What fee do firms charge for institutional deals over $50m?
What % fee do firms typically charge for institutional deals over $50m+?
The property types would be industrial, retail and office.
I've seen some monster deals recently. How much for example would a $500m deal command fee wise?
Thanks
Leo
It really depends...... You're going to see some teams charge 1% or even 2% for deals over $50m. It depends on the complexity, the area and so much more. It's hard to put a figure on fees and commissions but you're likely to see under 1% fees for deals over $50m+. On a $500m deal, again, it depends on how many properties the deal includes. Is this a portfolio deal with mixed asset classes? Or is this one large multifamily or office portfolio? There's usually too many factors that determine the fee of large institutional deals but you'll notice there are often ceilings and caps to how much a fee can go up to. All dependent on the listing agreement, rep, or contract.
Thanks for the reply. The deal was a portfolio of the same asset class (a dozen shopping malls). Any other questions?
My firm did one of those monster deals last year, north of $500 million by a good amount, I think the IS broker (an Eastdil/CBRE/JLL type) was paid 25-30 bps. Was a single asset transaction.
My impression is that north of $100m fees never go above 50bps and often are subject to max fee caps.
To add some color, I agree 50 bps, but the IS team may get success fee bonuses, such as, if they reach above $x dollar threshold (usually a reach price) the commission jumps to 3-5% per every dollar higher.
Yep. To add to this, we always pay brokers on a sliding scale. We want our brokers' incentive to be the same as ours. The bigger the sale number, the bigger their %.
When I worked in IS on deals ranging from $7mm up to $150mm+ we always put the commission on a sliding % scale that would land the dollar amount somewhere between $250k up to about $750k depending on how much work would likely be required. Smaller deals would be around 1% and larger deals might only be like 35 bps. On the big institutional deals we’d often have incentive pay too, like if we agreed $150mm was the “reach” pricing, the commission might be 35 bps + 2% of anything over 150mm.
The only guys who take their commission no matter what and say fuck you no negotiating are top office leasing brokers in NYC. The standard sliding commission trumps all and frankly if you're looking at the upper range, these guys probably make more than anyone does in this business, and that includes top IS brokers.
Everyone else who takes a commission, whether they're selling buildings, mortgages, JV equity, or anything else, has intense fee pressure and will discount on large deals to win the business. As others have pointed out, many times these include success fees to align interests and further protect the client.
I've seen a total commission that came out to something like 1.3+% on a large ($100mm+) deal, but I'm positive there was some incentive on top of a base fee that got them there.
I've seen up to a 2-3.5% fee on a few $150M+ portfolios. Pretty surprising what you would see out there. Some top IS brokers command a high commission and say fuck all to negotiations.
That's way higher than I would ever expect. Interesting data point.
On the financing side, anything around $80MM+ would be around 50bps. Our firm arranged in ~$100MM in bridge financing last year and our fees were 75bps, which was pretty generous lol
Not entirely true. We’ve charged 100 bps on $100M+ construction loans at my last firm. Lot of 85 bps - 100 bps fees. Average deal size in our shop was probably around $150M. Maybe a little less.
That's definitely not 100% across the board. When I was in D/E brokerage, we'd charge 1% on senior debt, 1.5% on sub-debt, and 3% on equity. We'd occasionally get away with charging full freight on $100mm+ deals. Even on some $200mm+ deals, I've seen the firm bill the full point on the senior and the full point and a half on the sub-debt. That equity fee almost never got discounted and when it did, it came down to something like 2.6% at the lowest. Hey if you can sell yourself, you can sell yourself.
Agree with this construction loans and equity are 1% for institutional deals. Sometimes, equity gets more. Bridge loans .5%-1%. And than senior loan I’ve seen .25%-.4%. (These are all brokerage fees). The easier the capital raise, the less the fee.
Currently working on two separate sales:
- Office in the $65M - $85M range with a broker fee of 60-70 bps depending on transaction price
- MF in the $90-$110M range that we are paying as low as 30 bps
I am curious if anyone has insight to broker fees on lower market sales - I currently am invested in two multifamily buildings in a tertiary market (at best) and looking to sell as a package for around $6M or so.
The firm I intern for, which is a small boutique in a secondary market and does smaller deals (2-15mil) the fees I’ve seen are like 4-6%. I think fees for smaller deals tend to be higher compared to larger ones.
Right; I was quoted 4% ($240k commission on a $6m price point) from a brokerage out there. That is slightly below the 30 bps on a $100m transaction ($300k) that I'm working on at my institutional shop which is why I'm scratching my head
The smaller deals have higher fees. Justifiable or not - I’m not sure. But they take the same amount of time to sell. I’ve seen deals sub 10 MM have fees from 2-6%.
As I mentioned in another comment, my broker in IS would often try to set the fee based on expected work required vs deal size. Anecdotally, we sold a lot of $50-100mm+ vanilla deals between institutions where the buyer pool and transaction process was very predictable and ran seamlessly. Alternatively, we sold a few $7-10mm deals (not deals we normally would take on but did as a favor to friends/family) that were a massive headache and required way more work (unsophisticated buyers with a million underwriting questions, unorganized DD process, random unprofessional issues/excuses leading to retrade requests or backing out and then having to go back to other offers or fully remarket the deal). So this would lead to similar or even higher commissions on the smalls deals as the large ones, even though the larger deals might trade for 10x the smaller ones.
For something simple, we go off of what would pay us 250-500k, depending on complexity, and then have a sliding scale above a certain price.
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