What do real estate investment bankers actually do?

Honest question. Do you guys stay on the public side mostly? I've seen the LP, GP, and middle manager side within REPE and have never once heard anything about what RE ibankers actually do...

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Comments (18)

Mar 10, 2021 - 10:46pm

Real REIB is much like any other IB job but like an industry coverage group in the same vein as TMT. So you're working on entity-level M&A, IPO's, DCM/ECM at the entity level (advising on a REIT issuing public debt), etc, etc. These guys don't really touch asset level deals.

Many debt / JV equity brokers refer to themselves at investment bankers. They are not. The worst abuser is a shop called Greenwich International - I went to NYU with a bunch of these guys. They'd slap the words 'Investment Banking Analyst' (without even mentioning Real Estate) on their LinkedIn and frankly, it was a bit cringe.

Mar 10, 2021 - 11:00pm

No argument here. I guess when I said  'don't really touch asset level deals' I probably should've caveated a bit better. Very large and portfolio deals are an occasional thing true REIB will see, but in general, its mostly entity level deals.

  • Associate 2 in RE - Comm
Mar 11, 2021 - 10:47am

I am a CRE lender and have underwritten 100+ property portfolio's (Blackstone acquisitions of GPT, Space Center, etc). As a CRE lender, real estate is pretty much all we do. Which means reviewing ESA, PCA, appraisal etc for each property even if it is a massive portoflio and writing a credit memo. The work I do is very different from what Morgan Stanley, Citi and Merrill Lynch did as investment bankers in the transaction. Maybe (huge maybe) Eastdill who were also involved in the deal can call themselves real estate investment bankers but if debt brokers who just placed debt for a portion of the portfolio Blackstone had identified from the deal call themselves investment bankers, it is pretty cringy. 

Mar 27, 2021 - 12:32pm

"Investment bankers" are brokers. The people who do capital raise and M&A work are brokers as are the people who do single asset. Raising debt is raising debt - raising equity is raising equity. It's all the same - one just works asset level and one works corporate level. Even the big bank Real Estate teams will sell and finance single assets. It doesn't happen often but it happens. 

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  • Associate 1 in RE - Comm
Mar 10, 2021 - 10:54pm

The RE forum loves dumping on REIB, so I'm going to answer before someone with no REIB experience hops in.

To start, it depends on the type of bank you work for. Certain balance sheet banks with minimal advisory expertise almost exclusively lend (through credit facilities and term loans) to publicly and privately traded REITs and sell equity (through follow-on offerings and IPOs) for publicly traded REITs.

Groups that do advisory work (M&A, lead-left IPOs, Private Debt and Equity Deals) will do some of the stuff below. I believe most IBs will fall into this category. You'll know if they don't because you won't be able to read about any of their deals online::

  • Sell Large Portfolios of real estate assets. Basically a glorified broker role. You're selling 10-50 apartment complexes instead of 2
  • Raise JV Equity or structured equity for a portfolio of assets. Also a glorified broker role. An owner/operator will hire you to raise equity to close on a large group of assets or recap an existing group of assets they already own
  • Raise entity level equity or structured equity. Also referred to as "platform deals". This is actual investment banking work. Private REITs and real estate operating companies will often sell a portion of their company (and give up a piece of the GP) in exchange for receiving a $XXXmm investment from a private equity fund, sovereign wealth fund or whatever. This has become a more popular way of investing in owner-operators. You typically will underwrite an initial portfolio of a few assets and have an understanding of what types of assets the pro forma company will acquire. The new investor often-times will "control" the company and be able to deny any acquisitions brought to them that they don't like. Then the investor exits through an IPO, portfolio sale, or recap.
  • PIPEs: basically same as the above but it's a private investment into a publicly traded company. Usually these are more "structured equity" or mezz / pref type deals and less "control" of the company
  • Take-private of public REITs. Basically selling an entire public REIT to REPE funds or other REITs. At the end of the day, it's not too different from selling any other portfolio. You just have to account for balance sheet items, change of control costs, the process of handing over the asset management responsibilities to the new owner, etc.
  • Public to Public Mergers - only the biggest banks will typically work on these. Two large public REITs becoming one.
  • Spin-Outs: Selling a portion of a company to the public markets. Basically Company A owns office in the NE and SE, but they decide the NE and SE portfolios would be worth more in the public markets if they traded separately. So they "spin out" the SE portfolio into a separate, publicly traded REIT. I believe CUZ did this.

Also the more boring stuff:

  • Competing in pitches to win the above transactions
  • Doing "market update" books. Aka "Hey, thinking about you, plz include me on your next follow-on offering ;)"
  • Debt / Equity offerings for public REITs

The catch is, that you may get to work on 1-2 of the above advisory deals per year. Compared to working in other areas of real estate where you'll see deal after deal after deal. You will really get to know 1-2 companies and be involved in a complex transaction for each. The rest of the time you'll be pitching, doing follow-on offerings or debt deals, or texting REIT CEOs "You up? Thinking about your next follow-on ;)". You will likely be comped 50-100% more than the standard RE analyst, which is another part of the tradeoff.

  • Analyst 1 in RE - Comm
Mar 10, 2021 - 11:55pm

Thanks for such a detailed response!  As someone who works on the asset-level and sees a ton of deal flow comparatively, it must be strange to have only 1 or 2 deals a year.  But I suppose since everything you listed is so niche from company to company, it must be a completely different ride each time.  I guess that added complexity explains the comp difference - I keep seeing 25 year old REIB associates saying they're clearing 250k on here lmao

Overall, it seems that REIB is more investment bankers that happen to work in the real estate sector than real estate guys that work as investment bankers...out of curiosity, where do these banks usually recruit out of?  It seems like there's not a lot of substance transfer between REIB and REPE...

  • Associate 1 in RE - Comm
Mar 11, 2021 - 12:17am

So every deal type I listed (with the exception of public to public mergers), the investor / buyer is a REPE fund. So there's still transferability to REPE at the junior levels.
 

It depends on the person. I think the people who would enjoy REIB the most are real estate people who enjoy working on large, strategic transactions. Not investment bankers who want to work on LBOs.

REIB recruits from all the same places IB does. People lateral into non-BB REIB groups from all over

Mar 11, 2021 - 2:19am

They connect those seeking capital for real estate deals with those who provide it. Banks examine risk, the location and overall reach of projects, types of assets, and cash flow potential, as well as underwriting, and aiding in property sales.

Mar 11, 2021 - 4:28pm

Oh god here we go again

I had a flair for languages. But I soon discovered that what talks best is dollars, dinars, drachmas, rubles, rupees and pounds fucking sterling.
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Mar 11, 2021 - 5:29pm

"Just imagine that a bond is a slice of cake, and you didn't bake the cake, but every time you had somebody a slice of the cake a tiny little bit comes off, like a little crumb, and you can keep that. […] If you pass around enough slices of cake, then pretty soon you have enough crumbs to make a gigantic cake."

Mar 16, 2021 - 10:23am

Having gone from a traditional large brokerage (e.g. C&W/CBRE/JLL) and now at a "REIB" I would say its very much similar to what the more institutional groups at the large brokerages do however there is a larger side of our work that is on the advisory, structuring and impact side than at the brokerage. To put this in a blunt way, we didn't really care how selling a building would impact the financial statements of X client on the brokerage side, just needed to close. Whereas on the "REIB" side we may be involved earlier on how best to structure the transaction (e.g. sale/leaseback, recapitalization, joint venture, minority interest sale etc.) and a much more involved role on definitive documentation than traditional brokerage. 

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