Wanted to get feedback on experiences here. Has anyone gone from a hands-on sponsor to a hands-off LP before, and what were the biggest differences you found, what did you like more, etc?
I have 2 years exp at a bb, and have been in acquisitions and asset management for a small sponsor ever since. I do enjoy my current role, but am interested in working with a smaller platform (ie no property management company, ability to choose operators, more finance focused and client facing) placing and structuring equity.
Could anyone add some color on experiences of moving from a gp like Greystar type group to a Lp like blackstone or Carlyle?
I have a similar background. IB to Owner/Operator (OO) to LP Investments.
Pros:
I spend way more time doing what I actually like doing, which is underwriting/structuring investments and negotiating deal terms. Way less looking at property-level variances and some of the more mundane AM/PM work that comes with working at an OO.
Coming from IB, I felt like the hands-on type of asset management we were doing at the OO shop was very transferable to real estate but not transferable to finance. Working at an LP investment shop you spend a lot more time interacting with capital markets, rather than interacting with construction teams and PMs. You learn more about financing on the LP side, and less about the gritty aspects of maintaining/operating property.
Quicker pace, more repititions. Could be firm specific in my case, but I feel like LPs can move quicker than GPs for a variety of reasons. A lot of the groups from developers that we work with will be almost entirely focused on just one or two development deals at a time. For us, they're one deal of like 10 that any given Associate is actively engaging at the moment.
Cons:
Having experience at the OO side, it's tough being so hands-off in formulating the business plan and putting all of your trust in the sponsor to execute. You're a bit removed from the actual execution of the strategy, which is an exciting thing to miss out on for some.
It's fun being creative and formulating a value-add plan for a property. Having a true expertise in your market at an OO allows you to make bonafide smart investments throughout the cycle. If you do move to the LP side, always try to understand the sponsor's business plan and pick out which sponsors have a true expertise and recipe that works.
Working at an OO gives you essential skills you need to excel if you eventually want to start doing your own deals. The LP side does introduce you to valuable avenues for the financing side of doing your own thing, but if you don't know how to operate a property RE investing with your own resources might not be easy. Value-Add real estate is anything but "passive" income.
Great response, thanks. which did you find more fun? how have you used the OO experience to add value to deals at the LP, and which did you find paid better or got you closer to your goals?
Definitely will take the LP side all-day, but at the end of the day my primary interest is finance and not real estate operating/management. Pay is equivalent and more dependent on how good/big your shop is. You can definitely bring OO experience to the LP side for the benefit of your team. For LP investors, OpEx and CapEx numbers are just assumptions in a financial model. On the OO side you actually have to drill down on these numbers as the crux of your business plan. Knowing how to do that within a specific asset class can definitely add value at the LP level.
A bit of an oversimplification, but this simply comes down to whether you want to work as a capital allocator/finance professional overseeing real estate decisions at the 30,000 SF level, or a bricks and mortar development guy at the ground floor getting in the weeds on the execution process.
Started out with a large owner/operator and now with a national firm where I am on the LP side. Although I am on the LP side, we are still very active in the day to day Asset Management and at the property level.
Both sides are great. I loved the GP side because you get a lot of exposure to the nuts and bolts of real estate and it’s a great mixture. The LP side is great as well. It’s always good to be the one who can swing their dick all they want since we are 90-95% of the stack in most deals.
90%-95% of the stack or 90%-95% of the equity?
Equity
I went from a GP acquisitions to LP acquisitions and actually miss the nuts and bolts of the GP side. The LP side is about one thing: volume. It gets monotonous. On the LP sid, I definitely feel more in tune with what's going on at the macro level with the economy and capital markets, and it is nice to be able to explore and learn about new markets (that's what RE is all about). But I miss really being an expert on the property and submarket level that comes with the GP side. Now when I'm on conference calls with our GPs, managers, construction teams, etc....I feel like I never know what's going on and add little value, since I am focused on underwriting 5+ other deals.
I feel you - I work at a large LP and I feel like I never know enough about a specific asset/market to truly challenge the assumptions underwritten by the GP and add value. While I’m gaining good knowledge of several markets and solid RE skills, I’m still debating internally whether it’s ever going to be enough for me.
