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Debt or equity?
Debt and Equity
Yeah I agree with PacNumber. On deals that size, you will be capped by a dollar amount. I mean even 50 bps on the debt is $1.25M, that's a pretty hefty fee. That being said, I also have noe experience with deals this size, so i guess take it with a grain of salt.
1% for Debt(cause it's construction), 3% for Mezz and Equity. If you're sourcing both debt and equity you could give them a break on the debt cost by 20bps. All depends on relationship, first deal together, market and sponsorship.
First deal with the group. The plan is to do both debt and equity raise (preferably with insurance that'll take both sides).
1% + 3% seems high to me for these dollars. I have limited experience dealing with these dollars. I'm getting NDA's signed right now for my first deal this size. In brokerage, if I were to sell something of that size the fee would probably be set to a flat commission versus a %. Probably less than 1% on both sides for deals over $30MM.
Brokerage fees for debt and equity I would think would come way down too as dollars go up. But again, I don't do deals this size on the regular. I don't think anyone is going to pay me $4.5MM on placing $150MM in equity. I'd love the pay day but I'm just being realistic.
a $250M piece of debt for construction financing is likely going to be syndicated and split up between several banks. The lead bank is likely going to charge you 100 to 120 bps to serve as the administrative agent and originate the loan. Even a big bank like PNC of BofA does not want to hold that much exposure on their balance sheet, especially for development risk. If you are using a broker, their fee may range from 40-80 bps depending on the firm and how hungry they are. I would guess 1.50% all in.
I think 1% is correct for the debt as construction is still very intricate as opposed to investment sales of a stablized asset. I it were a stablized asset of this price scale the debt fee would obviously go down to 50bps-70bps. The equity would still be 2% at the min.
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