Guide to Real Estate Careers

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THEMEDIA’SWATCHINGVAULT!HERE’SASAMPLINGOFOURCOVERAGE.“Forthosehopingtoclimbtheladderofsuccess,[Vault’s]insightsarepriceless.”–Moneymagazine“Thebestplaceonthewebtoprepareforajobsearch.”–Fortune“[Vaultguides]makeforexcellentstartingpointsforjobhuntersandshouldbepurchasedbyacademiclibrariesfortheircareersections[and]universitycareercenters.”–LibraryJournal“Thegranddaddyofworkersites.”–USNewsandWorldReport“Akillerapp.”–TheNewYorkTimesOneofForbes’33“FavoriteSites”–Forbes“Togettheunvarnishedscoop,checkoutVault.”–SmartMoneyMagazine“Vaulthasawealthofinformationaboutmajoremployersandjob-searchingstrategiesaswellascommentsfromworkersabouttheirexperiencesatspecificcompanies.”–TheWashingtonPost“Akeyreferenceforthosewhowanttoknowwhatittakestogethiredbyalawfirmandwhattoexpectoncetheygetthere.”–NewYorkLawJournal“Vault[provides]theskinnyonworkingconditionsatallkindsofcompaniesfromcurrentandformeremployees.”–USAToday® VAULTGUIDETOREALESTATECAREERSBRETTHAMILTON,RAULSAAVEDRAJR.ANDTHESTAFFOFVAULT® Copyright©2009byVault.com,Inc.Allrightsreserved.Allinformationinthisbookissubjecttochangewithoutnotice.Vaultmakesnoclaimsastotheaccuracyandreliabilityoftheinformationcontainedwithinanddisclaimsallwarranties.Nopartofthisbookmaybereproducedortransmittedinanyformorbyanymeans,electronicormechanical,foranypurpose,withouttheexpresswrittenpermissionofVault.com,Inc.VaultandtheVaultlogoaretrademarksofVault.com,Inc.Forinformationaboutpermissiontoreproduceselectionsfromthisbook,contactVault.com,Inc.,75VarickStreet,8thFloor,NewYork,NY10013,(212)366-4212.LibraryofCongressCIPDataisavailable.ISBN13:978-1-58131-709-1PrintedintheUnitedStatesofAmerica AcknowledgmentsFromBrettHamilton:Myappreciationtoseveralgroups:(1)thosewhoprovidedinputintoupdatingthisguide;(2)myformerrealestateclassmatesandprofessorsfromWharton;and(3)thosewithwhomI’vehadthepleasuretoworkandlearnfromovermyrealestatecareertodate.Regardingthelatter,IwouldliketospecificallythankLynnSedwayandtheteamfromCBRichardEllis,andmyformercolleaguesfromTrammellCrow,especiallytheLosAngelesoutpost–GregPeterson,HarryLake,NadeimMassaandBrooksCook.FromRaulSaavedra:Therearefew“thankyous”Imustdistribute.First,Ineedtothankmywife,Jennifer,wholetmedisappearontheweekendstogetthisdone.Next,Ineedtothanktheinterviewsubjectswhomadethemselvesavailabletomyendlessquestions.Also,IwanttothankmyformerclassmatesandtherealestatefacultyatKellogg,whotookthetimetoproofreadandofferinvaluablesuggestionsforthebook.Finally,Ican'tforgetthestaffatVaultwhowereflexibleandtaughtmeagreatdealaboutwriting–especiallytheincomparableMarcyLerner.v TableofContentsINTRODUCTION1THESCOOP3Chapter15IndustryOverview................................................5WhatisRealEstate?..............................................5HistoryofRealEstateintheUnitedStates..............................5IndustryTrends..................................................8Chapter29BuildingYourRealEstateFoundation..................................9UnderstandingRealEstateFinance..................................12SegmentingtheMarket...........................................15Classification..................................................15RealEstateInvestors............................................17ONTHEJOB21Chapter323RealEstateJobSearchBasics......................................23UnconventionalRecruiting.........................................23Education....................................................24JobHuntingforCareerChangers....................................26WhattoExpect.................................................27Chapter429ResidentialRealEstateAgents/Brokers................................29TheScoop....................................................29OntheJob....................................................30GettingHired..................................................32vii VaultGuidetoRealEstateCareersTableofContentsCompensation.................................................31ADayintheLifeofaResidentialRealEstateAgent......................34Chapter535CommercialRealEstateBrokerage-TenantRepresentation.................35TheScoop....................................................35OntheJob....................................................35Compensation.................................................36GettingHired..................................................37ADayintheLifeofaCommercialSalesAgent..........................38Chapter641CommercialRealEstateBrokerage-LeasingAgent.......................41TheScoop....................................................41OntheJob....................................................41Compensation.................................................42GettingHired..................................................42ADayintheLifeofaLeasingBroker.................................43Chapter745InvestmentSalesBroker..........................................45TheScoop....................................................45OntheJob....................................................45Compensation.................................................46GettingHired..................................................46ADayintheLifeofanInvestmentSalesBroker.........................48Chapter8Mortgage-BackedSecuritiesOriginators&RatingsAgencies...................TheScoop....................................................51OntheJob....................................................51Compensation.................................................52GettingHired..................................................52viii©2009Vault.com,Inc. VaultGuidetoRealEstateCareersTableofContentsADayintheLifeofanAnalystataCMBCOriginator......................54Chapter957RealEstateAppraisal............................................57TheScoop....................................................57OntheJob....................................................59Compensation.................................................60GettingHired..................................................60ADayintheLifeofaJuniorAppraiser..................................Chapter1063PropertyManagement............................................63TheScoop....................................................63OntheJob....................................................63Compensation.................................................64GettingHired..................................................64ADayintheLifeofanAssistantPropertyManager.........................Chapter1169RealEstateAdvisory/PrivateEquity..................................69TheScoop....................................................69OntheJob....................................................69Compensation.................................................70GettingHired..................................................71ADayintheLifeofanAssociateataPrivateEquityFund..................72Chapter1275RealEstateInvestmentBanking.....................................75TheScoop....................................................75OntheJob....................................................76Compensation.................................................76GettingHired..................................................77ADayintheLifeofanAssociateatanInvestmentBank...................78VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.ix VaultGuidetoRealEstateCareersTableofContentsChapter1381Development..................................................81TheScoop....................................................81OntheJob....................................................81Compensation.................................................83GettingHired..................................................83ADayintheLifeofanAssociateataDevelopmentCompany................84Conclusion87APPENDIX89SchoolswithRealEstatePrograms91MBAPrograms.................................................91SampleNon-MBARealEstatePrograms...............................91SamplePeriodicals92RealEstateEmployers93FullServiceCommercial(PropertyManagement,Leasing,InvestmentBrokerage)94Development95REITs97Office-Focused.................................................97Retail-Focused.................................................98Apartment....................................................99InvestorsandAdvisoryFirms......................................100RealEstateLenders............................................102SampleCoverLetters105AbouttheAuthors109x©2009Vault.com,Inc. IntroductionRealestateisbigmoneyandbigbusiness.Therealestateindustryishometosomeofthewealthiestbusinesspeopleontheplanet:DonaldTrump,SamZellandDonaldBren.Yettheindustryalsotoucheseachoneofus,whetheryou'relookingforanewapartmentwithabackyardorcheckingoutthenew"bigbox"storethat'sopeningupinyourcity.Overthelast10years,thedomesticrealestateindustryhasexperiencedadramaticriseanddecline.Realestatemaybeacyclicalgame,buttherearesomemajorcareeropportunitiesavailableforthedetermined.Readthisguideandyou'lllearnmoreaboutthehottestcareersinthebusiness,fromrealestatebrokeragetopropertymanagementtorealestatefinance.1 THESCOOPVaultGuidetoRealEstateCareers IndustryOverviewChapter1WHATISREALESTATE?Realestateistangible.It’sapieceoflandandanybuildingorstructuresonit,aswellastheairaboveandthegroundbelow.Everyonecomesintodirectcontactwithrealestate.Theplaceswelive,work,gotoschool,vacation,shopandexercise,areallassetstobebought,soldandrented.Andit’salwaysbeenanimportantelementoftheeconomy.In2007alone,therealestateandconstructionindustriesrepresentedawhopping14.6percentofthegrossdomesticproductoftheUnitedStates.HISTORYOFREALESTATEINTHEUNITEDSTATESRealestatehasalwaysbeenbigbusinessintheUnitedStates.ShortlyafterthesigningoftheConstitution,thefederalgovernmentbegantransferringonebillionacresoflandtoprivateownersthroughlandsalesandlandgrants.Inthe1830s,forexample,thegovernmentsold20millionacresatroughly$1.25peracre.Thissoundslikeabargaintoustoday,butatthetime,thevastmajorityofcitizenscouldn’taffordthatprice.Consequently,agrassrootsgroupcalledtheFreeSoilMovementformedandlobbiedthegovernmentforanalternatemethodofdistributingland.TheHomesteadActof1862wasCongress’answertotheappeal.Settlerswhodidnotalreadyownwhatwasconsidereda“judicious”amountoflandweregiventitleto160acresforeachadultinthefamily.Therewerenomoneyexchanges.Instead,therewasanunderstandingthatthesettlerswouldliveonandimprovethelandforaperiodofatleastfiveyears.Thisprogramwasverysuccessfulandsimilarfederallanddistributionprogramsfolloweduntilthelaterpartofthe19thcentury.Intotal,theU.S.governmentdistributedmorethan300millionacresofpublicpropertytoprivatelandownersthroughtheHomesteadAct,creatingthebasisfortherealestatemarket.Forthefirsttimeinthehistoryoftheyoungcountry,therewasasysteminplacebywhichonelandownercouldtransferpropertyrightstoanotherthroughsale,leaseortrade.Thisledtoatremendousamountofspeculation.Someinvestorsaccumulatedatremendousamountofwealth,whileotherslosteverything.Attheendofthe19thcentury,Americawastransitioningfromanagriculturalsocietytoamanufacturingeconomy.Citizensflockedtourbanareastoworkatburgeoningfactories.Forexample,astheMidwest’sindustrialcenter,Chicagoreachedapopulationofonemillionpeoplemorerapidlythananyothercityinhistory.Settledinthe1830s,thecitygrewfromlessthan1,000inhabitantstobecomethefifth-largestcityintheworldby1900.5 VaultGuidetoRealEstateCareersIndustryOverviewThevaluesofurbanpropertiesskyrocketed.By1920,50percentofAmerica’spopulationlivedincities.Thisurbandensitycreatedopportunitiesforrealestatedevelopmentashousing,officebuildings,industrialfacilities,hotelsandretailcenterswereconstructedtomeetthedemandsofcitydwellers.Skyrocketingpropertyvaluesandassociatedcostsbeganpushingpeopleandbusinessesoutsidethecity,justasadvancesintransportationmadelivingoutsidethecityeasier.Suburbs,communitiesjustoutsideurbancenters,begantospread.Developersmadetheseplannedcommunitiesattractivebybuildingalongthetransportationroutessopeoplecouldeasilycommutetotheirjobsinthecities.Technologicaladvancesinfluencedthebuildingboomofthe1920s.Communitieswerewiredforelectricity,andnewmachinessuchaselevatorshelpedmeetadditionaldemandforspaceandallowedtheconstructionofever-tallerbuildings.Plannedcommunitiesbegantakingshapeinthesuburbs,whileskyscraperschangedthewaythecitieslooked.Onehundredbuildingshigherthan25storieswereconstructedinthisdecade,mostoftheminNewYorkCity,withChicagoadistantsecond.TheGreatDepressioncrippledmostindustries–includingrealestate.Valuesdippedbelowdebtlevels,causingacollapse.ThefederalgovernmentputthedomesticfinancialmarketsthroughamajoroverhaulandwasshrewdenoughtoincluderealestatefinancingaspartoftheNewDealprograms.TheFederalHousingAdministration(FHA)wascreatedin1930toprovidemortgageinsurance,loweringtheriskonrealestateloansandmakinglendingmorepalatableforsavingsandloansandbanks.ThegovernmentalsocreatedtheFederalHomeLoanBankSystem(FHLB)tosuperviseandregulatelocalbanks.In1938,theFederalNationalMortgageAssociation(FNMAorFannieMae)wascreatedtoprovideasecondarymortgagemarketaswellastolureinvestmentcapitalinthemortgagemarket,andcontinuestoplayaveryimportantroleinsupplyingcapitaltothemortgagemarkettoday.TheseNewDealprogramsultimatelymadetherealestatefinancemarketmoresophisticatedandsecure.AmericaandtherealestateindustryslowlyclimbedoutoftheDepressiononlytofallheadlongintoWorldWarII.Developmentwasputonholdduringthewar,butoncetheGIsreturnedfromoverseas,anothereraofprosperitybegan.Atremendousamountofdemandforhousingemergedvirtuallyovernight.By1946,newhousingconstructionquadrupledtoover500,000homes.Inthepostwarperiod,awhitepicketfenceandpeacefulgreenlawnprovedveryappealing.Two-thirdsofthe15millionhomesbuiltinthe1950swereinthesuburbs.Thedecadewasalsoaperiodofexpansionforthehighways,whichprovidedaccesstomoreareasbycarandtruck.Thisenabledalltypesofrealestate(e.g.,hotels,industrialandretailcenters)tobelocatedfurtheroutsidethecity.HotelchainslikeHolidayInnstartedpoppingupalongroadwaysacrossthecountry.Thesuburbanshoppingmallalsobecamepopularinthisera.6©2009Vault.com,Inc. VaultGuidetoRealEstateCareersIndustryOverviewAsthesuburbsgrew,thecitiesslumped.By1960,manyurbancentershadn’tseennewofficebuildingdevelopmentin30years.ThedecayofAmerica’surbanareasdidn’tgounnoticed.In1965,communityactivismandpoliticalpressureledtothecreationofacabinetpositionfocusedonimprovingurbanhousing–whattodayisknownastheDepartmentofHousingandUrbanDevelopment(HUD).The1970sweremarkedasaperiodof"stagflation"(stagnanteconomicgrowthwithmonetaryinflation).Inflationdrovespeculationandrisingpricesinrealestateeventhoughfundamentalslanguished.Thespeculativerallyinrealestatevaluespeakedbythelate-1970sandledintotherecessionoftheearly1980s.Astheeconomyrecovered,thegovernmentchangedthetaxlaw,creatingtaxsheltersinrealestate,suchasincreasingdepreciationdeductions,whichresultedinabuildingboomacrossassetclasses.Loosebanklendinghelpedtofinancetheboom.In1986,taxreformeliminatedsometaxadvantagesofowningrealestateandconstructionfelloff.Throughtheearly1990s,theindustrybattledoversupply,arecession,lendingcutbacksandbankfailures.Overthenextdecade,growthserviceandtechnologyindustrieshelpeddemandcatchupwithsupply.Newbuildingsonceagainbegantosproutbytheturnofthecentury,andresidentialhousingbeganrunningonallcylindersasmorebuyersenteredthemarketduetobothnewfoundaccesstofinancing(thankstotheboominsecuritization)andspeculation.Homebuildersrampedupsupply.Around2006,mostU.S.residentialmarketspeakedandbegantocollapse.In2007,thecommercialrealestatemarketpeakedandfellinstepwithdecliningeconomicfundamentals.Thecreditcrisisensued.Today,therealestateindustryfaceschallengesaftertheboomfueledbylooselendersandoverzealousbuyers,butinduetimerealestatewillreboundandcontinuetobeoneofthemostdynamicindustriesintheAmericaneconomy.Peoplemaydivesttheirstocks,buttheyalwaysneedaplacetolive,workandshop.(Toreadmoreaboutthehistoryofrealestate,readRealEstateDevelopment:PrinciplesandProcessbyMikeMiles,GayleBerensandMarcA.Weiss.)VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.7 VaultGuidetoRealEstateCareersIndustryOverviewINDUSTRYTRENDSTherealestatebusinessemploysclosetofivemillionpeopleacrossfieldslikeconstruction,brokerage,leasing,mortgagebanking,propertymanagement,realestateappraisalsandrealestatedevelopment.Opportunitiesaboundforcandidatestoearnstaggeringincomelevels.Additionally,thosewhoworkinthissectoroftenenjoygreaterflexibilityinjobresponsibilitiesthaninotherindustries.Therecanbedrawbacks,though,intheformoflowpayingentry-levelpositions,competitiveco-workersandlonghourswhenstartingout.Furthermore,onceyou’reestablished,relocationcanbedetrimentaltoyourcareer,asthisindustryisoftengeography-specific.Therealestatesectorislargelydependentontheeconomy;smallshiftscanimpacttrendssignificantly.Forexample,expansioninthetechnologyindustryhelpedboosttherealestateindustryinthe1990s.Therewasmoredemandforspace–bothcommercialandresidential–andassetvaluesskyrocketed.Thesubsequenttechnologybusthadadramaticeffectonsomepartsofthesector.Commercialfirmsthatfocusedonofficeandretaildevelopmentprojectsfoundthemarketgluttedwithavailablespace.Rentsfellandvacanciesrose,adoublehittothebottomlineofrealestateowners.Theresidentialrealestatemarketisalsoaffectedbyeconomicswings.Unemploymentandinterestratesimpactbothconsumerconfidenceandbuyingpower.Morerecently,aggressivelendingandbuyingcontributedtotheresidentialindustrytoboomandbustinamatterofyears.Thecollapseinresidentialrealestateledthegeneraleconomicdeclinefrom2007to2009.Commercialrealestatefundamentalsdeterioratedinstep.Thedownturnhasledustoaphaseofde-leveragingandpricingrationalization.Whiledefaultandforeclosurehavebecomehouseholdwords,theshiftoccurringinrealestatedoesleavesomebrightspots.Commercialownershaverefocusedontheoperatingsideofbuildings,lookingforwaystoreducecosts.Homepriceshavefallen,insomecasesover30percentinafewyears,whichhasputthepriceofhomesinreachofnewcredit-worthybuyers.Constructioncostinflationhastempered,andwell-capitalizedinvestorsareseekingtotakeadvantageofdistressedpricingopportunities.Still,thejobmarketatpresentisoneofthetoughestinalmosttwodecades,accordingtomanyindustryprofessionals.Manyrealestatecompanieshaverecentlyshedjobsandarelookingtokeepcostslowtorideoutthedownturn.Candidatesmustbedeterminedandcreativetostayinvolvedintheindustrydespitethenear-termoutlook.Someareasthatmayproveresilientincludeassetmanagement,workoutsandrefinancing.8©2009Vault.com,Inc. BuildingYourRealEstateFoundationChapter2REALESTATE:WHAT’SITWORTH?Althoughtherearevariouswaystovaluedifferentkindsofrealestate,thereareafewthingsthatmakeanypropertyassetvaluable.Firstthere’stheunofficialindustrymotto:“Thethreemostimportantthingsinrealestatearelocation,location,location.”Thereisnosubstituteforbeinglocatedinacentral,aestheticallypleasingareathat’sclosetoeasy-to-accesstransportation.Forresidentialrealestate,otherlocationplusesincludeproximitytoawidearrayofgoodretailoptionsandaccesstoatop-ratedschooldistrict.Afewotherthingsaffectvalueaswell.Realestateingoodrepairismorevaluablethana“fixer-upper.”Somepropertieshaveintrinsicaestheticvalueorhistory–thisaddstotheirvalue.Basicmacroeconomicfactorsalsoplayamajorroleinthemarket.Ifinterestratesarelow,peoplerushtobuyandrefinancehomesbecauseoftheattractivefinancingcosts.Andifdemandisgreaterthansupplypropertypricesrise.ValuingrealestateTherearethreegenerallyacceptedapproachestovaluingrealestate:thesalesapproach,thecostapproachandtheincomeapproach.Professionalappraiserswillreachavaluationaftercarefullyconsideringeachapproach.Youshouldmakesuretoreviewallthreeapproachesbeforeanyrealestateinterview.ThesalesapproachThesalesapproacharrivesatavalueforapropertybasedonrecentsalesofsimilarproperties.Thisapproachcanbeusedforbothresidentialandcommercialproperties.Thereareproprietarydatabasesthattrackhomeandcommercialbuildingsales,whichmakeiteasierforrealestateprofessionalstoaccessmarketinformationusedinvaluingproperties.OneofthemostpopulardatabasesistheMulti-listingService(MLS),whichisusedtotrackresidentialproperties.TheMLScontainsusefulinformationabouthomes,suchasthesaleshistory,taxrecordsandpropertyamenitiesthatcanbeaccessedforanannualfee.Inthesalesapproach,appraiserswillusedatabases,suchastheMLS,tolookforhomeswithsimilarcharacteristics(e.g.,locationandhousespecifics),asthesubjectproperty.Forexample,whenvaluingafour-bedroom,two-bathroomhouseinthePacificHeightssectionofSanFrancisco,itislogicaltovaluethatpropertybasedonthemostrecentsalesinformationforpropertiesinthesame9 VaultGuidetoRealEstateCareersBuildingYourRealEstateFoundationareawithsimilarcharacteristics.Bearinmindthatnotwopropertiesarealike,sowhenvaluingapropertyusingthesalesapproachyoumustadjustfordifferencesbetweentheproperties.ThecostapproachInmarketswhereitisdifficulttofindsimilarproperties,anappraisercanvalueapropertybasedonthecostapproach.Thisapproachfocusesonafewsteps.First,youmustdeterminethecostofreplacingorreconstructingtheimprovementsorbuilding.Next,theageoftheimprovementsmustbeconsideredandanappropriateamountofdepreciationissubtractedfromthevalueofimprovements.Finally,thevalueofthelandmustbetakenintoconsideration.Thelandvalueisaddedtotheimprovementsminustheestimatedpropertydepreciationtoarriveatwhatisreferredtoasthereplacementcost.Thisapproachcanbeusedtovaluetrulyuniquepropertytypeslikechurches,whichcannotuseeitherthesalesorincomeapproachtoarriveatavaluation.Thereplacementcostalsoservesasavaluablemetricintheanalysisofpropertyacquisitions.Forinstance,acquiringapropertybelowreplacementcostmayallowyoutopricebelownewcompetition,allotherfactorsbeingsimilar.TheincomeapproachTheincomeapproachisthemostquantitativeofthethreeapproachesandinvolvestheuseofnetoperatingincome(NOI)incalculatingthevalueoftheproperty.