Deal size increase in last 6 months. Interested in underwriting process at institutional scale for Acquisition Directors and Lenders of MF and development properties.
What specifically are the key metrics and perhaps higher level details looked at on a large scale? What are the best resources to learn the ins and outs of institutional level real estate?
[{"id": "h2pz8gf", "text": "Depends on the firm and what their investment objectives are. For development, almost all developers are going to look for a 20%+ IRR, some will target 15, and a reasonable spread on the development yield (for multifamily, my firm typically targets 6-6.5% yield on cost).\n\nFor buy and hold properties, some firms might not care about IRR at all and be more concerned with cash-on-cash or ROE, some look at equity multiple, etc.\n\nIt\u2019s all based on investment goals.\n\nI don\u2019t really have any tips on learning institutional level real estate. You kind of have to learn it by doing it. The overall understanding of what makes a good investment still applies, and you can read textbooks to get the finance side down.", "replies": [], "depth": 1}, {"id": "h2qg065", "text": "Adventures in CRE can be an excellent resource. The models can help you understand which key metrics are often seen as important in the market (IRR, Yield, Cash-on-cash, etc). Studying the models and breaking down the functions will also help you understand why the metrics are important and how they\u2019re calculated. \n\nIf you really want to dive in and commit, you could look at MRED programs.", "replies": [], "depth": 1}, {"id": "h6cyju9", "text": "Just to add to the conversation and give insight into my experience (large PERE, union pension fund investors, GP side). YoC, dev spread for dev - but really we typically always fell back to IRR, Profit, Multiples (at the property and fund level). Time weighted returns were also benchmarked at the fund level. \n\nIt really is dependent on the shop. I have been at places where performance measurement was laser focused on the equity  position, much more than the property level\u2026and vice versa \n\nAs far as education: everyone had some RE, Finance or Biz degree, advanced degrees and/or CFA.", "replies": [], "depth": 1}, {"id": "h6o7l5o", "text": "Yield on cost is also an important metric for development. Important to understand what additional yield you\u2019re getting for taking development risk.", "replies": [], "depth": 1}]