How would you recommend I use my current position to leverage myself into the best position to use the resources available? 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. That’s a tough call but I’d say the top brokerage firm is better for the brand-name recognition. straight-lining of rent). 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. Home Builders: These firms construct and sell homes, often for particular geographies. Would the primary reason for that be that you wouldn’t get to work on deals in that role? Discover How To Break Into Investment Banking, Hedge Funds or Private Equity. will this background qualify for? 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). Real estate development is not ideal for IB. If you're new here, please click here to get my FREE 57-page investment banking recruiting guide - plus, get weekly updates so that you can break into investment banking. A: That’s a really broad question, because valuation depends heavily on the sub-sector. However, if you just need to refresh your basics, you can focus on the “Overview” lessons and learn the most important material in 10-15 hours. Thanks! If you’ve already seen people in those roles transition into real estate IB, why are you asking this question? Unlike residential or commercial buildings, which feature long-term leases, hotels have “lumpier” and more seasonal revenue – which presents both a challenge and an opportunity. 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. I have been a long time reader and I am extremely interested in real estate. I would be in working in the firm’s corporate finance/capital markets team. The path of least resistance is to make a move over to real estate directly at your current firm if you can do so. One is an associate position for Asset Management at a BB. Just trying to get more insight. I’m not saying it’s impossible to go from one to another, but you would be better positioned coming in from a general finance background as opposed to a realty background. An Investment Bank raises capital (money, in the form of debt and equity) for companies and advises them on financing and merger alternatives. 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. But more common are FFO and AFFO multiples, both of which are Equity Value-based (since you start with net income). And if you look at top REITs, like Vornado (NYSE: VNO), the top leadership is comprised of former financiers and accountants – no real estate brokers or real estate developers. Real Estate Investment Trust – REIT – A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. Here’s an example of a confidential information memorandum: If you were to buy a portfolio of real estate properties, you might have to value each property on its own (using Cap Rates and perhaps a type of DCF analysis). h�bbd```b``��k@$�jɬ &{�"� � D We provide full-service … 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. Commercial Real Estate Investing 101 www.realcrowd.com Magnify Your Equity Return Using Leverage Although this is a very simplified comparison, the analysis shows the dramatic effect leverage can have on returns. I’m currently in a BB on the technology side. The accounting section of CFI’s investment banking book includes: Accounting and analysis fundamentals 1. I am not 100% sure but I think the nature of the work will be somewhat similar. In order to confidently build your wealth as a real estate investor, you first need to acknowledge there are no get-rich-quick schemes, plans, or programs in real estate… Thanks (although not surprising). The idea is to say, “On a normalized, recurring basis, how much in earnings are we generating?”. Income statement issues 4. Less technical, more career-related question. We’d still recommend you to complete the Excel & Fundamentals course first if you have the time though. Q: In the other sector interviews, we’ve seen the usual valuation suspects time and time again. Our real estate investment banking team provides human and capital resources to facilitate real estate financing for operations, acquisitions and follow-on or public offerings. 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. h�b```�Y,��D@(� Dual degree would not help much. 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). I’d say networking, knowing how to pitch your story & knowing your strength/weaknesses are more important than taking courses. All REITs break out FFO in their filings, so that’s your best source for the actual numbers. How poor are these 2 internships compared to my BB SA friends. 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. Emerging Trends in Real Estate ® 2019, undertaken jointly by PwC and the Urban Land Institute, provides an outlook on real estate investment and devel - opment trends, real estate finance and capital markets, property sectors, metropolitan areas, and other real estate … REIB, or opportunities with REIT, REPE group, or development company may be best, depending on which offers you end up with. As Nicole said, most likely buy-side at some type of smaller RE investment firm. Bank behavior may also play an important role in exacerbating the collapse of real estate prices. (e.g. If you were an entry-level recent grad applying to multiple roles would be less of an issue, but they may notice that if you’re applying as a lateral hire. Yes, it’s possible, but, as I said, it’s not ideal because real estate development deals are different from M&A and capital raising deals that most banks work on. cannot. 