What's with all the IB/PE bros asking about CRE?
What's with the sudden interest in commercial real estate?! It's not fun and you get paid like shit, go away!!!!
Just kidding, all are welcome.
But for real, what's with all the interest in real estate as of late? Not strictly talking WSO, but in general. Everyone seems to be wanting to get in the space as of like, 2016 or so. What would be your guess as to why?
Could be related or not, but feel as if the CRE job market has gotten absurdly competitive the last few years too. It used to be you have a degree and you like real estate, then bam - you got a job. Now they are looking for 3+ years experience, MBA or MSRE, plus whatever else for an entry level, ANALYST role, like wtf is that?
What are your guys' thoughts?
Dude I have no idea, but I have noticed the same thing as well. Especially on WSO- there are so many people talking about this field. It's weird because during my time at school I had met maybe one person who was interested in real estate- most were gunning for IBD.
I think in general CRE is becoming more institutionalized. Most jobs were (and maybe still are) with small family offices, but that is changing. Now, larger institutions are building out more CRE allocations and teams. As such, you'll have more people inquiring about it.
I think it's this, it's becoming a big-money play more and more every day. Especially for foreign cash where parking it in European debt gives you zero or negative (!) returns, investing in US RE gives you at least 4% in the strong markets, and some institutional money will even be cool with a 3.5 cap in LA/NYC since it's miles beyond what they're getting anyway. I mean, the growth in commercial debt shops alone has exploded since '08, and that's not even talking about dev/PE/AM.
Institutional money was in there prior to '08. Real estate debt funds were an opportunity for "new" non-traditional lenders to fill a need following the GFC (see risk and CMBS shops).
Downturn > contraction in liquidity > tightened lending criteria > less lending activity > opportunity for private debt shops
This is absolutely true, but I don't think it has changed much in last 10 years. But real estate is like 20 years behind the mainline finance industry, which is actually good for all our careers! More opportunities!!
Yes, i think the door is beginning to close though, and close fast. I went to a non-target school (graduated 2013) and studied history and did not go to grad school, and am now working in instituional-level acquisitions. That path has probably all but disappeared due to two reasons:
more competition and interest to get into the industry
consolidation of the industry (large instituional shops replacing fragmented family shops) means less jobs.
Ultimately you will have less jobs, and more competition.
Exactly this. You can summarize it into one word: BREIT.
Big REIT's?
Helpful tip for you given that based on your username you were likely born in 1999 so you genuinely may not know this yet
Whenever you see an abbreviation or any word that you don’t fully understand... just copy and paste it into google. Sometimes the first result won’t be exactly what you’re looking for. Then you can try “xyz abbreviation finance”
Idk why but this always bugs me when I see someone on the forum type out an entire response saying “what does xyz mean?” When you can literally type “xyz” into google and the very first result gives you the answer
End rant
Bravo on the name, bravo
I can only speak for myself and for my close network. I think COVID is partially to blame. With massive layoffs across the country, I am starting to realize that one source of income may not be the best approach because if you lose your job, you’re kinda screwed.
People are seeing RE as a great way to diversify investments and produce monthly income. However, it can be a steep learning curve to be able to jump in without any experience. What better way to learn than to join the industry?
On a more personal note, Commercial Real Estate as a career is quite appealing. I have always been interested in fundamental research and it seems like this will exist for a long time in RE compared to other asset classes. It’s still a form of investing, except you are looking at something more tangible and there are proven ways to add value to your investments. This is not necessarily true in other investing careers (Equities, PE, VC, etc).
He said it guys! You know the rules, take a shot.
lol, that same sentence gets repeated in every interview particularly if the position is for an intern or entry level analyst. Its become one of those interview answers. Its funny in the real world that is not the first thing that comes to mind when a person particularly a senior professional is asked "why CRE"? Not even close.
"It's tangible, it's solid, it's beautiful. It's artistic, from my standpoint, and I just love real estate"
-- you don't want to know
Are they actually IB/PE bros or are they undergrads who don't know jack shit about anything?
This, 100%. Don't confuse the "IB" tag beside their name with working in the industry.
They're probably college kids who are still figuring things out and just learned that there's a career path that doesn't necessitate 80 hours a week of editing powerpoint slides.
I suspect it could be driven by the market, or specifically, people thinking there will be big 'distressed' deals ahead.
Finance types always mess this up, they think stuff will be '10 cents on the dollar' in the NPL and distressed property arena. This happened in the early 90s due to the gov't being stupid (research the RTC). Did not happen after 08 anywhere like people thought it would.
