Real estate was nothing much before 1947 as it is today. It got the attention of individuals like William Levitt. He was the one who built a dream for all Americans. He built a large residential subdivision in New York. That attracted soldiers that came back after the war. They were happy. They married and had a family of their own. As all these went on, everything went complicated within, one step at a time. Here, let’s know about Real Estate Investment Banking Careers.
Banks went wiser, and new things evolved within the financial world. Investment banking was an old story for bankers at that moment. But some things brew within that made a foothold for what was to come.
In 1960, real estate and investment banking gained a legal face. The signing of President Eisenhower of a federal act made sure of it. It made it easy for pooling resources for real estate projects. From then on, market forces affected the trend along with it, the players with power. And power is money.
What is Real Estate Investment Banking?
This is a very broad field that encompasses both real estate and investment banking. Let us cut the pie down to manageable sizes.
Real estate refers to land, but it is deeper than that. It is a land with known boundaries that includes all improvements on the land, man-made or natural. All structures, houses, fences, bridges fall under the definition of real estate. Also in its meaning are natural formations. These may be rivers and creeks, trees, and minerals that are all-inclusive to the land.
Investment banking is a financial service extended by a bank or a financial company. It stands as the middleman between a company and a group of investors. The investment banker will assist, analyze risks. The job also entails giving help in creating or raising capital for the venture.
Real estate investment banking refers to two things. One, it is a group. Two, it is what the group does.
This group is a specialized group within the organization of an investment bank. It has its strata of personnel, from an analyst to the Managing Director. These are the people that know the world of investment in real estate like the back of their hands.
What the group does makes this form of investment an alluring enterprise. Especially for people with money. The group helps in creating capital for companies. It is also open for service to the government.
The group also helps in risk analysis, divestiture, and mergers. Acquisitions, underwriting new debt, and equity securities are also in their service. These are a few of the many help they can provide to their clients. With all the duties, the group is in close collaboration with other departments in the bank. The most important among these is the legal department.
The real estate investment banking group does not buy any property at all. They give advice and be the consultant of a client. The client pays them for their services and know-how. A side benefit here is the use of other resources of the bank.
The Giants of Investment Banking in the USA
The choices one makes will show in the outcome. Nobody can argue that everybody agrees, but what we are trying to get across is very simple. A tailor can make you a suit. A good tailor can make a better suit. The best tailor is, without batting an eye, can make the best suit in town.
How will one know who the best tailor is? Ask around, read the news, surf the internet. Ask your momma. The same thing one has to do in finding the best investment bank for guidance. One can not risk the money involved and one does not have all the time in the world. Money, by itself, is expensive.
To help one in this shady part of the trek, we have come up with a shortlist of the giants that play the game. These are no mere brick-walled, one vault, one-floor edifice at the shopping mall premises. That is an ant while these are the dinosaurs, not that they are extinct, but the size of these. They are on the list in no particular order.
1. Morgan Stanley.
An American company named after the founders who gave it a start in 1935 in New York City. After the first year alone, it already had over a billion dollars in its portfolios. That represented a remarkable quarter of the total share of all the banks in the USA.
Though new in the American market, it established its presence in the local scene. With a huge resource, it expands to the international market in its early years. It was also one of the spearheads in the reconstruction of Europe after World War 2.
2. JP Morgan Chase.
This is a corporation that grew out of a multitude of other corporations through the years. The Manhattan Company in 1799 is where it all started, where they had the tasked to supply water to New York. The charter given to them by the state allowed them to set up a bank, The Bank of The Manhattan Company. That put a foothold into the ground of the financial needs of the American nation.
Chase Manhattan and JP Morgan agreed to merge in 2000 with the current name chosen. It is now a huge corporation with an international presence in many of the countries of the world.
3. Goldman Sachs. B
A German immigrant, Marcus Goldman, in 1869 in New York, arrived at a novel alternative. This was to ease the difficulty of having to gain credit from banks. This became known as the commercial paper business which he was the pioneer of. An intelligent son of the Sachs family became his son-in-law. Together with his son, they continued the business in partnership.
4. Credit Suisse.
The need for railroads opened the need to have a company to handle the finances of several projects. The name of the bank had to be that which was something that people understood. The place was as important as the name, Schweizerische Kreditanstalt. The bank was in Zurich, Switzerland,
Alfred Escher and his bank were to help finance the railroads. But the scene changed and opportunities bloomed. He opened his first foreign office in New York in 1905. The bank and the man are both Swede in birth and nature.
5. Bank of America Merrill Lynch.
The bank was started in 1904 by Amadeo Giannini who set up the Bank of Italy. With other businesses, he set up a holding company, Transamerica Corporation. The bank soon had a new name, Bank of America, which became the largest bank in America by 1930.
