Where to next? CMBS vs debt fund
Monkeys - I have been working in balance sheet lending for the past 2 years, where I have underwritten, managed, and worked out deals. However, I do not think balance sheet lending is for me since it’s slow & bureaucratic, and I am beginning looking to move on. I have spoken internally with our CMBS group, and they said they will be hiring soon for someone at my level and was told to stay in touch. Additionally, I have been networking with debt funds.
I am interested in CMBS because I will be exposed to all sorts of properties, and it also has a capital markets aspect. I am also intrigued by the high-risk deals that debt funds undertake given they are typically hairier.
What route would you suggest for someone still in the early stages of their career?
I do not have any long-term goals in CRE, but I like the debt side because you get to touch every asset. I also like volume.
Any guidance or opinions would be great.
Based on the most helpful WSO content, here are some insights and guidance for your situation:
CMBS (Commercial Mortgage-Backed Securities) Group:
Debt Funds:
Considerations for Early Career:
Recommendations:
Ultimately, the decision should align with your personal preferences for work environment, risk tolerance, and career development goals. Both paths offer unique advantages and can significantly contribute to your growth in the real estate finance sector.
Sources: Way too early for a promotion? - Advice, To Those Who's Had A Successful Career In CRE, What Advice Do You Have For Younger Generations?, Best place to start your career? IB or Tech?, Q&A: Principal at Early-Stage VC Fund, Career Paths/Exit Opportunities
I think it would be wise to explore both options given the job market is still fairly tough right now, but I'd still prioritize making the move to a debt fund over staying at a bank.
If you think balance sheet lending is slow - CMBS probably will be too. CMBS bread and butter is stabilized core assets. Debt fund will be more interesting product unless they are financing stabilized deals.
There are many shops such as 3650, Argentic and Benefit Street Partners who do both. But if you had to choose, I'd say a well capitalized Debt Fund would be better. While CMBS can teach you a lot about deal structuring, I think there is more flexibility and creative in the debt fund space. CMBS is very volatile and it's tough to make a stable career out of it.
Thank you for the color, on the CMBS side why would you say it is harder to have a stable career?
The market for CMBS is a rollercoaster and they have a tendency to be quick to fire. Plus it gets pretty slimy in that space.
I would pick a well capitalized debt fund over CMBS if you want the flashy, higher velocity deals.
Conduit is made to be boring. They sell the bonds based on the stable cash flow which means those deals won't be too far from the core balance sheet deals you are working on now.
Plus cmbs tend to hire and fire quickly because it is 100% fee generation. There is no interest to pay your salary. If you arent doing new deals and producing fees, then you don't get to stay very long.
A well capitalized debt fund will give you the variety you are looking for in terms of asset classes and in business plans. Plus they work on management fees, which gives you a little bit more cushion in case things get slow.
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