Ask Me Anything: REPE Investment Professional

Mod Note (Andy) - as the year comes to an end we're reposting the top Q&A from 2015, this one was originally posted 1/6/2015.

Hi Guys,

I've noticed there's been a lot of unanswered questions about REPE on the forums lately. Given that WSO has provided a great deal of valuable information and insight to me over the years, I'd like to give back to the community in the form of an interactive, REPE-focused Q&A.

I work in acquisitions (mostly asset-level CRE) at one of the largest REPE firms according to the PERE 50 (think Blackstone, Starwood, Oaktree, Carlyle) in the firm's headquartered metro. Prior to joining my current firm, I worked at an investment bank in a real estate coverage group. I graduated from a non-Ivy target school. That's the extent to which I'd like to provide a background to remain as anonymous as possible.

Please ask away!

 

What are your thoughts on working for Asset Management at a big mega fund compared to Acquisitions? Recently I was pitched an Asset Management associate opportunity. The idea was that working in Asset Management on a pre-mba track at a mega fund will allow the associate to develop an extensive deal sheet across different geographic areas and asset classes. An Acquisitions role would be a post-mba opportunity.

p.s. im currently in Acquisitions.

 
inspiredanalyst:

What are your thoughts on working for Asset Management at a big mega fund compared to Acquisitions? Recently I was pitched an Asset Management associate opportunity. The idea was that working in Asset Management on a pre-mba track at a mega fund will allow the associate to develop an extensive deal sheet across different geographic areas and asset classes. An Acquisitions role would be a post-mba opportunity.

p.s. im currently in Acquisitions.

Acquisitions experience, in my opinion, creates the most valuable and transferable skill set you can have at the junior level. While asset management at a mega fund would likely be beneficial from a brand perspective, you would be building a completely different skill set and potentially limiting your future career prospects.

As an aside, I truly believe that asset management folks create the most value at the real estate level. Unfortunately however, asset management at my firm and comparable other firms are seen as a cost center and not "front office". Compensation, as you may expect, is reflective of this.

It sounds like your goal is mega fund acquisitions post-MBA. My advice for you and anyone with a similar situation / goal is to 1) stay in acquisitions, 2) network and 3) recruit for the mega funds post-MBA, leveraging your deal experience and industry contacts.

 

I would be very interested in learning your path to getting a position at your current company and recommendations you give to others in the recruiting process.

I am currently in acquisitions at a smaller REPE group and am actively looking to make the jump to a large REPE firm. I've made personal connections at many of the main funds, but the story is similar, that there aren't currently any positions open. How do you suggest finding available openings beyond searching the job boards and networking? I know there have been many general forums about this topic, but I am interested specifically in these smaller acquisition teams at the large funds.

Also, do you recommend connecting with outside recruiters?

 
REFinance13:

I would be very interested in learning your path to getting a position at your current company and recommendations you give to others in the recruiting process.

I am currently in acquisitions at a smaller REPE group and am actively looking to make the jump to a large REPE firm. I've made personal connections at many of the main funds, but the story is similar, that there aren't currently any positions open. How do you suggest finding available openings beyond searching the job boards and networking? I know there have been many general forums about this topic, but I am interested specifically in these smaller acquisition teams at the large funds.

Also, do you recommend connecting with outside recruiters?

In addition to the job boards (SelectLeaders, LinkedIn) and networking, I'd recommend reading the industry periodicals (RE and Commercial Mortgage Alert grapevine section) and getting in touch with real estate-focused headhunters (Amity, Glocap, Bellcast, SG, CPI). There have been a ton of open positions in the past six months alone from what I've seen.

For me, I was able to source my current role from one of the above methods. My network also came into play - real estate is a small world, and some trusted former colleagues who were familiar with my current team were able to vouch for me.

I'd continue to keep doing as you're doing, and follow some of the suggestions above. One last thing - keep working and stay focused at your current role. When the time comes where you need a recommendation, a glowing review will likely seal the deal for you.

 
re1098:

For me, I was able to source my current role from one of the above methods. My network also came into play - real estate is a small world, and some trusted former colleagues who were familiar with my current team were able to vouch for me.

I'd continue to keep doing as you're doing, and follow some of the suggestions above. One last thing - keep working and stay focused at your current role. When the time comes where you need a recommendation, a glowing review will likely seal the deal for you.

This is right on (as a general career rule in any industry).

 

Thanks for your thoughtful response to my questions! I will have to catch-up on some of the periodicals since I mostly just review industry reports. Also your headhunter recommendations were very helpful. I haven't been pursuing this avenue to much since I was unsure how much these larger firms utilize headhunters.

Great reminder to continue working hard in my current position. It can always be easy to get distracted as I look forward to other opportunities, but the connections I've made so far will definitely prove priceless.

 

Are REPE funds / groups as structured as regular PE in recruiting? Do most REPE guys have prior banking experience, or is it possible to break into REPE with different backgrounds as well (i.e. real estate consulting / law / you name it).

 
LiamNeeson:

Are REPE funds / groups as structured as regular PE in recruiting? Do most REPE guys have prior banking experience, or is it possible to break into REPE with different backgrounds as well (i.e. real estate consulting / law / you name it).

Not at all. I find REPE recruiting to be largely ad hoc in nature, from the large funds to the smaller managers. For this reason, it's especially important to be networking, searching the job boards and connecting with headhunters constantly.

I'd say that nearly every one of my contacts in REPE generally has either banking, acquisitions or investment sales experience prior to recruiting. However, these are for acquisitions-type roles. There is always a need for investor relations, legal and business development folks at REPE firms, where the different backgrounds you mentioned may even give you a slight edge.

 

I work for a real estate principal in various aspects of Asset Management (acquisitions, dispositions, refinances, repositionings, property oversight, etc.). I'm finishing up my real estate master's program in about 2 1/2 years and I'd like to jump to a major PE fund's acquisitions or asset management group in about 2 1/2 years, but I don't really know what the ultimate goal is. Assuming a person doesn't start a PE fund, what is the end goal for PE careers? Managing director or something along those lines?

I just can't seem to figure this out. We here are all so focused on the early career roles, but what are we going to be doing when we're 40 in this business? That's what I'm having trouble figuring out. And it's really hard to figure out because I literally don't know anyone in their 40s in high finance--at my firm, at my previous firms, around town, etc. I think 38 is the oldest I've known, and he inherited most of the RE portfolio that he runs.

 
Best Response
DCDepository:

I work for a real estate principal in various aspects of Asset Management (acquisitions, dispositions, refinances, repositionings, property oversight, etc.). I'm finishing up my real estate master's program in about 2 1/2 years and I'd like to jump to a major PE fund's acquisitions or asset management group in about 2 1/2 years, but I don't really know what the ultimate goal is. Assuming a person doesn't start a PE fund, what is the end goal for PE careers? Managing director or something along those lines?

I just can't seem to figure this out. We here are all so focused on the early career roles, but what are we going to be doing when we're 40 in this business? That's what I'm having trouble figuring out. And it's really hard to figure out because I literally don't know anyone in their 40s in high finance--at my firm, at my previous firms, around town, etc. I think 38 is the oldest I've known, and he inherited most of the RE portfolio that he runs.

You figure out that Cap Rates and Discount Rates are different yet?

 
gregt14:
DCDepository:

I work for a real estate principal in various aspects of Asset Management (acquisitions, dispositions, refinances, repositionings, property oversight, etc.). I'm finishing up my real estate master's program in about 2 1/2 years and I'd like to jump to a major PE fund's acquisitions or asset management group in about 2 1/2 years, but I don't really know what the ultimate goal is. Assuming a person doesn't start a PE fund, what is the end goal for PE careers? Managing director or something along those lines?

I just can't seem to figure this out. We here are all so focused on the early career roles, but what are we going to be doing when we're 40 in this business? That's what I'm having trouble figuring out. And it's really hard to figure out because I literally don't know anyone in their 40s in high finance--at my firm, at my previous firms, around town, etc. I think 38 is the oldest I've known, and he inherited most of the RE portfolio that he runs.

You figure out that Cap Rates and Discount Rates are different yet?

I never said they were the same. In fact, I went into painful detail to explain this point. I said for the specific example given they would be APPROXIMATELY the same and would be perfectly fine to utilize for an undergraduate class assignment.

In fact, I can be specifically quoted as saying, "Cap rate is NOT the same thing as discount rate" [emphasis added].

 
DCDepository:

I work for a real estate principal in various aspects of Asset Management (acquisitions, dispositions, refinances, repositionings, property oversight, etc.). I'm finishing up my real estate master's program in about 2 1/2 years and I'd like to jump to a major PE fund's acquisitions or asset management group in about 2 1/2 years, but I don't really know what the ultimate goal is. Assuming a person doesn't start a PE fund, what is the end goal for PE careers? Managing director or something along those lines?

I just can't seem to figure this out. We here are all so focused on the early career roles, but what are we going to be doing when we're 40 in this business? That's what I'm having trouble figuring out. And it's really hard to figure out because I literally don't know anyone in their 40s in high finance--at my firm, at my previous firms, around town, etc. I think 38 is the oldest I've known, and he inherited most of the RE portfolio that he runs.

In my mind, the end goal for people staying with the firm is making Managing Director / Partner. At this level, carry participation can be extremely lucrative. Assuming one can consistently continue to generate business for the firm (source capital, deals), it can be a pretty cushy position - one that someone could ride into retirement.

