The new private equity track develops many skills in real estate graduate students but perhaps the most important is the client-facing presentations. In the first year of the program, presentations were conducted virtually because of the pandemic but most will be in person again beginning Fall 2021.
In some ways, the presentations that Wisconsin School of Business graduate real estate students made every other Wednesday in the Spring 2021 semester were pretty typical. They made a pitch to a board that peppered them with questions. Those board members had vast experience and deep insights. Even the fact that the meeting happened virtually was by now pretty ordinary.
But, the outcome riding on these presentations was anything by typical. For students in WSB’s Real Estate Private Equity Program, this wasn’t a case competition or consulting project. It was, in the truest sense of the word, the real deal.
The Wisconsin Real Estate Program’s new one-year private equity track provides a transformational learning experience to graduate students by offering the opportunity to bring real deals to real investors. What’s more, the track is the result of a cooperative effort of the dedicated members of the Wisconsin Real Estate Alumni Association (WREAA) who raised more than $3 million for students to invest in real estate projects nationwide and serve as advisors throughout the process.
“WREAA creating this fund is crazy important,” says Mark Eppli, director of the James A. Graaskamp Center for Real Estate. “What a great opportunity, second to none in the world for real estate and urban land economics students.”
Providing private equity experience
The track gives real estate students exposure to an important segment of the commercial real estate industry. Nearly three-fourths of the $16 trillion in investable real estate in the U.S. is privately held and the new track gives students experience in working with those assets. It will complement the Graaskamp Center’s Applied Real Estate Investment Track (AREIT) in which students manage a live portfolio of public securities.
In the private equity track, students solicit real estate deals, research them, decide whether to move forward or not, and present them to an 11-member board made of up WREAA alumni and investors in the properties. Students sourced and researched 41 deals and presented five to the investment board. All were approved.
“They told us this wasn’t a typical class, we wouldn’t have projects due every two weeks,” says Carolyn Kane (MBA ’21). “We knew we might have to work evenings and weekends because when a deal comes through, it comes through—just like if we were working in a private equity shop.”
Once through the track, students graduate prepared not just to work in private equity, but also to understand market and risk analysis, negotiation, and asset management that could benefit them in other sectors.
“The goal is to drive the educational experience and to put another arrow in the real estate program’s quiver,” says Jim Roemer (BBA ’87), managing director and group manager, U.S. commercial real estate at CIBC U.S. “We have big aspirations for where this can go and what this can do for the program.”
But, Roemer stressed, the fund that supports the track isn’t charity. It’s an investment, like any other, and investors expect a return.
Roemer, who was WREAA’s president in 2018-20, helped spearhead the effort to create the new track. Conversations about the need for a private equity track came up during the organization’s biennial meeting on campus in 2018, and Roemer and others reached out to their networks and met with other alumni nationwide to gauge interest.
“We realized there was interest in making this happen,” he said.
Creating a connection between students and alumni
A year later, WREAA had raised the first $1 million for the fund that would grow to more than $3 million, enough to move forward with the plan. They got the legal and administrative help required, created a five-member oversight board of the fund, dubbed WREAA Fund I, and the investment committee that would hear the students’ presentations and decide whether to invest or not.
Connecting experienced alumni with the students has been invigorating for everyone involved, Roemer says.
“It’s a win for the association, it’s a win for more mature alums, it’s a win for students,” he says, “and the real estate program is better for all of those.”
The two-semester, 12-credit track has academic and applied learning components, and it’s taught by Eppli and Mike Brennan, Irgens Executive Director of the Graaskamp Center. Brennan has also had a long career in private equity and is co-founder, chairman, and managing principal of Brennan Investments. He says the private equity track offers students the opportunity to master all of real estate.
“It’s the symphonic component to everything we teach,” he says. “All the little bits and pieces you’ve heard are then amalgamated into the art and science of making real estate acquisitions and doing it with real money.”
Students establish investment criteria
In the fall students learned about private equity and also did a macroeconomic study to understand the real estate landscape throughout the country and the impact of COVID-19 on the markets.
They also created an investment criteria sheet: Where in the U.S. would they invest? What kinds of properties? How much would they invest? What would be the expected rate of return?
Then the students, in teams of four that essentially made up an investment management team, sought out investment deal invitations from “sponsors,” those who were in search of funding for a project that fit the students’ investment criteria. Real estate alumni helped pave the way for students to make connections and to get their foot in the door on a deal.
“Often they saved space to give us a chance because it’s kind of a cool thing to have a student fund invest,” said Mark Schaer (MBA ’21). “Sometimes we heard, ‘Sorry, we’re full’ and that happens because if it’s a good deal, people want to invest in it. We did have some sponsors that were willing to wait for us, and we chalk that up to the real estate network being full of people making sure we were getting the best experience possible.”
Working with new and existing properties
Investments ranged from $125,000 to $450,000. Projects included new apartment developments, self-storage units, and repositioning of existing properties. The five deals the students secured totaled $1.175 million in investments, saving the rest of the fund for next year’s students to invest.
Fourteen students were in the inaugural private equity track, an experience that will stay in their minds beyond how it will help them build their careers.
“One of the properties we invested in is in Chicago and since I live here now I think, ‘Maybe I’ll drive by there and see how’s it’s doing,’” says Kane, who graduated with a job at Link Logistics Real Estate, a Blackstone Company. “It’s important to me that we get good returns for our investors and maybe one day I’ll invest in that fund and can give back to the students as well.”
When fundraising begins for another fund, the success of these first investments will play a key role. Time will tell if the financial goals will be reached, but those involved with the new track believe the educational goals are a success.
“There would be no way these students couldn’t advance in their abilities because they had so much they had to accomplish,” Roemer says. “Investors were relying on the students to do their job. They had to perform and they did. They made us proud.”