commercial real estate case study interview

Common Commercial Real Estate Interview Questions

1. how do you assess the potential of a commercial real estate property.

When evaluating commercial real estate, it’s crucial to consider a range of factors beyond the physical attributes of a property. Candidates should be prepared to discuss their understanding of the comprehensive analysis necessary to determine a property’s potential.

When responding, outline a systematic approach to property assessment. Start by discussing the importance of location and market analysis, including factors such as foot traffic, accessibility, and demographic trends. Proceed to describe how you would evaluate the physical condition of the property, considering age, design, and suitability for prospective tenants. Then, explain how you would analyze financial factors such as income potential, operating expenses, and the current tenant mix. Finally, highlight the importance of staying informed about market conditions and trends that could impact the property’s performance. Your answer should demonstrate a balanced consideration of both quantitative data and qualitative factors, showcasing your proficiency in property valuation.

Example: “ In assessing the potential of a commercial real estate property, I begin with a thorough location and market analysis. This encompasses evaluating foot traffic, accessibility, and demographic trends that may affect the property’s appeal to businesses and consumers alike. A prime location with a growing population or increasing economic activity can signify strong potential for commercial properties.

Next, I examine the physical condition of the property, including its age, architectural design, and how well it meets the needs of potential tenants. This involves looking at the layout and functionality of the space, as well as any necessary capital improvements that could affect the property’s competitiveness in the market. It’s crucial to consider the adaptability of the space to various types of tenants, ensuring a diverse and sustainable income stream.

Lastly, I delve into the financial aspects, analyzing the income potential through current and projected rental rates, occupancy levels, and the existing tenant mix’s stability. Operating expenses, including maintenance costs, property taxes, and management fees, are scrutinized to understand the net operating income. Understanding the local market’s cap rates helps in estimating the property’s value and potential return on investment. Throughout the process, staying abreast of market conditions and trends is vital to anticipate shifts that could impact the property’s performance, such as zoning changes or economic downturns. This multifaceted approach ensures a comprehensive evaluation of a property’s potential.”

2. Describe your strategy for negotiating commercial lease agreements.

To excel in negotiating commercial lease agreements, one must possess a blend of market knowledge and understanding of the client’s business needs. Candidates should be ready to demonstrate their mastery in negotiation and their ability to create beneficial deals.

When responding, focus on articulating a clear process that begins with thorough preparation, including market research and understanding the client’s requirements. Emphasize your ability to listen and communicate effectively, ensuring you understand the landlord’s position and constraints. Illustrate your adaptability in negotiations, citing examples of how you have successfully navigated through complex deals. Demonstrate your problem-solving skills by discussing how you’ve overcome obstacles in past negotiations to achieve a favorable outcome.

Example: “ In negotiating commercial lease agreements, my strategy starts with a comprehensive analysis of the current market conditions, including comparable lease rates, tenant improvements allowances, and vacancy rates. This data forms the foundation for developing a negotiation plan tailored to the client’s specific needs and the unique aspects of the property in question. I prioritize understanding the landlord’s objectives, which often include maintaining high occupancy rates, securing long-term leases, and maximizing return on investment.

Armed with this information, I approach negotiations with a focus on creating a win-win scenario. I employ active listening to fully grasp the landlord’s perspective, which enables me to propose solutions that align with both parties’ interests. For instance, I have successfully negotiated lower lease rates in exchange for a longer lease term, which benefited the tenant through cost savings while providing the landlord with stable occupancy. Additionally, I leverage my problem-solving skills to navigate and resolve issues such as build-out contributions and lease escalations, ensuring that the final agreement is both economically favorable and operationally viable for my client. Through a combination of market knowledge, strategic communication, and creative problem-solving, I consistently deliver leases that meet or exceed client expectations.”

3. What are key indicators you look for in an emerging commercial real estate market?

Recognizing the economic, social, and geographic indicators that signal the vitality of a commercial real estate market is essential. Candidates should be able to discuss how they make informed investment decisions and forecast future trends.

When responding to this question, one should highlight their methodical approach to evaluating a market, including quantitative measures like vacancy rates, rental yield trends, and absorption rates, as well as qualitative factors like local government policies and business climate. It’s beneficial to discuss how these indicators interplay to provide a holistic view of a market’s health and potential. Cite specific examples from past experiences where these indicators have informed your decision-making process or led to successful outcomes. This demonstrates not only your technical expertise but also your practical application of knowledge in the field of commercial real estate.

Example: “ In identifying an emerging commercial real estate market, I prioritize a blend of economic, demographic, and real estate-specific indicators. Key among these is employment growth, as it drives demand for office and retail spaces, and by extension, multifamily units. I closely monitor infrastructure developments and business incentives, as these often precede corporate relocations and expansions that catalyze market growth.

Real estate metrics such as declining vacancy rates, increasing rental rates, and a healthy absorption rate are critical quantitative indicators that signal a market’s strengthening demand. Additionally, I assess the cap rate compression trends, which can indicate the market’s stage in the real estate cycle and investor sentiment. An example of this in practice was when I observed a sustained period of cap rate compression in a mid-sized market alongside significant infrastructure investment and a burgeoning tech sector. This triangulation of data points suggested an opportune moment for investment, leading to a successful acquisition of a Class A office property that outperformed initial yield projections.”

4. Outline your approach to due diligence when acquiring a new property.

Due diligence in commercial real estate begins after an offer is accepted and is a critical step in evaluating a property. Candidates should be prepared to show their meticulous attention to detail and their analytical skills in assessing various aspects of a property.

When responding, outline a methodical approach that showcases your attention to detail and risk management. Start with how you review legal documents, such as titles and leases, to identify any encumbrances or liabilities. Move on to discussing your process for conducting physical inspections, assessing environmental risks, and evaluating the condition of the property. Explain how you analyze financial records to understand the property’s performance and potential revenue streams. Mention any specific tools or software you use to assist in your due diligence process. Finally, demonstrate your understanding of market analysis by explaining how you evaluate the local market conditions, comparable properties, and future development plans that could affect the property’s value.

Example: “ In conducting due diligence for a new property acquisition, I begin with a meticulous review of all legal documents, focusing on the title to ensure it is free of encumbrances that could affect the asset’s value or usability. I scrutinize leases for any unusual clauses or obligations that could impact future revenue streams. This legal due diligence is critical to uncovering potential liabilities that could pose significant risks post-acquisition.

Next, I conduct a thorough physical inspection of the property, engaging with specialists to assess structural integrity, building systems, and compliance with current codes. I also ensure a comprehensive environmental assessment is carried out to identify any contamination or regulatory issues. Concurrently, I analyze the financial records, including income statements, rent rolls, and expense reports, to validate the property’s financial performance and identify any discrepancies that could signal underlying issues.

Utilizing industry-standard tools and software, such as ARGUS Enterprise for cash flow modeling and CoStar for market data, I perform an in-depth market analysis. This includes examining local market conditions, trends, and comparable property transactions to ensure the property’s projected performance aligns with market realities. I also consider future development plans within the area that could influence demand and property value. This multi-faceted approach ensures a comprehensive understanding of the property’s potential and risks, enabling informed investment decisions.”

5. Detail how you would handle a situation where a major tenant is considering vacating.

For those in commercial real estate, tenant retention is a critical challenge that impacts revenue stability. Candidates should be ready to discuss their strategic approach to retaining tenants and managing high-stakes situations.

When responding to this question, it’s important to demonstrate a structured and proactive approach. Start by explaining your initial step of engaging in a dialogue with the tenant to understand their concerns and reasons for considering a move. Then, outline how you would assess the impact of their departure and explore all possible retention strategies, such as renegotiating lease terms or offering upgrades to the space. Be prepared to discuss how you would collaborate with your team and possibly other stakeholders to formulate an enticing offer that aligns with the tenant’s needs while ensuring it’s financially viable for your company. Finally, show that you’re ready to develop a contingency plan, should retention efforts fall short, to minimize downtime and swiftly attract new tenants.

Example: “ Upon learning that a major tenant is contemplating vacating, my immediate action would be to open a direct line of communication to understand their motivations. This conversation is crucial, as it allows for a tailored response that addresses the tenant’s specific concerns, whether they’re related to the physical space, financial terms, or external factors such as changing market dynamics. Demonstrating attentiveness to their needs can often be the first step in altering their decision trajectory.

With a clear understanding of the tenant’s position, I would conduct a thorough analysis of the financial and operational impact of their potential departure. This would inform the development of a strategic retention plan, which might include lease renegotiations, offering incentives, or customizing improvements to the space that enhance its value to the tenant. The goal is to present a compelling proposal that balances the tenant’s requirements with our own financial thresholds, ensuring a mutually beneficial outcome. Concurrently, I would initiate the development of a marketing strategy to mitigate vacancy risks, engaging with brokers and leveraging industry networks to identify prospective tenants, ensuring a proactive stance regardless of the major tenant’s final decision.”

6. In what ways do you stay informed about changes in zoning laws or regulations?

A robust understanding of zoning laws and regulations is a must for commercial real estate professionals. Candidates should be prepared to discuss how they stay informed and use this knowledge to seize opportunities and anticipate challenges.

When responding to this question, you should outline a systematic approach to staying updated, such as subscribing to industry publications, attending city council meetings, participating in real estate associations, or engaging in continuous professional education. Highlight any connections with local government officials or planning departments that provide you with direct insights into upcoming changes. It’s also beneficial to demonstrate how this knowledge has been applied in past projects to show practical understanding and foresight.

Example: “ To stay abreast of changes in zoning laws and regulations, I maintain a proactive approach by subscribing to key industry newsletters and reports from reputable sources such as the Urban Land Institute and the National Association of Realtors. These publications provide timely updates on regulatory shifts and their potential impacts on commercial real estate. Additionally, I regularly attend city planning and zoning commission meetings, which not only offer firsthand information on imminent changes but also allow for early input and adaptation strategies.

I also leverage my network of relationships with local government officials and planning department personnel, which often grants me early insights into regulatory discussions before they become public. This network is a result of active participation in local real estate associations and continuous professional development courses focused on land use and zoning. By integrating this knowledge into my strategic planning, I’ve successfully navigated zoning changes in previous projects, ensuring compliance while optimizing development potential and investment returns. This systematic and engaged approach ensures that I can anticipate and respond effectively to regulatory changes, maintaining the viability and profitability of my real estate endeavors.”

7. Share an example of a particularly challenging deal you closed and the lessons learned.

Closing a challenging deal in commercial real estate showcases a professional’s ability to navigate complex negotiations and overcome obstacles. Candidates should be ready to share experiences that highlight their problem-solving skills and adaptability.

When responding, select a deal that was genuinely challenging, and explain the context succinctly, focusing on the specific hurdles faced. Then, articulate the strategies employed to address these challenges, emphasizing your role in the solution. Conclude with the lessons learned, ensuring they are not generic but tailored to the nuances of commercial real estate, such as the importance of due diligence, flexibility in negotiation, or the value of fostering strong relationships with all parties involved.

Example: “ In a recent complex deal, I was tasked with closing the acquisition of a distressed asset that had significant potential for redevelopment. The challenge was multifaceted: the property had environmental issues, the current tenants were under long-term leases well below market rates, and there was considerable community opposition to the change of use we proposed. To navigate these obstacles, I spearheaded a meticulous due diligence process, which included engaging environmental consultants to assess and propose remediation strategies. I also initiated open dialogues with the tenants to renegotiate lease terms, offering incentives for lease terminations that aligned with their business goals.

Simultaneously, I led a series of community engagement sessions to understand and address local concerns, which resulted in a revised development plan that included community benefits and won local support. The deal closed successfully, largely due to our proactive approach to stakeholder management and our willingness to adapt our strategies in response to new information. The key lessons I took from this experience were the critical importance of thorough due diligence in uncovering and quantifying potential risks, the value of transparent communication in negotiations, and the necessity of community involvement in development projects to ensure successful outcomes.”

8. What metrics do you prioritize when evaluating the performance of a commercial real estate portfolio?

Analyzing the performance of a commercial real estate portfolio requires attention to financial, market, and property-specific indicators. Candidates should be prepared to discuss how they identify and analyze key data points that drive investment decisions.

When responding, one should articulate a clear strategy for monitoring and interpreting key performance indicators (KPIs). A candidate might explain how they balance quantitative metrics, like net operating income and internal rate of return, with qualitative factors, such as tenant satisfaction and property location. It’s also important to discuss how these metrics align with the broader investment goals of the portfolio, whether it’s long-term growth, stability, or risk management. By demonstrating a holistic and strategic approach to portfolio analysis, candidates can show they are well-equipped to contribute to the company’s success.

Example: “ When evaluating the performance of a commercial real estate portfolio, I prioritize a blend of financial, operational, and market-driven metrics to ensure a comprehensive analysis. Financially, Net Operating Income (NOI) is paramount as it reflects the core profitability of the properties, excluding financing costs. Alongside NOI, I closely monitor the Capitalization Rate to gauge the return on investment relative to the market and property value, as well as the Internal Rate of Return (IRR) for a time-valued assessment of performance.

Operationally, I consider the occupancy rates and the average lease term as they provide insight into the stability and future cash flow of the portfolio. Tenant satisfaction scores are also critical, as they can be indicative of lease renewals and the potential for organic rental growth. Market-driven metrics, such as absorption rates and comparable market rents, are essential to understanding the portfolio’s performance in the context of the broader market and economic conditions.

Balancing these quantitative measures with qualitative factors like property location, tenant mix, and asset class diversification ensures alignment with the portfolio’s strategic investment goals, whether focused on long-term appreciation, immediate cash flow, or a balance of both. This holistic approach enables me to identify both opportunities and risks within the portfolio, informing strategic decisions that drive value and align with the overarching investment objectives.”

9. How would you structure a deal to minimize risk while maximizing return?

Structuring a deal effectively in commercial real estate involves a careful balance between risk and profit. Candidates should be ready to demonstrate their ability to navigate this interplay and apply their financial acumen.

When responding, start by outlining your approach to assessing risk, which may include market research, due diligence, and financial analysis. Explain how you would consider factors such as location, tenant mix, lease terms, and economic indicators. Then, discuss how you would leverage this information to structure a deal, possibly through negotiation strategies, leveraging debt wisely, or diversifying income streams to ensure a robust return on investment. Be specific about the tools and methods you would use, and if possible, provide an example from past experience that demonstrates your proficiency in this area.

Example: “ In structuring a deal to minimize risk while maximizing return, my initial step would be a comprehensive risk assessment, involving granular market research, meticulous due diligence, and a thorough financial analysis. I would scrutinize the property’s location, the creditworthiness of existing tenants, and the stability of the income stream. Additionally, I would analyze lease expiration profiles to ensure a staggered and diversified lease term structure, mitigating the risk of mass vacancy.

Leveraging this data, I would structure the deal to include a mix of debt and equity financing, optimizing the loan-to-value ratio to ensure sufficient cash flow while maintaining an adequate equity cushion. I would negotiate favorable debt terms, possibly seeking interest-only periods or fixed interest rates to reduce initial outlays and protect against market volatility. Furthermore, I would aim to secure tenants with strong covenants and implement a proactive asset management strategy to enhance the property’s value over time. For instance, in a previous mixed-use development, by securing a pre-lease agreement with an anchor tenant and incorporating a revenue-sharing clause, I was able to increase the property’s NOI and provide an exit strategy that yielded a high IRR for investors, demonstrating a balance between risk mitigation and return maximization.”