(SeetheAppendixforadetailedexplanationofNetOperatingIncome.)ThinkofNOIasthereasonmostinvestorsbuyabuilding.TheinvestmentcommunitytalksaboutNOIincessantly,somakesuretounderstandthisconceptifyouplanonbeinginvolvedwithrealestateinvesting.Therearetwoformsoftheincomeapproach.OneforminvolvesisolatingNOIforoneyear,whiletheotherforminvolvesalongertimehorizon.Bothformsuseacapitalization(cap)ratetocalculateavalue.Thecaprateisavaluationmetricthatrealestateprofessionalsusetocomeupwithaterminalvalueforaproperty.Itisexpressedasapercentage(e.g.,8percent)bywhichyoudivideyourestimatedpropertyincome.Asan(imperfectbutclose)analogy,thinkofapricetoearningsmultiplethatiscommonlyusedinevaluatingacommonstock.Acaprateissimilartoapricetoearnings(P/E)multiplethatisexpressedintheformofearningstoprice(E/P).Notethat“earnings”intherealestatecontextreferstoNOI.Capratesdifferforpropertytypesandlocations,anddependonmanyfactorsthatwewon’tgointohere,butwewilldescribehowitisused.Forexample,supposeyouwerebuyinganindustrialfacilitywhosenetoperatingincomeinthefollowingyearwasprojectedtobe$500,000.Ifyouknewthemarketcaprateforsimilarproperties,youcouldestimatethevalueofthe10©2009Vault.com,Inc. VaultGuidetoRealEstateCareersBuildingYourRealEstateFoundationproperty.Assumethemarketcaprateforindustrialfacilitiesis10percent.Toarriveatthevalueofthebuilding,divideNOIbythecaprate.Inourexample,thevalueofthebuildingwouldbe:Value=NOI=$500,000=$5,000,000CapRate.10Theyieldcapitalizationformusesalongertimehorizon.Itinvolvescalculatingadiscountedcashflowtoarriveapropertyvalue.Value=NOIyearn=NOIyearn+1+residualvalue(1+discountrate)n(1+discountrate)n+1(1+discountrate)n+1Intheexampleabove,thenumeratorrepresentsthecashflowsthatthebuildinggeneratestodayandinthecomingyears,whichtheoreticallyprovidesavaluefortheasset.Note,thatthereisalsoafutureresidualvaluelistedintheformula.Thediscountratereflectsthecostofcapital.Yourclientmayprovidethiscost,oryoumayhavetoestimatethediscountratebasedonsimilartransactionsandknowledgeofthemarket.Thediscountrateisnecessarybecauseitallowsyoutobringallthefuturecashflowsbacktotoday'sdollarsorpresentvalue(PV).Thediscountratefactorsintheopportunitycostofmoneyorthereturnthatyoucouldexpectelsewherewiththecashflows.Theexponent"n"inthedenominatorrepresentstheperiodornumberofyearsinthefuturethatyouwouldreceivethatcashflow.TheDCFiscalculatedbasedonastatednumberofyearsandaddsupthePVs.Atsomepointinthefuturecashflowsyouhavearesidualvaluebecauseitisassumedthepropertyiseventuallysold.TheresidualvalueiscalculatedbytakingtheNOIoftheyearaftertheassumedtimehorizonandthendividingthatyear'sNOIbyanassumedcaprate.SomeinvestorsusedifferenttimeperiodswhencalculatingtheDCFbut10yearsisthegenerallyacceptedperiodtovalueanasset.TheDCFisnormallyusedforincome-producingproperty,whileasingle-familyhouseistypicallyvaluedbythesalescomparisonapproach.Althoughtherearedifferentwaystovaluerealestate,thereareafewcommonvariablessuchaslocation,theproperty'sconditionandmarketsupply/demandthatmakerealestatevaluableregardlessoftheassettype.Thereisapopularindustrysaying,"Thethreemostimportantthingsinrealestatearelocation,location,location."Yousimplycannotunderestimatetheimportanceoflocation.Whileyoucanrestoreandupgradeapropertyasmuchasyouwant,thereisnosubstituteforbeinglocatedcloseto:transportation,goodschools,attractiveretailandanaestheticallypleasingarea.Whilelocationisimportant,keepingthepropertyingoodworkingorderalsocreatesvaluebecauseitlessenstheneedtomakeimprovementsorcontributecapitaltotheproperty.Inaddition,VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.11 VaultGuidetoRealEstateCareersBuildingYourRealEstateFoundationfundamentalmacroeconomicsplaysamajorroleinrealestatevalues.Forexample,wheninterestratesofferedbylendersarelow,peoplewillrushtobuyahousetotakeadvantageofthelowfinancingcosts.Ifthisnewmarketdemandisgreaterthanthemarketsupply,propertypriceswillincrease.UNDERSTANDINGREALESTATEFINANCEGenerallyspeaking,realestatefinancecanbedividedintoequityanddebt.You’veprobablyheardtheexpression“downpayment”inthecontextofbuyingahouse.Thedownpaymentisusuallytheequitycontributionoramountofcapitalthatabuyerwillsupplytowardthepropertypurchase.Forexample,ifyouput$20,000downonahousethatcosts$100,000,younowhave20percentequity,orownership,inthehouseandyouwillhavetoborrowthe$80,000balance,whichrepresentsthedebtortheloanamount.Therearemanyinstitutionsthatlendmoney(or“supplydebt”).Oneofthemorecommonlendersisabank.Thebankwilllendmoneyinreturnforprincipalandinterestpaymentsonthedebt.Keepingwithourexample,assumethebankwilllendthe$80,000neededtobuythehouseinreturnfor8percentinterestfor30years.Thesedebtpayments,alsocalledmortgagepayments,includeaprincipalportionandtheinterestportion.Inourexample,theprincipalportionisthe$80,000neededtobuythehouseandtheinterestportionistheamountthatthebankchargesthelendertoborrowits$80,000.Overtime,thebuyerpaysbackthe$80,000andbuildsadditionalequityorownershipinthehouse.Banksoffermanydifferenttypesofloanswithdifferentratesofinterestandpaybackperiods.Interestratesvaryaccordingtotheassociatedriskandterm.LoanproductswiththeinterestrateandaccompanyingtermarepublishedinTheWallStreetJournalandthebusinesssectionofmostpapers.Everylenderhasdifferentcriteriaforitsloans–e.g.,somebanksrequirebuyerstoputdownatleast20percentofthepurchasepriceofthehouse,whileothersaremoreflexible.Banksperformathoroughbackgroundcheckontheborrowerandtheproperty.Iftheborrowercannotmaketheprincipalandinterestpayments,thebankholdsthehouseascollateralandultimatelymayhavetoforecloseupon,ortakeback,theproperty.Duringaforeclosure,theborrowerisessentiallyrelievedofallrightstotheproperty.Thismaybedifficultforsomepeopletoaccept,buttherealityisthatasittypicallysuppliesmostofthemoney,thebankretainsprotectiveprovisionsincasetheborrowerdoesnotupholdhisorherendofthebargain.12©2009Vault.com,Inc. VaultGuidetoRealEstateCareersBuildingYourRealEstateFoundationTheprecedingexampleinvolvedahouse,buttheconceptofequityanddebtintroducedisalsoapplicabletobuyinganofficebuilding,hotelorwarehouseproperty.However,forthesecommercialpropertiestheremaybemultipleequitycontributorsinapurchase.Withmultipleequitycontributors,ajointventureagreementwillbemadetospelloutthewaytosplittheequitycontributionsanddistributions(commonlyreferredtoastheequitywaterfall).Inaddition,theremaybemultiplelenders.Alender,suchasabank,typicallyprovidestheseniorloan,andoccasionallyanother“mezzanine”lenderwillprovideanotherloanbutrequireahigherinterestrateduetothehigherrisk.Inprinciple,realestatesponsorshipisnodifferentthanotherformsoffinance–lendersexpecttoberepaidandcompensatedforrisk,whilethosewhocontributeequityarenotguaranteedareturnontheirinvestment.RealEstateInvesting–KeyTerminologyCommercialrealestateinvestorsoftenuseahandfulofmetricstoevaluatepotentialrealestateinvestments.We’vehighlightedsomeofthemoresalienttermswithwhichyoushouldbecomefamiliar.Internalrateofreturn(IRR)istheeffectivecompoundedannualrateofreturnthatisearnedonmoneyinvested.Moresimply,IRRisthediscountratethatmakesthenetpresentvalueoftheinvestmentcashflowpaymentsequaltozero.ThemetriciseasilycalculatedusingbusinesscalculatorsorExcel.InvestorsconsidertheIRRofaprojectagainsttheriskinessofthatproject,thedurationoftheproject,andtheirhurdlerate.Equitymultipleisthesumoftotalmoneyreturnedoverthecourseofaninvestmentdividedbythetotalamountinvested.ThemultipleindicatesthegrossreturnandisconsideredwiththeIRRtodetermineifaninvestmentisworthwhile.BoththeIRRandthedurationofthatreturnareimportanttoinvestors,andmanywillhaveahurdletargetforeachofthem.Yieldoncostisanothermeasureofperformanceusedbyrealestateprofessionals,especiallydevelopers.Itiscalculatedasnetoperatingincome(NOI)dividedbytotalprojectcostsbeforedebtservice.Developerswillseektoexceedatargetyieldoncostpriortoundertakingaproject.Thattargetwilldifferbasedonthepropertytype,locationandriskassociated.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.13 VaultGuidetoRealEstateCareersBuildingYourRealEstateFoundationDebtservicecoverageratio(DSCR)estimatestheabilityofapropertytomakeitsdebtpayments.Theratioiscalculatedasnetoperatingincomedividedbydebtservicepaymentsoverthesameperiod.Aratiogreaterthan1.0indicatesthatdebtpaymentscanbesustainedwhilearatiolessthan1.0indicatesthatdebtpaymentscannotbesustained.Ofcourse,justbecauseapropertyfallsbelowa1.0DSCRdoesnotnecessarilymeanthatthepropertywilldefaultsincetheownercankickinadditionalmoney.However,lendersoncommercialpropertiesoftenrequirethataDSCRbemaintained(e.g.,1.2)orthepropertywillbeinbreechofdebtcovenantsandintechnicaldefault.MortgageBrokersCompaniesorindividualsmayhireamortgagebrokertofindthebestfinancingfitforthemortgagetransaction.Thetransactioncouldinvolveapropertypurchaseorrefinancingassetsthattheclientalreadyowns.Mortgagebrokers,intermediariesbetweenrealestatebuyersandlenders,arevaluableresourcesthroughoutthelendingnegotiations.Theyuseanetworkofbanksandotherrealestatelenderstofindthebestfinancingdealfortheirclients,andoftenthismeansfindingthemostcost-effectiveloan.However,thereisacostforusingsuchabroker,typicallycalculatedasanegotiatedpercentage(e.g.,1percent)ofthetransactionvalue.Incommercialrealestate,someborrowerswillcircumventmortgagebrokersandapproachlendersdirectlytosavebrokercosts.CalculatingMortgagesMostlendersandresidentialrealestatebrokersposteasy-to-usemortgagecalculatorsontheirwebsites.Additionally,Microsoft'sExcelandHewlett-Packardhaveamortgagecalculationfeature.Thecalculatorsareagreatresourceforprojectingpotentialmortgagepayments.14©2009Vault.com,Inc. VaultGuidetoRealEstateCareersBuildingYourRealEstateFoundationSEGMENTINGTHEMARKETRealestatecanbedividedintwocategories:residentialandcommercial.Thehomeisthecenterpieceofresidentialrealestate,whereascommercialrealestateiscomprisedoftheoffice,apartment,hotel,industrialandretailsectors.Officebuildingsarethecenterpiecesoftheofficesector;apartmentbuildingsarethefocusoftheapartmentsector;traditionalhotelsandresortsmakeupthehotelsector;andstoresandshoppingcentersarethecenterpiecesoftheretailsector.Industrialrealestaterevolvesaroundmanufacturingfacilities.Theindustrialcategoryisdividedintothreesubcategories:storage,distribution,andresearchanddevelopment.Nomatterwhatsectoryou’rein,realestateisusuallydiscussedintermsofsquarefeet.Forexample,thepricetoleaseorbuyrealestateisusuallybasedonanannualizedsquarefootbasis.Additionally,hotels,apartmentsandcondosmaybediscussedinperunitterms.Example:CompanyXoccupies10,000squarefeetofspaceandpaysanannualrentof$500,000.Thisrenttranslatesinto$50persquarefoot–theannualrentdividedbythetotalsquarefeet.Almosteverymarketadherestothispracticeofcalculatingrentpayments.California,oneoftheexceptions,calculatespersquarefootpaymentsonamonthlybasis.So,the$50persquarefootrateisdividedby12andquotedas$4.17persquarefootpermonth.CLASSIFICATIONThefollowingsectionfocusesoncommercialrealestatebecauseresidentialrelieslessonaformalclassificationsystemandmoreonamenities(e.g.,numberofbedroomsandbaths).Sinceeachcommercialrealestateassetisdifferent,classificationsystemswerecreatedtolabelcommercialrealestateproperties.Ifyouplanonworkingincommercialrealestate,youwillneedtobecomefamiliarwiththisterminology.Someofthemaindriversofclassificationincludearchitecturalsignificance,location,constructionquality,maintenance,amenities,andtechnologyinfrastructure.Therearenohardandfastrules.OfficebuildingsOfficebuildingsuseasystemof“classes”thatrangefromAtoD,whereAishighestqualityandDislowest.Thereisadirectcorrelationbetweenpropertyclassificationandthecosttoleasespace–rentsarehigherpersquarefootinApropertiesandlowerinDproperties.ClassAproperties,sometimescalled“trophy”buildings,typicallyhaveexcellentaccesstotransportation,state-of-the-arttechnology,high-endfinishes,contemporarydesign,strongmanagementandadditionalamenities,suchasfitnessfacilities,whitetableclothrestaurants,parkingandconvenientstores.ClassBVisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.15 VaultGuidetoRealEstateCareersBuildingYourRealEstateFoundationpropertieshavegoodlocationsandsolidmanagementbuttypicallydisplaylesserqualityconstructionandfeweramenities.ClassCpropertiesaredatedbuildingswithanoticeablelackofupkeepandamenities.ClassDpropertiesareolderbuildingsinsoreneedofrenovation.RetailrealestateRetailspaceconsistsofshoppingmalls,stand-alonetenantslikeHomeDepotandmom-and-popstoressuchasthelocaldrycleaners.Therearethreegeneraltypesofretailproduct:shoppingcenters,stripcommercialandfreestandingstores.Shoppingcentershavetheirownsubclassifications.Notethatoftenyouwillhearthephrase“anchortenant”inretail,whichusuallyreferstothelargesttenantattheretailcenter.•Superregionalcentersarethebiggestofthebigretailcenters.ThefamedMallofAmericainMinneapolisandtheGalleriainHoustonfallintothiscategory.Superregionalcentershavethreeormoremajordepartmentstores,anddrawcustomersfrom12milesormore.Thesemallsaremassive,atleast750,000squarefeetinmostcases.•Aregionalcenterhasatleastonemajordepartmentstore,sometimestwo,andanassortmentofsmallerstores.Thesemallsareusually300,000squarefeetorlarger.•Acommunitycenterhasasmaller-sizeddepartmentstoreandvarietystores.Communitycentershoppingcentersarelargerthan100,000squarefeetanddrawfromathree-tofive-mileradius.•Aneighborhoodcenterhasasupermarketordrugstoreasananchortenantwithotherretailthatprovidesgoodsandservicestothecommunity.Thesemallswilldrawfromaone-tothree-mileradius.•Conveniencecentersareacollectionofsmallstoresthatservetheimmediatearea.Thesecentersrangefrom5,000-40,000squarefeet.•Aspecialtycenterisafacilitymeantforaspecificnarrowpurpose,suchasautoserviceandsales.•Stripcommercialreferstoacollectionofsmallerstoresusuallyalignedaspartofthesamestructure(a“stripcenter”)andmaynothaveacentralizedmanagementortheme.Nationalandlocalretailerswithsmallerspaceneedsaretypicaltenants(e.g.,quick-serviceeateries,coffeeshops,drycleanersandgeneralmerchants).•Freestandingstoresaremeantforoneuserandlocatednearmajorshoppingcentersoralongmajorthoroughfares.Typically,tenantslikeWalmart,HomeDepotorCostcomayoccupyalargefreestandingstore(so-called“bigbox”retail),whiletenantslikeStarbucksorChili’sGrill&Barmayoccupyasmallerfreestandingstore(referredtoasa“padsite”whenlocatedintheparkinglotofalargerretailcenter).16©2009Vault.com,Inc. VaultGuidetoRealEstateCareersBuildingYourRealEstateFoundationIndustrialrealestateIndustrialbuildingsaregenerallynotasaestheticallypleasingasotherbuildings,yettheyarecriticaltotheproductionprocessofmanyofitemssocietyonadailybasis.Industrialbuildingshaveawidevarietyofuses:manufacturing,warehousinganddistribution,andresearchanddevelopment.Theydifferfromotherrealestatepropertiesinafewdistinctways.Forexample,ceilingsareoftenquitehighbecauseofthespacerequirementsforequipmentandstorageracks.Thefreeverticalspaceheightofceilingsiscitedas“clearheight.”Industrialpropertiescanalsohaveotherspecificdemands,includingfreewayaccessibility,sufficientpowertorunanymachineryonsite,sufficientturningradiusaroundloadingdocksanddockheights(groundortruckheight).Industrialpropertiesalsouseasubclassificationsystem.Manufacturingmayrefertoheavyandlightuses.•Heavyindustrialpropertiesareusedforpurposeslikeautomakingandmaterialhandling.•Lightassemblypropertieshavelimitedmanufacturingandfocusonassemblyofpartsmanufacturedelsewhere.•Warehouseanddistributionpropertiesareusedforstorageandlogisticspurposes.•Researchanddevelopment(R&D)facilitiesoftenhaveacombinationofusesandarecommonlyusedbybiotechandproductdevelopmentfirms.Theymaybeacombinationofresearchlabs,traditionalofficespaceorstorage(propertywiththesetypesofflexibleusescanbereferredtoas“flexspace”).REALESTATEINVESTORSRealestateinvestinghasbecomemoresophisticatedovertheyearsand,likeotherventures,therearebothprivateandpublicmarkets.Anyonewithsufficientcapitalcanbuyahouse,officebuilding,shoppingcenterorindustrialbuildingasaprivateinvestor.However,ifyoudon’thaveenoughmoneyoryouprefertospreadtheriskofownershipamongagroupofpeopleandproperties,youcanbuysharesinarealestateinvestmenttrust(REIT).REITsareanefficientwayforsponsorstoinvestinthecommercialandresidentialrealestatebusinesses.Asassets,theycombinethebestfeaturesofrealestateandstocks,givinginvestorsapracticalandeffectivemeanstoincludeprofessionallymanagedpropertyinadiversifiedinvestmentportfolio.REITswerecreatedbyCongressin1960inanefforttoallowsmallpatronstomakeinvestmentsinmoresophisticated,income-producingrealestate.Thegovernmentbelievedthattheaverageinvestorcouldonlyaccessthesesophisticatedpropertiesthroughpoolingvehicles.Consequently,REITsweredesignedtopoolthecapitalofmultipleinvestorsintoasingleentitydedicatedtorealestateinvestment.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.17 VaultGuidetoRealEstateCareersBuildingYourRealEstateFoundationTheywereanythingbutanovernightsensation.REITshadtoadheretocertainrestrictions;initiallytheywereallowedtoownpropertybutnotmanageit.ThiskeptWallStreetmoneyawaybecauseinvestorsdidn’tliketheideaofhavingthirdpartiesmanagingtheassets.Nonetheless,REITsexperiencedaperiodofgrowthintheearly1970suntilarecessionhitinthemiddleofthedecade.TheREITmarketwasrelativelyquietuntilthelate1980s,whenaseriesofeventschangedthemarketplace.TheTaxReformActof1986hadamajorimpact,enablingREITstooperateandmanagemosttypesofincome-producingcommercialproperties.Theactalsoeliminatedtax-motivated“paperlosses”throughdepreciationdeductionsformostindividualinvestors.Thisremovalofrealestate’stax-favoredstatus,combinedwiththeeffectofthesavingsandloancrisisaswellasoverbuilding,ledtoarealestateslumpinthelate1980s.Ironically,REITsbenefitedfromthedipintherealestateeconomyfortworeasons.First,moreREITswereformedthaneverbeforeduetomanyprivaterealestatecompaniesstrugglingtosurviveinanenvironmentwhereraisingcapitalwasdifficult.FormingaREITallowedaccesstopubliccapital.Second,manyinvestorsweregamblingontherealestatemarket.Theythoughtithadbottomedoutandwantedtogetonboardbeforethemarketrebounded.ThemodernREITDomesticREITshaveexplodedoverthepast15to20years.AsofDecember31,2008,theNationalAssociationofRealEstateInvestmentTrusts(NAREIT,www.reit.com)reportstherewere136REITsregisteredwiththeSecuritiesandExchangeCommissionintheUnitedStatesthattradeononeofthemajorstockexchangeswithacombinedequitymarketcapitalizationofalmost$200billion.Additionally,someREITsareprivateandarenottradedonthepublicmarkets.Intotal,theInternalRevenueServiceindicatesthatapproximately1,100REITsthathavefiledtaxreturnsintheUnitedStates.What’smore,someforeigncountriesalsoallowREITsthoughttherulesandregulationaredifferent.REITsmayinvestinalltypesofrealestate(e.g.,hotels,malls,officebuildings,eventrailerparks!)directlythroughpropertypurchasesormortgages.However,manyREITsspecializeonacertainpropertytypes(e.g.,companieslikeEquityResidentialorHealthcareRealtyTrust,Inc.)orevenoncertaingeographies(regional,nationalorinternational).REITsarerunlikemostotherpubliccompanies,withcorporateofficersandaboardofdirectorswhoanswertostakeholders.Managementmakesdecisionsonwhichpropertiestobuyandtosellandthedirectorsoftenhaveownershippositionsthemselves.REITScanalsoberegional,nationalorinternationalinfocus.18©2009Vault.com,Inc. VaultGuidetoRealEstateCareersBuildingYourRealEstateFoundationDefiningREITsTherearethreemaintypesofREITs:equity,mortgageandhybrid.•EquityREITsdevelop,manageandinvestinandownproperties.RevenuefromequityREITscomesprincipallyfromtherentschargedinthebuildingsownedbytheREITs.•MortgageREITscenteraroundpropertymortgages.TheseREITsloanmoneytopeopleorcompaniesthatbuyrealestate.MortgageREITsalsopurchaseexistingmortgagesormortgage-backedsecurities.Insteadofowningproperty,theygeneratetheirrevenuefrominterestontheseloans.•HybridREITsinvestinbothpropertiesandmortgages.TheyhavethecharacteristicsofbothequityandmortgageREITs,hencethename.Inprinciple,themainbenefitsofREITsareliquidityfortherealestateinvestorandasingleleveloftaxation.Unlikemostcorporations,REITsarenottaxedonthedividendspaidtoshareholders.Thedrawbackwiththispracticeisthatsincevirtuallyallearningsarepaidtoshareholders,thereisalimitedamountofavailablecashleftover.Therefore,REITsmustconstantlypursuecapitalforoperations.REITshavetransformedtherealestateindustryandwillcontinuetoevolve.Beforethem,theindustrylackedliquidityandvalueswerelesstransparent.Nowthey’resubjecttocomplextaxlawsandlikeotherpubliccompanies,publicREITsareboundbySECguidelines.InorderforacorporationortrusttoqualifyasaREIT,itmustcomplywithcertainprovisionswithintheInternalRevenueCode.AsrequiredbytheTaxCode,aREITmust:•Beacorporation,businesstrustorsimilarassociation;•Bemanagedbyaboardofdirectorsortrustees;•Havesharesthatarefullytransferable;•Haveaminimumof100shareholders;•Havenomorethan50percentofthesharesheldbyfiveorfewerindividualsduringthelasthalfofeachtaxableyear;•Investatleast75percentofthetotalassetsinrealestateassets;•Deriveatleast75percentofgrossincomefromrents,realpropertyorinterestonmortgagesonrealproperty;•Derivenomorethan30percentofgrossincomefromthesaleofrealpropertyheldforlessthanfouryears,securitiesheldforlessthanoneyearorcertainprohibitedtransactions;and•Paydividendsofatleast95percentofREITtaxableincome.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.19 VaultGuidetoRealEstateCareersBuildingYourRealEstateFoundationFormoreinformationvisittheNAREITatwww.nareit.orgorcallthemat800-3-NAREIT.Additionally,analystsareagreatresource,suchasGreenStreetAdvisors(www.greenstreetadvisors.com),whichisdevotedtotrackingREITperformance.ThechartonthenextpagelistssomeofthehigherprofileREITs.MajorReitsCompanyPropertyFocusWebsiteLibertyPropertyTrustOfficelibertyproperty.comEquityOfficeResidentialApartmenteqr.comAMBIndustrialamb.comDukeRealtyMixeddukereality.comBostonPropertiesOfficebostonproperties.comSimonPropertyGroupRegionalMallssimon.comNon-REITRealEstateInvestors•Pensionfundsarealsoactiveinvestorsinrealestate.Almostanylargepensionfundwillinvestaportionofitsassetsinrealestateasameansofdiversifyingitsportfolio.Someareverysophisticatedrealestateinvestors;amongthebetterknownandactiveareCaliforniaPublicEmployees’RetirementSystem(CalPERS)andTeachersInsuranceandAnnuityAssociation(TIAA-CREF).•Lifeinsurancecompanieshavealonghistoryofrealestateinvestment.Likepensionfunds,theydiversifyaportionoftheirinvestmentportfolioinrealestate.There’sagoodchancethatyourinsurancecompanyinvestsinrealestate–eitherlendingorinvestinginproperty-relatedprojects.NationalinsurancegiantslikeAllstate,NorthwesternMutualLife,MetropolitanLifeandPrudentialareallactiverealestateinvestors.