Career Spotlight: Private Equity Real Estate
In this series, we explore some of the many career options available to those who study Land Economy at Cambridge.
Colin Lizieri is a professor of Real Estate Finance and the Head of Department for Land Economy. He has a wide range of experience in property-related research and consultancy, and is a Fellow of Pembroke College, the Royal Institution of Chartered Surveyors, and the Royal Geographical Society. Below, Colin introduces the possibilities of a career in Private Equity Real Estate.
Commercial real estate — offices, shops and shopping malls, hotels, business parks and similar properties — is the third most important investment asset after equities and bonds. Major private equity investors, insurance companies, pension funds, sovereign wealth funds and property companies all own substantial portfolios of commercial real estate and their actions shape the development of our cities. Many Land Economy graduates pursue rewarding and exciting careers in commercial property — for example working in private real estate equity funds.
Private real estate equity funds pool together capital from a wide range of investors, from institutional investors to high net wealth individuals and then use that capital to acquire or develop real estate assets which provide cashflow for the investors from the rents generated and capital growth from the increasing value of the properties owned. These specialist funds may be part of major private equity funds (like Blackstone) or Investment Banks (like Morgan Stanley) or may be smaller specialist funds operating in niche areas of the market. The managers of those funds and their staff need a broad range of specialist skills to meet the varying tasks and demands they face. These might include:
- Identifying land and property assets in cities (often at a global scale) that meet the needs of the fund and its investors — for example finding an office to acquire in the centre of a global city or a business park on the edge of a university town;
- Analysing the potential risks and returns of the assets in the portfolio — what are the likely cashflows, how volatile are property prices, are there any hidden costs facing the fund, are there options to transform the building (for example changing the use from office to residential)? This involves not only financial analysis skills but also a strong understanding of supply and demand in the market and the dynamics of the city;
- Arranging the capital structure of the portfolio — what mix of debt and equity is appropriate? This might involve negotiating loans with banks or other lenders, arranging for other investors to join in projects and using the fund’s own equity capital;
- Negotiating with many individuals and organisations linked to the fund’s projects, from the fund’s investors and banks, to lawyers involved in the purchase, local planners, the tenants in the properties and other professionals in the market.
This is no desk-based job — the private equity manager needs to visit the properties, the cities, the clients and the professionals that come together to create success.
So this exciting and rewarding career requires a wide range of skills, from an understanding of cities and markets, through financial and legal skills to the communication skills needed to operate in a “people industry” — just the skills developed in the Land Economy programmes!
For more information on the undergraduate degree in Land Economy, please see our website.
If you are a current Land Economy student interested in exploring your career options, please get in touch with the Cambridge Careers Service.
