellers are asking for unreasonable terms. most sellers in socal are stuck in 2006. 4 cap is a little absurd. our principals/md's have about 20-30 yrs exp each in cre, and they are telling us younger guys that they are seeing transactions that they have never seen or could comprehend possible. def an interesting time to be working in cre.

100-250 MM in assets is not very big at all for a nationally focused firm, but it is for a regionally focused firm. noexplode, you're right on on the fact that larger firms syndicate with local partners. we occasionally syndicate with institutional investors. however, institutional investors are having second thoughts on cre.

as far as getting an mba, i hope not to. i already studied re finance/re dev. in undergrad, i dont see why i should again. it wouldnt make sense for me unless i went back to get my mred at USC, since i plan on working in socal only.

hey quick question, new_monkey.

did you get fully certified in ARGUS through realm or did you just take one of the classes? did that actually help with the job search?

i was sent to a class in NYC for training through a re consulting company, i forgot who though. it doesnt matter bc i rarely use argus, you just dont have too many units for a multi tenant industrial building. im afraid the lack of argus experience will hurt me when i move on or work with a more complicated product type.

honestly i think argus requirement is stupid, what matters are the assumptions you put into the black box, not navigation of the software. But when i see job postings that require "argus experience" i think they are asking mostly someone who knows how to enter XYZ numbers into the program, which even during the first time i used argus were pretty self explanatory. I agree with there being a lot of old guys in the industry, some who just buy a couple apartments and hold on to them the rest of their lives, and the young guys just want to flip properties like day trading. Lots of inefficiencies, which is great b/c they are all opportunities.

I definitely have more interest in getting a MSRED too, I've heard a lot of great things about USC's program, especially for network in west coast. Most of the other top programs seem to be in the NE though (MIT, Cornell, Columbia, maybe NYU)

It's interesting you say institutions are having second thoughts, I agree, especially for the past 8 months, but I also know some big players that are eager to get their idle money to work, with a lot of caution. Maybe it has something to do w location, n Cali got hit harder than most other places.

hmmm well fuck argus. i dont think i will spend the time and money to get certified but maybe ill take the advanced course. for now, i think having 'proficient in argus dcf' is good enough on my resume. hey newmonkey, did you take the advanced course? theadvanced course also covers portfolio level features in argus, i think that will def help in the future.

i think cre recruiting is overall subpar, at least in CA. employers dont know what exactly they want or what they need in terms of new-hires. our firm takes pride in comprehensively interviewing candidates, but we only source new candidates from either USC, Wharton, or Cal and i dont think we make the effort to expand to other schools. out of the 6 analysts in all our offices, 4 are from USC, one is from Cal, and one from Wharton. i think recruiting is an issue that needs to be addressed on all levels of the cre business.

noexplode, i want to tell you that getting an mred/msred/msre over an mba would be the way to go. however, i think a top 10 and maybe even a top 15 mba is more in demand over the re masters programs at USC/cornell/columba/mit. regardless, i think the relevant info you take away from USC's mred would be above and beyond what you take away from even a harvard/stanford/wharton mba, including real estate finance. its just the way of the world, i guess. i hope this changes b/c the top 4 mred programs are LEGIT.

does anyone know the dollar amount for cmbs issuances for 2009? i think 1st half was $0. and i mean specifically for cmbs, not rmbs.

Had to at least be $1 billion because Freddie Mac's CME program issued a $1 billion deal in May and June.

o yes, true. still, only $1 B? ouch. any others ive missed?

I honestly think that may be it. I can't think of any other issues. I know CMBS originators have been decimated by layoffs.

how about rmbs?

I'm starting to see some RE relevant job posts, although it is recruiting season, wonder if it is an indication of how the market is.

noexplode, i hope that is the case.

vtech, is the cme program multi family only? it looks like it is.

dude, its 8 45 am, and im the only one in the office. and i work in a decent size office. wtf.

Yeah, only multifamily.

vtech, how's is the asset managment side of the business? exciting? dull?

It's been good. The organization I work with is the elite of the elite so they have an incredible name and a lot of work. I'm learning a lot about property operations, maintenance, markets, insurance, defeasance, etc. I'm right down the hall from our originators, too. Each one of our 6-8 originators make at least $1 million per year, and most way more. Over the next 2 years or so, I'm going to try to learn as much as possible, interface with as many borrowers as possible, and hopefully try to "apprentice" under an originator and try to start moving to that side.

It's so hard to do--anyone can become a single family originator (and most fail after they become one), but it's not easy to even get the opportunity to originate commercial loans. It's like a circular problem--you need a lot of experience and contacts to break into commercial origination, but you can't get that experience and build those contacts without...the experience...