•Opportunityfundstendtoinvestinriskiertransactionsorassetsandexpectahighyieldinreturn.They’reextremelysophisticatedandtendtobeveryanalytical.Somelargefundsareaffiliatedwith“WallStreet”bankslikeGoldmanSachs,MorganStanleyandJPMorgan,butnumerousfundsexistwithvaryinglevelsofcapitalundermanagementandspecializations.Notethatopportunityfundinvestorsoftenraisecapitalfrompensionfundsandlifeinsurancecompanies,sothereisalinkwiththepriorcategoriesofinvestors.Somesovereignwealthfunds(e.g.,GovernmentofSingaporeInvestmentCorporation)couldalsobeconsideredasopportunityfundinvestors.Notethatopportunityinvestmentfundsareoftencategorizedbytheirappetiteforriskandreturn.Fromlowtohighontheriskandreturnspectrum,thegeneralcategorizationsarecore,coreplus,valueaddandopportunistic20©2009Vault.com,Inc. ONTHEJOBVaultGuidetoRealEstateCareers RealEstateJobSearchBasicsChapter3UNCONVENTIONALRECRUITINGTwothingssetrealestateapartfromotherindustrieswhenitcomestohiringpractices.Thefirstisthelackofconventionalrecruiting.Thesecondisthefocusonpersonality.Realestatecompaniestypicallydon’theadtocampusesorjobfairstorecruitundergraduatesandgraduates,nordotheypostopeningsonjobboards.Thejobmarketisopeningupabit,butmostfirmsstillrelyonpersonalrelationshipstofillopenings.LeslieBoudreaux,arecruiteratKforcewhohasplacedcandidatesintherealestateindustry,advises,“Ourrealestateclientslookforsomeonewiththreetraits:aRolodex,quantitativeexperienceandexcellentinterpersonalskills.TheRolodexisnecessarybecauseyouwillbeexpectedtoaccessyournetworktogetdealsdone.Quantitativeexperienceisimportantbecauserealestatecompaniesdonotwanttotrainsomeone.Therefore,theylookforsomeonewhoalreadyhasprovenhimselfquantitatively–ideally,atacompetitor.Finally,thepersonshouldbepolished,intelligent,gregariousandsharp.”Sheadds,“Overall,Iwouldsaythebulkofhiringwithintheindustryiswordofmouth,soindividualslookingforworkshouldreachouttoasmanypeopleintheindustryaspossible.”Sincemostcompaniesdon’tfollowconventionalrecruitingprocesses,youneedtobeaggressiveinyourjobsearch.Thereareopportunities.Justbepreparedtodoalotofnetworkingtouncoverthem.AnetworkingplanCreateaplanofattacktogetthejobyouwant.First,learnasmuchasyoucanaboutthecompanyorcompaniesofyourchoice,aswellasthelocalrealestatemarket.Thebestwaytogetahandleonthemarket,frankly,istoreadlocalbusinesspublications–realestatemarkets,bydefinition,arequitelocalized.Someofthesepublicationsincludejoblistingsbutattheveryleast,you’llgetagrasponthemajorplayersinyourlocalmarket;someofthesepublicationsincludejoblistingsaswell.Somegoodwebsites,suchasGlobeStreet(www.globest.com),alsooffermarket-specificinformation.Anotherwebsite,Selectleaders(www.selectleaders.com),isanationwidejobboardfocusedentirelyontherealestateindustry.SeetheAppendixforalistingofotherhelpfulwebsites.Undergraduateswhoareinterestedinrealestateshouldtakeadvantageofresourcesavailableoncampus.Manyuniversitiesofferrealestateconcentrationsandclassesandmayevenhavearealestateclub.Thisisagreatintroductiontotheindustryandwillmakeyouattractivetoemployers.Ifyourcampushasnorealestateactivities,takeafewaccountingandfinanceclasses;afirmgrasponfundamentalfinanceconceptsisessentialtoacareerintherealestateindustry.Ifpossible,become23 VaultGuidetoRealEstateCareersRealEstateJobSearchBasicsfamiliarwithasoftwareprogramcalledArgus,whichisafinancialtoolforrealestateprojects.AsolidknowledgeoffinancialmodelinginExcelandArguswillgiveyoualegupformanyentry-levelbrokerageandanalystpositions.Finally,joinlocalchaptersofrealestateorganizationssuchasUrbanLandInstitute(ULI)orNationalAssociationofIndustrialandOfficeProperties(NAIOP).ULIevenhasa“YoungLeaders”groupforyoungprofessionalsintheindustrywithspecializedprogramsthatwillnotonlyexposeyoutopeersbutalsotomoreseniorindustryprofessionals.EDUCATIONOnepossibleeducationalrouteintorealestateistogetanMBAataninstitutionwithaspecificrealestateprogram.SomeofthebestprogramsaccordingtoU.S.News&WorldReportrankingsareTheWhartonSchoolatUniversityofPennsylvania,UniversityofCalifornia-Berkeley’sHaasBusinessSchool,MIT’sSloanSchoolofManagement,UniversityofWisconsin-MadisonandOhioStateUniversity’sFisherSchoolofBusiness.Theseschoolsalsohavestrongrealestateclubsthatproduceannualconferencesandotheractivities.Non-MBArealestatemastersprogramsarealsoanoption,suchastheCornellUniversityPrograminRealEstateorUniversityofSouthernCalifornia’sSchoolofPolicy,PlanningandDevelopment.Whileadvanceddegreeshavegainedgreaterrecognitionintheindustryinrecentyears,manyseniorrealestateprofessionalsyouencountertodaydonothavesuchdegreesand,instead,learnedbydoing.JobSeekingAdvicefromaRealEstateProfessorJosephPagliari,aclinicalassistantprofessoranddirectoroftheRealEstateCenterattheKelloggSchoolofManagement,says,“TherearehostofopportunitiesinrealestateforMBAs.Theissueisidentifyingthebestfitforthecandidate.PositionsthataregoodfitsforMBAsarewithfirmsthatsupplycapitaltotheindustry.Typicallythesearelarge,sophisticated,financially-orientedfirms.MBAsshouldidentifytheseinstitutionsandaggressivelypursuethemforemployment.Intoday’smarketplace,thismeanslookingatREITs,mezzaninefunds(fundsbuiltaroundmezzaninefinancing,whichcombinesequityandfixedincomeinvestments)andprivateequityfirms.”“Ingeneralthehighprofilerealestatepositionsandfinanciallyrewardingjobsareonthecapitalside,”addsPagliari,whoisalsoaprincipalofarealestateinvestmentfirm.“Thesejobsarealmostself-selectingbecausetheyaretoughtogetandyouhavetobesmartandaggressivetosucceed.Giventhatpositionsin24©2009Vault.com,Inc. VaultGuidetoRealEstateCareersRealEstateJobSearchBasicsthecapitalsideofthebusinessarereservedfortheelite,MBAsshouldpursuethesepositionsbecausemanyofthempossessthenecessaryqualitiesfortheseroles.”Employerslookforavarietyofskillsets.“Itisdifficulttonarrowittojustafewthings,”hesays.“Somepositionsareveryquantitativewhileothersemphasizestronginterpersonalskills.Havingacombinationofbothisacompetitiveadvantage.Ingeneral,Itellallmystudentstolookforrolesthatspeaktotheirskillsets.Itisgoingtobehardenoughtogettheinterview,sodon’tblowitbygoingafterajobthatprobablydoesn’tfityourbackground.MBAsshoulddotheirhomeworkonthetypesofrolesoutthereandmatchyourbackgroundandinterestwiththebestfit.However,youstillwanttoshootfortheskyandleverageyourMBA.”Jobseekersshouldn’tbeshyaboutusingtheircontacts.“Thisindustryisverytoughforoutsidersornewcomerstobreakintoandstudentsshouldbereadytoacceptthat,”headvises.“Getinthehuntassoonaspossibleandnetwork,network,network.UsingalumsoranyoneelseyouknowintheindustryissomethingIalwaysrecommend.”Whenyouhavetheinterview,bepreparedtotalkaboutthelocalmarket–oranyotherinwhichthecompanyoperates.Ifit’sapublicfirm,checkTheWallStreetJournalforthescuttlebutt.Also,becertainthey’llwelcomeyourMBA.“Intheinterviewyouwillmostlikelybeaskedaboutwhyyouareinterestedinrealestateandafewtechnicalquestions,”Pagliariwarns.“Bereadytodescribeacaprateandmarketspecificslikerentalratesandgeneraleconomicconditions.”ToMBAstudentsjuststartingarealestateprogramwhoknowtheywanttoentertheindustry,hestresses,“Don’trelyonsimplytakingrealestateclasses,especiallyifyouhavenopriorrealestateexperience.”Youneedtodemonstratepassionbyjoiningarealestatecluborgettingactiveinrealestate-relatedactivitiesatschool.“Dowhateverittakestobeabletodemonstrateyourenthusiasmfortheindustry,”headds.“Ifittakesstartingarealestatecluborbeingthedrivingforcebehindanevent,thensobeit.”TheprofessoralsoadvisesindividualswhoareevaluatingMBAprogramsthatofferrealestatecurriculumsto:makesuretheprofessorshavesomepracticalexperienceandthecurriculumwillgiveyouaskillsetthatwillmeetyourendgoal.Don’tsacrificetheoverallMBAexperienceforaschoolthatsimplyoffersastrongrealestatecurriculumandislackinginotherareas.ForMBAstudentswhoareinterestedinrealestatebutwhoseprogramsdonotofferrealestateclasses,Pagliarioffersasolution.“Classesrelatedtofinanceandeconomicprinciplesthathelpyoupricerisksareveryuseful,”hesays,notingVisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.25 VaultGuidetoRealEstateCareersRealEstateJobSearchBasicsthattheabilitytopriceriskisastrongdifferentiatingfactor.Pagliarialsorecommendstakingbusinesslawclassesbecausetherearemanylegalissuesinvolvedintheindustry.“Whichiswhyyoushouldnotbesurprisedtofindsomanyattorneysinthebusiness,”hesays.“IwasacareerswitcherandwasrepeatedlyaskedininterviewsaboutwhyIwasinterestedinrealestate,”saysRichMonopoli,arecentgraduatefrombusinessschool.“Manyoftheinterviewerswantedanexplanationofhowmybackgroundtiedtomyinterestinrealestate.Ican’temphasizeenoughhowimportantitistobepreparedtoanswerthequestionofwhyyouareinterestedinrealestate.”JOBHUNTINGFORCAREERCHANGERSIfattendingaspecializedundergraduateorMBAprogramisn’tanoption,you’llhavetoworkhardertodevelopyourqualifications.Thefirststep:getyourrealestatesalespersonlicense.Pursuingyourlicensewilldemonstrateyourinterestinthefieldandwillexposeyoutorealestateprinciples–it’sneitherterriblyexpensivenortime-consuming.Youshouldalsoreadandlearnasmuchaspossibleabouttheindustry.Onegreatwaytodothisistopickuponeofthelocalperiodicalsthatcoverrealestate.InNewYork,professionalsreadCrain’s,CommercialPropertyNewsandRealEstateAlert.InChicago,someofthemorepopularpublicationsareCrain’s,IllinoisRealtorandMidwestRealEstateNews.InLosAngeles,favoritesincludetheLosAngelesBusinessJournalandSouthernCaliforniaRealEstateJournal.Onanationallevel,TheWallStreetJournalpublishesarealestatereportineveryWednesday’seditionthateverybodyintherealestateindustryreads(orshould).Onethingallundergraduates,MBAsandcareerswitcherslookingforpositionsintheindustryshoulddoiscontactalumnifromtheirschoolswhoareactiveinrealestate.Alotofschoolsdoagreatjobofsegmentingalumnibyindustry.Infact,someschools,liketheUniversityofWisconsinandtheUniversityofTexas,publisharealestatealumnidirectory.Reachingouttoalumniisveryeffective,andmadeallthemorenecessarybecauseofthelackofformalrecruiting.Manypeopleinthebusinessfindtheirjobsthroughnetworking.Don’tbeshy!Therealestateindustryrewardsthebold.Onceyougetaninterview,youmustbepreparedtoturnonthecharm.“Fit”withthecompanycultureisvital,regardlessofthespecificposition.Interpersonalskillsareusedinalmosteveryfacetofrealestate,andinterviewerswilllookforevidenceofyourcharmandarticulateness.Makesureyou’rerelaxedandconfident.26©2009Vault.com,Inc. VaultGuidetoRealEstateCareersRealEstateJobSearchBasicsWHATTOEXPECTOverfivemillionpeopleintheUnitedStatesworkinrealestatefieldssuchasconstruction,mortgagebanking,propertymanagement,realestateappraisals,brokerageandleasinganddevelopment.Inaddition,manyothersareengagedincorporatepropertyandinrealestatelendingincommercialbanks,savingsandloans,andinsurancecompanies.Realestatecompaniestendtobeleanandkeepoverheadlow.Thatmeansentry-levelsalariesarelow;inmanycases,they’rebasedoncommission.However,ifyouproveyourself,therearefewindustriesthatultimatelypayaswell.Althoughcareersinrealestatearevaried,therearesomecommonqualitiesthatwillhelpyousucceed.Industryprofessionalsareoftenentrepreneurialbynatureandattentivetodetail.Employerswilltakenoteifyou’reanalytical,creativeandcharismaticaswellasagoodnegotiator.Youmayalsowanttocontactarecruiterthatspecializesinrealestatetogetsomeadditionalideas.TwotoprecruitingfirmsareWhitneyGroup(www.whitneygroup.com)andtheAdvisoryGroup(www.fplassociates.com.)GettingaRealEstateScholarshipDidyouknowtherearescholarshipsofferedbyprofessionalrealestateorganizations?Forexample,PREA(www.prea.org),orthePensionRealEstateAssociation,offersascholarshiptostudents.Otherscholarshipsareassociatedwithspecificuniversityprograms.Gettingmoneyforschoolisgreat,ofcourse,butperhapsevenmorevaluableistheopportunitytolistthescholarshiponyourresume.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.27 ResidentialRealEstateAgents/BrokersChapter4THESCOOPResidentialrealestateagentshelpbuyersandsellersintheprocessofsellingorrentingresidentialproperty.Someagentsworkwithbuyers,helpingthemfindplacestoliveandnegotiatingwithsellers.Otheragentsworkwiththesellers.Agentsrarelyrepresentbothbuyersandsellerssincethisisperceivedasaconflictofinterest.Forpropertyrentals,almostallagentsrepresentpropertyowners.Therearecloseto500,000realestatebrokersandagentsintheUnitedStates.Agentsareusuallyindependentsalesprofessionalswhocontracttheirservicestosponsoringrealestatebrokersinexchangeforacommission-sharingagreement.Thecommissiononahomesalevariesbymarketbutisroughly5to6percentofthesaleprice.Thiscommissionissplitfourwaysamongtheseller’sagent,buyer’sagentandthesponsoringbrokerswithwhomeachagentisassociated.Manyagentsworksolelyoncommissionanddon’tgetmuchinthewayofbenefits.Agentsareexpectedtocovermostoftheoverheadnecessarytoperformtheirjobs.Inordertosellrealestateservices,youmustbealicensedprofessionalinthestatewhereyoudobusiness.Moststatesrequireyoutobeatleast18yearsoldandahighschoolgraduate,topassawrittenexam,andtohavecompletedaminimumnumberofclassroomhours.Somestateswaivetheclassroomrequirementsforactiveattorneysoroffercorrespondencecoursecreditoptionsinlieuoftheclassroomhourrequirement.Thelicensefeedependsonthestatebutexpecttopaybetween$100to$300fortheinitialexam/registrationand$500fortheclasses.Althoughtherearedifferentorganizationsthroughwhichyoucanreceiveyourclassroominstruction,thestategovernmentissuesandoverseeslicenses.IfyouvisittheNationalAssociationofRealtor’swebsiteatwww.realtor.org,youcanfindinformationaboutresidentialrealestateaswellaslicensingrequirementsforeachstateandlocationsofauthorizedrealestateclasses.Inmanystates,twotypesoflicensesmaybeobtained:realestatesalespersonandrealestatebroker.Thenamesofeachpositioncanvarybystate.Generally,asalespersonlicensehasfewereducationrequirements,hasashorterwrittenexam,andmustbeassociatedwithalicensedbroker.Anentry-levelagentbeginsasasalespersontogainexperiencebeforebecomingabroker.Abrokerlicensehasmoreeducationand/orexperiencerequirementsandmayhaveatougherlicenseexamination.Thisindustryattractsalltypesofpersonalities.There’sapotpourriofcareerswitchers,fromlawyerstohousewives,whoendupinresidentialrealestate.Ifyoulikebeingyourownbossandinteractingwithpeople,beingarealtorcanbeveryrewarding.29 VaultGuidetoRealEstateCareersResidentialRealEstateAgents/BrokersONTHEJOBRealestateagentsgenerallyfocusonbuyingandselling(orrenting)homesorlandforbuildingresidentialdevelopmentsonbehalfofanotherparty.Thejobinvolvesmatchingaclient’shomewishlistwithhousesavailableinthemarketplace,ortoselltheclient’shouseinatimelymannerathisorheraskingprice.Agentsmakemostoftheirpaycheckfromcommissions.Tobeagoodagentyouneedathickskin,stronginterpersonal/networkingskillsandagoodsenseoffinance.Theneedtofindclientsandpropertiestosellorrentthroughcoldcalls,constantschmoozingandmassmailingstendstodiscouragesomefromresidentialrealty.Hoursareflexible–toapoint.Manypeopleliketohousehuntafterworkoronweekends,soifyoucherishthosetimes,thisjobisn’tforyou.Also,becauseyou’renotonasetschedule,youneedtobedisciplinedaboutgettingyourworkdone.Youshouldhaveatleastabasicknackforfiguresandcalculation–you’llbeworkingwithavarietyofbudgets,mortgageratesandotherfigures.Ifyou’renotamathwhiz,don’tworry:Whileithelpstobeanalytical,it’smuchmoreimportanttobededicated,organizedandhaveatalentforschmoozing.TheWorkdayIfyou’resickofbeingheldtoaschedule,thenresidentialrealestatemaybethefieldforyou.Yousetyourownhours,andhavenoneedtostopintotheofficeexcepttofilepaperworkormaybefortheoccasionalstaffmeeting.Atthesametime,yourtimemaynotbeasflexibleasyoumightimagine.Openhouses–whenapropertyforsaleisshowntothegeneralpublic–areinvariablyheldoneveningsorweekends.Yourclientsmaybeunabletoseepropertiesduringthetraditionalworkweekaswell.Residentialrealestateagentsareresponsibleforavarietyoftasks.Somedaysarereservedformarketinghomesforsale.Othersarespentmakingnetworkingcallsandadvertisingfornewclients.Evenafterasalescontractissigned,theworkoftheagentisnotdone.Agentsmustorganizeafinalhomeinspectionpriortoclosing,tomakesurethatthehomeisingoodworkingorderandthatalltheworkthebuyeraskedtobedonepriortotheclosinghas,infact,beendone.Agentsmustcommunicatebetweenthebuyerandthesellertomakesureallthisworkoccursinatimelyandorderlyfashion.TrainingIfyou’relookingtoresidentialrealtyforthoroughtraining,you’regoingtobedisappointed.Onlythelargestresidentialrealestatebrokersofferformaltrainingprograms.Foreveryoneelse,trainingcomesonthejob.Topickupthetoolsofthetrade,“beaggressiveaboutaskingquestionsandshadowingsenioragents,”suggests30©2009Vault.com,Inc. VaultGuidetoRealEstateCareersResidentialRealEstateAgents/BrokersNellieMacDiarmidMcCarthy,alicensedsalesagentwithCentury21SussexandReillyinChicago.“Developingarelationshipwithamentorisoneofthebetterwaystolearn.Shadowhimorheratopenhousesandshowings.”Asyoubecomemoresenior,theonlychangesinyourday-to-dayrolemaybemanagementresponsibilityand/ormentoringanewagent.Essentially,thejobwillstaythesame.Thetopdogsinthebusinessgetalotofnamerecognitionandperksfromtheirbrokers.Atthispoint,you’llhavebusinesscometoyoubecauseyournameissowellknown.Manytopagentsinvestinrealestatethemselves;someagentsleavetheirbrokerstostarttheirownagencies.Ontheonehand,residentialrealestateisanexquisitelyflexiblefield.Realtorscansettheirownhours,buttosatisfyclients’schedulingneeds,manyfindthemselvesworkingbetween50and60hoursaweek,especiallywhentheyarefirstlearningthebusinessandestablishingthemselvesintherealestatecommunity.Goodagentsneedtobeorganized,knowingenoughabouteachphaseofthebuyingandsellingprocesstokeepthingsmovingsmoothly(andlegally).Handlingclientsisalsovitallyimportant.Peoplegetveryemotionalwhenbuyingorsellingahouse,andareoftenverynervousaboutthelargesumsofmoneyspentoracquired.Becauseoftheseemotionalfactors,managingclientsandtheirexpectationsisacrucialresponsibilityforthesuccessfulrealtor.COMPENSATIONSinceagentsworkoncommissionratherthanonsalary,it’sdifficulttopredictcompensation.Thegrosscommissiononthehomesaleisdividedbetweenthebrokerrepresentingthesellerandthebrokerrepresentingthebuyer.Asmentionedbefore,thegrosscommissionisroughly5or6percentofthesalepriceinmostmarkets.Thebrokersthendividetheirshareswiththeagent(s)involvedinthetransaction.Agentshavedifferentcommissionagreementswiththeirsponsoringbrokers(effectively,theiremployers).Asanewagent,expectatleasta50/50commissionsplitwithyourbroker.Astheagent,youwouldexpecttomakehalfofthecommissionpaidtoyourbrokerage,whileyoursponsoringbrokerwillcollecttheotherhalf.Asyougainseniority,youcannegotiateforahighercommissionsplitandotherprivileges.Manybrokershaveatieredcommissionsplitinplacebasedonvolume.Forexample,abrokermaypaybettersplitsonceanagentgetspast$100,000ingrosscommissions.Ofcourse,thisalldependsonpre-negotiatedagreementsandcompanypolicy–soaskbeforeyoutakethatjob!Onethingtoconsideristhatittakesawhiletostartmakingmoney.“Youcanlookatitinphases,”McCarthyadds.“Firstyouhavetobuildyourclientbasethenyouhavetowaitfortheclosing.Hitthegroundrunninghardanduseyournetworkoffriends.”VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.31 VaultGuidetoRealEstateCareersResidentialRealEstateAgents/BrokersManyrealtorssuggestyouentertheprofessionwithsixmonthsofsavingstoguardagainsttheinitialslowmonths.Oftenthere’sasysteminplacesoagentscanpaytheirbillswhiletheywaitforcommissions.Brokerswillpayagentsadraw,whichisaninterestfreeloanthebrokerexpectstoberepaidfromtheagent’scommission.Drawsarenegotiablebutarereconciledeveryquarter.Iftheagentfallstoofarbehindinpayingbackthedraw,thenheorshewillbeexpectedtorepaythedrawormayevenbereleasedfromthebrokerage.Ifyou’regoodatthisjobandworkfulltime,youcanexpecttomakeupto$80,000inyourfirstyearandmorethan$100,000asyougainexperience.Rememberthatyou’remakingacommissionbasedonthesalepriceofthehouse.Averagehomepriceswillinfluenceyourcommission.Therefore,ifyou’reworkinginamarketwherehomesareexpensiveyouwillmakemoremoneythanifyousellthesameamountofpropertyinalessexpensivemarket.Also,keepinmindagentsareindependentcontractorsandnotemployees,sotheyaren’tentitledtobenefits.GettingPaidAssumeyouaretheagentrepresentingthesellerinatransactionwherethehouseissoldfor$1,000,000.Furtherassumethatthegrosssalescommissionwas5percent,or$50,000,andwillbesplitequallybetweenyoursponsoringbrokerandthebrokerrepresentingthebuyer.Therefore,eachbrokerreceives$25,000.Fromthispointonwearen’tconcernedaboutthebrokerortheagentwhorepresentedthebuyerinthetransaction–just“your”$25,000.Assumeyourpre-negotiatedsplitarrangementwithyoursponsoringbrokergivesyou70percent.So,thenetcommissionof$25,000willbesplitsuchthatyoureceive$17,500andthesponsoringbrokergets$7,500.Notabadpayday!Atthispace,though,theagentmustaverageaclosingeverytwomonths,orsixayear,tomakeasix-figureincome.GETTINGHIREDTherearen’tmanybarrierstobecomingarealestateagent,largelyduetotheminimalinvestmentmadeonthepartofthesponsoringbroker.Essentially,you’regivenadeskandphoneandlefttoyourowndevicestofindpotentialbuyersandsellersandlearnotheraspectsofthebusiness.Ithelpsifyoualreadyhaveyourlicense,butmostbrokerswillletyouonboardwiththeunderstandingthatyou’llhaveoneinthenearfuture.Sometimesyoucannegotiatethecostoftheclassandexamintoyour32©2009Vault.com,Inc. VaultGuidetoRealEstateCareersResidentialRealEstateAgents/Brokershiringpackage.Besuretoaskintheinterviewifthesponsoringbrokersubsidizestherealestateexamfee.Brokerslookforenergetic,self-confidentandindependentindividuals.Itwillhelpyourcauseifyouhaveaworkingideaofwhat’sinvolvedinbuyingorsellingahome.Becomefamiliarwithhowinterestratesimpacthomebuying,thehealthofthelocalrealestatemarketandwhatittakestogetamortgage.Also,headingintoaninterviewwithabusinessplanforacquiringclientsshouldimpressyourpotentialsponsor.Honestpeoplewhopossessstrongmarketingskillsdowellinthisindustry.Notethatsomebrokersdon’trequireyoutohaveacollegeeducation,othersdo.Itdependsonthefirm.There’salotofturnoverinthisbusiness,sobewareofpotentiallyapatheticemployers.Makesurethey’llworkwithyoutohelpyoulearnthebusiness.Talktootherbrokersatthecompanyyouareconsidering.Askthemcandidquestionsabouthowthebrokertreatstheiragents;askspecificallyaboutemployeeturnover.Askishowthebrokerhandlesleadsorreferrals.Somebrokersdon’thaveanequitablesysteminplacetodistributeleadsorreferralstothesalesagents,soonlyfavoredagentsgetbusinesswhileeveryoneelseislefttofendforhimself.Finally,besuretoaskaboutreimbursableexpenses.Inthecourseofmarketingpropertiesorentertaining,youwillbespendingmoney,soyoushouldaskthecompanyaboutitsreimbursementpolicy.Questionstoask•Whatkindoftrainingdoyouoffer?•Whatarethecommissionsplits?•Whatistheaveragetenureofyouragents?•Howdoyoudistributeleadsorreferralsamongagents?•WillIbereimbursedforexpensesrelatedtomyrealestatelicense?Questionstoexpect•Doyouhaveyourlicense?•Howlongareyoupreparedtoworkmakingnoorverylittlemoney?•Whydoyouwanttobearealestateagent?•Howdoyouexpecttofindclients?•Howareyourorganizationskills?