I think after 08 there was like $10 for every $1 dollar of actual distressed assets, it was a joke. Tons of HF and PE shops that never had an eye on real estate gave it a try. (go look up firms that where trying to 'buy tape')
I'm already seeing it in NYC. Several calls from investors (HNWIs and PE, no HF yet) asking about getting 20% off before even explaining their situation. When I ask why they think that's warranted it's been, "Hello do you see what's going on out there? It's going to get worse." Sorry man, just because your equities got slammed doesn't mean there's a fire sale on performing assets in Manhattan. Kind of scary that people with this much money are that disconnected from reality.
To be fair, equities get slammed overnight. Real estate may just be trailing by 60-90 days. Once you have 2-3 months of rent collections declining from 95% ot 85% down to 50... some of those fire sales will definitely materialize.
But for sure, there are a lot of vultures who frankly don't even understand the industry who are thinking to buy "at a discount" as if that's a business plan.
I know in my market, pension funds were trying to deploy capital the last few years and reach outsized returns. Due to this,they started investing billions and billions of dollars into unlisted real estate/listed real estate, whilst also paying fees upon fees to unlock that opportunity.
As a result, I guess it became attractive for IB/PE bros to jump since the opportunity to earn performance fees was just too attractive.
Many people who succeed in real estate do so not because they're the smartest in the room, but because they know how to build relationships and ultimately a pipeline of business. My hot take: might be a rude awakening for those who decamp to real estate only to find the reason they didn't make VP is still staring them down, and they're now down a fair amount of social capital.
This is so true!
Re: your hot take, maybe it's cause I'm slightly hungover but are you saying that those who are in industry that didn't make VP is due to their lack of sourcing/production abilities?
Not directed at anyone in particular, but yes succeeding in any partner- or principal-level role is heavily dependent on one's ability to source deals (and politics). I've never worked in IB but I know it's true for most banking industries with an established hierarchy.
There's a book titled "What Got You Here Won't Get You There." I think it's a handy reminder (warning?) that to continue up the ladder, one's main responsibility pivots from execution to sales.
Sometimes this hits analytical people hard. Law firms are even more notorious for it.
edit: reworded to make more succinct
edit 2: less cryptically, anyone will have job security if they're able to bring in business and some people don't learn that skill set early enough in their career. I just think real estate highlights this better than other industries.
Agreed, id go even further that (in my experience) RE guys are way more personable/social (some insane/electric characters) vs maybe more boring ppl in other areas (decent chunk of nerds in IB that fail out after analyst/associate). This is senior mgmt down to analyst in my experience. In the past decades/years many of the players obviously weren't your typical HYP types and much more wild/unique personalities... this has died down and changed with the times and RE has become more institutional... but nonetheless. This is obviously a high level generalization but id argue overall... one would have much more difficult time relationship wise in RE than IB/ER etc
I've been lightly interviewing a few people that I feel could lead some investments for my partners and I. I think it will get interesting if cap rates go back to being decent/something blows up. Until then I'm sitting on cash and just going to wait as assets are still way too pricey but I'd like to have a decent team that can handle investing in the asset class. We'd like to treat it like a bank on steroids.
Can you explain what you mean by “a bank on steroids?” Do you intend to be debt focused?
We can park cash in RE with minimal leverage and when we need cash to invest on the PE side, we just relever the RE.
Hi guys. Long story short, I am a non-target with an RE background that broke into IB in Chicago. The more I think about it, I enjoyed my RE classes more than my general business classes and I know how to use Argus very well, make Models for REPE, model from OM's, etc. My school really set me up for success with the background and experience I have in RE.
I am committing to working in IB for a while, but like everyone else, want to move to greener pastures or something I enjoy more (assuming I do not enjoy IB). I have been thinking about REPE and with all this talk, was wondering if anyone could lay it out for me as to what I need to do to work in REPE. As in, what the hell should I do now to achieve the goal of REPE.
I know there are guides for IB to PE but dont know what do to to get from IB to REPE.
Realisticaly speaking, I would like to work for a global REPE firm and do some macro RE work.
What kind of non-target did you go to that taught you Argus and REPE modeling...and land a job in IB for that matter lmao
My school has resources that any student can take advantage of. I grinded for my 4 years of college and spent every moment trying to learn as much as I can to differentiate myself. My hard work paid off, and I'm seeking advice to improve my career.
In the affordable housing side of institutional RE funds, those who are especially skilled at navigating the HUD system are generating great returns consistently and it seems like there is no end to the funds flowing into the asset class. I have done both traditional PEI and PERE, and for employees of the fund it is easier to get into the carry than traditional PE, and its much easier for the GP to generate carry from some well bought property and good execution of the typical lever-pulling than it is to generate carry from a dozen random shitco's with management issues etc.
Former IB'er: "Hi RE Firm, I gunned all my life for IB or PE, and ended up hating it or couldn't cut it."
RE firm: "Please, please come in and have a seat, golden child. We were just looking ahead at recovery rate projections based on xyz."
Former IB'er: "What's a recovery rate? It sounds so... tangible."
