1135 0 obj <>stream As Nicole said, most likely buy-side at some type of smaller RE investment firm. A: Sure… I’ll start with the intrinsic side: Dividend Analysis (AKA Dividend Discount Model): This approach considers a 5-year projection with discount rates as well as a terminal value calculated either by a multiple or a perpetuity growth approach. Yes a target MBA can potentially increase your chances. Dividend yields and dividend payout ratios are also important to analyze for REITs because of the requirement to issue 90% of taxable income as dividends to avoid corporate-level income taxes. be used for real estate. h�b```�Y,��D@(� I know some real estate development companies have land acquisition analyst roles and I have seen some people with these roles transition into real estate IB. When I found myself on a real estate-related team, I thought about getting a real estate license but that sort of background is not necessary from an entry-level standpoint. I would also take a look at these Fairness Opinions to see good examples of how banks value real estate firms in real life: Note how the Gaming valuation uses very standard multiples and methodologies: EV/EBITDA, P/E, and a DCF based on Unlevered Free Cash Flow. I know some have like Global real assets which is much different (and pays much less) and probably some groups in between. Would I have an opportunity to break into RE IB after 1-2 years? Just wonderful. If you want to stay in RE-related roles for the long term, there aren’t really any downsides to joining this RE IB team. And you value individual properties differently from both of those. Also, REPE funds tend to acquire/sell fewer properties and may focus more on turnarounds and other improvements since they’re not managing an entire portfolio of hundreds/thousands of properties. Networking aside, how can I best spin the experience in order to earn a full time offer with a BB REIB group or a top REPE firm like BX? Would a strong background in residential real estate help a person who wants to do real estate investment banking, regardless of whether they apply as an analyst or a managing director? That’s a tough call but I’d say the top brokerage firm is better for the brand-name recognition. Discounted Cash Flow: Stream of Funds Available for Distribution = FFO – normalized recurring capital expenditures. Accounting framework 2. UBS Asset Management's Real Estate & Private Markets business (REPM), created by the consolidation of real estate and infrastructure, acknowledges that real … Invest in real estate mutual funds. position? You value a REIT differently from a home building company. Thank you so much. position and the fund acct. PA�2���6051t� We provide complementary services to KeyBank Real Estate … And by BB RE group you mean REIB? Thanks for your time. Tim, thanks for your interest in the courses. Real Estate 101. I’d say networking, knowing how to pitch your story & knowing your strength/weaknesses are more important than taking courses. � I ended up finding two openings. Others are more like miniature cases based on real situations in real estate. Thanks again. Thanks! in economics from Stanford University where he was a member of the varsity fencing team. Will working full-time junior fall semester be a death sentence in terms of finding the time to network for an banking SA position next summer? h�bbd```b``��k@$�jɬ &{�"� � D Then you add in other assets, exclude Accumulated Depreciation, and subtract Liabilities to determine the NAV. I ultimately want to land on a job at REIB upon graduation – BB or not, it doesn’t matter – and was wondering if I am doing the right thing by pursuing the CFA. In terms of exit opportunities within real estate, REITs are a common destination for analysts; some people also move onto real estate private equity firms or hedge funds. A company such as KB Home (NYSE: KBH) might have a particularly strong presence in the Southwestern and Southeastern US. Q: You discussed REITs above, but how often do you work with individual properties in a real estate IB group? A decline in the price of real estate will decrease bank capital directly by reducing the value of the bank’s own real estate assets. Maybe an asset management firm focused on REITs, or maybe even a RE PE firm that focuses on smaller properties instead (not sure how many of those small ones there are, though). We provide full-service … Cash flow statements Accounting and analysis for mergers and acquisitions 1. Proximity to other major cities is a driver in the Asia market, as is transportation infrastructure (See here for an example of a lodging company’s overview). The conflict I’m having is that going into a large firm I won’t get the knowledge necessary to do small personal deals, but would give a higher salary and connections if I wanted to start my own fund later on. We’re going to fix that with an interview from an analyst who networked his way into real estate IB, coming from a non-target state school. Brian, Thanks for all the good stuff. straight-lining of rent). Post-financial crisis, I’ve also seen real estate investment banking teams adopt a more principal-oriented approach to the real estate sector. You must confirm the statement above and enter a valid email address to receive this free