I could use your guys' help. I am currently weighing two competing offers and having a hard time determining which one is the better opportunity. Would really appreciate your thoughts. As an end goal, I want to develop real estate--whether as an actual developer or private equity real estate firm that allocates a fund for a particular real estate allocation strategy. Keep in mind that I am not 100% sure I will remain in my local market for the rest of my life.
Option 1--senior real estate analyst, REIT
-REIT recently underwent complete restructure at management level and I think the new team is highly capable
-owns over 50 properties. 5 year plan calls for a slew of acquisitions and dispositions, so good deal flow
-analyst experience will be specific to an asset class, which is somewhat limiting
-job also has an Asset Management component, which I think is a very important part of the experience
Option 2--development analyst, local developer
-similar comp
-owns over 20 properties, some of the biggest development projects in my market
-responsibilities are VERY broad, but are more development oriented (entitlements, design development, construction, etc), with some underwriting and financial engineering exposure
-very flat organization with major opportunity for future growth (only 2 people on development team, senior management is older)
-more disorganized in how the company functions and what my roles and responsibilities will be (little bit of everything)
These are clearly two very different opportunities, but both provide skills that are essential as a good developer, whether an operating partner or PE fund manager. I think option 1 provides more focus, but option 2 potentially more long term growth. I can't figure out which gets me closer to my end goal from a learning experience and future growth opportunity.
Any thoughts? Sorry to ramble.
Which firm has the better name in the industry? What asset class are you going to be pigeonholed into in option 1?
One factor to look at: some markets don't really have any potential employers in the REPE/equity space but have a decent number of operators. If you decide you want to take the fund/equity path but want to stay near your home town, you might find your options fairly limited in your market, depending on what market you're in (i assume you're not in NY).
If you want to develop real estate, then learn how to develop real estate. You won't learn how to develop at a REIT
I think most of us don't really know what we're saying when we say we "want to develop real estate". I think when we think of developing real estate we mean being part of a machine (or being the machine) that creates and renovates properties. It's a bit ironic but learning the skills of a developer is limiting with regard to your future potential as a part of the machine (organization) that creates new properties. So I see why the OP doesn't have clear direction on which way to go. It's not as cut-and-dry as go to a developer to learn to develop real estate as opposed to a REIT.
I've "developed" 4 properties from raw land. I in no way utilized development skills since I hired that part out. I utilized fundraising skills and analysis skills (objective and subjective) to make my decisions about which properties to acquire and build on. So I don't think you necessarily need to work in "development" to one day develop property. It really depends on what you mean by you want to develop property.
Edit: analysis, fundraising etc all falls under the umbrella of "development" skills.
Fundraising and investment analysis is just a slice of real estate development--skill sets that overlap with PE, REITs, etc. But my group, for example, is hiring a guy with 10 years of development experience because none of us have the development skills necessary for the job. Those "development" skills have to do with managing contractors and subcontractors and understanding (at a deep, professional level, not at an amateur level) how to do things like get permits, re-zone land, understand schematic drawings, putting together site plans, manage the entitlement process, understand infrastructure needs, price out work, etc. Those aren't the typical skills gained at PE firms or REITs.
So it's fair to say that there is overlap in skill sets, but a person with 5 years of development experience will have considerably different strengths than a guy with 5 years of REIT experience. But I wouldn't say a guy without development experience wouldn't be able to develop real estate--unless you're an expert in development (5+ years of experience) then you're probably going to be working with a developer anyway on your own stuff.
thank you all for your answers, this is very helpful. @"DCDepository" Option 1 is focused on multifamily, likely with limited opportunities to work laterally on a deal by deal basis. It is difficult to compare status in the industry--both are very well-known owners in the local market, but obviously have very different niches. the REIT owns more properties, but is limited in how it can structure deals as a REIT. the developer does most deals in one asset class, but has flexibility to structure all kinds of deals (cap stacks) and own/develop some of the biggest front-page sites in my market.