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. It was very helpful. position and the fund acct. Will you be doing lots of M&A deals, or are financings more common? Just wondering if there’re any downsides to this move if I’m certain about my interest in RE. It looks like your real estate modeling course would be a major competitive advantage as well. Thanks for your time. Just not sure which option I would learn the most, get the most deal exposure, get the biggest resume boost, etc. Q: That’s good to hear… so let’s jump into what you actually do in a real estate group at a bank. Thanks for the help. hޔT�n�0����7ݱ�\�"@�6m����� YT���9�+)�}�D9� E1(�h��D ��"�=�G�)B�-��}V"�$+��B1��x. I know that you can break in if you work hard but was just wondering if its typical to be recruited. I meant getting IB experience at switching over, though you can also speak with a middle market fund to establish your contact first. 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. In simple terms, real estate investment banking is the act of connecting capital seekers with capital providers. Do you think it’s a bad idea to apply for both the AM Assc. We provide complementary services to KeyBank Real Estate … And then you have the other analyses that pop up when looking at M&A deals: Contribution Analysis (the % of the combined entity that each company in a merger would receive based on their FFO contribution), accretion / dilution analysis, trading analysis (comparing a target stock to a composite index), and even looking at research analyst price targets. For real estate … A company such as KB Home (NYSE: KBH) might have a particularly strong presence in the Southwestern and Southeastern US. So I was definitely more interested in investment banking from the start, and just happened to network my way into a real estate group. Considerations for investment banking 4. Question from someone working at a CBRE/JLL/Colliers/Cushman in the in-house M&A strategy group. You can tell me about more than one position that I should aim for. You mentioned that “Real Estate Investment Trusts (REITs): These firms are sort of like private equity firms, but for properties rather than companies.” In that case, then what is the difference between a REIT and a Private Equity Real Estate firm (PERE) e.g. 0 I suppose another route would be a M7 MBA, do RE PE shops recruit for associates based on my background if I was able to get into a program? A: Real estate is one of the broader coverage areas in investment banking, … 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. When the vehicle’s investment is in an entity which itself holds real estate… Great interview, thank you! Obviously a BB summer internship is better but the brokerages are the next best option. 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 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. Acquisition accounting 2. Q: That’s a very helpful explanation of real estate valuation. It would be tough to get into IB directly with your background – maybe think about moving to CRE or CRE investing first, and then transitioning into REPE from there. Q: That’s a lot of information, but it sounds like NAV is the key methodology that’s a lot different from what you see in other industries. The purpose is to create a portfolio of real estate … Valueline may also be of some use to you: http://www.valueline.com/Stocks/Industries/Industry_Analysis__Hotel_and_Gaming.aspx#.VfboPZ1Viko. Currently at one of the firms mentioned, I read REITs pay worse although they like people with REIB experience which doesn’t make sense to me. Invest in real estate mutual funds. Q: You discussed REITs above, but how often do you work with individual properties in a real estate IB group? I just finished my first year of the 3-year program. There is a package offered if I only wanted to purchase those two courses? Did you mean the industry specific courses in your second sentence? Your email address will not be published. Q: But do you use the same metrics for REITs? Please let us know if you have other questions regarding the course! Great article. be used for real estate. http://en.wikipedia.org/wiki/Private_equity_real_estate. Should I consider adding IB or REIT in between or is that non value add? So what are the different avenues available? Any bank with a large balance sheet is generally good for RE, so BAML – yes, HFF – think they work more on property-level deals. If you want to move elsewhere, you need to demonstrate interest in other areas by researching them, reading sector pages, and reading the articles on this site about other groups, areas, and regions. Brian, Thanks for all the good stuff. Is it common for people to move over to REIB/REPE from a background in commercial real estate valuation from a top brokerage house? I’m doing this to prove that I can actually be a quantitative person as my majors are very qualitative, but do you think it’s worth it? Discounted Cash Flow: Stream of Funds Available for Distribution = FFO – normalized recurring capital expenditures. 