10. Can you provide insight into how e-commerce trends are impacting brick-and-mortar retail spaces?

The shift in consumer behavior due to the rise of e-commerce has had a significant impact on commercial real estate. Candidates should be prepared to discuss how they understand and adapt to these trends to make informed decisions about property development and management.

When responding, it’s important to demonstrate your awareness of current e-commerce trends, such as the growth of online shopping and the increased demand for quick delivery. Discuss how these trends influence the valuation and utilization of retail spaces, and offer examples of how you’ve adapted strategies or provided solutions for clients. Highlight any successful projects where you’ve helped repurpose or optimize a retail space in response to e-commerce challenges, showing your proactive approach and adaptability in the face of industry changes.

Example: “ E-commerce trends have significantly shifted the landscape for brick-and-mortar retail, leading to a reevaluation of location strategies and the physical footprint required for effective omnichannel operations. The rise in online shopping has reduced foot traffic in traditional retail spaces, necessitating a transformation in their role and design. Retailers are now integrating experiential elements to create destinations that offer more than just transactions, such as in-store events or services that can’t be replicated online.

In response to this shift, I’ve guided clients through the process of optimizing their retail portfolios by identifying underperforming locations for conversion into fulfillment centers, which support the ‘last mile’ delivery crucial for e-commerce efficiency. This dual strategy not only revitalizes the utility of these spaces but also aligns with consumer expectations for rapid delivery. Moreover, by analyzing market data and consumer behavior, I’ve successfully advised on the strategic placement of smaller-format stores that serve as both brand showcases and local pick-up/drop-off points, enhancing the synergy between online and offline retail channels.”

11. Illustrate how you’ve used technology to enhance property management efficiency.

Efficiency in commercial real estate correlates with profitability and client satisfaction. Candidates should be ready to show how they leverage technology to improve operations and provide a better experience for tenants.

When responding to this question, focus on specific instances where you’ve implemented technology solutions that had a measurable impact. Discuss software or systems you’ve used for tasks like automated rent collection, energy management, or maintenance request tracking. Detail the problems these technologies solved, how they improved operations, and any feedback received from tenants or stakeholders. Quantify the benefits when possible, such as reduced operational costs or increased tenant retention rates, to underscore the tangible value of your tech-savvy approach.

Example: “ In a recent project, I leveraged a cloud-based property management platform to centralize operations, which significantly streamlined communication between tenants, maintenance staff, and management. By introducing an integrated system for maintenance requests, we reduced the average resolution time by 30%. This efficiency not only improved tenant satisfaction but also allowed us to better allocate resources, leading to a 20% reduction in maintenance costs over six months.

Additionally, I implemented an automated rent collection system that interfaced seamlessly with our accounting software, reducing manual entry errors and saving approximately 10 hours of administrative work per week. This system also provided real-time financial reporting, enhancing our ability to make informed decisions quickly. The introduction of these technologies resulted in a 15% increase in tenant retention rate, as the convenience of digital payments and prompt maintenance responses directly contributed to a more satisfactory tenant experience.”

12. How do you determine the right balance between commercial property types within a diversified portfolio?

Diversifying a property portfolio in commercial real estate involves weighing various factors. Candidates should be prepared to discuss how they align their investment strategy with market conditions and financial goals.

When responding, articulate your approach to analyzing different property types, referencing specific factors such as location demographics, economic indicators, and historical performance data. Discuss how you evaluate risk versus reward and the role of asset allocation in achieving stability and growth. Provide examples of how you’ve successfully managed diversification in past roles, demonstrating your strategic thinking and adaptability to changing markets.

Example: “ Determining the right balance between commercial property types within a diversified portfolio requires a strategic approach that considers both macroeconomic and microeconomic factors. Macro-level analysis involves understanding the broader economic indicators such as GDP growth, employment rates, and interest rate trends, which influence the overall demand for commercial real estate. On the micro-level, I delve into location demographics, tenant mix, and local market supply and demand dynamics to assess the viability of specific property types, whether it be office, retail, industrial, or multifamily.

For instance, in a market with a growing technology sector, I might allocate a higher proportion to office spaces designed to meet the needs of tech companies. Meanwhile, in an area with a burgeoning population and limited housing, multifamily units would be a prudent choice. I balance these decisions by analyzing historical performance data, which helps in identifying cyclical trends and potential market corrections. Risk versus reward is evaluated through rigorous financial modeling and scenario analysis, ensuring that the portfolio is not only diversified across property types but also positioned for both stability and growth. A successful example of this approach was rebalancing a portfolio during a period of retail uncertainty by increasing the allocation to industrial properties, which capitalized on the e-commerce boom and provided a hedge against retail vacancies.”

13. What strategies have you implemented to retain tenants in a competitive market?

A professional’s ability to retain tenants is a testament to their understanding of market dynamics and tenant needs. Candidates should be ready to discuss their retention strategies and how they contribute to a property’s financial stability and reputation.

When responding, it’s imperative to highlight specific strategies you’ve employed, such as maintaining open communication channels with tenants, offering lease renewals with favorable terms, or making proactive improvements to properties. Provide examples that demonstrate an understanding of tenant satisfaction and how it directly impacts retention rates. Emphasize your ability to anticipate market trends and adapt to them to keep tenants committed to your properties, showcasing a blend of tactical and strategic thinking in your approach.

Example: “ In a competitive market, tenant retention is paramount, and my strategies are rooted in understanding and anticipating tenant needs. Acknowledging that businesses thrive in environments that cater to their growth, I focus on creating tailored experiences. For instance, I’ve implemented a program that regularly assesses tenant satisfaction through surveys and direct communication, allowing for immediate response to concerns and fostering a sense of community. This proactive approach not only addresses issues before they escalate but also demonstrates a commitment to tenant well-being, which is crucial for retention.

In terms of lease structuring, I’ve had success with offering graduated lease terms that accommodate the evolving financial landscapes of tenants. By providing options such as reduced rates in the initial years or flexibility in space usage, tenants are more inclined to renew, knowing that the lease terms are designed to support their business’s lifecycle. Additionally, I stay abreast of market trends, ensuring that the amenities and services offered at my properties remain competitive. This includes investing in technology upgrades and sustainable practices that not only enhance the property’s value but also align with modern tenant values, further solidifying their decision to remain long-term.”

14. Assess the impact of interest rate fluctuations on commercial real estate investment decisions.

Interest rate fluctuations play a critical role in commercial real estate investment. Candidates should be prepared to discuss how they understand and anticipate these changes to protect investments and maintain attractive asset values.

When responding, it is crucial to demonstrate a comprehensive understanding of economic principles and their real-world applications. You might discuss how rising interest rates can increase the cost of borrowing, potentially cooling off property purchases and development projects, while conversely, lower rates can boost these activities. Articulate how you would analyze the ripple effects on asset valuation, rent dynamics, and investors’ required rates of return. Providing concrete examples or case studies where you’ve navigated such scenarios will cement your expertise and strategic thinking capabilities.

Example: “ Interest rate fluctuations play a pivotal role in shaping the commercial real estate (CRE) investment landscape. As rates rise, the cost of capital increases, which can compress capitalization rates and lower property values. This typically leads to a more cautious approach from investors, as the higher cost of debt financing can erode investment yields. For instance, in a rising interest rate environment, I would meticulously reassess the debt structure on potential acquisitions to ensure that the investment can withstand increased financing costs while still meeting targeted returns.

Conversely, in a period of declining interest rates, the cost of borrowing becomes cheaper, often resulting in an uptick in CRE transaction volumes and development projects. Lower rates can improve cash flows and justify higher property valuations, as investors are willing to accept lower yields in exchange for the perceived safety of tangible assets. In such scenarios, I prioritize securing favorable debt terms to lock in low-interest rates for the long term, enhancing the investment’s resilience against future rate hikes. Additionally, I closely monitor rent dynamics, as tenants’ ability to absorb rent increases can be a deciding factor in the investment’s performance amidst fluctuating interest rates.”

15. When analyzing cash flow projections, what factors do you consider critical?

Analyzing cash flow projections is key to understanding the viability of a property investment. Candidates should be ready to discuss how they assess financial health and risks and make strategic decisions.

When responding, a candidate should demonstrate a methodical approach by discussing the examination of revenue streams, such as rental income, and the scrutiny of variable and fixed expenses, including maintenance costs and property taxes. They should also mention the assessment of external factors like market vacancy rates, interest rate fluctuations, and the economic stability of the area. Highlighting experience with sensitivity analysis to predict outcomes under various scenarios will show a comprehensive understanding of cash flow analysis. The response should convey a balance between technical financial skills and an understanding of the broader economic context in which the property exists.

Example: “ In analyzing cash flow projections for commercial real estate, I prioritize a granular examination of revenue streams, particularly rental income, which is the lifeblood of the investment. This involves not just current lease agreements but also an assessment of market trends to forecast potential future rental growth or contraction. Equally important is a meticulous review of both variable and fixed expenses, such as maintenance costs, property management fees, and property taxes, ensuring that all potential costs are accounted for and appropriately escalated over time.

Beyond the property-specific factors, I incorporate external influences that could impact cash flow, such as local and national economic indicators, vacancy rates, and interest rate fluctuations. Understanding the economic stability of the tenant mix and the area’s growth prospects is crucial. I also employ sensitivity analysis to model how changes in these variables could affect the property’s financial performance. This dual focus on the micro details of the property’s operations and the macroeconomic environment provides a comprehensive view of potential cash flow scenarios, allowing for informed decision-making and risk mitigation.”

16. How do you incorporate sustainability and green building practices into your projects?

Sustainability and green building practices are becoming increasingly important in commercial real estate. Candidates should be prepared to discuss how they incorporate these practices into their work and the benefits they provide.

When responding to this question, candidates should highlight their familiarity with LEED certification, energy-efficient technologies, and sustainable materials. They should provide examples of past projects where they’ve successfully integrated eco-friendly solutions. It’s also beneficial to discuss ongoing education in sustainability trends and how they stay informed about new green practices. Demonstrating a commitment to sustainability not only reflects well on their professional acumen but also aligns with the corporate responsibility goals of the organization.

Example: “ Incorporating sustainability and green building practices into commercial real estate projects is a multifaceted approach that begins with site selection and continues through design, construction, and operations. For instance, I prioritize the selection of sites that have access to public transportation and existing infrastructure, reducing the development’s carbon footprint from the outset. During the design phase, I work closely with architects to ensure that buildings optimize natural light and incorporate energy-efficient HVAC systems, which are not only cost-effective but also enhance the well-being of the occupants.

I actively engage with the latest advancements in sustainable materials, selecting those with low volatile organic compounds (VOCs) and high recycled content for construction, and I advocate for the installation of green roofs and rainwater harvesting systems to reduce runoff and improve insulation. To formalize these efforts, I pursue LEED certification for projects, which provides a recognized standard for measuring building sustainability. This approach not only minimizes environmental impact but also results in lower operating costs and increased asset value, aligning with both ecological and economic objectives.”

17. Explain your experience with redevelopment or repositioning of underperforming assets.

Transforming underperforming properties into profitable investments is a challenge in commercial real estate. Candidates should be ready to share their experiences and strategies for repositioning assets to enhance value and ROI.

When responding, outline specific projects where you have played a key role in redevelopment or repositioning efforts. Discuss the strategies you employed, the challenges you faced, and the outcomes achieved. Quantify your successes with metrics such as increased occupancy rates, improved rental income, or enhanced property value. Demonstrating a track record of successful asset transformation shows that you possess the skills necessary to navigate the commercial real estate landscape effectively.

Example: “ In one notable redevelopment project, I spearheaded the transformation of a distressed suburban office complex into a mixed-use development. Recognizing the evolving market trends towards live-work-play environments, I conducted a thorough market analysis and collaborated with urban planners to rezone the property. This allowed for the addition of residential units and retail spaces, diversifying the income stream and mitigating the risk associated with a single-use asset. The repositioning resulted in a 30% increase in property value and a significant uptick in foot traffic, which in turn attracted higher-quality tenants.

Another example involved the repositioning of an underperforming retail center. By renegotiating existing leases, incorporating a more varied tenant mix, and enhancing the property’s aesthetic appeal, we were able to reduce vacancies from 20% to 5% within a year. This repositioning effort not only improved the rental income by 25% but also increased the asset’s net operating income, which positively impacted the overall valuation of the property. These experiences underscore my ability to identify potential in underutilized assets and execute strategies that align with market demands and investor expectations.”

18. What methods do you employ to accurately appraise commercial properties?

The accuracy of commercial property appraisals is crucial for real estate transactions. Candidates should be prepared to discuss their understanding of appraisal methodologies and how they apply them to produce reliable valuations.

When answering this question, highlight your proficiency with the different appraisal methods, emphasizing your analytical skills in comparing similar properties, assessing income potential, and evaluating cost factors. Share specific examples of appraisals you’ve conducted, detailing the steps you took to ensure accuracy and how you adjusted for unique variables. By providing concrete instances, you illustrate your meticulous approach to valuations, your ability to navigate the multifaceted nature of commercial real estate, and your commitment to upholding industry standards.

Example: “ To accurately appraise commercial properties, I utilize a combination of the three primary valuation methods: the cost approach, the sales comparison approach, and the income capitalization approach. For instance, when evaluating a Class A office building in a central business district, I begin with the income capitalization approach, analyzing the property’s revenue streams and expenses to determine its net operating income (NOI). I then apply a capitalization rate reflective of the current market conditions and comparable sales data.

In parallel, I employ the sales comparison approach, meticulously gathering data on recent transactions of similar properties in the area. Adjustments are made for differences in location, size, condition, and tenant mix to ensure a like-for-like comparison. For properties with unique features or in markets with limited sales activity, the cost approach becomes more relevant. I estimate the cost of constructing a similar property from scratch, then subtract accrued depreciation. Throughout the process, I remain vigilant to market trends, zoning changes, and economic indicators that could affect the property’s value, ensuring a comprehensive and precise appraisal.”

19. How do you navigate through periods of economic downturn in the commercial real estate sector?

Resilience and strategic thinking are essential during economic downturns in the commercial real estate sector. Candidates should be ready to discuss their experience with market volatility and how they mitigate financial risks.

When responding, it’s crucial to highlight past experiences where you’ve successfully weathered economic challenges. Discuss specific strategies such as diversifying property portfolios, renegotiating leases, cutting operational costs, or identifying new growth markets. Emphasize your analytical skills in monitoring market trends and making data-driven decisions. Showcasing a proactive and innovative approach will indicate to employers that you can maintain stability and even find pathways to growth despite economic headwinds.

