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HFF charged 0.50% equity raise fee on a deal I just worked on with them. It was a big equity check though (>$50 MM) so I would assume their fees goes up as the deal gets smaller.
Not exactly what you asked but I know some fund placement agents charge 0.25% - 0.50% on equity raised for funds as well.
This, HFF charged us 45 bps for a $30 mm equity raise - ended up being a pretty good mezz structure. Hope that helps.
Market for a single-asset equity raise is probably between 1-2% of equity in the middle-market space (call that $10-20M). The last time my firm paid a name-brand brokerage shop on a deal, the fee was 2% on $11M of LP equity. I've seen it all over the place, though.
A firm that my fund worked with charged 1% on an equity placement north of $250MM.
Way lower than 2%
For those of you that are raising equity through HFF and other brokerages. What criteria do they like to see for the raise to be successful? I am assuming there needs to be a certain million in transaction history. Are there IRR requirements? I always thought of the idea of a brokerage bringing you property and then doing the debt/equity portion of it, seemed a little farfetched.
I know that HFF typically prefers to handle both debt and equity placement on deals in order to ensure that they have more control over whether the transaction is actually consummated. Reason being that they can sully their own capital relationships by advocating for a deal/sponsor and then having the deal fall through because the sponsor couldnt secure debt etc. Fee typically runs from 1-2% and can be generally negotiable.
Makes sense, but I am sure HFF would only see a successful raise for a top notch sponsor that normally wouldn't have an issue raising equity anyways. I don't think they would raise a for like a third tier sponsor (AUM less than $75 million).
Ok so at what IRR are you really seeing equity being raised quickly. Let's say for a 5-7 year hold on a stabilized asset in a market outside a large city. What about the IRR in major cities? I'm curious because some of our investors seem to be out of sync with realistic IRR or maybe its just me.
Related question, assuming you hired HFF to handle both debt and LP equity on a deal (let's say it's a $35MM purchase with another $5MM in capex/TI/LC to stabilize), if you as the sponsor came across potential equity that was not part of HFF's network, is it acceptable to carve said group out of the fee or at least tell HFF that you located one of their non clients on your own, and if that capital does the deal, HFF isn't getting paid?
Just wondering how those types of situations are handled. I'm guessing HFF may be pissed if that situation happened (i.e. they are pounding the pavement for equity and sponsor ends up sourcing their own below the radar capital).
Thoughts?
Every broker is different, but one thing I'll guarantee is they'll fight like hell against carve outs. For us, carve outs are an automatic deal killer. We'll refuse an assignment before we accept carve outs, though if it's a good client that we want to work with we'll probably negotiate a reduced fee for a specific capital source if they are adamant about it.
One thing that's really important to understand is that each exclusive agreement is negotiated separately for each deal so even though we always start with the same agreement, by the time negotiations are done you can have all sorts of unique adjustments in there. Sometimes there are incentives based on rate, softs terms etc. Think of them as hurdles if you will. Sometimes the fee is flat or there are caps. The commission rate can be tiered as different leverage levels or actual dollar amounts. The term of exclusivity can be different. You get the point.
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