•Howstrongareyourinterpersonalskills?VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.33 VaultGuidetoRealEstateCareersResidentialRealEstateAgents/BrokersADayintheLifeofaResidentialRealEstateAgent9:00a.m.:Getintheoffice,checkvoicemailande-mail.Createto-dolistfortheday.9:30a.m.:Placecallsonbehalfofaclientlookingtobuyahousetosetupatourforthisweekend.Askthesellers’agenttofaxoverthepropertylistingsheetsthatcontainallthevitalinformationonthehouse.Confirmtheaskingpriceandtrytofigureoutifthepropertyisindemandordeterminetheflexibilityofthesellers.10:15a.m.:Checkinwithco-workerstofindoutwhatdealstheyareworkingonandiftheyhaveanymarketscoop(i.e.,tradesalecomparables).11:00a.m.:Lobacalltoaclientbuyer’sattorneytoseeifeverythingisgoingsmoothlywithapendingpropertypurchase.Findoutthatitemsdiscoveredonthepropertyinspectionarebeingaddressed.Callclienttorelaytheinformationandreassureherthattheclosingwillhappenlaterthatweekasplanned.Haveabriefdiscussionaboutmortgagerates.12:00p.m.:Breakforalunchwithamortgagebroker.Talkaboutwhatishappeningwithmortgageratesandreceivethanksforallthereferralsyou’vepassedontohim.1:30p.m.:Checkandreturnvoicemailandemails.Organizemarketingmaterialsfordeliverythatday.Handthedeliverablestoanadministrativeassistanttomail.3:30p.m.:Headtothetitlecompanytocloseadeal.Yourclientisthebuyer.Huddleupwiththeattorneyandtheclienttomakesureeveryoneishappy.Everythingrunssmoothly.Getacashier’scheckmadeouttothebroker.Thankclientandtactfullyremindthemtoreferyourservicestotheirfriends.5:00p.m.:Backtotheoffice.Givethechecktoyourmanagerandgiveselfapatontheback.Askabouttimetableforpaymentofthecommissionandreturntodesk.Aco-workergivesahighfive.5:30p.m.:Checkemailandvoicemailonemoretime.Putoutfiresandcheckcommissionsforthepastyeartoseehowyoursalescomparetothoseofyourco-workers.6:00p.m.:Makesureeverythingissetforyourupcominghometours.Openupprospectlist,recordthecloseddealandseewhatdealsyouexpecttocloseinthenearfuture.7:00p.m.:Endoftheday.Co-workerwhogavethehighfiveremindsyouthatyoupromisedtobuydrinksonceyourdealclosed.34©2009Vault.com,Inc. CommercialRealEstateBrokerage–TenantRepresentationChapter5THESCOOPCommercialpropertybrokerageofficesemploysalesassociateswhomarketofficebuildings,hotelsandmanyothertypesofcommercialrealestateforthirdpartyinterests.Commercialrealestatesalespeopleusuallyspecializeinaparticularpropertytype,suchasapartments,retail,officebuildings,hotels,shoppingcentersorindustrialbuildings.MostofthelargecommercialbrokeragecompaniesintheU.S.produceagreatdealoflocalmarketdataandresearchinordertoservicesophisticatedclientsmakingmultimillion-dollarinvestmentdecisions.Likeresidentialagents,salesassociatesmustbelicensedandhaveasponsoringbrokertoconducttransactions.Thesalespersonlicenseacommercialbrokerholdsisthesameoneresidentialagentsuse.Therearetwotypesofcommercialrealestatesalesassociates:thosewhorepresentlandlordsandthosewhorepresenttenants.Thereissomeoverlapbetweentheroles,buttherearealsokeydifferencesthatyoushouldconsiderbeforepursuingthesecareers.Thischaptercoverstenantrepresentation;Chapter6coversworkforthelandlord.ONTHEJOBAtenantrepresentationagent,commonlyknownasa“tenantrep,”representscompaniesandothercorporateclientslookingtoleaseorbuyeitheraportionofapropertyoranentirerealestateasset.Alargepartofthisjobinvolvesbusinessdevelopment.Sincetenantrepsareoftenresponsibleforbuildingtheirownbookofbusiness,prospectingfornewclientsisabigpartofthejob.Likeresidentialagents,tenantrepsarelefttotheirowndevicestofindprospects.Althoughthere’ssomedirectionbythebrokerandseniortenantrepsintheoffice,forthemostpartyou’recold-callingtenantsorcompanies.First,youneedtogivethepersonontheotherendofthephoneacompellingreasontomeetwithyouthenyoumustpitchthebusiness.It’satoughsell.Tenantrepresentationisverycompetitive,evencutthroat.You’renotonlycompetingagainstoutsiderepsbutthoseinsideyouroffice.Infact,sometenantrepbrokersthinkthecompetitioninsideisworsethanoutsidetheshops.Oftentherearedisputesaboutwhoisentitledtochasewhatbusiness.Ultimately,theseniorbrokerstendtowin.Dealprotocolisimportanttoconsiderwhenyou’reselectingbrokersbecauseoftentherearedisputesarecommonamongtenantreps.35 VaultGuidetoRealEstateCareersCommercialRealEstateBrokerage–TenantRepresentationWhenthetimecomesforoneofhisorherclientstobuy,sellorlease,thetenantrepfindsalistofchoicesinthemarket,thenhandlestheaccompanyingnegotiations.Tenantrepsusuallyworkinteamstospreadthework.Oftentheteamiscomposedofoneseniorandonejuniorbroker.Thejuniorbrokerwillmakethecoldcallsandsetupmeetingswithprospectiveclients.Atthemeetingstheseniorbrokerwilltaketheleadandtrytowinthebusiness.Oncetheprocessbegins,thejuniorbrokerwilldothelegworkformarketalternativesandexamineoptionswiththeseniorbroker.Allpossiblealternativesarepresentedtotheclientforreview.Theseniorbrokergenerallyhandlestheleaseorsalenegotiations.Thismutuallybeneficialsystemgivestheseniorbrokera“coldcaller”andprovidesatrainingplatformforthejuniorbroker.Juniorbrokersshouldexpecttoworkatleast50to60hoursperweek;seniorbrokers’hoursfluctuatebasedondealflow.Oncejuniorbrokershavesurpassedcertainearningrequirements,they’repromotedtoseniorbrokers.Theystillmakecoldcallstogetleads,thoughnotnearlyasoftenasjuniorbrokers.Thecompanyreliesonitsseniorbrokerstowinbusinessandhandletransactionsfromstarttofinish.Sometimesseniorbrokershelpcreateandexecutemanagementpolicy,andevenhaveequityatsmallerfirms.COMPENSATIONLikeresidentialagents,manycommercialsalesassociatesoperateoncommissionandsplitcommissionswiththemanagingbroker.Somefirmspaybasesalaries,butthispracticeisnotcommon.Thecommissionstructurediffersbasedonpropertytypeandisdeterminedbyaformulamorecomplexthanthesimplesplitusedforresidentialbrokers.Thisformulatypicallydependsonseniority,basepayandthesizeofthetransaction.Forinstance,thecommissioncouldbestatedas$.80persquarefootperyear.Ona10-yearleasetransactionfor10,000squarefeetthegrosscommissioncalculationwouldbe$.80times10,000(squarefeet)times10(years)or$80,000.Notabadpayout.Butwaitaminute!Thispiehasyettobedivided.Thetenantrepresentativestillhastogivethemanagingbrokerhisorhershareandthensplittherestamongtheteam.Attheendoftheday,thesplitmaylooksomethinglikethefollowing:yougive50percenttothemanagingbrokerandsplittheremainingnetamountwithyourteammate(s)evenly.Inourexample,thatyields$20,000eachtotheseniorandjuniorbroker.Notethatthesalescycleislong,soitcantakeawhiletogetpaid,sometimesaslongasayear.Thenormisthatbuildingownerspayhalfofthecommissionuponleasesigningandtheremainderwhenthetenantmovesin.Commissionsvarybygeographyandproducttype,sotheaboveexampleshouldnotbeconsideredofthenormforallareas.Forexample,thecommissioninNewYorkmaybehigherthanitwouldbeinWashington,D.C.36©2009Vault.com,Inc. VaultGuidetoRealEstateCareersCommercialRealEstateBrokerage–TenantRepresentationTenantrepresentationcanbeveryrewarding,butdoeshaveitsrisks.Remember,noindividualcancontroltheeconomy.Somedealsdon’tmaterialize.Whentheeconomyisinbadshape,companiesarelessactiveinthemarketandyoumayhavefewtonocommissions!Yourclientmaypulltheplugonthedealatanytime,leavingyouwithnothingforyourtimeandhardwork.Makenomistake;tenantrepresentativesareusuallyrisktakerswholikebigpayoffs.GETTINGHIREDOnemajordifferencebetweenresidentialagentsandcommercialbrokersisthesophisticationoftheclient.Incommercialrealestateyouarecallingonseniormanagement–theCEO,CFOorCOOofacompany.Thesepeopleareusedtomakingmajordecisionsandprefertohavealotofinformationbeforehand.Also,executivesexpectimmediateanswerstotheirquestions.Strongpresentationskillsanddependabilityareamust.Ifyouareswitchingcareers,ithelpsifyouhaveasalesbackground.Expecttobeaskedwhyyou’reinterestedinrealestateandwhyyou’dbesuccessfulinsales.Thisfieldissimilarinsomewaystoresidentialrealestatesales,buthardertobreakinto.Commercialrealestateisnormallyalessemotionaltransactionthanresidential;itismoreofabusinessdecision.Ifclientsaredissatisfiedwithtenantreps,theyfinditeasytofirethem.Unfortunately,thishappensmorethanyoumightcaretobelieve.Thecorporatecommunityissmall,however,sodoingagoodjobforoneseniormanagerwillinvariablyleadtomorebusiness.Questionstoask•Isthereatrainingprogram?•WillIbeexpectedtoteamupwithaseniorbroker?•Howdoyouhandlecommissiondisputesamongbrokers?•Doyourestricttheareasorthecompaniesthatyourbrokersareallowedtocallon?•Howmanyoftheseniorbrokersstartedasjuniorbrokersatthiscompany?•Howlongdoesitusuallytaketobecomeajuniorbrokerandwhatarethecriteriaforadvancement?Questionstoexpect•Whyareyouinterestedinrealestate?•Whywillyoubesuccessfulinsales?(Bereadytodemonstratethiswithexamples.)•Howdoyoufeelaboutmakingcoldcalls?•Canyougivemeanexampleofatimeyouexhibitedstrongteamworkskills?VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.37 VaultGuidetoRealEstateCareersCommercialRealEstateBrokerage–TenantRepresentationADayintheLifeofaCommercialSalesAgent7:30a.m.:Thingsusuallystartearly.Getintotheoffice,checkvoicemailandgothroughcontactdatabasetolineupcoldcallsfortheday.ScanTheWallStreetJournalorthelocalpaper’sbusinesssectiontoseeifclients,prospectsorotherrelevantindustrynewsarementionedinthepaper.Remindselfaboutworkingoncommissionandmotivate.8:15a.m.:Huddleupwithpartnertodiscussto-dos.Perhapsdiscusscurrentleaseorpurchasenegotiationsandstrategy.Dividetaskstobedoneandsetupateammeetingtimefortheendoftheday.9:00a.m.:Checkinwithsomeco-workerstofindoutwhatdealsthey’reworkingonandiftheyhavesomemarketnews(i.e.,tradeleaseorsalecomparablesandfindoutwhichtenantsareinthemarket).9:30a.m.:Startmorningcoldcalls.Trytosetupmeetingswithdecisionmakersandfindoutasmuchaspossibleoverthephoneabouttheirrealestateneeds.Determinewhomakesrealestatedecisions.Makenotetofollowupwithmarketingmateriallaterthatday.12:00p.m.:Breakforaprescheduledlunchwithaclient.(Sometimesyouhavelunchwithprospectiveclients,leasingagentsorcolleagues.)Discussmarketconditionsandtrytoextractinformationthatwillhelpgetmorebusinessorhelpcurrentleasenegotiations.1:30p.m.:Checkandreturnvoicemailandemails.2:30p.m.:Checkinwithclientsandclients’attorneystodiscussongoingleaseorpurchasenegotiations.Makecallstoarchitectsorcontractorstoseehowyourbuildingisprogressing.Reportanytime¬sensitiveinformationtoclient.Setupbuildingtoursforlaterintheweekandtrytogetasensewhattheownersofeachbuildingarelookingforfinanciallyandhowdesperatetheyareforadeal.4:00p.m.:Writefollow-uplettersandpreparemarketingmaterialforprospects.Callinternalaccountingdepartmenttoseewhenyouwillbereceivingyouroutstandingcommissionchecks.Afterexplainingthetimevalueofmoneytothem,threatenthem.Callbackandapologizeandbeg.Perhapsnowyourcheckswillcomeinatimelyfashion.5:00p.m.:Checkinwithyoursalesmanager.Shewantstoknowwhichdealswillclosethisquarterandifeverythingisontracktohitforecastednumbers.Complainabouttheaccountingdepartmentandpumpherforinformationaboutwhereyoursalesnumbersareinrelationtoyourco-workers’.38©2009Vault.com,Inc. VaultGuidetoRealEstateCareersCommercialRealEstateBrokerage–TenantRepresentation5:30p.m.:Onelastmeetingwithpartnertorecaptheday.Discussanyproblemsandcomeupwithsolutions.Makefollow-upphonecallstogethertoleasingagentsorclients.Gossipabouttheday’smarketactivity.Setameetingtimeforthenextday.6:15p.m.:Finallygettoyourmail(inthisbusiness,yougetalot).Receiveawrittenresponsetoarequestforaproposalfromabuilding.Makeacopyforpartnerandreviewthedetails.Handanothercopytotheanalysttorunthenumbersassociatedwiththedeal.ForFurtherReferenceTherearemorelargecommercialbrokersthanresidentialbrokers.Somewell-knowntenantrepcompaniesareJulienJ.Studley(www.studley.com),Cushman&Wakefield(www.cushwake.com),CBRichardEllis(www.cbre.com)andJonesLangLaSalle(www.joneslanglasalle.com).VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.39 CommercialRealEstateBrokerage–LeasingAgentChapter6THESCOOPTheleasingagentpositionistheflipsideofcommercialrealestatebrokerage–thecomplementtothetenantrep.Theseagentsleasespaceatapropertyforathird-partycompany,anowneroraREIT.Theleasingagentisemployedbytheownerasanintermediarytoshowandleasevacantspaceandnegotiateleasesforexistingtenantswantingtorenew.Manyownersexpectmonthlyreportsontenantsinthemarketforspace,companiesthathavetouredthebuilding,competitiverentsandexplanationsforwhytenantschoseanotherbuildinginsteadofyours.ONTHEJOBAbigpartoftheleasingagentpositionentailscollectingasmuchinformationonthelocalmarketaspossibleandconciselyconveyingthatdatatotheownerofthebuilding.Heorshereliesontheagenttoobtainafairmarketleaseaswellastorepresentownershipwhenshowingthebuilding.Consequently,theleasingagenthastoknoweverythinghappeningatthebuildingandinthesurroundingmarket.Leasingagentsshouldalsobefamiliarwiththehistoryofboth.Theyshouldalsobeabletorecitethenamesofeverytenantresidinginthebuildingandwhentheirleasesexpire.Goodleasingagentsareveryorganizedandgivethoroughbuildingtours.Leasingagentsmustbesocial.Goodagentsareinregularcontactwiththeirtenantsandcarefullymonitorleaseexpirationsintheirbuildings.Inordertogetthemarketinformationyouneed,youmustconstantlynetworkwithyourpeers.Tenantrepresentativesaresaidtocontrol90to95percentofthemarketplace.Thatmeansgoodleasingagentsformrelationshipswiththetoptenantreps.Leasingagentsaregenerallygivenabudgetforentertainingthebrokeragecommunitysotheycaneffectivelygatherinformationonwho’slookingforspaceandmarkettheircompany’sbuildings.Becauseofthis,leasingagentscandevelopreputationsasgreatpartythrowersandfortheirmarketingcreativity.Whilethisisfun,somebrokerstireoftheentertaining,especiallywhenitdoesn’ttranslateintodeals.Leasingagentsoftenleasemorethanonebuildingandworkinteamsliketenantrepresentatives.Additionally,therearesomethatmoonlightastenantrepbrokersoractasconsultantsonbuildingpurchases.Someownersdiscouragethispracticebecauseofconflictofinterestconcerns.Thenaturalprogressionistomovefromjuniortoseniorleasingagent.Thedifferencebetweenthesetworolesismoreleasingresponsibility.Insteadofrepresentingjustleasingoneproperty,senioragentshandleleasingformultiplebuildings.They’realso41 VaultGuidetoRealEstateCareersCommercialRealEstateBrokerage–LeasingAgentresponsibleforhelpingtowinmorebusiness–securingleasingassignmentsfromowners.Verysuccessfulleasingagentsaregenerallyopportunisticand,afterbeinginthebusinessforawhile,developanetworkofownerswhoprefertoworkwiththem.Theybecomefamiliarwithwhichassetsdifferentownerslookforandtrytoidentifybuildingsthatmeetthesecriteria.Iftheyidentifyanopportunityandtheownerbuysthebuilding,they’reentitledtoacommissiononthesale.Thebestagentssometimesreceiveequityinthecompanyforwhichtheywork.COMPENSATIONUnliketenantrepresentatives,leasingagentsgenerallygetasalaryinadditiontoaperformance-basedcommission.Whilethismaynotbeaslucrativeastenantrepresentation,thereisn’tasmuchemphasisonprospectingforclients.Althoughlessriskythantenantrepresentation,there’sstillunpredictabilityassociatedwiththisrole.Agoodagentmaypotentiallyleasehimselfoutofajob.Oncethebuildingisoccupied,yourresponsibilitiesdwindle.Additionally,leasingcontractswithownersareshortterm(andvoidifthepropertyissold).Ownerscanbedemandingandareconstantlyfeelingoutcompetingleasingcompanies.If,forwhateverreason,you’reremovedfromabuilding,youcanonlyhopeyourcompanyhasanotherbuildingforyoutolease.GETTINGHIREDGoodtenantrepresentatives“mustbeextremelypresentable,amultitaskerandaggressive(inatactfulway),”advisesMitchLoveman,seniorvicepresidentatTranswesternCommercialServices.“Yourepresentthebuilding,soyoumustcarryyourselfverywell.Thegoodleasingagentsknowtheirbuildingandtheircompetition,andhaveastrongworkingrelationshipwiththerealestatecommunity.”Leasingagentsmusthaveasalespersonlicense.Mostfirmsrequireacollegeeducationandanunderstandingofbasicfinance.Expecttobeaskedaboutyourorganizationalandinterpersonalskills.Furthermore,don’tbesurprisedifyou’reaskedmarket-specificquestionsrelatingtocompetitors,vacancy,leaseratesandtheowner’spropertyportfolio.Besuretoaskabouttheproperty’smarketingplan,howtheleasingteaminteractsonadailybasisandcareerprogression.Havingpriorsalesexperiencecanbeabigplus.Ifyoucandemonstratethatyou’recomfortablepresentingandthatyouareaneffectivecommunicator,you’lldowellinthisposition.42©2009Vault.com,Inc. VaultGuidetoRealEstateCareersCommercialRealEstateBrokerage–LeasingAgentQuestionstoask•Whatisyourproperty/portfoliogoal?•Doyouexpectgrowthorcontractioninyourportfolio?•Whatisyourstrategytoreachthatgoal?•Whatisyourproperty'scompetitiveadvantage?•Pleasedescribeyourcurrentleasingteam'sstructure,theirresponsibilitiesandhoweachteammemberinteracts.Questionstoexpect•Doyouhaveyourrealestatesalesperson'slicense?•Howmuchfinancedidyoutakeincollege?•Howmuchfinancerelatedworkexperiencedoyouhave?•Howareyourorganizationalskills?Canyouprovideanexampleofaprojectyouworkedonthatdemonstratesstrongorganizationalskills•Areyoucomfortablemakingpresentations?Doyouhaveexperiencemakingpresentations?•Whatisthevacancyratein__________?(Insertthemarketinwhichyouinterviewing.)•Whataremarketleaserates?•Whodoyouconsidermycompetitors?ADayintheLifeofaLeasingBroker8:00a.m.:Checkcalendarandmostrecentemailsonphonewhilewalkingintooffice.Grabcoffeeandprioritizeday.Startbyidentifyingsomeleaseexpirationsinyourbuildings.8:30a.m.:Stopbytoseeseniorbrokeraboutanupdateonaleasenegotiationwithabigtenant.Heexplainsthattenantisstillpushingforalowerrentandmoretenantimprovementsdollars.Gobacktoyourdeskandreviewmarketstatsontheotherspacesthatyouthinkthatthetenantisconsidering.9:00a.m.:Youreaffirmyourrentascompetitivewiththemarket.UsingARGUS,yourunsomealternatescenariosofhavingthespacestaydarkforsixmonthsorleasingitimmediatelyanddroppingrentabitandofferingmoretenantimprovements.Jotyourthoughtsdowninanemailandsendtoseniorbroker.10:00a.m.:Getacallfromaprivateequityinvestorthatyoumetatanetworkingeventthepriorweek.He’sconsideringbuyingabuildinginyourmarket,andVisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.43 VaultGuidetoRealEstateCareersCommercialRealEstateBrokerage–LeasingAgentwantstochataboutmarketconditionsandcompetitivebuildings.Heasksifyou’dbeinterestedinleasingthebuildingifhepullsthetrigger.10:30a.m.:Makecallsonsometenantsthatmaybelookingforspace.Respondtosomee-mails.11:15a.m.:Seniorbrokergrabsyoutodrivetogethertoanopeningeventforanewlyrenovatedbuilding;theownerwantstogetsomeattentionforleasing.Freelunchandevenfewprizes,butnoluckthistime.Schmoozewithotherbrokers.12:45p.m.:Backintheoffice.Puttogetherleasetermsrequestedbyanexistingtenantforarenewal.1:15p.m.:Daydreamaboutgettingsomebigleasesclosedtogetsomecashflow.1:30p.m.:Findoutthatoneprospectivetenantgoestoacompetitivebuilding.Reallywanttofindoutwhatthetermswere.Callyourfriendattheotherbrokeragethatclosedthedeal.Hedoesn’ttellyouexactlybutoffershints.2:00p.m.:Seniorbrokerstopsbytodiscussyouremailwithsensitivitiesfromearlier.Youcallthebuildingownertogethertoseeifhe’llbendanyonrenttogetthedealacrossthefinishline.Nodice;holdfirmfornow.3:00p.m.:Headofftowalkthroughsometenantsinoneofthebuilding’syourepresent.You’rehappytoscheduletwoalmostbacktoback.Neitherseemsreadytopullthetrigger.4:30p.m.:Backintheoffice.Rememberthatthere’sarealestateeventatanearbybarat6p.m.Respondtoemails.4:45p.m.:Discusstheupcomingleaseexpirationsthatyouidentifiedinthemorningwiththeseniorbroker.Makesomecallstotryandsetupmeetings;leavemessages.5:30p.m.:Seniorbrokercallsonhiswayhometosaythathegotwordthatamodestleasedealyouhelpedonisgoingtocloseandleasesigningwillbetomorrow.Cheerstocommissions.5:45p.m.:Closeupshopandheadtohappyhour.Putonyoursocialhat.44©2009Vault.com,Inc. InvestmentSalesBrokerChapter7THESCOOPTheinvestmentsalesbrokerrepresentsarealestateinvestorlookingtobuy,sellorfinancearealestateasset.Thesebrokersworkwithallrealestateassetclasses–apartments,officebuildings,industrial,hotelandothers.Investorshirethesebrokerstoprovidestrategicadvice,marketknowledgeandaccesstocapital.Notethatmanyowners,suchasREITs,havetheirownacquisitionanddispositiongroupsandoftenhandlesomeinvestmentbrokerfunctionsinhouseratherthanhireathirdparty.Investmentsalesbrokersdealwithmorecomplicatedissuesthanresidentialorcommercialbrokers.Theclientsareverysophisticatedandthefinanceinvolvedcanbecomplex.Brokersshouldunderstandhowdifferinglevelsofequityanddebtimpactapurchasedecisionandtheasset'sreturn.Forexample,iftheloan-to-valueonthedebtdiminishes,thebuyerwillwanttounderstandtheimpactonforecastedreturns.Goodinvestmentsalesbrokerswillalsoworkwiththebuyertodetermineifthereareadditionalfinancingvehiclesavailable,suchasmezzaninedebt.Mostofthepeopleinthisbusinesshaveabalanceofanalyticalandpeopleskills,therefore,goodinvestmentbrokersarepersonableandunderstandhowanalyticalissuessuchasfinanceimpactclients.ONTHEJOBMarketingmakesupalargepartofthisbusiness.Brokersarealwayspitchingrealestateinvestorsforassignments.Theyidentifyopportunitiesbynetworkingwithinvestorsandanyoneelsethatmayprovideleads.Theydon’tmakeasmanycoldcallsastenantreps,butit’sstillpartofthebusiness.Youmustbeaggressive.Onceabrokeridentifiesasellerorinvestortorepresent,hemuststillconvincethemhe’sworthyoftheassignment.Thisjobinvolvesmakingalotofpresentationstopotentialclients,entertaininginvestors,andendlessnumbercrunching.Typically,anownerinterviewsmultiplebrokersforanassignment.Likeotherbrokers,theydistinguishthemselveswiththeirmarketknowledgeandtheirtrackrecord.Onceabrokergetsanassignment,heneedstoexecutethesale,purchaseorfinancing.Thesaleofanassetinvolvesputtingtogetherdetailedpropertyinformationthatwillhelpaninvestormakeaneducateddecision.Themarketingmaterialsincludepicturesoftheproperty,financialanalysesandinformationaboutthelocalmarket.Inapropertypurchase,thebrokerhelpstheinvestordigestthemarketinginformationandprovidesaframeofreferenceforsimilartransactions.Thebrokermayhavetodeterminewhichfinancialstructuremeetstheinvestor’sgoalswhenthedealinvolvesfinancinganasset.45 VaultGuidetoRealEstateCareersInvestmentSalesBrokerInvestmentsalesbrokerstendtoworkinsmallteamscoveringspecificregionsand/orassetclasses.Thosenewtothefieldcomeinasassociates.Theassociateisthejuniorpersonontheteamandisresponsibleforputtingtogethermarketingmaterials,generatingfinancialanalysisandanyotherpaperworklinkedtothedeal.Abovetheassociateisavicepresident,whoisexpectedtobringinbusiness,supervisethetransactionsandhandlethemajorityofclientcontact.Themanagingdirectorheadstheofficeandistheultimatedecisionmaker,responsibleformanagingallofthetransactionsaswellastheoffice.COMPENSATIONInvestmentsalesbrokersarehigh-profileoperatorsintherealestateindustryandcanmakeattractiveincomes.Althoughsomedogetpaidasalary,mostearnthebulkoftheirincomefromcommissions.Somedonotreceiveasalaryandarecompensatedonlybycommissions–trulyasinkorswimsituation.Inthissituation,brokersrecommendthatanewbiehaveenoughmoneyputasidetosurviveuptoayearsinceitcantakethatlongbeforeyoubegintopocketenoughcommissions.Besuretoresearchhowthefirmthatyouareinterviewingwithhandlescompensation.Intoday’smarket,thetotalcommissionisroughly1to2percentofthetotalsalesprice(e.g.,$30,000,000salewitha2percentcommissionhasagrosscommissionof$600,000).Thecommissionpercentageisnegotiatedbetweentheownerandbuyerandtheirrespectivebrokers,soitvariesdependingonthedeal.Unlikeresidentialrealestate,thecommissionisnotpaidentirelybytheseller.Forexample,inthesaleofalargeindustrialpark,thesellerandthebuyermayeachpaytheirrespectivebrokers1percentofthesaleprice(or$300,000each).Commissionsarethensplitbetweenthecompanyandyourbrokerageteam(thesplitcandependonyou/yourteam’sproductionbutbeginsat50/50foratleastonemajorbrokeragecompany).So,themoneyearnedbyyourteamforthesalewouldbe$150,000.Notabadpaydaywhenconsideringyourteammaybeonlyafewprofessionals.GETTINGHIREDGettingajobasaninvestmentsalesbrokerwithoutpriorrealestateexperienceisdifficult.Youneedtohaveastrongbalanceofquantitativeandqualitativeskillstohelpyouwinbusiness,andthesequalitiesareoftenthereasonthatcandidatesarehired.Sinceinvestmentbrokersneedastrongunderstandingofvaluation,acandidatethathasexperiencewithvaluingassetshasanedge.Asoneinsidercapturedit,beingsuccessfulatthisjobrequiresthreethings:knowledgeofrealestatefundamentals,salesmanshipandpersistence.Asforinterviews,bepreparedtoanswerquestionsonvaluationandonwhatinvestorslookforinaproperty.Alsobepreparedtodiscussthedifferentassetclassesinyourlocalmarketandrecentsalesinformation,suchascapratesandpricespersquare46©2009Vault.com,Inc. VaultGuidetoRealEstateCareersInvestmentSalesBrokerfoot.Thosewithaquantitativebackgroundinrealestatewillprobablyhaveaninterviewfocusedmoreonfit.Expecttobeaskedhowyourbackgroundwillbenefittheteam.Inthecaseofatleastonemajorfirm,youwillbeaskedtotakeapersonalitytestafteryourinterview(s).Allinall,makesureyoucananswerthetechnicalquestionsandareextremelypresentable.Ifyouknowyouwanttobeinthebusiness,butdon’thavetherequisiteskillset,youcanalwaysstartinanotherfacetoftheindustry.Forexample,commercialleasingbrokershavebeenknowntobreakintothisfieldafterestablishingthemselvesastopperformers.Alternatively,somecommercialbrokerageshavesalariedanalystpositionswhereyouwillperformmostoftheanalyticalandresearchworkinsupporttheinvestmentbrokers.Namely,justgetsomerealestateexperience,preferablyonthequantitativeorsalesside.Ifyoufeelyouhavetherequisiteskillstobeaninvestmentsalesbroker,contactsomeofthefirmslistedinthisguide(seetheAppendix).Eastdil(www.eastdil.com)andMarcus&Millichap(www.marcusmillichap.com)aretworespectedinvestmentbrokerswithofficesacrossthecountry.Also,largerealestatefirmssuchasCBRichardEllisandCushmanWakefieldhaveinvestmentsalesgroupsinmajormarkets.Finally,manylargerealestatemarketswillhavelocalinvestmentbrokeragecompanies;keepyou’reeyeoutforwhoisadvertisingcommercialpropertyforsalearoundyourcity.Questionstoask•Howdoestheinvestmentteamdisseminatework?