I was recently on a call with a Vice President from a NYC based development firm. I casually stated that I'd be fine ending up in REPE/Development. The VP basically distinguised that REPE is not the same as working at a real estate investment/development firm. REPE firms are more focused on raising capital, doing extensive financial analysis, and have a plethora of deals come across their desks. Typically, if a REPE firm gets 100 deals, they'll probably go through with only 3-5 and they just provide capital. Whereas at a real estate investment/development firm, you are actually focused on a specific deal. You deal with the day to day realities of a property or investment opportunity. You get more hands-on experience about what goes on in real estate and you are more of the expert than someone at a REPE firm. With that info, I now see that Blackstone and Related are completely different firms. Can anyone validate the claim that REPE is less about real estate and more about raising and deploying capital whereas REI/Dev. is more about actually focusing on the details of one specific deal at a time?

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Comments (26)

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Aug 6, 2020 - 1:12pm

Thank you.

OP and/or that VP are confusing individual roles with company financial structures. It is true that REPE firms focus on raising capital, underwrite deals, and may or may not have a ton come across their desk. But once they raise the fund...they have to deploy it, no? They don't hand the money to a separate "REI" company (Not REPE...but also, not really a thing since every principal level firm, regardless of structure, invests in real estate at some point). Once they raise the fund, that same REPE firm is investing in development deals, buying existing deals, etc.

What really happens is that capital markets personnel raise the funds. Acquisitions personnel deploy the capital to existing assets or some sort of investment personnel deploy the capital to new development opportunities as a LP. Maybe these are the same people, maybe not. Asset management personnel optimize and manage the assets. Development personnel create assets.

All of these roles - capital markets, acquisitions, asset management, development, etc. - exist at firms that are both REPE and not REPE. Whether or not you work at the fund level or the asset level doesn't have anything to do with whether the firm you work for is "REPE." That distinction is entirely up to me. People on WSO get completely wrapped around the axle on the financial structure of the firm they work for without focusing anywhere near enough on what their actual job is.

...but is it REPE?
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Aug 6, 2020 - 4:00pm

Honestly, this sounds like a person who is thinking of REPE as making an entity level/limited partner type investment. Which is what most REPE funds do as their primary means of investing in real estate. So this is really more of "LP" vs. "GP" role question, in that way, he is right. Firms like BX just happen to do both. I'm guessing his development firm gets LP capital from PE shops, that is how he interacts with them.

Aug 6, 2020 - 6:54pm

That is what I would assume.... this is why saying I want to work in "REPE" essentially saying nothing. Like saying "I want to work in a bank", I mean doing what??? what division?? what role???

Truthfully, if someone says I want to work in "REPE" I have no real idea what they want to do. I just assume they mean "institutional real estate investments" but don't really under stand functional roles (like acq/am/cap mrks/etc.) or asset classes (office/retail/apt/etc.).

Aug 7, 2020 - 9:02am

Out of curiosity did you actually say the acronym "REPE" over the phone? Or did you say a "real estate PE firm" or "real estate private equity firm"?

Aug 7, 2020 - 10:07am

Oh god. Please say "ReePee" over the phone.

Please please please

If you went to an Ivy you can say "RehPeh"

...but is it REPE?
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Aug 7, 2020 - 7:21pm

It sounds like he was describing the general partner vs limited partner roles. GP is responsible for the performance and execution of the business plan for a real estate deal. Typically the developer/operator handling the actual asset. The LP is basically a major equity partner in the deal, making sure the deal performs. The GP still contributes equity in many cases but usually a small amount by comparison to the LP. The LP could be a PE firm that does investments in RE exclusively, and you could say by definition they are an "REPE firm". Its not wrong, but they would not be considered an operator if they were partnering with another RE firm responsible for the asset.

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Sep 2, 2020 - 2:02pm

Just to give my two cents using a live example.

I work with a developer in the role of investment and development finance. Before real estate, spend a couple of years in investment banking and private equity. So I have hands-on/first person experience re the difference.

Say my firm is looking to assemble a couple single family homes near a public transit node in a neighborhood that's rapidly intensifying, with the goal of owning a good-sized site to build a multifamily rental.

Before we engage in any REPE to give us money/for capital raising, we have to figure out on a preliminary basis and in-house what can be built, what to build, the budget, expected profit, etc. Then we put together a deck to our REPE friends on the project. Say they like the idea (amongst 100 others sent across their desk). Then we'd get into the nitty gritty of the deal to hammer out all the details required for them to give us firm commitment, so on and so forth.

On this particular project, if it's structured as LP, we the developer will act as GP and basically manage the project from start to end, and the REPE as one of the LPs. Lots of work would go into the diligence phase before their commitment. But once they are in, my interaction with them would be less day to day, except regular updates. At the end of the day, both of us know equally well how the budget is tracking, how much rent can be charged, what the expense profile will be upon stabilization, how much money LPs are expected to be distributed, so on and so forth. But I on the developer side will know things that our LP wouldn't necessarily care about, for example, why floor 6 is stepped back in that way, why and how we rearranged the stairs and elevator wells so that GFA could increase by X...

What am I missing? Naturally, given the scale of each developer and area of focus and expertise, we might very well not be involved in every single fantastic development opportunities out there.

Many of the folks on the REPE side had experience working at developers themselves, and know what questions to ask/where to focus on when vetting developer pitches and working through diligence.

Hope above helps.

Sep 11, 2020 - 2:53pm

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