Going entrepreneurial is another route. Real estate as an industry is extremely fragmented - exploiting a niche in a specific market as a sharpshooter / specialist is very realistic with enough experience.

 
S.P.O.R.T.:

What was the interview process like for your current position?

Consisted of three rounds, each with varying levels of professionals (Associate through Managing Director). Questions were mostly fit and about my previous real estate positions / deal experience.

It is important to note - at some REPE firms where deal teams run lean, fit is extremely important. If you click with the team, both you and your interviewers should know right away. At this point, proving your technical competency is a check-the-box item.

Many other REPE processes will include a modeling test where you are expected to model out cash flows for a property (likely a hotel due to its simplicity) and come up with an investment thesis. So look out for that as well.

 
AcquisitionsGuy:

Do many of the people at your shop have MBAs? Did any of the guys/gals do REIB post-MBA then switch to REPE?

MBAs at my firm are actually pretty rare. People have been very successful moving up from the lower levels and being promoted through the ranks, though this may not be the culture everywhere.

As far as REIB post-MBA to REPE, it is certainly possible, though I don't believe anyone at my firm has taken that path. I'd imagine you'd make some pretty valuable REPE contacts working in REIB, though, which could be a potential entryway to REPE if you make a good impression. With that said, REPE straight out of MBA should be your number one option, even if it's at a smaller shop.

 
Big Swinging Chimp:

Does your firm originate solely through their seniors contacts or do they have an origination team? More specifically my question is where does your firms deals usually come in from?

For certain strategies, there are origination teams that concentrate 100% on deal sourcing. For other strategies, deals come through more generalist investment professionals who are responsible for both sourcing and execution.

A vast majority of our deals come from established relationships - some brokered but usually off-market. Bigger deals i.e. > $1 billion, are sourced from Partner-level relationships.

 

What do you think of someone with no RE experience (only personal investments), would a Wharton MBA be of any help? I have 5 strong years of experience in another field in finance (trading), but again none in REPE. Would really appreciate some guidance as I am still pondering the + and - of doing an MBA at Wharton

 
REPE:

What do you think of someone with no RE experience (only personal investments), would a Wharton MBA be of any help? I have 5 strong years of experience in another field in finance (trading), but again none in REPE. Would really appreciate some guidance as I am still pondering the + and - of doing an MBA at Wharton

Yes, I believe so. Wharton has far and away the largest alumni network in REPE, in my experience. I also consider their real estate MBA the strongest program out there.

I'd be sure to have a demonstrable real estate interest and compelling story for your switch. While you may be at a disadvantage by not having any real estate experience, that can be overcome by networking and hustle. Alternatively, you could also look into hedge funds and distressed debt shops that invest in real estate credit / securities, in which case, your background could be an advantage.

 
xxxx:

Im interested in your experience in REIB - how did you best prepare yourself for REPE and what advice would you give for someone in his first year as an analyst looking to make the jump? How long were you at the bank and how much did brand name count?

Thank you!

I've come to realize that the biggest change from REIB to REPE is the amount of responsibility and autonomy you have. At my shop, I handle the entire underwriting process and assembly of the IC memo, with the only real check being a glance at the end result from a VP. This means that attention to detail and the ability to create exceptional work product (skills gained as an Analyst) are especially critical in establishing a healthy working relationship with your superiors and colleagues.

In short, I concentrated on being able to take on more responsibility as an Analyst during my time in REIB. I was confident that my work could go straight to the group head or client, without anyone else checking my work.

I worked at my bank for one year. A brand name gig will get you headhunter attention and perhaps an additional interview or two, but after that, it's about fit and competency.

 

You mention you handle the entire underwriting process and assembly of the IC memo.

Can you tell me a little more about how you managed the learning curve? What were areas you felt you weren't as strong in when you made the move?

Can you also elaborate on the level of due diligence required? Do you get involved with legal/any other aspects as well?

 

What range of return do REPE firms target? Do you see the return has been driven down a lot because many people open up dedicated funds to REPE strategy and there are not many need-to-be-fix buildings out there? Can you ball park the percentage of off-market deals that you guys have, or in other words, do the majority of deals that you guys have are brokered and auctioned?

 
kamikade:

What range of return do REPE firms target? Do you see the return has been driven down a lot because many people open up dedicated funds to REPE strategy and there are not many need-to-be-fix buildings out there? Can you ball park the percentage of off-market deals that you guys have, or in other words, do the majority of deals that you guys have are brokered and auctioned?

Usually REPE strategies target three distinct buckets: core, value-added or opportunistic returns, each level ascending in risk profile. Core will generally target returns of 7-10%, value-added 10-16% and opportunistic 17%+. Firms like mine usually manage a series of predominantly opportunistic funds.

Return targets have compressed over the years as the market has become more efficient. There's simply been a vast amount of capital flowing into real estate, driving up the purchase price for assets - thus it's harder to achieve 20%+ returns as some funds had done post-recession.

I would say more than 90% of our deals are either off-market or limited competition - we never want to be the highest bidder in an auction process and thus tend to avoid them. Our opportunities come from relationships who will give us a first look and opportunity to close because of our speed and certainty of execution.

 

Thanks re1098. Do you think the skill-sets of someone dealing mostly with core investments can be transferable to REPE? I was wondering how you got into REIB initially. Did you intern in REIB group before or did you intern at other real estate companies?

 
REPE8:

Thanks for taking time to answer questions. Where do you go from here? I work for a small shop and once you reach a certain level, are you looking to switch firms if you don't believe there is further opportunity for advancement?

Where do you see yourself in 5 or 10 years?

I'm not quite sure yet. In the short term, I'd like to move up within the firm and develop my deal underwriting and structuring acumen. Though I've been in real estate for my entire working career, there's still a lot I have to learn. I am sure that I want to skip grad school, though - just personal preference.

In the long term, I can see myself doing something proprietary, leveraging the skills and network gained from my time here. I don't think I'd switch shops unless an opportunity was extremely compelling - it takes time to build clout and tenure, which is instrumental when the firm decides carry allocations.

 
S.P.O.R.T.:

Is your role primarily acquisition based? Meaning, do you just underwrite and churn out IC's, and deal with closing due diligence all day? Do you have any involvement in the financial reporting, Asset Management or fund marketing processes? Do you attend any investor meetings?

Or, more simply, what is your typical day like?

I spend nearly all of my time on deals, either underwriting or putting together IC memos. Once the IC approves the deal, closing due diligence is handed off to someone else, though I may provide support if needed. At my firm, roles in general are very structured.

Since we are a larger shop, we have dedicated investor relations and asset management personnel who are responsible for ancillary functions (reporting, fundraising, asset management, etc.). I don't attend investor meetings, those are usually reserved for very senior-level personnel.

 

Acquisition analysts/associates in REITs... What's the professional pathway for those guys? I see a lot of stuff around REIB and REPE... But I wonder what's the path for acq guys... seems like they get a lot of good experience from a deal perspective but no one really talks about them.

 

I can help answer this for the op (I am a senior acquisitions analyst for a good sized REIT). Analysts/Associates come from a similar type background as REPE (REIB, brokerage, commercial lending, etc.) There is no one who came straight from undergrad on my team because we prefer people with some type of experience. Career path is also similar: Analyst -> Associate -> VP/Principal -> Director -> Managing Director with usually 2-3 years at each level (maybe 4 at the VP level). Analyst/Associates mainly do the underwriting. VPs may source some deals but are principally in charge of quarterbacking the deals. Directors/Managing Directors are the rain makers.

Overall, not much difference in background, progression or main job function. The difference is the asset type/risk profile/etc. GENERALLY, REIT acquisitions are much easier to underwrite when compared to REPE deals since REITs generally invest in more core products as opposed to value-add or opportunistic.

 
handullz:

Acquisition analysts/associates in REITs... What's the professional pathway for those guys? I see a lot of stuff around REIB and REPE... But I wonder what's the path for acq guys... seems like they get a lot of good experience from a deal perspective but no one really talks about them.

AcquisitionsGuy covers this pretty well. The progression of title / rank and day-to-day roles are pretty similar.

I'd like to add that many on the forum often ask about the distinctions between publicly traded REITs and REPE firms (I'm noting that REITs are "publicly traded" as this is often the context in which REIT is used, though a REIT is really just a tax structure, and can take private or public and non-traded forms). Functionally, we've established REITs and REPE firms are pretty similar. However, from my perspective, the main differences are 1) the source of the equity and 2) investment style (though as a disclaimer, there are exceptions).

Generally speaking from an equity capitalization standpoint, REITs will use public equity to fund acquisitions while REPE firms will invest in assets via a private pool of capital comprised of third-party institutional and REPE firm capital (together, private equity). Therefore, REPE really derives its name from the fact that equity is invested out of a private equity fund, not that it makes exclusively equity investments (plenty of opportunistic funds make debt investments as well).

In terms of investment style, it is true that REPE firms generally make more value-added and opportunistic investments. The reason for this is that REITs pay out dividends, therefore non-cash flowing assets that fall within the realm of a value-added or opportunistic risk profile are not as attractive.

 

Thank you for doing this. Here are a few questions on my mind:

Any tips for networking with REPE headhunters?

