Gentlemen (and ladies?) -
Looking to get some insight on a fair acquisition advisory fee to charge my friend. Ultimately, I will roll these fees into the deals so they will not be upfront cash expenses.
Background:
I've been advising my friend and his family on refinancing and acquisitions. Due diligence, negotiating term sheets and contracts, securing financing (negotiating loan docs), as well as carrying the transaction through closing (SPE formation, operating agreements, title insurance, closing coordination, etc.). They are great property managers but virtually no finance/transactional experience as they inherited their properties.
They approached me recently to come up with a price to continue advising them and help grow their portfolio. It is not yet at the size where I can leave my current job and join their team (it is, but they would essentially be giving up 30% of their existing CF).
I'm thinking 1% of purchase price rolled into the deal via ownership in each SPE we form for new deals. Is this fair, undermarket, greedy?
Appreciate the insight.
Depends on deal size. 1% acquisition fee (based on total capitalization) is "market" in my opinion
Assuming they are not institutional size players, and how frothy the specific market is...
.50% to 1.00% for debt/mortgage advisory unless it's construction which is 1%. From my experience .80% on debt is fair depending on the market(NYC hardly anyone pays a point, but plenty still do). If you don't have to split fees with a "house" then .80% if a great deal to both of you. It would also depend on how much work you do to secure the financing, are you going to 3 banks or 20? *For office and retail If you have to use Argus then the pain alone is also probably 1.00%.
I should point out that fees are slowly shrinking, for a vanilla multifamily mortgage in NYC I know one brokerage that caps fees at 150k.
Acquisition is 1.00%-2.00% depending on the deal. If you are buying through a broker you can save your friends fees as most sales brokers would split their fees.
Brokers usually won't split fees unless he shows up with an exclusive right to represent and he is a licensed broker himself.
1-2% for acquisitions depending on deal size. Since you are doing all of the work I'd start at 2% unless the metrics don't pencil. The guys I see doing this are using whatever number they can work into the deal while still hitting the required projected return.
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