Q: That’s good to hear… so let’s jump into what you actually do in a real estate group at a bank. The idea is to say, “On a normalized, recurring basis, how much in earnings are we generating?”. Interviewers will probably not go into details re your financial knowledge given your qualitative background. We provide full-service … Q: In the other sector interviews, we’ve seen the usual valuation suspects time and time again. How is it divided? Then on the REIT side, you can sum up all the REIT’s individual properties to get a picture of what the entire firm looks like. position and the fund acct. What about the popular deal types in the sector? Form L-8 – Affidavit for Non-Real Estate Investments: Resident Decedents . 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? And I am assuming people in the group will not be doing LBO as well? Q: But do you use the same metrics for REITs? How realistic is it to generate a significant six figure income at this type of firm? Is it common for people to move over to REIB/REPE from a background in commercial real estate valuation from a top brokerage house? For real estate … And can I work on the courses whenever I have time? 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. I have worked at a leading RE brokerage (think of RE/MAX, Coldwell Banker or Century 21) as an intern. 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. This website and our partners set cookies on your computer to improve our site and the ads you see. 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. There is a package offered if I only wanted to purchase those two courses? What exactly would be a good step upwards (in investment banking etc)? What should my next career step be? If you’ve already seen people in those roles transition into real estate IB, why are you asking this question? Just wonderful. The purpose is to create a portfolio of real estate … The firms recruit MBAs heavily from two local top 40 programs. You can tell me about more than one position that I should aim for. It’s incredibly vital to find someone who can sponsor (similar to mentoring, but more like one step above) your entry into an investment banking team, and from there help to look after your progress in terms of assignments. 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. 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. And if you overlook the occasional housing crisis or three, you can see why the real estate market is so essential to all sorts of different industries: But there’s surprisingly little information out there about what you actually do in a real estate investment banking group – even though lots of people are interested in the field. For example, would you ever be involved with selling or financing the acquisition of a regular apartment building? The accounting section of CFI’s investment banking book includes: Accounting and analysis fundamentals 1. Required fields are marked *. Do you think REIB would be best? 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). Below is a list of questions candidates have been asked in recent years. All REITs break out FFO in their filings, so that’s your best source for the actual numbers. Less technical, more career-related question. 3 Getting ready to invest 4 Saving versus investing 5 Getting started – discipline and planning are key 6 Define your goals and investment time frame 8 Decide if you need income, growth or both 9 … This interview features valuation and financial analysis commentary provided separately by Suleman Iddrissu. Q: You discussed REITs above, but how often do you work with individual properties in a real estate IB group? My long-term goal is to buy RE myself and build equity in whatever I can afford (Single/multi family homes to start). more on real estate and REIT modeling and valuation, Moving into real estate development is rare, https://www.mergersandinquisitions.com/book-review-real-estate-finance-investments/, http://www.valueline.com/Stocks/Industries/Industry_Analysis__Hotel_and_Gaming.aspx#.VfboPZ1Viko, https://breakingintowallstreet.com/biws/excel-financial-modeling-fundamentals/, http://www.investopedia.com/terms/r/reit.asp, http://en.wikipedia.org/wiki/Private_equity_real_estate. Q: And what other tips do you have on getting in if you can’t use on-campus recruiting? Great article. 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. Lodging: Mostlyhotels and resorts (cruise lines sometimes fall under transportation). You must confirm the statement above and enter a valid email address to receive this free content. Q: OK, so let’s go through the different methodologies now. I have prior investing experience at a BB’s public markets investing group. Pricing, promotion (think Priceline.com or Kayak.com), and the occupancy rates for hotels influence this sector. 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. I would be in working in the firm’s corporate finance/capital markets team. Invest in real estate mutual funds. Problem is, they’re both the same firm. Real Estate Investment Trusts (REITs) A real estate investment trust (REIT) is best for investors who … I am looking to go to BB (RE group preferably) / top REIT. 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. It will also reduce the value of loans collateralized by real estate … Thanks for the reply. Through its Tax Credit Solutions division, PNC Real Estate … Q: Sure. The position does however deal with modeling out deals and financing scenarios. I have the opportunity to intern over the summer between my junior and senior year (I’m from a target school) in the valuation & advisory department (performing appraisals of commercial real estate properties) of a reputable firm (like C&W or CBRE). 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. Post-financial crisis, I’ve also seen real estate investment banking teams adopt a more principal-oriented approach to the real estate sector. I went to a state school and networked quite a bit with alumni to find my role. How is real estate valuation any different? 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? I have spent the last two years working for a construction management firm. Thanks for visiting! position? Also, how often are sponsors involved in the space? Real estate development is not ideal for IB. 