I also agree with some comment about "developing" real estate. Both sets of skills (intensive underwriting/some Asset Management vs. intensive project management/development with limited underwriting) are crucial to becoming an owner and manager of real estate assets. I am trying to determine which skill set best enables me for 5 years from now.
Also, option 1 is more structured as a larger corporation but a better educational/mentorship opportunity, however with limited opportunities for growth. option 2 is much more entrepreneurial, with more of a chaotic structure with less mentorship, but greater opportunities for taking on responsibility on the long-term horizon.
Honestly, in this market I would go to the developer and try to work on as many unique deals as possible and really get my fingers dirty. I think that skill set is harder to come by than the REIT skill set. That's my gut. But my gut also says that we're in a super heated market right now and that I'd also be looking at which opportunity offers the best job security IF the market takes a sharp downturn. With a local developer, a change in demand for housing or for office or retail space can drastically impact its decision to move forward on projects. But REITs have some of the same issues, too, although perhaps not felt quite as drastically.
the restructured reit- if it is public I know which one- stay way. or do your own homework read on articles on them. read the restructuring docs and the public disclosures/analyst calls. also if share price is flat walk away.
in the dev. side- the 1 single question is how many projects do the they have on the go at any one time? if its 1 a year or 6 at once- huge difference. also find out structure- if they do deals on the side with land or just transactional type 1 building 1 client idea. If its family outfit- just walk away- its going to be a nightmare. Are they client led development or investor led? BIG difference, if investor led- much tighter policies and probably audited returns so you can show your next employer. Proof of track record is what you want. especially if you want to leave town later. also non family based investor led biz has huge opp for you to shine- in getting money in (HNW or lead a co-investment deal) again going to your track record. see early how they feel about growth too. dont be surprised if they dont do projects outside area code. but see if they would do a co-invest deal that is much bigger than they could do themselves- especially attractive for dev's that like to play with land deals- which is developers crack.
Rick, can you add some color on your professional background/education and how you came about get these two competing offers?
this is good color, thank you. @"rc211" do you mind PMing me and providing insight on which group you are thinking of and why your advice is to stay away?
the developer is currently running 4-5 projects at once and is one of the more active in my region. proof of track record will certainly be there. in my mind, the developer track is good resume value, job responsibilities are significantly more hazy but the opportunities are there to learn and take on responsibility. Option 1 is more corporate, I know what I am getting and will follow a more structured advancement process, but know up front that the resume value and experience is solid.
one of my main concerns is that I will not get a ton of underwriting experience at the developer, which is harder to obtain and be competitive further down the road, as opposed to getting that experience and knowledge base early before transitioning to the development side.
Dude don't fool yourself, you know the right answer. Obviously getting a job with a developer will help you much more to get where you want in the long run.
I understand your concern with the statement above regarding underwriting experience. Underwriting is very important to determining the right project and structure, but after that if you don't have the experience of actually getting this project from start to finish will not allow you to further grow as a developer.
why do you think this? who are the capital sources for the developer?
Thanks everyone for your feedback. And for calling bullshit on not getting any exposure to financial engineering/underwriting. Took the job with the developer. Expressed a concern to the COO regarding my exposure to underwriting and I will get to help support the acquisitions team in new deal underwriting. The job responsibilities are a bit hazier in terms of clarity when measured comparatively to the REIT, but the opportunities for learning and advancement seem much greater on the development team, especially given that they are managing 4 active projects major among 3-4 people.
Congrats Ricky!
Sounds like you made the right choice. I think a lot of people overvalue underwriting skills, anyway. There are shitloads of people who can read a lease, do some market research, and build a financial model. If you build the skill set where you can make the right underlying assumptions, pull deals together, and get them through municipal approval processes, you can just hire one of those people.
The only people who over value underwriters are financial analysts who underwrite all day and dont have exposure to other more complicated sides of the business. Yes, having a financially feasible transaction is mandatory, but the majority of real estate veterans know if a deal will work before it goes into a model.
Hey #Ricky Rosay what part of the US are you in?
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