Sweat Equity or Not?

Hi All,

I am currently advising a leading real estate group in the student housing business (the "Group") , and the owner of the company is very pleased with my services that he decided to give be a 3% success fee on the equity I raise (he plans to sell majority of his company). During the capital raising process, I was able to connect him with a leading industrial park that is in need of employment housing. Since the Group already had existing operations in place for student housing, we realized that there could be a much bigger opportunity with the industrial park for employment housing (over 1000 hectares), which could potentially increase the value of the Group.

To put a long story short, on top of the capital raise by the Group for student housing, the owner of the new industrial park wants to form a JV in the employment housing business for the industrial park by contributing land, construction and capital. They would like to form a JV in employment housing with the Group... After a few weeks, the owner of the Group approached me and said he would like to also compensate me for organizing and pitching the employment housing concept to the Industrial park and for putting this JV together, but he asked me how I would like to be compensated given that it will be a Joint Venture.

My question is: for Joint Ventures, how would you normally ask for fees when there is no real capital that is raised and it is a brownfield project (there will be some cash equity but it will be minimal at first and the rest would be service contributions by each company). Some questions:

Would you ask for a % of equity, in the form of cash, contributed by the group I am advising? Would you ask for ownership in the project plus some salary? and what is an ideal share?

Ideally, I would prefer a blend of cash fees and equity.

Capital raise: 3% of equity raised paid in cash separate JV: ?

Any help would be appreciated.

Best regards,

1 Comments
 

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