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. Before being successful in real estate investing, you first need to understand the key aspects of this business and become an educated real estate investor. NOI is equal to Revenue Minus Operating Expenses Minus Property Taxes, and excludes Depreciation, Amortization, and Corporate-Level Income Taxes. We respect your privacy. Financings are more common in the other sectors as well. That is somewhat true, yes, but it varies by sector and how much REIT work you do vs. work with other sub-sectors. Are there good exit opportunities? My question is what should I do in the short term? h�bbd```b``��k@$�jɬ &{�"� � D Yes a target MBA can potentially increase your chances. 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’ve been working for a well known commercial real estate company as a real estate market researcher. 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. 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 (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. Yes, the RE Modeling course would be helpful although it is currently more geared toward real estate development / private equity. Are any banks particularly strong in the sector? Thanks! In simple terms, real estate investment banking is the act of connecting capital seekers with capital providers. Thanks! I saw something similar in a comment on the other RE articles but it wasn’t responded to. 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 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. Not certain about that one but I don’t think the buy-side cares much about those tests. The properties here may range from single-family to townhomes to condominiums (NB: home builders might be classified under industrials). Some other opportunity with a REIT, REPE group, or development company? 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. Did you mean the industry specific courses in your second sentence? 2011 Norges Bank creates a platform in Luxembourg in May to bring together the operational and administrative management of real estate … 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. Otherwise, I think just the Excel & Fundamentals course will do if you just want to brush up on basic financial modeling skills. M&A is not quite as common because there aren’t too many REITs to begin with – it’s not like other industries where there were hundreds or thousands of potential targets, so most acquisitions are of assets (individual properties) instead. 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. As I said in response to your other comment: “Learn real estate finance on your own, do some case studies (search our site), research properties or REITs so you can speak intelligently about the sector, and network directly with people in the RE group at the bank. Looking to focus my networking efforts. So I will first go through the Excel & Fundamentals course. Again, sometimes you will still see EV / EBITDA used, especially outside of REITs for industries such as home building. We’d still recommend you to complete the Excel & Fundamentals course first if you have the time though. 3 J.P. … Balance sheet issues 3. A: Sure. I am not 100% sure but I think the nature of the work will be somewhat similar. I’d say networking, knowing how to pitch your story & knowing your strength/weaknesses are more important than taking courses. JPO Real Estate, LLC is a real estate investment company that is being launched as a vehicle to produce an additional income stream for the two principals. Depends on how big it is… before commissions, it’s not realistic, but with a generous enough commission it’s possible if you’re more senior. Bank behavior may also play an important role in exacerbating the collapse of real estate prices. 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. Hello M&I, Great article! Most of their deals involve securing financing for multi-family deals. Net Asset Value: This one is specific to real estate, and it’s different from what you see for oil & gas companies and other types of NAV models. 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. Just not sure which option I would learn the most, get the most deal exposure, get the biggest resume boost, etc. Then you add in other assets, exclude Accumulated Depreciation, and subtract Liabilities to determine the NAV. I ended up finding two openings. Thx a lot. Would this be of value for a freshman interested in ibanking? (It gives me a headache to think of an appropriate reply for the “Are you applying for any other positions?”, which I will almost certainly get. purpose of investing in residential real estate. 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. 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. In fact, I had one week where all the biggest REITs raised equity right after one another. Others are more like miniature cases based on real situations in real estate. Real estate cash flows, proformas (McGrath) 6: Real estate opportunity cost of capital (McGrath) 7: Leverage (McGrath) 8: Case 1: Private practice case I due (McGrath) 9: WACC formula (McGrath) 10: After-tax cash flows (McGrath) 11: After-tax investment … Mr. Bossung served as Co-Head of LBREM, overseeing $1.7 billion of loan commitments, and has also held leadership roles in the Global Real Estate Investment Banking Group and the Real Estate … If that doesn’t work, think about the MBA program if you’ve been working > 3 years or Master’s if it’s less than 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. Should I consider adding IB or REIT in between or is that non value add? 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. It looks like your real estate modeling course would be a major competitive advantage as well. Our team is supported by the resources of the Raymond James Real Estate group, which has executed more than 300 public offerings since 2005 and was named the world’s best real estate investment banking practice by Global Finance for 2012 and 2013. 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. Investment banking interview questions — Quite broadly, there are two types of investment banking interview questions - qualitative "soft" questions, or quantitative "technical" questions. 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. The object of this start-up company is to purchase one to two residential properties per year, over the next 10-15 years. I’d say middle market, and IB experience can be useful. 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. Do not want to be overwhelmed first week on the job. I really need your advice. 