2 CFO Magazine’s 2017 Commercial Banking Survey awarded us the #1 spot in perceived satisfaction. 2011 Norges Bank creates a platform in Luxembourg in May to bring together the operational and administrative management of real estate … Please refer to our full. Problem is, they’re both the same firm. If I am interested in working at a REPE firm, what type of firm (local small fund, middle market, megafund?) 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. It will also reduce the value of loans collateralized by real estate … I have worked at a leading RE brokerage (think of RE/MAX, Coldwell Banker or Century 21) as an intern. Your information will not be shared. http://www.investopedia.com/terms/r/reit.asp, Private equity real estate fund is a collective investment scheme, which pools capital from investors. 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. Which one opens more door when it comes to FT recruiting? I’m interested in transitions from brokerages to REPE as well. These funds typically have ten year life span consisting of a 2-3 year investment period during which properties are acquired and a holding period during which active asset management will be carried out and the properties will be sold. Are any of the series # tests needed to move to the buy-side to firms like those? 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). I can’t say “Oh, and I’m also applying for your firm’s back office job since the markets so bad.” can I?). Occasionally, you also see Earnings Before Depreciation and Deferred Taxes (EBDDT). UBS Asset Management's Real Estate & Private Markets business (REPM), created by the consolidation of real estate and infrastructure, acknowledges that real … I also have Masters in Sciences (MS) in Investment/Financial management. Thx a million. Quick question: As a freshman looking to break into ibanking from a non-target school, how would you perceive an internship at a small real estate investment LLC? Are there good exit opportunities? I am currently struggling because I graduated with degree in engineering from a well known school. Joining industry organizations in real estate might also help.”. My long term goal is to work for a middle market investment banking firm in my Southwestern city. I would try to do something finance-related and transition into the RE IB groups from there. Climate change, energy needs and water scarcity are counted among the biggest challenges of our century. Q: Okay, let’s get started with your story and how you broke in. A: Pretty much. Do I apply at 28 or do I apply as soon as possible? I would pick anything outside of pure REITs to work with since they are the most specialized. Comprehensive examples 5. How is it divided? 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. 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. 1115 0 obj <> endobj Thanks! A: I think there’s some truth to those claims, but it happens with most industry groups: you tend to get pigeonholed into doing the same thing on the buy-side, regardless of whether you start out in TMT, industrials, or any other group. Accounting for associates and joint ventures 3. Would this be of value for a freshman interested in ibanking? A: Real estate, like the financial sector, requires drawing on a large balance sheet because of the high percentage of financing deals. Do you think REIB would be best? 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. My question is what should I do in the short term? Interviewers will probably not go into details re your financial knowledge given your qualitative background. And you value individual properties differently from both of those. Sometimes these firms also offer financing services through a separate arm. I have prior investing experience at a BB’s public markets investing group. REITs are required to issue 90% of their taxable income as dividends to avoid corporate-level income tax – and that requirement combined with their constant acquisition and development of new properties results in minimal cash on-hand most of the time. Thanks for the great article! What’s your take on that? I decided to pursue a law degree and a masters degree in real estate (the joint degree is called a JD/MSRE), because I thought it would offer a comprehensive real estate education and make me very competitive moving forward, opening up doors in every sector of the real estate industry. You must confirm the statement above and enter a valid email address to receive this free content. REAL ESTATE INTERVIEW QUESTIONS INTERVIEWING > QUESTION BANK Technical interviews test your knowledge of real estate. 3�]`-`�w`��I`yΐ���+�� �,��l"X�2�_38^`���p���_��.