What's your work/life balance like?

What is your compensation range for both salary and bonus?

What is your opinion of acquisition roles and career paths at life companies?

What is your opinion of the undergraduate and MBA real estate program at The University of Wisconsin - Madison?

Thanks again.

 
20-IR:

Thank you for doing this. Here are a few questions on my mind:

Any tips for networking with REPE headhunters?

What's your work/life balance like?

What is your compensation range for both salary and bonus?

What is your opinion of acquisition roles and career paths at life companies?

What is your opinion of the undergraduate and MBA real estate program at The University of Wisconsin - Madison?

Thanks again.

I'll answer these rapid fire:

Be personable, yet professional. Assuming you have solid real estate experience and the headhunter likes you, you're more likely to get an interview or two.

Work / life balance is great. I work 60-70 hours most weeks.

Compensation range is 125K to 175K all-in, with a majority coming from base salary.

At life companies, you'll see different deals - likely cash-flowing, core-type assets as opposed to value-added or opportunistic deals you'll see at REPE firms. Lifestyle is generally good.

I'm not sure about UW - Madison, though I've seen some undergrads at a few REITs and REPE firms.

 

Have a ton of questions for you. I understand that for REPE recruiting, many REIB analysts jump after a year. What are your thoughts on leaving your REIB group after a year since REPE is hired on more of an as needed basis? Are there benefits to staying/ would a senior really recommend you if you were jumping ship early? Are there REPE that hire 2 years out? Can you work you way up in most REPE shops or do they kick you out after 2 years to get an MBA? Do you enjoy your job or is number crunching all day boring? Did you think about doing corporate PE over REPE and how similar do you think they are? Which large REPE firms are more asset level versus corporate level? Which do you prefer? In corporate PE recruiting, there is a huge focus on what group and bank you are coming out of. If you are in a REIB group at a BB, is that a check the box, or are the RE groups at certain banks a lot more highly desired than others. I've been looking for an AMA like this for YEARS! Thanks so much.

 
mookeyisland:

Have a ton of questions for you. I understand that for REPE recruiting, many REIB analysts jump after a year. What are your thoughts on leaving your REIB group after a year since REPE is hired on more of an as needed basis? Are there benefits to staying/ would a senior really recommend you if you were jumping ship early? Are there REPE that hire 2 years out? Can you work you way up in most REPE shops or do they kick you out after 2 years to get an MBA? Do you enjoy your job or is number crunching all day boring? Did you think about doing corporate PE over REPE and how similar do you think they are? Which large REPE firms are more asset level versus corporate level? Which do you prefer? In corporate PE recruiting, there is a huge focus on what group and bank you are coming out of. If you are in a REIB group at a BB, is that a check the box, or are the RE groups at certain banks a lot more highly desired than others. I've been looking for an AMA like this for YEARS! Thanks so much.

A lot of these questions are entirely situational, but I'll answer as best I can.

It's up to you to weigh whether or not it's beneficial to stay for two years or lateral to the principal side after one. I felt ready after one year, and decided to make the switch.

I built a great rapport with my team at my bank, and felt comfortable enough to ask for a recommendation (though I recognize the culture isn't like this at most places). Again, you'll have to judge for yourself whether you can make the ask.

Nearly all REPE firms do not hire two years out - most are immediate start. MBA is firm-dependent, but not at mine - people have moved up through the ranks.

I like the current role I'm in - I have a lot of discretion in the deals we take on. I've always had a real estate background and never considered corporate PE.

REPE firms that do corporate real estate investments will likely also manage buyout funds. Asset-level REPE aligns more so with my background.

It's actually hard to find good REPE candidates. If you have REIB experience at a good brand bank, you have a better chance at getting an interview slot, though you'll have to hustle through the aforementioned headhunter and networking grind. It's shop-dependent, though REPE in general is less focused on prestige.

 
inspiredanalyst:

is there an automatic screen for those who have poor GPAs in Undergrad for REPE? or is it more dependent on the shop you worked for and the transaction exp?

more directly, would your firm hire someone who has great transaction exp from an owner but average gpa, 3.3 (AM or Acq)

I would say that GPA is increasingly less important as your time after undergrad progresses. What matters more is the quality of your real estate experience - with acquisitions skills being most valuable and transferable.

However, a few years out of undergrad, it is pretty critical, namely because headhunters and some entry-level positions have GPA cutoffs.

 

Thanks a lot for doing this man! Here are my questions: 1. What's your opinion on Fannie Mae/Freddie Mac? Does your firm recruit from these places regularly? What's the chance for someone in those two firms join REPE? 2. How does programming/quantitative skills valued at REPE? In other words, does REPE need quants?

 
zhangyizhe900723:

Thanks a lot for doing this man!
Here are my questions:
1. What's your opinion on Fannie Mae/Freddie Mac? Does your firm recruit from these places regularly? What's the chance for someone in those two firms join REPE?
2. How does programming/quantitative skills valued at REPE? In other words, does REPE need quants?

Clarify what role. Multifamily? Single-family? MBS? Structured finance? Underwriting? Origination? Fannie and Freddie are gigantic organizations.

 

Sry for being not clear. It's multifamily and mainly focus on analytical side. There isn't a lot of threads here talks about Fannie/Freddie. They are definitely huge----I'm still confused about different levels of organization.

 
zhangyizhe900723:

Sry for being not clear. It's multifamily and mainly focus on analytical side. There isn't a lot of threads here talks about Fannie/Freddie.
They are definitely huge----I'm still confused about different levels of organization.

It really depends on the role, though Fannie and Freddie aren't regular places we recruit from, to be honest. If you gain experience in a valuation / modeling position, however, you may be able to lateral into a multifamily-focused REPE shop. Going into a traditional value-added / opportunistic REPE firm would be a harder transition.

Underwriting skills are most valuable at the junior level. Programming and quant skills aren't necessary unless you're doing more hedge fund-oriented strategies, like trading real estate securities for example. At most REPE shops, the asset-level modeling you'll be doing is fairly simple and within the confines of Argus and Excel.

 
re1098:
zhangyizhe900723:

Sry for being not clear. It's multifamily and mainly focus on analytical side. There isn't a lot of threads here talks about Fannie/Freddie.
They are definitely huge----I'm still confused about different levels of organization.

It really depends on the role, though Fannie and Freddie aren't regular places we recruit from, to be honest. If you gain experience in a valuation / modeling position, however, you may be able to lateral into a multifamily-focused REPE shop.

Are you in NYC? Assuming you are, do you think lack of recruiting (or hiring people) out of Fannie and Freddie at your firm is a function of location? I think Fannie Mae has no physical New York office presence and Freddie Mac has a small regional NYC office. My assumption would be that in the grand scheme of NYC finance talent that there would be very, very few people with GSE experience.
 

Just trying to understand your path -- When you say 1.5 years of post grad experience, do you mean 1.5 years post undergrad experience? So did you do IB for a year and then joined your current shop 6 months ago? What is your base?

Why does REPE pay less than corporate PE? $125-$175k is great, but I feel like associates in corporate pe can make upwards of $250k....

 
REfinance2011:

Just trying to understand your path -- When you say 1.5 years of post grad experience, do you mean 1.5 years post undergrad experience? So did you do IB for a year and then joined your current shop 6 months ago? What is your base?

Why does REPE pay less than corporate PE? $125-$175k is great, but I feel like associates in corporate pe can make upwards of $250k....

I mean one and a half years of post-undergrad experience total, including the time spent at my current firm. I spent one year in REIB.

My base is in the six figures. To clarify, I am still very junior and not yet Associate-level.

I'm glad you brought up that question - usually the top REPE firms will pay in-line with corporate PE, in the range you mentioned. It's a common misconception that REPE pays less than corporate PE - private equity firms (both real estate and corporate) with larger AUM can simply afford to pay more to their employees (the larger the funds, the more carry and management fees are collected). As traditional LBO shops have a larger AUM on average, this skews the data in favor of corporate PE, thus all-in compensation seems much higher by contrast.

 

Thank you for doing this AMA. How does your firm feel about analysts with a BB CMBS origination background? Do REPE firms actively recruit analysts from lending backgrounds? What is your opinion/do you have any advice for someone trying to make that jump? Thanks again.

 
SDRE:

Thank you for doing this AMA. How does your firm feel about analysts with a BB CMBS origination background? Do REPE firms actively recruit analysts from lending backgrounds? What is your opinion/do you have any advice for someone trying to make that jump? Thanks again.

Generally, a good background to have and pretty applicable from my perspective as long as you're underwriting deals. I've seen the transition at several shops before, but mainly to debt funds.

All the top shops will have some need for credit-focused analysts - nearly everyone has a debt strategy these days.

My advice to anyone trying to break into REPE is pretty similar - get in touch with headhunters (you'll have an easier time with relevant, brand experience like yours) and start networking with those already in REPE, alumni preferably. Also be looking on SelectLeaders, LinkedIn, and the Grapevine section in Real Estate and Commercial Mortgage Alert for open positions.

 
Gene Parmesan:

Does your group build out RE platforms (similar to TPG, Blackstone) or property/portfolio specific? My interest gravitating toward the former

Yes, my firm builds out platforms. Usually, the larger REPE shops will run various strategies backed by dedicated deal teams, whereas smaller shops will have more collaboration amongst investment professionals. In either case, you tend to become pretty specialized and will usually stick with an investment type after awhile (a generalist model isn't as efficient in REPE, especially at the mid-level).