Example: “ Navigating through economic downturns in the commercial real estate sector requires a strategic and proactive approach. During such periods, I focus on diversifying the property portfolio to mitigate risk. This involves identifying recession-resistant property types and markets, such as healthcare or industrial spaces, which tend to remain stable or even grow in demand during economic contractions. Additionally, I prioritize maintaining strong relationships with tenants, which becomes crucial when renegotiating leases to ensure continued occupancy and cash flow. By offering flexible lease terms or temporary concessions, we can retain tenants while positioning the portfolio for recovery.

Analytical skills are essential for monitoring market trends and making informed decisions. I leverage real-time data and economic indicators to identify early signs of market shifts, enabling a quick response to changing conditions. Cost management is another critical strategy; by scrutinizing operational expenses and implementing efficiency measures, I ensure that properties remain competitive and profitable. In identifying new growth opportunities, I look beyond traditional markets, often exploring emerging neighborhoods or alternative uses for properties that can lead to untapped revenue streams. This combination of risk management, tenant relations, operational efficiency, and market analysis forms the cornerstone of my approach to sustaining and growing the commercial real estate portfolio during economic downturns.”

20. Describe a time when you had to convince stakeholders to support a risky investment decision.

Presenting a risky investment in commercial real estate requires demonstrating strategic foresight and market acumen. Candidates should be prepared to discuss their persuasion skills and risk assessment abilities, as well as their research and communication strategies.

When responding, outline the situation clearly, emphasizing the research and analysis conducted to evaluate the risk. Discuss how you communicated the potential benefits and addressed the concerns of the stakeholders. Provide concrete examples of the strategies used to gain their trust and support, such as data-driven presentations, success stories, or risk mitigation plans. Highlight the outcome and what you learned from the experience, showcasing your ability to navigate high-stakes scenarios and lead decisively.

Example: “ In the commercial real estate sector, I once faced a situation where we identified an underperforming asset in an emerging market that showed signs of rapid economic growth. The property was in a prime location but had been mismanaged, leading to low occupancy rates. The investment was considered risky due to the initial capital required for renovations and the market’s volatility. To convince the stakeholders, I conducted a thorough market analysis, including demographic trends, economic forecasts, and a comparative study of similar asset turnarounds.

I presented a comprehensive business plan that outlined the renovation costs, projected increases in rental income, and a timeline for achieving a stabilized occupancy rate. I also developed a risk mitigation strategy that included phased renovations to maintain some cash flow and pre-leasing agreements with anchor tenants. By illustrating the potential for a significant increase in the asset’s value post-renovation and the strategic advantage of entering the market ahead of competitors, I was able to secure stakeholder support. The investment ultimately yielded a high ROI and positioned us favorably within the market, reinforcing the importance of thorough analysis and strategic risk-taking in commercial real estate investments.”

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I'm going to be doing a case study in the next few weeks. I just passed the phone interview and I'm kind of worried. I have some experience doing Excel but I'm not the best at it. Looks like the case study will be done online and not in person. What should I do to prepare? It's a mid-level position so they're looking for someone with experience.

In the job description, it says that candidate should have working knowledge of all asset classes but I really have only done models for multifamily.

Just bought the REFM course on Udemy but if anyone has any case study samples or idea of what this entails, this would help!

Congrats on making it to the case study round! It's normal to feel a bit nervous, but remember, they wouldn't have moved you forward if they didn't think you had potential.

To prepare for a commercial real estate analyst case study, you might want to focus on a few key areas:

Brush up on your Excel skills : You mentioned you're not the best at Excel. This is a good time to improve. The REFM course you bought on Udemy should be a great help. Make sure you understand the basics, but also try to learn some more advanced functions that are commonly used in real estate financial modeling.

Expand your knowledge beyond multifamily assets : The job description mentions a working knowledge of all asset classes. While your experience is in multifamily, try to familiarize yourself with other types of assets like office, retail, and industrial properties. There are plenty of resources on the WSO platform that can help you with this.

Practice, practice, practice : The more you practice, the more comfortable you'll become. Try to find some case study samples online or on the WSO platform and work through them. This will not only help you understand the types of problems you might encounter but also give you a chance to apply what you've learned.

Understand the company and its portfolio : If you know what types of properties the company typically invests in, you can tailor your preparation accordingly.

Prepare for the unexpected : Case studies can sometimes throw curveballs. Be ready to think on your feet and don't panic if you encounter something you're not familiar with.

Remember, the goal of the case study is not just to see if you can crunch numbers, but also to see how you think and solve problems. Good luck! Sources: Looking for guidance finding my path in commercial real estate , Career Path in Commercial Real Estate , MIT Commercial Real Estate Analysis and Investment Online Course worth it? , Real Estate PE Technical Interview Question - Case Study

REFM is a great course. The Real Estate Financial Modeling Bootcamp by Justin Kivel is also great. I did the two of those and passed my firm’s modeling test, best of luck!

What was on your firms modeling test? What type of prompts and asks? What did they expect of you?

Mine was pretty simple, but I'm at a boutique brokerage. It was modeling out a triple net lease over a lease term lol...But the additional stuff I learned from REFM has not hurt at all.

Interesting. Was it hard? Did you do it online or in person? Was it timed or did you just have to submit it online?

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How to Get into Commercial Real Estate

Step-by-Step Career Guide on How to Get into Commercial Real Estate Investing (CRE)

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Getting into Commercial Real Estate (CRE) is a challenging achievement yet a rewarding career path for investment professionals.

The following comprehensive CRE investing career guide will provide guidance on the skill set and industry-specific knowledge required to navigate the interview process and secure an offer.

In particular, we’ve compiled the most frequently asked commercial real estate (CRE) interview questions in the following post to help candidates prepare for CRE roles.

Table of Contents

How to Get into Commercial Real Estate Investing

How to prepare for commercial real estate investing, career tips: commercial real estate investing knowledge, how to follow the commercial real estate market (cre), top commercial real estate interview questions.

The commercial real estate (CRE) asset class is comprised of properties used for business purposes, as implied by the name. For instance, some of the more common commercial properties include office buildings, retail spaces, warehouses, and hotels.

Contrary to residential real estate, the commercial real estate sector focuses on generating rental income via long-term leasing arrangements and selling commercial properties at a profit.

Commercial Real Estate (CRE) Market Knowledge ➝ Understanding the current market trends and remaining up-to-date on the latest developments is critical to securing an investing role at a CRE firm. Therefore, remain informed of the latest developments and market sentiment because that sort of knowledge can help facilitate informed investment decisions.
CRE Analytical Skills ➝ Analyzing a potential investment and arriving at a sound thesis on the individual property is a comprehensive process because of the sheer number of moving pieces that can impact the return on investment. Performing diligence on the financial data of the underlying property and creating a pro forma forecast using assumptions supported by historical data is necessary. However, the state of the CRE market at present, sale prices of comparable properties, supply/demand trends, and economic conditions (e.g. interest rate environment) must each be closely considered.
Excel Proficiency (and Argus) ➝ For CRE professionals, familiarity with Excel improves workflow efficiency while mitigating the risk of errors. In addition, property management software like Argus and data analysis tools can further enhance one’s productivity on the job.
Technical Acumen ➝ The common real estate metrics used to estimate the implied return on property investments are necessary to master to perform well. But more importantly, the intuition behind each metric—i.e. the underlying core drivers—must be grasped, and the connections between each metric are crucial to tie the insights into a formal investment thesis.
Build a Network ➝ Effective communication is a skill applicable to essentially all career fields, including real estate. By networking and building close relationships with employees at CRE firms, the likelihood of becoming hired is greater since that shows a candidate can collaborate with other CRE professionals, employees, and clients. In short, networking can open doors to job opportunities, partnerships, and the gradual accumulation of industry knowledge over time.

First and foremost, understand that your resume is the source for most of the initial questions, and every detail included is subject to scrutiny during the interview.

In short, most of the behavioral questions are derived directly from your resume, so be ready to elaborate on each bullet point and respond to any follow-up questions.

Each item listed on your resume should be directly relevant to the position for which you’re interviewing, and you should be able to expand upon the bullet point with relative ease.

Therefore, come prepared to discuss your resume in depth and anticipate potential questions that may arise.

If commercial real estate is genuinely your chosen career path, and you spent sufficient time researching the firm’s background and investment strategy, answering behavioral questions that pertain to your interest in joining the firm should be straightforward and conversational.

While the following should go without saying, it is imperative to be truthful on your resume. If you feel the need to lie on your resume, you are likely not qualified for the position (and the potential downside is never worth the risk).

Begin your preparation early and conduct thorough research on the firm. In short, avoid procrastinating at all costs because the effort you put into learning about the firm will be evident in the interview.

Firms can easily discern candidates with genuine interest from the rest early on in the interview process, so make sure you come across as well-prepared and fully committed to joining the firm.

Here are some of the key topics to research on a given real estate firm ahead of an upcoming interview:

Investment Strategy ➝ What is the firm’s investment strategy?
Property Types ➝ What types of properties does the firm invest in?
Financing Structure ➝ What is the financing structure of the firm’s investments (e.g. mix of equity or debt)?
Fund Investment Criteria ➝ What are the firm’s investment criteria (e.g., geographical focus, transaction size, risk/return profile)?
Past Transactions ➝ Explain a past transaction completed by the firm that you found interesting (and why).

One final tip on preparing for technical questions: remember that “practice makes perfect,” so participate in mock interviews to hone your skills, especially under timed pressure.

Following the commercial real estate market is an absolute must for those pursuing a career in the field.

Part of impressing an interviewer and securing a job offer is showing your passion for commercial real estate, which requires understanding the current market trends that impact investment decisions and recent commercial real estate transactions (or deals).

Why? Timing is one of the most important core drivers of returns in commercial real estate investments.

That said, it is crucial to come into the interview prepared to speak about, at the very least, one notable real estate deal in-depth.

Before the interview, prepare a one-pager with the transaction deal terms and the intuition behind the investment strategy to show that you are capable of thinking like a commercial real estate investor.

Why? That sort of skill set is precisely what real estate firms seek in a potential hire.

Our top recommendations to follow the commercial real estate industry and market trends are as follows.

Top Commercial Real Estate Newsletters (2024)

Commercial Observer
Trepp: The Rundown
MSCI Weekly
Moody’s CRE Digest

In the subsequent section, we’ve outlined some of the most frequently asked interview questions in the commercial real estate (CRE) interview process.

The list of compiled CRE interview questions covers the core basics needed to get into commercial real estate.

However, fill out the following form to access our comprehensive real estate interview guide.

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Real Estate Technical Interview Guide | File Download Form

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Q. What happens to the property values in the commercial real estate (CRE) market when interest rates rise?

When interest rates rise, the capitalization rates most often follow suit. Moreover, if cap rates increase, property values tend to decline.

However, there are some economic benefits that can help mitigate the decrease in property values.

Fundamentally, rising cap rates are frequently a sign of a strong real estate market and economy, signifying that the real estate outlook is likely positive.

Since rising interest rates mean higher financing costs, the pace of new supply (i.e. new properties flowing into the market) can slow down while demand remains the same, so rent tends to increase in such times.

Q. Why do higher interest rates cause real estate purchase prices to decline?

If interest rates increase, borrowing becomes more expensive, which directly impacts the returns of real estate investors.

In a higher interest rate environment, investors must offset the higher cost of financing with a reduction to purchase prices – since a lower purchase price increases returns (and enables them to achieve their targeted return).

Therefore, as interest rates climb upward, cap rates are also expected to rise, placing downward pressure on pricing.

Q. What is the net absorption rate?

The net absorption rate is a measure of supply and demand in the commercial real estate market, so the metric attempts to capture the net change in demand relative to supply in the market.

Calculating net absorption involves taking the sum of physically occupied space in square feet and subtracting the sum of square feet that became physically vacant over a specified period, most often a quarter or a year.

Q. What is the difference between positive and negative net absorption?

Positive Net Absorption ➝ More commercial real estate was leased relative to the amount made available on the market, which suggests there is a relative decline in the supply of commercial space available to the market.
Negative Net Absorption ➝ More commercial space has become vacant and placed on the market compared to the amount that was leased, indicating the relative demand for commercial real estate has declined in relation to the total supply.

Q. What is the difference between NOI and EBITDA?

The net operating income (NOI) metric measures the profitability of a property investment before any corporate-level expenses such as capital expenditures (Capex) , financing costs (e.g. interest expense), and depreciation and amortization (D&A).

NOI is frequently used among real estate firms because it captures the property-level profitability of the firm prior to the effects of corporate expenses.

In contrast, EBITDA – which stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization” – is most commonly used to measure the operating profitability of traditional companies, meaning NOI can be considered a “levered” variation of the EBITDA metric.

Q. Which is used more in real estate investment banking: NPV or IRR?

Both the net present value (NPV) and internal rate of return (IRR) are important metrics for all real estate investors to consider.

However, the IRR is arguably used more frequently because the metric represents the discount rate at which the NPV of future cash flows is equal to zero.

In other words, the minimum required return on an investment is based on the implied IRR.

Further, the IRR is more easily used to compare the returns on real estate investments relative to other asset classes such as equities, fixed income , and other types of real estate investments.

Q. What are the different types of leases?

Full Service ➝ A lease structure in which the landlord is responsible for paying all of the operating expenses of the property, meaning the rental rate is all-inclusive as it accounts for expenses such as taxes, insurance, and utilities.
Triple Net ➝ A lease structure in which the tenant agrees to pay for all of the expenses of the property, including taxes, maintenance, and insurance, all in addition (and separately) to rent and utilities. Because these expenses aren’t left to the landlord to pay, the rent on a triple-net lease is typically lower than in other lease structures.
Modified Gross Lease ➝ A lease structure in which the tenant pays the base rent at the beginning of the lease and then takes on a proportion of other expenses, such as property taxes, insurance, and utilities.

Q. What are the three methods for valuing real estate assets?

The three methods to value real estate assets are the cap rate, comparables, and the replacement cost method.

Cap Rate ➝ Property Value = Property NOI ÷ Market Cap Rate
Comparables ➝ The valuation is based on the transactional data of comparable properties, specifically based on metrics such as the price per unit, price per square foot, or current market cap rate.
Replacement Cost Method ➝ CRE investors analyze the cost of building the property that they are considering purchasing (and, in general, most would avoid purchasing an existing property for more than it could be built).

Q. Compare the cap rates and risk profiles for each of the main property types.

There are four commercial property types in particular, which are each described in the following list:

Hotels ➝ Higher cap rates due to cash flows being driven by extremely short-term stays.
Retail ➝ Higher risk due to increasing creditworthiness concerns due to the rise of e-commerce.
Office ➝ Closely correlated with the broader economy but with longer-term leases, making the risk profile a bit lower.
Industrial ➝ Lower risk profile due to continued trends in e-commerce and longer-term leases.

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Q. Walk me through a basic pro forma cash flow build for a real estate asset.

Revenue ➝ The calculation starts with revenue, which will primarily be rental income but could include other sources of income. From this, vacancy and leasing incentives will be deducted.
Net Operating Income (NOI) ➝ Next, operating expenses are subtracted from revenue to arrive at the NOI.
Unlevered Free Cash Flow ➝ From NOI, capital expenditures related to the purchase and sale of properties are subtracted to arrive at the unlevered free cash flow metric.
Levered Free Cash Flow ➝ Finally, financing costs like interest are subtracted from unlevered free cash flow to arrive at levered free cash flow.

