Patrick: Oh that sweet moment I finally received an offer to start as an Analyst at a PE real estate shop. Not having to go through three gruelling years of investment banking with its all-nighters, sleeping bag under the desk, toothbrush in the drawer. No 2am caffeine-fuelled sessions correcting the font of PowerPoint slides that no one reads! This is not to take away from the overall importance of the sellside, but there was just a huge sigh of relief that I hopefully managed to avoid the investment banking horror stories. Instead, I was picturing 8-hour working days five days a week, negotiating deals in the morning, some modelling in the afternoon and a fancy business lunch in between.
Jordan: The inexperienced graduate in me was definitely thinking that life was going to be so sweet! I couldn’t wait for all the off-market deals I would be sourcing over Surf n’ Turf at Le Gavroche… Unfortunately, this largely remained and remains a dream. I approached the first day at work with the attitude that I would be revolutionising the industry. Reality hit home hard and fast. I believe I spent my first week updating a spreadsheet with around two thousand leasing comparables in Germany and France. Not the most intellectual stimulating exercise.
P: I know what you mean, I remember one night having to download an entire dataroom, document by document until 6am, because the automatic download function wasn’t working. Followed by replicating the entire folder system manually. I was never so close to quitting on the spot and moving to Guatemala the next day to become a part-time yoga instructor, part-time environmental activist and part-time Instagram model advocating vegan diets.
J: Hahaha! Unfortunately, being on the buyside does not save you from doing mundane tasks. Someone has got to do it and inevitably that person will be you: the most recent addition to the team. Thankfully, the work did become a lot more interesting very quickly. Underwriting new transactions, sitting in negotiations with counter-parties and my personal highlight: going on site visits.
P: I’ll never forget my first business trip in October three weeks into the job. Suited and booted, wearing my best tie and best watch (a Casio Retro, as I couldn’t afford anything else at the time). I got a car to pick me up in the morning to drive me to the airport and I felt like I was about to conquer the world. As always, reality is a bitch: The 6am flight was certainly not the most relaxing or spacious. I also painfully realised that opportunistic real estate is usually located in the less glamourous locations and that my attire was sub-optimal to say the least. Unfortunately, our destination was a German industrial development site that we were inspecting and just like the English autumn, the German autumn tends to be rather wet. You can imagine that the initial sense of euphoria quickly vanished and transformed into embarrassment when I got stuck in a mud hole and I had to get pulled out by my boss.
J: Even though the site visits are always the more memorable moments on the job, what keeps me on my toes most is how often I am actually being asked for my opinion. It can be incredibly intellectually stimulating to identify issues with a particular property and to come up with interesting angles or solutions that the competition either misses or doesn’t have the time or resources to underwrite. Despite how numerically intense our roles are, people often forget that there is still a lot of room for creativity. The day to day tasks such as cash flow modelling, presentations, market research, tenant analysis, data collection, and internal and external interactions with counterparties are essentially only tools to help us understand the strengths and weaknesses or a particular opportunity better, in order to make informed investment decisions that should generate superior outsized risk-adjusted returns.
P: Couldn’t agree more Jordan. The challenge (and the beauty of the game) is that we are not incentivised by commissions or fees for completing a deal, but rather for successfully acquiring, implementing the business plan and exiting, i.e. actually having made the investors money. The benefit is that we often have discretion and full control over how we invest the fund’s capital, but are also 100% accountable for the investment decision. There is a real alignment of interest, particularly once you finally receive carry in the business or fund and actually get your piece of the pie, no matter how small.
Next Up: Deflecting the Devils on your Shoulder: Recruiters.
