Hi wso,
I just got a call from HR and asked me to come in on Friday for an interview. The company is a real estate debt fund and manages about $5bil. I work at a commercial re brokerage firm in their investment sales division, so I have no idea how debt investing works. Would anyone be nice enough to shed some light on re debt investing 101? What kind of modelling experience are they looking for?
Thank you in advance!
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is it BX?
Not BX, but smaller shop
Ranieri ?
No, but similar...
anyone?
lol lets just keep asking who it is...AREA (Apollo)?
FYI sorry I don't work on the debt side but I would assume its pretty similar to equity, underwrite the property then discount the debt based upon chances of the loan being made whole.
Nope..... Thanks for your input though
Is it Colony Capital...?
You mean Ares? :)
I think AREA still runs separately from Ares, at least the guy we work with there still has an Apollo business card I think.
How do you even work in CRE.... Haha I'm just busting your balls. However, it's not rocket science. Go chat with some guys over on your capital markets platform (assuming you guys have one) or just google around. You'll be fine. The only area I'd see you coming up short on is the modeling. What kind of role are you in right now? Is it purely business development where you're pounding the phones or are you more of an analyst that supports a senior broker?
Sent you a private message. Some add't info on what the specific role is would be helpful.
KW is CEO?
It seems like you guys are more interested in where I'm interviewing, but I want to ask you guys few questions....
I know I asked a lot of questions, but I would really appreciate it if you could give me some guidance!!!!!
1) I think you're way overthinking it. just because its labeled "debt" instead of "equity" its still all just finance, cash flows and probabilities. IRR and NPV will be looked at but probably not cash on cash like equity deals. There are no "appropriate" discount rates, higher for more risk, lower for less risk, you use your required rate of return.
2) acquiring a mortgage and acquiring CMBS are different animals. CMBS comes down to pure credit for the most part (but you still underwrite the largest properties to see where a good backstop is) if you're buying distressed mortgages you have a high likelihood you will end up with the property so you figure out how much you can sell it for if you have to foreclose, factor in debt payments, discount using a required rate of return and viola you have what the loan is worth to you. Loans are bought and sold just like equity stakes either directly from lenders or (more often) via capital markets brokers.
3) Question to vague sorry
While I dont work for a debt fund we have purchased several loans with the intention of taking over the property. I seriously believe you are overthinking it though. A question like "How do you quantify and adjust your valuation according to the risk that collateralized property has?" can be asked and answered almost exactly the same and equity investing.
Good luck
2. You network your ass off to privately buy them from lenders and banks? Even guys like HFF do loan sales. Or you can go out into the bond market and buy and sell CMBS? 3. "How can you make double digit IRR when you are just originating a loan and getting what you are promised to get?" You don't, but there are funds who borrow money as part of their own mix of capital sources behind the scenes; that cheap leverage can significantly boost returns. I don't know if your particular fund does. And yes, a more opportunistic lender could do loan-to-own, where they offer fresh money (but very expensive money) knowing that they will probably foreclose ... but I can't think of any concrete examples at the property-level. I'm sure it happens. Much more common is buying bad mortgages.
It sounds like you have no idea what sort of fund you're talking to. You should be able to figure out if they're a highly risky opportunistic/distressed player or if they are more of a "core" investor, simply buying/originating safe, single-digit-interest-rate senior loans.
without knowing which firm, it is hard to tell whether they may ask technical stuff or just some basic real estate questions. I was asked technical stuff from modeling a single tenant industrial building to modeling an office with 5 tenants. Some firms may ask you to do some sensitivity analysis (break even rent rate, vacancy, cap rate that makes LTV reaches 100%, etc.) or analyze metrics at maturity. I have heard from others that some firms may ask you to model waterfall, irr of loan to own, pik debt stuff. At other places, I was asked basic stuff like explaining cap rates. Good luck with your interview.
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