In this article, I'm going to use the term analyst to represent underwriters, financial modeling professionals, and commercial real estate analysts. At a high level, the job responsibilities of an analyst fall into two buckets.
The first is to analyze and evaluate new investment, development, and/or loan opportunities by modeling potential cash flows and profitability. Outputs are documented in some sort of deal memorandum, along with an opinion about whether to proceed or not.
The second bucket is to analyze capital improvement projects for existing properties. This includes the cost of a project relative to the potential benefit (usually via increased income).
On a more detailed level, the day to day responsibilities of an analyst include:
- Building Financial Models: Building, updating, or editing the financial models used to project property income and profits.
- Document Review & Analysis: A review of important documents including: leases, historical financial statements, property tax records, and utility bills.
- Market Data & Analysis: Find and analyze market data that is relevant to the project they are evaluating. For example, analysts may look at market rental rates, absorption figures, and vacancy.
- Sensitivity Analysis: Analysts may run many different scenarios to account for unforeseen circumstances. For example, they may present “base case,” “best case,” and “worst case” property scenarios.
- Debt Sizing: Work with banks and lenders to determine the maximum amount of a debt that a project can support based on projected cash flows and lending requirements.
- Prepare Underwriting Memo: Documentation of their analysis in a detailed underwriting memo that is presented to senior management and other stakeholders. The contents of the memo form the basis of the invest/don’t invest decision.
- Stakeholder Meetings & Presentations: For each deal, the analyst is the expert on the finances of the deal. As such, they may be asked to give presentations to potential investors, lenders, or other stakeholders.
- Records & File Maintenance: Management of files (electronic or paper) for each deal. For smaller firms, these files may be used for reference throughout the investment lifecycle. In larger, publicly traded firms, these files may be used in regulatory or internal risk reviews.
- Provide Opinions: Analysts may be expected to provide their opinion about the attractiveness of a deal. Senior management may rely on this opinion when deciding whether or not to greenlight a deal.
In short, analysts play a pivotal role in the quantitative analysis of commercial real estate investment opportunities. They are an important voice in the decision to deploy capital.
When do you need to hire an analyst?
Frankly, an analyst should be one of the first hires at your firm. They are that important.
Large commercial real estate firms may have enough deal flow to justify the cost of hiring multiple full-time analysts. The largest firms with the most deal flow have entire teams of analysts looking at opportunities daily.
Small firms may not have the resources to support a full-time underwriter/financial analyst, but this is not necessarily an issue. Analysts can be flexibly hired from Bullpen to evaluate opportunities as they arise.
What differentiates a good analyst from a great one?
For commercial real estate firms, there are financial consequences for sloppy analysis. It is important for hiring managers to look for certain skills and qualities in a great analyst. They include:
- A “Numbers” Person: Real estate analysts have a highly quantitative role. Analysts should have a knack for numbers and use them to tell the story of the deal.
- Power Users of Modeling Tools: Having a knack for numbers is important, but great analysts must be able to translate this into the modeling tools that are used to create pro forma cash flow projections. The most common tool is Microsoft Excel, but more complex projects may require the use of advanced modeling tools like Argus.
- Highly Analytical: Great analysts are able to understand what the numbers mean and how they relate to the potential profitability of a project.
- Industry Certifications: Great analysts pursue the highest levels of excellence in their field. They may have a CCIM designation or certifications in real estate software programs like Argus.
- Advanced Degrees: The best analysts usually have a college degree (at a minimum) in a related discipline like Finance, Accounting, or Economics and often have advanced degrees like an MBA.
- Collaborative: In order to obtain the needed data for their models and to interpret the needed output, analysts must develop strong working relationships with stakeholders up and down the value chain. These include: senior management, lenders, tenants, legal counsel, data providers, and other software vendors. Strong relationships allow analysts to do their job faster and with more accuracy.
- Excellent Communicator: The best analysts are excellent communicators both verbally and in writing. They must be able to translate their analysis into non-technical terms and succinctly communicate their conclusions to interested stakeholders.
When it comes to making sound investment decisions, the analyst is one of the most important roles in a commercial real estate firm.
Where can you hire a real estate analyst?
The commercial real estate investment business is a dynamic, fast-paced, growing industry. As it continues to grow and change, there is an increasing focus on analytics and making data-driven investment decisions. As a result, competition for talented analysts can be intense.
That’s where Bullpen comes in. We help commercial real estate acquisitions and development firms find and hire the best freelance analysts in the industry. We pre-screen the candidates, verify their experience, and handpick the best talent for your hiring needs … all within 72 hours.