Before 1930, Bank of America became the first bank to have branches all over the state of California. He covered the national and international market after. Merrill Lynch merged with Bank of America in 2009.
The original name of the bank was City Bank of New York, with the state legislature approval given in 1812. For helping the American government, they had the designation as the depository bank. This help came in the form of money to fight the British from 1812 to 1814. The name had changed several times before what it is today.
7. Wells Fargo.
Two men in 1852 envision a company that provides reliable money services. Henry Wells and William G. Fargo had come into a world of iron horses and stagecoaches. that could travel far, new bridges, and canals. Their banks came about with the concept of safe delivery of money from one branch to another. This was because of their experience before their first bank.
8. Deutsche Bank.
The bank ventured into the Americas in 1872 with the acquisition of two banks, not under its name. The bank itself did not have a solid footing into the continent. When they had their first representative office, Europe was on the brink of war. After several mergers, Deutsche Bank finally had its bank under its name in 1979 in New York.
The Clients Of A Real Estate Investment Bank (REIB).
Investment banking doesn’t have John or Jane come through the door and open an account. No, that is retail banking. Investment banking has a huge clientele, a business group with long-term projects. The prime movers in their industry and we will identify them by the sector they are in.
1. Real Estate Investment Trust (REIT).
Yes, it looks like REIB, but it is different. What is alike to both is the real estate part of them.
One has to understand that REIT is akin to a Private Equity (PE) company that sought to buy another company. The PE works hard to make the company they bought be operational and liquid to sell it for profit. Like, the American Telephone and Telegraph Corp. buying Warner Brother but has no offer yet for sale.
The REIT works the same way except that it buys real estate. With investors, they buy shopping centers, office buildings, medical centers, apartment buildings. Some REITs in the USA are Weyerhaeuser Company and AGNC Investment Corporation.
2. Residential Developers and Home Builders
Some countries experienced huge upticks in the housing industry. It is because of these developers and homebuilders that residences are sprouting. It is not as easy as buying land, build the structure on it, and sell the units.
Homebuilders and developers have to understand the complete picture. Aside from that, know also the points that make up the entire picture. The decision to buy and start construction relies on several factors. Factors such as interest rate, employment rate, population growth. That is why they usually get the services of a REIB to help them. This is to get a better understanding of the complexities to get the entire project through.
Examples are Lennar Corporation of Miami, Florida, and Alliance Residential of Phoenix, Arizona.
3. Gaming Operators
This is not the arcade of young teens, and kids that we know are inside malls. These are the casinos with elaborate and expensive restaurants. Extravagant and fabulous shows to entertain. Of course, a gaming area, public or private, for games contrived by man. Card, dice, or machines with specialized functions. Such as the slot machine, the keno board, and the roulette.
There are countless casinos all over the United States. Though the number is in gradual decline. There are big ones and those that have a few seats and tables for gamblers. A few of the bigger and popular ones are Tropicana, Caesar’s, Sand, and Bellagio.
The Careers in Real Estate Investment Banking.
There are many investment banks in the USA. It is finite but a definite number would be hard to come up with. There is certain privileged information within a private company. The positions also would vary depending on the size of the bank and the specialty they go into. For real estate investment banking, we simplify positions in that department. The purpose of which is to gain a foothold of understanding.
This position may come in two levels, the entry-level Analyst, and the Senior Analyst. The position has a base salary range of $70K to $90K. Since it is a base salary, incentives, allowances, and adjustments may extend the pay.
An analyst must have a college degree. No specific course is common in any of the banks, so, any 4-year course will do. Banks are selective of graduates that must come from reputable academic institutions.
A state college graduate with exemplary grades will be in consideration for the position. Also, most corporations today, if not all, are adopting the concept of equal opportunity. This is the state of fairness without prejudice or preferences to sex, age, and ethnicity.
A deep perusal into the course the candidate had taken must have the subjects that are essential in bank operations. Subjects that touch on economics, finance, accounting, business administration are but a few. With regards to the experience, only a few of the giant banks need at least a year of relative experience. Most do not.
An entry-level analyst is under the impression to learn the operation of their team. This may be by personal means or with the structured help of the bank. Depending on the bank, an analyst will do market research with past financial reports to come up with valuation and loan amount.
The analyst may also be tasked to prepare investment reports, make ready underwriting of real estate properties in a portfolio. It is listed in the duties of an analyst to help the associate above him in all the phases of real estate investment banking.
Again, this position may have one or two levels in it, a junior and senior associate. Both may be in-house promotions or an outsider investment. This is dependent on the level of activity of this department of the bank.
Some investment banks are in bigger cities but associates may travel when necessary. These travels may not be in the critical stages of the project yet. With such situations, some banks adopt the two-tier analyst position.
The office in New York would encounter more dealings than the office in Rhode Island. An analyst from New York would be more realistic to deal with projects in other small states. Hiring one for Rhode Island is not a wise decision.
