Commission in CRE Lending?
Do people at the VP level and above who are considered "relationship managers" get a majority of their compensation from commission? If so, what is considered a typical % for commission?
I'm referring to commercial banks and LifeCos who are originating CRE loans of $10M+. I would imagine if they are getting even 1% commission on these deals they are making a good sum of money. Curious how these relationship managers' compensation is structured.
Totally depends on the firm. It’s also probably not called a commission but some firms originators will get a percent of origination fee, other firms they don’t. And other firms, originators’ bonus’ are based upon profitability of their entire loan portfolio they have originated. This will look at spread, points, performance, etc.
Very helpful, thank you
They are certainly earning bonuses based on volume, whether or not based on a direct % or not is going to be very specific to the bank/lender. pudding is right in that it will be more than just originations, it will be profitability more broadly. Still, be way less than 1% for sure if you are trying to make guestimations on origination volume. But, yeah, those types can make serious money.
I’ll add it’ll depend on the lending platform you’re on as well. If you’re at a debt fund the compensation structure will be different than a life co. Whereas the debt fund may compensate you on origination volume and profitability the life co may not explicitly tie you to originations as they may not want originators to feel pressure to get money out the door like a fund (with a 4 year investment period) and therefore, although compensation is tied to production, it’s also tied to other factors, such as soft skills, mentoring, execution, etc. Of course if you don’t produce, your bonus will be lower, but they try to not put the pressure on because they would rather shut the spigot off and not do a deal than force an investment.
I’ll also add something else about lending that many people don’t talk about or just are misinformed. Compensation can be just as high, or if not higher, on the lending side. I know people at a few funds that have both equity and debt arms, and many people try to move up the debt arm as the compensation is higher. It’s higher because lending volumes in general are higher (acquisition financing and refinancing). Because there are more opportunities to lend, and compensation is tied largely to production, compensation is higher on the debt side of the house than the equity side of the house.
Is this just because theoretically there are bigger carry checks to be earned on the equity side? What does carry look like at a debt fund
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