Q. If you had two identical buildings in the same condition and right next to each other, what factors would you look at to determine which building is more valuable?

The primary focus here should be on the cash flows, especially the risk associated with them (and the creditworthiness of the tenants).

Average Rent and Occupancy Rates ➝ Specifically, the average rents and occupancy rates of the buildings must be closely examined, as this sort of analysis can reveal differences in management and leasing (and potential issues).
Credit Risk ➝ The riskiness of the cash flows is also critical. The creditworthiness of existing (and future) tenants and the specific terms of the leases are used to gauge the credit risk. In short, a property owner wants to be near certain that rent will be collected on time from the tenant.
NOI and Cap Rate ➝ The net operating income (NOI) and cap rate of each property must be calculated. In short, the property with a higher cash flow and less risk will be more valuable.

Q. Describe the four main real estate investment strategies.

The four main commercial real estate investment strategies are core, core plus, value-add, and opportunistic investments.

Core ➝ Of the four strategies, the least risky strategy (and thus, resulting in the lowest potential returns). The strategy typically involves targeting newer properties in locations with higher occupancy rates and tenants of higher creditworthiness.
Core-Plus ➝ The most common type of real estate investing strategy, which carries slightly more risk by involving minor leasing upside and small amounts of capital improvements.
Value-Add Investments ➝ A riskier strategy in which the risk can come from less creditworthy tenants, meaningful capital improvements, or substantial lease-up (i.e. more “hands-on” changes).
Opportunistic Investments ➝ The riskiest strategy that targets the highest returns. The strategy consists of investments in new property development (or redevelopment).

Q. What are the risks associated with investing in commercial real estate properties?

Investing in commercial real estate (CRE) properties involves several material risks that potential investors must consider to mitigate the risk of incurring capital losses.

Here are some of the main types of risks posed by CRE property investments:

Vacancy Risk ➝ One of the primary risks in CRE is the potential for vacancies (or rental units without tenants). Unlike residential properties, which often have a steady stream of tenants, commercial properties can take longer to find suitable occupants. In effect, there can often be extended periods wherein a rental property (or units) remain empty, and no rental income is generated.
Economic and Market Risks ➝ The CRE market dynamics (supply-demand) are closely tied to the current state of the economy. For instance, economic downturns, recessions, or instability can cause demand for commercial properties to drop off, resulting in lower rental rates and a widespread reduction in property values.
Interest Rate Risks ➝ The interest rate risks, or financing risk, refers to the ease (or difficulty) of obtaining loans to fund the acquisition of a property. Debt financing, or the use of borrowed funds, is an integral component of CRE investing, so the pricing and availability of commercial loans is a critical driver of the deal activity in the CRE market (and the profitability of property investments)
Liquidity Risk ➝ The CRE sector is generally more illiquid than residential real estate, considering the fewer potential buyers. Therefore, an investor’s capital can be tied up for a longer period, which reduces the internal rate of return (IRR) of CRE investment funds since a longer hold period cuts into an investment’s IRR.
Operational Risks ➝ Commercial property management involves higher maintenance costs due to larger spaces and specialized systems like HVAC, elevators, and amenities. Property management issues, such as disputes with commercial tenants, can emerge, which is a far more complicated process than a residential tenant missing a mandatory payment (and defaulting).
Geographic and Location-Specific Risks ➝ The location of a commercial property is an influential factor with broad implications on the valuation of such properties. For example, factors such as local economic conditions, population growth, near-term trends (e.g. Miami), and developments (e.g. Amazon HQ) can cause significant swings or declines in the valuation of nearby properties.

Q. Are Property Taxes Included in NOI?

Contrary to common misconception, property taxes are, in fact, included in net operating income (NOI).

Why? NOI is a measure of operating performance, and property taxes are an operating expense in the commercial real estate industry.

However, income taxes paid to the government are NOT included in NOI.

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Real Estate Financial Modeling Interview Exam Questions – What You Need To Know

When applying for a real estate analyst or associate job at a private equity real estate or brokerage shop, just writing “proficient in Microsoft Excel” on your resume usually won’t cut it these days.

And during the interview process, to test your knowledge in real-time, many commercial real estate firms will give potential analyst hires some sort of real estate financial modeling interview exam , where the candidate will have to demonstrate their knowledge of Excel, and their ability to calculate real estate investment returns and metrics for various scenarios.

The exact format of these exams can vary quite a bit from company to company, but even when the format changes, the core fundamental knowledge-base most that most firms are looking for tends to be pretty consistent across the board.

So in this article, to help you prepare for interview day and ace whatever exam is thrown your way, let’s walk through five of the most commonly tested topics included real estate financial modeling interview exams, and the specific terminology and calculations you should know within each.

If video is more your thing, you can also watch the video version of this article here .

1. Basic Excel Functions

In a real estate analyst or associate role, the vast majority of your workday (at most firms) is going to be spent in Microsoft Excel.

And with that, a big part of being successful in these types of roles is coming into the position with a solid understanding of the core functions and formulas used by CRE analysts on a regular basis.

Here are some of the most commonly used functions that I’ve seen included in real estate financial modeling interview exams, in no particular order:

HLOOKUP & VLOOKUP

These functions allow for dynamic retrieval of values within a table array based on a specific column or row reference value and a column or row reference number.

The IF function allows a user in Excel to create binary “If-then” scenarios, where a user can dynamically test if the value in a certain cell is less than, equal to, or greater than another value, and return a certain value as a result of whether or not the result of that test is true or false.

PV & FV

The present value (PV) and future value (FV) calculations measure the time value of money. Specifically, these functions measure the impact of a given discount rate or interest rate on an expected value in the future, or a current value today.

IRR & NPV

The internal rate of return (IRR) and net present value (NPV) functions allow a user to easily calculate the time-weighted, annualized returns on a series of cash flows, and these two functions are used extensively on a day-to-day basis at the vast majority of real estate private equity and brokerage firms.

Data Tables

Data tables aren’t technically Excel functions , but they are a functionality in Excel that allows users to sensitize the effects of various manual input drivers on outputs in a model. In a real estate context, this allows investors to see the effects of things like differing purchase prices, exit values, rent growth figures, and debt levels on the key return metrics of the deal.

2. Real Estate Finance Modeling

Obviously Excel is important, but just knowing Excel itself won’t put someone at the top of the candidate stack when applying for real estate analyst or associate positions.

In addition to Excel knowledge, real estate investment, brokerage, and lending firms are also going to be looking for candidates with a strong fundamental knowledge of real estate finance, specifically , including the following topics:

Loan Metrics

Employers are going to be looking for a strong working knowledge of how to calculate things like monthly debt service given a loan amount, interest rate, and amortization period, the loan-to-value (LTV) and loan-to-cost (LTC) ratios of a deal, and maximum loan proceeds based on a minimum required debt service coverage ratio (DSCR) and/or debt yield on the asset.

Return Metrics

Employers are going to be looking for a strong working knowledge of how to calculate key return metrics on a deal, including the cap rate, internal rate of return (IRR), equity multiple, and cash-on-cash return.

Growth Modeling

Aside from the key finance concepts used to analyze commercial real estate deals, employers are also going to be looking for candidates that understand how to model various growth rates into a model to adjust things like rent growth, expense growth, property tax growth, or capital expense growth over time.

3. Commercial Real Estate Lease Modeling

This is where things start to come together, and how an employer can make sure that your Excel skill sets and real estate finance knowledge play nicely together. These skill sets include:

Modeling Weighted Average Renewal Cash Flows

For modeling purposes, when an in-place lease matures, commercial real estate firms need to make assumptions around what those cash flows will be for that particular suite, even after that lease expires. This requires the ability to model weighted average values for things like downtime between leases, tenant improvement (TI) allowances, leasing commissions, and market rents, all based on the probability that the in-place tenant renews its lease (or vacates).

Modeling Operating Expense Reimbursements

For firms that work on commercial real estate deals (really anything other than multifamily or hospitality), the ability to be able to quickly identify and model common operating expense reimbursement calculations is critical for CRE analysts. Before heading into an Excel interview exam, make sure you’re clear on the definition of a triple-net (NNN) lease, full service gross (FSG) lease, modified gross (MG) lease, and base year stop (BYS) lease, and how revenue will be impacted by each structure.

Modeling Tenant Improvements and Leasing Commissions

Similar to the point above, this is generally only going to be important for firms that invest in office, industrial, and/or retail properties. With that said, being able to calculate a tenant improvement (TI) allowance based on a market amount per square foot, as well as leasing commissions as percentage of total contractual base rent over the lease term, will be extremely helpful in preparing for a real estate financial modeling interview exam at most CRE private equity and brokerage firms.

4. Commercial Real Estate Cash Flow Modeling

Once an employer knows that you understand Excel, have a strong foundation in real estate finance, and understand how commercial leases work in practice, from there, most firms will want to see you put all of that knowledge together to create a complete, dynamic pro forma model to analyze a deal based on given assumptions.

For the purposes of an interview exam or case study, this usually consists of three steps:

Build a Complete Pro Forma Model Based on Given Assumptions

Step number one of this process is going to be to build out a dynamic pro forma cash flow model based on assumptions given to you around things like market or in-place rent values, rent and expense growth, operating expense ratios, vacancy rates, loan metrics, and an exit cap rate.

Ideally, this model should be dynamic, meaning that if you change any manual input assumptions in the model itself, the rest of the cash flow calculations will change automatically . This is big in showcasing your abilities in Excel, and your ability to quickly model various deal scenarios for senior members of the firm to evaluate.

Calculate The Key Return Metrics on the Deal

This step includes taking the pro forma cash flows you’ve created based on the assumptions you’ve been given, and then calculating the return metrics we talked about earlier in this article.

The most heavily scrutinized metrics are generally going to be the cap rate, IRR, equity multiple, and cash-on-cash return, but you will likely also be asked to calculate debt metrics like the DSCR, debt yield, LTV ratio, or loan constant, as well.

Value The Property Based on Target Return Metrics

Many real estate financial modeling interview exam case studies will require the candidate to take everything they’ve built to come up with a valuation on the property based on a target IRR, equity multiple, cash-on-cash return, or mixture of all three.

And this is very similar to what an analyst would do on a day-to-day basis on the job, coming up with offer prices on new deals in an acquisitions role, or creating broker opinion of value (BOV) documents in an investment sales analyst position.

5. Working With ARGUS

Again, this is usually only applicable for retail, office, and/or industrial-focused firms, but if commercial leases exist in the company’s portfolio, it’s likely that they use a software called ARGUS in some shape or form.

And while an interview exam doesn’t generally require you to work within ARGUS directly, many exams will require you to build a real estate financial model based on another Excel file that has been exported from ARGUS, directly.

In these scenarios, you’ll often be expected to solve for similar metrics as mentioned in point number four on this list, with the IRR, equity multiple, and cash-on-cash generally being the most widely tested.

However, this portion of the exam may have some additional “cash flow interpretation” questions based on the ARGUS cash flows provided, including when the property achieves stabilization, what types of operating expense reimbursement structures most tenants have, and what an exit cap rate would need to be to hit a desired sale price.

What If I Don’t Know All of These Things?

Ok, so it might seem like I just gave you a lot of homework.

And if you aren’t familiar with most of these topics, then that is true – I would recommend taking the time to learn these concepts, even if it might take some time to get the hang of things.

I would rather give you homework now than have you unprepared for exam day, going through 3-5 rounds of the interview process only to make (very) avoidable mistakes on an Excel assessment, and potentially losing the position.

Ain’t nobody got time for that.

So, if you want more help with preparing for a real estate financial modeling interview exam than I can give you in a short blog post, here are two great options to get you started.

The Real Estate Financial Modeling Interview Exam Guide Course

This class will walk you through each of the five topics discussed in this article in detail, with dozens of practice interview exam questions and walkthroughs of the solutions to each. You can find all the details by heading over to our Courses page here .

Break Into CRE Academy

A membership to the Academy will give you instant access to all Break Into CRE courses, our entire library of practice interview exams and case studies, and additional, one-on-one, email-based career coaching to help you navigate the application and job search process and land your dream job in the real estate industry.

If you’re about to head into a real estate financial modeling interview exam soon, I hope this helps. Good luck!

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One Workplace

Format Full City Santa Clara State/Province CA Country USA Metro Area San Jose Project Type Office Building(s) Location Type Inner Suburban Land Uses Office Parking Warehouse Keywords Adaptive use Build-to-suit development Changing workplace Collaborative office space Corporate real estate Industrial redevelopment Innovative interior design Relocation Showroom Space planning Tenant improvements Warehouse renovation Site Size 9.45 acres acres hectares Date Started 2009 Date Opened 2013

The One Workplace facility in Santa Clara, California, is the new corporate headquarters, showroom, and warehouse facility for one of the largest commercial furniture suppliers in the state. The firm worked closely with developer Prologis and a design and construction team to renovate, reconfigure, and update this existing industrial facility that had previously been used for paper manufacturing. The new space includes 35,000 square feet of modern collaborative open-plan office space that also serves as a showroom for the furniture and modular office pieces that One Workplace sells and installs. The new space also includes 167,000 square feet of updated warehouse space, which involved the addition of around 24 new truck docks.

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Edward Hofer, executive vice president, San Jose–Silicon Valley, Colliers International

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35 Jaw-Dropping US Real Estate Statistics [2023]: How Many Realtors Are In The US

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Real estate research summary. Real estate is a major part of almost every American’s life, whether you’re a buyer, seller, or agent. Since the Housing Market Crash of 2008, it seems real estate prices have rebounded to the point of climbing higher than they’ve ever been. In fact, in many locations around the U.S., the COVID-19 pandemic has only served to further increase prices.

If you’re curious how many real estate agents in the U.S., among other things, you’re in luck. We’ve gathered all the essential facts about the U.S. real estate industry, and according to our extensive research:

There are over 1.53 million realtors operating in the US as of February 2023.

The full stock of U.S. housing is worth roughly $43.4 trillion.

From January 2022 to January 2023, overall home prices across the U.S. have increased by 5.5%.

Currently, 97% of home buyers search for their homes online .

The market size of the Real Estate Sales Brokerage industry in the U.S. is $222.3 billion in 2023.

There are 143.8 million housing units across the U.S.

97% of home buyers search for their homes online

General real estate industry statistics

Owning a home through real estate has always been a major part of the “American Dream.” However, lately, it seems housing prices have outpaced the incomes of most Americans. With that in mind, where is real estate today? Here are the insights our research uncovered:

There were 5.95 million homes sold in the U.S. in 2022

San Francisco, California, has the highest median selling price for U.S. real estate, at $1.36 million.

Manhattan, New York, has the most expensive cost per square foot in the U.S., at $1,400 per square foot.

While Manhattan’s spot as one of the most expensive cities in the U.S. may not be surprising, the buyer’s market here is actually starting to impact prices. For example, while the median listing price in 2020 was $1.6 million, the median selling price was only $950,000.