Being a senior to an Analyst, the Associate needs to have a wider knowledge. of the industry, like mergers and acquisitions. One primary task of the position is to take charge of extending support for the bank’s clients. They help the clients in identifying and accomplishing the client’s need towards their financial goal.
Reports, underwriting works, research, and analysis, among the many duties, are done with the help of the analyst. These documents are essential for the vice president to read, understand, and analyze the proper approach to the project at hand.
The base salary is $150K to $180K. Like an analyst, this can go higher with the number of incentives and the likes.
3. Vice President
This is the first officer of the company to meet a client in person. He is to open the possibility of further discussions about the project. He assembles his team of associates, analysts, secretaries, and interns. They have tasks in the procurement of documents. Governmental regulations, articles of incorporation, and such. These are to build the backbone of the client’s projects.
The Vice President is the manager of all teams in the investment bank. That is if the bank has different teams to handle different real estate projects. He is the synchronizer of all events, schedules, personnel assignments, and the likes. He is also the puppeteer of all associates and analysts in the movements. This is for seamless delivery of services each day of the project.
The position is of high experience depending on which bank. It may be an in-house promotion for competent employees. It can also be external hiring that the board finds more ideal for the functions. At times, several units of a master’s degree may be requisite in some banks. Some years of experience to qualify for the position mat come up. This happens most with external hiring.
This position must be conversant in absolute terms in all the fields of real estate investment. There may also be one or two more vice presidents to handle a team for different projects. His annual base take is between $200K to $300K. This may increase with benefits and perks.
4. Director or Senior Vice President
In a technical, this position has authority over the first three positions. The position represents the company to the client with full assurance and confidence. He may be a signatory in any contract with the client. From consultancy agreement until the fulfillment of the project. He may also be the intermediary between the Vice President and the Managing Director.
Common in all banks is the expansive duties and responsibilities of the position. It is not only in investment that a Senior Vice President meddles into. He is also into bank acquisitions, capital sourcing, underwriting of debts. Disposition, negotiations, and relations maintenance are among the many in his hands.
The role of a Senior Vice President comes with an education of a master’s degree. This master’s may be in business or finance. A Master’s in economics or accountancy may be a good substitute for some banks. Because of the high sensitivity of the position, in-house promotion is the way for some banks.
A base salary for him is around $250K to $350K. Again, this is by the benefits and perks he may receive in the year.
5. Managing Director
The head of the real estate department of an investment bank. He is part of all the decisions of the team as it plods along. He is the last and important signatory for the company in all contracts with the client. This is bank-dependent. Managing directors may also be a member of the executives of the company.
This is again bank-dependent. Managing directors may also be a member of the executives of the company. Other companies put a distinction within the executives: the junior and the senior. With this set-up, a managing director reports to any of the three: COO, CFO, or the CEO himself.
He is the one who reports to the board of the bank about the department’s work and progress. Of course, he has the highest base salary on the team from $450K to $600K.
The Duties and Responsibilities in Real Estate Investment Banking
Itemization of each position’s duties and responsibilities would be ideal. But because of the size of an investment bank, a unified list is a more practical approach. This is also due to the multitude of duties and responsibilities to achieve as a team.
A team of real estate investment bankers will have some duties that may include:
- identify and contact prospective buyers and hold important talks with the interested party;
- generate and manage the flow of information;
- serve as a primary liaison between buyer and seller;
- be aware of the current and future trends in the industry;
- create a convincing thesis with solid knowledge;
- study the capital structure and advice which financing transaction to take;
- help in finding finances;
- identify issues that may evolve during the process and act appropriately;
- help in crafting the final terms of the deal.
Questions of Interest.
1. Is there a relation between JP Morgan and Morgan Stanley?
One of the founders of Morgan and Stanley, Henry S. Morgan, is the grandson of JP Morgan. JP Morgan started as a mere employee of an American company that represented a London firm. Henry S. Morgan, meanwhile, studied at Harvard and became a partner at his grandfather’s bank.
2. What and when was the first condominium constructed in the United States of America?
Graystone Manor has the distinction of being the first condominium. Built on the continental USA in 1960. This was after the opening of the gates for building condominiums.
3. What is the biggest mall in the USA in leasable space?
The Mall of America in Bloomington, Minnesota and opened in 1992. It has a total retail space for lease at over 5.6 million square feet. It used to have over 500 stores inside.
There are different career positions in the real estate investment banking world. One may come into it on a different path from the others. There is no one way to enter this world. College graduates from different disciplines. But preference is in finance education. A new master’s graduate that thinks he is capable may do so.
Present situation hoping to whittle down in the next few calendar quarters. Real estate investment expectation is to soar back as it once was. Resumption of the halted activities will bring in the missed regular income. Income that must infuse back to all the economies of the world.