Curious to see what kind of closing fee is awarded to the investment sales broker and further, how that money is split between the broker, supporting team, and company. To help will provide an example and see if someone can take a stab at it.A broker from a (CBRE, JLL, CW, W&D) type outfit concludes the selling of a $50MM apartment complex.What is the fee paid to broker/company?How is that fee split between the broker/company/supporting team?Thanks.
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It’ll depend on the team and number of people on the deal.
figure the fee on a $50MM deal will be $250k-$500k. Let’s say it’s one analyst, one associate/vp, and the MD.
let’s say it’s a $250K fee for the splits sake.
MD keeps 70%. It’s his/her relationship. Than splits with the house at their split level. Splits scale as you sell more through the year. Let’s call it 50/50 because it’s January. MD keeps 175k.
VP keeps 25%. $62.5. Split with house is 50/50.
Analyst gets 5%. This is probably super generous as the analyst is actually probably on a salary. If anything. This number is probably 2%.
Why does it change as you sell throughout the year? Doesn't it change as you sell more overall and get promoted, not year by year?
So I started my career in IS as an analyst but it has been a while so it might have changed/I might be misremembering. That said, fees would vary based on deal size, so on smaller deals up to about $15M were 6% of total deal split between seller's broker and buyer's broker (if 2 brokers, all 6% to one broker if only 1 broker involved). This % would drop as the overall price of the transaction went up, typically we saw a total of 4% of transaction cost as the floor for the largest deals I worked on that was about $80M. Once the fee was paid to the Broker, the fee was split up between Broker Team and company depending on the title and seniority of the Broker. So an MD might have to give 20% of the income to the company and a VP might have to give 40% (arbitrary numbers to show that title means you get more piece of the pie the higher your title is). This could vary at different firms so I don't want to speak on behalf of all brokerages.
Then the fun part, comp to support staff. Most of the time the support staff are salaried and the Broker is the one that pays them. So the total % of the income per year would change. The % would be lower if the team had a great year and higher when the team didn't close many deals. I'm aware that some teams might have bonuses at the end of the year based on profit sharing so that total % of team income stays the same, but since every team is unique that might not be the case even with every team in the same office. For example, if you earn $60k salary as an analyst and the team keeps $600k once split with company, then you would be given 10% of team earnings. But say the next year your team brings in $6M after company split, your % of team earnings is now only 1%. This is obviously extreme case, but you get the idea.
Like I said, it has been quite a long time since I was on that side of the business so it might have changed and obviously every team is different so it could've been my specific team that operated differently, who knows. Hope this was helpful though.
How long ago was this and what market? The last deal I sold was approx $100MM and the broker charged Us .50% ($500K). 4% on $80MM - quite far. While I’m sure it happens / happened - curious how long ago this was because that’s some insane fee compression. Or you were selling assets that were either (1) very difficult to sell or (2) had a seller that just didn’t know any better? I could be totally wrong on (2), but it’s just seems expensive today. Even 6% on $15MM. I would think that fee would be more like 1% and 2% if you’re lucky.
Yeah nowadays on our dispos of large assets we only give about 50bps on transactional costs for the developer I've been at since my days in brokerage. I was at a team in the Midwest working in tertiary cities at a tier 2 brokerage ( Marcus and Millichap/Matthews/Berkadia types) and so obviously we got the deals that either were very specialized to the market or deals that CBRE/JLL/CW couldn't or wouldn't sell. This was also at the beginning of my career a bunch of years ago so times have changed and I no longer operate in that market anymore so I could be drastically off with that blanket statement originally. Only other point is that you get the fees you can negotiate. So obviously the institutional players know what's standard (and industry standard changes so this is definitely dated figures) but the mom and pop owners that owned a $15M strip mall or local office building that didn't have a large enough portfolio to transact a lot were not as savvy with knowing what appropriate fees were. The brokers I worked under were consistently bringing in high fees and at the time being a bright eyed 22/23 year old I didn't question it.
This is completely wrong lol. No one is paying 4% on transactions above ~5m. A more typical fee for a $50m+ deal is 50-150 bps to seller, no buyer broker fees at this level. Once that commissions comes in, it is first split with the house (probably 50/50 unless you are a 0.1% team). From there the team splits that 50% amongst themselves based on their internal fee splits.
Analyst will be on salary paid by the house (through their 50% take). For top teams, this leaves the opportunity to negotiate the second half of your salary directly with the brokers. HFF was well known for doing a 4% split, 3% direct to the analyst and 1% to an analyst pool. I know some JLL/CBRE teams pays their Client Service Coordinators 1% on top of salary, so I would assume the analyst would get a bit more than that. This is for major markets at a JLL/CBRE office or similar.
bps stands for "basis points" and is one one-hundredth of a percentage point. I think you mean to say a typical fee is 0.5-1.5%, so 50-150 bps, which sounds about right to me
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