Curious if anyone on the acq side has a bonus structure that pays an acq fee % on deals closed? And if so, how many basis points are you getting, and what is you typical deal size in dollars?
Thanks
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My group does not, but I have heard it exists. Honestly, I do not get it and feel it misplaces incentives. I feel like it incentives people to pay the highest price and close the most deals, regardless of quality.
Agreed - one thing I've seen firms do is agree to invest the entirety of the acquisition fee into the deal, which (falsely) leads investors to think that the conflict is resolved.
At my firm, it's usually 100BPS of total price (Before debt); We invest it in the deal and we also co-invest so that it's really integrated around 10-30%Eqty..We bleed with them.. We also have get let's say 20-25% of the marginal CF after reaching X% IRR.
I re-read and I think you meant for the staff not the firm.. we used to have some sort of closing fee where senior guys would get Z% of the firm's acquisition fee, but when my VP left and the firm grew bigger and the department turned around it was dead..Never had the opp. to taste this "nectar"..$$.
Our firm usually underwrites and agrees to an acq fee with our JV partner. Typical fee is 0.5% of price on marketed deals and 1.0% on off-market deals that we source.
Of that, bonus for the little guys (like me) diligencing the deal is usually 1-5% of the fee.
I realize my comment differs from a fund level 'acquisition fee', but for comp purposes: depends on deal size and product type, but bonuses for the acquisition personnel range between 50k-200k per closing. Median is typically 150k, typical to close 4-5 deals per year
This was more along the lines of what my original post was searching for.
Some firms will bonus their acquisition team out at the end of the year (i.e. as a % of base salary), typically larger firms, institutional, etc. Working for a smaller group, I see much more where comp is salary (typically a bit lower than what a larger group would pay), and then a % acq fee tied to each deal closed. For example, 25 basis points, on a $20M acquisition, or $40K.
It's this acq fee that I was curious about, if others have it as part of their comp package and what it is.
In Companies that have incentives on acquisition, I am keen to find out about the what is the basis of allocation of sourcing incentives (IPO/Sell Side) (for sourcing/acquisition of deals), who all get the incentives? Is it given to the entire team who have worked on acquiring, deal executing and closing team?
Yes, we have a fixed $ bonus for deals closed--not tied to any purchase price/development cost.
I run acqs for a shop with ~1.5B AUM. We get % of acq fee but its not paid in cash or as GP carry in a deal, but rather as LP piece in our fund. This ensures you don't get volume focused or focus attention on deals you only have carry in.
Buyer Broker Acquisition Fee - What’s Market? (Originally Posted: 01/29/2018)
We are looking for boots on the ground knowledge of a certain submarket, and are willing to pay for assistance in sourcing/assembling development sites. This individual has relationships in town as well. I asked that he send his standard agreement over for our counsel to review, and noticed he wants 3% of purchase price if we close on anything in the next year. I want to align interests here, but I was expecting 1% acq fee and at most 2%. Is 3% standard for this type of work?
depends totally on the market and deal size. Your best bet may be an agreement where the broker must ask the seller first to pay their fees (as that is common that seller pays fees and the brokers split them if there is more than one broker, less common to have 2 brokers on larger deals) If the seller isn't willing to pay fees then agree to pay their fees. But try and protect yourself by making the broker ask the seller first.
3% is market
I haven't seen 3% in, well, I can't remember. Maybe 20 years???
It's at best 5% split 50/50 up to 2mil. After that all bets are off. I have a seller paying 4% gross on a $3mil apartment deal and that is very fair.
When you get in to institutional assets, the fees generally become flat...not %.
I have a client paying a land broker 3.5% for both sides on a $16mil dirt deal and that is super generous.
Can you elaborate on the 5% split 50/50 up to $2M?
5% total fee paid by seller...this fee is split 50/50 by listing broker and buyer broker (2.5% each). This is pretty standard in SoCal up to a sales price of $2mil +/-.
Ok that makes sense, but what I’m asking is if 1) there is no listing broker because I’m paying my rep to go knock on doors in areas I like, it would just be 2.5% to my guy? and/or 2) would existing owner be forced to find someone to rep him if my broker got traction, and thus command his 2.5% totalling the 5% you referenced? Appreciate the clarification.
I get paid on a simple $/door basis on deals closed. It is a very basic pay structure; I get cut a check on the next pay period after closing, no carry in the deal or anything else involved. This is in addition to and has no effect on my year end % bonus.
Is this reflective upon the size of the asset? i.e. You will get paid 10x the amount if you close on an 100 unit apartment vs. a 10 unit apartment?
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