How Much is Equity Worth?

Say you have development experience and want to go out on your own. You have the ability to source deals, navigate entitlements, get the development built, and get it leased. But you don't have capital.

Say you have a friend who has a network of HNW people that he can raise the capital from. To make things more specific, say your total development cost is $20M, you need $3M of equity, and your friend can raise it from 12 individuals who put in $250K each. He would probably also need to sell one of them on providing a completion guarantee in exchange for additional upside.

How much/in what manner would your friend need to be compensated for this? I could imagine him taking a fee out of the total development cost and not being part of the deal, or (more likely) being a partner and maintaining a figurehead role with the investors without being super involved on a day-to-day basis.

 

In my opinion, equity is your lifeline here. I would compensate this person handsomely (above what you deem to be fair) and use this as an opportunity to grow the relationship.

 
Most Helpful

Awesome! I figured you were aware, but just wanted to throw that out there since the debt market is pretty crazy right now!

As far as raising equity, I’d say most Brokers are 3-5% range. I’m seeing JLL at 0.75-1.5% for equity $50MM-400+MM or flat fees of $150M-250M of that size. I think the above case of flat fee $150M for equity is favorable to you and him. You can write it into the project cost and have it funded that way.

Also, as you probably know and already did. Don’t forget to add development fee into the project budget, you need to pay yourself for your work.

Look forward to seeing your success on this deal!

Cheers!

 

Quae nulla dolorem rem quibusdam error. Quibusdam aut sequi cumque ea.

Aspernatur hic voluptatem omnis blanditiis consequatur debitis excepturi. Aut alias quaerat tempora sunt molestias sunt. Repellendus rem nihil unde quibusdam et est laborum. Voluptatem unde et fugit dolorem voluptatem. Fugiat maiores nobis hic mollitia expedita omnis provident.

Voluptatem laudantium doloremque sint deserunt dolorem. Tenetur occaecati recusandae qui iure. Occaecati ut iste nemo earum. Quia rerum et optio consequatur minus.

Et tempore minus asperiores et voluptas officia. Quam aliquid sed dolores aut enim. Ut tenetur esse ut.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
kanon's picture
kanon
98.9
6
dosk17's picture
dosk17
98.9
7
GameTheory's picture
GameTheory
98.9
8
CompBanker's picture
CompBanker
98.9
9
DrApeman's picture
DrApeman
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”