Commercial real estate analysts are the fingers of the industry. A good real estate analyst can be a game changer for a growing investment firm, developer, or debt/equity broker.
At Bullpen, we make sure all our analysts are experts in the following competences. Can your analyst support these top 10 commercial real estate analyst skills?
1. Pro-forma cash flow modeling
The foundation of analyst support, your analysts should be able to create a detailed, monthly cash flow model from scratch.
Modeling skills should include income and expense analysis, return calculations, equity waterfalls, sell vs. hold analysis, construction schedules, and debt modeling. Analysts should be able to organize their models in an easily-readable format. Inputs should be designated with blue text, formulas should be designated with black text, and hard-coded overrides should be shown in red text.
2. Custom equity waterfall
Make sure your analyst can read an operating agreement and create a corresponding equity waterfall.
The waterfall should provide a picture of returns for limited partners, preferred equity holders, and the sponsor. Most equity waterfalls require several IRR, cash on cash, and preferred rate hurdles, adding complexity to the models.
3. Due diligence
Your analyst should know the items that need to be collected to conduct diligence on a property.
Additionally, a good real estate analyst will know the deal process and be able to explain it from start to finish. Your analyst should know how to organize and manage a deal due diligence folder, containing trailing utility bills, zoning information, property tax evidence, T12 analysis, rent roll, market research, etc.
4. Investment/debt memos
A basic understanding of graphic design and storytelling is crucial to create compelling presentation materials. Your analyst should know the difference between an investment (equity) memo and debt memo. In addition to creating memos, real estate analysts should be prepared to present this information in investor pitches alongside company leadership.
5. Market and neighborhood research
Nothing beats boots on the ground, but your analyst should be able to provide detailed insights in your target markets by conducting a desktop analysis.
Such an analysis should leverage paid and free research, as well as calls to brokers, property managers, and comparable properties.
6. Site investigation/feasibility study
Detailed information can be gathered on the potential uses of a property by merging city and county records with market research. Your analyst should be able to conduct a site investigation and feasibility study from their desk.
7. Size debt and equity
Debt and equity brokers, your analyst should be able to model cash flows and size debt for a purchase or refinance. They should know that sizing can be based on loan to value, debt service coverage, and debt yield. Given an underwriting model, a debt and equity broker analyst should be able to create a debt memo that can be distributed to key stakeholders.
8. Manage requisitions
Developers, your analyst should be able to track invoices and manage the requisition process for your projects. They should be intimately engaged in the tracking and management of the construction process. Additionally, your real estate analyst should be prepared to continually update models in real-time to track the impact of changes during the construction period.
9. Support close of escrow
Closing a deal is the culmination of effort by numerous internal and external stakeholders. Your analyst should be able to organize and manage closing day.
10. Manage on-going budget, pro-forma updates, and investor reporting
Real estate investments require on-going management and reporting. A good analyst will be able to manage and execute on-going reporting requirements for your properties and investment partners. These include the creation of monthly, quarterly, and annual performance reports.