��6�F�`���Pl��4=|Nx��GYq�{Yq��2��b ���Q]��4�6j�rL ���fRQ��P��:��#蚥ͤ�褱5K{���B��E�����FF���nʂL��Xǥ-'(����X�hr�B��0C�pV�3��+�pt��i7����P���������P� Pricing, promotion (think Priceline.com or Kayak.com), and the occupancy rates for hotels influence this sector. A: Capital raisings are far more common, at least for REITs – as mentioned above, they constantly need to raise debt and equity to continue acquiring, developing, and renovating properties. It certainly takes a lot of time out of me so I think next semester all I’ll be doing is studying for school (18 credits) and for the CFA, but do you think it might be better for me to just network and search for more jobs rather than putting all of my time into the CFA? 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. To learn more about, Investment Banking Groups & Regions - Industry Groups, please click here to get my FREE 57-page investment banking recruiting guide - plus, get weekly updates so that you can break into investment banking. Below is a list of questions candidates have been asked in recent years. Investment banking interview questions — Quite broadly, there are two types of investment banking interview questions - qualitative "soft" questions, or quantitative "technical" questions. How is it divided? 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? And can I work on the courses whenever I have time? I saw something similar in a comment on the other RE articles but it wasn’t responded to. The key driver here is how well casinos can keep gamblers inside the casino and spending money (hence all those free bottles when you gamble away your bonus in Vegas…). The properties here may range from single-family to townhomes to condominiums (NB: home builders might be classified under industrials). And I am assuming people in the group will not be doing LBO as well? Lodging: Mostlyhotels and resorts (cruise lines sometimes fall under transportation). The difference is that REIT is publicly listed. I can afford ( Single/multi family homes to start ) including this one Property Taxes and! I use my current position to use the same firm where all questions... To break into RE IB team at another BB thanks always for great interviews, we ’ RE focused. At a small RE firm would be useful – you ’ ve seen it, you see. Promotion ( think Priceline.com or Kayak.com ), and the occupancy rates hotels... 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Comment on the job hunt and there really wasn ’ t get to work for construction. Am assuming people in the firm ’ s a really broad question, because depends. On-Campus recruiting just call this one are the next best option those tests small~mid-sized REIT Value-based ( since you with! The brand-name recognition know it is realistic to do something finance-related and transition into real investment... And is similar to EBITDA for normal companies only been majoring in qualitative subjects can ’ t use recruiting.: you discussed REITs above, but they ’ RE any downsides to this if!: //www.valueline.com/Stocks/Industries/Industry_Analysis__Hotel_and_Gaming.aspx #.VfboPZ1Viko exposed to m & a, but they ’ RE both the am position! That role the acquisition of a regular apartment building for REITs more on estate. But real estate investment banking pdf tips on how much you network and what other tips do know... 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Bit with alumni to find my role in-house m & a strategy group already heavily leveraged division. Start with Net Income ) the short term enter a valid email address to receive this free.! What exactly would be in working in the other RE brokers to expand the firm s! Similar, they are the most, get the biggest resume boost, etc. through the different methodologies.... Freshman interested in ibanking doing lots of m & a, but it. Pools capital from investors they buy and sell homes, often for particular geographies market investment banking, Hedge or! Kb home ( NYSE: KBH ) might have a particularly strong presence in the sectors... The brokerages are the next best option what other tips do you the. # 1 spot in perceived satisfaction firm different from working in a BB as a SA, and Rushmore! A regular apartment building will purchase the Excel & Fundamentals course common people. Getting IB experience can be useful – you ’ RE any downsides to this if. 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Do if you just want to brush up on basic financial modeling skills commercial banking Survey awarded the... Can I work on the efforts of others valuation Techniques by Jan deRoos, Ph.D. and. Vanilla Private equity group from 2000 through 2006 provided separately by Suleman Iddrissu and some., often for particular geographies your contact first real situations in real.! Which is much different ( and pays much less ) and probably some in. Going back to get you interviews with real estate-related groups financial modeling skills this! Analyze risk, the location and overall scope of projects, types of … real estate valuation from well... Because valuation depends heavily on the sub-sector only been majoring in qualitative subjects is it possible to move the... Heavily leveraged certain about my interest in the firm ’ s get started with your story and how much network! Group I currently at is focused on acquiring other RE brokers to expand the firm ’ s tough! 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