 

Thanks. What do you find most interesting/challenging about creating a new platform? Also curious to hear what strategies for sourcing deals you have found (or heard) to be the most successful.

I ask because several acquisitions I've worked on recently have been beat up by very competitive bidding processes, looking for a better angle

Fill the unforgiving minute with 60 seconds of run. - Kipling
 
YoungBiz:

how often do you see people coming from brokerage? Either Investment Sales or Capital Services?

I see investment sales experience sometimes, but not as often as REIB or REPE. I do think the experience is very relevant, however. It honestly depends on the brokerage - if the firm has a history of sending Analysts to REPE, then it is more likely to do so (some shops are more connected than others). If you're in a major metro, I'd say you're in a good spot to get some interviews.

 
re1098:
YoungBiz:

how often do you see people coming from brokerage? Either Investment Sales or Capital Services?

I see investment sales experience sometimes, but not as often as REIB or REPE. I do think the experience is very relevant, however. It honestly depends on the brokerage - if the firm has a history of sending Analysts to REPE, then it is more likely to do so (some shops are more connected than others). If you're in a major metro, I'd say you're in a good spot to get some interviews.

Thanks! Yes i am at a bigger firm in a big market. CBRE/JLL/C&W in Manhattan. Capital Services.

 
Aseny:

How helpful is a Master Degree in real estate at a top school (say MIT, NYU, etc.) for someone with limited prior industry experience to find a job in PERE? Thanks!

From what I've seen, they're helpful if you're in a major metro and have prior industry experience. Without experience, you may need to work in REIB or a smaller principal investor (doing underwriting / acquisitions) before lateraling to REPE. I'd say that networking is also critical - the upside is that you'll have a bunch of new alumni contacts by getting your M.S. (though your class will likely be competing for the same jobs).

 

Hi, thank you for starting this thread! Im wondering what's your opinion on how difficult is it to switch from a smaller REPE shop (deal size ranging from $5M - $25M mostly) to an institutional platform? I have been at a NYC-based owner and operator shop for about 1.5 years, it is more multi-family focused and I always wanted to switch to a bigger institutional platform that looks at different asset classes.

Also have you had any experience with NorthStar?

Thank you very much!

 
jinglebellsss:

Hi, thank you for starting this thread! Im wondering what's your opinion on how difficult is it to switch from a smaller REPE shop (deal size ranging from $5M - $25M mostly) to an institutional platform? I have been at a NYC-based owner and operator shop for about 1.5 years, it is more multi-family focused and I always wanted to switch to a bigger institutional platform that looks at different asset classes.

Also have you had any experience with NorthStar?

Thank you very much!

I'd imagine the quality of your deal experience would be important as well as the amount of networking you do to break in, though since you're in a major metro it's much more competitive. What you can try to do is lateral into a small REPE firm where you'll have a more generalist experience, then move to a larger shop from there. Depending on your background, an MBA may be helpful to re-brand yourself.

We've run into NorthStar a few times on a couple deals. Good shop - most people I know who have worked there previously are now in REPE.

 
  1. Do top REPEs (Blackstone, Starwood, Lone Star, Colony, Carlyle, Oaktree, Northwood) prefer REIB analysts from BB/EB over institutional sales analysts from CBRE/Eastdil in major market cities?

  2. If you're located in a major city like NYC can you still recruit for firms located in DC/SF/LA/DFW?

  3. What percent of your colleagues in Acquisitions come from an IB role versus a more traditional RE role or law background?

  4. What's the typical base salary for a REPE analyst and a REPE associate? What's the expected bonus for an associate?

  5. Could you go into further detail the REPE recruiting process out of IB programs? (when do firms recruit / modeling test)

  6. What are your thoughts on joining the real estate debt strategy focused team at Blackstone / Apollo / Oaktree / Colony / PIMCO versus a pure equity acquisition guy?

Robert Clayton Dean: What is happening? Brill: I blew up the building. Robert Clayton Dean: Why? Brill: Because you made a phone call.
 
goodL1fe:

1. Do top REPEs (Blackstone, Starwood, Lone Star, Colony, Carlyle, Oaktree, Northwood) prefer REIB analysts from BB/EB over institutional sales analysts from CBRE/Eastdil in major market cities?

2. If you're located in a major city like NYC can you still recruit for firms located in DC/SF/LA/DFW?

3. What percent of your colleagues in Acquisitions come from an IB role versus a more traditional RE role or law background?

4. What's the typical base salary for a REPE analyst and a REPE associate? What's the expected bonus for an associate?

5. Could you go into further detail the REPE recruiting process out of IB programs? (when do firms recruit / modeling test)

6. What are your thoughts on joining the real estate debt strategy focused team at Blackstone / Apollo / Oaktree / Colony / PIMCO versus a pure equity acquisition guy?

I'd give REIB Analysts a slight edge in recruiting, though both will get interviews. I've seen people with backgrounds from CBRE and Eastdil break into REPE, though at the more asset-level shops.

Yes, that's definitely a possibility. I know numerous people who have done this.

I'd say about 50/50. Nearly everyone has REIB, REPE or investment sales experience, however.

For the top shops, base of $80k+ for Analysts and $100k+ for Associates. Bonus would be anywhere from 50-100%. Compensation as noted previously varies greatly.

Nearly all REPE firms recruit ad hoc - meaning it is important to stay in the loop with headhunters and the various job boards / industry publications (RE / CM Alert). Many people I know who have recruited during their time in REIB will leave after one year. It'll be likely that you start in either the summer or the winter (interviews are rolling throughout the year). Most firms will assign a modeling test (typically a multifamily or hotel asset due to its simplicity) where you'll be required to model out cash flow, build out a simple promote structure and answer a few questions about your analysis. If you have legitimate deal experience, this should be nothing new to you.

Real estate debt is a growing space in the REPE world - nearly all firms have a strategy and dedicated deal team these days. Debt investing is just as complex and interesting, in my opinion. Opportunistic returns are also very achievable - in fact, a majority of the larger REPE firms will do both debt and equity investing out of their flagship opportunistic funds.

 

At what seniority level do employees typically start getting carried interest? Do employees get to co-invest equity on deals? If so, what seniority level does this generally start happening at? Thank you!

 
dude093:

At what seniority level do employees typically start getting carried interest?
Do employees get to co-invest equity on deals? If so, what seniority level does this generally start happening at?
Thank you!

Completely varies. I believe at my shop, it's Vice President-level and above. Probably similar to other shops. Not sure about co-invest, though I'd assume that would be available around the same time.

At some smaller shops where it's more entrepreneurial, I've heard of all investment professionals (Analyst and above) getting carry and co-invest.

 

Thank you for doing this! I am currently a junior majoring econ at a liberal arts college and I was wondering if you could recommend some valuable skills and technical work I should know and prepare myself for in order to land a REPE internship during the summer.

 

Thank you for doing this! I am currently a junior majoring econ at a liberal arts college and I was wondering if you could recommend some valuable skills and technical work I should know and prepare myself for in order to land a REPE internship during the summer.

 

How important do you think location is for the top PE firms when it comes to VP/MD level hiring? For example, let's say there's an elite REPE firm (e.g. Lone Star Funds, KKR, Starwood Capital) that invests all over the country/world but has its acquisitions office in NYC. Would these types of firms have acquisitions guys sourcing deals that are, say, working from home or in "micro offices" in their major target markets?

 

DCD typically these local acquisition guys are in separate companies (especially abroad), but large REPE firms sometimes put boots on the ground also

Fill the unforgiving minute with 60 seconds of run. - Kipling
 
DCDepository:

How important do you think location is for the top PE firms when it comes to VP/MD level hiring? For example, let's say there's an elite REPE firm (e.g. Lone Star Funds, KKR, Starwood Capital) that invests all over the country/world but has its acquisitions office in NYC. Would these types of firms have acquisitions guys sourcing deals that are, say, working from home or in "micro offices" in their major target markets?

Probably not in the way you're thinking. Blackstone's real estate team has direct employees in India, yes. But if they happen to be buying a bunch of buildings in Charlotte NC (not that I'm saying they are, I'm just using Charlotte as an example), that doesn't mean that Blackstone real estate has an office in Charlotte. There might be a brokerage or mgmt office there that has a relationship with BX RE where they bring deals to BX, but those are not BX employees.
 
CRE:

What are your/your firms' feelings on MRED/MSRE type degrees?

CRE re1098

I'd be interested to hear more about this too. From what I've seen, real estate masters degrees seem to have much more applicable curriculums covering a wide array of real estate-specific issues from the entitlement process to advanced real estate finance, whereas some of the top MBA programs may only have 1-3 real estate specific classes.

Not to mention, I would assume pursuing a MSRED could be a less competitive route to getting a name like Harvard or Columbia on the resume. I understand, however, that a major push for attending a top MBA is growing your network and that the classmates at a top MBA vs a MSRED typically come from and continue into more competitive / prestigious roles within PE / REPE and are thus more valuable from a relationships standpoint.

Regarding MBAs though, I've heard / read that the best real estate MBAs out there are from Wharton (#1), Columbia, Kellogg and Berkeley... would most agree with this?

Thanks

 

Question for you..

