What firm is the university for real estate? I.E. the new trammell crow?

Many people left Trammell Crow Company and Trammell Crow Residenital to start their own ventures. It seems that it used to be a breeding ground for future entrepreneurs. This seems like it was the case with Hines as well in the past (still is, but not to the extent it used to be). What firms currently seem to be those breeding grounds for future development entrepreneurs?

 

I would argue that there is not a modern equivalent. TCC was really the first institutional developer in an industry that was primarily dominated by local mom and pop shops. Their business model was effective and served as a launching pad for others who wished to replicate it. Real estate now has significant representation in public markets (REITs) and in the portfolio of every pension and endowment, which wasn’t the case 50 years ago.

Due to the prevalence of companies in this space today, none have quite the monopoly of power or talent that TCC had. I’d love for someone to prove me wrong, but I just don’t see it.

 

I’m only familiar with TCR, so I can’t comment on the other lines of business at TCC. That said, TCR is a very well run shop. Great place to learn the multifamily business, but by no means the only place. You’ll work on interesting deals with smart colleagues. It’s setup regionally, with each regional office overseeing a different geography. I believe they have their own in house construction team which is a huge plus and something that few people discuss on this forum.

 
crejunkieeeee

Many people left Trammell Crow Company and Trammell Crow Residenital to start their own ventures. It seems that it used to be a breeding ground for future entrepreneurs. This seems like it was the case with Hines as well in the past (still is, but not to the extent it used to be). What firms currently seem to be those breeding grounds for future development entrepreneurs?

I can’t really think of any examples of ex Hines people going out on there own in the past 5 years

 
Most Helpful

I think pancakewaffle makes the best point, the reason groups like TCC and Hines had such prolific talent pools and thus spinoffs was due to the fact that few large scale, institutional development firms existed at the time they came to rise. I would say the same is true for PGIM (then, just "Pru"), which you can trace as the origin jobs for tons of successful entrepreneurial startups over the last 20+ years or more.  Real estate as an institutional asset class (for equity investment and development) really reached maturity in the mid-2000s at best. REITs were not a thing of any status until the mid (or really late) 90s, private equity didn't gain its scale until the mid 00s, and pension funds, SWFs, endownments, and other large institutional allocators (i.e. the "LPs") didn't really effectuate their massive increase in real estate allocations (generally above 10% and rising now) until the 10s. 

I know this is not what people probably want to hear, but the concept of "striking out on one's own" (at least with respect to institutional grade assets and developments) is very different today than it was 20+ years ago. Major downtown skyscrapers and malls were literally funded via syndicated equity raises (i.e. country club capital) and use of opportunistic senior debt from local/regional banks. There was no CMBS, lifecos were even more conservative, debt funds weren't a "thing", and there were a lot fewer equity funds taking LP spots let alone co-GP spots. The net effect was real estate was a far more local business, and thus one could "strike out on their own" and literally do institutional grade deals (so long as you could shake the local rich folks for cash) in a big market without the same competition today.

Today, you have multiple firms with the capacity to pay all cash for land, that alone changes the competitive landscape for being a developer substantially. Still, the fractured nature of real estate assets (especially land and development sites) will allow for entrepreneurial deals to occur, but when going vertical the game is usually just to sell and take the horizontal land lift profit (I mean, that seems the smartest trade most of the time).

So, I love this question from the OP, but without a good understanding of how much this industry has shifted over the past 40 years, you will probably be confused as to why no answers appear. If you look at banking and finance, you see a similar story, just about 20+ years ahead of real estate. That is likely the future, more consolidation into mega firms with diversified platforms of vertically and horizontally integrated business units. 

Ironically, when TCC sold to CBRE, they basically proved this point! Similar case when EOP sold to Blackstone, was the signal of a major shift in the story arc of this industry.  

 

This is something I think about a lot.  The opportunistic / informationally imperfect nature of real estate is becoming more a thing of the past.  It’s kind of sad tbh, the golden days are behind us.  Don’t you think there will always be some smaller or middle market deals that entrepreneurs can take on and make money on? 

 

Also, do you think real estate will become less and less lucrative as it becomes more institutional?  More competition on land will drive prices up.  At what point is land so expensive that the return is not really worth the risk for ground up development? 

 

One thing I've said a few time in comments (usually posts from finance types who don't understand real estate), is that one nice feature of this asset class is the inability to assign ticker to everything that can be then researched and traded from a Bloomberg terminal. The fractured, local nature of real estate will always make space for individuals and entrepreneurs to have a go against firms of all sizes. Especially those willing to risk pursuit costs. (granted when Blackstone and Starwood stared buying SFHs in 2011, I guess you can say nothing is truly off limits)

The difference is in the sources and availability of capital, which is just flat out 10x or 100x or even 1000x plentiful (and generally cheap) than before. Thus, you just have more and more buyers out there and essentially same number of properties or land. The capital side has exponential growth, the user/demand side very linear. So, if you are the person doing a "middle market" deal, the ability to get LP, co-LP, and debt capital is soooooo much easier than it was. Flip side, it's easier for everyone.

The idea of the "golden age" being over isn't how I would frame it. There is a BIG shift coming in the next 20 years, that is the empowerment of individual investors away from pension funds. Fewer and fewer people today have defined benefit pensions, almost everyone but some gov't employees are starting out with defined contribution programs (i.e 401k/403b). Thus, the "massess" will be the larger allocators in the not so distant future. This is virgin territory for the real estate industry. Hence the hype of groups like Fund Rise and Cadre. You are also seeing more and more institutionals create products for "mom and pops" (like Blackstones' BREIT for example). 

