I'm an associate at a small Multifamily sponsor. We have about 6,000 units (& growing fast). The average deal is about $50M.I've raised about 7% of the equity on a deal. Should I tell partners that I deserve some of the equity that's rolled over from the acquisition fee?Or should I ask for some type of sweat equity?If so how do I ask and how should I structure it?I was thinking.. if I raise 7% of the equity I deserve 7% of that acquisition fee that's rolled into equity in the deal (is that too much?)….thoughts?All comments and insights would be appreciated!
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First off - you work for them and get a salary. Your job is get the deal closed. That doesn’t entitle you to any equity. However, that doesn’t mean you can’t ask.
Just keep it simple and ask - “I’ve done a lot of important work on this deal specifically surrounding capitalizing it, would it be possible to get a portion of the equity.”
Most likely scenario: they tell you no. You won’t get equity. But maybe you get some of the promote.
If they give you equity and the deal goes over budget - are you planning on funding cost overruns? Hope you have deep pockets.
What you should ask for it a piece of the promote…
Agree with this - you're too early in your career to request equity, and frankly even if they give it to you you probably are not in a position to manage the consequences if a significant capital call is needed.
7% is not an insignificant amount to raise, and I would put together my thoughts and present to the execs as to why I think a piece of the promote is warranted on that deal (have a number in mind). Worst they can say is no, but if you are valuable to the company and they want to retain you they should be willing to share.
Not OP but curious what number you think would be appropriate to ask for
Thoughts on a number for the promote? How to structure, ask, etc?
Thank you for your insights!
Very helpful!
Any thoughts on how much promote? How to structure it , word it, etc?
Not really. It’s kind of whatever you can get, if you can get it. You’re young and unfortunately don’t have much leverage yet
Usually at associate level promote is measured in sub-100bps amounts. You'd be lucky to get 1%.
You should discuss this as a matter for future deals, not for any current or past one. Equity, or some variation of equity, is not something one should generally bring up in the middle or at the end of a process
I agree, I think being so junior it should not even be brought up tbh. It's another reason why you are valuable and that can help on the promotion side or when times are bad and they need to cut someone.
Thinking about it more it comes across as a junior who has a good salary asking for every penny he can without sharing the risk. Maybe see if going forward this same group invests you can get a % like a broker may but even then I see conflict if you get a blanket fee because then you'll be reaching out to too many people and may cause issues all to get your fee.
But I wouldn't ask for anything at this stage, use it as leverage for a quicker promotion. I wouldn't risk what may come out of asking for a commission of part of the deal for bringing in $3.5mm.... that's candidly not a lot and there are people who could write that in one check easily. The partners may think why tf is this junior asking for at most 1% fee so $35k, and brings many more negatives to how they think of you in the future on deals (is he all in for the money and being selfish) and how it affects your standing in the company. It's shortsighted thinking for nothing significant - and if you leave and others in the industry ask your seniors they'll bring this up because it is very unique and it may hurt you then too and in future roles. Not worth it.
If you asked me at my company whatever I gave you (if anything at all) would be tied to a 5 year vesting schedule. So if you left before five years from close- you would let be able to take that equitable interest with you.
Speaking personally- I would want to see someone show strong promise after two years or so then I would be more receptive.
You certainly are not entitled to any of the acquisition fee - that goes towards paying your salary. You could ask for a small fee for raising the equity - if you want the same 75 bps or whatever that a broker would get.
More to the point, is this part of your job description? Whose equity is it? I think it's perfectly fair for you to say "hey, I'm going above and beyond my job description to help capitalize these deals, but I'm not eager to continue doing it without that being recognized." That seems pretty harmless - they may say no, but you also then don't have to do actually do that job anymore.
Also worth noting 7% isn't exactly a deal-breaking raise. If it was 70% you'd have real leverage, but my guess is the principals at the firm can backfill that pretty easily. 70% leverage on a $50mm deal leaves $15mm of equity. Finding an extra million dollars isn't gonna be hard when you've already got $14mm committed.
You definitely should not "tell the partners that you deserve some of the equity."
If the topic of equity interests has never come up before, I'd set up a meeting to clarify how your compensation package is structured.
Don’t listen to the nay sayers. You need to be your biggest advocate and there’s no harm in asking. Depending on their response, you’ll know where you stand at the firm long term. It’s funny, it’s a given you get equity in tech/corporate development/even lower level IB roles and yet people here think you’re a weirdo for even asking. Pathetic industry.
I've never heard of anyone really below VP getting equity.
Lol you are 2 years in the business devmonkey. How do you deserve any equity? You need to risk capital and major relationships to put a deal together. And a relationship takes years- not a coffee or networking mixer to develop in a real way.
What could possibly be known after being in the business 2 years. Congrats- you are a spreadsheet jockey- master that then move on to the other nuances of the business. Relationships, risk, managing people, raising money, tax, contracts, title etc. I wish I had the luxury of a six figure salary to learn the business.
There’s so much more risk and upside In tech so equity is easier to give away and appropriate to do so. Investment banking… equity in what? The fees made? Not a valid comparison there.
Not trying to be too harsh here but everyone can run a dcr model. Raising 7% of the capital is awesome and commendable. It likely cements you at the company.
The next 2-3 years will be immensely humbling for folks 5 years or less in the industry. All should be more focused on job retention now - not bonus. Just mark my words and circle back on this comment in 12 months- no one will be talking about equity, they will be talking about layoffs/employment search etc.
Maybe that came off harsh- not meaning it to but people need to wake up- a storm is coming.
Echoing this sentiment. It’s all about your approach. Come humbly, not hard nosed. Talk about your ability going forward on how you can contribute on a partner level. Most people on this board are employees or not employed. Very few, if any, institutional owners giving you advice.
In the tech world and buy side finance, most are owners. RE keeps you a W-2 employee way longer. Hard to encourage a recent grad to enter the industry given other options.
Outside a corporate culture, even if it’s only 7%, it’s still worth an equity piece. For example, if you do a deal with family and friends, you can absolutely negotiate an equity stake (even if it’s a little) for raising 7% of capital. But the reality is, in corporate, you aren’t gonna get the credit because people are going to downplay “it’s just 7%.”
This is my suggestion. If you are working in a environment where people aren’t going to credit you (and say “that’s why we pay you the base salary, blah, blah, blah, etc.), don’t raise the capital for them instead save those relationships for later. Rather do a $5M deal yourself whenever you feel comfortable to take a deal down yourself. Even if it’s 1/10 of the size of your typical deal at the company, that’s how you’re going to get really paid for the $1.2M - $2M you raise.
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