Just started as an Analyst at massive corporation in their Corporate RE group (made thread here.. not a specific RE company like JLL).. I'm doing mainly budget/capital/expense management stuff like that. No traditional modeling or ACquistions. These are obviously not skills that translate to investment side although my goal in two years is to buy my first rental property and build a portfolio possibly starting my own firm.

My main question is I would like to before that work somehow in the investment/acquisition side. I actually like multifamily more than commercial. Not sure firms that specialize in that. I know Argus/Excel modeling is biggest value to landing job. If I got Argus certified and learned excel modeling a lot on my own, would that have any merit in eyes of a firm or would they want hands on work experience doing it?

 

Hi requestions,

We recently got a Real Estate Finance forum opened on this site. That may be a better forum for this topic.

As one opp fund associate to another, I am curious to hear (1) the comp range at your firm (feel free to speak in broad ranges to preserve anonymity), (2) your deal focus (property / region) and recent transaction volume, and (3) whether your firm is in fundraising, and your perception of how that is going.

Also, is the firm you are with now a one-fund-at-a-time opportunistic manager, a multi-fund real estate manager with core / value-add / separate account funds, or the REPE arm of a multistrategy megafund?

 
  1. RE finance has the largest range in terms of compensation. At my level, I think average all-in market compensation is $175k-$300k. Base salary is pretty standard in the $110k-$125k range. That being said, there are legitimate shops that pay $135k-$150k due to the perceived experience play (a buddy of mine got an offer from CIM a few months ago in LA and the pay was around $130k all-in). There are also some outliers that get up to $350k. I can't get into firm specifics by the way but I think this helps.

  2. Can't get into firm strategy as it is pretty specific. We closed several of the largest deals in 2010/2011 (single and portfolio assets, nothing on the corporate/buy-out side)

  3. We are fundraising. It is going well but we are largely drawing from the same investors in our previous funds and we had a very solid 2010 and 2011. I think there is a huge bifurcation in the market right now for who is able to fundraise and who is not. I'm only marginally involved in this world (through historical models and syndication presentations) so I do not have intimate details on this.

  4. We have a few different pools of capital (one fund at a time and then several separate accounts)

I would prefer to avoid any identifying questions in the future and hoping to guide this more towards general career advice. Feel free to PM.

 

Do you think you can get pigeon holed into certain areas of repe? For example, if you worked at a repe shop that specialized in industrial properties, would it be harder to then move to a repe with a commercial or residential focus? What about strategy to strategy (opportunity to core, etc.)? Im under the impression neither should be that difficult (strategy more so than type of property, if anything) but would interested to hear an industry person's take on it. thanks

GBS
 

DatGreyPoupon - 100% networking with alumni and maintaining good grades and relevant internships.

Goldman - I think it depends. If you are talking about analyst opportunities then probably not. That being said, residential, hotel and multi-family are all pretty unique so there is probably a point that you will become pigeon holed. Retail/office are usually more complicated from a structuring stand point and modeling stand point so they are probably the better sectors to specialize in early on (especially for the ARGUS background which is critical). I specialized in one sector at the BB and another at the opportunity fund. It was pretty seamless. I think the same logic carries for the risk profile of the fund... early on it probably doesn't matter but once you are a senior associate/vp these will become more of a factor. I don't think either are a deal breaker but its important to remember that as you get older you will be compared to people with various backgrounds so if you're interviewing a VP with an office background at an opportunity fund versus a multi-family guy from a core fund each will have an edge on the other depending on the opportunity they are interviewing for. I think the ideal play that would position you best for any opportunity is an opportunistic strategy focusing on office properties in a major metro area. That is entirely an opinion though.

 

Notaspammer - Its cliche but it completely varies. When I don't have a "live" deal, 30% of my time is on existing deals that require some sort of recapitalization/refinancing/equity syndication or some finance-driven assistance that Asset Management can not run with; 60% of my time is screen new deals meaning reviewing/editing/building ARGUS and Excel models, reviewing offering memorandums, discussing opportunities with the internal team/brokers/potential partners; and 10% of my time is spent doing random tasks like internal valuations or historical return models. When I have a large live deal, I spend most of my day doing whatever it takes to get the deal done including IC presentations, equity syndication presentations, model updates, site visits, due diligence, prorations and closing adjustments

MBA - I have not met many people (only one person is ringing a bell) who has left the CMBS world for REPE. I think the more natural plays are in the debt sphere and I have historically only worked on the equity side (with some preferred equity and mezzanine loan-to-own strategies). Also, CMBS and banking generally pays more in your twenties so I think a lot of people get sucked in for the long haul through that (or they could obviously prefer it). Most REPE, outside of the diversified private equity shops, are going to pay below banking and traditional PE and reward people later through equity in the funds/deals,

 

Thoughts on real estate at the big insurance providers (i.e. PREI, TIAA) especially in regards to a starting point of a career. Good transferability to REPE? (or are they even essentially REPE themselves, I'm a little unclear there)

GBS
 

Goldman--I disagree somewhat with requestions on this. PREI and TIAA are good firms, but I think that they are largely seen as "sleepy core money" (TIAA more so than PREI) and I don't often see folks from these firms moving to the more "Wall Street-esque" REPE funds. I know the pay at PREI and TIAA are substantially lower than the big opportunity funds. In general, it seems difficult and relatively rare for people to cross that pay bridge despite the fact that the gap in skill set is arguably small.

 

^i think questions are best answered through dialogues, rarely do career based questions have concrete answers, rather just various opinions (so it's obviously best to see the different ones). I also appreciate all you guys taking the time to answer. As far as my last question, my main goal is acquisitions analyst so I guess I'll aim more "repe shopesque" if you will, but would be retarded to not take said position at any type of strategy, fund, etc, at this point imho

GBS
 

"In general, it seems difficult and relatively rare for people to cross that pay bridge despite the fact that the gap in skill set is arguably small."

Does lifestyle/tenure have an impact on this? I have noticed that people will stay at firms that pay $300k at the mid-senior level and have a life versus leaving to those that pay $500k and you do not. And once you have enough experience, you can work at smaller "eat what you kill" shops and make that kind of money anyways.

Or maybe I am comparing $175k to $500k here...not sure what the pay is like at TIAA.

I think you are right that it is rare for more senior people to jump....but maybe at the lower levels it works. What I've heard from networking is that you can make the jump (fairly easily?) but you'll start over - - if you have 5 years of experience and made it to an Associate, you will start as an Analyst. When that happens, you'll likely have to sacrifice short-term $$ & time for the longer term possibilities.

 

Can you speak a little bit about the networking/ jobhunting process used to make your jump after 2 years? I'm guessing you went through headhunters/ firms came to you.

Currently an analyst at a regional REIM/REPE fund and have been thinking about potential exit opportunities in the future to a bigger city / want to keep my options open.

Curious as to to how you or how others approach fishing for options while employed? Bit afraid to reach out to alumni while still an Analyst as RE is a small industry. Would you suggest sticking with a headhunter to be more discreet?

 

RE-IB, please feel free to chime in. I'm only four years deep so my insight is not absolute by any means.

Re: Prudential and TIAA, I agree for anything past the first two years and I agree with your comment that Prudential and TIAA are not one in the same (preference towards Pru). I think that a shop that will give you exposure to large real estate deals and heavy exposure to ARGUS are extremely valuable for the next step (which I would think both of these would).

I think it is also important to distinguish between REPE like Blackstone and REPE like Colony. Blackstone-esque (and many RE divisions at "megafunds") shops are going to recruit almost exclusively from IBDs because they also do corporate-level investments and takeovers of real estate companies. The majority of REPE shops are asset-level and portfolio-level opportunity funds where one of the best assets you can have coming in as a 3rd year analyst/first year associate is extremely strong ARGUS skills. As a result, almost any real estate investment role could be seen as favorable if you structure your resume and story right.

 

Real estate is small. My first switch was to a company the my first company had a joint-venture with. And during my last search almost every interview at some point mentioned mutual friends/colleagues in the industry and deals we competited against (usually both).

I used head hunters for most opportunities and select leaders would get something solid every so often. There is a confidentiality understanding that I have never heard of people breaching since the entir erecruiting process would fall apart for a firm if it came out that they told current bosses. I would use SOME discresion (ie. dont interview with a small firm that is a major partner with your firm) but I would not fret about this.

 

While we're on the topic of headhunters, has anyone ever heard of using a headhunter for entry level positions. Some places like Keller Augusta claim they provide HH services for entry-level but I don't know how viable of an option this actually is.

 

Never heard of entry-level HH. I spoke with Keller in the past but have never used them.

I have actually never worked on multi-family (aside from ~2 one off deals). I think multi-family is tough to start out in without pigeon holing yourself because it is very unique (short-term leases and non-commercial lease structure as well as no ARGUS experience). I have no few on its outlook.

 
requestions:
Never heard of entry-level HH. I spoke with Keller in the past but have never used them.

I have actually never worked on multi-family (aside from ~2 one off deals). I think multi-family is tough to start out in without pigeon holing yourself because it is very unique (short-term leases and non-commercial lease structure as well as no ARGUS experience). I have no few on its outlook.

Thank you for the reply, definitely a thought I'll take into consideration when researching/talking to the firm.

