Job Description

Real Estate Equity Intern

 

Imagine investing millions of dollars in a piece of land. Which piece of land would you choose? Over the past summer, I interned as a real estate private equity analyst for a large asset management company. It felt surreal to handle deals on such a large level.  I contributed to the kind of investments a single person normally can not accomplish alone. After a summer of trainings, meetings, and modelings, I learned the different roles of a real estate equity analyst.

 

A real estate equity analyst helps evaluate potential real estate investments and performs due diligence on prospective assets. They help invest money into commercial real estate and perform valuations to see how long to hold onto the real estate before selling it for a profit. Sometimes, to sell for profit, the company makes changes to the real estate, like renovations, changes in management, or more drastic alterations. As an intern, I performed similar roles to a starting analyst. The responsibilities fall into three main areas:

 

·      Valuation

·      Market Research

·      Due Diligence

 

Valuation

For the most part, real estate analysts spend their time valuing real estate. By performing these calculations, analysts determine whether to invest or not.  Valuations take a large amount of time. Analysts input formulas and tables in Excel to build out a thorough story of the building. Here is a rundown of how analysts perform valuations:

 

1.     Gather past financial documentation for the property

2.     Input financials into Excel

3.     Calculate projected returns and other metrics

 

Underwriting is the process of going through financials and projecting them out. The company provides some base underwriting assumptions to estimate the profitability of the asset in future years. With the given assumptions and historical cash flows, analysts uncover many valuation metrics, including the equity multiple and the internal rate of return. The metrics help analysts give a recommendation to the committee board to invest or not.

 

 

 

Market Research

 

An analyst needs to understand the market to understand real estate. Prices and demands always fluctuate, so it is important to know where your real estate lies in the context of the market. I used CoStar, a real estate platform, to research historical information and current market events. The site provides news articles as well as historical pricings for many commercial real estate properties. For example, I used CoStar to compare the property we wanted to buy with other similar properties in the area to analyze historical performance and pricings. By pulling rent and sales comparables, analysts can compare the property with others. I could note whether we priced too high or too low for an area and if there were any concerning factors based on looking at the surrounding market. Market research gives you a better idea of supply and specific local market prices. 

 

Due Diligence

 

Analysts perform due diligence to ensure the prospective property meets all the required regulations and laws. This consists of reading through leases, zoning reports, title and survey, taxes, insurance, and more. Analysts work with third-party consultants to gather this information on the property. These consultants point out any notable red flags of concern regarding the property. For example, say we want to buy a property for industrial use, but we find out the zoning laws specify the property is for retail use only. There would be many legal issues down the line if we bought the property without knowing its restrictions. Due diligence ensures the property is in the same condition you expect it is in before you close.

 

It took me most of the summer to understand the nuances of the role as a real estate equity analyst. Despite the long trainings and meetings, I never had a dull moment working over the summer. The role requires constant communication with coworkers and outsiders. It tests your analytical skills and ability to work with different platforms. You constantly learn something new as a real estate analyst.

 

 

 

 

Flesch Reading Ease: 49

Flesch-Kincaid Grade Level: 10.3

Passive Sentences: 0%