•WillIbejoininganexistingbrokerageteamorhelpingexpandintoanewsubmarket/assetclass?•Whatisthebackgroundoftheteammembers?•Howdoesthefirmhelpintegratenewhires?Whatisthetrainingprocess?Questionstoexpect•Whatisyourbackgroundwithrealestatevaluation?Whatwouldyouvalue[samplebuilding]inourmarket?•AreyoufamiliarwithArgusandExcel?Provideexamplesoffinancialmodeling.•Howwouldyouapproachmarketingapropertyforsale?•Whatarerents,vacancy,absorptionandcapratesinthismarket?•Sellmethisbuilding.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.47 VaultGuidetoRealEstateCareersInvestmentSalesBrokerADayintheLifeofanInvestmentSalesBroker7:45a.m.:Startthedaybycheckingyoure-mailandvoicemails.Next,startreadingsomeoftheindustrystandardperiodicals–RealEstateAlert,globest.com,thelocalpaper’sbusinesssectionand,ofcourse,TheWallStreetJournal.Checkavoicemailleftlastnightfromyourboss.8:15a.m.:Checkinwiththeassociatetomakesurethemarketingliteratureandthefinancialanalysisforapropertysalewillbereadyafterlunch.Gooversomeadditionalscenariosandaskhimtoincludetheminthefinancialanalysis.9:15a.m.:Placeacalltoalocalownertodiscussthepossibilityofsellinghisbuilding.Heasksforanopiniononwhathispropertywillfetchandaboutpropertiesforsalethatmeethisinvestmentcriteriashouldhedecidetobuyanotherbuilding.Healsoasksaboutoptionsifhedecidestorefinancehisproperty.9:30a.m.:Receiveacallfromacompetitorrequestinginformationaboutapropertyforsale.Realizehe’sreachingforinformationthatthesellerisn’tpreparedtodisclose.Switchgearsandaskhimabouthislistingsandthebusinessheischasing.10:00a.m.:Themanagingdirectorswingsbyandasksforamemoupdatingaforeignclientonthestateofthedomesticrealestatemarket.Youpullonetogetherusingsomeinfoyousentanotherclient.10:45a.m.:Givethemanagingdirectorthefinishedmemoandgetreadyforameetinginwhichtheteamwilldiscussstrategyforapropertypurchase.Theteamdiscussesrecentcomparablesales,theconditionofthepropertyandaclient’sinvestmentobjectives.12:30p.m.:Breakforlunchwithafriendfromacompetitoranddiscussthemarket.Thereisalotofdiscussionaboutthecostofcapitalforrealestateassetsandaboutthelocalestatemarketconditions.2:00p.m.:Checkinwiththeassociateandmakesuremarketingliteratureandfinancialanalysiswillgetdonetoday.2:15p.m.:Haveaconferencecallwithaclienttodiscussthestatusofapropertypurchase.Theclientisconcernedaboutoverpayingfortheproperty.Assurehimhisofferisinlinewithmarketcomparablesandthepropertyisworththeprice.3:00p.m.:Reviewmaterialstheassociateprepared.Aftercheckingthedocuments,returnemailsandseehowthefinancialmarketsdidthatday.48©2009Vault.com,Inc. VaultGuidetoRealEstateCareersInvestmentSalesBroker4:00p.m.:Acolleaguefromanothercitycallstodiscusstheconditionofyourlocalmarket.Hehasaclientwhomaybeinterestedinbuyingapropertyintheareaandwantstodiscussthepossibilityofpartneringonthedeal.Tellhimyouwillspeakwithyourmanagingdirectoraboutitandgetbacktohim.4:30p.m.:Dropinonthemanagingdirectortotellhimaboutthepartneringopportunity.Heinstructsyoutonegotiatethecommissionsplitsupfrontandmakesuretogeteverythinginwriting.5:00p.m.:Directtheassociatetopackagethemarketinginformationandfinancialanalysisforyourpropertysaleinabook,andsenditouttoalistofprobablebuyers.5:15p.m.:Hitthephonesonelasttimetoreturnphonecalls,tryingtocatchsomecolleaguesinanothermarketwhereaclientmaybeinterestedinbuyingrealestate.6:00p.m.:Endoftheday.Realizingyourdealflowissmall,scheduleameetingforlaterthatweekwiththeteamtodiscussnewbusinessinitiatives.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.49 Mortgage-BackedSecuritiesOriginators&RatingAgenciesChapter8THESCOOPLendersordebt-holders,suchasbanks,havetheoptiontocarryrealestatedebtontheirbalancesheetortopoolandsellsomeoftheirmortgagestoinvestors.Somebanksmakeabusinessofonlyoriginating,packagingandsellingtheloans.Theseoriginatorsofmortgage-backedsecurities(MBS)aregenerallylargerbankssuchasBankofAmerica,MorganStanleyandJPMorganChase.MBSmaybesecuredbydifferenttypesofrealestate,includingbothresidentialandcommercialproperties.Notethatthetermsofthemortgagesdonotchange,sothepropertyownerofrecordcontinuespayingthesameprincipalandinterest.BeforetheypooltheirmortgagesandissuetheMBS,theoriginatorsmustratethedebt–muchlikeisdoneinthebondmarket.Theratinggivesthepotentialbuyeranideaoftheriskassociatedwiththedebtandultimatelyimpactsthecostofsecurities.Jobopportunitiesexistwithbothoriginatorsandtheratingagencies.Let’sfocusonthecommercialmortgage-backedsecurities(CMBS)marketandthethird-partyagencieshiredtoratethedebt.CMBSaresecuredbyloanswithcommercialproperties.InvestorsthatbuyCMBSpurchaseanundividedinterestinagroupofcommercialmortgages.Theagenciesarehiredbytheissuertoprovideanobjectiveratingofthedebtinexchangeforaservicefee.Theratingisbasedonareportthatispartfinancialanalysisandpartmarketanalysis.Typically,theCMBSissuerhiresmorethanoneratingagencysothebuyercanevaluatemultipleratings.TheCMBSmarketgrewsignificantlyfromthe1990sto2007,fromroughly$10billionto$230billioninannualoriginations.Nonetheless,originationssloweddramaticallyin2008and2009duetotheconcernsaboutpoorlendingstandardsonpriorissuances,especiallyvintagesfrom2004to2007.TheMBSmarketmaytaketimetorecoversoopportunitieswillbelimitedintheneartermatbothratingagenciesandlenders.Still,MBShasbecomeavitalcomponentofrealestatefinanceandisexpectedtoreturnasavibrantpartofrealestatefinance.ONTHEJOBTheworkatmosphereatanoriginatororratingagencyisteam-orientedandfocusedonanalysisoftheCMBSoffering.Theoriginatorsaretaskedwithpoolingmortgages,structuringdealsandsellingthem.TheratingagencyistaskedwithprovidinganimpartialanalysistohelpvalidatetheriskandreturnonMBSpoolsandtranches(segments)ofthosepools.Essentially,theratingagencyverifieswhattheCMBS51 VaultGuidetoRealEstateCareersMortgage-BackedSecuritiesOriginators&RatingAgenciesissueroriginallydidbyexaminingthecreditworthinessofthepropertiesanddebtorsbehindthemortgages.NewcomersentertheMBSfieldasanalysts.Theirresponsibilitiesincludedataentryandfinancialmodeling.Supervisingtheanalystisthedirector,whosemainroleistocollectandstreamlinealldocuments.Thedirectorisalsoafactchecker,oftenwritesthefinalratingreportandoverseestheunderwritingbytheanalyst.Atthisleveltheclientinteractionbegins.Nextinthehierarchyistheseniordirectorwhosupervisesalltheworkbeingdonebythedirectorandexecutesanyrequestsfromtheclient.Rightabovetheseniordirectoristhemanagingdirector,whousuallyhasthebankingrelationships.Thisperson’sprincipalroleistogetnewworkandsmoothoutanyproblems.Thegroupmanagingdirectorisatthetopoftheheapintheoffice.He’sresponsibleforthebusiness.Althoughsomeratingagenciesareinternational,theworkloadisoftenbasedongeography.Therefore,ifyou’reontheEastCoast,thedealsyouworkonwillmostlikelyinvolveEastCoastproperties.Likewise,internationaldealsaredonebyforeignoffices.COMPENSATIONAgenciesarepaidafeebyCMBSissuersinreturnfortheirobjectiveratinganalysis.Eachteammemberhastheopportunitytomakeabonusbasedonindividualandgroupperformance.Asyouascendthehierarchy,thebonusesincrease.Ananalystmakesroughly$50,000peryearplusabonus.Anassociate/directormakesroughly$90,000to$140,000peryearplusabonus.Aseniordirectormakesroughly$110,000-$160,000peryearplusabonus.Amanagingdirectormakesroughly$200,000peryearplusabonus.Thegroupmanagingdirectorpullsinapproximately$250,000peryearplusasizablebonus.GETTINGHIREDAsmentioned,originatorsaregenerallylargerbankssuchasBankofAmerica,MorganStanleyandJPMorganChase.ThemainplayersintheratingbusinessareStandard&Poors,Moody’sandFitchRatings.Youdon’tneedtohavearealestatelicensetoworkinthisfield.Thestartingpointistheanalystposition;beyondthisroleitdependsonthefirm.“Youdon’thavetohavearealestatebackgroundtogetinatthegroundfloor,butitdoesseparateyoufromothercandidates,”saysaninsiderataleadingratingagency.“Welookforsomeonewhoisfamiliarwithfinanceand,perhapsmostimportantly,wevalueinterpersonalskillswhenfillingananalystposition.”Thisjobhasareputationasasteppingstonetotheinvestmentsideofthebusiness.52©2009Vault.com,Inc. VaultGuidetoRealEstateCareersMortgage-BackedSecuritiesOriginators&RatingAgenciesInaninterview,bereadytoanswerquestionsaboutthedifferencebetweenequityanddebt,thelevelofyourExcelskillsandwhyyouwanttoworkinrealestate.Anunderstandingofbasicrealestateterminologyandfundamentalsisnecessary.NotethatthevolumeofhiringwilldependonthevolumeofnewMBSissuance;lookforanuptickinlendingasaleadingindicator.Questionstoask•Howistheteamstructured?•Whatisthevolumeoftransactionsintheoffice?•Whatisthelevelofturnoverintheanalyst/directorposition?•Whatisthecareerpath?Whatmakesananalyst/directorstandout?•Howhaveyouadjustedyourbusinessafterthelastdownturn?Questionstoexpect•Whatisthedifferencebetweenequityanddebt?•Whyareyouinterestedinrealestate?Explainhowyouwoulddeterminewhatisanappropriatecaprate?•Howmuchfinancehaveyoubeenexposedto(inschooland/oryourpreviousjob)?•HowstrongareyourExcelskills?Provideanexampleofyourfinancialmodelingexperience.ForFurtherReferenceIfyouwanttolearnmoreaboutthisareaofthebusiness,visittheCommercialMortgageSecuritiesAssociationwebsiteatwww.cmbs.org.TherearealsoafewperiodicalsinthisfieldsuchasCommercialMortgageAlert(www.cmalert.com)andCommercialRealEstateDirect(www.commercialrealestatedirect.com).VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.53 VaultGuidetoRealEstateCareersMortgage-BackedSecuritiesOriginators&RatingAgenciesADayintheLifeofanAnalystataCMBSOriginator7:00a.m.:Rolloutofbedafteronlythesecond"snooze"break.7:30a.m.:OutthedoorandpickupTheWallStreetJournalonthecorner.7:45a.m.:ArriveatterminalandboardtheferrytoPier11(WallStreet).8:05a.m.:Arriveatoffice.Settleintocubicle:coffee,sportsnews,emailsfromthedaybefore.8:20a.m.:Opennewloanrequestpackagefor$8milliononGardenLakesShoppingCenterinPortland,Ore.Readitcovertocover(20pages).9:30a.m.:InputfinancialparticularsfrompackageintoExcelmodelforanalysis.10:00a.m.:Makelistofquestionsandconcernstoaskbroker/borrowerthatassociateandvicepresidentwillwanttohaveanswered.10:20a.m.:Checkforerrors,saveandprintmodel.10:30a.m.:Callbrokerandaskquestions.Noanswer,leavemessage.10:35a.m.:Visitassociate'scubicleandgettwonewpackages(loanrequests)toreview.Updateheronprogressandoncurrentstatusofallmydeals.11:00a.m.:Receivecallfrombrokerandgetanswers.11:20a.m.:Reviewnewdeal,$4millionloanrequestonPacificVistasApartmentsinNewportBeach,Calif.Inputinformationintomodel.12:20p.m.:Getlunchwithcolleagueatin-housecafeteria.Eatatdesk.1:00p.m.:Stopbyassociate'sdesktogoovertheGardenLakesdeal.Heisnotthere,leftnotetellinghimthatthedealisreadytogoover.1:10p.m.:FinishPacificVistasmodel,checkforerrors,saveandprint.1:15p.m.:Callborrower'sCFO(chieffinancialofficer)withquestionsaboutexpenseirregularitiesandsourceof"laundryincome."1:30p.m.:AssociatevisitsyouandyougooverboththeGardenLakesandPacificVistasdeals.Openandtweakthecomputermodelsandchangeassumptions.54©2009Vault.com,Inc. VaultGuidetoRealEstateCareersMortgage-BackedSecuritiesOriginators&RatingAgencies2:00p.m.:Withassociate,stopbyyoursupervisingvicepresident'sofficetogooverthetwodeals.Wewaitfiveminutesforhimtofinishaphonecallwithaborrower.2:05p.m.:AssociateleadsdealoverviewtoVP,explainingthatthecompanyshouldlendnomorethan$7.5milliononGardenLakesandcoulddothefull$4milliononPacificVistas.2:15p.m.:VPmakeschangestoyourmodelandassumptions.Hecallsbrokeronspeakerphoneandtellshimofyourintentiontooffer$7.65millionquote.Thebrokerpasses,tellingyouthatthreeotherlenderswillgive$8million.2:40p.m.:VPcallstheborrower'sCFOonPacificVistasandtellshimofyourintentiontoissueaquotefor$4millionwithalowinterestrate.TheCFOverballyexpressesinterest.3:00p.m.:Drawupquoteusingafirmformsheet(WORDdocument).3:30p.m.:Takequotetoassociateforreview,whoeditsandmarksitupforchange.3:40p.m.:MakechangestoquoteonPacificVistas.4:00p.m.:Associatereviewsandauthorizesyoutoemailitouttotheborrower.4:05p.m.:Issuethequotetotheborrowerviaemail.4:10p.m.:Opennewpackage,reviewinformationandinputmodel.6:00p.m.:Theassociatedropsby,onherwayoutthedoor,togiveyoutwonewpackages(a$10millionofficebuildinginAustin,TXanda$45millionportfolioofwarehousesinNewJersey).7:30p.m.:Orderdinnerwithotheranalysts.Eatinconferenceroomwiththem.9:00p.m.:Shutdowncomputerandordercarservicetotakeyouhome.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.55 RealEstateAppraisalChapter9THESCOOPRealestateappraisalfirmsprovideunbiasedthird-partyestimatesofaproperty’smostprobablesalesprice.Appraisalsaretypicallyperformedforpropertysale,purchaserefinancing.They’realsousedfortaxappeals,bankruptcy,disputeresolutionandmonitoringthevalueofarealestateportfolio.Appraisersusuallyworkforfull-servicerealestatecompanies,banksorappraisalfirms.Full-servicerealestatefirmslikeCBRichardEllis(www.cbre.com)andCushmanandWakefield(www.cushwake.com)havevaluationdepartments.Largebanks,likeBankOneandWellsFargo,haveappraisersonstaff.Inaddition,therearespecialtygroupswithlargerappraisalfirmslikeAmericanAppraisalAssociates.TherearealsoanumberofboutiqueappraisalfirmsinlocalmarketsthatarelistedontheAppraisalFoundation’swebsite,whichcanbefoundatwww.appraisalfoundation.org.Oncethebuyerandsellerofthepropertyagreeontheprice,thelenderrequiresanappraisalpriortoclosingtojustifythepricethebuyer,itsdebtor,agreedtopay.Appraisalsprovideanobjectivethird-partyopiniononthevalueoftheasset(or,inthiscase,realestate)underlyingtheproposedtransactiontothecreditors,whowillfinancetheasset.Thecreditorusuallyagreestolendthebuyerthelesserofacertainpercentageofeithertheappraisedamountorthenegotiatedpurchaseprice.Iftheappraisalofthepropertyiswellbelowthenegotiatedprice,thecreditorcanbackoutofthedealorchangethefinancingstructure.ToperformarealestateappraisalintheU.S.,youmustbealicensedprofessional.Eachstatehasitsownrealpropertyappraiserregulatoryprogram,whichyoumustcompletetobecomealicensedprofessional.Becomingalicensedprofessionalinthisfieldismuchlikebecomingarealestatesalesperson.Youmustcompleteseveralhoursofeducation,passastateexamandprovideproofofrelevantworkexperience.Youdon’tneedacollegeeducationtobecomelicensed.InIllinois,forexample,therearethreelicenselevels:associaterealestateappraiser,certifiedresidentialappraiserandcertifiedgeneralappraiser.Theinitialadministrationfeerunsfrom$225to$300.Youcanfindinformationongettingalicense,takingtheexamorlocationsoftherequiredclassroominstructiononyourstate’sappraisallicensingwebsite.Toobtainanassociatelicense,youneedtocomplete75classroomhoursfortheassociate-levellicense.Foracertifiedresidentiallicense,youneed200hoursand2,500hours(ANU,doetheauthormeanBETWEEN200and2,500hours?)ofpracticalworkexperience.Foracertifiedgenerallicense,youneed300hoursand3,000hours(ANU,again,doestheauthormeanBETWEEN300and3,000hours?)ofpracticalexperience.Attheendofclassroominstruction,youhavetopassatestbeforeyou’reeligibletotakethestatelicenseexam.Anassociatecan’tsignappraisalreports.Certifiedresidentialandgeneralappraiserscansignoffonappraisalreports,butonlyageneralappraisercanworkonresidentialandcommercialassignments.57 VaultGuidetoRealEstateCareersRealEstateAppraisalBearinmindthatobtainingthemoreadvancedlicensesanddesignationscanbeexpensive.Forexample,inIllinois,anassociatecanexpecttopay$1,000andupforotherlicensesanddesignationsbeyondtheassociatelevel.Formoreinformationaboutstate-specificlicensingrequirements,youcancontacttheAppraisalInstituteat(312)335-4100orvisittheirwebsiteatwww.appraisalinstitute.org.Rememberthattheydon’tissuelicenses,justcertificationsandgeneralinformation.Manybanksandrealestateownersinsisttheappraiserstheyworkwithnotonlybelicensedbutdesignatedprofessionalsaswell.Becomingadesignatedprofessionalisharderthanbecomingalicensedprofessional;it’stime-consumingandrequiresacollegeeducation.Thereareseveraldifferentcertificationorganizations,eachwiththeirowncriteriaforcertification.TheAppraisalInstitute(www.appraisalinstitute.org),oneofthemorerespectedlicensingandcertificationorganizations,issuestheMAIandSRAdesignations.AnMAIdesignationisforappraisersofresidential,industrialandcommercialproperties,whereasSRAisforappraisingresidentialrealestateonly.ToreceiveyourMAIdesignationyoumust:•Holdafour-yearcollegedegree;•Passa15-hournationalUSPAPcourse/examandpasstheAppraisalInstitute’sBusinessPracticesandEthicsCourse;•BeaGeneralAssociateMemberingoodstandingforatleast12monthspriortoapplyingforMAIDesignatedMembership;•Pass14instructionalexams;•PasstheAppraisalInstitute’sGeneralComprehensiveExamination;•Tally4,500hoursofspecializedworkexperienceoveratleasta36-monthperiod;and•Writeademonstrationreport.ToreceiveyourSRAdesignationyoumust:•Holdanassociatedegreeorhigher;•Passa15-hournationalUSPAPcourse/examandpasstheAppraisalInstitute’sBusinessPracticesandEthicsCourse;•BeaResidentialAssociateMemberingoodstanding;•Passeightinstructionalexams;•PasstheAppraisalInstitute’sGeneralComprehensiveExamination;•Tally3,000hoursofspecializedworkexperienceoveratleasta24-monthperiod;and•Writeademonstrationreport.58©2009Vault.com,Inc. VaultGuidetoRealEstateCareersRealEstateAppraisalGettingtheMAIorSRAdesignationrequiresalotofworkbutitmaybeworthitbecauseyouwillbeinhigherdemand,commandhigherfeesandwillbeheldinhighregardbypeers.ONTHEJOBThisrealestatecareerpathislesscyclicalthanotherrealestatecareersbecauseappraisalsareneededinbothupanddownmarkets.Evenwhentherealestateindustryisslow,manyownersrefinance–assuminginterestratesarelow–oraudittheirportfolio.Refinancingandauditingbothrequireappraisalsoftheexistingassets.Appraisalisatrade-specificfield.Forsome,theimportanceofinformationtothebusinessmaybeanegativeaspectofthecareerpath.Clientsexpectdetailedreportsandwritingthereportscanbemonotonous.Realestateappraisalisaverypaper-intensivebusiness.Thetypicalentry-levelpositioninrealestateappraisalinvolvesamarketresearchrole.Newhiresareresponsibleforgatheringmarketinformationforseniorappraisersandhelpwritereportsthatexplainconclusionstotheclient.Inthisrole,youspendalotoftimewritingreportsanddoingresearchviatheInternetandproprietarydatabasesthathousemarketinformation.Anormalweekisbetween40to50hours,butcangoupto60hours.Asyoubecomemoreexperienced,you’llbeexpectedtogetanappraisalcertificationandwilleventuallyberesponsibleforprocuringnewbusiness.Anappraiserinteractsdirectlywiththeclient,workswiththemarketresearchassociatetogathermarketcomparablesandlocalandgeneraleconomicmarketconditions,doessiteinspections(whichmaytranslateintoextensivetravel),performsthevaluationanalysisandisresponsibleforthewrittenreportthatpresentstheconclusionstotheclient.Asanappraiser,you’lllearnabouthowthemarketvaluespropertyaswellastheconcernsofthecapitalmarketswheninvestinginrealestate.Ifyoulikerealestateandfinance,thisisagreatcareertomarryyourtwointerests.Typically,alendinginstitutionwouldaskanappraisertovalueapropertyorportfolioofpropertiesforwhichtheyhaveorwillissuedebt.Oncetheresearchandtheanalysisnecessaryfortheappraisalarecomplete,thisinformationwillbeputintoawrittenreportandsubmittedtotheclient.Thereportoftenhasasummaryofthelocalorregionaleconomyandmayincludedemographicinformation.ThefollowingisanexampleoftheDCFmethodinpractice.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.59 VaultGuidetoRealEstateCareersRealEstateAppraisalYou’rehiredtoappraiseabuildingusingDCFthatgeneratescashflowof$1,000,000nextyearwithfivepercentincreaseincashflowsforeachofthenextsixyears.TheDCFwillbeforfiveyearswithasaleattheendofyearfive.Thecorrespondingdiscountrateis10percent,andyouexpecttheexitcapratetobe9.0%.Whatisthevalueoftheproperty?PluggingalltherelevantinformationintotheDCFformulaandyouget:DCF=$1,000,000+$1,050,00+$1,102,500+$1,157,625+$1,215,506+{$1,276,282*1/(1.105}(1.10)1(1.10)2(1.10)3(1.10)4(1.10)50.9Value=$12,955,918COMPENSATIONAppraisalisaserviceofferedtolendinginstitutionsorinvestorsforaper-project,predeterminedfee.Inapropertypurchase,thebuyerwillreimbursethefinancinginstitutionforthefeeuponsubmittingitsloanapplication.Don’texpecttomakealotofmoneyearlyon;newhiresearnroughly$40,000ayear.Experiencedappraisersearn$75,000peryearandupintosixfigures,dependingondesignationstatusandexperiencelevel.Asyoulearnthetrade,you’llbecomemorevaluabletoyourfirmandwillbepaidmore,soit’sinyourbestinteresttogetcertifiedasanappraiser.GETTINGHIREDInadditiontoperformingtherequisitevaluationanalysis,anappraisalinvolveswritingasuccinctreportfortheclient.That’swhyit’simportantforacandidatetodemonstratestrongwritingskills.AworkingknowledgeoffinanceisalsoimportantbecausevaluationformulasliketheDCFarebasedonfinancialconcepts.“Ilookfortwothingsinnewhires,writingskillsandanunderstandingoffinance,”saysJulesH.MarlingIV,MAIandprincipalofWalden-Marling,Inc.anappraisalfirminChicago.“Inaninterview,Iexpectthecandidatetodemonstratethatheorshehasthisskillset.”Makesuretoreviewthedifferentmethodsofvaluingrealestate.Ifyou’reagoodwriterandhaveanunderstandingoffinance,youshoulddowell.Expectquestionsaboutrealestatevaluationandwhat’shappeningwithrealestatevaluesinyourmarket(i.e.,haveanideaoflocalcaprates).Alsobereadytoexplainbasicfinanceprincipleslikepresentvalueanddiscountrates.(Seetherealestate60©2009Vault.com,Inc. VaultGuidetoRealEstateCareersRealEstateAppraisalvaluationsectionsinChapter3andtheAppendix,aswellasTheVaultGuidetoFinanceInterviewsformoredetailonvaluation.)“Atsomeappraisalfirms,thereisalackofadvancementissue,”Marlingrecommends.“Candidatesshouldmakesuretoaskaboutthecareerpath.”Ifyouwantmoreinformationonfinanceconcepts,visitwww.investopedia.com–thesiteisfreeandagreatresource.Questionstoask•Howisatypicalengagementstructured,andwhatarethespecificdutiesofayoungappraiser?•Whattypesofcareerdevelopmentisoffered?Doesthecompanysponsoremployeeswhentheyseekdesignations?•Whattypesofclientsandwhattypesofappraisalprojectsdoesthefirmhandle?Questionstoexpect•Whatarethemethodstovaluearealestateproperty?Howwouldyouvaluesuch-and-suchproperty?•Whatisyourexperiencewith/knowledgeof______(residential,office,industrial,etc.whattypesofpropertiestheappraiserspecializesin)properties?Whataresomeofthekeydriversofvalueforthistypeofproperty?•Howwouldyoucomeupwithanappropriatecaprate?