Most expensive cities by cost per square foot

Median Selling Price	Median Listing Price	Average Price per Square Foot
$1.36M	$1.3M	$1,100
$950K	$1.6	$1,400
$983K	$925K	$610
$848K	$1.2	$500
$799K	$730K	$720
$760K	$860K	$550
$692K	$770K	$760
$757K	$690K	$525
$751K	$690K	$520
$610K	$625K	$700

Houston, Texas, currently has one of the best and most popular real estate markets, with a healthy median listing price of $342,000.

Washington State has the most competitive real estate market, with 44.74% of homes selling above their listing price.

Further, an average of 68 homes are sold per month here only two weeks after they’ve been listed. Much of this growth can be attributed to large tech companies offering jobs , such as Microsoft.

Most competitive real estate markets by state

% of Homes Sold Above Listing Price	Ave. Homes Sold in Less Than 2 Weeks per Month	Ave. Monthly Supply of Homes
44.74%	68	1.27
38.80%	68	1.13
27.16%	55	0.00
38.87%	56	1.71
40.67%	50	1.50
41.87%	48	1.73
25.24%	65	1.23
29.51%	59	1.30
34.46%	55	1.94
37.34%	45	1.57

The market size of the Real Estate Sales Brokerage industry in the U.S. is $222.3 billion as of 2023.

2020 saw a huge shortage of the new home supply, with the cumulative shortage reaching over 5 million.

REITs (Real Estate Investment Trusts) own roughly $3.5 trillion in gross real estate assets.

Housing market statistics

The real estate housing market is highly competitive , expensive, and there are significant shortages in the U.S. right now. Of course, this isn’t the case everywhere. All of that still affects the housing market and makes it more difficult for new buyers to purchase homes. Here are the facts:

There are 143.8 million housing units in the U.S. as of 2022

While this might seem like a big number, the number of housing units has actually remained very stagnant, only growing by just over 7% since 2010. On the contrary, growth between 1980 and 1990 was over double that, at 18%.

The average down payment for a home in 2023 is $24,100.

This might seem like a lot, but it is, in fact, a small percentage of the average home cost (over $250,000). In fact, the average down payment in the country is equal to only around 13% of the borrower’s loan value.

As of Q3 2022, the median home price in the U.S. was $392,000.

As of May 2023, the median cost of a new home in the U.S. is $436,800.

In the U.S., it takes an average of 56 days to close a loan on a home purchase.

As of 2023, there are roughly 16 million vacant houses in the U.S.

Median home price by state

State	Median Home Price
	$615.3K
	$505K
	$381.6K
Colorado	$343.3K
Washington	$339K
	$335.6K
	$314.8K
	$313.7K
Oregon	$312.2K
Utah	$279.1K
	$275.4K
Virginia	$273.1K
	$270.4K
	$267.9K
	$261.9K
	$261.7K
	$251.1K
	$230.6K
	$227.7K
	$225.5K
Minnesota	$223.9K
	$220.5K
	$215.3K
Idaho	$212.3K
	$194.5K
	$193.9K
	$190.4K
	$180.6K
	$180.2K
	$176K
	$172.5K
	$172.5K
	$171.4K
	$167.2K
	$167.1K
	$163.1K
	$162.3K
	$157.2K
Nebraska	$155.8K
	$154.9K
Kansas	$151.9K
	$147.8K
	$145.7K
	$142.7K
Indiana	$141.7K
	$141K
	$136.8K
	$127.8K
	$119.6K
	$119K

Real estate agent statistics

Real estate agents play a crucial role in the process of buying or selling a home. In fact, the vast majority of Americans rely on agents for their home buying or selling process. According to our research:

There are roughly 1.46 million real estate agents operating in the U.S.

Currently, Pennsylvania is the #1 state for real estate agents.

The average commission for a real estate agent is 6% of a home’s sales price.

87% of real estate agents fail within the first five years.

75% of home buyers work with the first agent they contact.

Real estate industry trends and predictions

Real estate has been growing more expensive for a while now, but will this trend continue? After all, the industry has continued its growth even through the COVID-19 Pandemic. Well, according to our research:

From May 2020 to May 2021, overall home prices across the U.S. increased by 13.2%.

And that’s just the overall numbers, as many popular destinations have seen record price increases. For instance, Austin, Texas experienced a 30.5% increase, Phoenix, Arizona a 23.5% increase, and Salt Lake City, Utah a 20.6% increase. Believe it or not, an Austin home worth $300,000 in May 2020 would now be worth $574,000 in 2023.

On average, homes appreciate by 3.5% to 3.8% per year.

The growth of housing prices is expected to slow to 4.4% in 2022.

From 2016 to 2026, the U.S. real estate industry is expected to have a CAGR of 7%.

Home buyer statistics

Real estate changes are always on buyer’s minds, and with everything that’s happened since 2020, you might be wondering how buyers have reacted. After all, many young Americans are still relying on apartments, and certainly, the state of the market isn’t helping with this issue. Here are the facts:

Millennials (22-40) are the largest generation buying homes, making up 37% of the market.

The average home buyer will visit ten homes before they find “the one.”

81% of Millennials between 22-38 found a home on a mobile app.

The average American spends 16.4% of their income on housing.

As of 2021, 88% of buyers use real estate agents or brokers.

Overall, the average income of first-time homebuyers is $67,342 per year.

Real estate industry FAQ

How many real estate agents are in the U.S. in 2023?

There are over 1.53 million real estate agents operating in the US as of February 2023. These agents either work independently or at one of the over 106,000 real estate brokerage firms across the United States.

How much is the real estate industry worth?

The U.S. real estate industry is worth $222.3 billion. This is not to be confused with the value of homes or commercial properties, as the industry represents real estate agents, brokers, and others in the business of buying and selling homes.

Is the real estate industry growing?

The real estate industry is growing, but still saying rather stagnant. The industry’s growth is only expected to increase 0.6% in 2023.

Is real estate a concentrated industry?

No, the real estate industry is not concentrated. For the most part, the real estate industry is diverse and specific to local areas. Of course, there are markets with higher concentrations than others, but no broad conclusions can be made.

Is it hard to be successful in real estate?

Yes, it is hard to be successful in real estate. 87% of real estate agents fail within their first five years of working, which is no small number.

Real estate agents make their money when a house sells, so they need to close on homes to get a paycheck. This requires finding clients who are either buying or selling a home and convincing them to work with you – no small task when you’re competing with the 1.46 million other real estate agents working in the U.S.

To do this, not only do you have to find clients who don’t have realtors yet, but you also have to try to find them before other real estate agents can.

This is important because if you can get a strong initial interview with a home buyer, your chances are good that they’ll choose you, as 75% of buyers choose to work with the first real estate agent they meet with.

If you can build a good client base and stay in the industry for a significant amount of time, you’ll have a higher chance of being successful, as it should get easier to find clients since you’ll have more recommendations from happy home buyers and sellers.

Why do most realtors fail?

Most realtors fail because they aren’t able to put in the work it takes to be successful, they don’t know how to market well, or their interpersonal skills are lacking.

Often real estate is touted as a great side gig, and while it can offer a significant amount of flexibility, it still takes a significant amount of time, energy, and money to get yourself off the ground.

Many people don’t realize how much work it takes or aren’t ready to hold on through poor real estate markets, so they quickly fail. Others don’t have enough money set aside to help them get going or to get them through the leaner times, so they have to find another line of work to pay the bills.

In addition to this, many realtors fail because they don’t know how to effectively market themselves or the house they’re selling. If they can’t market themselves, they won’t find clients and won’t be successful.

If they can’t market the house accurately, they’ll either not be able to sell it or sell it for far too little, shorting themselves and the seller and damaging their reputation.

What is the highest-paying job in real estate?

The highest-paying job in real estate is that of a mortgage loan officer. These professionals are the ones who help homebuyers find and get approved for loans that will allow them to buy a house.

Instead of working for a bank or a mortgage company, mortgage loan officers usually work independently, shopping for loan options on behalf of the buyer. You’ll need several state and national licenses to become a mortgage loan officer , but the average salary of $152,639 makes that work worth it.

Other high-paying real estate jobs include:

Real Estate Attorney

Compliance Specialist

Real Estate Broker

Property Accountant

Real Estate Investment Consultant

Real Estate Appraiser

Despite an overall price hike of over 15% since 2021, it seems the real estate market still remains stable. In fact, things are expected to continue stabilizing. That’s good news for millennials, who now make up 37% of the real estate market.

However, the COVID-19 Pandemic has also had a significant effect on the market, with the inventory of new homes reaching a shortage of over 5 million.

On top of that, many traditionally competitive markets , such as Manhattan or Los Angeles, have now become buyers markets, while states like Nebraska, Kansas, Texas, and Idaho are seeing considerable influxes of buyers. Austin alone saw a 30.5% increase in prices in 2022.

This shift of people moving away from the largest cities in the U.S. is partially connected to remote working , but it’s uncertain whether or not the trend will last.

CNBC. “ The typical home price is up a record 13.2% compared to last year, according to Zillow. ” Accessed on October 31st, 2021.

Statista. “ Total home sales in the United States from 2011 to 2020 with a forecast for 2021 and 2022. ” Accessed on November 1st, 2021.

Rocket Mortgage. “ Most Expensive Cities In The US. ” Accessed on November 1st, 2021.

Rocket Mortgage. “ Best Real Estate Markets in 2021. ” Accessed on November 1st, 2021.

Insurify. “ Listed, Listed, Sold! States with the Most Competitive Real Estate Markets. ” Accessed on November 1st, 2021.

IBISWorld. “ Real Estate Sales Brokerage in the US – Market Size 2002–2027. ” Accessed on November 1st, 2021.

Realtor.com. “ Category Archives: Housing Supply .” Accessed on November 1st, 2021.

Nareit. “ REITs by the Numbers. ” Accessed on November 1st, 2021.

Statista. “ Number of housing units in the United States from 1975 to 2020. ” Accessed on November 1st, 2021.

The Ascent. “ Average Down Payment on a House 2021: $27,850. ” Accessed on November 1st, 2021.

World Population Review. “ Median Home Price By State 2021. ” Accessed on November 1st, 2021.

Statista. “ Average sales price of new homes sold in the United States from 1965 to 2021. ” Accessed on November 1st, 2021.

Bankrite. “ How long does it take to buy a house? ” Accessed on November 1st, 2021.

FRED. “ Housing Inventory Estimate: Vacant Housing Units in the United States. ” Accessed on November 1st, 2021.

Statista. “ Number of National Association of Realtors members in the United States from 2009 to 2020. ” Accessed on November 1st, 2021.

Zippia . “ Best States for a Real Estate Agent To Live and Work in 2021. ” Accessed on November 1st, 2021.

Bankrite. “ How do Realtors get paid? ” Accessed on November 1st, 2021.

ClubWealth. “ Why 87% of Real Estate Agents Fail in the First 5 Years. ” Accessed on November 1st, 2021.

National Association of Realtors. “ 2019 Profile of Home Buyers and Sellers. ” Accessed on November 1st, 2021.

Millionacres. “ What Is the Average Appreciation of Real Estate in the U.S.? ” Accessed on November 2nd, 2021.

Cision. “ Global Real Estate Market Report 2021: Market is Expected to Grow from $2687.35 Billion in 2020 to $3717.03 Billion in 2025 – Forecast to 2030. ” Accessed on November 2nd, 2021.

National Association of Realtors. “ 2021 Home Buyers and Sellers Generational Trends Report. ” Accessed on November 2nd, 2021.

Realtor.com. “ How Many Homes Will It Take to Find ‘The One’? ” Accessed on November 2nd, 2021.

The New York Times. “ Online Home Buying by Generation. ” Accessed on November 2nd, 2021.

Millionacres. “ Americans Spend This Much of Their Paychecks on Housing: How Do You Compare? ” Accessed on November 2nd, 2021.

National Association of Realtors. “ Highlights From the Profile of Home Buyers and Sellers. ” Accessed on November 2nd, 2021.

NAHB. “ Characteristics of New and First-Time Home Buyers. ” Accessed on November 2nd, 2021.

IBISWorld. “ Real Estate Sales & Brokerage in the US – Market Size 2005-2029. ” Accessed on March 13th, 2023.

Statista. “ Number of existing homes sold in the United States from 2005 to 2023. Accessed on March 13th, 2023.

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Jack Flynn is a writer for Zippia. In his professional career he’s written over 100 research papers, articles and blog posts. Some of his most popular published works include his writing about economic terms and research into job classifications. Jack received his BS from Hampshire College.

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Ernst & Young LLP (EY US) is pleased to announce the winners of the Entrepreneur Of The Year ® Midwest Award. The Midwest program celebrates entrepreneurs from Illinois, Indiana and Wisconsin. This prestigious award program recognizes the ambitious leaders of high-growth companies who are creating a more equitable, sustainable and prosperous world for future generations.

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Monika Roots | Bend Health | Madison, Wisconsin

Sean Riley | DUDE Products Inc. | Chicago, Illinois

Jennifer Sherman | Federal Signal Corporation | Oak Brook, Illinois

Benjamin Bachman | Gerflor USA | Bolingbrook, Illinois

Brian Helm | Helm Group | Freeport, Illinois

Vadim Vladimirskiy | Nerdio, Inc. | Chicago, Illinois

Emily Hikade | Petite Plume | Wilmette, Illinois

Michael Osanloo | Portillo's | Oak Brook, Illinois

Bob Carzoli | Program Productions, Inc. | Lombard, Illinois

Jed Richard | Richard Group | Chicago, Illinois

Tony Mirchandani | RTM Engineering Consultants | Schaumburg, Illinois

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Wells Fargo racial disparity case heads to class-action decision

At the heart of the case is a dispute over a credit-scoring algorithm that plaintiffs say disparately impacted minority applicants.

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Wells Fargo & Co. faces a decision as soon as this month on whether a lawsuit over its pandemic-era mortgage denials to non-White applicants gets class-action status, a key turning point in a high-profile and potentially costly case.

The bank, which was long the biggest US mortgage lender until a recent pullback under Chief Executive Officer Charlie Scharf, has asked a federal judge in California to deny the motion the plaintiffs filed earlier this year. The case consolidates a number of lawsuits brought before and after Bloomberg News reported in 2022 that Wells Fargo rejected a majority of Black homeowners who applied to refinance mortgages in 2020, the only big bank to deny more Black applicants than it accepted.

At the heart of the case is a dispute over a credit-scoring algorithm that plaintiffs say disparately impacted minority applicants, creating a potential class of at least 119,100 people. All non-White applicants who applied for a refinance, home purchase or home equity line of credit and were initially “approved” by Fannie Mae’s, Freddie Mac’s or Wells Fargo’s own internal underwriting system but ultimately denied from 2018 through 2022, the plaintiffs argue, are entitled to damages.

The plaintiffs say that a proprietary model Wells Fargo uses to assign prospective borrowers to one of four risk groups disproportionately sent Black and Latino applicants to higher-risk classes, subjecting them to more scrutiny from underwriters than applicants in other classes. The model, called Enhanced Credit Score, generates a score measuring each applicant’s likelihood of default, resulting in higher denial rates, they say.