That is interesting....So are you doing Asset Management right now? What are some of the most coveated jobs in RE finance and which are some of the most difficult companies to get into?

huh. i am assuming those originators arent doing so hot this year. not to talk shit or anything, but cre loan officers had it MADE in the last couple of yrs, and will be sucking wind for yrs to come.

vtech, i would honestly avoid the loan originations route. things were easy in the past. i dont think loan originations will return to its past glory anytime soon...

Maybe, but our guys are having one of their best years yet, but they are GSE originators by trade, and the GSEs have all the business so it's not a fair comparison. You're probably right on this point.

new_monkey, yeah, I'm doing asset management now. I've already learned a lot about property level operations (been on 5 site inspections so far--I'll be doing 10 in Chicago the week after next). It's definitely a lot different on the property level than at the "finance" office level.

As far as the most coveted RE finance jobs--my guess would be as a general partner in a small real estate development and property management group. I can't tell you how rich some of these guys have gotten. It's sickening really. It's only slowing down for the moment--but the smart guys are biding their time, building up cash reserves and getting ready to move again in about 12-18 months.

question: how profitable is a property management business. As in, rich guy builds a luxury rental building, the property management company comes in and takes 2- 3% for managing the building, along with other buildings it manages, how is the margin, for a small PM company/for a large PM company? It seems like there are thousands of these companies just in NE, and many of them don't really know what they are doing.

It's interesting in RE, property management goes under asset management, front office, when it involves alot of operational type work that would be tossed in back office at other parts of the banks.

just to clarify, for the profitability, i was wondering about owning a PM business that manages many buildings as opposed to being a property manager for a single building. I looked up some smaller PM businesses 5 to 10 employees, one claims to generate ~800k with ~300k being "cash flow." You won't become a mega millionaire, but it's not a steep learning curve and as the business owner you can easily get away with 20 hours or less. Can't really verify if the claimed numbers are accurate though.

I don't see the post anymore, but what you described is pretty much exactly what my bosses, the GP's, do. The business model is rather simple.

Weird, I don't see the post either...hmmm.

I'm going to be perfectly honest with you--I have very rarely worked with mom-and-pop property managent firms in the past (not in underwriting, not in appraisal, not in asset management) because the GSE properties are underwritten based upon property management experience, size, and expertise. So I couldn't give you a good answer on that question. I assume it's a profitable model, but in our market economy, few things are REALLY profitable, otherwise other companies would swoop in.

I have no idea what happened to the previous post. Oh well.

The server messed up yesterday so they reset it to an earlier back up, everything on the site during the day yesterday was lost.

i saw a building for around 3.25 cap lol, nuts.

There were lots of talks about distressed properties, but sellers are just not giving in at all. So there are single-familes being foreclosed/sold for cheap, then high-profile large portfolios being dumped (ex: while back Merill sold a bunch of toxic ABS to Lone Star for ~20 cents/dollar, i assume part of it might be CRE related), you guys think the properties in between, single buildings b/t 10 - 200m, will ever start selling at distressed levels? Or are most sellers/lenders going to hold on and get through this storm. (I guess big part of the answer would depend on if interest reserves are sufficient, and DB had a research report that suggested they arent enough)

Ppl say the stock market will pullback soon, but it also hasnt yet, so if the double dip doesnt happen and say the economy very slowly recovers, maybe all the new funds being raised for distressed CRE investing are just "waiting for Godot". What do you guys think, or are you guys seeing very different pictures. V-tech - not trying to get details or anything, but it sounds like the portfolio you work on is doing fine. Will 2010-2012 be more eventful years?

2011/2012 are the years when the shittiest of shittiest loans originated in 06 - 07 will mature.

We under write properties with Management fees of about 5% of Rental Revenues.I have seen that generally with properties having NOI of $1m,the management fees averages $50,000.So i guess if you are managing 8-10 properties,it really is quite a lot of money.

I am not seeing too many CRE distressed notes yet.Most bankers and attorneys i talk to say that it is going to be atealeast 10-12 months before we will see some of them hit the market.The banks aren't done with residential mess yet. What i am thining is that while definitely we will see some damage,it is not going to be as bad as people project it to be.If the economy does pick up by second half of next year,and if the job growth resumes,i think occupancy numbers as well as rental rates will go up and probably banks might become just a little liberal with their underwriting conditions.I feel that the damage is likely going to be between $100-200 billion rather than trillions that we hear.

I also think that the correction in the stock market is not coming.Seems to me that the hedge funds and other biggies are trying to talk the market down so that they can enter.What do u guys feel?

