In the process of syndicating a deal on this side and having some difficulty agreeing to a promote structure with a group of our investors who's advisers think the following structure is fair: They don't seem focused on fees but fees are as follows: 1% acq. 0.5% at refinance 1% at disposition 1% AM Fee
90/10 LP/GP capital
They've countered our proposal with:
7% pref pari passu 7-10% - 80% to the LP 10-15% 70% to the LO over 15% 50/50
This is a multifamily deal and they're requesting we use a minimum of a 7 year hold for the asset, so getting 15% seems pretty high to me put that way. This get's them to a net 14.5% at underwriting which is a slightly conservative (I hope)
LP's aren't providing any guarantees.
Has anyone done any smaller syndications with F&F to give any insight on what's reasonable. Our other investor is offering to provide 100% of capital, guarantees and 50/50% over a 6% with a minimal fee structure. He's is requesting a low leverage point which hurt deal IRR, but this is obviously better than the above.
Why in the world aren't you going with the latter offer? 50 over a 6, no guarantee risk, 100% leverage? Am I missing something? Who cares if your deal IRR is low; you have no money in the deal. You're doing it on the side so you don't need the current income. Try and structure in a conversion option on your promote so you can step into the deal.
That being said, the first set of terms is also reasonable for F&F, in my experience. Unless you have a long track record of excellent returns, you aren't going to find a 20/7, 30/10, 50/15 equity investor. Especially not ones who want to provide guarantees. And low fees are the norm in multifamily acquisition - you are taking a large piece of the back end if you do well, why should you be justified in taking substantial ongoing fee income without delivering returns?
Probably will take the latter. The only reason we are entertaining the top is to get a new group of investors. Also if we take the former the GP side gets split with a 3rd partner (although none of the fees).
I was thinking about going back with a 95/5 on the former and a 2% acquisition fee, which would also be no equity. But was more curious about other structures people had seen.
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