 

On the topic of compensation gap / lifestyle / tenure / type of fund, I don't think lifestyle is really an issue. In other words, I think the higher paying funds tend to pay more by virtue of being more profitable and more selective (or maybe snooty) on associate talent than because they have to compensate for deficient lifestyle, etc.

As for seniority, I actually think the inverse is true from what I think SK8** is positing. In my observation, the top REPE funds are a little more flexible on pedigree for their senior MDs than their associates. For instance, senior brokers and "bricks and sticks" real estate operators are often hired by big name funds for their relationships, but these same funds would not hire an associate from a brokerage firm, local operator, or diversified/core fund manager.

To requestions, I think you have a point. I agree that the Blackstone/MSREF/TPGs of the world are REIB focused because they are corporate/platform focused. And on the opposite end of the opportunistic spectrum there are small, asset-level shops that are flexible on pedigree and like Argus-heavy, real estate types. My observation has been that pay at these places is spotty, are there any conflicting data points? Then there's a big slice of opportunity funds in the middle, which I think are still asset-focused but have perhaps more of a Wall Street heritage and tend to pay in line with middle market-plus generalist PE (I am thinking of firms like Rockpoint, Westbrook, Northwood, Starwood, Carlyle, etc; I count Carlyle here given their investment focus is more asset-level despite being part of a megafund platform).

Finally, on the topic of headhunters, if you include associate-level hires (from IBD analyst to REPE associate, at least) as entry-level, then yes, headhunters are active in this space and very useful. Headhunters are good at aggregating a target pool of people (for instance, RE IBD analysts at BB banks) and sifting through them to present the top 25% (give or take) to their clients. For totally entry-level roles (like analyst level, no job experience) I have never seen headhunters get involved. For one thing, the target pool is too broad and better accessed via on-campus recruiting at selected schools, and there's not a lot of value the headhunter can add in terms of access to candidates or resume selection. Entry level hires are generally made either on campus, through postings, or by referral.

 

I have actually spoke with someone from Keller Augusta when I was doing my job search. I previously had a solid eight months of commercial real estate experience and much more on the brokerage side and buying and flipping residential homes. But still, I was looking at entry-level positions as I recently graduated.

From what I was told at Keller Augusta, they obviously don't focus on entry-level hires, but they occasionally will have entry level leads. I ended up finding my FT job shortly after the meeting and never actually had an interview through Keller Augusta. You never know, it could be worth it just to have a meeting once and follow up every so often. Also, maybe use the meeting to see what companies are looking for and any advice they have. Can't hurt IMO, but don't rely on them getting you an interview.

 

I agree 100% regarding the broker--> REPE play. I replied to a PM to someone yesterday telling them that the better shops could place well after 1 or 2 years because of the heavy ARGUS experience and understanding of the deal process but it would probably fall pretty dramatically after that due to the lack of heavy structuring skills/excel modeling/etc. After 8-10 years though there is a strong chance that a fund may hire you given the relationships you've developed and at that point in your career your job is much less modeling intensive.

RE-IB: I think for the most part you're right regarding the compensation. I would also agree that pay doesn't necessarily correlate to hours. With that being said, it doesnt mean all RE shops are laid back. A lot of the "megafunds" crank their RE associates as much if not more than the generalist PE associates.

 

requestions and others: I would appreciate if you could weigh in on whether I should complete an Econ. minor. I expect recruiters to question my quantitive ability given my Urban Studies major and Real Estate & Development minor. I was hoping to minimize that concern through an Economics minor. I am only 2 courses away. But the problem is the mandatory Econ 101 is notably hard at Penn and curves to a B-/B, so I think I would probably only get a B+. My gpa is already right below 3.5, so it can’t really take any more hits from mediocre grades.

I do have some separate plans to prepare for real estate finance in the fall and summer though. I will be taking corporate finance, Financial Accounting, Real Estate Law, and Real Estate Investments in Sep. I also plan to purchase and study the BIWS RE Modeling course soon. I might do the Argus Certification program but unsure at the moment. So, given the plans I just mentioned, would the addition of an economics minor be irrelevant to recruiters?

 

"So, given my plans"...it does not appear that you've identified those plans. Probably worth clarifying.

On face, it doesn't sound like the econ degree is worth the cost. Bringing your GPA above 3.5 will open more doors than adding the Econ minor. Also, if anything, having an economics degree will invite more quantitative questions in an interview setting than if you don't have it.

Your best bet is to include a section on your resume called Relevant Coursework and include those classes (like CorpFin, FinAcc, RE Inv, etc.) that implicate your preferred career choice. And you should be prepared for quantitative questions, and willing even to invite them.

 

This is an obtuse question and not directly related to PE but I'll ask anyway:

Is there money in RE development, compared to the entities managing the actual portfolios? There's only so much economic value that can come from one piece of property and my (uneducated) feeling is the developers aren't seeing a large share of that.

 
theBEEGEES:
This is an obtuse question and not directly related to PE but I'll ask anyway:

Is there money in RE development, compared to the entities managing the actual portfolios? There's only so much economic value that can come from one piece of property and my (uneducated) feeling is the developers aren't seeing a large share of that.

Generally speaking, there is. While a fund or an institutional equity source may own the majority (if not all) of a property, developers make money off fees, excess cash flow generated above and beyond the pref and the promote on the back end (i.e. sale of the property). So if successful, a developer can make a lot of money relative to how much equity they put into a deal.

 

Developers can make a ton of money (the guys who own development firms) if they are paid on promote. In some promote structures, the developer is getting 40-50% of the upside in a deal above the top IRR hurdle, and maybe put in 1-5% of the capital. If he knocks the deal out of the park, he can make a fortune. A lot of these guys have pretty lean shops, so they'll pocket most of that money personally. Other developers will prefer to get paid a fee. Working for a developer at a junior level, however, doesn't generally pay in line with "high finance" (but this will vary depending on how generous a one-man-show developer feels).

Disadvantages of starting in REPE are that the funds that hire straight from undergrad tend to pay less than funds that hire out of REIB programs. So if you can spend a couple of years first working at a bank, you'll likely expand and up-tier the selection of firms that will recruit you. Freshman level internships tend not to have the effect of narrowing your field/focus, since people just want to see that you went out and got something business/finance-related. By the summer before senior year, however, your internships will make or break your full-time recruiting prospects.

 

Great thread...

On the developer comment, generally speaking the owner / senior management is the one who will make the money.

Having said that, some developers are pretty integrated companies and also manage their own portfolios (usually with institutional money) and some have even launched funds in the past. Think Tishman or Related type companies on the top end, with some smaller shops doing similar work on a more modest scale. For the integrated companies, the guys who are doing the fund raising, or managing the investment funds will be paid inline with other fundraisers and real estate investment managers respectively.

As to the disadvantage of starting in REPE vs. REIB, that used to be mitigated by starting at the REPE arm of one of the investment banks (MSREF, GS/REPIA/Whitehall, LBREP etc...), but those have been decimated since the financial crisis started 5 years ago. Depending on the bank, some of these groups used to share their junior resources with the REIB teams.

A lot of the guys (from junior up to partner) at larger Opportunity funds and REPE have historically come from these groups, rather than the REIB groups. Westbrook, Dune Capital, the guys managing Related's fund, etc... To my knowledge of the investment banks, Parella are on their 2nd RE fund in Europe and REPIA still have some dry powder for mezz, although a lot of their guys have moved to other firms over the past few years.

 

I agree with the developer comments. There is a lot of money in development but the wealth isn't shared as much and the majority of the profits go towards the few partners at the firm. A lot of developers are also more focused strategy-wise so it is tough to advance professionally within the companies since the sourcing will come from the CEO etc. Also, if we're talking solely about the finance/acquisitions side, I don't think there is much of a trade off between the REPE and developers.... meaning, I don't think you learn any new skills for the lower pay at the associate/VP levels and I don't really know why it would be a good move. Its different if there is some serious development and operations exposure but there probably on't be with the larger developers.

 

Hi guys, I'd like to keep this one going....

do the funds typically prefer to an MBA to a Master in Real Estate? I'm considering top programs for each and plan to target REPE funds for both a summer internship and post graduate job.

Note that I dont have direct real estate experience (though i have solid finance and entrepreneurial experience which can translate well into understanding real estate deals) so I'd really prefer to do the MSRE for the hands on exposure, but not it if the funds typically only look for top MBAs.

Also, regarding top MBAs, how do the funds look at Harvard and Stanford? Does the brand really overshadow the fact that there is little, if any emphasis on real estate? Comparing to Columbia/Wharton which have very strong real estate concentrations.

 
djc225:

Hi guys, I'd like to keep this one going....

do the funds typically prefer to an MBA to a Master in Real Estate? I'm considering top programs for each and plan to target REPE funds for both a summer internship and post graduate job.

Note that I dont have direct real estate experience (though i have solid finance and entrepreneurial experience which can translate well into understanding real estate deals) so I'd really prefer to do the MSRE for the hands on exposure, but not it if the funds typically only look for top MBAs.

Also, regarding top MBAs, how do the funds look at Harvard and Stanford? Does the brand really overshadow the fact that there is little, if any emphasis on real estate? Comparing to Columbia/Wharton which have very strong real estate concentrations.

Interested in the answers to these questions as well

 

How would you view the following entry level positions? Which do you think would be more beneficial going forward towards REPE.

