AM Fee - Modeling (Net CF / Promote)
Hi everyone,
How would you treat AM fee in a modeling test?
I've seen AM fee modeled below NOI based on the dynamic GAV calcs (Spot NOI *12 / exit cap).
When it comes to Property / LP / GP cashflow, how would you model it?
Example 1:
"The asset would be bought as part of a 95%/5% joint venture between Capital Partner X and AAA respectively. No promote is payable to AAA but an AM fee of 0.75% of GAV is payable per annum to AAA. Please show a cashflow split and IRR and Equity Multiple for both partners."
1. Property CF = AM fee modeled as an outflow below NOI (like corporate cost, capex, dm fee...)
2. GP = 5% of contrib & distrib of property CF + AM fee added as an inflow?
3. LP = 95% of contrib & distrib of property CF?
Thanks
Based on the most helpful WSO content, here's how you can approach modeling the Asset Management (AM) fee in this scenario:
Property Cash Flow (CF):
GP Cash Flow:
LP Cash Flow:
IRR and Equity Multiple Calculation:
This structure ensures that the AM fee is appropriately modeled as a cost at the property level but also reflects as income for the GP. It aligns with typical joint venture cash flow splits and fee structures seen in real estate private equity modeling.
Sources: Secondary PE Modeling, Relationship among Cap Rate, IRR, Discount rate and NPV, Do you think it's justifiable to ask for 25% of the GP for being the fund raiser for the projects?, Modelling Test - Please tear it apart :), Trying to understand the concept of IRR
bump
In most cases, you should have your unlevered cash flow THEN you deduct the asset management fee to arrive at your cash flow before debt service THEN deduct debt service for your levered cash flow. Your answers for number 2 and 3 look correct.
Hey,
Thanks for your answer, just checked a model from Goldman (german resi), they do:
Income
OpEx
NOI
Other items (Corp costs, capex, sinking fund, AM Fee)
Net Income
Acquisition
Exit
Unlevered
VAT
Unlevered with VAT
Debt
Levered
I may use your way, looks straightforward and suitable for a modeling test
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