So I'm partnering with a development company to raise capital for their new projects. I am thinking to ask for around 15-20% of the sponsor promote as my end. I think this is fair, given the amount of work I am doing to bring the capital to bear, and because of the value of that capital.
For proof of reasonability, I thought I could present a scenario where an IB raises $500M in 10 year bonds with a 4% fee, and the company has an ROA of 8% over the life of those bonds, the IB's $20M fee would be almost 10% of the NPV of the profits made off the bond proceeds (and that's getting those paid out in cash! while they will have to pay me in taxable equity grants because they won't be liquid enough to pay my fee in cash). Maybe there's a more clear example someone could help me propose?
Ultimately if I raise them say $100M for sake of round numbers, and the project hits a 26% gross IRR, and they earn their 20% promote, on an 8 year project they would walk away with $45.6M in promote fees, and I would walk away with $8M (at 15% of promote).
Does this seem copacetic?
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