RE firm think to themselves without words: "He/She is glorious"
I lol'd
Guilty of falling into this category. This is happening with a lot of alternatives to traditional banking and private equity though. Analysts and associates are less interested in staying in banking long term, many go in knowing it retains optionality or provides a path somewhere else (tech, business school, etc.). The unfortunate reality is the lifestyle in banking has only improved marginally in the last 20 years while the upside has been drastically diminished. You have to actually enjoy the work somewhat to survive the first few years and that's a small percentage of people. On the PE side, even pre-MBA roles only go to the top 25% of analysts and from there you have to somehow get into an MBA business schools">M7 b school and hopefully land a post-MBA gig (very few make it this far).
Tl;dr the dynamics in IB and PE have changed such that the long-term career outlook isn't great for most people.
Out of curiosity, are you seeing much traffic in the other direction (people coming investigating the viability of a switch to asset mgmt now that acquisitions have dramatically slowed)?
havent seen this at all
I don't currently work in CRE, so are you referring to the real estate definition of acquisitions and AM? If so I wouldn't really know.
I majored in RE and intend to go back when my analyst stint is over, but I more or less fell into an IB offer out of school and took it before RE recruiting picked up.
Reasons that it's a better mouse-trap below:
(i) It is generally good to work in an industry, particularly on the principal side, which is inefficient and is as essential to the broader economy as labor and capital. RE is that industry. (ii) As a general matter, the actual finance component of the job is both much more tolerable and valuable in RE than it is in Corp. Fin. I would never spend time on out in the weeds on GAAP pension accounting so that I could un-GAAP and re-GAAP an income statement if I were underwriting the acquisition of a multifamily property. I would be able to cut out all of the bullshit and be able to focus on the actual applied economics. (iii) Mid-late career ceiling is much higher. I guess that you could get to C-suite or partner level and be doing as well as the top earners in RE, but you could throw a dart out a window at a ULI annual meeting networking event and semi-regularly hit a guy who could buy and sell my MDs. (iv) No suicide-inducing hours. Pretty self-explanatory, but it's generally good to have a job where you never have stretches where you're consistently clocking out at 3-4am. (v) RE people are generally more enjoyable to be around. There are some IB associates or VPs who are just wired for the job, but most are miserable fucks because they have miserable jobs. (vi) Way more interesting and fulfilling to have the end result of your work be something tangible instead of being a deal toy which represents Company A trading a piece of paper to Ad Hoc Creditor Group B in exchange for a new piece of paper which Company A winds up defaulting on 6 months later.
I could go on, but these are the big ones.
True. If we use the respective WSO forums as a crude proxy, I'd take r/wallstreetbets over the participants in the IB forum any day.
promoteseeker shot!
never fails!
On 6), it's funny how the grass is always greener. I've worked in RE for three years and would love to work on a restructuring deal (regardless of the industry). There will always be people who switch between IB and RE and vice versa thinking one will be better than the other, but at the end of the day it's personal preference.
It happens late into every real estate cycle. 2003-2007 was the same. Then 2014-2020. You can call peak market by MBA applications to REPE.
Can you point to any data that backs this claim up?
Schwarzman's ascension of Jon Gray, who held CRE in high regard from the start. Back in the day (like 7-years ago lol), people thought BX was CRAZY for allocating like they did into RE. The direction of taking its exposure from 40/60 to 60/40 in favor of RE was unheard of - they've now proven out that thesis.
Also - the hours and culture. Went of a bachelor party with a bunch of dudes from IB last year, I was the only one beside the groom who didn't miss a day or two of golf.
Everything's always hyped up right before the crash.. RE was all the talk in '05-'07. Then no one cared.
Whatever happened to all the expert bitcoin investors on WSO? I haven't seen a post about it in quite some time...
Define "no one." Plenty of people seemed to think it was a good time to buy assets. And made a lot of money doing it. If by "no one cared" you mean to say that the world was too pre-occupied watching Wall Street implode in an ethical and financial supernova of it's own making to care much, then yes, real estate took a back page in the news cycle. As a career/wealth building engine, people still cared quite a bit
I have nerworked heavily over the past few weeks and have landed 2 informational interviews/phone calls with Carlyle and Cerberus. Both interviews/phone calls will be conducted by 2-3 people with at least one of them being alumni. What should I do to prepare for the interview and going forward, what resources exist for me to make sure I land a REPE role this recruiting cycle.
EDIT: pls explain why MS. I am a noob.
I'm assuming it's because your comment is 100% irrelevant to the topic of this thread. It looks like you just found a thread with a lot of activity and decided to post an off-topic comment in it, hoping that you'd get replies.
Ok my bad. The position is for a REPE role, I see that I did not mention that in the original comment. I thought someone could shed some light on the subject since the thread has mentioned some facets of the REPE industry.
Thanks for the response.
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