Hello all,

I am a recent college grad lucky enough to be caste into the worst job market ever. More importantly, I am very interested in real estate-whether it be in regards to the brokerage end or the financing end. I have been interviewing heavily with real estate brokerages and I believe that I will soon get a job at a top firm, but I am also considering the financing/investment banking aspect of this industry. However, I do not have a strong finance background and while I am learning all the concepts I can. I do not feel that I have the technical experience to succeed in an investment banking interview. Do you guys have any advice for me considering I am very passionate about real estate and am very eager to learn the financing end? Should I just take a broker position to learn the business that way first? I am feeling a bit lost and after reading all of your posts (from my current job which is god awful), I can tell that you guys really understand the business and where it may be heading. Thank you so much.

I would say how much you can learn from brokerage depends on what kind of properties you will be working on, and the size of the deals. I've met a lot of brokers for small residential properties who don't really work with anything except for comparables. They would make offering memos that only show they don't understand what they are selling.

On the other hand, as you move away from small residential units, in to mid & high rise, or office buildings, or industrial complex, even though most brokers don't build models, they have to be knowledgable enough to show investors where the value in each deal is, and they might also prepare pro forma statements for advertising material (which unless you're are building from scatch is the majority of modeling). In the end though, real estate finance isnt that complicated, and it will be up to you to learn what you want to learn. In a decent brokerage firm, you will have access to the right material and come in contact with lots of investers (presumably re finance). As long as you are not working on single-family, it's really not a bad way to enter the industry. Also i see some multifamily housing teams are killing it now, judging by the volume of deals they are handling, but i dont really have any idea how it comapres to previous years. Many people get into brokerage and stay there because it can be as lucrative, if not more, than principal investing.

Thanks a lot for your comments and I really appreciate your advice. I am interviewing with all of the top commercial brokerages in NYC and Stamford, CT (jones lang lasalle, nemark, CB etc) and my location will most likely determine what I will do. So no matter what I will not be doing any residential; only office, industrial or retail. I guess my real question then becomes, am I crazy to pursue any type of Real Estate IB jobs right now? You guys make it sound like a fuckin massacre. Granted, being in an NYC office leasing brokerage wouldn't be exactly lucrative until I was in my 30's, but I am trying to make the most educated decision with my first job out of school. Thanks again.

I don't think the real estate investment banking model is a good model. I'm not saying it's dead (the market will eventually come back and probably create a market for it), but there are other more palatable models that are far less volatile. Think about real estate investment banking like this:

1) Your firm is profitable because it works on massive deals with big players.

2) Financing costs for, say, a simple acquisition of a single family house is about 3-3.5% typically. Financing costs for real estate IB transactions must be massive--fees to the equity investors, huge required returns, probably 6% in fees to debt providers, debt interest in the high single digits or even the double digits. Probably looking at 15-20% in origination costs. For more perspective, the conventional financing model would likely not exceed 6%, and the GSE model could be as low as 1-2%.

3) Now, your big players are typically your must creditworthy borrowers (typically). So, when they review the costs associated with going the investment banking route and then compare it to other models--conventional financing, GSE financing, REITs, etc.--one has to think the big players with their large, profitable deals will tend to avoid going the investment banking route.

I don't see it as a good model. But of course, if the price is right, I'd take a job doing that. But I guess the point I'm trying to make is this: you may land a RE IB job. You may also eventually run into a lack of career future in that industry. My advice is to avoid RE IB unless a really great opportunity comes up.

With regard to commercial brokerage, yes, I know at least one guy who did it for a year in NYC, failed, got on with Freddie Mac as an analyst, and now is a 24-year-old underwriter (probably one of the youngest in the country). So, yes, it is a good learning experience if you get on with a good group and commit to learning your industry.

I don't think the real estate investment banking model is a good model. I'm not saying it's dead (the market will eventually come back and probably create a market for it), but there are other more palatable models that are far less volatile. Think about real estate investment banking like this:

1) Your firm is profitable because it works on massive deals with big players.

2) Financing costs for, say, a simple acquisition of a single family house is about 3-3.5% typically. Financing costs for real estate IB transactions must be massive--fees to the equity investors, huge required returns, probably 6% in fees to debt providers, debt interest in the high single digits or even the double digits. Probably looking at 15-20% in origination costs. For more perspective, the conventional financing model would likely not exceed 6%, and the GSE model could be as low as 1-2%.

3) Now, your big players are typically your most creditworthy borrowers (typically). So, when they review the costs associated with going the investment banking route and then compare it to other models--conventional financing, GSE financing, REITs, etc.--one has to think the big players with their large, profitable deals will tend to avoid going the investment banking route.

