What do you define "Real Estate Inestment Banking?"

Many different terms are thrown around on here and I want to know

How do you define REIB?

I consider it to be:

-Mortgage divisions at Banks, Life Insurance companies, etc.
-Mortgage Banking
-Mortgage Brokering
-Mezz/Boutique Lenders, etc.

The reason I bring this up is because there seems to be little connection between regular investment banking and REIB.

Real Estate Investment Banking is pretty much just connecting potential/current investors with capital sources. They can be the actual source(Bank, Life Insurance) or mortgage bankers/brokers.

I currently work as a commercial loan analyst at a bank and are kind of perplexed with the term. It seems like a "fake" term that makes being in real estate finance SOUND more important than it actually is. I mean, it "technically" involves investments and banking, but maybe I am reading into thing too much.

Am I wrong with my thinking? If so, how do you define Real Estate Investment Banking?

Comments (13)

May 11, 2013

Yeah, real estate investment banking definitely gets claimed by a lot of different people, much more so than any other banking group.

Lots of small potato brokers call themselves real estate investment bankers. It doesn't really mean anything though, right? I mean, anyone can call themselves anything as long as its not a professional title that requires a license. I could open my own shop and call myself "Her Royal Highness Brunhilde Von Pinnafore, the Fanciest Little Financier In All The Land." It's just a title people claim to sound important.

In my mind, true real estate investment banking refer to coverage groups at investment banks that cover real estate companies. The mortgage underwriters and originators sweating it out in the sausage factories are real estate finance/CMBS guys even if they happen to sit in banking. The brokers are brokers, not bankers.

Investment banking period is just connecting companies to the capital markets, but the difference between a broker and a banker is bankers execute and brokers don't. I mean, we don't call residential real estate agents "real estate M&A bankers" why would we call commercial mortgage brokers investment bankers?

Anyways, underwriting commercial mortgages at a bank is really more of a trading role than a banking role, because you're not chasing advisory fees, you're taking down principal risk. Mezz/boutique lenders fall into the same category - they're investors/traders not bankers. The insurance guys are buy side, not sell side, so I don't see how you can argue that they're bankers....

Really the only people I see claiming the REIB title other than real estate coverage guys are the brokers, which is sort of fluffing their resume. I've never seen a guy writing mortgages at an insurance company claim to be an investment banker. Doesn't make sense. I mean, if a guy writing commercial mortgage paper at an insurance company is a banker, why isn't his co-worker who buys like IG debentures? It's the same role isn't it? Just a different product.

But yeah REiB is definitely the most abused title in investment banking.

May 14, 2013

I sell houses in Nevada. Therefore, I'm a real estate investment banker. In fact, I'm self-employed so i own my own real estate investment bank. I own a bank.

Jul 15, 2013
Jul 15, 2013
Jul 15, 2013

It's kinda similar to FIG in the respect that it's all balance sheet driven and you don't use typical metrics like EBITDA, P/E etc. Net Asset Value (NAV) is the key thing to look at, along with dividends and Loan to Value. REITs have to pay out 90% of all profits as dividends, so EPS is basically just a proxy for dividends. You also look at yields (capitalisation in the US) and deferred taxes are very important. Let me know if you want more info.

Jul 15, 2013
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It's kinda similar to FIG in the respect that it's all balance sheet driven and you don't use typical metrics like EBITDA, P/E etc. Net Asset Value (NAV) is the key thing to look at, along with dividends and Loan to Value. REITs have to pay out 90% of all profits as dividends, so EPS is basically just a proxy for dividends. You also look at yields (capitalisation in the US) and deferred taxes are very important. Let me know if you want more info.

Thanks. Could you break down the roles of various players, Investment Banks, REITs, Private Equity firms....

Jul 15, 2013

There are definitely topics that cover RE IBD. Some pretty recent ones as well. Search again.

Curious: if you don't know much (or anything, maybe?) about the space, why RE IBD?

Jul 15, 2013

cap rates

Jul 15, 2013

P / FFO, P / AFFO, discount / premium to NAV (in Europe), LTV%, Cap rate (NOI / Value), dividend yield. There are a few more.

Regarding M&A - in the US there were two recent large transactions. ProLogis AMB ($14b) merger and there was also a merger of healthcare REITS (Ventas acquired NHP for $7b)

Lots of deals to do as the CMBS pile starts to get worked out.

Most RE groups also cover Lodging and gaming which have different metrics as well.

Jul 15, 2013

thanks guys - anything I should know about the market for Real estate investment banking? ie. obviously going in mining, you should know mining prices of gold, silver, etc... but what about RE? What should I look at on a daily basis?

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Jul 15, 2013
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