Would you move from real estate development to asset management?

I have been offered a position with a prominent PE firm working on the asset management side. I would be managing / overseeing our development partners and projects where we are the LP.

This firm invests in pretty high profile projects.

I am not sure about this move (because I seem to hear mix bag on 'asset management')... my interest is in real estate and real estate development , but ultimately on making the most money (with the least amount of stress hah..).

What are your thoughts on long term prospects?

 

Personally, no, I wouldn't. Just depends on what you want. Making the most money and stress are directly related in this business, unfortunately. The reason you (can) get paid so much in development is because you are taking an enormous amount of risk and putting in an enormous amount of effort in locking up a site without (in many cases) having a guarantee of making a deal/making it work. Asset management you are managing an existing portfolio of assets. So you will make good money in AM, but probably not 'retire at 45' money. You might not achieve that in any of the other CRE paths either, but development is much more of a j curve potential track than AM or acquisitions. You could argue that brokerage is on that level, but again a risky proposition for other reasons.

"Who am I? I'm the guy that does his job. You must be the other guy."
 

Entry level asset management CAN be easier to break into than acquisitions/development roles assuming that you aren't expected to hit the ground running with any type of portfolio management knowledge. That being said, you want to play up your CFA accreditation and the multi-tasking aspect of your sales gig. As long as you have decent experience to speak to and good UG credentials to match, shouldn't be that tough to get a gig. You might not get an AM gig at a megafund, but you should be able to land at a pretty good firm somewhere.

"Who am I? I'm the guy that does his job. You must be the other guy."
 

I think you have to define this as "by choice" or not. If the market tanks and my options are AM or unemployment, then you better believe I'll live in a cube and crank out models all day. If I have my choice though? Absolutely not - it's neither the day to day I want currently (I'm a DM) or aligned with my long-term goals (being a developer).

Commercial Real Estate Developer
 
d309206:
but ultimately on making the most money (with the least amount of stress hah..).

For the first part of your quote, I'd say AM might make you more money in your first 5 years, but then a whole lot less money over the course of your life.

For the second part of your quote, re: stress, I'd recommend you go with AM over development.

Commercial Real Estate Developer
 

agreed on these two points but when you add a temporal component to the discussion, a real estate career can last an extremely long time. there is also a ton of value in experience ("grey hair") whereas other industries are kindof the opposite.

i would argue the best possible thing to prepare someone for success as their own development shop is capital. they gotta be able to weather the storm if deals dry up. almost like brokerage.

so for new people, i'd rather see them go into AM first, and build up their balance sheet, then take that experience and nest egg into development where they can absorb some risk and enjoy the returns.

nothing wrong with the opposite route if you time it right and are at a larger, legit developer. but timing the market is tough thing and in downturns there are a million brokers and developers looking for jobs and nobody wants to hire them. the AM job is a lot more stable.

but like i've said elsewhere, when you are young and have no expenses, that may be the best time to take some risk. if there is minimal downside.

it is a lot more about personality and appetite for risk IMHO.

 
Best Response

Everyone is entitled to their own opinion, but I have to disagree with the guy saying AM is more challenging, etc. It's clear he is in AM and has probably not had any experience in acquisitions and/or development. I am responsible for all three in my current position and AM is by far, and I mean a long, long shot, the easiest portion. In terms of learning the most it goes development>acquisitions>asset management. In terms of challenging, enjoyable work it goes development>acquisitions>asset management. But I do agree, in terms of job stability, it goes in reverse - asset management>acquisitions>development.

To recommend someone starts in AM and uses their nest egg and experience to get into development is a recipe for disaster. Managing a stabilized property will not prepare you for running a development. Don't get me wrong, operating/managing the asset once it's stabilized is important, but not nearly as difficult as development or even acquisitions.

But to OP's question - leaving development to go to AM when your actual goal is development does not really make sense to me. You will learn more in development. Now if it's just a personal choice of wanting the type of work and job security, then that's a whole different discussion.

 

I think another item worth mentioning here, is the last 5-6 years has been great to be a developer... When the cycle slows, a lot of these shops will have to become lean. There's only so much G&A that can be justified and thrown at development directors and VP's to chase deals that realistically aren't going anywhere. At least in an asset management shop you job security is much better.

 

Like RE Dev, I also cover all three and agree with most of what he says. That being said, I would say AM can be the most challenging due to the fact the acq guys hand you a bag of shit i.e., give you a deal they PF a 5cap and that's what IC is expecting when in reality, it's barely at a 4.

I've also noticed when things are hot, everyone wants to do acquisition/development. When the economy hits the shitter, the traffic is in the other direction. I'll let you judge where we are in on this cycle.

 

I was waiting for someone to comment on this. Depending on how the shop operates (i.e. if acquisitions and asset management are independent silos) yeah you could be in for a stressful job. Your acquisitions team pulls the trigger on a crap investment and leaves it up to you (AM) to figure out how to make it perform as underwritten. You're playing from behind from the start.

Also I would argue that right now AM professionals are super stressed given where we are in the cycle and with COVID impacting almost everything. 2020 budgets are shot. Long term pro formas are probably shot. AM might be running around like chickens with no heads trying to save properties, portfolios, or a whole company whether acquisitions folks gave them a great deal, horrible deal, or somewhere in between. Probably having uncomfortable conversations with their deal team/capital markets group, investment committee, tenants, and probably lenders too.

Generally I would say AM is much less stressful than other areas of CRE (especially development) but can also be incredibly stressful in certain situations and certain constructs.

 

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