The Complete Real Estate Private Equity Guide

If you've wanted to learn about real estate private equity, here is a complete guide prepared by FinanceWalk.

What is Real Estate Private Equity?

An asset class of investment finance, real estate private equity investments deal with both equity and debt. Real estate investments are made through private equity real estate funds which are often a collective investment scheme where capital is pulled from multiple investors. These investments usually have a ten-year life span.

Real Estate Private Equity

In the early 20th century, the real estate investments were either done through direct property ownership or through investment funding (explained above). By the beginning of 21st century, the real estate private equity underwent various core changes and continues to experience immense growth.

Primarily, there are four real estate private equity strategies:

  • Core: It is the low-risk investment strategy with regular cash flow because the fund is invested in stable properties like multi-tenancy or properties in metropolitan areas because they have assured returns.
  • Core Plus: It is the medium-risk investment strategy where the funds are invested in core properties that come with value-added enhancements.
  • Value Added: It is the medium to high risk investment strategy where properties are bought, modified and sold at a later date.
  • Opportunistic: It is the high risk investment strategy because the funded properties require higher degree of enhancements such as development of niche property sectors or raw land development. The opportunistic strategy yields higher returns. 

The real estate private equity industry is worth billions of dollars in the international market.

Further in the guide, we will tell you how to become a real estate private equity analyst, share a list of real estate private equity firms and talk about real estate private equity salary, jobs and interviews.

Let’s begin.

Real Estate Private Equity Analyst 

The basic responsibility of a real estate private equity analyst is to analyse investments right from the acquisition date to its disposition through financial modeling and other strategies. The overall functioning of the real estate private equity organisation depends on the conduct of the analysts because they are involved in strategic decision making, ranging from individual investments to portfolio development. 

Some of the duties and responsibilities of a real estate private equity analyst are as follows:

  • Undertake key strategic initiatives.
  • Develop sensitivity models.
  • Prepare investment models on Excel to understand and explain capital structures.
  • Calculate developmental and operational investments.
  • Fluency with Excel and all operations like financial modeling.
  • Offer analytical support for transactions during major leases, dispositions, recapitalization and more.
  • Analyse and research the market.
  • Keep track of ownership documentations and venture agreements.
  • Manage investor communications.
  • Perform quarterly valuations.

…and more! 

To work as a real estate private equity analyst, you need to have a degree in Accounting, Economics or Finance. You need to have thorough knowledge of quantitative analytics and modeling skills, be detail oriented, work in a dynamic environment, be assertive and a self-motivated person. You can know more about becoming a private equity analyst here. 

If you want to learn real estate financial modeling, we recommend this course and here is our review of the course. You can also watch the course sample video. 

If you want to read some books, we recommend:

Real Estate Private Equity Firms/ Companies

Every year, PERE (Private Equity Real Estate) portal releases a list of top 50 firms in real estate private equity. PERE is the world’s top global news service website dedicate to private real estate markets. Here’s the current list for the year 2019. We will update this list every year.

  1. The Blackstone Group
  2. Lone Star Funds
  3. Starwood Capital Group
  4. Colony Capital
  5. Brookfield Asset Management
  6. Tishman Speyer
  7. Angelo Gordon
  8. Westbrook Partners
  9. Oaktree Capital Management
  10. Global Logistic Properties
  11. Walton Street Capital
  12. GI Partners
  13. Orion Capital Managers
  14. The Carlyle Group
  15. Fortress Investment Group
  16. TA Associates Realty
  17. CapitaLand
  18. Cerberus Capital Management
  19. LaSalle Investment Management
  20. Beacon Capital Partners
  21. Hines
  22. Northwood Investors
  23. Rockpoint Group
  24. Prudential Real Estate Investors
  25. GTIS Partners
  26. Ares Management
  27. KSL Capital Partners
  28. Secured Capital
  29. Rialto Capital Management
  30. DRA Advisors LLC
  31. Merlone Geier Partners
  32. Paramount Group
  33. CBRE Group
  34. Perella Weinberg Partners
  35. Hemisferio Sul Investimentos
  36. Alpha Investment Partners
  37. Gaw Capital Partners
  38. Harrison Street Real Estate Capital
  39. Kayne Anderson Capital Advisors
  40. Phoenix Property Investors
  41. Kildare Partners
  42. DivcoWest
  43. Patron Capital
  44. Mapletree Investments
  45. GreenOak Real Estate
  46. Heitman
  47. GE Capital Real Estate
  48. The JBG Companies
  49. Related Companies
  50. Tristan Capital Partners

For previous years, check out: Year 2011, Year 2012, and Year 2013.

Real Estate Private Equity Salary and Jobs

The real estate private equity salary varies with each country. For this guide, we will consider the various real estate private equity salary packages from USA, UK and India.

In USA:

The average salary of an analyst is 70,000 USD. The salary varies on the basis of experience, industry, location, company and benefits.

Here’s the data from SimplyHired.com.

SimplyHired USA

On the other hand, we see Indeed.com sharing statistics which place the salary way above the average shared by SimplyHired.com. Here’s data from Indeed.com.

Indeed PE USA

Even though the data is centered on New York specifically, we can surely see a huge difference between the location-based average and the national average.

Here is a data showing the national salary trends for a real estate private equity associate.