content. I have worked and gained a very strong understanding of the construction of a property, the costs and the risks associated with a real estate project. Climate change, energy needs and water scarcity are counted among the biggest challenges of our century. Are any banks particularly strong in the sector? But any-hoo, what’s a girl gotta do? The investment banker analyses the capital stock such as preferred equity and JV equity and identifies potential capital sources in terms of investment … Long term I would like to work my way to the top of a large REIT or development company, or perhaps even manage a REPE fund. With REITs, DCFs and Dividend Discount Models can often give you similar values because FFO – Recurring CapEx tends to be close to the actual dividends issued. One is an associate position for Asset Management at a BB. Should’ve been more attentive. Just not sure which option I would learn the most, get the most deal exposure, get the biggest resume boost, etc. Do you think it’s a bad idea to apply for both the AM Assc. What about the popular deal types in the sector? Thanks for the guidance. Q: Once again, lots of information there – but it sounds like the different multiples are the main point to keep in mind? What exactly would be a good step upwards (in investment banking etc)? Is it common for people to move over to REIB/REPE from a background in commercial real estate valuation from a top brokerage house? Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews. Real estate development is not ideal for IB. What about relative valuation and multiples? An Investment Bank raises capital (money, in the form of debt and equity) for companies and advises them on financing and merger alternatives. Yes, there is a great package for Excel & Fundamentals – https://breakingintowallstreet.com/biws/excel-financial-modeling-fundamentals/, Of course, you have lifetime access to the courses and can access them whenever you have time and wherever you are. Q: Finally, some people claim that going into real estate makes your skill set much more specific and limits you to ONLY real estate-related opportunities. Hey, sorry, not sure how we missed this question. REPE at a normal MM/megafund PE shop would be very hard as they mostly look at people who were in the REIB groups at BBs. Your email address will not be published. I’m currently in a BB on the technology side. It appears that increasingly on the private side, M&A experience is considered good but it also helps to have coverage experience and relationships. He earned his B.A. Would BAML or HFF be near the top of that list? The only real downside is that you won’t be able to join generalist PE firms/banks/other funds as easily in the future, especially if you stay in RE for several years. Investment … 1127 0 obj <>/Filter/FlateDecode/ID[<01200B28B2764618928E2EF1E3D8691F>]/Index[1115 21]/Info 1114 0 R/Length 80/Prev 1573148/Root 1116 0 R/Size 1136/Type/XRef/W[1 3 1]>>stream Play up the valuation / modeling side as much as possible and point out how there are similarities in the deal types between CRE and REPE/REIB. Many of these questions are like a verbal quiz about real estate. Luis Miguel Ochoa has facilitated a variety of strategic initiatives from corporate acquisitions to new market development. I became highly interested in real estate as an undergraduate, where I had a business degree (finance and real estate concentrations) from a top-10 program. It looks like your real estate modeling course would be a major competitive advantage as well. Some firms also use Prospective Buyer Analysis to see if other buyers could execute the transaction without having EPS decline immediately afterward; you’ll see it referred to as Affordability Analysis as well. They are similar. We guarantee 100% privacy. Thanks, I think moving to the buy-side at a small RE firm would be a better bet. You’ve heard those words plenty of times when it comes to real estate – whether you’re just casually interested or you fully intend to become the next real estate guru. Hello, I’m a rising senior at a non-target school, double-majoring in subjects unrelated to finance. Going to a larger bank’s RE group would also be an option, though it’s heavily dependent on the economy and the hiring climate. The first investment in unlisted real estate, Regent Street in London, is announced on 4 November. REAL ESTATE INTERVIEW QUESTIONS INTERVIEWING > QUESTION BANK Technical interviews test your knowledge of real estate. REITs might be diversified, or they might focus on a specific sector like commercial, residential, retail, industrial (ex: warehouses), healthcare, and so on; some firms might have a geographic concentration as well. Acquisition accounting 2. Maybe move to buy-side at a small RE investment (although you can do this from UG) firm in AM or acquisitions and try to climb up the ladder? I guess I’m just looking for advice/guidance here. Financial sponsors are quite involved and firms like Blackstone / KKR have actually been buying up individual properties lately. A: Sure. My long term goal is to work for a middle market investment banking firm in my Southwestern city. Thx a million. Our KeyBanc Capital Markets ® platform provides full-service financing for all types of Real Estate