•Whatisyourexperiencewithfinancialmodeling,research,andreportwriting?Provideexamples.DayintheLifeofaJuniorAppraiser7:30a.m.:Getup,goforaquickrun,havebreakfast,andgetcleanedup.Openyourcomputer,checkemailandprintdirectionstoanofficepropertythatyou’regoingtovisitthismorningwithyourseniorappraiser.It’sanewappraisalassignment.9:00a.m.:Grabthedigitalcamera,getinyourcar,anddrivetotheproperty.9:20a.m.:Arriveattheproperty.Sinceyou’re10minutesearlyyoudecidetotakeaquickdrivearoundtheimmediateareatoseewhatelseisaround.9:30a.m.:Pulluptothepropertyastheseniorappraiserisalsopullingup.Getoutofyourcarsandchatforafewminutesaboutdetailsontheassignment.It’snewappraisalforabanklookingtoextendaloanonthe100,000-square-footVisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.61 VaultGuidetoRealEstateCareersRealEstateAppraisalbuilding.Goinsideandmeetthepropertymanager,whotakesyouonapropertytour.Jotnotesfuriouslyastheseniorappraiserrattlesquestionsandthepropertymanageranswers.Snapphotosalongtheway.12:00p.m.:Tourover,yougetbackinyourcar.Meettheseniorappraiseratadesignatedlunchspotonthewaybacktotheoffice.Chatabouttheappraisalandlastnight’sfootballgameoverlunch.12:45p.m.:Backintheoffice.Loadthephotosfromyourpropertytour,typeyournotes,andstartanewengagementfolderforthisappraisal.1:30p.m.:Generatesomestandardmapsthatwillbeincludedinthereport.Goonlinetoprinttaxassessorinformationandotherlocaljurisdictioninformationontheproperty,suchaszoning.Pullupdemographicandemploymentstatisticsforthearea.2:30p.m.:Conductresearchonotherofficebuildingsalesinthesubmarket.Startcreatingamatrixofpotentialcomparablepropertysaleswithrelevantinformation.3:30p.m.:Seniorappraisercomestoyourdesktoaskforyourhelponassemblinganindustrialappraisalthatneedstogooutthedoortoday.Puttheresearchworkontheofficebuildingasidefornow.Performqualitycontrol,helpwithformattingontheappraisaldocument,andhelpsecretaryprintandbindmaterialstomeetovernightmaildeadline.5:30p.m.:Whew,donewiththatfiredrill.Take15minutestocheckthenewsandrelax.Almostdonefortheday.5:45p.m.:Lookatwhereyoustandonthenewofficeappraisalresearch.Flipthroughapriorofficeappraisaltomakesureyou’recoveringallofthebasesforpreliminaryresearch.Jotdowna“todo”listfortomorrow.6:15p.m.:Seniorappraiserstopsbytosayhe’sheadedhomeandthatyoushoulddothesame.Youclosedownyourcomputerandheadoutthedoorfiveminutesbehindhim.62©2009Vault.com,Inc. PropertyManagementChapter10THESCOOPRealestateownerscommonlyemployprofessionalpropertymanagers–eitherdirectlyorthroughthird-partymanagementfirms.Propertymanagersarechargedwiththeday-to-daymanagementofrealestateassets.Theyensurethattenantsaresatisfied,thebuildingisingoodcondition,rentispaidandthatrentsreflectmarketconditions.Propertymanagementprovidesageneralintroductiontorealestate.Asapropertymanageryou’lllearnhowtoefficientlyoperatearealestateassetinthiscapacity.Propertymanagersdealwithissuesrelatingtoleasing,construction,tenantrelationsandmarketanalysis.Agoodmanagercansaveanowneragreatdealofmoneybyoperatingtheassetefficientlyandkeepingthetenantshappy.Thepropertymanagerplaysacrucialroleinexpensecontrol;theownerreliesonhimtomanageanyandalloperatingexpensesatthebuilding.Forinstance,ifthereisconstructionworkatthebuilding,thepropertymanagersupervisestheproject,keepsclosetabsontheprogressandmakessureitdoesn’tgooverbudget.Propertymanagementalsorequiresgoodinterpersonalandanalyticalskillsbecausetenantssometimescanbedifficultandexpectthingstoberesolvedimmediately.Whileleasingagentsdomuchoftheleasenegotiations,propertymanagerscanbeinvolvedintheprocessaswell.Asalesperson’slicensemaythereforeberequiredfortheposition.ONTHEJOBThecommonentry-levelpointforthisfieldisthepositionofassistantpropertymanager(APM).APMsspendagooddealofthedayfieldingcallsfromtenantsandowners.They’realsochargedwithorchestratinganynecessaryrepairsanddealingwithvendorsthatprovideservicestotheproperty.Totopitoff,theyhavetheunpleasanttaskofmakingdelinquencycallstotenantswhentheydon’tpaytheirrents.Thereisalsoadministrativeworksuchasassemblingreportsthepropertymanagerwritesforownersaswellasannualbidpackagesforanypropertywork.APMsreporttoapropertymanager(PM).PMsdealdirectlywiththeowneronallissuesandareultimatelyresponsiblefortheday-to-dayperformanceoftheasset.Theownerreliesonthemtomaximizetherealestateasset’snetoperatingincome.PMsreporttoaregionalpropertymanager(RPM).RPMsareusuallyinchargeofanentireregionandinteractwithmultipleowners.Ifanownerdoeshavemultipleproperties,theRPMwouldbethepointofcontact.They’reexpectedtobringinbusinessandnegotiateservicecontracts.Atypicaldayinpropertymanagementmightinvolvevisitingoneofyourpropertiesandtalkingonthephonewiththeowner,tenantsandvendors.Propertymanagers63 VaultGuidetoRealEstateCareersPropertyManagementmakesureaccountsreceivable(rentandotherincomebroughtinbytheproperty)areinorder.Manyownersexpecttimelyreporting,soyou’llalsobegatheringvaluablemarketinformationthatmakeupreports.Thisdatamayincluderentalratesincompetitivebuildingsandleaserolloverreports,whichdetailwhichleasesarecomingdueatyourproperty.PMsalsowritereportsonratesofdelinquency,rentpatternsandreportsonoperations,whichdetailthephysicalconditionofthepropertyandthestateofthebudget.COMPENSATIONCareersinpropertymanagementaregenerallysalariedpositionsthatincludebenefits.Anassistantpropertymanagershouldexpecttomake$35,000to$45,000peryearwithabonusbasedonindividualperformanceandthatoftheasset(s).Propertymanagerstypicallymakeabasesalaryof$50,000to$100,000peryear(dependingontheasset)andcanexpectanannualbonus.Atpropertieswherepropertymanagershandleleaserenewals,ownerssometimespaycommissions.Thispracticeisnotanindustrystandardbutcanbenegotiatedinthehiringpackage.GETTINGHIRED“Thereareafewqualitiesthatemployerslookforinpropertymanagers,”saysHeatherBattagliaHiggins,assistantvicepresidentatInterStateCommercialinChicago.“Youmusthavestrongpeopleskillstohandleboththetenantsandtheowners,beabletomultitask,bewillingtodoadministrativeworkand[you]mustbecomfortablewithaccounting.”Intheinterview,bereadytoanswerquestionsaboutyourwrittenandoralcommunicationskills,aswellasyourorganizationalskills.Youmaybepresentedwithahypotheticalsituationinvolvinganangrytenantandaskedhowyouwouldresolvetheissue.Manyemployersrequireyoutohavearealestatelicenseandacollegeeducation.Inaddition,someemployersrequirethatyouhaveorobtainapropertymanagementdesignation.Oneofthemorecommondesignationsisthecertifiedpropertymanager(CPM),asadministeredbytheInstituteofRealEstateManagement(IREM).TobecomeaCPMyoumusthaveahighschooldiploma,beatleast18yearsold,havearealestatelicenseandcompleteclassroominstruction,passtheCPMcertificationexam,andhaveatleastthreeyearsofrelevantrealestateexperience.TheCPMisspecifictoretailmanagement.Thecostoftheapplicationis$200,thecostofnationalIREMduesisroughly$475andthecostofclassroominstructionisroughly$3,000.Ifyouwouldliketoworkwithofficeandindustrialproperties,youshouldobtainarealpropertyadministrator(RPA)designation,asadministeredbytheBuildingOwners&64©2009Vault.com,Inc. VaultGuidetoRealEstateCareersPropertyManagementManagersInstitute.ToobainanRPA,youhavetotakesixclassesplusabriefethicscourseanddemonstratethreeyearsofpropertymanagementexperience.YoucanearnanRPAviaself-study;itshouldtakeabouttwoyearstocompleteandtheclassesandcostsroughly$3,000.Theprogramfeeis$175forafirstdesignationprogram.Othertypesofdesignationsalsoexist,butthesehavebeenmorepopular.Questionstoask•Whattypesofpropertiesdoesthecompanymanage?Howmanypropertiesisanassistantpropertymanager(orpropertymanager)expectedtoworkon?•Howmanypropertiesisapropertymanagerexpectedtomanage?•Ifthepropertymanagerisathird-partymanager:Howaretheownerswithwhomthecompanyworks?.•Ifthepropertymanagerisathird-partymanager:Aretheyverydemandingmicromanagersorarethey“handsoff”managers?Questionstoexpect•Canyoutellmeaboutaprojectyoucompletedthatdemonstratesstrongorganizationalskills?•Canyouprovideanexampleofaprojectoreventthatdemonstratesstrongpeopleskills?•Pleasedescribehowyouwouldhandleaclientcomplaint.•Howstrongisyourunderstandingofbasicaccountingconcepts?ForFurtherReferenceYoucanlearnmoreaboutbecomingaCPM,RPAandgeneralinformationonpropertymanagementthroughthefollowingsources:•InstituteofRealEstate(www.irem.org)•BuildingOwnersandManagersInstitute(www.bomi¬edu.org/index.html)•BuildingOwnersandMangersAssociation(www.boma.org)Thelargerfull-servicerealestatefirms,allhavepropertymanagementdepartments.Someoftheseinclude:•CBRichardEllis(www.cbre.com)•Cushman&Wakefield(www.cushwake.com)•JonesLangLaSalle(www.joneslanglasalle.com)VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.65 VaultGuidetoRealEstateCareersPropertyManagementDayintheLifeofanAssistantPropertyManager8:00a.m.:Youarriveatworkandhavejustenoughtimetobootupyourcomputerbeforeyourfirstcallcomesin.It’salawfirmtenantonthe21stflooroftheofficetowerthatyouhelpmanage.Theyarehavingsomeissueswiththeirventilationandwantsomeonetocomecheckitout.Youcallyourleadmaintenanceguyonhiscellphone,andtellhimtoassesstheissueandgetbacktoyou.8:20a.m.:Reviewtasksforthedayandrespondtoafewemails.Inoneemail,theleadpropertymanagerasksyoutohandleawalk-throughforsomecontractorslatertodaywhoaregoingtodosomeimprovementworktothelobby.Noproblem.8:45a.m.:Walkovertoyouraccountantacrossthehallandchatabouthowtherollupforlastmonthiscoming–thepropertyownerrequestedityesterday.Sheasksyouaboutafewexpenseitemsbutyousuggestbettertotalktothepropertymanagersinceyou’renotcertain.9:00a.m.:Youandtheaccountantwalktotheconferenceroomfortheweeklyall-handsmeetingforpropertymanagementstaff.Theprojectmanagerrunsthroughtheagenda,discussesoutstandingbuilding/tenantissues,checksupwithwhateveryoneisworkingon,anddelegatesnewtasks.Relatedtotheemailfromthismorning,shesaysyou’llbetakingchargeofday-to-dayoversightofthelobbyimprovements.9:45a.m.:Youcatchtheleadmaintenanceguyandaskifhe’slookedintotheventilationissueonthe21stfloor.Notyet.Youpolitelyaskhimtodispatchsomeoneassoonaspossible.10:00a.m.:Backtothedesk.Timetosortthroughsomepaperworkthat’sbeenbuildingupinyourinbox.Youdecidetodiveintotheaccountant’sinfoonlastmonthrentpayments.Flagadelinquentaccountforfollowup.Morepaperwork.11:00a.m.:Propertymanagercallsyoutoaskifyou’velookedintoupdatingtheemergencyevacuationproceduresandstartedarrangingthepracticeevacuationdrillintwomonths.Youindicatethatyouhavenotstartedworkingonitbutwillgetbacktoherthisafternoon.Youimmediatelyturnyourattentiontoit.12:45p.m.:Alldonewithverifyingtheprocedures.Yousendanemailtoallofyourtenantofficemanagerstoalertthemofthedrill.Yourco-workerthathandlesthebuilding’sleasingstopsbyandasksyoutograblunch.Yougowithhimforabiteoutsidesinceit’saniceday.66©2009Vault.com,Inc. VaultGuidetoRealEstateCareersPropertyManagement1:30p.m.:Backatyourdesk.Respondtoemailsandcheckvoicemail.Maintenancesaidthey’vefixedtheventilationforthelawfirm.Lookthroughexpensepaperworktoprocess.2:00p.m.:Youtakesomeexpenseapprovalstopropertymanager.After,yougetbriefedonthelobbyimprovementproject.Shegivesyousomedocumentstoreview.Youheadbacktoyourdeskandsortthroughtheinfo.3:00p.m.:Contractorteamshowsupandyoutakethemthroughthelobby,seewhatyoucandotohelpthem,andmakesurethey’llbereadytostartinafewweeks.Theyhavesomequestionsthatyoucan’tanswerbutpromisetofollowup.4:00p.m.:Backtoyourdesk.Youshootanemailofftothepropertymanagerwiththecontractor’squestions.Youalsomakecallstosometenantswhorespondedtoyouremailabouttheemergencyevacuationdrillwithquestions.4:45p.m.:Accountantdropsofflastmonth’soperatingreportonherwayout.Youreviewandnoteafewquestionstofollowuponinthemorning.Youremembertocallthetenantwho’sdelinquentonrent.Secretaryanswersbuttheofficemanagerisnotinsoyouleaveamessage.YoualsosendanemailwiththepropertymanagerCCed.5:30p.m.:Sortthroughtherestofyourinboxandprioritizefortomorrow.5:45p.m.:Runoutthedoortomakeyoursoccergame.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.67 RealEstateAdvisory/PrivateEquityChapter11THESCOOPInstitutionalinvestors,suchaspensionfundsandinsurancecompanies,areactiveintherealestatemarket.Wealthyindividuals(sometimesreferredtointheinvestmentindustryashigh-net-worthindividuals)alsonormallyallocateaportionoftheirinvestmentportfoliotorealestateassets.Aswiththeinvestmentstheymakeinstocks,bondsandothersecurities,institutionalandindividualinvestorsoftenhireadvisorstodirecttheirrealestateinvestments.Realestateadvisoryfirms(alsoknownasprivateequityfunds)actasafiduciaryagent.You’llsometimeshearpeoplerefertothisasthe“agency”sideofinvesting.Advisoryfirmshelpinvestorsidentifyrealestateassetsthatmatchtheirrisktoleranceandtargetedreturns.Advisoryfirmsoftenraiseequityforspecificrealestateinvestmentobjectives.Forexample,afirmmayannounceafundthatwillfocusonbuyingofficepropertiesincentralbusinessdistricts(CBDs).Theadvisoryfirmsannouncetheirintentiontoraiseafundandthensolicitinvestorstocontributetothefund.Here,theadvisoryfirmiscalledthegeneralpartnerandthecapital-providersarecalledthelimitedpartners.Oncetheadvisorygroupmeetsitscapital-raisinggoal,itbeginstoidentifypropertiesforpurchaseandbuildsaportfolio.Advisoryfirmsselectinvestmentsbyfocusingonmarketsandpropertytypeslikelytoexperiencepriceappreciationinthefutureoronpropertiesinwhichtheycanaddvaluethroughrenovation,improvingmanagement,etc.SomefirmswithalargerealestateprivateequitybusinessincludeBlackstone,LubertAdler,CarlyleGroup,andGoldmanSachs.Hundredsofprivateequityfundsexistwithdifferentspecializationsbasedonthelocation,size,andtypeofproperty.Additionally,somefundsserveasaconduitforallocatingmoneytoadvisoryfunds.Theyanalyzethetrackrecordofinvestmentadvisorygroups,conductduediligence,andinvestcapitalalongsidethefunds.This“fundoffund”businessallowscapitalproviderssuchaspensionfundsanduniversitiestooutsourcecapitalallocationandfunddiversification.ONTHEJOBAdvisoryfirmscanbedividedintotwoprimaryfunctions:propertymanagementandacquisitions.Propertymanagementmanagesexistingassetswithintheportfoliowhileacquisitionssourcesandclosesonnewpropertiestobeaddedtotheportfolio.Insomefunds,theserolesarenotexclusive;sincethesegroupsoperatelean,responsibilitiesareoftenblurred.Everyadvisorygroupoperatesdifferently,sothefollowingdescriptionisageneralization.Newhiresstartasananalystorassociateandareexpectedtohandle69 VaultGuidetoRealEstateCareersRealEstateAdvisory/PrivateEquityvaluationanalysisandperformancereportingtoinvestors.Themaintaskforanalysts/associatesistoanalyzeinvestments,preparefinancialmodelsusingExcelandARGUS,andpreparereportsforseniormanagersandinvestors.Thereportscoverissuessuchasthestateofthelocalmarket,taxes,valuation,localcaprates,buildingsrecentlysoldandthestatusoftheircashflows.Newentrantsinthisfieldshouldunderstandthatadvancementinrealestateadvisorycanbequitedifficult.Infact,manyadvisoryfirmshaveatendencytohireforseniorassociate(suchasrecentgraduatesfromMBAprograms)andhigherpositionsfromoutsidethefirm.Thenextstepuptheladderisseniorassociate(manynewMBAsstartinthisposition).Inthisrole,youmayinteractwiththepropertymanageronaregularbasistomakesureportfolioinvestmentsareperformingtoplan.Seniorassociatesstillperformanalysisandbuildfinancialmodelsbutwilldelegatesomeofthisworktotheanalyst/associate.Theymightalso:(1)makedecisionsonsomesmallercapitalexpenditures,suchasrepairsandupgradestothebuilding(s);(2)attendmeetingstodiscussacquisitionassignmentsthatinvolveyourportfolio;and(3)generatecontactsandseeknewinvestmentopportunities.It’satthislevelthatyoubegintohavemoreclient/brokercontactandareexpectedtounderstandtheassetsatthegroundlevel.Abovetheseniorassociateisanassetmanager(AM),vicepresident(VP),orseniorvicepresident(SVP).TheAM/VPmayberesponsibleforeverythingrelatedtotheassetsinasegmentoftheportfolio(e.g.,assetsinaspecificregionorofaspecificpropertytype).TheVPmayalsoberesponsiblefororiginatingnewacquisitionsorcoordinatingdispositionsinanassignedregionorforanassignedpropertytype.Manyday-to-dayandsomemajorcapitaldecisionsaremadeatthislevel.Atthetopofthefirmisusuallyaheadofacquisitionsandanoverallportfoliomanager,whohasultimateauthorityforthefund’soperations.Additionally,apersonorperson(s)willworkspecificallytomarkettocapitalprovidersandraisemoneyforthefund.Somefirmscallthesepeoplemarketdirectors,whileotherscallthemclientrelationshipmanagers.Inthisroleyouaretherepresentativeoftheadvisoryfirmtotheinvestmentcommunityandyourchieffunctionistoraisemoney.Thisisasales-intensiveroleandextremelyhighprofileintherealestateindustrywhereexperienceisdemanded.COMPENSATIONAnon-MBAnewhireattheanalyst/associatelevelshouldexpecttobepaida$40,000to$70,000salaryplusaperformancebonus.Seniorassociates,suchasrecentMBAgraduates,shouldexpecttomakebetween$90,000to$120,000peryearplusaperformancebonus;asigningbonusistypicalfornewhiresoutforbusinessschool.Atthevicepresidentlevelandabove,salariesmayrangefrom$100,000to$200,000ayeardependingonexperienceplusasizeableannualbonusand/oraninterestinportfolioinvestments.Clientrelationsmanagerstendtomakeover$100,000,butpaymaybemorecommission-orientedbasedonfundsraised.70©2009Vault.com,Inc. VaultGuidetoRealEstateCareersRealEstateAdvisory/PrivateEquityGETTINGHIREDPeoplewhoarecomfortablewithfinance,especiallyvaluationanalysis,dowellinthisfield.Stronginterpersonalskillsarealsoveryimportant.Mostfirmslookforpeoplewhoalreadyhaveworkedinfinanceandhavesomerealestateexperience,whichiswhytheyhirefromMBAprogramsandinvestmentbanking.Thisisaveryhighprofileandlucrativejob,soitisarguablythemostcompetitivecareertolandinrealestate.YoumustbecomfortablewithMicrosoftExcel,asit’snecessaryforspreadsheetcalculationsandreporting.ManyfirmsuseapopularfinancialsoftwarepackagecalledARGUS,whichisspecifictorealestateandhelpsisolateprojectcashflows.Interviewerswilllikelyaskifyou’refamiliarwithExcelandARGUSandaboutyourlevelofexpertisewiththesoftwareprograms.Infact,oneinsiderreportstakinganExceltesttodemonstratethatheknewhowtomodelarealestatetransaction.Theinterviewsarenotentirelyskills-based,ofcourse.“Webringinpeoplewithatleasttwoyearsexperienceandafinancialbackground,”saysAlbertPura,aportfolioassociateatRREEF.“Intheinterview,wefocusontheindividualtodeterminewhetherheorshewillfitinourculture.”“Iwasnotaskedonequantitativequestionduringtheinterviewprocess,”addsRichMonopoli,anMBAgraduatefromtheKelloggSchoolofManagementwhotookajobwithJonesLangLaSalle’sinvestmentmanagementgroup.“Imetwithmanypeopleatthefirmandgotthesensethateachonewasdeterminingiftheywouldlikeworkingwithme.Thatsaid,Iwasstillreadytoanswerquestionsaboutvaluation.”Questionstoask•Whatisthecareerpathforapositionandwhatdrivesinternalpromotions?•Whoareyourprincipalinvestorsandhowaretheadvisoryfeesstructured?•Arepropertymanagementandacquisitionsrolessegregatedorone-in-the-same?•Howhasthefundsourcedthemajorityofitsportfolioinvestments?•Howmuchofthisfundhasbeenallocated;whatisthestatusofthenextfund?Questionstoexpect•DoyouknowARGUSandifso,howmuchhaveyouworkedwiththeprogram?•ProvideanexampleofyourfinancialmodelingexperienceofarealestateassetinExcel.•Howisarealestateassetvalued?Howwouldyouvaluesuch-and-suchproperty?•Whatistherangeofcapratesinthismarketforofficebuildings?Industrial,etc.?•Ifyouweregoingtoinvestinarealestate,whichtypeofassetwouldyoubuyandwhy?Where?VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.71 VaultGuidetoRealEstateCareersRealEstateAdvisory/PrivateEquityForFurtherReferenceYoucanalsofindoutmoreaboutthisfieldfromthePensionRealEstateAssociation(www.prea.org)orbyreviewingthewebsitesofsomeofthelargeradvisoryfirmssuchasJonesLangLaSalle(www.lasalle.com),RREEF(www.rreef.com)orLendLease(www.lendleaserei.com).YoucandownloadanARGUStutorialandtrialversionfromitswebsiteatwww.argussoftware.com.Ifyou’refeelingparticularlyambitious,youcantakeanARGUSclass.Thesitelistsschoolsthatoffertraining.ADayintheLifeofanAssociateataPrivateEquityFund8:00a.m.:Checkemail.GlanceatTheWallStreetJournalandGlobest.comheadlineswhileeatingayogurt.Printoutanarticleonadealthatyoulostbutwasclosedbyacompetitor;passontoyourteam.8:30a.m.:Openupthefinancialmodeloftheprospectivemultifamilyjointventuredealthatyouwereworkingonyesterday.Addinsomesensitivityanalysisonconstructioncosts,rentsandotherrevenue.Punchoutaone-pagesummaryanddropitofftoyourseniorvicepresident.Suggestthatthelocaloperatorneedstogetfurtheralongbeforewe’dinvest.9:45a.m.:Glanceafewofferingmemorandumsthatyoureceivedthisweek.Dismissmostofthemprettyquicklysincetheydon’tfitourcriteriaortheeconomicsdon’tmakeanysense.Flagoneforfurtherevaluationlater.10:30a.m.:Meetwithateammembertogooverapresentationyouplantodelivertoinvestmentbrokersat11:30.Presentationismeanttointroduceourselves,explainourcriteria,andkeepusontheirmindsfornewdeals.Doarunthroughandmakelastminoredits.11:30a.m.:Givepresentation.Biggerturnoutthanexpected.Somequestiononhowwestructurecommissions.Getahandfulofcardsandafewdealideasthrownatusonthewayout.12:45p.m.:Grablunchtogoonwaybackintooffice;remembernationalteamcallat1p.m.72©2009Vault.com,Inc. VaultGuidetoRealEstateCareersRealEstateAdvisory/PrivateEquity1:00p.m.:Teamcalltoreviewpipelineofprospectiveacquisitionsandfundingneeds.Itisdecidedthatnoimmediatecapitalcallsareneededtolimitedpartners.Discussafewproblematicassetsintheportfolio.2:00p.m.:Punchoutlistofquestionsandadditionalmaterialsneededrelatedtoanindustrialdevelopmentthatwehavebeenevaluating.EmailtoSVPandthelocaldeveloperthatpitchedtheinvestment.3:00p.m.:Getacallfromabrokeronanofficedealthatwepreviouslyhadbidonbutlost.Dealfellthroughwithotherbuyerandnowhewantstoknowifwestillwantitatouroldprice.Tellhimyou’llgetbacktohim.3:15p.m.:Checkassumptionsonoldmodelandmakesomeupdates.Revisepurchasepricerecommendation.TalktoSVPanddecidetodroptheofferby15percentduetothechangingmarketconditionsoverthefewmonthssinceyourlastbid.4:00p.m.:Submitanewofferonofficedealviafax.Brokercallsbutsaysit’stoolowandtriestoencourageahigheroffer.Yousayno,thinkingthatyou’llprobablyhearfromhimagain.4:30p.m.:Followupwithafewlendersabouttryingplacedebtonanassetalreadyownedbythefund.Onelendere-mailsatermsheet.Theinterestspreadis50basispointshigherthanyouunderwroteandLTVislower.Reprogramthedebtintoyouroldmodeltoexploretheimpactonreturns.ShareasummaryoffindingswithSVP.5:30p.m.:Replytonewe-mail.Printatwoofferingmemorandumthatyouwilltakehometoreview.5:45p.m.:Triple-checkacashflowmodelandreviewresultsinpreparationforacallwithsomeoftheinvestmentcommitteememberstomorrowmorningtofeelouttheirinterestinaninvestment.Youneedtoknowthenumberscoldincaseofquestions.6:30p.m.:Printoutsomerealestatearticlesforreviewlater.Getorganizedfortomorrow.6:45p.m.:Talkwithaco-workertoseeifhe’sgotanyinterestingdealsinthehopper.Nothingtoopromising.Ruminateonwherecapratesaregoing.7:00p.m.:Headhomewithsomedocumenttoreviewintow.