Buy-Side and Sell-Side Overview

One common misconception is that a career in repe will solely consist of buy-side work. This would mean all you do is conduct due diligence, buy buildings, and close big M&A deals. At some small shops, this may be the case. But as you grow more senior, the sell-side work starts to pick up.

Traditional Buy-Side vs. Sell-Side Distinction

Traditionally, buy-side vs. sell-side is used to distinguish between jobs at hedge funds, private equity funds, etc. (firms that buy things) versus work at banks, brokerages, etc. (firms that help sell things. In reality, the lines can get blurry. Through my career in real estate private equity and past life as a junior banker, I’ve worked on both sell-side and buy-side projects at both firms.

Buy-Side Projects at the Banks

The list of buy-side projects at the major investment banks is a bit more slim. It typically involves advising a sponsor looking to take a company private. Though you might also be advising a real estate company looking to make a strategic acquisition. Company-scale buy-side assignments are not as common in real estate investment banking as other coverage groups because real estate is typically more easily traded in portfolios and at the asset-level. If a REIT wants to acquire an office segment of a competitor, they can just bid on the individual portfolio.

Sell-Side and Buy-Side Projects at the Banks

Sell-side services that real estate investment banking teams provide include, from order of most to least common:

1. Debt financing
2. Equity financing
3. Strategic Alternatives Advisory

Debt financing is most popular at banks with large balance sheets, as is equity financing. This is because large balance sheets allow banks to attract real estate clients, which are always hungry for capital. Real estate can be an easy sector to lend against given its hard collateral and more predictable cash flow (versus, say, a consumer retail company).

Strategic alternatives advisory is the fancy word for when a bank helps a company sell itself. Perhaps it is a privately-held company, or a publicly-traded company looking to get bought out. Whatever the case, the banks that win the most important sell-side M&A business are often the ones that lend the most balance sheet. Real estate companies often reward the fees of their M&A deals to the banks that lend to them the most, since lending is a useful service to the real estate companies.

Buy-Side Projects at REPE Funds

The bulk of the work during a career in real estate private equity will be buy-side. That’s because the core business of an REPE fund is to raise capital and invest it. REPE funds buy all sorts of things - buildings, portfolios of buildings, real estate operating companies, and entire REITs with both operations and portfolios of assets. Whatever the case, the buy-side process kicks off with high-level DD and works its way into the nitty-gritty as the transaction progresses.

Sell-Side Projects at REPE Funds

Note above where I mentioned the core business of an REPE fund also includes raising capital. Thus, just because you leave banking/brokerage to kick off your career in repe doesn’t mean you can put away your sales hat for good. In fact, investments professionals often have to pitch investments internally for investment committee. But even more literally, large capital raises of new funds and sidecar co-investment often drag the deal team into the mix to prepare materials and hop on countless conference calls to field questions from limited partners. This is common even at the largest megafunds.

Prepare with Leveraged Breakdowns

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