Dealing with shady principals as a broker
There's has been quite a bit of chatter over the years about shady or questionable brokerage practices. However, I haven't heard much from the other side regarding some of the antics from the principal side. Let's be honest - these characters exist on both sides of the closing table.
I have seen and always heard of principals dodging rightfully owe fees, taking your RFPs and selling deals or financing direct, etc. - what type of stuff are you brokers seeing from principals and how are you navigating around these issues?
I'm curious to hear about your experiences across the board (investment sales, leasing, debt/equity, etc.)
People play games in the middle market. I have stories for years spent playing games with sponsors. It sucks but is part of the business.Nobody likes brain damage on deals but when your handed that six figure commission check it makes up for it.
Yeah I feel. This does occur too on larger deals - I find that more sophisticated sponsors are a bit more like politicians when it comes to this whereas private owners can be pretty candid about their motives.
When looking for lenders, I always try to work with Publicly traded companies - too much of a reputation risk for them to go around the broker.
How do you define all this? What is a "rightfully owed fee"? If you have something in writing, you can sue. If you don't, it seems pretty obvious that there are two opinions on the matter.
It's rare you see flat out theft, since as I said, generally you have an agreement in place. If you don't, then its a question of opinion about how much your work was worth.
Shady broker practices are much harder to litigate, which is why they're "shady" instead of black or white.
i just left a shady shop in the seattle area. tech guys who said they created a tool that helps them analyze deals in 30 minutes or less, turns out that tool is EXCEL from REFM. same guys will tell during the closing call they have capital ready for the deal but in reality they probably have to go and raise 30 to 50% of the equity. also, to raise capital, they need to show their friends and family source of capital 15% IRR return so they will show 4% revenue growth 2% expense growth on core, lower market TIs, lower exit cap rate than entry, etc to buy a deal...essentially optimistic case as base case to dumb yet rich investors. they are heavy on fees and the market has been super strong with strong growth and cap rate compression....time will tell if they get caught with their pants down or if they continue to produce 20%+ IRR. when i arrived, i thought i was joining smart sophisticated engineers who came from microsoft, then i realized quickly folks had no idea what s&u, discount rate, etc was....they have just ridden the gravy train of the last 7-9 years and due to them making solid returns, they have investors coming back! i asked too many questions and didn't fit in their culture of fuckery hence i got the can. now i am back on the market looking silly after updated some of their tools and having no choice but to tell employers the story of what's going on....IT'S A SHIT PLACE TO BE!!
You talking about those FlyHome dudes?
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