Leveraged Breakdowns

Life as an REPE Analyst, Part Two

Introduction

This article continues our discussion on life as a real estate private equity analyst. If you’re looking to build a real estate private equity model or learn to calculate private equity real estate returns, we recommend you check out our hard-skill resources. But without further ado, onto the Q&A.

How long does a typical deal last?

Deals last in phases. If you’re working a standard process with an institutional sales broker, you’ll typically get a month or two for first round desktop underwriting. This is when you get a bunch of files in a secure data room that you underwrite in Excel without leaving your desktop (hence the name). After that, round two is typically open to a smaller audience. Namely, those who bid the highest during the first desktop round.

This second phase might last a couple weeks or a month. The length of phase two depends greatly on the degree of on-site diligence. If you have to fly all over the country to tour the assets, it could take a good while before you submit a final offer.

The final, exclusive phase of a deal goes as quickly as possible. However, the exclusive closing round often ends up dragging out for weeks as the buyer and seller negotiate and nitpick the purchase and sale agreement. Reps and warranties are hardly ever easily agreed upon, and will continue to give lawyers and brokers headaches for years to come.

How many deals do you typically work on?

Most real estate private equity analysts will have about three live deals, and a couple of backburner projects. Most deals will take probably 2-5 hours of your day, depending on your impending deadlines. If a deal really blows up, you’d usually get some leniency from your teams to focus entirely on that one project. But if two deals blow up, you may be in for a few late nights!

What does asset management work entail?

Even at the megafunds, acquisitions analysts can staffed on asset management projects. This is actually a great experience to learn how a real estate portfolio ticks and I strongly suggest you take up an asset management project if the opportunity arises. But what do asset managers actually do?

Well, if you’re in asset management, you effectively own the asset. Imagine if you owned the building with your very own capital. What sorts of things do you care about? Just about everything, really. What’s the property worth today? Should you refinance? How is the property performing? Are there any fire drills you need to manage? This all rolls into quarterly reporting, which sets the cadence for asset managers. Even private funds have quarterly reporting. Valuation and cash flow reforecasting is ultimately the name of the game, but it’s your job to know anything and everything relevant about the asset and its market.

Learn with Leveraged Breakdowns

To become an analyst, you should learn to build a real estate private equity model. After all, in private equity real estate, returns drive every investment decision. That’s why we’ve created a suite of free and premium educational resources to help any outsider with no prior knowledge learn to perform well in this exclusive industry.

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