“Wells Fargo discriminated against the minority applicants by subjecting them to its discriminatory loan policies,” Dennis Ellis, the lead class counsel, wrote in an April motion. “The lost opportunities of potential wealth building derived from homeownership and access to favorable financing will, unfortunately, have generational consequences for these families.” He said in an interview that the credit ratings “were treated like a gold star or a scarlet letter.”

Wells Fargo, in a response last month, called the conflation of the firm’s front-end loan platform, internal and external underwriting systems and thousands of additional rules and policies “counterfactual and logically incoherent,” and it said the proposed class was “overbroad and ill-defined.” Advertisement

In the bank’s telling, the scoring model is a workflow tool and there is no such thing as approval through the Fannie and Freddie underwriting systems or its own – the systems merely indicate whether an applicant’s mortgage would be eligible for purchase by Fannie or Freddie. If so, the application moves on to the underwriting phase, in which Wells Fargo underwriters verify documentation such as an applicant’s income, employment and credit history. The internal model just sorts applicants by the strength of their credit profile, with higher-risk applicants assigned to “more skilled” underwriters.

“This case has no merit, and we will continue to vigorously defend ourselves,” Wells Fargo said in a statement. “Our underwriting practices are consistently applied regardless of race or ethnicity of the applicant. Any suggestions otherwise are simply inaccurate.”

DOCUMENT TROVE

A trove of documents and emails turned over by Wells Fargo in the discovery phase of the case sheds additional light on what happened when the San Francisco-based bank reviewed its mortgage operations in 2022.

One study conducted in February 2022 by the bank’s fair-lending analysts looked at the outcomes for mortgage applicants by race in 2020. It found that Black applicants were approved at less than 90% of the rate of White ones with broadly similar credit profiles, which the analysts said merited further investigation.

Another study done in March of that year found that the credit-scoring model gave disproportionately lower scores to applicants in four out of five classes protected by fair-lending laws because of their race, gender or age. The document did not specify which classes were affected. Advertisement

The bank’s analysts then zeroed in on which criteria were having the biggest impact, identifying three: the age of an applicant’s other credit lines, signs they had applied for more in the past six months, and any debts that were 90 days delinquent. But the bank concluded that those were legitimate indicators of creditworthiness and kept the system in place.

What those documents mean has become a point of contention. The plaintiffs’ lawyers said in their filing that it shows the firm knew its practices adversely affected certain protected classes and did nothing about it.

In its filings, Wells Fargo said it “uses a simple, race-neutral scoring system” and that its reviews “consistently confirm that minority applicants were denied for legitimate credit-related reasons and consistent with White applicants.” Furthermore, the bank said, its fair-lending team weighed changes to the model, but those either didn’t significantly reduce the “adverse impacts,” introduced new disparities, or “caused unacceptable model performance.” Even then, the model didn’t make approval decisions, the firm wrote.

Whether the judge allows the class certification to proceed will dictate the stakes for a bank that has sought to move past a series of consumer scandals that erupted in 2016. Problems that began in Wells Fargo’s branch network and rapidly multiplied across business lines led to the exits of two CEOs, billions of dollars in fines and settlements, and an unprecedented Federal Reserve cap on the bank’s growth.

BANK RETREAT

Scharf, who took over in 2019 with a mission to move the bank past its legal and regulatory woes, announced a major pullback in the mortgage business last year. Most big US banks made a similar move more than a decade ago, concluding after the 2008 financial crisis that home lending was too troublesome. Wells Fargo took the opposite approach – for a decade, it doubled down on the business, dominating the industry and at one point churning out one in every three US home loans.

That was the state of play in 2020, when the pandemic hit, interest rates fell to historic lows and borrowers raced to refinance their mortgages. A Bloomberg examination of federal mortgage data published in 2022 showed that 47% of Black homeowners who applied to refinance their mortgage with Wells Fargo that year were approved, compared with 72% of White homeowners. Wells Fargo did not dispute Bloomberg’s findings, but said at the time, and in its opposition to class certification, that “legitimate, credit-related factors” drove the differences.

A hearing about the proposed class certification is scheduled for June 27, with a decision on the matter expected then or shortly thereafter.

The consolidated cases are In re Wells Fargo Mortgage Discrimination Litigation, 22-cv-00990-US District Court, Northern District of California (San Francisco).

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G7 Leaders Agree on Plan for $50 Billion Loan to Ukraine

Biden and Zelensky also signed a 10-year security agreement aimed at making Ukraine’s military more self-sufficient. “A lasting peace for Ukraine must be underwritten by Ukraine’s own ability to defend itself,” Biden said.

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Biden and Zelensky Deliver Remarks at G7 Summit

G7 leaders agreed on a plan to give ukraine a $50 billion loan to help it buy weapons and begin to rebuild..

“President Zelensky and I have just now signed that agreement between the United States and Ukraine. Our goal is to strengthen Ukraine’s credible defense and deterrence capabilities for the long term. A lasting peace for Ukraine must be underwritten by Ukraine’s own ability to defend itself now, and to deter future aggression any time in the future. The United States is going to help ensure that Ukraine can do both, not by sending American troops to fight in Ukraine, but by providing weapons and ammunition, expanding intelligence sharing, continuing to train brave Ukrainian troops at bases in Europe and the United States.” “Today is a truly historic day, and we have signed the strongest agreement between Ukraine and the U.S. since our independence. And this is an agreement on security, and thus, on the protection of human life. This is an agreement on cooperation, and thus, on how our nations will become stronger. This is an agreement on steps to guarantee sustainable peace, and therefore it benefits everyone in the world because the Russian war against Ukraine is a real, real global threat.”

David E. Sanger and Steven Erlanger

Here are the latest developments.

The United States and the other large Group of 7 economies agreed Thursday on a plan to give Ukraine a $50 billion loan to help it buy weapons and begin to rebuild damaged infrastructure at a crucial moment in the war, when Russia has the momentum on the battlefield.

The loan is expected to be repaid using interest earned on $300 billion in frozen Russian assets, which are mostly in European banks. Announced at a G7 summit in southern Italy, the loan will be underwritten by the United States, but American officials say they expect their allies, including members of the European Union, to provide some of the funds.

President Biden also signed a 10-year security agreement with President Volodymyr Zelensky. President Biden said the agreement would make Ukraine self-sufficient and put it on the road to becoming a member of NATO.

“Our goal is to strengthen Ukraine’s credible defense and deterrence capabilities for the long term,” Mr. Biden said. “A lasting peace for Ukraine must be underwritten by Ukraine’s own ability to defend itself now and to deter future aggression.”

Mr. Biden is trying to persuade allies that the United States will continue backing Ukraine even if former President Donald J. Trump, who has spoken openly of pulling the United States out of NATO , prevails in the November election. But if re-elected, Mr. Trump could abandon any security agreement with Ukraine, underscoring the political challenges shadowing Mr. Biden and other G7 leaders.

Here’s what else to know:

On the eve of the summit, the Biden administration announced new financial sanctions aimed at interrupting the fast-growing technological links between China and Russia that American officials believe are aimed at bolstering Russia’s military in its war with Ukraine.

Mr. Biden isn’t the only G7 leader arriving in Italy under siege politically . Polls suggest that Prime Minister Rishi Sunak of Britain will be unseated in elections in less than three weeks. And President Emmanuel Macron of France and Chancellor Olaf Scholz of Germany saw their parties humbled by far-right rivals in European elections just days ago.

Later in the G7 summit, the leaders will tackle topics including migration and artificial intelligence, an issue that Pope Francis plans to address on Friday.

Erica L. Green

The news conference has wrapped up. President Biden and President Zelensky have left the microphones.

President Biden, in response to a question from a reporter at the G7, expressed his support for his son Hunter Biden, who was convicted on three felony gun charges this week, and reiterated that he would not pardon him.

Biden fielded a shouted question from a reporter at the end of the news conference: whether he would commute his son's sentence. “No,” he replied.

Zelensky identifies the goal of the security agreement with the United States as making a “bridge” to Ukraine’s membership in NATO.

Zelensky calls it a “historic day,” saying that he and Biden have signed the strongest agreement between the U.S. and Ukraine since their independence.

In remarks on the new security agreement, President Biden reiterates that the pact is designed to make Ukraine self-sufficient and put the country on the road to NATO membership. He also salutes the plan to use the interest from frozen Russian assets to provide nearly $50 billion to Ukraine, calling it a “significant outcome.”

President Biden and President Volodymyr Zelensky of Ukraine walked out together for a news conference here in Italy, and immediately signed the new security agreement and shook hands. The two leaders are now starting their remarks. [This post originally misidentified the site of the news conference as Brussels.]

The deal outlines a long-term effort to train and equip Ukraine’s forces, provide more modern weapons and help the country build its own self-sustaining military industry.

Alan Rappeport

The Treasury secretary, Janet L. Yellen, an architect of the plan to use Russia’s central bank assets to help Ukraine, said at an event in New York on Thursday that the G7 agreement demonstrated to Russia’s president, Vladimir V. Putin, that Western allies were “completely united” in support of Ukraine. “We intend to give Ukraine the resources it needs to wage an effective war against Russia, and to support their direct budget needs,” she said, “and we’re going to provide a very meaningful chunk of resources.”

Yellen also said that the interest from Russia’s assets could continue to help bolster Ukraine, making it harder for Putin to wait out the West. “This is the first tranche, and if necessary there’s more behind it,” she said. “In a sense, we’re getting Russia to help pay for the damage it’s caused.”

Japan commits $4.5 billion for Ukraine, Zelensky says.

Japan has agreed to provide $4.5 billion in aid for Ukraine this year, part of a 10-year security deal signed by the two countries on Thursday, President Volodymyr Zelensky of Ukraine said.

The agreement significantly increases Japan’s support for Ukraine at a critical moment in its war with Russia and underscores Japan’s efforts to strengthen its security and diplomatic ties with Europe after the full-scale conflict began in 2022.

“For Japan, this type of agreement and this level of support is a breakthrough,” Mr. Zelensky said on social media . “We see this and thank Japan for its unwavering solidarity.”

Mr. Zelensky said Prime Minister Fumio Kishida of Japan had signed the pact as the leaders gathered for the Group of 7 summit discussed other plans to support Ukraine.

Ukraine’s deal with Japan included commitments on defense support, humanitarian aid and technical cooperation, Mr. Zelensky said.

Mr. Kishida said in a statement earlier this week that Japan would “do its utmost to ensure” that peace was restored in Ukraine.

Ukraine has signed several similar agreements with wealthy nations during the war.

Last December, Japan outlined a $1 billion assistance commitment for Ukraine, and signaled a willingness to later increase the support to $4.5 billion.

“The scale of the involvement is an escalation,” Daniel Sneider, a lecturer in East Asian studies at Stanford University, said of Japan. “They want to march in lock step with NATO. That’s a pretty big deal in Japan.”

Separately, President Biden was expected to sign a 10-year U.S. security agreement with Ukraine on Thursday, the first day of a three-day G7 summit in Italy.

The leaders of the G7 nations — Britain, Canada, France, Germany, Italy, Japan and the United States — also agreed on a plan to provide Ukraine with a $50 billion loan to help it buy weapons and restore infrastructure.

Steven Erlanger and David E. Sanger

U.S. and other large economies agree on a plan to loan $50 billion to Ukraine.

The United States and the West’s other large economies have agreed on a plan to issue a roughly $50 billion loan to Ukraine that would be repaid by interest and profits from nearly $300 billion in frozen Russian assets held in the West.

The promise of much-needed financial support for weapons and to begin to rebuild damaged infrastructure comes as Ukraine has been forced to sell some state assets and as the momentum in the war on its territory has shifted in favor of its foe, Russia, whose forces launched a full-scale invasion in 2022.

President Biden agreed to have the United States underwrite the entire loan, but American officials said they expected allies, including members of the European Union, to provide some of the upfront funds.

The loan would eventually be repaid through interest and profits earned on the frozen Russian assets, which would serve as collateral.

In a news conference Thursday with President Volodymyr Zelensky of Ukraine in Italy, on the sidelines of the Group of 7 summit , Mr. Biden said the agreement was another reminder to President Vladimir V. Putin of Russia that “we’re not backing down. In fact, we’re standing together against this illegal aggression.”

In New York on Thursday, Treasury Secretary Janet L. Yellen, an architect of the plan, said that the profits from Russia’s assets would provide Ukraine with additional aid in the future, making it harder for Mr. Putin to wait out the West.

“This is the first tranche, and if necessary there’s more behind it,” Ms. Yellen said. “In a sense, we’re getting Russia to help pay for the damage it’s caused.”

The president of the European Commission, Ursula von der Leyen, said on Thursday that all the members of the Group of 7, the world’s wealthiest large democracies, would participate, including the European Union itself, but the extent of each member’s participation was being worked out by finance ministers and other technical experts.

The European Union might contribute up to half the money, a senior European official said, speaking anonymously under normal diplomatic ground rules, while American officials said that Washington would make up any remaining difference.

The issue is complicated, because if the Russian assets are unfrozen or if interest rates drop significantly, then the interest and profits may not cover the loan, requiring a burden-sharing arrangement with other countries to guarantee repayment.

The idea of a loan using the assets is an American one, given the need to get money to Ukraine quickly and before the November U.S. election that could return Donald J. Trump, who has been more critical of aid to Ukraine, to the presidency.

The European Union had agreed to use only the yearly profits and interest from the assets — perhaps $3 billion — to aid Ukraine, but embraced the essence of the American plan once the issue of who would guarantee the loan seemed to have been resolved.

The money is expected to be disbursed through various channels, instead of being directly handed to Ukraine, so that it will be used for Ukraine’s pressing military, budget and reconstruction needs, the European official said.

Alan Rappeport and Tim Balk contributed reporting.

The NATO secretary general, Jens Stoltenberg, says that delays in sending military support “created big problems for Ukrainians on the battlefield” this year. His comments were part of a push to create a new, more predictable system of military aid to Ukraine after the United States delayed approving $61 billion for more than six months.

reporting from Brussels

At a meeting of a Ukraine defense alliance, Austin pledges to keep sending military aid.

Reinforcing the support for Ukraine that the Biden administration has expressed during the Group of 7 summit, Defense Secretary Lloyd J. Austin III pledged at a high-level gathering in Brussels on Thursday that Washington would keep supplying Ukrainian forces with military hardware to use against continued Russian assaults.

“As we gather this morning, Ukraine’s forces are in a tough fight,” Mr. Austin said at the event, a meeting at NATO headquarters of the Ukraine Defense Contact Group, a consortium of about 50 nations that have provided military and humanitarian aid to Ukraine during the war. “In Kharkiv and elsewhere, the Kremlin continues to intensify its bombardment of Ukraine’s cities and civilians, and Ukraine urgently needs more air-defense capabilities to defend its skies.”

The U.S. defense secretary said that Ukrainian forces were both fending off Russia’s assault around Kharkiv in northern Ukraine and “holding strong” along the country’s eastern and southern fronts — although Ukraine has struggled in recent months .

Representatives from more than 40 nations attended the meeting, including all 32 NATO member states, several of what the United States calls its “major non-NATO allies,” and European nations like Georgia and Bosnia and Herzegovina that hope to someday join NATO.

