Deal guys specifically - what commission rates are you currently charging/seeing in west coast markets? Brokers, what are you asking, and acquisition/disposition folks, what are you agreeing to pay? I'm trying to get a feel for the different rates in different markets across the west for different deal sizes (i.e., what you're seeing for a 50M deal in LA vs. similar size in Seattle, if there's a spread) similarly looking for size differential ($100M vs. $25 M, etc. market agnostic - looking for a spread here). Any input is appreciated. We generally know what the marketed rates are, but curious as to off-market stuff. We are trying to remain competitive and work in good faith to pay a fair number without getting gutted. Focused on capital markets/investment sale transactions more so than leasing.
All input appreciated.
Total commissions I traditionally underwrite are as follows (total commission, or inside + outside broker):
Core markets = 6.0% years 1 - 5; 3.0% years 6 - 10. Non Core markets = 6.00% years 1 - 10
market specific, and can even be higher than mentioned if it's a inferior investment / market.
Sorry, should have clarified this is for an off-market investment sales deal, not as concerned with leasing commissions at the moment. Appreciate the input though.
Fees will usually run like 20% lower if there is only a broker on one side.
Those bigger deals are usually flat fees and not a %. I saw a $100mil deal paying each broker $300k. I have a client that does land. He tends to pay a bit more in broker fees because it's land. He had a $15mil deal in escrow that he was selling. The broker, representing both sides got a generous 3.5% gross commission. The deal fell out but that would have been his commission.
Whether it's $20mil or $100mil, the most I"m seeing brokers make is about $300k a side. This is why I'm a middle market broker doing deals in the $2mil to $7mil range. There's tons of deal flow at this level and the commissions can be 4-5% gross.
$3.5mil deals pay the bills...$30mil deals pay off the bills.
This.
Broker commissions are capped fairly quickly after the price reaches $10M.
And in recent years they've been getting squeezed more since brokers are willing to cut commissions to win business.
I closed a 7.3mil deal two weeks ago. Buyer had to pay my buyer broker fee. We quickly agreed on 2%. Buyers, who are very seasoned, said if I had requested anything greater than 2% that there would "need to be a conversation"...lol.
Coincidentally, same buyer for $11mil, I'm splitting a broker fee of 2% on the buy side. I've asked buyer for a 50bps to 100bps additional fee to me even though seller is paying 2% to us buyers brokers. My buyer quickly did the math on what looks like a gross 4% fee split with listing broker and buyers brokers...buyer said to me $400k gross is about the ceiling on broker fees.
There will be exceptions to this, but I'm still seeing a ceiling like I mentioned. I'm thinking they'll pay me 50pbs more and that's it.
For what it’s worth we generally get paid 85-125 bps on $50MM-$100MM+ deals.
Closing a $56MM financing right now and being paid 100 bps fee - not to even mention the break up fee.
Generally focus on more transitional or structured financings though. Something with a heavy lift or a story.
Anecdotally, I Saw a $700M+ deal with a .65 bps point success fee. The seller was BX.
"Under the terms of the agreement, Hudson would pay Carlton a 2.5 percent commission on the first $40 million in financing it secured, and 2 percent on anything exceeding that figure" see here: https://therealdeal.com/2017/07/31/carlton-group-sues-hudson-companies-…
https://therealdeal.com/2016/07/22/heres-how-much-a-top-capital-broker-…
We just paid 50bps on a $50mm debt placement for a value-add industrial deal in NYC.
I recently got a 50 bps debt quote on a $20 million loan. That deal would be pretty easy to place, though. Not a lot of hair on it.
Was this MF or commercial?
Thanks everyone for the feedback thus far... This has generally been the range I've been seeing as well.
Off-market is typically deserving of a point imo.
Okay, I lied. working a few bigger off market deals at the moment and a full pt is aggressive. 50-75bps for larger deals.
Are you saying you're giving a point/50-75 bps additional, or that's the all-in fee for these?
selling 40mm portfolio in santa ana w 1.25% sales broker fee
Thanks!
also, 3% incentive fee of the value above which their bov came in at ~40mm. tbh my principal could've pushed down even more. other brokerages' initial proposals came in at 55bps, 85 bps, and 90bps
I think I know the deal!!!!
I saw a gross commission on an approx 50mil portfolio deal of almost 1mil (around 960k to be more precise) in 2016.
wow 2% on a deal of that size seems pretty rich to me. I think 1.25-1.5 is what I've been seeing for that deal size.
Yeah, it was an 8 Property Walgreens single tenant net lease portfolio. The gross fee was that much but there were several brokers on the deal. Plus company splits as well. I’m not sure but I still think the most that a single broker walked away with was 250k net. Still a great deal though.
Also, it was a wealthy family owner, not institutional.....so I have seen those fees traditionally higher.
Generally for most refinance deals between 25-50M we're seeing broker fees at about 50-75 bps. For ground up construction in that range closer to the higher end of 75 bps.
For deals 50M+ there's usually layers. For example, on a 150M+ deal you could expect 75 bps on the first 50M, 50 bps on the second 50M and then 25-50 bps on anything over 100M. But then again these are for portfolios or strong single assets with steady cash flow and not much hair.
For riskier deals where the property is value-add or redevelopment we've seen commissions at 75 to even 150 bps.
Equity deals are usually 200-300 bps. For instance on a 550M+ ground up development job in Hawaii there's a 100 bps. fee on the debt and a 250 bps fee of the equity.
On property sales, we like to do the opposite - almost a waterfall structure for the broker.
Under market commission % up until their low or mid, then slightly above market % for any money between that and their high, then massive fees for anything above their high - hopefully incentivizing them to hit a home run.
CRE curious to know how that’s received in your market. I’d imagine that would disincentivise a buy side to work on the deal.
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