1) Large fund (similar to Prudential) with big respected name that does pension advisory. The role would be more portfolio management than acquisitions based.

2) Smaller firm with less well known name. Have raised multiple opportunity funds and done some deals with large funds like Blackstone. The role would be multifaceted with a stronger focus on acquisitions (what I am most interested in).

 
atwoodt:
Esp at entry level, a smaller, multifaceted position would be far more dynamic. If you want to do acquisitions, take the acquisitions job. My group (a REPE acq team) wouldn't consider bringing on a PREI (or similar) asset manager.

would your answer (on what type of experience your group prefers) be different if he said the PREI type role WAS acquisitions?

 

Objectively speaking, if both were acq based then it wouldn't really make a difference in the grand scheme of things. I would concentrate more on what you actually did during your time at either of the firms than the size or name. Personally, I like candidates who are willing to take greater risks, have underwritten more value-add deals and understand fundraising as compared to your run of the mill analyst who has focused solely on core acq underwriting. But that's more of a personality preference than anything else.

 

Touching back on the MBA question above. How do REPE look at non-target MBA programs. If someone were to begin an MBA program, and then refocus because of learning about REPE (a sector I had never heard of before my MBA) am I likely to be recruited at all? If so, what position would this MBA grad come into? Analyst? Associate?

And what would this position entail?

 

Day to Day:

I would say that my hours fluctuate dependent on how many live deals we have. But for the most part I would say I spend 9 - 10 hours at the office with periodically checking emails if I am not at the office.

The majority of my day is spent going through OM / Equity Packages / Models trying to source deals that may fit within our fund. Once I have identified several deals that might fit within our fund I usually have one of the analyst model the deal and go through the underwriting with them. Hopefully the deal pencils out and we are able to present an initial outline to our investment committee. The initial outline is fairly straight forward just introducing the deal and going out the main highlights on why we think this deal would fit within our fund based on the economics on a property level and macroeconomics.

Once we have gotten the initial green light that is when we will schedule a property tour along with putting together a term sheet. From that point forward we begin to put together our full investment committee presentation which typically is anywhere from 20-40 pages. Hopefully after our site tour and continued research we are comfortable with the economics of the deal and still want to pursue the deal. The last step is presenting a final investment offering to the investment committee that hopefully gets signed off. This process typically takes anywhere from 3-4 weeks from start to finish.

 

Great thread, thanks. Is your AVP role at the same shop you started at after M&A in Europe, or did you join a new group after the 1.5 years as an Analyst/Associate. Also, was there anything specific that drew you to your current firm, like their geographic focus, track record, complexity/badassness of deals, or did you just interview well and like the group after applying on SelectLeaders?

I ask because it sounds like your role is similar to what I'm looking for next; travel to properties and get out of the office, assess deals at a higher level rather than only building the model.. seems like a natural next step after an analyst/associate gig. The next place i go to though, I want to remain at for a good while until I can break off on my own, or eventually be brought up to having some kind of interest in the deals or firm.

It sounds like you are on your way to doing this, so I'm curious to know your thought process or how you went about deciding on this current role. Did you tell them you want to stay and grow into the firm, start making contacts, building business, etc?

Also, have you noticed any of the older guys you work with, or decision makers, start changing strategies as 'the cycle' or capital markets environment has supposedly begun to shift? You hear on the news a lot about how institutions are selling aggressively, shifting strategies, etc.. wondering what your experience has been thus far as a younger person in a mid-level role.

 

chinchopperchinchopper I moved back to the West Coast after spending that year in Europe. My last two jobs have been in the US on the West Coast

pudding I haven't had a 7 day per week yet granted I have worked at this firm for only 5 months now. There have been a few 15 hour work days but mostly due to the number of deals we had floating around. When a deal is on I would say it is all hands on deck. I would say that I was lucky in that I didn't have to work in REIB at a Eastdill where I have heard long hours are typical and expected.

 

Thanks OP! +SB

I'm interested to make the jump to REPE some point down the road and would like to know what types of hires your firm traditionally look for. I currently work in SF in CMBS origination (Top 10 by Volume).

i'm not smart enough to do everything, but dumb enough to try anything
 

chinchopperchinchopper Typically for the AVP role the firm has hired people with an MBA / Masters in RE. As for the analyst that we have hired I would say the typically have 1-2 years of RE background where they have learned the basics and how to underwrite deals whether it is from the perspective of a lender, mortgage banker, or equity. If you want to make the jump to the REPE side I would definitely try and understand the lenses in which an equity partner would look at all the CMBS deals you are originating. Also networking is huge especially when these REPE shops typically run lean.

PM for more details I would love to hear more about your background.

 

GLCRE Great questions.

I wish there was a perfect answer to that question in-regards to MBA or Masters in RE but to be honest there really isn't. I do not have my MBA or Masters in RE so it may be hard for me to fully understand both options. But from the feedback I have had with people an MBA is more of a career change / pivot move and a Masters in RE would be more focused towards the industry. Both are great options in my mind but if you knew you wanted to be in Real Estate I would find more value in the Masters in RE. For the West Coast I have heard the dual MBA and Masters in RE at USC is highly regarded especially if you plan on staying on the West Coast.

I would assume at both my firm and REPE headhunters and networking are two main sources of where they get their candidates but to be honest I just applied through SelectLeaders and Linkedin for both of my job that I got in the US. So although networking gets you a foot in the door it is possible to get it through traditional applications. I would say that I had a very unique background and resume.

 

Thanks for starting this thread. Can you touch on the modeling skills that your firm looks for in new hires out of an MBA program? Is asset level project management/development experience viewed positively if the fund targets value-add/opportunistic returns and has to engage engineers, architects, and GCs?

 

My Background: Top 10 US University - Econ Major 1 Year analyst DUS Lender 2 years associate in RE acquisitions group at a major US Bank I'm currently an associate at a smaller REPE shop

Small REPE firm ($450 million AUM)

Day to Day:

I usually get into the office around 8:00. I am usually one of the first people into the office and use this time to get caught up. I usually work on underwriting any live deals we currently have going. This could mean modeling the deal assembling our investment package (25-35 pages), answer investor questions, asking for clarification from our development partners/broker, or collecting market information. If we have a deal near closing or are in the process of selling a deal I also use this time to update our investors on deal progress, manage closing, and calculate returns on our exit. Depending on how many live deals we currently have moving forward I may also use this time to source new deals through our collective network. If we find a deal that sounds appealing and models out to a return that works for our investors/funds we will call and "interview" the broker/developer/seller and get a better feel for the transaction. If that conversation goes well visit the project and seller/broker/developer and create a full underwriting package for presentation to our investors. Our process from deal identification to commitment is usually 4 weeks, with typical DD and closing periods after. As we are a small shop there is no formal investment committee. The deal team sits down and discusses deals as a group and decides whether or not they should be pursued. Everyone has a voice at the table, which is good experience for a more junior member of the team.

As we are a small shop, I also run our investor relations so around the end of each quarter I send out updates to all our investors with information on asset and fund level performance. I usually leave the office between 5 - 5:30. We are a smaller office and quality of life is important to all the partners here so late nights are usually discouraged. Sometimes shit hits the fan but late nights are very rare.

 

PEREtzel realestate1

Great questions regarding the modeling expectations. I can only answer from my experience but maybe picklemonkey can shed light on his experience.

I would say that for all the REPE firms that I have ever interviewed for they have given me a model test where they expect me to build something from scratch and it typically has been a office or MF deal. They will typically give you the assumptions and you have to build a model which includes a Pro-Forma, Cash Flow, and Waterfall. I would say that most times the model aren't super in-depth they just want to see how you think and how you structure the model.

PM for more details as I can help you with practice models.

 

I have had a few interviews that included a modeling test and a few interviews that have not had any modeling at all. The modeling tests were very straightforward. They just wanted to see that you actually know what you are doing. I threw together a rough deal from an OM and calculated deal level returns (create revenue based of rent assumptions, stress the OM's opex, come up with debt terms that make sense, create a NOI calculation and projected returns for a given investment horizon).

I did not have to create a waterfall or dictate deal terms on any modeling test. Honestly, I wouldn't care at all if a potential analyst could create a waterfall on the spot. That is a pretty irrelevant skill IMO.

kmzz most but certainly not all buy side positions pay better than REIB comp in my market. Carried interest, co-invest options, and equity helps boost total comp on the buy side.

 

kmzz I started a thread about Real Estate compensation earlier. But I can reiterate what I said on there. I am located in Seattle and expect to make $150k to $200k all in after bonus with the bonus fluctuating depending on how our fund does. Not sure how that compares to BB REIB but it seems on the high end for someone who graduated college in 2012 based on comments from others in the industry.

PM if you want more details.

 

I would say the next step for me was taking on more responsibility and continuing to build relationships with capital partners and sponsors which is what lead me to accepting my current job about 5 months ago. After spending 1.5 years underwriting and modeling I felt I wanted to join a fund to understand that business model while also being able to take the next step in my career in terms of sourcing and running my own deals.

I would say the biggest thing that changes as you move up the ladder is that you are farther away from the actual underwriting and modeling along with the macroeconomic research and creating investment packages. Not to say that you will not do it as you move up the ladder but that is the point of having analyst / associates.