“We have a clear framework we are supporting with Ukraine,” Irakli Chikovani, Georgia’s defense minister, said in an interview before the meeting began. “This is a political and humanitarian framework. This is something that has been declared for many months — since the beginning of the war against Ukraine — and we’re going to stick to that plan.”

Kosovo, which the United States recognized as a sovereign nation in 2008 but that is not universally recognized by members of the United Nations, has also contributed material support to Ukraine as a member of the contact group. Kosovo has been modernizing its military to NATO standards — an expensive and time-consuming process that Ukraine itself is also working to do in the middle of fighting a war.

“We are very determined on the path to joining the alliance,” Ejup Maqedonci, Kosovo’s defense minister, said in an interview at NATO headquarters. “For defense equipment, we are procuring only from NATO countries, mostly from the U.S., the U.K., Turkey and Italy.”

The country has conducted two training sessions on demining for Ukrainian troops and recently provided Kyiv with mortar ammunition and tracks for armored vehicles, Mr. Maqedonci said.

“We procure for ourselves, but we see the war in Ukraine as our war also,” he said.

Mr. Austin announced that Argentina, also a major non-NATO ally of the United States, had joined the coalition and he welcomed the country’s defense minister, Luis Petri, to his first meeting of the group. Argentina committed last year to delivering two Russian-made Mi-17 helicopters to Ukraine, according to data from the Stockholm International Peace Research Institute.

Mr. Austin said Russia had suffered “staggering losses” thus far in the war, including 350,000 soldiers killed or wounded, thousands of vehicles destroyed and at least 24 vessels sunk, destroyed or damaged in the Black Sea.

“This is a critical moment. The stakes of this war are high. Ukraine’s survival is on the line, but so is all of our security,” Mr. Austin said, adding, “Make no mistake, Ukraine’s partners around the world have its back.”

Mark Landler

Reporting from the G7 summit in Italy

Climate change and aid for Africa have faded as G7 priorities, campaigners say.

One byproduct of a politically weakened Group of 7, critics say, is a weakening of commitments to curb climate change or aid global development. Advocacy groups have turned out in Italy to press the G7 leaders to make concrete commitments to aid for Africa and increasing financing to offset damaging climate change.

But these groups say they have little hope that the meeting will produce tangible results on either. That reflects both the political headwinds these leaders face at home, as well as the legacy of the coronavirus pandemic and the war in Ukraine, which have squeezed public finances across the West.

Luca Bergamaschi, the co-founder of Ecco Climate, an Italian climate advocacy group, said he hoped the G7 would commit to increasing the target for global climate financing, which still depends heavily on contributions from the industrialized countries that make up the group.

But beyond a general expression of support by the leaders for expanded financing of projects to reduce carbon emissions, Mr. Bergamaschi said he did not expect “a concrete commitment to increase it.”

Western aid to Africa has similarly suffered, according to One Campaign, an advocacy organization. An analysis released by the group on the eve of the summit concluded that the share of aid going to Africa from Group of 7 countries, as well as the European Union, had fallen to its lowest level since 1973.

That is a result of cuts to aid spending in the United States, Germany, France and other European countries, the group said. It has led to a drop in net financial flows to Africa and greater fiscal pressure on those countries, which are projected to spend $81 billion to service their debts between 2023 and 2025.

“The need for increased investments that drive economic growth and healthy lives in Africa has never been more important, but many partner countries are looking inward instead of forward,” One Campaign’s president, Ndidi Okonkwo Nwuneli, said in a statement.

David E. Sanger

The U.S. and the West’s other large economies have agreed on a plan to issue a roughly $50 billion loan to Ukraine. The loan would be repaid with interest earned on $300 billion in frozen Russian assets, mostly in European banks. President Biden agreed to have the U.S. underwrite the entire loan, but American officials say they expect allies, including members of the European Union, to provide some of the funds.

The loan comes at a critical moment, when Ukraine is being forced to sell some state assets, and when the momentum in the war has shifted in favor of Russia — meaning that destruction is accelerating, even as Ukraine struggles to rebuild its power plants and destroyed hospitals, communication networks, ports and homes.

President Volodymyr Zelensky of Ukraine, below with Prime Minister Giorgia Meloni of Italy, has arrived at the G7 summit. He is slated to meet with President Biden later today to discuss U.S. support for Ukraine, and the two leaders are scheduled to sign a security agreement and hold a news conference.

NATO allies have pledged more military support to Ukraine during a meeting of the alliance’s defense ministers, their last gathering before a high-level summit in Washington next month. “We are urging allies to step further up, and also to ensure that the assistance is delivered as soon as possible,” Jens Stoltenberg, the NATO secretary-general, told Ukraine’s defense minister, Rustem Umerov.

President Biden and other G7 leaders are currently in a working session on the Middle East. Biden has been working to shore up support for a three-phase cease-fire proposal he announced last month.

G7 leaders, who have been divided over Israel’s conduct of the war, united to back the plan, which the U.N. Security Council has also endorsed. But neither Israel nor Hamas has publicly accepted it, and Biden’s national security adviser said this morning that the U.S. was working to “ bridge the remaining gaps ” between the two sides.

Steven Erlanger

A senior European Union official said that G7 leaders were still working toward a complex agreement on a big loan to Ukraine, financed with the interest from frozen Russian assets, and that the money would be used for Ukraine’s defense and financial needs, and a small part for reconstruction.

After a dispute between the U.S. and the E.U., which holds the bulk of the roughly $300 billion in frozen Russian assets, about who would guarantee the loan, the discussions were moving toward a guarantee by G7 countries that wish to participate, the official said.

Emma Bubola

Reporting from Rome

In a first, Pope Francis will attend the G7 summit.

As leaders from the Group of 7 nations gather this week in southern Italy, they will be joined by representatives from countries at the center of international conflict, from developing nations like Brazil and India, and, for the first time, from the Holy See.

Pope Francis, the Vatican announced, will take part in a discussion on Friday on the ethical implications of artificial intelligence at a session that is open to envoys from countries that are not G7 members. The Vatican said Pope Francis would also have bilateral conversations with some of the visiting leaders, including President Biden and Turkey’s Recep Tayyip Erdogan.

Prime Minister Giorgia Meloni of Italy, who invited him, said the pope’s presence would “make a decisive contribution to defining a regulatory, ethical and cultural framework” for A.I., adding that his participation “brings prestige to our nation and to the entire Group of 7.”

Francis’s participation in the summit comes as the 87-year-old pope was reported this week to have used again an offensive slur to refer to homosexuality, the same pejorative he was accused of using last month. The reports last month prompted a backlash among L.G.B.T.Q. people, toward whom the pope had generally adopted a more welcoming approach.

The pope’s G7 presence breaks with a long tradition in the Roman Catholic Church of refusing such invitations on the basis that a pontiff does not need state leaders or anyone else to offer him a platform to speak, said Alberto Melloni, an Italian church historian.

“The pope already has the floor,” Mr. Melloni said.

But in this case, Pope Francis, who has a record of breaking with conventional behavior, might see the summit as a high-profile opportunity to send another loud message on ending conflicts such as the wars in Ukraine and Gaza, Mr. Melloni said.

Cardinal Pietro Parolin, the Vatican’s secretary of state, told Avvenire, an Italian Catholic daily, that Francis was ready to use “all the means and spaces” available to make the case for peace.

Francis’ invitation to the summit, he added, was also a recognition of the profound ethical implications of the technology he will officially be there to discuss.

The pope has already been caught in the currents of A.I.-generated photographs of Francis wearing a giant white padded jacket, riding a motorcycle and drinking a beer at a music festival have caused widespread glee on social media. But Francis and the Vatican have also highlighted more serious implications of artificial intelligence, including in education, communication, working life, and corporate and government decision-making.

In 2020, the Pontifical Academy for Life, a research institute whose members are selected by the pope, issued a document, the “Rome Call for A.I. Ethics,” that laid out principles for the development and use of the technology. Top players in the field of A.I., including leaders at Microsoft, I.B.M. and Cisco, have signed the document.

Francis himself addressed the subject in a message on New Year’s Day, calling for a global treaty to ensure that A.I. systems preserved space for human mercy, compassion and forgiveness, rather than be plunged into a reality operated by inscrutable algorithms. He said it was vital to understand what effect these technologies will have on individual lives and on societies, on international stability and on peace.

The Rev. Paolo Benanti, who serves as an A.I. ethicist to both the Vatican and the Italian government, said that the pope’s attendance at the G7 meeting emphasized his willingness to engage with pivotal global issues.

“The pope shows that he has these antennae,” Father Benanti told reporters this past week, citing Francis’ other major concerns, such as migration and climate change, adding, “He perceives where the world goes.”

In the seaside town of Savelletri, where the G7 summit is taking place in a luxury tourist resort, residents had high hopes for the pope’s visit. Although tight security protocols mean that locals are unlikely to see Francis in person, many were keeping their fingers crossed for some payoff, however small.

“At least a blessing,” said one 68-year-old resident, Laura Mancini. “He must give that to us.”

Matthew Mpoke Bigg

What is the G7, and why does it matter?

Every year, as the leaders of the world’s wealthiest large democracies gather for a summit, the same questions arise: What exactly is the summit for, and why does the group matter?

The heads of the Group of 7 nations — Britain, Canada, France, Germany, Italy, Japan and the United States — started their annual summit on Thursday at a luxury hotel in Puglia on the southern Italian coast, overlooking the Adriatic Sea. The wars in Ukraine and Gaza and the threats posed by China’s economic rise are high on the agenda.

The leaders, along with representatives of the European Union and selected guests, meet to discuss economic issues and major international policies. This year the summit’s host, Prime Minister Giorgia Meloni of Italy , has also invited other figures including Pope Francis and Prime Minister Narendra Modi of India.

Whatever the leaders’ disagreements on the issues, one feature of the summits tends to be a shared overall outlook. Their countries are major trading partners, and even if their share of global trade has declined, they account for about half of the world economy. They also share broadly similar views on trade, security and human rights, giving them enormous influence when they act in concert.

A recent example of that is the war in Ukraine. President Volodymyr Zelensky, whose defense against the Russian invasion of his country has been a rallying point for the G7, is attending again this year.

By the same token, President Vladimir V. Putin of Russia is one of the group’s most notable absentees. Russia was a member of the group from 1997 until it was excluded in 2014, the year that its forces entered eastern Ukraine and seized Crimea.

The group’s origins go back to the 1973 oil crisis . It grew out of an informal gathering of finance ministers from Britain, France, Japan, the United States and what was then West Germany — initially known as the Big Five — as they tried to agree on a way forward.

Since then, the group and its added members have met dozens of times to work on major issues that affect the international economy, security, trade, equality and climate change. In 2015, the summit paved the way for the Paris agreement to limit global carbon emissions, which was adopted later that year.

The summits are often defined by the most pressing issues of the day: The Sept. 11 attacks on the United States in 2001, the financial crisis of 2008 and the coronavirus pandemic that began in 2019 have all dominated the meetings.

They are also a showcase for cultural diplomacy, as each year’s host country offers examples of the best of its cuisine.

For all the aura of diplomacy at the summit, however, each leader has an eye on domestic politics as well. A leader fresh from an election victory can sometimes arrive with a swagger. For a leader about to face an angry electorate, the reverse can be true. Several of the leaders in Italy this week are in the latter category .

The summit will put on further display the unexpected allyship of President Biden and Prime Minister Giorgia Meloni of Italy, whose far-right politics have drawn comparisons to former President Donald Trump.

Biden, who expressed concern for democracy after Meloni was elected, has since embraced her as a partner and has leaned on her in getting aid to Ukraine . When she visited the White House in March, he said they “have each other’s backs” and “have Ukraine’s back.” At the first roundtable of the summit, the two leaders sat next to each other.

Biden will sign a 10-year pact to aid Ukraine’s military, officials say.

President Biden signed a 10-year security agreement with President Volodymyr Zelensky of Ukraine on Thursday, an effort to signal a long-term American commitment to Ukraine’s future as an independent and sovereign state at a time when the war set off by Russia’s full-scale invasion is deep into its third year. But the accord could easily be upended by the coming American presidential election.

The deal outlines a long-term effort to train and equip Ukraine’s forces, provide more modern weapons and help the Ukrainians build their own self-sustaining military industry that is capable of producing its own arms.

Speaking at the Group of 7 summit in Italy on Thursday, Mr. Biden said the agreement was designed to make Ukraine self-sufficient and put the country on the road to NATO membership. The accord is essentially an executive agreement between two presidents.

The pact is modeled on the kind of long-term security agreements that the United States has with Israel . But the “Israel model” is based on a congressional agreement to provide billions of dollars in aid. The agreement with Ukraine carries a commitment by the Biden administration only to work with Congress on long-term funding.

Given the bitter monthslong wrangling over the $60 billon in aid to Ukraine that Congress passed this spring, there is little appetite for bringing the issue up again until next year. If Mr. Biden were no longer in office, that commitment would mean little.

The new accord does not commit the United States to send forces in to defend Ukrainian territory. According to two administration officials, it requires the United States to “consult” with Ukraine about its needs within hours of any attack on the country.

NATO membership for Ukraine — which President Biden has opposed while the war with Russia is still being fought — might compel the U.S. to send forces if the country was re-invaded by Russia. That is one reason Mr. Biden has resisted.

While Mr. Zelensky embraced the agreement at the news conference with President Biden on Thursday, the Ukrainians are skeptical of these accords. Without congressional funding, the support is largely rhetorical.

Ukrainian officials often talk about the emptiness of the accord known as the Budapest Memorandum , a political agreement signed in December 1994 in which Ukraine agreed to give Russia old Soviet nuclear weapons that had been based in Ukrainian territory. In return, the memorandum committed Russia, the United States and Britain to seek help for Ukraine from the United Nations Security Council if it “should become a victim of an act of aggression or an object of a threat of aggression in which nuclear weapons are used.”

When Russia annexed Crimea two decades later, in 2014, Western nations said that Russia had violated its commitments to Ukraine, and they made a similar case in 2022, when President Vladimir V. Putin invaded the entire country. The Russians denied that claim, saying the accord had only committed them not to use nuclear weapons against Ukraine.

Speaking to reporters on Air Force One on Wednesday night as Mr. Biden flew to Italy for the G7 summit, Jake Sullivan, the national security adviser, said that the situation was radically different today, and that the United States and the West had already provided Ukraine with tens of billions of dollars in aid.

The new arrangement with Ukraine is not a treaty, so it does not require American security guarantees the way that mutual defense treaties with Japan, South Korea and the Philippines do. And because it is essentially an executive agreement, Donald J. Trump, if re-elected, could abandon the deal, as he abandoned the 2015 nuclear agreement with Iran in 2018.

Tim Balk contributed reporting.

President Biden has arrived at Borgi Egnazia, in Puglia, Italy, for the G7 summit. The president’s big priority is to secure a deal among leaders to unlock frozen Russian assets to support Ukraine, but National Security Adviser Jake Sullivan said the president would gauge the summit’s success on making “tangible progress” on a range of other issues, including Chinese trade practices and the war in Gaza.

NATO defense chiefs pledge more aid for Ukraine, and carve out an exception for Hungary.