National Salary Trends

In UK:

We couldn’t find any specific salary trends but we did check out some UK-based real estate private equity firms to see what kinds of salaries they offer. For the Analyst position, we share the data from two firms:

Analyst 1:

Private Equity Analyst

Analyst 2:

PE Associate

Evidently, the real estate equity analyst salary ranges between £ 50,000 and £ 100,000.

In India: 

Again, the real estate private equity industry is relative new in India so we couldn't get specific data but we do have data on private equity in general.

PE Salary India

The national average is as such:

National Average

Having financial modeling and financial analysis skills impacts the salary. Here is a representation from PayScale.com.

Skills Impact

To wrap this section, the real estate private equity salaries vary on a lot of factors, mainly skills and geographical location.

Real Estate Private Equity Jobs 

It’s quite easy to find real estate private equity jobs through vacancy search engines. You can check out these links on SimplyHired.com and Indeed.com. The links will directly take you to the current jobs listings in this sector.

Alternatively, you can visit the websites of all the above listed 50 real estate private equity firms and check their careers section. 

20 Real Estate Private Equity Interview Questions 

You know the importance of cracking interviews at the opportune time. Breaking into real estate private equity is a tough job. If you have a real estate private equity interview lined up, prepare really well in advance.

We list 20 often-asked interview questions here with brief tips to answer them.

  • Tell us about yourself in brief.

Let your personality shine through. Avoid rambling. Give an introduction as to who you are and what you do and then talk about real estate.

  • Talk about your resume.

A very common question but most interviewees fail to answer it satisfactorily. Take 2-3 minutes to walk the interviewer through the resume. Highlight your achievements, your interest in real estate, previous work experiences and your skills.

  • Why do you want to come into real estate?

Prove that you are “made” for real estate business. Don’t say something vague like “I think I can work in real estate” – you will be shown the door! You have to come across as passionate.

  • Talk about DCF.

Be clear about concepts. DCF projects future cash flows and discounts. If you say a property is going to generate income in future, back up the claim with data.

  • How will you choose to invest money in real estate?

This is to test your mettle. Be aware of the firm interviewing you. If you are in Maharashtra, talk about its real estate than any other state. Be clear and succinct about explaining how to invest money. Prove that you have a sound business and finance knowledge.

  • Explain IRR.

Again, be clear about concepts. NPV becomes zero with IRR discount.

  • Explain equity multiple.

Same advice as above! Equity multiple metric is used to analyse investor returns.

  • Talk about company statements and its importance.

A typical debt-side query wherein you have to look at the company’s cash flow statement and make the interviewer understand how will the company generate cash flow. You have to analyse market share and growth prospects. Talk about balance sheets and income statements, key ratios and debt structures.

  • How will you value the Empire State Building, for example?

A hypothetical question, of course! You have to talk about running DCF, cash flows and other approaches.

  • Will two Class A buildings on the same street sell at same price or a different price? Explain.

Surely not because you have to evaluate its factors like building age, tenancy age, occupancy, management, amenities, construction, environmental factors and more. You have to explain this to the interviewer.

  • What do you think is the future of real estate investing?

Use real estate market knowledge to answer this. Talk about past and current real estate market scenario and how prospects look for in future. Quote data and statistics.

  • How comfortable are you with value drivers like MF, Office, Industrial, Retail, Medical Office, Hotel and Senior Housing?

These value drivers are all about:

  • MF – Housing Affordability, Population, Employment
  • Office – Employment, GDP, Transportation
  • Industrial – Employment, Manufacturing, GDP
  • Retail – GDP, Income, Employment
  • Medical Office – Healthcare Employment, Transportation, Elderly Population
  • Hotel – GDP, Employment, Tourism
  • Senior Housing - Employment

…and others!

  • How is a building valued?

You need to talk about the building features, tenancy, credibility and other factors.

  • Why property type do you value and why?

This is another opportunity to convince the interviewer of your passion and dedication towards real estate. Talk about the kind of buildings you like and why.

  • How is a joint venture structured?

A Joint Venture (JV) is a co-investment model wherein multiple parties are involved through an LLC, limited partnership or general partnership. A JV adjusts average real estate risk and gives benefits to each party. Talk about this in detail.

  • Explain a waterfall structure.

Know the basics.

  • Define cap rate.

Know the basics.

  • Define closed-end and open-end fund.

Again, basics.

  • Define ‘promote’.

Same as above.

Never make mistake while explaining the basics. It will leave a really bad impression on the interviewer.

  • What Excel formulas do you know?

A tricky question – the interviewer is trying to judge whether you really know Excel or not. Therefore, talk about relevant Excel formulas like VLOOKUP, SUMIF, MATCH and others.

Note that you shouldn't depend only on these questions. Expect more detailed and concept-based questions. Do a lot of mock interviews and be very well prepared. Most importantly, learn about the real estate private equity firm as well.

The interviews will be conducted in several rounds, ideally 4…be prepared.

Summing Up

FinanceWalk hopes the real estate private equity guide proves to be useful for you. If you have any questions and queries, share below.

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The Complete Real Estate Private Equity Guide 1

2 thoughts on “The Complete Real Estate Private Equity Guide”

  1. i have done mba in finance & i want to start my career in investment banking plz tell me something about this course

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