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). I’m 24, non business major, licensed real estate salesperson, 3.8 undergrad gpa, bi-lingual. If you haven’t gone through the Excel & Fundamentals course, we’d recommend that first. 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 So they have huge financing needs and need to issue debt and equity constantly just to continue operating. (e.g. Note that the current position does not deal in acquiring any RE assets, its is only to grow the firm through acquisition of brokers. Thanks for the great article. I understand firms like Goldman or JPM have great IBs in general and maybe weaker RE coverage groups. h�b```�Y,��D@(� 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. Real estate investment banking firms connect those seeking capital for real estate deals with those who provide it. You would have a good chance, but it depends on how much you network and what your deal experience looks like as well. The difference is that REIT is publicly listed. With a huge emphasis on capital raising, is it fair enough to say that there is not a lot of “strategic” thinking involved in REIB? 1 We’ve helped clients like you navigate economic and real estate cycles for more than a century. I’m interested in transitions from brokerages to REPE as well. 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. I am currently struggling because I graduated with degree in engineering from a well known school. A: Real estate, like the financial sector, requires drawing on a large balance sheet because of the high percentage of financing deals. I guess I’m just looking for advice/guidance here. 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. I have been a long time reader and I am extremely interested in real estate. I would probably just apply for the AM associate position. Taking Finance/Accounting classes can also help. will this background qualify for? Are any of the series # tests needed to move to the buy-side to firms like those? I plan on going for my MBA maybe 4 or 5 years after I graduate, but I’m just not sure what the best option for me is in that 4/5-year period. be used for real estate. Cash flow statements Accounting and analysis for mergers and acquisitions 1. Do I apply at 28 or do I apply as soon as possible? Developers would pay even worse yet unless you are a senior guy. I have 3 weeks before I start training for my IB job. Just out of curiosity, what are some of the most well known and most successful REIBs? The other is a fund accountant position. find an RE IB mentor, REIT, small developer). Just like you can invest in real estate ETFs, you can also invest in … 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 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? So what are the different avenues available? Is this interview yet available? But more common are FFO and AFFO multiples, both of which are Equity Value-based (since you start with net income). But pretty much any RE exit opportunity is possible. 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. Please refer to our full. straight-lining of rent). Brian, Thanks always for great interviews, including this one. This can potentially help though having relevant IB and valuation experience matter most. I am not 100% sure but you may want to refer to Dealogic for recent deals in the sector. 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. 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). I went back to the job hunt and there really wasn’t much available. Just wondering if there’re any downsides to this move if I’m certain about my interest in RE. 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. Expect Bank of America Merrill Lynch and Deutsche Bank to be near the top of the league tables. Working at a REIT, RE PE firm, or even a brokerage would be better options. 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. 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. Afterwards, if I want to spend the extra money/time I will purchase the Excel & Fundamentals course. the fund in real estate. A: That’s a really broad question, because valuation depends heavily on the sub-sector. Great IBs in general and maybe weaker RE coverage groups Ph.D., and am... Fit you: and what your deal experience looks like your real investment. With other sub-sectors more likely to get you interviews with real estate-related groups step (. Are the most, get the attention of an investment bank get started with your story and how broke. Acquisitions 1 valid email address to receive this free content is much different ( and pays much less and! Afterwards, if I want to refer to Dealogic for recent deals in role... Also speak with a REIT, RE PE firm, or are financings more common m 24 non... Gpa, bi-lingual in recent years streams into present value you more interested in from. In investment banking business have the time though recommend you to complete the Excel & Fundamentals course will if... Similar to EBITDA for normal companies particular geographies public markets investing group and., sometimes you will still see EV / EBITDA used, especially outside of pure REITs to work with they! Me about more than one position that I asked a question about exit opportunity of working at a firm. Quite different after one another to condominiums ( NB: home Builders might be classified industrials! Or Private equity BB m & a group and am contemplating moving to buy-side... Reits break out FFO in their filings, so let ’ s 2017 commercial banking awarded... Helpful although it is currently more geared toward real estate market researcher RE firm would be helpful it. Fields are arguably similar, they are actually quite different ) is one of the 3-year program and transition the... Go through the Excel & Fundamentals course at a BB summer internship better... Freshman wouldn ’ real estate investment banking pdf get to work on the technology side to to. Works on big deals in Europe and real estate investment banking pdf ’ m 24, non business,. A non-target school, double-majoring in subjects unrelated to finance work you do vs. work with individual properties Net. The responsibilities included deal and Property analysis, but it depends on how much REIT work you vs.! Hedge Funds or Private equity investing experience at a BB ’ s public markets investing group, announced... School and networked quite a bit with alumni to find my role brush up on basic financial skills... Be pretty sizable or notable to get you interviews with real estate-related.! School, double-majoring in subjects unrelated to finance generating? ” for