As G7 leaders meeting in Italy were focused on Ukraine, NATO’s defense chiefs gathered separately on Thursday in Brussels to pledge additional air defenses, ammunition, drones and other weapons to Kyiv, and to prepare long-term military commitments to be announced next month at a high-level summit in Washington.

But perhaps the most significant boost for Ukraine came in a new agreement that Hungary would not contribute to the military alliance’s war effort — but also would not block it.

Prime Minister Viktor Orban of Hungary is the NATO ally closest to President Vladimir V. Putin of Russia, and under his leadership Hungary has refused to give Ukraine any weapons or other lethal war support. Hungary has also opposed European Union sanctions against Russia and delayed financial aid to Ukraine , leaving other NATO states worried that Mr. Orban similarly would block additional military support at the alliance’s gathering in July.

“It is well known here that Hungary’s position is different from the majority of NATO member states,” Mr. Orban said on Wednesday after meeting with the NATO secretary-general, Jens Stoltenberg.

But Mr. Stoltenberg headed off any Hungarian veto by agreeing that the country would not be expected to contribute to any NATO efforts supporting Ukraine’s military with money, weapons or training.

On Thursday, Mr. Stoltenberg said he did not expect other NATO allies to follow Hungary’s lead.

“There has been as a broad agreement across the alliance for many years, and in particular, since the full-scale invasion in February, that we need to provide military support to Ukraine,” he said. “Hungary has been clear since the beginning that they don’t provide lethal aid, but other allies have.”

Some other allies, like Slovakia, have signaled that they are weary of footing the bill for the war effort. The success of hard-right nationalist parties in some of last weekend’s European Union elections has given rise to concerns that other states may also back away from supporting Ukraine.

Asked if allowing members to opt out of war support for Ukraine would become a new practice in NATO, Defense Minister Pal Jonson of Sweden shrugged off Hungary’s defiance.

“It’s very important that we make progress on supporting Ukraine, and we think that this is a pragmatic way to move forward in this regard,” he said at NATO headquarters in Brussels on Thursday. “The most important thing is that the alliance, as such, can deliver any support to Ukraine.”

Mr. Stoltenberg said the defense ministers’ meeting would also finalize plans for a new role for the alliance in overseeing delivery of military aid and training for Ukraine, and discuss plans to send $43 billion annually to the war effort for the foreseeable future.

David E. Sanger , Alan Rappeport , Edward Wong and Ana Swanson

Reporting from Washington

On the eve of the summit, the U.S. expanded sanctions on Russia.

The Biden administration on Wednesday announced a series of new financial sanctions aimed at interrupting the fast-growing technological links between China and Russia that American officials believe are a broad effort to rebuild and modernize Russia’s military during its war with Ukraine.

The actions were announced just as President Biden was leaving the country for a meeting in Italy of the Group of 7 industrialized economies, where a renewed push to degrade the Russian economy will be at the top of his agenda.

The measures were coordinated by the Treasury, State and Commerce Departments and aimed to further isolate Russia from the global financial system and cut off its ability to gain access to the technology that powers its military arsenal.

The effort has grown far more complicated in the past six or eight months after China, which had previously sat largely on the sidelines, stepped up its shipments of microchips, machine tools, optical systems for drones and components for advanced weaponry, U.S. officials said. But so far Beijing appears to have heeded Mr. Biden’s warning against shipping weapons to Russia, even as the United States and NATO continue to arm Ukraine.

Although the measures expand the reach of the U.S. sanctions program, the Biden administration has so far held back from imposing sanctions on Chinese or European banks that it believes are helping Russia. The new measures do not restrict banks from facilitating transactions related to Russia’s energy exports, which the Biden administration has allowed to continue out of concern that restricting them could fuel inflation.

Announcing the sanctions, Treasury Secretary Janet L. Yellen said in a statement that “Russia’s war economy is deeply isolated from the international financial system, leaving the Kremlin’s military desperate for access to the outside world.”

At the heart of the measures is an expansion of “secondary” sanctions that give the United States the power to blacklist any bank around the world that does business with Russian financial institutions already facing sanctions. This is intended to deter smaller banks, especially in places like China, from helping Russia finance its war effort.

The Treasury Department also imposed restrictions on the stock exchange in Moscow in hopes of preventing foreign investors from propping up Russian defense companies. The sanctions hit several Chinese companies that are accused of helping Russia gain access to critical military equipment such as electronics, lasers and drone components.

In addition to the Treasury Department’s measures, the State Department imposed sanctions on about 100 entities, including companies “engaged in the development of Russia’s future energy, metals, and mining production and export capacity.” And the Commerce Department announced its own set of restrictions, banning American exports to certain addresses in Hong Kong that the United States says are used to set up shell companies to funnel banned goods to Russia.

Mr. Biden has tried before to choke off supplies and financing to Russia, and overestimated the effects of that move. In March 2022, shortly after the war began, he announced an initial round of financial actions and declared, “As a result of these unprecedented sanctions, the ruble almost is immediately reduced to rubble.” It was not. After a brief dive, it recovered, and while today it is not as strong as it was a year ago, the Russian economy has been expanding because of the strength of war-related growth.

Much of that is thanks to China’s effort. It has been buying Russian oil, often at a discount to world prices. And it has ramped up its sale of dual-use goods, especially the microelectronics and software needed to manufacture weapons systems, drones and air defenses.

The result has been the rise of a somewhat parallel war economy involving Russia, China, Iran and North Korea. Many of the firms subject to sanctions are in Hong Kong or just over the border in Shenzhen, the technology manufacturing center of China. Yet administration officials insist that this time, they can choke off what has become a deepening commercial relationship.

In announcing new restrictions on Chinese firms, the Biden administration is also hoping to spur European governments and possibly Asian allies to take similar measures.

Secretary of State Antony J. Blinken discussed the issue with European counterparts at a meeting of the North Atlantic Treaty Organization in Prague last month, and U.S. officials intend to put it on the agenda of a leaders’ summit in Washington in July.

Mr. Blinken has also warned the Chinese government that it cannot hope to have an amicable relationship with European powers if it props up the Russian defense industry.

At a news conference in Prague on May 31, Mr. Blinken said 70 percent of the machine tools that Russia is importing are coming from China, as well as 90 percent of microelectronics.

“China cannot expect on the one hand to improve relations with countries of Europe while on the other hand fueling the biggest threat to European security since the end of the Cold War,” he said.

Erica L. Green and David E. Sanger

Biden plans a push for frozen Russian assets to help rebuild Ukraine.

Two weeks after President Biden reversed himself and approved firing American weapons into Russian territory, he and his closest allies are preparing a different kind of assault, using the proceeds from Russia’s own financial assets to aid the reconstruction of Ukraine.

For two years, the world’s largest Western economies have debated how to deal with $300 billion in frozen Russian assets, which the Kremlin left in Western financial institutions after the Ukraine invasion began in 2022.

Now, after long debates about whether the West could legally turn those assets over to the government of President Volodymyr Zelensky of Ukraine, the allies seem on the brink of a compromise, to be announced at the Group of 7 summit in Italy.

The Group of 7, which comprises the world’s wealthiest large democracies, is about to agree to a loan to Ukraine of roughly $50 billion to rebuild the country’s devastated infrastructure, with the understanding that it will be paid back by interest earned on the frozen Russian assets, Western officials said. But even that amount, experts say, would only begin to make a dent in building a new Ukraine.

The financing announcement will be only a part of a summit this week that will range from how to reverse Russia’s new momentum to how to bring about a cease-fire between Israel and Hamas. Mr. Biden and Mr. Zelensky will meet on Thursday and sign a security agreement, said Jake Sullivan, Mr. Biden’s national security adviser.

“We want to demonstrate that the U.S. supports the people of Ukraine, that we stand with them, and that will continue to help address their security needs, not just tomorrow, but out into the future,” Mr. Sullivan told reporters aboard Air Force One on the way to Italy.

“By signing this, we’ll also be sending Russia a signal of our resolve,” he added. “If Vladimir Putin thinks that he can outlast the coalition supporting Ukraine, he’s wrong.”

There will be moments during the summit when the leaders will try to lift their eyes beyond the current crises, including a meeting between the leaders and Pope Francis, focused on harnessing the power of artificial intelligence.

The loan deal, combined with a raft of new sanctions aimed at countering China’s effort to remake Russia’s defense industrial base, are part of the latest efforts to bolster Ukraine and hobble Russia at a perilous moment in the 27-month old conflict.

Still, Europe is bracing for the possibility that former President Donald J. Trump, who has spoken openly of pulling out of NATO, could be back in power by the time the group next meets, in 2025. And several of the leaders present — including Prime Minister Rishi Sunak of Britain and President Emmanuel Macron of France — are facing elections that could redefine Europe.

Mr. Biden faces the hurdle of convincing his allies, starting with Mr. Zelensky, that the United States plans to stay in the fight with Ukraine, no matter what happens in November. The extensive delays this spring in getting congressional passage of the $61 billion in new ammunition and air defenses, Mr. Biden’s aides acknowledge, cost Ukraine lives, territory and tactical military advantage.

Mr. Biden told Mr. Zelensky last week, in France, that “I apologize for the weeks of not knowing what was going to pass,” and put the onus on Republicans in Congress. “Some of our very conservative members were holding it up,” he said.

But the scope of the opposition in Congress also raised the question of whether that last injection of a sizable military package could be the last, and threatens Mr. Biden’s claim as the Western leader who rallied the rest of the allies to fend off further assaults by President Vladimir V. Putin.

Now, with the war at a critical moment, the Group of 7 leaders seem poised to end months of deliberations over how to use the $300 billion in frozen Russian central bank assets, which were largely kept in European financial institutions. The idea is to provide an infusion of economic aid to Ukraine.

During a trip to Normandy last week, Mr. Biden appeared to have persuaded France, one of the last holdouts, to support the deal. At the end of the trip, President Emmanuel Macron of France told reporters that he hoped “all members of the G7 will agree to a $50 billion solidarity fund for Ukraine.”

The Biden administration, after considerable internal arguments, had been pushing to outright seize the assets. But that idea fell flat in Europe, where most of the funds are held, out of concern that it would be a violation of international law.

The European Union did agree to use the interest that the central bank assets have been earning where most of them are held — in Belgium’s central securities depository, Euroclear — to provide Ukraine with about 3 billion euros annually.

But the Biden administration wanted to provide Ukraine with more funds upfront, so it devised a plan to use that interest to back a loan that the United States and other Group of 7 countries could deliver immediately.

The loan could be as large as $50 billion and would be repaid over time with the so-called windfall profits being generated from Russia’s money.

In recent weeks, finance ministers from the Group of 7 have been trying to hash out the complicated details of how such a loan would work, with several outstanding questions still to be answered. Officials have been trying to determine how the money would actually be transmitted to Ukraine, and have discussed running it through an institution such as the World Bank as an intermediary.

It is unclear how the loan would be repaid if the war ended before the bond matured or if interest rates fell, making the proceeds on the assets insufficient to repay the loan.

John E. Herbst, senior director of the Eurasia Center at the Atlantic Council, and a former U.S. ambassador to Ukraine, said that unlocking the assets was of principal importance for the Group of 7, especially after the stalemate in Congress and the United States’ delays in providing Ukraine with certain weapons.

“The administration has been quick to get aid to Ukraine once Congress moved, and that’s to its credit,” he said. “But we still are slow in getting Ukraine what it needs in terms of the right weapon system, especially right now. This is not just an American failure; it’s a failure of the entire alliance.”

The unlocking of frozen assets would be “a game changer,” said Evelyn Farkas, the executive director of the McCain Institute at Arizona State University, who previously served as deputy assistant secretary of defense for Russia, Ukraine and Eurasia under President Barack Obama.

Ms. Farkas said that the U.S. delays likely “focused the European mind,” in making European countries think: “OK, we have to come up with alternatives because the U.S. is not reliable.”

“Hopefully,” she said, “they stay focused.”

Alan Rappeport contributed reporting.

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The leaders of the G7 nations — Britain, Canada, France, Germany, Italy, Japan and the United States — also agreed on a plan to provide Ukraine with a $50 billion loan to help it buy weapons ...

+95	For you development monkeys- please help me understand how there are still developers getting deals done in several markets right now? I’ve been a development manager/director for 7 years. I was recently laid off because our firm couldn’t keep funding payroll without any capital eve… ">How are developers still building?	30	6h
+38	Current a generalist at a middle market shop whose future prospects are not good - on the PERE list, ranked 50-150 and will likely fall as fundraising stalls further. Currently have the opportunity to join a larger firm to specialize in office acquisitions & asset management, which is siloed fr… ">Specializing in Office Long-Term - Prospects	13	1d
+33	Hello everyone, I am very bored at my job. I did private fund debt (bridge lending) and REPE. Took a job at a BB doing debt AM. Is it me or is this the most boring job in the world? Teams are very split up, no one seems very competent, and software is doing everything for you. Financial modeling… ">HELP I am Bored-BB CRE Debt AM	26	8h
+33	Hey everyone,   Made a good chunk of money ($1.5m net after taxes) in the crypto markets and taking that to free myself from the 9-8 (3rd Year associate at REPE fund focusing on multifam). Starting my own RE shop, looking to start with light value add/value add multifam acq deal, sized ~… ">Made $1.5m profit in markets - Taking This And Starting Multifam Real Estate Shop	29	3d
+28	I am a rising senior at H/Y/P/S/W looking to pursue a career in development in NYC. I feel confident in my ability to get a development job out of undergrad based on conversations I have had with different groups, but I am considering getting a masters in real estate to build on my technical skills… ">Masters in Real Estate	9	1d
+24	Typical GP indemnification has a carve out for acts or omissions which involve intentional misconduct, gross negligence, or knowing violation of the law , which I'd generally understood to mean things like taking the company's funds and going to Vegas. It was suggested on the Trepp podcast a few w… ">GP indemnification and the limits of bad boy clauses	8	1d
+22	I've learned that it's common for landlords to offer a period of free rent to prospective tenants to entice them to sign a lease. I'm confused as to why this practice exists (and how it started), why don't rental markets just adjust to an equilibrium rent that both tenants and landlords are happ… ">Why does rent abatement exist?	12	1d
+16	Can someone comment on the general cost structure for a Letter of Credit provided by borrower to lender in lieu of recourse guaranty? Assuming LOC for $25M and required for the full term of loan (36 months).  Is there an origination fee and then form of interest payment due to the provider … ">Letter of Credit in lieu of Personal Guaranty	13	14h
+15	I am a rising senior at H/Y/P interested in real estate development. I am looking to get a masters in real estate after graduation from undergrad to build my technical skill set and make myself more attractive to employers. I ultimately want to work in NYC. Considering how much cheaper tuition is a… ">Masters in Real Estate: Europe	10	2d
+12	Anyone in the life science acquisitions space currently? If so, what are your thoughts. I keep seeing job postings pop up, and the sector definitely interests me, but unsure if I would be pigeonholing myself in a specialized and potentially downward trending sector. ">Life science Acquisitions	8	19h

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Top 20 Commercial Real Estate Interview Questions & Answers