Niche down to an operator or stay an allocator
Weighing options here, possibility of joining a well capitalized but smaller by head count multi developer with an interesting pipeline, not a name brand that most would know here, would be a tight team. Other option is an allocator/opportunistic fund that’s newly raised and well positioned given current market conditions.
One feels a bit boring, well laid path with known runway. Other seems further out on risk with higher long term upside and maybe more fun.
Anybody debate something like this in their career, what was the takeaway?
I left a well known REPE fund last year to move to a multi owner-operator. I was VP on the path to Principal and there was definitely a long term career available with the firm. As you’ve said, it was a well laid path and pretty boring. Unless you really enjoy the deal process, I find it gets dull and repetitive quickly. Once you’ve been through 10+ deals as an allocator they really don’t change that much.
Now I’m at a small but very credible owner-operator. We’ve a few $BN AUM and were backed by a very supportive capital partner. The work is far more interesting and it feels far entrepreneurial formulating and delivering the business plan rather than just investing into someone’s business plan. Long term, I feel far more confident in my ability to go out on my own in this line of work than I would have if stayed in REPE which is a big plus for me. I think my ideal sweet spot would be in a multi developer similar to the opportunity you have.
Been thinking about making the same jump (currently VP at a MM REPE shop). Do you mind sharing how comp is at your new shop? Thanks
Salary is broadly the same across both, bonus is a lower but not materially. My comp trajectory for salary and bonus is definitely lower looking forward. I can argue for a greater cut of the economics on deals I originate and manage.
What do you find more interesting? You shouldn't ever make career-spanning decisions based on market conditions today, by the way.
If you want to be on the development side and be closer to the assets, have more responsibility, be a little more entrepreneurial, then you should choose the developer. If you want to be on the fund side and enjoy allocating capital to other people's shit, do that! And yes, I am making one sound way better than the other, mostly because I cannot imagine why anyone would want to be in an allocating role instead of doing the work and cannot even think of what would be positives to accentuate for that role, but if that's your speed then go for it!
It sounds like you understand what you want to do too. More fun, more upside... those are good reasons to move. You say the fund role is a well laid path with known runway.... known runway to what? What is your end goal? People say this kind of shit a lot without actually specifying what that "runway" leads to. Certainty of a nice paycheck for the next several decades? Starting your own fund? What the goal is, even in the haziest sense, is important in determining what the right choices are right now
Known runway in the sense of a stable seat with a consistent paycheck and some amount of carry allocation (which I put little value to). I guess it’s a question of stable life outlook vs doing something actually creates something but take on some additional risk for the sense of fulfillment that comes with it, maybe a nice promote check eventually too if things go well.
Well this is exactly my point. If you want a stable paycheck, go work for some megafund or whatever and do that. It has it's own risks, of course, but someone else is in charge of paying you and that stability is worth something.
And the whole "create something" is kind of a silly argument, because whatever the developer is "creating" doesn't happen without the fund's equity, but I get what you're saying. Again... you need to decide what it is you want before you make the decision about where to go
Developer no brainer
Very tough to make real money working for an allocator unless you own it as most firms never hit large promotes in their funds. Money is all made in the fee’s.
At the developer level it’s a lot easier to get rich as much easier to hit promotes in a deal by deal basis
Under-appreciated reality of the real estate game. Most my contacts at allocators secretly want to be on the operator/developer side of the business for this reason.
This is 1000% true. Every allocator wants to be the Developer and now Developer ever wants to be the allocator.
Allocators are a commodity nowadays
Would you mind explaining how more money making opportunities are available from dev / why it’s easier?
Unless you own the fund you will never make money as no funds ever hit big promotes anymore since the markets are that efficient. Look at the IRR's Starwood and Blackstone have recently been hitting...like 15-17%. Not a ton of juice there
When you are on the developer side none of your deals are crossed and you can hit Monster promotes. I did a deal and hit a 44% IRR...another hit a 31% IRR. Not small deals either.
You get rich making Promote's like that. Not working at a Fund
Maybe not the best role model but Pat Carrol gave a great quote on this - guys at LPs making $1-200k making decisions to invest in deals so that he can make millions. Clear as day that GP/operator is way to go for real money, but also risk depending on the shop.
Only people at REPE funds making $1-$200k are interns or people fresh out of school. No decision maker makes that little. Pat Carroll also own(ed) his own firm (terrible person to use as an example btw, he’s clearly mentally ill). I highly doubt many if any Carroll employees got rich off of promote.
Not to hijack this thread but how does one go about finding positions with a developer? Trying to transition into development and have not seen a ton of job postings.
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