Friday Letter: Back to school

In the current issue of PERE, there is a special section looking at the recruiting, compensation and teambuilding practices of the private equity real estate industry. Of particular note in that section is a guest column on the industry’s recruiting practices through the eyes of a recent MBA graduate – a view that is likely to be a revelation to some firms that think they have recruitment figured out.

In the column, Will Renner, a 2014 MBA graduate of the University of North Carolina’s Kenan-Flagler Business School, pointed out that “the real estate hiring process appears unorganized, unpredictable and unattractive” to new recruits. That is because much of the industry lacks a professional recruitment process, unlike the investment banks and consulting firms that take the time to visit college campuses each fall.

Meanwhile, the industry’s standby method for new talent acquisition– poaching junior analysts from investment banks – is becoming harder to do as finance houses crack down on the practice and recruits become disillusioned with the frantic pace. Indeed, the New York Times flagged the issue in its DealBook blog early last week, following up on a more in-depth piece in its Sunday Business section.

One commentator on the Times’ Sunday article suggested that private equity firms do their own recruiting on college campuses, bypassing the banks altogether. “The time has come for private equity firms to realize they are too big individually and in aggregate to slipstream off the shoulders of investment banks anymore,” the commentator, a blogger named the Epicurean Dealmaker, wrote.

Indeed, some private equity and real estate firms already are moving in that direction. For example, DealBook cited The Carlyle Group and Kohlberg Kravis Roberts, which hired college graduates for the first time this year. Renner, meanwhile, pointed to such firms as Hines and Harrison Street Capital, which created an undergraduate intern program that seeds its hiring pool.

Still, the biggest challenge to campus recruiting for private equity and real estate firms is training new hires on the basics of the business, a skill at which investment banks have become adept. For private equity firms, however, it is undertaking that involves “time, money and effort they are normally loathe to spend,” the Epicurean Dealmaker wrote.

Luckily for private equity real estate firms, a growing number of US universities are shouldering the burden. Schools like the University of Pennsylvania, Columbia University, the University of North Carolina, the University of Southern California and the University of Texas at Austin are offering courses in real estate finance, capital markets and development to MBA students and spending significant time crafting teamwork and leadership skills. Although a number of real estate firms visit such campuses to present to students and conduct interviews, there is room for many more, particularly at schools with lesser-known or less established real estate programs.

Regardless if there are immediate jobs available, real estate firms can benefit by forming an on-campus presence, which offers the opportunity to market to a large group of young professionals during a single meeting. That scale is far more attractive than a series of one-on-one meetings or interviews with candidates. And when there is a position to fill, campus recruitment efforts provide a selection of thoroughly scouted candidates from which choose.

Therefore, PERE encourages its readers to empower one of their senior employees to lead the recruiting process and represent your firm on campus visits each year. Not only will this help to address your firm’s long-term hiring needs, it will help to address the industry’s unflattering recruitment image, which is a horrible first impression to make upon someone that a firm is looking to mold into its next master of the universe.

For more on dedicated real estate MBA programs, as well as a representative list of what’s available and how they compare, check out our upcoming September issue.