Origination Fees on +$100MM Loans
Fellow Monkeys,
I work in investment sales currently and focus on private client transactions. Our mortgage brokers will place debt on deals that typically range between $1MM and 30MM and will charge anywhere from 1-2% in fees for doing so.
My question is what is the typical market fee for placing +$100MM of debt on a project?
Depends on the type of deal. I've seen anywhere from 50-200 bps. Class-A office building refinance with stabilized cash flows will probably have fees closer to 50-75 bps, whereas a development deal might be 100 bps+.
Typically see 25 bps as the base fee, but varying structures of premium depending on the transaction.
It's a wide range and depends on the execution and the assets. Here are some assignments or deals I know of:
Construction Financing (~$200MM at 125 bps) Construction Financing ($10MM at 300 bps) Perm Financing ($400MM at 10 bps) Bridge ($5.3MM 100 bps)
The range is very wide. It comes down to how much of a commodity the financing is for the profile of the sponsorship and the type of asset or business plan. It also comes down to the value prop the arranger sells to the sponsor.
If it's multifamily, the answer is usually zero. For something close to 4bps on the rate you can probably get 50bps rebate and pay any and all closing costs for the client too. We have several heavy hitting family offices in town with thousands of units. I'm nearly certain that even on a $20mil loan he's paying no fees.
Construction, bridge and a ton of commercial deals I see points but cannot imagine a savvy investor paying 3pts on any dollar amount. The bank may charge, but I'm talking fees to the broker...I've never seen any broker on a clean construction deal of, say, $20mil collect 200k.
Every market is different.
Spent some time at a well established debt fund. I’ve seen the broker fees on closing statements.
Savvy well-capitalized sponsors pay a full 100 bps on $20mm+ bridge and construction loans all the time.
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HFF generally charges 100 bps on construction loans depending on size. For really tough speculative projects (for example - Miami highrise condos) I've seen up to 150 bps.
Equity placement charges 250 to 350 bps.
Spec vs preleased is a significant factor in fees/pricing on commercial construction deals. Lenders can charge way more for a spec deal vs a build-to-suit or a deal with significant preleasing. Additionally, on a BTS or preleased deal, tenant quality will also be a factor - unrated or local tenants vs a credit-tenant lease.
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I do acquisitions for office buildings. Mortgage broker fees in my experience are typically in the 25-35 bps range. The larger the deal the smaller the fee.
If anyone could answer this - does the debt broker then have to give a certain % to the brokerage shop he works in? Whats the typical % cut that the firm takes from the gross fee?
Yes, there is a split. The company is going to keep at a very low 10% of the fee all the way up to about 50%. Lots of factors.
Yes, bigger deals you get economies of scale (50 bps on $100mm for example), and smaller deals are more expensive on a relative % basis. Makes sense though; there really isn't a huge amount of difference working on a $20mm loan vs. $100mm+ loan. Assuming you have access to the right players for each of those loans...
However, my firm would never pay more than a 1.00% capital markets fee. Same for the lender origination. I don't care what type of deal it is (bridge, construction, etc.). We also only lever up to mid 60% level, have a proven track record, and have direct lending relationships at all of the top banks, debt funds, or life cos. We could honestly run the process by our self, but would rather have the debt brokers create the competitive market. Also allows them to deliver bad news, aka take us out of the process.
I think a 100 bps point is only warranted if the deal is very speculative and hard to get done. Boutique hotel and condo projects are very difficult to get construction financing, especially with limited or no recourse.
That, or the deal is like a $5M loan. brokers gotta get paid! I'm also stingy on fees because of how active our firm is within the process.
Nonrecourse condo construction financing. Not a huge bench-line on this.
If I could upload our engagement letters/agreements here I think many of you would be shocked. People are willing to pay 75-100+ bps on $100MM+ deals for super heavy bridge/construction/high-leverage/senior+sub+junior sub stuff that is very complex. Our average deal size is in the low 9-figs and avg fee is likely .70-75 bps if I had to guess. You'd be surprised who pay these kinds of fees as well. No one is exactly running around telling everyone how much they pay in fee though - you'd only know if you need to know.
But suffice to say, if you're looking for 60% LTV for a full occupied Class-A building you're either not paying a fee or you're paying a small one. That is simply just a pricing exercise.
On the multi-tier debt stacks, Borrowers are often paying for essentially financial consulting as well, because they do not have the in-house capability to properly analyze leveraged cash flows of more complex structures than the typical LP/GP equity + senior note. When they see their IRR's going-up (and thus the promote) they start caring less about fee...
50-150bps....with most common being 75-100.
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