There is still a game out there, but it's not the same game of 20+ years ago. Not to offend the WSO community who lives to "strike it out on one's own", but they need way more creative thinking if they are going to have the type of success they are dreaming of, simply repeating the story of some old guy is not likely going to work as easily for them as it did those people. 

 

redever

Today, you have multiple firms with the capacity to pay all cash for land, that alone changes the competitive landscape for being a developer substantially. Still, the fractured nature of real estate assets (especially land and development sites) will allow for entrepreneurial deals to occur, but when going vertical the game is usually just to sell and take the horizontal land lift profit (I mean, that seems the smartest trade most of the time).

You're touching on a good point here, but one I think should be explored a little more.  I've said this before, both on this side and to colleagues, but it's important to note that it's not as easily possible to make money in the same ways.  All of the points you make are good ones, and are accurate as far as they go.  But that holds true for any business - once someone has proven a path, it becomes more crowded and the opportunity to really make a mark decreases drastically.  Maybe the way to make money in development now is not to specialize in syndicating out equity (though I'll point out that hitting the market right, you can absolutely do this) but in something like focusing on upzoning land.  There is always some new angle you need to set yourself apart from the pack, or as you say, you're just subject to diminishing yield as you pay more and more to beat out competitors to buy land.  I believe that this is something people on this site don't understand, because it goes against everything that we do on a day to day basis - you need to be truly entrepreneurial, in more than just the traditional definition.  Knowing how to structure a deal from start to finish is great, but no one is giving you capital to do that when there are dozens of established players who can do the same thing and have a track record.  "Going out on your own" is meaningless, because there are a thousand people looking to do the same every day, you need something that is reasonably unique.   

Which is why when you say "sell the land after creating value".... I mean, that's an interesting concept but a good way to never truly break into the business.  Doing that first deal is always the hardest one.  Do it once and use the resulting fees and cash flow to buy and entitle yet more land... become an expert in local land use processes and go from there.  Or an expert with a strong relationship in using a local tax credit.  I just feel like taking the short term profit, while maybe smart from an IRR standpoint, isn't the way to go about building a business.  

 

Good points Ozymandia, still I wouldn't knock the "horizontal development" game. Master developers can do pretty damn well with much lower risk profiles. Still, my real point is about the concept of "Risk Arbitrage", a local/entrepreneurial person will see a rezoning or upzoning as way less risky if they know/understand the process than a big time developer if they don't have same local depth. Further, they can choose to risk a $100-250k in up front monies to make 10X+ on it without needing to show the liquidity or track record to be competitive in getting a loan or securing LP capital. 

For those with deep capital and lower return requirements, the faster buck of buying entitled land and going direct to design/construction is worth it, especially from the timeliness of capital deployment. I mean how the hell do you raise a fund of $100 million then take 3+ years before you can actually deploy it. Lot's of reason why these groups prefer to de-risk the time boundary of projects more than anything. 

I think that is the "door" left open for start-ups, doing what is increasingly infeasible the larger a firm gets. Since real estate always has local dynamics, a lot harder for that to get commoditized away. 

 

How does one gain the skills/expertise to rezone/upzone?

Depends on how the municipality in question handles it.  But go to local government meetings, community board meetings, land use committee meetings, etc - see how other people present their case, see what is well received and what isn't.  Get a feel for what local politicians want, or what it is they want to hear.  Understand local zoning code, if one exists.  Go to local networking events, there are always lobbyists and architects and folks who do site planning, etc.  Basically, the same way you get experience doing anything else: go watch other people go through the motions and then stick a toe in the water yourself.

 

I mean, this is just a core part of being a developer. As Ozymandia notes, can be a large team (and often is in many cases), but all comes back to the developer who orchestrates (and funds) the process.

Knowing the internal political dynamics is key, as is knowing the market dynamics. It can be hyper-technical (and hyper-local). Want a jump start on learning how, go attend some planning and zoning board meetings (probably all online now due to COVID anyway). You can figure a lot out by just watching.

The key part of why individuals still have potential for advantage is that every single municipality in the US has it's own process, own rules, own zoning code, own building code, etc. Really impossible to get the details from just searching "online", and even reading the printed code will not tell you what is actually possible. In fact in many cases, you get can be called "planned development" type zoning were you are effectively submitting plans and negotiating with the city/county. 

All why development can be profitable, or loss producing! 

 

Repudiandae tempore et eveniet reiciendis et deserunt velit. Porro adipisci doloribus et ut amet nemo non. Eius blanditiis in et velit.

 

Nesciunt ex molestiae voluptas qui ut. Tenetur recusandae reprehenderit molestias dolore.

Neque veritatis quia et ut asperiores voluptatum dolore. Repellendus qui similique doloremque voluptatum vel alias eum. Eveniet a consequuntur laborum et est expedita quo. Doloremque animi velit aut eius mollitia provident. Non repellendus beatae molestias vel a fugit. Minus voluptatem maxime omnis ipsum voluptates ipsam.

Est pariatur expedita adipisci vel enim eos assumenda aut. Tenetur iusto doloremque non qui. Laudantium corrupti animi vitae voluptatem. Dicta harum animi voluptas soluta ipsam ut non. Nesciunt nam est nostrum repellendus. Placeat maxime officiis quas tempora quia ea.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
BankonBanking's picture
BankonBanking
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
Secyh62's picture
Secyh62
99.0
5
kanon's picture
kanon
98.9
6
DrApeman's picture
DrApeman
98.9
7
dosk17's picture
dosk17
98.9
8
GameTheory's picture
GameTheory
98.9
9
CompBanker's picture
CompBanker
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”