My end goal would be to run my own shop but that will be down the road. I have started to personally invest in RE outside of my job which I would say has been really beneficial in my learning curve as well. Such as buying duplex or a small retail parcel.

 

The next step for me is the same as @MIWP1989MI" stated. You need to build your book of business through contacts with sponsors, developers, and capital partners. Once you have a big enough contact list and a reputation for getting deals done you become extremely valuable as people will start regularly bringing you deals. Lots of firms would pay up for a solid pipeline of "proprietary deal flow".

cre123 Several partners at my firm have their own private RE holdings. They don't manage day to day operations, but act as individual LP in smaller deals. So long as they operate below what we look at as a firm no one has any issues with how you invest your own money. Everything gets run through compliance too.

 

tengleha

I would say that is the best part of my job. On all the deals that pass the initial underwriting / investment committee I get to visit the property and sub-market which includes tour the comps and spend time with the Sponsors as well. I would say every month I am on the road for at least a week if not more. Networking within real estate is a huge component as you probably have heard. As much fun as I have modeling all day the reason I got into this industry was the fact that I loved the aspect of the ability to physically go see the things you were investing in. I always relate it to solving a puzzle where you are looking at it from a top down approach. 1st from a macroeconomic level all the way down to a property level.

 

REAcquisitionsnyc Yeah feel free to shoot me a PM

nontraditional_hopeful Yeah I would say any CMBS BB shop as an internship is a great way to get exposure into real estate industry and also shows that you have an interest in real estate. There are many ways to get into REPE but some may be more beneficial than others. Obviously if you could intern at a real estate pe shop or investment firm that would be great experience.

I would say I took a non-traditional route in that I went to Europe and did M&A for a year while also playing professional water polo before coming back to the US. I started at a boutique real estate shop with only two other people that focused on LP Equity for Multifamily Development. This is where I spend the next 1.5 years just modeling and underwriting. This was a great experience for me because I had to build our model from scratch and over time improved the model to where it is today. Our firm put out about $77M of LP Equity in about 1.5 years equating to roughly $285M in MF Development and over 1,500 units.

I would say that most REPE firms are looking for people who have a passion for real estate but also have experience underwriting and modeling and the last aspect is fit do I want to work with you and travel with you. PM as I would love to hear more about your background.

cre123 exactly as picklemonkey said the deals my firm are looking at and the deals I am looking at are much different in terms of project size and cost. I am only 26 so most of the things I have been looking at are sub $5M total cost and are long term plays. For example I am looking at buying two parcels of land with residential homes totaling 11,000 SQ ft nearby a new light rail in Seattle that is suppose to come in 2020. Hoping to buy the land and have the rent from the residential homes pay the mortgage until down the road I could potentially entitle the land for commercial / apt use and in turn sell it off to a developer or develop it. As for the time aspect of it everyone in the world has 24 hours a day it is a matter of how you spend those 24 hours and how efficient you are. The 9-10 hours I spend in the office there are periods of time where things slow down and I am able to catch up on a few personal items that relate to things outside of my office work. PM as I would love to hear more about your story as well.

 

VanillaGorilla Great question. Yes I did start as an AVP Day 1 I just joined the firm about 5 months ago. And it does seem accelerated in terms of what I have heard from other people. All the three other AVP at the firm have their MBA or Master of RE and were late 28+ when they started. But I would say my experience at my previous firm was vital to getting the job along with the personality fit with my boss in the West Coast Office. I would also say I am very driven and have been successful through hard work and networking. Yes I mean this is my only experience with REPE but we raise a fund every 12-18 months and we typically raise $150M - $200M focusing on value-add / opp / development deals with the majority of the equity coming from Europe or the Middle East. We have multiple offices around the world. PM would love to hear your background as well.

 

@MIWP1989MI" Thanks for starting this thread. A few questions.

1) Where do you guys invest within the risk spectrum (opportunistic / value add / core) & product type? 2)Who sources the deals for your shop, are deals coming directly to you? Or is it more of deals are blasted to the partners, and they cherry pick ones they are interested & would like you / your team to give those a second look? 3) How often is your shop seeing off market deals? 4) What markets do you invest in? To build off of that, do you view your markets as becoming "frothy", and are you seeing more aggressive assumptions to make deals pencil? Also, has there been a shift to investing in more secondary / tertiary markets to find deals that work for your fund?

 

Sealberg When you say no RE experience do you mean that they also have no internships while they were doing their MBA / MRE? PM as I would say nything is possible because everyone's situation and background is different.

@GentlemanAndScholar" Great Questions:

1) Within our fund we are on the opportunistic / heavy value - add risk spectrum. We focus on Multifamily and Office. But we also have several separate account clients who have different risk spectrum. For example one of our clients right now is looking for core plus multifamily and another who is looking for trophy retail / office assets. That is a huge plus for me at my firm is the fact that we have several buckets of capital that we are able to look at a variety of asset types and risk spectrum.

2) It comes from both avenues obviously the partners who have been in the industry for years have their network of Sponsors send us deals that we take a 2nd look at. But the majority of our partners are located on the East Coast so that was what was so unique about this job opportunity. The ability to get lots of responsibility at an early age but more importantly in my mind is to build the network of developers, sponsors, and capital partners here on the West Coast. Anytime you are an equity shop you will get a response from developers and sponsors. I often refer to it as being the pretty girl at the party. But I would also say you have to be proactive in the sense that I often go out of my way to reach out to Sponsors / Developers to see what they are working on and introducing myself and our company. That way if they have a deal or their next deal they will think of us. Again this refers back to the networking aspect of real estate.

3) Our firm focuses on the LP equity side of the business. We are not operators / sponsors. So in terms of seeing off-market deals. Yes we do see off-market deals in the sense that we have built relationships with certain sponsors / developers who show us their deals and give us a first look at it prior to marketing it to other capital partners.

4) We currently focus throughout the United States but mostly on the West Coast, East Coast, and Texas with select Midwest markets. Yes I would definitely say that the window of error has gotten smaller in terms of deals you are seeing and more aggressive underwriting. Granted I have only been in the industry since 2013 so I haven't seen the down-cycle yet. So it may be tough for me to have a clear perspective in that essence. I agree that it logically makes sense that secondary / tertiary markets are where people focus to chase yields as you get later in the cycle. That question comes up quite frequently when discussing our fund and what we plan to invest in. It is a constant battle between yield vs location.

brosephstalin Just PM that might be easier.

 

youngunner Great questions

I joined a new shop after 1.5 years as an analyst / associate. The firm I was at as an analyst / associate was a boutique REPE shop that focused on $3M to $12M LP Equity space. I wanted to take the next step and get into the large real estate opportunistic fund side. The opportunistic deals are the type of deals I enjoy working on and I think are the most exciting typically due to the complexity. I ended up interviewing with three firms over a 3-4 month period as these types of jobs only come up every so often.

Ended up getting three offers and the other two companies in my mind had a bigger name within the REPE world. But what drew me to my current firm was the opportunity to grow within the company but also personally along with the track record. At the other two firms I would have been a spoke within the wheel. Mostly underwriting and modeling while still partaking in the property tours and capital / lender calls but not being the lead. At my current firm the west coast office is very small but there is tremendous growth potential and the job was pitched to me by the head of the west coast as I want to groom you into being my side kick to help build out the west coast office. So I have been with the firm for about 6 months and it has been everything that was promised to me. I have been given the opportunity to chase deals that fit within out fund and separate accounts with mentorship from the senior member of the west coast.

How I fundamentally looked at my career path was that I wanted to gain as much exposure in REPE at an early age. My first job as an analyst / associate allowed me to look at almost every asset type while also learning the economics and the demand drivers of each asset type. The next step in my career I thought would be to gain more responsibility at a higher level vs a deal level in terms of term sheet negotiations, lender negotiations, fund raising and Sponsor/ Investor relationships. This next step is important because eventually like you mentioned I would love to start my own shop or gain equity in a REPE firm.

Our firm has traditionally been an opportunistic fund so the capital we have expect opportunistic returns. But we have several separate account clients who have long-term hold deals that we have started to sell off this past year. But in the deals I have seen especially on the West Coast in the metro areas you are starting to see the yield stretch thin and the underwriting getting pretty aggressive.

PM would love to hear your background.

 

Lets say you graduate from university with no experience at all, and work in a cost estimator role for commercial construction. Would you say with self study, and then get into a top MS in RE program, you could have a shot?

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller. "Live fast, die hard. Leave a good looking body." - Navy SEAL
 

UTDFinanceGuy

I would say that anyone has a shot to work in REPE or any job for that matter. It is all about formulating a plan to get you there and having the right experience and background to give you a better shot. A top MS in RE along with a background in construction would be a good start but I would try and supplement that with an internship at an real estate investment firm while you are getting your MS that way you can differentiate yourself.

 
MIWP1989MI:

@UTDFinanceGuy

I would say that anyone has a shot to work in REPE or any job for that matter. It is all about formulating a plan to get you there and having the right experience and background to give you a better shot. A top MS in RE along with a background in construction would be a good start but I would try and supplement that with an internship at an real estate investment firm while you are getting your MS that way you can differentiate yourself.

That's encouraging to hear. I have a background in commercial construction and will be starting at TAMU's MSRE program. I'm hoping for a solid internship this summer.

"There are only two opinions in this world: Mine and the wrong one." -Jeremy Clarkson
 

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