Investment Trusts (REITs) and private owners of real estate, from both the public and private equity markets, and includes joint venture funding and both buy-side and sell-side advisory services. When M&A does happen, geographic presence tends to be a key driver: one firm is strong in the Northeastern US but wants to expand to the Midwest or Southwest, for example. It’s the inverse of valuation multiples: a 20x multiple corresponds to a 5% Cap Rate, and a 10x multiple corresponds to a 10% Cap Rate. The idea is that you take the REIT’s projected NOI and divide it by the appropriate Cap Rate (you can go granular and divide this into different regions or property types) to figure out the value of their gross real estate assets. The object of this start-up company is to purchase one to two residential properties per year, over the next 10-15 years. Please let us know if you have other questions regarding the course! Easy! If you’ve already seen people in those roles transition into real estate IB, why are you asking this question? I am not 100% sure but you may want to refer to Dealogic for recent deals in the sector. I have worked at a leading RE brokerage (think of RE/MAX, Coldwell Banker or Century 21) as an intern. Afterwards, if I want to spend the extra money/time I will purchase the Excel & Fundamentals course. Demand for houses is the strongest indicator of where this sector is going – in a poor economy with high unemployment, home building is not a great place to be. And I am assuming people in the group will not be doing LBO as well? You have to value it using the methodologies described above and see how your estimates compare to its current share price. Q: And what other tips do you have on getting in if you can’t use on-campus recruiting? Quick question about exit opportunity of working at a small~mid-sized REIT? BIWS Real Estate & REIT Modeling gives you a crash course with case studies on real estate developments, acquisitions, pre-sold condos, REIT valuation and M&A/LBO modeling, and more. 0 A: Technically, you can calculate NOI and Cap Rates for REITs, but the most important metric by far is Funds from Operations (FFO), which is defined as Net Income + Depreciation & Amortization – Gain / (Loss) on Sale of Real Estate. Certain bankers might also cover aggregates, which are related to the materials used in home building or even infrastructure development (NB: companies in this space include Martin Marietta Materials, or Vulcan Materials). But how is working in an PE (RE) firm different from working in a REIT? I have worked as a mortgage loan processor for like 6 years and as a loan officer and loan consultant (loan modifications, hard money deals) for about 5 years. Use this form for release of: New Jersey bank accounts; Stock in New Jersey corporations; Brokerage accounts; and New Jersey investment bonds. will this background qualify for? Do I apply at 28 or do I apply as soon as possible? I just finished my first year of the 3-year program. But one of them pertains to Real Estate, and I have been getting myself involved in RE internships as much as possible (did three up to this summer). Thanks for the reply. Q: But do you use the same metrics for REITs? Pricing, promotion (think Priceline.com or Kayak.com), and the occupancy rates for hotels influence this sector. You can tell me about more than one position that I should aim for. The NOI divided by the Property Value equals the property’s Cap Rate (also called the Yield in the UK and other regions), which is typically anywhere from 5-10%. In fact, I had one week where all the biggest REITs raised equity right after one another. And in turn, you, as the mentee, need to perform well to ensure that your superior looks great. I don’t think too much of what I’m saying here is specific to real estate – networking in any area of investment banking is the same. In general, real estate valuation is different from “normal company” valuation due to the metrics you use, but it’s not quite as different as valuation for banks and insurance firms, for example. Salary wise, there is some good news in the real estate investment banking sector. I’d say middle market, and IB experience can be useful. Thanks for visiting! Not necessarily, as long as you can spend an hour or two a day on networking and as long as you can take a few days off here and there for weekend trips. A: Real estate is one of the broader coverage areas in investment banking, … Thanks for the great article! All REITs break out FFO in their filings, so that’s your best source for the actual numbers. Currently a non-target junior and am offered an internship in the investment sales Team in one of the top brokerage firm (CBRE, JLL, HFF) and a small REIT (non S&P 500). Just to add on to that Brian – how do you know if a REIT is overvalued or undervalued? Q: I know we’re not focused on networking here, but any tips on how to stand out? There are pockets of activity around the globe known for this segment – Las Vegas, Atlantic City, and Macau come to mind (see page 19 here). Do I continue working as a researcher and use the MBA to change careers or find a job in finance or on the sales side of commercial real estate before applying to an MBA program? Banks analyze risk, the location and overall scope of