True, but this makes it sound like there is no strategy or deep dive into the assumptions at the LP level.. An LP is paid to perform and manage the capital, so they have to have a very solid understanding of the capital placement, and trust and understanding of the ability of the operator.
So as an LP, where do you see your value add?
Co-Sign both of the gentlemen above. This debate really comes down to whether you're more intrigued by the macroecon / capital markets aspect of RE or the asset-level strategy side of real estate, at least in my mind.
Well said, very few positions - if any - encompass both.
I agree with this. Every person's personality is different. No route is definitively better than any other. Both can be very lucrative, work long hours or have great work life balance, and be fulfilling.
WSO (a site created for IB/ finance) tends to lean more towards LP roles because it is skewed towards finance and capital markets.
The only major alpha creation occurs through understanding and dealing with asset level strategy. On the fund allocation side, capturing 1-2% above peer set in RoE is great whereas proper development/asset management can create far more economic upside.
I am at an LP equity firm now after previously working at a sponsor developing and acquiring institutional retail assets. I've mentioned this to other people on the site, but I think working on the sponsor side of a ground-up development project while being involved in the land acquisition, financing, construction, leasing, operations, and disposition of the asset is the best way to learn the most about real estate in the shortest amount of time.
The LP side (for me) involves strenuous modeling and legal structuring as the only control you have is spelled out in your partnership and development agreements at the end of the day. I've learned quite a bit about contract law, waterfall modeling, fund accounting, and general risk mitigation in my new LP role, but could never have learned as much in total if I had not worked previously at a sponsor. That said, many sponsors do not touch all the asset classes whereas all institutional LP's do...
Have some of you working on the sponsor side worked very closely with LPs during UW? Did you feel like they brought some really good points with regards to assumptions and asset strategy? What was your experience?
In my experience, it's the opposite dynamic. We thoroughly underwrite every aspect o a deal before sending to any LPs. They are looking to us to help fine-tune their assumptions, understand the market, and help them understand the overall story. They pay us to be the local market and product expert. Every LP is different of course, but in general they are going to have their separate model/ICM/assumptions and we will have ours. We answer questions to get them comfortable and defend/explain assumptions. They rarely tell us something we don't already know about our product/market/strategy. Ideally, they will be pretty hands-off and trust us to do our job.
as an analyst i was on the phone with the counterpart at our partner often, reviewing assumptions, going through market research, explaining how the business plan works or will be adjusted, etc.
They seemed more handsoff than myself, but they definitely were in the weeds, UW'ing, and producing their own internal models to discuss with their IC.
That has only been my experience with one group though, thats why i created the topic to get more color from others who may have different perspective.
Bump - any further thoughts on starting at an LP vs GP at the junior levels (Analyst / Associate)?
Seems beneficial, even ideal, to get experience on both sides. Bonus points for a stint in an agency role like IB or IS.
I am analyst level at an LP, no experience in GP (or any other CRE position). Echoing what some comments above said - this is more on the financial side, and we are 90-95% equity so we can swing our D and have the final say. DM at a GP tend to have a handful of projects that they carry from birth to finish, and are experts on basically every aspect of those projects. At my firm, we have many projects with many partners in different asset classes, so you really get exposure to tons of issues/markets/etc. Our goal is to put up the equity, figure out how we can get the best return, basically manage the teams to keep them on track, and sell the asset at the highest valuation possible to get our returns, repeat. We can choose which deals we want. While I don’t want to be on a construction site everyday, it is always fun to be able to get hard hat tours every so often and see the vision come to life. I think it all comes down to personal preference- I think the LP path is a little less common so there’s less posts about it on here. GP side (IMO) seems to be very in the weeds on everything, LP side seems to be in the weeds on the finance piece and “overseeing” the rest of it. Again, I’m still new here so I’m no expert, but this is what I’ve gathered in my year of experience. Not sure what I want to do long term yet, I’m just trying to be a sponge and get as much as I can out of this role for now
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