What are Real Estate Investment Firms?
If you’ve ever purchased a single family home, you are likely already familiar with the parties involved in real estate: You have the seller (usually just a private individual like yourself), the sales agents, and the mortgage lenders. To the extent there are professional investors in the real estate process, they’ll be either “flippers” or developers who recently built or renovated a home and are now selling.
However, once you move up the ladder towards large scale multifamily projects or commercial developments, the buyers and sellers are not individuals, but are large institutional real estate investors and developers.
This guide was written to give you an understanding of the types and roles of real estate companies involved in real estate investing on the larger, institutional scale as you explore career options within real estate.
Table of Contents
- Real Estate Investment Firms: The Ecosystem
- Real Estate Private Equity
- Real Estate Investment Management
- Real Estate Private Equity vs Investment Management
- Real Estate Investment and Asset Management
- Real Estate Development
- Real Estate Investment Trusts (REITs)
- Real Estate Operating Companies (REOCs)
- Real Estate Brokerage
- Real Estate Lenders
Real Estate Investment Firms: The Ecosystem
While many real estate firms don’t fall neatly into the buckets described below, the following is a breakdown of the various types of real estate companies:
|Types of Real Estate Firms||Representative Firms|
|Real Estate Private Equity (REPE)||Oaktree, Blackstone, BentallGreenOak, Starwood Capital Group|
|Real Estate Investment Management||Brookfield Asset Management, PGIM, Nuveen/TH Real Estate, Clarion Partners|
|Real Estate Development||Trammell Crow, Hines, Related|
|Real Estate Investment Trusts (REITs)||Equity Residential, JBG Smith, Ventas, Prologis, Park Hotels & Resorts|
|Real Estate Operating Companies (REOCs)||Crow Holdings, The Davis Companies, Grosvenor|
|Real Estate Brokerage||Cushman & Wakefield, CBRE, JLL, Avison Young, Colliers, Transwestern, Marcus & Millichap|
There’s also Real Estate Lenders (just like you would see with small individual real estate).
Real Estate Private Equity
Real Estate Private Equity (known as “REPE”) refers to firms that raise capital to acquire, develop, operate, improve, and sell buildings in order to generate returns for their investors. If you’re familiar with traditional private equity, REPE is the same, but with buildings.
As the “private” in “private equity” suggests, these firms raise capital from private investors and deploy that capital to make investments in real estate.
Like traditional private equity firms, REPEs raise money from Limited Partners (“LPs”) – these are private investors (usually pension funds, university endowments, insurance companies, etc…). As an important fine point, REPEs raise capital for specific “funds” (think individual investment vehicles all run by the same firm). These funds have their own “mandates” meaning they have specific types of real estate investments they look for.
Another important thing to understand is that REPE funds are “closed-end funds” meaning that investors expect to get their money back (ideally along with a hefty return on investment) within a specified time frame – usually within 5-7 years.
Real Estate Investment Management
Similar to REPEs, Real Estate Investment Management firms raise capital from LPs to acquire, develop, operate, improve, and sell buildings in order to generate returns for their investors. The same key activities (raising capital, screening investment opportunities, acquiring or developing properties, managing properties, and selling properties) still take place.
Real Estate Private Equity vs Investment Management
The key differentiator between REPE and Real Estate Investment Management is the dominant fund structure – Private Equity leans towards closed-end funds while Investment Management leans towards open-end funds.
Closed-end funds have an end date which requires the manager to deploy capital in a manner that fits within the fund life. Open-end funds have no end date and therefore offer more flexibility to the manager.
While this delineation generally holds, you will come across firms that manage both closed-end and open-ended funds – some will describe themselves as REPE while others will describe themselves as Real Estate Investment Management.
Real Estate Investment and Asset Management
Real Estate Investment and Asset Management firms are generally smaller, entrepreneurial firms, and often more more capital constrained than their larger counterparts – REPE and Real Estate Investment Management firms.