I may be able to bring an LP who is willing to commit essentially more capital than we could possibly put to use with the size of our projects. I haven't yet finalized my compensation structure with the GP, and I have done some sensitivity tables of what I would earn based on potential IRR's of the project. I could obviously get basically nothing if the GP screws up with the operations, or the market turns sour, and we don't earn our promote (but would earn part of the 1% asset management fee).
But I've taken a ton of meetings, done a lot of work on the presentations, gotten some great interested parties, and the GP is unwilling to settle our end of the contract (and I think would be very dumb to not do so) right now. We are halting discussions until we can come to an agreement on our end. I think for the amount of work I'm doing, the risk I am taking by not taking cash compensation, additional risk I am taking by not being in the LP box, but rather taking a share of the GP, 25% is not unreasonable. In terms of the value I'm bringing, it's probably half the value, and in terms of the amount of work, it will probably be 15-20% as much work as the investment team does. Then again, they will be compensated outside of me for a lot of that work, acquisitions and disposition fees, development fees, etc.
What do you think?
FYI, the investment team is just two guys.
If you're committing yourself financially, and taking on risk, then sure, go for it.
If you want 25% of the developer's upside merely for placing equity, then expect to be laughed out of the room
I doubt an LP who was introduced via this guy is doing a 99/1 deal with a firm they don't even know.
To your point about needing more information, you are right. However, I ran it based on a hypothetical scenario in which he received 20% of the promote and the result provided him 4x the expected value than if he was merely an LP. Now, if you tell him that he can participate in the upside of Dev Fees, GC fees, Dispo Fees, Management Fees, his expected value is going to be that much greater. Perhaps even as high as 6x what he would receive if he receive LP economics.
To Ozymandia point, I do not think the "value" he provided is worth 20% of the promote and perhaps fees.
OP - Did the sponsor retain you with some sort of contract stipulating that you were their equity placement broker? Or did you merely introduce them to someone without a deal in place and now you are asking for 20% of the promote? Next time, I would make sure you have this all in writing before you make the connection. Otherwise, this is the risk you run.
Would you mind attaching an excel of your calculation? I want to make sure I am understanding your point.