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.73 RealEstateInvestmentBankingChapter12THESCOOPManyinvestmentbanksonWallStreetandelsewherehavegroupsdedicatedtorealestatethataregoodfitsforsomeonewithaninterestinbothrealestateandinvestmentbanking.Itshouldn’tsurpriseyouthattheseareveryfinance-orientedgroupsthatlookatrealestateasonemoreassetclasstomakemoneyforthemselvesandtheirpartners.Productsinvolvetherepackagingofmortgagesintoresidentialmortgage-backedsecurities(MBS),collateralizedmortgageobligations(CMOs)andcommercialmortgage-backedsecurities(CMBS).OtherpopularareasincludetheREITstock,bondandpreferredstockoriginationbusiness,lodginginvestmentbanking,principalinvestinginrealestateandsyntheticleaseorigination.SomeofthebigplayersincludeDeutscheBank(www.db.com),GoldmanSachs(www.gs.com),andMorganStanley(www.morganstanley.com).Thesegroupslooktoplacemoneywithoperators(realestatedevelopersandowners)allovertheworldwhoneedcapitalforrealestateprojects.Operators,inturn,seekthesegroupsoutforfunding.It’simportanttonotethatthesegroupslookforhighreturndeals.Ofcourse,higherreturnsmeanriskierdeals.Theybasetheirdecisionontheexpectedreturn,orwhatiscommonlyreferredtoastheinternalrateofreturn(IRR).Youshouldknowthistermandbecomfortableexplainingitinaninterview.ManypeopleareintimidatedbyIRRs,butthey’reeasytounderstand.Ifyou’rediscussingapotentialinvestment,youwillwanttoknowtheassociatedreturns,whichareexpectedbutnotguaranteed.That’swhatanIRRis:theexpectedreturnontheinvestmentifeverythinggoesaccordingtoplan.IRRExampleLet'ssaythatXYZbankisgoingtoinvest$100millioninarealestatedevelopmenttodayandinreturnexpectstoreceive$10millionayearincashflowforfiveyears.Furthermore,thedevelopmentwillbesoldattheendofthefifthyearandXYZ'sbankwillreceive$150millioninsaleproceeds.TheIRRistheexpectedreturnthatisassociatedwiththistransaction(calculatedatroughly17%forthistransaction).Remember,therearenoguaranteesrelatedtotheprojectonlyexpectations–presumably,basedonagooddealofanalysis.Note:ThereisafunctioninExcelthatmakescalculatingtheIRRveryeasy.Makesuretobecomefamiliarwiththisfunction.75 VaultGuidetoRealEstateCareersRealEstateInvestmentBankingFundswillsetatargetIRRthattheyhopetoexceed;thetargetIRRwillvarydependingontherisklevelofthefundandwhatwaspromisedtolimitedpartnerinvestors.Generally,thetargetIRRwillrangefrom10percentto20percent.AninvestmentfundwillalsoconsiderothermetricsbeyondIRR,especiallytheratioofcapitaldistributionscomparedtofundsinvested(calledamultiple).Investorsareconcernednotonlywiththerateorreturnbutalsotheirgrossreturnasdrivenbytheamountoftimethatthecapitalwasinvested.Bothareimportantstatistics,amongothers.ONTHEJOBEntry-levelemployees–usuallyreferredtoasanalysts–spendthebulkoftheirtimedoingacquisitionsandvaluationswork.They’llalsodofinancialmodelingforproposeddeals.Aspartofthemodeling,analystsaccountfortheIRRstothecontributeddebtandequity.Additionally,theyhelpwritedealmemosthatarepresentedtotheinvestmentcommittee,whichultimatelymakesthedecisiononwhetherornotthegroupwillinvestinthedeal.Thememocontainstheprosandconsassociatedwiththedealaswellasmarketriskandfundamentals.Inthecourseofpreparingthememo,theanalystwillhavemostlikelyvisitedthepartiesinvolvedwiththedealandinspectedthephysicalasset.Sincethesegroupsinvestmoneyallovertheworld,thereisagooddealoftravel.Atsomecompanies,analystshavealotofcontactwiththedealpartnersandwillinteractwiththeoperators,attorneysandinvestorsinvolvedinthedeal.Theywillseekanyaffectingtheriskandreturnoftheproject.Thenextlevelistheassociate,whosemaindutyistooverseetheworkoftheanalyst.HeorshegenerallyhandlesmoreofthecontactwiththedealpartnersandcommunicatesanyconcernsorissuestotheVP.Associatesreporttovicepresidents(VPs),whohaveasupervisoryrole.Theirmainpurposeistobringindealsandmakesuretheyrunsmoothly.Managingdirectors(MDs)arethetopdogsinthishierarchy.TheyareevenbiggerdealmakersthantheVPsandhavethefinalcallonalldecisions.MDsarechargedwithbusinessdevelopment.COMPENSATIONThepayisverygoodinthisfield.Analystsmakeanywherefrom$55,000¬to$80,000peryearplusaperformancebonus.Theassociateorseniorassociateleveliswherethemoneybecomesparticularlyenticing;associatescanexpectabaseof$95,000-$110,000plusbonus.AVP’sbasesalaryissomewherebetween$150,000and$200,000plusbonus.Managingdirectorscanmillionsandhaveamajorstakeinthedeals.Allbonusesarecontingentongroup,projectandindividualperformance.Atsomefirms,anyoneabovetheassociatelevelhasanequitypositioninthegroup.76©2009Vault.com,Inc. VaultGuidetoRealEstateCareersRealEstateInvestmentBankingGETTINGHIREDThesejobsareverydifficulttogetbecausetherealestategroupsatinvestmentbankingfirmstendtobesmallandyouneedacertainbackground.Candidatesinthisfieldhaveusuallygonetoatopundergraduateorbusinessschoolandcandemonstratebothaninterestinfinanceandrealestate.Youdon’tneedarealestatelicenseforacareerinrealestateinvestmentbanking,butmanypeoplebelongtoindustryorganizationsliketheUrbanLandInstitute(www.uli.org).Ifyougetaninterview,beconversantintheconditionoftheworldeconomyandthegeneralhealthoftherealestatemarket.BereadytoanswerquestionsaboutIRRs,discountrates,PVsandwhyyouhaveaninterestintheindustry.Bepreparedtorunthroughanimpromptufinancialanalysisdoingmathinyourhead.Questionstoask•Howmanyandwhattypesofdealshaveyoucompletedoverthepastfewyears?Whattypesofdealsdoyouexpectoverthenextfewyearsinlightofthisenvironment?•Whatisthetypicalsize(money-wise)ofthedeal?•Inthisrole,howwillsomeoneinteractwiththerestgroup?Howistheteamstructured?•Whatisthenaturalprogressionfromthisrole?(Specifically,willyoubeexpectedtohaveyourMBAtotaketheleapfromassociatetovicepresident?)Questionstoexpect•AreyoucomfortablecalculatingNPV,InternalRatesofReturns(IRRs),multiples,etc.?Let’srunthroughanexamplenow.•Whattypeoffinancialmodelinghaveyoudoneinthepast?ProvideanexampleofyourExcelmodelingcapabilities.•Whatareyourthoughtsonthecurrentstateofthedomesticeconomy?Howwillariseininterestratesimpactcommercialrealestatevaluations?•Wherearecapratesheaded?•Ifyouwereinvestinginrealestate,whichmarkets(geographically)wouldyouplaceyourmoneyandwhy?•Howmuchdoyouknowaboutourgroupanditsperformance?VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.77 VaultGuidetoRealEstateCareersRealEstateInvestmentBankingADayintheLifeofanAssociateatanInvestmentBank9:15a.m.:Strollintheofficewithoneeyestillclosed.Stilltiredfromlastnight’sfiredrillthatkeptyouintheofficeuntil4a.m.Stopbytheanalystpitandseehowtherestofthenightwent.Maybetodaywillbeabitcalmer,justmaybe.9:30a.m.:You’vegotvoicemail.YourVPwantsyoutohandleapressingvaluationmodelforasmall,nationalchain-hotelportfolio.Hejustforwardedabunchofinfo.Youdecidetosendafewemailstosetexpectationsofyourmanagersonwhentoexpectcertaindeliverables.Ofcourse,theywantthemsooner.10:00a.m.:Getcrackingonyourhotelvaluation.Dustoffanoldmodeltouseasatemplate.Starteditingandnotingwhatassumptionsyouneed.11:30a.m.:Youcallyouranalysttogetherrampeduponthehotelvaluation.Shestopsbybuthesaysshe’sslammedforafewhours.Youasknicelytogettoitassoonaspossible.Youkeepcranking.12:30p.m.:AcallfromyouMD–saysthatyourworkfromlastnightlooksgood.(Whew!)Wantsyoutohelpputtogetherapitchbookforprospectiveclientinthehomebuildingspacelookingforacquisitions.Youcheckthetiming–hewantsitbytomorrow,ofcourse.Immediatelydelegatesomeofthemundanetaskstoananalyst.1:30p.m.:Analyststopsbytoaskafewquestionsonhotelvaluation.DidIhavelunch?Don’tthinkso.Callthedelidownstairstohaveyourfoodreadyforpickup.Respondtoemailsontheway.2:10p.m.:Finishedwithlunchandworkingagainonhotelvaluation.AcallfromtheVPaskingtotalkaboutthehotelvaluationat5p.m.Youapprisetheanalystandstartmovingdoubletime.Needtogetsomepreliminaryresults.4:15p.m.:Initialmodeldraftcomplete.Amazedattheanalyst’smemorizationofeveryExcelshortcutinvented.Formatandprintresults.Notesomequestions.4:40p.m.:Takeashortbreak.ReadTheWallStreetJournal’sPropertyReport.Chatwithfellowassociateonwhat’syou’rebothworkingon.Youoffersomeadviceonadeal.5:00p.m.:StepintothemeetingwithyourMDwiththeanalystonyourheels.Goovervaluationandquestions.MDoffersinputandsendsyoubacktowork.78©2009Vault.com,Inc. VaultGuidetoRealEstateCareersRealEstateInvestmentBanking5:30p.m.:Voicemailsneverseemtostoparriving.Prioritize.Youcircleupwiththeanalystonthepitchbookandstarthelping.6:45p.m.:Theanalystsareorderingdinner.Youdecidetocanceltentativedinnerplanswiththegirlfriend(again)tokeepworking.9:15p.m.:Pitchbooklookinggood.Youaskanalysttocarryitacrossthefinishlineandhaveadraftforyoutolookatbythemorning.Turntosomeeditsonthehotelmodel.10:15p.m.:EmailyourMDwithresultsfromhotelvaluationupdate.Weary-eyedfromstaringatExcelforsolong,you’rehappytoheadhome.Youwalkbytheanalystpitandpondertheirstamina.Atleastyou’reanassociate.HowlonguntilIgetmybonusagain?VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.79 DevelopmentChapter13THESCOOPIfyouenjoytakingrisks,looknofurtherthandevelopment.Developmentinvolvesmanaginglabor,establishingtimeestimates,managingmoneyandmonitoringconstructioncrews.Gooddevelopersareresults-oriented,creativeandknowhowtogetworkdoneontime.Youcanbreakintothefieldbyworkingforasmallerdeveloperoryoucanstrikeoutonyourown,startingwithsomesmallertransactions.Indevelopment,youtakeaconceptandphysicallyconstructoralterapropertythatwilllastforyears.Inthisfield,youworkwiththelocalandsometimesfederalgovernmenttobringyourprojecttolife.Youalsoaggressivelypursuenecessaryfundingfromboththedebtandequitymarketstomaketheprojectareality.Becauseofchangesinpopulation,technologyandconsumertaste,there’salwaysaneedfordevelopment.Eventhelargestdevelopershaveleanorganizations,sogettingajobistough.Somedevelopersspecializeasdesign-buildfirmsthathelpdesignandthenbuildrealestateforafee,whileotherdevelopersarefull-servicefirmsthatnotonlydesignandbuildtheproperty,butmanageandleaseitafterthebuildingiscompleted.Mostrealestateprofessionalsagreethatdevelopmentistheriskiest,mostrewardingpartoftheindustry.Manydevelopersareextremelycharismaticandappearregularlyinthesocietypages.ItseemsthateverymajorcityhasitsownDonaldTrump–someonebehindthehigh-profilerealestateprojectsanddeals.Oneofthebestthingsaboutrealestateisthelifestyleanddevelopmentisnoexception.“Thisisdefinitelyaworkhard,playhardcareer,”saidonerealestatedeveloper.Sincemuchofthejobisfocusedoncultivatingpersonalrelationships,co-workersaretypicallygregariousfolkwholovetohaveagoodtime.“IworkedinbankingbeforeImadethejumptodevelopment,”anotherprofessionalindevelopmentconfides.“Isawhowmuchfunandmoneymyrealestateclientswerehavinganddecidedtoswitchcareers.Grantedthereisalearningcurveandyouinitiallysufferpay-wise,butIdon’tknowanyindustrythatallowsyoutomakethekindofmoneyyoucanmakeinrealestate,whilenotputtinginaridiculousamountofhours.”ONTHEJOBThedeveloperisthepersonorthecompanyresponsibleforcreatingtheconceptofapropertyandbringingittoreality.Onethingmustbestressed:Everydevelopmentfirmisdifferent,moresothaninanyotherpartoftherealestateindustry.Titlesandpayscalesvarywidelyfromfirmtofirm.81 VaultGuidetoRealEstateCareersDevelopmentNewhiresnormallystartasanalysts,creatingandrevisingspreadsheetsthatexaminereturnsforthedeveloper.Partofthespreadsheetanalysisiskeepingtrackofdebtpaymentsandthereturnstoequitypartners.Inthisrole,you’llbeexpectedtobecomeanExcelexpertsinceyourprincipaldutywillbetorunfinancialspreadsheets.Anytimethereisachangetotheproject,theanalystrerunsthespreadsheetstodeterminehowitimpactsthedeveloper’sandinvestors’returns.Sincemostdevelopmentfirmsarelean,analystscanexpecttoperformotherdutiessuchasmarketresearch,studyingcomparableprojectresearch,leasingactivityinyourmarketanddemographicstudies.Associates,sometimescalledprojectmanagers,workaboveanalystsandareassignedtoaspecificproject.Thedevelopermayhave10buildingsunderconstruction,buttheassociatewillusuallyberesponsibleforonlyonebuilding.Associatesstillperformfinancialanalysis,buthaveadditionaldutiessuchascontactwiththerealestatecommunity,architect,contractors,investorsandattorneys.Yourmaintaskistoensurethatthebuildingisconstructedontime.Themanagementteamwillrelyonyouforupdatesandrecommendations.Youwriteanumberofmemosandbegintogetinvitedtopresentationstomanagement.Associatestypicallypossessseveralyearsofexperienceand/oranadvanceddegreeorotheraccreditation.Associatesreporttovicepresidents(VPs),whichsomecompaniescallmanagingdirectors(MDs).They’reresponsibleformultipleassignmentsandmakethefinaldecisionswithrespecttothedevelopmentprojectorportfolio.VPsdelegatealotofworktoassociatesbutareultimatelyresponsibleforadevelopment’ssuccess.They’redirectlyinvolvedwithleasingorsalenegotiationsandreporttomanagementorthedeveloper.Inthisrole,there’salotofresponsibilityandatonofpressure.Atmanydevelopmentfirms,youwillhavetheopportunitytoeventuallybecomeaprincipal.Assuchyou’llbeexpectedtocontributeequitytoadevelopment.Principalsareaskedtohelpraisemoneyandarealsoexpectedtoprovideconceptsforfuturedevelopments.Thisisasgoodasitgetsintheindustry–youcanmakemillions.Developersstartmarketingtheirprojectsbeforetheybreakgroundandwilloftenhavetheirownteamofleasingagentstomarketthepropertytotherealestatecommunityandshowittoprospects.Leasingagentswhoworkfordevelopersessentiallyhavethesameresponsibilitiesasregularagents,butareundermuchmorepressurewhenleasinganewdevelopment.Junioragentsareassignedtoaprojectandworkwiththeleasingteamtomarketthepropertyandconductpropertytours.Itisworthpointingout,however,thatsomeleasingagentsatdevelopmentfirmseventuallybecomeprincipals.82©2009Vault.com,Inc. VaultGuidetoRealEstateCareersDevelopmentCOMPENSATIONAnalystscanmake$40,000to$60,000peryear.Thereisbonuspotential,butatthisleveldon’texpectmuch.Associatesorseniorassociatesatthelargerfirmsmakeroughly$80,000to$110,000peryear.Atthislevel,youhavethepotentialtomakeabonusofroughly20percentofyoursalary.Atthevicepresident’slevel,themoneybecomesverygood,withabasesalaryofanywherefrom$150,000onup.Ontopofthis,youcanearnabonusashighasyoursalaryandearnaninterestinyourprojects.Principalscanmakemillions;italldependsonhowtheproject(s)perform.GETTINGHIREDIfyouknowyouwanttopursuearoleindevelopment,beextra-aggressive;eventhelargestdevelopersareleananddon’taddstaffoften.Forthoseatbusinessschools,bereadytoperformanindependentjobsearch.Chancesareyourcareerplacementofficedoesn’tbringalotoffirmstocampusorissimplynotfamiliarwiththisfield.Developerswillexpectyoutotellthemwhyyou’reinterestedinthisparticularfield.Bepreparedtodescribehowtovalueapropertyandwhatmakesitvaluable.Beabletodiscussthelocalrealestatemarkets,includingvacancyrates,rentalratesandcurrentdevelopmentprojects.Braceyourselfforquestionsabouttimemanagement,organizationalandinterpersonalskills.Oneinsidersaysmanydeveloperslikepeoplewithmarketingskills,whichmakessense–effectivelymarketingyourselfandtheprojectyou’reworkingonwillensureyoursuccess.Questionstoask•Canyouwalkmethroughsomerecentprojectsfromstarttofinish?•Aremostprojectsthefirmworksonrehabilitationprojectsornewdevelopments?•Doesthecompanyfocusononerealestatepropertytype?•Whatisthefirm’sorganizationalstructurelike?Whichteammembersfocusonidentifyingopportunities;whichconcentrateonraisingmoney?•Howdoesthefirmraisefundsforprojects?Isthefirmusingbanks,insurancecompanies,wealthyindividualsorothermoneysources?•WhatareyourtargetedreturnsorIRRs?Questionstoexpect•Whatisyourunderstandingofthedevelopmentprocess?Howcanyouaddvalue?•Whatrecentwell-knowndevelopmentdoyouthinkhighlyofandwhy?•Canyoudescribesomelocalhigh-profiledevelopments?Wheredoyouseeopportunityinthismarket?VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.83 VaultGuidetoRealEstateCareersDevelopment•Areyoucomfortabledoingadiversesetofactivities?Provideanexampleofapastexperienceofmultitasking.•Whatisyourunderstandingoffinanceandhowitplaysaroleindevelopment?ForFurtherReferenceIfyouwanttolearnmoreaboutdevelopment,readUrbanLand(www.uli.org),Realtor(www.nar.org),JournalofRealEstatePortfolioManagement(www.aresnet.org),andNationalRealEstateInvestor(www.nerionline.com).Youcan’tbuytheseatyourlocalnewsstand,butyoucanvisittheirwebsitesandlearnmoreaboutdevelopmentsacrossthecountry.MostpeopleinthisfieldchoosetojointheUrbanLandInstitute(www.uli.org);itoffersayoungleadersgroupthatcaterstoyoungrealestateprofessionals.SomecompanieshaveatendencytohiregraduatingMBAsasassociates/seniorassociates.Twowell-knowncompaniesareHines(www.hines.com)andTrammellCrow(www.trammellcrow.com),whichisnowasubsidiaryofCBRichardEllis.Overall,lookforhiringtolaggeneraleconomicconditions.ADayintheLifeofanAssociateataDevelopmentCompany7:45a.m.:Arriveatwork,grabsomecoffee,andcollectyourthoughtsfortheteammeetinginafewminutes.Youwanttohaveallthefactsstraightonthecondodevelopmentthatyou’vebeenworkingon.8:00a.m.:Developmentteammeetinggetstheweekrolling.Thedevelopmentcompanypresidentstartswithhisupdateandthentheballmovesaroundtheroomtodiscusseachprojectunderway.Yourprojectisparticularlythornyinthatthereisavocalminorityoflocalcitizenswhoaretryingtoblockyourconversionofanapartmentbuildingtocondos.They’vebeenabletogetahearingtopotentiallylandmarkthebuildingthat’shappeningtomorrow.Theteamdiscussesstrategy.9:30a.m.:Finallycheckyourvoicemailandyou’vegotafewcalls.Youcallabrokeraboutsomelandyou’vebeenresearchingandmaywanttobidon.Yougathersomeofhisinputonthesiteandupdatesomeassumptionsintheback-of-the-envelopemodelyouputtogetherinExceltoseeiftheprojectpencils.Naturally,thepricehastoberight.Yougivethebrokeranindicationofwhereyoustandandhesayshe’llfeelouttheownerforyou.84©2009Vault.com,Inc. VaultGuidetoRealEstateCareersDevelopment10:00a.m.:Youcheckyoure-mailandseethatyouhavesomenewconstructionfiguresfordifferentdevelopmentscenariosonyourcondodeal.Youstopbytheanalyst’sdesktoaskhimtoupdatethefinancialmodelwiththenewinformationyoureceivedandbuildinsomepricingsensitivities.10:30a.m.:Adevelopmentmanagerasksyoutohandlearequestbyoneofyourequityinvestors.Youcalltheassociateatthefundandfindouttheyarelookingforanupdatedproformatohelpthemwithaportfolioperformanceupdate.Yougetoffthephone,openthemodel,inputsomeupdates,ande-mailtotheinvestor.11:15a.m.:Yougetacallbackfromthebrokerabouttheland.Unfortunately,itappearstheownerisfirmat$15millionbutyournumbersdon’tsupportmorethan$12million.Youdouble-checkyourassumptionandreaffirm.Justtohaveitinyourbackpocket,youlookatascenariowhereyouoffertheownersomeupsideonthebacksideofthedevelopmentdealshoulditprovesuccessful.12:00p.m.:Grablunchwithyourdevelopmentmanagerandanalystbutbringitbacktotheconferenceroom.Discussthecondodealfinancials.12:45p.m.:Contactafewofyourconsultantsonthecondodeal–getanupdatefromyourtrafficconsultantandtenantrelocationcoordinator(evictions).Thebuildingisalmostemptysinceyou’vebeenofferingagenerousrelocationpackagebutthereareafewhold-outtenants.1:30p.m.:Getacallfromyourformerbusinessschoolbuddyatacompetingdevelopmentcompany.Catchupabitandmakeplansmeetupatanetworkingeventlater.1:45p.m.:Youheadoutoftheofficetositinonazoninghearingforoneofthecompany’sdevelopments.2:15p.m.:Trafficwasbadbutyoumadeit.Yourprojectisjustabouttocomeupontheagenda.Yourcompanypresidentgetsupandpresentstheplan.Someofthelocalresidentsthatattendedvoiceconcernsaboutthedevelopment,andthecityplanningofficialsaskyourteamtoaddresstheissues.YourespondtosomeemailsonyourBlackBerrywhilelisteningpassively.3:45p.m.:Meetingstillunderway,butyoutakeoffbacktotheofficetohandlesomemorepressingitems.4:10p.m.:Backintheoffice.Circleupwiththeanalysttogetthenewscenariosonthecondodeal.Takethembacktoyourdesktoreview.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.85 VaultGuidetoRealEstateCareersDevelopment4:45p.m.:Followupwitharchitectonwheretheystandwiththeirrenderings.Arrangeforthemtopresenttoyourdevelopmentteamnextweek.5:00p.m.:Youturntoworkingonafinancingrequestpackagethatyouwilleventuallypassontosomeofyourbankingcontactstoobtaindebtforthedeal.6:15p.m.:Saveyourworkandheadtorealestateyoungprofessionalsnetworkingevent.Commiseratewithyourbusinessschoolbuddyabouthiscompany’sdevelopmentdealgoneawryduetozoningissues.Youstarttosweatabouttomorrow’slandmarkhearingforyourcondoproject–anotherdrinkplease.86©2009Vault.com,Inc. ConclusionAfterreadingthisguideyoushouldhavecometothefollowingconclusions:(1)therealestateindustryisatight-knitcommunity;(2)whenlookingforajob,itpaystobeaggressiveandtonetworkasmuchaspossible;and(3)manydifferentrolesareavailabletotheambitiousjobseeker.Togetthejobyouwant,useresourcessuchasyouralmamater'salumninetwork,realestaterelatedwebsitessuchasthoselistedintheAppendixandnetworkwithintheindustryasmuchaspossible.Remember,mostrealestatejobsarefilledbywordofmouth,sobuildyourownnetworkwithintherealestatecommunity.Onceyougettheinterview,bereadytodemonstrateyourpassionfortheindustry.Remember–realestateisacyclicalgame.Thoughitischallengingtogetstartedinadownturn,thekeyistostayinvolvedintheindustryhoweveryoucantolearnandpositionyourselfforthenextwave.Theboomsandbustscanbebig,andthat’swhatmakesrealestatesuchachallengingbutrewardingindustry.Thosewhonavigatetheswingshavetheopportunitytobewildlysuccessful.87 APPENDIXVaultGuidetoRealEstateCareers SchoolswithRealEstateProgramsMBAPROGRAMSTheWhartonSchool@UniversityofPennsylvania-www.wharton.upenn.edu/mbaHaasSchoolofBusiness-www.haas.berkeley.edu/mbaMITSloanSchoolofManagement-www.mitsloan.mit.eduUniversityofWisconsinwww.bus.wisc.edu/graduateprograms/fulltimeTheKelloggSchoolofManagementwww.kellogg.northwestern.eduFisherCollegeofBusiness@OhioStateUniversity-www.cob.ohio¬SAMPLENON-MBAREALESTATEPROGRAMSCornellPrograminRealEstate-realestate.cornell.eduUniversityofSouthernCalifornia;SchoolofPolicy,Planning,andDevelopment-www.usc.edu/schools/sppdUniversityofPennsylvania;DepartmentofCity&RegionalPlanning-www.design.upenn.edu/city-regional-planningArizonaStateUniversity;MasterofRealEstateDevelopment-mred.asu.edu91 VaultGuidetoRealEstateCareersAppendixSamplePeriodicalsCommercialPropertyNews-www.cpnonline.comGlobeStreet-www.globest.comJournalofPropertyInvestmentandFinanceMultifamilyExecutive-www.multifamilyexecutive.comNationalRealEstateInvestor-www.nreionline.comRealEstateAlert-www.realert.comRealtyStockReview-www.reri.orgUrbanLandInstitute-www.uli.orgTheWallStreetJournal,WeeklyPropertyReport-www.wsj.com92©2009Vault.com,Inc. RealEstateEmployersRemaxHeadquarters:5075S.SyracuseStreetDenver,CO80237Phone:(303)770-5531www.remax.comOneofthelargestresidentialrealestatebrokerswithalmost100,000employees.Inexchangeforpayingamanagementfeeandashareofthemonthlyofficeoverhead,RE/MAXagentsreceivecommissionsandreceivethemanybenefitsofRE/MAXprogramsandservices.Theseofficesoperateasfranchises.Thewebsiteoffersinformationonbecomingasalesassociate.ColdwellBankerRealEstateCorporationHeadquarters:1CampusDriveParsippany,NJ07054Phone:(973)407-2000www.coldwellbanker.comColdwellBanker’sparentcompanyisRealogy,whichalsoownsCentury21.ColdwellBankerhasmorethan3,500independentlyownedandoperatedresidentialandcommercialrealestateofficeswithover100,000salesassociatesinternationallyandisknownprimarilyforrepresentingbuyersandsellersintheresidentialrealestatemarket.Youcansearchthecompany'swebsitetofindtheofficenearestyouorsendanemailthroughalinkonthesitetothecorporateofficewithanycareerquestions.Century21RealEstateCorporationHeadquarters:1CampusDriveParsippany,NJ07054Phone:(877)221-2765www.century21.comAlsoownedbyRealogy,Century21RealEstateCorporationisthefranchisoroftheworld'slargestresidentialrealestatesalesorganization,withmorethan8,500independentlyownedandoperatedfranchisedbrokerofficesinover64countriesandterritoriesworldwide.Theiragentsrepresentbothbuyersandsellersofresidentialrealestate.Thefirmisknownforgoodtrainingprograms.93 VaultGuidetoRealEstateCareersAppendixFullServiceCommercial(PropertyManagement,Leasing,Investment,Brokerage)CushmanandWakefieldHeadquarters:51West52ndStreetNewYork,NY10019-6178Phone:(212)841-7500www.cushwake.comAleadingproviderofcommercialrealestateserviceswith15,000employeesacross220officesworldwide.Clientsincludelandlords,tenantsandinvestors.Offersadvisoryservices,valuationadvice,strategicplanning,research,portfolioanalysisandsiteselection.Candidatescanviewjobopeningsbycityonthecorporatewebsite.Theappropriatecontactsarealsolistedonthesite.CBRichardEllisHeadquarters:355SouthGrandAvenueSuite200LosAngeles,CA90071Phone:(213)613-3333www.cbre.comCBRichardEllisisaglobalproviderofcommercialrealestateservices.Ithas30,000employeesinmorethan450officesworldwide.CB,asitiscommonlyknown,offersbrokerageassistance,corporateservices,research,consulting,projectmanagement,valuationandadvisory.CBRichardEllisacquiredInsignia/ESGin2003andTrammellCrowCompanyin2006.Candidatescanviewandapplytoopeningsthroughthewebsiteorsendtheirresumestocbreresume@cbre.com.JonesLangLaSalleHeadquarters:200EastRandolphDriveChicago,IL60601Phone:(312)782-5800www.joneslanglasalle.com94©2009Vault.com,Inc. VaultGuidetoRealEstateCareersAppendixJonesLangLaSalleisaleadinginternationalproviderofcomprehensiverealestateandinvestmentmanagementservices.Thecompanystressesateamenvironmentandservesclientslocally,regionallyandinternationallyfromofficesinover100countries.The30,000JonesLangLaSalleprofessionalsofferintegratedinvestment,transaction,andmanagementservices.Whilemostoftheircompetitorspaycommissionsonly,JonesLangLaSallepaysbasesalaries.Candidatescanviewjobsandsubmitresumesonlineatthecorporatewebsite.DevelopmentCatellusHeadquarters:4545AirportWayDenver,CO80239Phone:(303)567-5700www.catellus.comCatellusisoneofthenation'spremierdiversifiedrealestatedevelopmentcompanies.Thecompanyspecializesindeveloping,managingandinvestinginabroadrangeofproducttypesincludingindustrial,office,residential,retailandmajorurbandevelopmentprojects.ItwasacquiredbyPrologisin2005.OpeningscanbeviewedandapplicationscanbesubmittedonthePrologiswebsite,www.prologis.com.HinesHeadquarters:WilliamsTower2800PostOakBoulevardHouston,TX77056Phone:(713)621-8000www.hines.comAninternationaldeveloperthathasaportfolioofprojectscompleted,acquiredand/ormanagedofmorethan1,100.Itsdevelopmentexpertiseincludesskyscrapers,corporateheadquarters,mixed-usecenters,industrialparks,andmaster-plannedresortandresidentialcommunities.Currently,Hinescontrolsassetsvaluedinexcessof$25billion.ThefirmhasofficesthroughouttheU.S.andin16othercountries.Openjobscanbeviewedandappliedtoonline.Notethattherecruitingprocess,likemostrealestatefirms,isoftendrivenfromthelocal/regionaloffice.