To me, real estate investment banking always seemed like a glamorous aspect of the business, however until today, I didn’t really know what it was or what it involved. The Stern Real Estate club held a “lunch and learn” event featuring speakers from the Goldman Sachs and Citibank real estate groups. The speakers discussed their specific groups within each bank, what investment banking means for real estate, and the types of transactions they’re currently working on.
What is real estate investment banking?
Real estate investment bankers basically stand at the intersection of the real estate markets and the capital markets. To put it broadly, they provide corporate finance services and they advise real estate market participants such as publicly traded REITs, real estate operating companies, and some privately-held real estate companies. Typical transactions include CMBS financing (not so much right now), corporate bond offerings, public equity offerings (including IPO’s), and equity private placements.
Getting into real estate investment banking:
Recent MBA’s enter the industry as associates assisting in business development and the execution of a wide-range of transactions. Career progression typically involves taking on more direct responsibility; managing transaction executions (Vice President), developing client relationships (Principal), and generating revenue (Managing Director).
What types of transactions are real estate investment bankers working on?
Right now, similar to the rest of the business, most real estate investment bankers are looking at distressed debt opportunities. However, they are also looking to originate loans, such as the $400 million loan Goldman Sachs recently made to DDR. It was the first new CMBS deal since February of 2008. Goldman is working with the Fed to make the loan TALF eligible. The real estate industry has been hopeful that TALF would stimulate the secondary market for CMBS, and this deal may put TALF to the test.
Is real estate investment banking the career for you?
Real estate investment banking is not for everyone. When considering getting into real estate investment banking you need to ask yourself, how close to the asset do I want to be? In real estate investment banking you are far removed from the bricks and mortar and maintain more of a financial focus.
Personally, I like how tangible real estate is. I want to physically see the building, walk the market, understand the buyers and use my entrepreneurial ability to make good things happen. Is real estate investment banking the career for you?
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