projects, types of … Please refer to our full privacy policy. I know that you can break in if you work hard but was just wondering if its typical to be recruited. Yes this would be useful – you’re already ahead a lot of people because most freshman wouldn’t have such opportunity. Firms also tend to lack cash and the ability to raise debt (since they’re already heavily leveraged), so 100% stock deals are the most viable option, but those present risk to both parties. Please disregard that part of the question. The other is a fund accountant position. Not certain about that one but I don’t think the buy-side cares much about those tests. This real form was used by a bank … This summer I landed on an internship at one of the top brokerage firms (CBRE, HFF, JLL), and am preparing for the CFA level 1 to take it in December. This business plan lays out a simple strategy for developing a long-term real estate investment company by leveraging an initial investment of $43,000. You would have a good chance, but it depends on how much you network and what your deal experience looks like as well. Moving into real estate development is rare because the skill sets are totally different and development is much more “brick and mortar” than working with REITs, home building firms, and so on. In the real estate context, each investment held by an investment vehicle must be analyzed in light of Howey and subsequent authority in order to determine whether it is a security. Developers would pay even worse yet unless you are a senior guy. (and there’s no guarantee that I’ll pass so that’s another problem as well…) I am also planning on taking classes outside of school on ARGUS and financial modeling that involves DCF+@ to be set for the job prior to entering, but then again, I don’t really know if I’m doing the “right” thing. REIB, or opportunities with REIT, REPE group, or development company may be best, depending on which offers you end up with. Thanks for the help. How poor are these 2 internships compared to my BB SA friends. Valueline may also be of some use to you: http://www.valueline.com/Stocks/Industries/Industry_Analysis__Hotel_and_Gaming.aspx#.VfboPZ1Viko. So I was definitely more interested in investment banking from the start, and just happened to network my way into a real estate group. Lasalle Investment Management, Tishman Speyer, Blackstone Group etc.? Interviewers will probably not go into details re your financial knowledge given your qualitative background. Just trying to get more insight. Q: Awesome! Do you mean I would qualify as a strong candidate for a middle market fund or getting IB experience to switch over vs a middle market IB? I have prior investing experience at a BB’s public markets investing group. NOI is equal to Revenue Minus Operating Expenses Minus Property Taxes, and excludes Depreciation, Amortization, and Corporate-Level Income Taxes. I was wondering how competitive I would be for a role within a real estate coverage group coming from a Big 4 Real Estate Advisory background. Where do analysts from non-BB ‘REIBs’ go – such as Jones Lang, Eastdil, Carton, HFF, etc? In terms of time to complete the course, you go through every single lesson and complete all the Excel file exercises, we estimate a completion time of 35-40 hours. O�J*@���y�7H�j?������ Q:  So if you like real estate, where would you go work? I have been networking but I am not sure if my effort will pay off. Anything specific to real estate? New M&A accounting rules Bank behavior may also play an important role in exacerbating the collapse of real estate prices. If I have the chance to choose the types of deals / companies to cover, which types should I pick in order to give me a more general and transferable experience? Although I suspect comp would still be lower here as well. Gaming: They should just call this one “Casinos,” but I guess “Gaming” sounds better. It seems like working on deals is the most important aspect that IB’s look for in prospective employees rather than just having some basic modeling and forecasting experience. endstream endobj 1116 0 obj <>/Metadata 104 0 R/PageLabels 1103 0 R/Pages 1106 0 R/StructTreeRoot 135 0 R/Type/Catalog/ViewerPreferences<>>> endobj 1117 0 obj <>/ExtGState<>/Font<>/ProcSet[/PDF/Text/ImageC]/XObject<>>>/Rotate 0/StructParents 1/TrimBox[0.0 0.0 595.276 595.276]/Type/Page>> endobj 1118 0 obj <>stream How realistic is it to generate a significant six figure income at this type of firm? So I will first go through the Excel & Fundamentals course. 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M a rising senior at a BB as KB home ( NYSE: KBH ) might have a strong! Us through some of the key metrics then assets, exclude Accumulated Depreciation Amortization! Responded to single-family to townhomes to condominiums ( NB: home Builders might be classified under )! Re department that works on big deals you value a REIT differently from both of which are equity Value-based since! Walk us through some of the varsity fencing team would the primary reason for that be that you have! By a bank … real estate valuation comes to FT recruiting the RE IB mentor, REIT, REPE,. Groups in between or is that, and Corporate-Level Income Taxes available for Distribution = FFO – normalized recurring expenditures...