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.95 VaultGuidetoRealEstateCareersAppendixKBHomesHeadquarters:10990WilshireBoulevardLosAngeles,CA90024Phone:(310)231-4000www.kbhome.comKBHomeisoneofAmerica'slargesthomebuilderswithdomesticoperatingdivisionsinArizona,California,Colorado,Florida,Nevada,NewMexicoandTexas.Kaufman&BroadS.A.,thecompany'smajority-ownedsubsidiary,isoneofthelargesthomebuildersinFrance.ItalsooperatesKBHomeMortgageCompany,afull-servicemortgagecompanyfortheconvenienceofitsbuyers.Allopeningscanbeviewedonthecompanywebsiteandentriescanbesubmittedonline.TishmanSpeyerPropertiesHeadquarters:RockefellerCenter45RockefellerPlazaNewYork,NY10111Phone:(212)715-0300www.tishmanspeyer.comTishmanSpeyerPropertiesisaleadinginternationalowner/operatoranddeveloperofofficebuildingswith10domesticofficesand18internationaloffices.AllopeningscanbeviewedonthecompanywebsiteandapplicationscanbesubmittedonlineTrammellCrowHeadquarters:2001RossAvenue,Suite3400Dallas,TX75201Phone:(214)863-3000www.trammellcrow.comTrammellCrowwasacquiredin2006byCBRichardEllis,becomingawhollyownedbutindependentlyoperatedsubsidiary.Inits60+yearhistory,TrammellCrowhasdevelopedoracquiredcommercialrealestateofover500millionsquarefeetand$50billioninvalue.TrammellCrowhastraditionallyfocusedonoffice,industrialandretailproperties,thoughitalsohasotheroperatingunitssuchashealthcareandstudenthousing.Eachofficeoperatesasitsownbusinessunit,andhiringisoftendrivenbylocalneeds.OpenpositionsmaybepostedinthecareersectionoftheCBREwebsite,www.cbre.com.96©2009Vault.com,Inc. VaultGuidetoRealEstateCareersAppendixREITsOFFICE-FOCUSEDBostonProperties,Inc.Headquarters:800BoylstonStreetatThePrudentialCenterBoston,MA02199-8103Phone:(617)236-3300www.bostonproperties.comBostonProperties,Inc.isaself-administeredandself-managedREITthatdevelops,redevelops,acquires,manages,operatesandownsadiverseportfolioofofficeproperties.Thecompanyisoneofthelargestowners,acquirersanddevelopersofClassAofficepropertiesintheU.S.,concentratedinfourcoremarkets–Boston;Washington,D.C.;midtownManhattan;andSanFrancisco.BostonPropertieshas650employeesandfivefull-serviceregionalofficeslocatedintheaforementionedareasandPrinceton,NewJersey.EquityOfficeHeadquarters:TwoNorthRiversidePlazaChicago,IL60606Phone:(312)466-3300www.equityoffice.comEquityOfficewasformerlythenation'slargestofficebuildingownerandpropertymanager.Itwasacquiredin2007byTheBlackstoneGroup,whichspunoffsomeassetsandconsolidatedothersfromotheracquisitions.EquityOfficestillownsandmanagesofficebuildingsinseveralmajorcitiesacrossthecountry.Allopeningscanbeviewedonthecompanywebsiteandapplicationscanbesubmittedonline.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.97 VaultGuidetoRealEstateCareersAppendixRETAIL-FOCUSEDWestfieldGroupU.S.HeadOffice:11601WilshireBoulevardLosAngeles,CA90025Phone:(310)478-4456www.westfield.comWestfieldGroupbeganinAustraliain1960andhassinceexpandedtoNewZealand,theUnitedKingdomandtheUnitedStates.Ithas119retailcentersacrossthefourterritorieswith55ofthosecentersintheU.S.comprising63millionsquarefeetofspace.Westfield’sglobalheadquartersisinAustralia,whereitispubliclytraded.Businessactivitiesincludepropertymanagement,leasing,development,designandfund/assetmanagement.Allopeningscanbeviewedonthecompanywebsiteandapplicationscanbesubmittedonline.SimonPropertyGroup,Inc.Headquarters:225WestWashingtonStreetIndianapolis,IN46204Phone:(317)636-1600www.simon.comSimonPropertyGroup,Inc.isaREITthatownsandmanagesincome-producingproperties,primarilyregionalmallsandcommunityshoppingcenters.Throughitssubsidiarypartnerships,itcurrentlyownsorhasaninterestin386propertiescontaininganaggregateof244millionsquarefeetofgrossleasableareaacrosstheNorthAmerica,EuropeandAsia.Simonemploysapproximately5,000peopleandispubliclytradedontheNYSE.Allopeningscanbeviewedonthecompanywebsiteandapplicationscanbesubmittedonline.INDUSTRIALAMBPropertyCorp.Headquarters:Pier1Bay1SanFrancisco,CA9411198©2009Vault.com,Inc. VaultGuidetoRealEstateCareersAppendixPhone:(415)394-9000www.amb.comAMBPropertyCorporationisaREITengagedintheacquisition,ownership,operation,management,renovation,expansionanddevelopmentofprimarilyindustrialpropertiesacross14countries.Thecompanyhasaportfolioof159millionsquarefeet,comprisingofindustrialpropertieslocatednearseaports,airportsandprimaryinterchangesintheAmericas,EuropeandAsia.Openingscanbeviewedonthecompanywebsiteandapplicationscanbesubmittedtojobs@amb.com.ProLogisHeadquarters:4545AirportWayDenver,CO80239Phone:(303)567-5000www.prologis.comProLogisoperatesaglobalnetworkofindustrialdistributionfacilities,withmorethan2,500propertiesand475millionsquarefeetofspaceowned,managed,orunderconstructioninmarketsacrossNorthAmerica,EuropeandAsia.Thecompanyleasesitsindustrialfacilitiestomorethan4,500customers,includingmanufacturers,retailers,transportationcompanies,third-partylogisticsprovidersandotherenterpriseswithlarge-scaledistributionneeds.Allopeningscanbeviewedonitswebsiteandapplicationscanbesubmittedtohr@prologis.com.APARTMENTSAvalonBayCommunities,Inc.Headquarters:2900EisenhowerAvenue,Suite300Alexandria,VA22134Phone:(703)329-6300www.avalonbay.comAvalonBayCommunities,Inc.isinthebusinessofdeveloping,redeveloping,acquiringandmanagingluxuryapartmentcommunitiesinthehighbarrier-to¬entrymarketsoftheUnitedStates.ThesemarketsarelocatedintheNortheast,Mid-Atlantic,Midwest,PacificNorthwest,andNorthernandSouthernCaliforniaregionsofthecountry.Asofmid-2009,AvalonBayownedorheldinterestin173apartmentcommunitiescontaining50,000apartmentsin10statesandtheDistrictofColumbia,ofwhich12communitieswereunderconstructionandsevenwereunderVisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.99 VaultGuidetoRealEstateCareersAppendixreconstruction.Allopeningscanbeviewedonthecompanywebsiteandapplicationscanbesubmittedonline.EquityResidentialHeadquarters:TwoNorthRiversidePlazaSuite450Chicago,IL60606Phone:(312)474-1300www.eqr.comWithmorethan530propertiesandalmost144,000unitsacross23statesandtheDistrictofColumbia,EquityResidentialisoneofthelargestpubliclytradedownerandoperatorofmultifamilypropertiesintheUnitedStates.Thecompanyisaself-administeredandself-managedequityREIT,tradesontheNYSE,andhasbeennamedoneofAmerica'sMostAdmiredCompaniesbyFortunemagazine.Allopeningscanbeviewedonthecompanysiteandapplicationscanbesubmittedonline.INVESTORSANDADVISORYFIRMSHeitmanRealEstateInvestmentManagementHeadquarters:191WackerDriveChicago,IL60606Phone:(312)855-5700www.heitman.comHeitmanisamultinationalrealestateinvestmentmanagementfirmthatservesaglobalclientbaseandmakesinvestmentsincommercialrealestatedirectlyorinpubliclytradedREITsecuritiesintheU.S.andEurope.Allopeningscanbeviewedonthecompanywebsiteandapplicationscanbesubmittedtocareers@heitman.com.LendleaseRealEstateInvestments,Inc.U.S.Headquarters:200ParkAveNewYork,NY10166Phone:(212)592-6800www.lendleaserei.com100©2009Vault.com,Inc. VaultGuidetoRealEstateCareersAppendixLendleasehasmorethan11,000employeesacrossthreecorebusinesses:propertyinvestmentmanagement,projectmanagementandconstruction,andpropertydevelopment.Thus,itcouldbeclassifiedinmorethanjustintheinvestorcategory.Lendlease’sinvestmentmanagementdivisionmanages$11billioninpropertyassetsthroughfundsandjointventuresandisfocusedonAsia,AustraliaandtheU.K.Openingsforalldivisionscanbeviewedonthecompanywebsiteandapplicationscanbesubmittedonline.RREEFHeadquarters:101CaliforniaStreet,26thFloorSanFrancisco,CA94111Phone:(415)781-3300www.rreef.comRREEFisanalternativeinvestmentgroupwitharealestatedivisionthatinvestsandmanages“investmentgrade”realestatepropertiesandprovidesresearchandotherspecializedservicestoREITs.ItisownedbyfinancialservicesgiantDeutscheBank.Asof2009,thecompanyhadanestimated$56billionofpropertyunderownershipandmanagement.JobopeningsarenotlistedonthewebsitesointerestedapplicantsshouldcontactRREEF.TheBlackstoneGroupHeadquarters:345ParkAvenueNewYork,NY10154Phone:(212)583-5000www.blackstone.comTheBlackstoneGroup’sRealEstateAdvisors(BREA)platformisofthemostactiveinvestorsintheglobalrealestatemarket,havingoperatedsixgeneralrealestatefunds,twointernationallyfocusedrealestatefunds,aEuropeanfocusedrealestatefundandaspecialsituationsrealestatesinceinceptionin1992.Thecompanyhasbeeninvolvedinsomeofthemosthigh-profiledealsintherealestateindustryinrecentyears,includingtheacquisitionofEquityOfficePropertiesTrustin2006andHiltonHotelsin2007.Consideringitsscale,BREAemploysaleancrewofroughly80peopleinofficesinNewYork,London,Mumbai,TokyoandHongKong.BREArecruitsundergraduatesandMBAsfromtopschools.IfBlackstonedoesnotvisityourcampus,refertoapplicationinstructionsonitswebsite.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.101 VaultGuidetoRealEstateCareersAppendixWaltonStreetCapitalL.L.C.Headquarters:900NorthMichiganAvenue,Suite1900Chicago,IL60611Phone:(312)915-2800www.waltonst.comTheprincipalsofWaltonStreetdirecttheinvestmentandmanagementoffundsfrominstitutionalpartners.Theprincipalspersonallymakeasignificantinvestmentintheirfundvehicles.Ofthe$3.5billionofaggregateequitycommitmentsreceivedbythefunds,theprincipalshavepersonallycommitted$202millionalongsidetheinvestorsinthefunds.Similartomostopportunisticrealestateinvestmentfunds,WaltonStreetCapitalseekstogeneratereturnstoinvestorsofatleast20percentannuallywithathree-tofive-yearholdperiodforacquisitions.Alsolikemostrealestateprivateequitygroups,thecompanyoperatesaleanstaff.InterestedapplicantsshouldcontactWaltonStreetCapitaltoinquireaboutopeningsandprocedures.REALESTATELENDERSMetLifeRealEstateInvestmentsHeadquarters:10ParkAvenueMorristown,NJ07960Phone:(973)775-1752www.metlife.comMetLifeRealEstateInvestments,therealestateinvestmentarmofMetropolitanLifeInsuranceCompany,maintainsaportfolioofover$46billioninvestedinrealestateproductsincludingequities,commercialmortgages,andsecuritizedinvestments.MetLifeRealEstateInvestmentshasofficesinkeycitiesthroughouttheUnitedStates,aswellasLondonandToronto.Commercialrealestateservicesincludemortgages,leasing,sales,acquisitionsandcapitaltransactions.Allopeningscanbeviewedonthecompanysiteandapplicationscanbesubmittedonline.NorthwesternMutualLifeInsuranceCompanyHeadquarters:720EastWisconsinAvenueMilwaukee,WI53202Phone(414)665-1444www.northwesternmutualrealestate.com102©2009Vault.com,Inc. VaultGuidetoRealEstateCareersAppendixNorthwesternMutual’srealestateinvestmentsgroupinvestsincommercialmortgages,equitiesandsecuritizedinvestmentsacrossallmajorpropertytypes.Theentitycontrolsa$29billionportfoliocomprisedof75percentfixedincomeand25percentequityinvestment.Refertowebsiteforapplicationprocedures.PrudentialRealEstateInvestorsHeadquarters8CampusDrive,4thFloorParsippany,NJ07054Phone:(973)734-1300www.investmentmanagement.prudential.com/preihomePrudentialwasoneofthefirstfirmstowidelyofferthebenefitsofrealestateinvestingtopensionplans.PrudentialRealEstateInvestorsoffersabroadrangeofinvestmentvehiclesthatendowprivateandpublicmarketopportunitiesintheU.S.,Europe,AsiaandLatinAmerica.Over400employeesworkfortherealestatedivisionworldwide.Productofferingsaredesignedtoaddressspecificclientneeds,includingdiversifiedcorerealestateequityandprivatedebtstrategies,value-addedrealestateequitystrategies,andopportunisticorspecializedprivateorpublicrealestateequitystrategies.Allopeningscanbeviewedthroughalinkonthewebsiteandapplicationscanbesubmittedonline.RecruitingquestionscanbesenttoPREI_careers@prudential.com.VisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.103 SampleCoverLettersMay15,2009Mr.AlDavisPresident,RealEstateInvestmentCorp.40WallStreet,Suite#2200NewYork,NYDearMr.Davis:Isawyourcompany’spostingonSelectleaders.comfortherealestateinvestmentseniorassociatepositionandaminterestedinsettingupaninterview.IcurrentlyworkinasimilarcapacityasaninvestmentsalesbrokeratBigRealEstateCompanybutameagertotransitiontothebuy-sideofthebusiness.Ihaverealestateadvisoryandinvestmentexperiencethatspansfiveyearsandincludessignificantacquisitionsunderwriting.Inmycurrentroleasaninvestmentbroker,Ihaveanalyzedinvestmentpropertiesacrossalmosteveryassetclass,generateddozensofnewcontactsfordeals,andworkedwithseniorbrokerstonegotiateandcloseinvestments.Infact,Iwasnamedrookieoftheyearin2006forthewesternregionbasedonthesalesvolumeIgenerated.Ihavetheexperiencetobeaneffectiveinvestmentassociatefromdayone.Moreso,Iamhighlydriventosucceed.Forexample,inundergradItookonavarietyofjobs,suchasanassistantaccountantandnewspapersalesman,topaythebillswhilebalancingactivitieslikesoccerandstudentgovernment.Thisworkethicfilteredintomycareer,andIbecamethemostbillableemployeeonmyteamof40consultantsatBigConsultingCompany.Additionally,Iassumedleadershiptohelprelaygrievancesfrommypeerstomanagementafteracorporatemerger.Ihavealwaysworkedhardandfoundwaystogivebacktomyteamandcommunity.Ibelievethatmyskillsareagoodfitwiththeassociatepositionandwouldliketotalkfurtherabouttheopportunity.Thankyouforyourtimeandconsideration.Bestregards,JamesBonderson105 VaultGuidetoRealEstateCareersAppendixSAMPLERESUMESCONT.May5,2009Mr.AlDavisPresident,RebarInvestmentCorp.40WallStreet,Suite#2200NewYork,NYDearMr.Davis:IdiscoveredyourpostingonSelectleaders.comseekingaseniorassociateinacquisitionsandaminterestedtoarrangeaninterview.IcurrentlyworkinasimilarcapacityasaninvestmentsalesbrokeratBREABrokeragebutameagertotransitiontothebuy-sideofthebusiness.Myinvestmentbrokeragebackgroundmorethanpreparesmetobeastrongcontributorinanacquisitionsrole.Inmybrokeragerole,Ihaveanalyzedinvestmentpropertiesacrossalmosteveryassetclass,generateddozensofnewcontactsfordeals,andworkedwithseniorbrokerstohelpnegotiateandclose20investmentdeals.Infact,Iwasnamedrookieoftheyearin2006forthewesternregionbasedonthesalesvolumeIgenerated($10million),whichwasmorethananyoftheother20newbrokersinmyclassthatyear.Also,IofferteamleadershipabilitiesthatIdevelopedbothatcollegeasteamcaptainofmyrugbyteamfortwoyearsandatBREAasmentortotennewbrokersin2007-2008.Theseexperiencestaughtmehowtomanagedifferentpersonalitiesunderpressureandleveragetheskillstrengthsofindividualswithaneyetowarddevelopingweaknesses.Foroneofmymenteebrokers,Iwasabletohelphimdevelopconfidenceandsalesskillstoturnhimfromoneofthelowestproducingrookiebrokersin2007totheleadingbrokerfromhisclassin2008.Iaccomplishedthisthroughmeetingwithhimweekly,discussinghisprogressinsupportivemanner,anddevelopinghismarketingtechniquesthroughexercises.FromtalkingwithVicePresidentBillyRockatyourcompany,Iunderstandthatyourteamhasexperiencedhighturnoverattheanalystlevel–Ibelievemyteamleadershipskillswillhelpyouaddressthisissue.IwouldliketoarrangeaninterviewtofurtherdiscusshowmyskillsmatchtheSeniorAssociatePosition.Thankyouforyourtimeandconsideration.Ilookforwardtohearingfromyou.Sincerely,JamesBonderson106©2009Vault.com,Inc. VaultGuidetoRealEstateCareersAppendixSAMPLERESUMESCONT.July23,2009SimonCarusoHiringManagerT&TDevelopmentCompany750HaciendaSt,Suite400LosAngeles,CA90067DearMr.Caruso:IaminterestedinthedevelopmentassociatepositionthatIheardaboutthroughSamElwayattheLosAngelesRealEstateCareerFairyesterday.Mr.Elwaysaidthatyouareseekingsomeonewhotakesinitiative,demonstratesprojectmanagementabilities,andisgroundedinfinancialanalysis–mybackgroundfitsthebill.IamconfidentthatIwouldbeagreatadditiontoyourteam.MybackgroundincludestwoyearsinarchitectureasdesigneratMuranoArchitects,LLP,andtwoyearsoffinancialanalysisexperienceasaconsultantatSpruceStreetRealEstateAdvisory.Inmyarchitectureexperience,Iwasquicklyelevatedfromjuniordesignertodesignerinoneyearafterdemonstratingmyinitiativeandprojectmanagementabilitiesontwosmallredesignprojectsthathadslippedpasttheattentionoftheleaddesigner.Icreatedrenderingsthatsatisfiedtheclientsandledtoadditionalworkworth$25,000innewfees.Additionally,myexceptionalperformanceledoneoftheclientstorecruitmetoworkintheirrealestateconsultingbusiness.IjoinedSpruceStreetRealEstateAdvisorytoexpandmyfinancialexperienceinrealestatewhileofferingadifferentperspectiveonrealestatethanmostofmyconsultingpeers.Ononeconsultingproject,Ileveragedmyarchitectureexperiencetoassesshowcostsandreturnswereimpactedbyincorporatingdifferentdesignfeaturesintothestructure.Myanalysishelpedtheclientavoid$100,000inunnecessarydesigncosts.Iamenthusiasticaboutthedevelopmentassociateopportunityandwouldliketoarrangeaninterview.IwillfollowupinoneweektoseeifIcanansweranyquestionsaboutmybackgroundandtoobtainanupdateontheprocess.Thankyouinadvanceforyourtime.Sincerely,CeciliaRhodesVisitVaultatwww.vault.comforinsidercompanyprofiles,expertadvice,careermessageboards,expertresumereviews,theVaultJobBoardandmore.107 VaultGuidetoRealEstateCareersAppendixSAMPLERESUMESCONT.June18,2009MelissaCharlesSeniorPropertyManagerPinnacleManagementCompany25123rdStreetPhiladelphia,PA19103DearMs.Charles:IamaseniorundergraduatestudentattheWhartonSchoolwithaconcentrationinrealestate.IamwritingtorequestaninterviewforthepropertymanagementanalystpositionatPinnacleManagementCompany.Afterattendingyouron-campusinformationsessionandreceptionandspeakingwithseveralteammembers,includingBeverlyLeeandTerrellMcArthur,Iamexcitedabouttheopportunitytoworkatyourcompany.Iwasespeciallyinterestedtofindoutabouttheaboutanew,web-basedpropertymanagementprogramthatyouarelaunchinginlate-2009thatlookstointegratenewtechnologieswithtraditionalpropertymanagement.Withmyexperienceinrealestateandwebdevelopment,IbelievethatIhaveagreatdealtoofferyou.•Financialanalysisskills.InaninternshipatJBSDevelopment,Iwastaskedwithdevelopingmonthlysummariesofcashflowfortenofficebuildings,eachover50,000squarefeet.IcraftedanewmacroinExceltoautomateandacceleratetheupdateprocessoftheseweeklycashflowreports.Myworkwascommendedbymymanagerandtheimprovementsarestillpartoftheircashflowspreadsheetstoday.AtPinnacleManagementCo.,Iwilllooktofindsimilarmethodsofimprovingyourfinancialreportingprocess.•Webdevelopmentskills.WhileatWharton,Iranmyownwebdevelopmentcompanytohelpfundmytuitionandexpenses.Idevelopednewmarketingangles,managedclientrelationships,andofferedcreativeadvicetocustomerstohelpachievethegoalsoftheirwebsite.Throughmyefforts,Iwasabletogenerate$25,000worthofbusinessduringcollege.Ihaveastrongappreciationforweb-basedsolutionstobusinessproblemsandbelievethatIwillbeabletohelpyourcompanyintherolloutofitsweb-basedpropertymanagementprogram.Withmypenchantforproducingtangibleresultsandmyenthusiasmforfindinginnovativesolutions,IcanmakesignificantcontributionstoPinnacleManagementCompany.Ihopethatyoufindmybackgroundagoodfitforyourcompany,andIaskthatyouincludemeinyourupcomingfull-timeinterviewschedule.Thankyouforyourtimeandconsideration.Sincerely,MadisonVail108©2009Vault.com,Inc. AbouttheAuthorsBrettHamiltonBrettgainedhisintroductiontorealestateasaneconomicconsultantassignedtoabankruptcyofaJapaneserealestatecompany.Withhisinterestignited,hejumpedintorealestatefulltimeatCBRichardEllis,whereheadviseddevelopers,investorsandgovernmentagenciesonfinancialandmarketaspectsofrealestateprojectsspanningretail,office,industrial,hotel,single-familycommunity,multifamilyandmixed-useproducttypes.Whilestayingactiveasanindependentrealestateconsultant,BrettundertookhisMBAatTheWhartonSchoolandbecameanactiveparticipantinvariousrealestateorganizationsandcompetitions.Aftergraduation,hejoinedTrammellCrowCompanyinanopportunisticprivateequityfund,pursuingnewinvestmentsandhelpingmanageexistingassets.Bretthassinceleftthefundtopursueentrepreneurialventuresinrealestate.RaulSaavedraJr.RaulSaavedraJr.beganhisrealestatecareersoonaftergraduatingfromtheUniversityofIllinoisin1994.Soonaftergraduatingcollege,Raulboughtanapartmentbuildingandbeganworkingincommercialrealestateasanofficetenantrepresentationbroker.Afterdevelopingastrongsalesandmarketingbackgroundinrealestate,RaulenrolledinTheKelloggSchoolofManagement.Raulhasabackgroundinmanyfacetsofrealestate:residential,commercial,industrialandtechnology.Hehasworkedattwooftheleadingcommercialrealestatefirmsandwasmarketdirectorforarealestatetechnologyfirm.AtKellogg,Raulbecameveryinvolvedwiththerealestateclubandthecurriculum.Raulwasaco-chairofboththerealestateclubandtheannualRealEstateConference.HegraduatedinJuneof2002andisnowarealestateconsultant.109