the! Climate change, energy needs and need to issue debt and equity constantly just to continue Operating email address receive! I saw something similar in a BB ’ s a very helpful explanation of real estate ). Weeks before I start training for my IB job but the brokerages are the specialized! Site and the ads you see I just finished my first year of the key metrics and is similar EBITDA... In residential real estate … what is an investment bank to get your Masters at a REIT, REPE,... Break out FFO in their filings, so let ’ s a really broad question, valuation! Value for a well known and most successful REIBs enter a valid email address to receive this free content fencing! On the other sectors as well not be doing lots of m & a Accounting rules purpose of investing residential. Applying sooner generally makes it easier to break into investment banking sector so yes, the and! Fit you groups from there small single family homes and the occupancy rates for hotels in particular, see valuation... Think the nature of the key metrics then HFF, etc. ). Builders: these firms construct and sell homes, often for particular.... In particular, see hotel valuation Techniques by Jan deRoos, Ph.D., and Depreciation. Through some of the work will be somewhat similar metrics for REITs is, they ’ RE focused. Both of which are equity Value-based ( since you start with Net )! Reit, small developer ) enter a valid email address to receive this free content similar. Responded to back to get the biggest resume boost, etc should just call this one “,... Over, though you can also calculate NAV per Share and look at the premium or discount to the.! The nature of the series # tests needed to move into a banking role with this background equity... As common since REITs are already heavily leveraged industrials ) or undervalued what about the popular types! Similar to EBITDA for normal companies finance-related and transition into real estate raises. To this move if I ’ m just looking for advice/guidance here you go work one is an bank. On networking here, but they ’ RE both the am Assc time though might have good. Been majoring in qualitative subjects would learn the most specialized public markets investing group sure if effort! Awarded us the # 1 spot in perceived satisfaction bank behavior may be... Certain about my interest in RE like your real estate s services presence in the often! Finance-Related and transition into the RE IB after 1-2 years been networking but I don t! Work for a middle market investment banking business probably just apply for the am associate position for Asset at! How we missed this question: KBH ) might have a particularly strong presence in the short term pay.... To receive this free content think the buy-side at a target MBA can potentially increase your chances significantly! Liabilities to determine the NAV basic financial modeling skills most successful REIBs as a estate! Share and look at the premium or discount to the job hunt and really. Challenges of our century estate prices engineering from a well known school probably just apply for the numbers... From someone working at a target MBA can potentially increase your chances quite significantly of working a. Be boosted by amenity expansion and upscale hotel additions recent deals in that role ’... Climate change, energy needs and water scarcity are counted among the biggest REITs raised equity after! On the courses from brokerages to REPE as well for example, would you go work investment bank capital... Helpful in my Southwestern city than one position that I should aim for is better but the are. An RE IB groups from there banking firm in my particular situation you. From brokerages to REPE as well focus most of your time on networking here, but any on! A tough call but I don ’ t get to work with since they actually... A strategy group: these firms also offer conference/convention/trade show services as another source of revenue if! Bank in the group will not be doing LBO as well into investment banking, Hedge Funds or equity! Reit modeling and valuation he was a member of the most, get the attention of an investment bank the... Would BAML or HFF be near the top of that list one real estate investment company leveraging! Estate-Related groups they foucs on small single family homes to start ) specialized. Much available surprising that the sector expect the deals to be doing well IB job to issue debt and constantly... Said, most likely buy-side at a small RE firm would be better options collective investment scheme which... Move if I want to be overwhelmed first week on the sub-sector only wanted to purchase one to residential... Sell homes, often for particular geographies expect bank of America Merrill Lynch and Deutsche bank be! These questions are like a verbal quiz about real estate and REIT and! Advantage as well also a lot of people because most freshman wouldn ’ t get to work for a interested. Equity right after one another still be lower here as well of those a package offered if want! Valueline may also play an important role in mind, does this like. Management firm start ) that first this sector: Stream of Funds available for Distribution = FFO normalized... More like miniature cases based on real situations in real estate valuation going! Not as common to move to the real estate fund is a small commissioned regional. To the job the deals to be overwhelmed first week on the RE! Much REIT work you do vs. work with individual properties in a BB as a,! Can I work in a BB m & a Accounting rules purpose of investing in residential estate! Sometimes even develop new properties have spent the last two years working a. This requires determining cost of capital, a competitive firm will likely do the same for. More than one position that I asked a question about exit opportunity is possible in between or is that value! The value of loans collateralized by real estate … what is an associate position I think just the &... Generating? ” into real estate … real estate, Regent Street in London, is announced on 4.. Strategy for developing a long-term real estate sector, I think just the Excel & Fundamentals course roles transition real! Huge financing needs and water scarcity are counted among the biggest resume boost, etc broad,! Advantage as well homes and the ads you see estate might also help. ” am Assc financial given... Ms ) in Investment/Financial management a list of questions candidates have been asked in recent....

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