I don't see it as a good model. But of course, if the price is right, I'd take a job doing that. But I guess the point I'm trying to make is this: you may land a RE IB job. You may also eventually run into a lack of career future in that industry. My advice is to avoid RE IB unless a really great opportunity comes up.

With regard to commercial brokerage, yes, I know at least one guy who did it for a year in NYC, failed, got on with Freddie Mac as an analyst, and now is a 24-year-old underwriter (probably one of the youngest in the country). So, yes, it is a good learning experience if you get on with a good group and commit to learning your industry.

tishman may default in property in NYC and LA http://www.bloomberg.com/apps/news?pid=20601087&sid=asHgoknKMTwA

opus shuts down http://www.costar.com/News/Article.aspx?id=E96D451AAEE14277ED6A80494116…

tishman may default in property in NYC and LA http://www.bloomberg.com/apps/news?pid=20601087&sid=asHgoknKMTwA

opus shuts down http://www.costar.com/News/Article.aspx?id=E96D451AAEE14277ED6A80494116…

Stuy town was DOA. the funny thing is there were other players who wanted that project, so tishman wasnt the only one with the over valuation and stupid plan.

then you have lots of NY players, Macklowe/Swig/Levy who are in it pretty deep.

But in some of the worst markets, vegas & FL at least multi fams are trading given all the private investors with cash + foreign backing, the other stuff will pick up eventually. Its not the end of the world.

gotta commercial lending interview in november anybody got any advice? I've done a fair share of my homework but wanted to know from the gurus if there are any main themes that will come up from a technical or a behavioral standpoint. if you're going to tell me im insane to take a job in commercial lending trust me i already know. MANY THANKS

It's an I-Bank. I applied to Wells, BofA etc but none of them bit. I do not know the nature of the salary but im guessing its 50 to 60 g's its a job in NYC so it shouldn't be that bad. Mind you im going for an entry level analyst spot so its not gonna be something big time.

I agree with you about the experience, i do not have any except that I worked at a mortgage broker so I have a sense of how the industry works and I did some underwriting as well.

In regards to questions, so far I can only come up with a few because I do not really know the details of the job. I plan to ask about the training program, whether the team will take an equity position on the loans or whether they are simply the primary lender and then sell it to the secondary market, im gonna ask if they do only CRS deals as opposed to business banking (im guessing that is another division), and then i was going to ask about joint ventures and whether that is a current trend. i am not very confident in these so any recommendations would be extremely appreciated.

I know this job may be a burn out type job where they work me to the bone but I'm young and willing to do that at a reputable firm that will teach me valuation, which is exactly what I want to learn right now.

Thanks so much for all of your help!

Well, when I say burnout, I mean that you'll quit because you can't make enough money to support yourself because you can't produce business. It's VERY hard to originate single family loans, let alone commercial loans because it's such a relationship business--without those relationships, it can be very difficult.

But if there's a salary and you're really working with people who contact YOU (i.e. you're not drumming up your own business), then it could be a great job.

Questions don't have to be stump-the-interviewer questions. Ask them about training, tuition reimbursement, if the culture supports continuing education. Ask how they have been affected by the local and national economies, what they are projecting for 2010 and 2011 as far as CRE, what type of properties they lend for, what type of properties they avoid (if any). Ask the interviewer about his background and how he got into this industry. Ask about the learning curve for the job. Ask what is the standard profile of the clients you would be working with. What are your loan max and loan minimums? Do you lend nationally or just locally? Is there travel involved? If so, how much and for what reason (site inspections, conferences, networking, etc)?

Do a little research into their company and ask them some general questions along those lines (don't ask stump-me questions!). Find something praiseworthy in your research (ranked top 5 lender in the northeast) and ask them about it. Do you have a biggest client? How is business sourced? Is it sourced mostly through advertising, referrals, repeat business, internet, etc.? How does the company make money? Points, interest, other fees? Does the firm service in-house? Does the firm pay for access to real estate sites like LoopNet, Real Capital Analystics, Reis, Property and Portfolio Research (PPR), etc? Does the firm source affordable housing loans (this might be a big money maker for them--NYC is HUGE in affordable housing)? Ask them about their most memorable deal. Who would be my direct supervisor (often times, it's not even the guy you interview with).

Lots of questions have sub questions. But often some of the best questions are peppered into a nice conversation or are made on the spot. Make sure the interviewer is aware that you are armed with a long list of inquiring questions. This doesn't make you look bad--it makes you look smart.

double post.