Best place to include asset management fee in proforma?
Long time lurker here. Currently enrolled in a MSRE program looking to make a career switch. Been helping out with the modeling on a few deals. Just curious where it is most appropriate to include an annual broker-dealer fee (1.5% of initial equity) in the proforma cash flows? Would you include it below NOI but before equity, before tax cash flows, or would you not include until doing your cash flow available for distribution calculations?
Any insight as to industry norm (and why) would be much appreciated.
Hopefully, the question makes sense. Thanks
To cover all our bases, let's clarify the following:
Broker Fee: if you're referring to the fee that an investment sales team/broker is charging for facilitating the deal, then that would go into your acquisition closing costs to be paid before month 1 of your cashflows. This is a non-recurring fee.
Property Management Fee: this is the fee you're paying a 3rd party management company (or yourself from cashflows & charging your LP equity). This gets pulled from cashflows and factors into your final NOI.
Asset Management Fee: this is the fee you're getting paid as a sponsor or paying as an LP to the sponsor for managing all aspects of the deal. This is typically a % of total equity invested in the deal, or of cash flows, etc. This goes below "the line" (NOI) and is taken out before your net cash flows (equity free cash flows). This is in the same section as your debt service.