Institutional real estate investment has become an increasingly popular way for large pension funds, insurance companies, commercial banks, and other corporations to invest their money. As real estate values and as competition to invest in desirable properties increased, these organizations continued to place more of their assets into development projects.
These businesses are not seeking to be developers themselves, yet they could be important sources of equity or start-up money for developers as they begin their new projects. Commercial banks, like KeyBank based in Cleveland, often have an arm that focuses on the real estate investment. This could involve providing financing to Real Estate Investment Trusts (REIT) as well as partnering with developers in the construction of a new retail center or large residential community.
Another form of large institutional investing has begun over the last half century with the creation of REITs. These trusts can operate as developer and/or owners of real estate, but there are specific characteristics that a company must meet in order to be qualified as a REIT.
Most of the career options in institutional investment companies are focused on financial analysis in some capacity. It is important for these firms to identify quality investments from less desirable ones, and the best way to do so is through pro-forma valuations and financial projections for a specific property. It is vital for these professionals to have a strong knowledge of a property’s local market and comparable properties so they know whether or not a better investment opportunity exists.
Analysts are needed in order to help with the valuation of properties and may provide a good entry-level opportunity for those looking to be part of large real estate transactions. There could also be opportunities for positions in market research and statistical research, but finance related positions hold the key for these firms longevity.
Similar to development positions, one of the best ways to gain a foothold into institutional investing is to have a degree in finance or other quantitative subject matter. Additional skills in market research are helpful in studying information related to different geographic and property-specific market segments.
If you are able to secure a position with one of these types of companies, spend time studying the business of the properties you will be analyzing. For a hospitality REIT, understand how a hotel or resort operates, or for a new residential community understand the local demographics as to why this project would sell versus competitors.