Just got off a GP webinar thats pitching to LPs, this was the structure/fees:
Curious to get everyones thoughts on this:
- Large GP raising new $100m fund. Focused on hotels primarily. Targeting 15-16% IRRs.
- 25% promote after 7% pref and return of capital
- 1.5% acquisition fee (on purchase price)
- 3% of equity fee (on total equity invested)
- 5% development fee (on the total renovation/construction costs)
- .75% asset management fee (on total AUM)
- GP is putting in 5% of the total equity/fund ($5m)
Anyone in the LP space able to see if the fees are market level or are they much higher than what the average is?
Could you lay out what the fees are calculated off of
Edited my post on top, let me know if you want other specifics and I can provide.
Is it a GP only fund? As in, this fund is than going to go out and invest 5% in every deal and operate it as the LP?
Pref can definitely can get up to more like 8-11% range but depends on strategy. Acq and equity fee should both be like 1%. But equity fees are dumb frankly shouldn’t even be paying that. Maybe tell them drop the equity fee and offer like 1.25% acq fee. And dev fee should be more like 3-4% of dev costs (hard costs only). Especially given they’re only putting in 5% that’s not much alignment I wouldn’t go for those terms. I would imagine they proposed those expecting push back so would recommend pushing back on some of those points.
Additionally, with that huge fee load they’re really not actually putting up equity, those would likely cover their whole equity slug. So in reality they would have slim to none of their own cash in the deals. Gotta make sure they’re putting their own money at risk here.
As someone in Hotels, curious who this GP is?
PM me?
This all looks fairly normal to me except:
"3% of equity fee (on total equity invested)"
Haven't seen that one before. Seems pretty steep and redundant with the acquisition fee. Is this common?
Yes I found this to not make sense. I asked why they needed this. They said its to cover the broker dealer. I then asked if I am directly contacting you to invest, then the broker dealer doesnt take a cut, so why do I still need to pay? They didnt give a clear answer then.
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