Is This A Good Offer for an Acquisitions Role (Promote Question)
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You didn't really put your experience. If this is for an MD role this is drastically underpayment, if you have 3ish years of experience this seems like a great deal. Given the offer from the debt fund I'd put you in the 3-5 years of experience bucket. With that in mind, the base/bonus seems low, but the fee/promote seem high, so I guess it just depends on your risk reward mindset.
This also depends heavily on what the acquisition fee is. Is it a flat fee/deal? if it's $300k/deal in total fees you'd need to close ~3 deals per year in order to break even with the Y1 comp at the debt fund, is that feasible? How many deals have they closed in previous years?
I've got nearly 7 years experience, all in mortgage banking (LifeCo, Agency, etc.). It's a VP level role. My thoughts are that I've built up a decent Rolodex of sponsors around town and should be able to cherry-pick a few off-market deals while hopefully having the backing to also chase some fully marketed ones.
3 deals/year would probably be a stretch but doable, but it's hard to say without really know how tight the purse strings are internally. They don't seem shy about taking down big deals in the 9 figure range. However, I feel that my lack of direct experience is leading them to lowball. Closed probably 12 deals last year.
I may have been a little skewed by primary vs. secondary market differential on the pay range/experience. The 3 deals/year is based on a $300k average fee, so take that with a grain of salt. I'd push for a pretty big bump on the base pay (at least six figures) and a bigger discretionary bonus, but the promote/carry seems pretty fair.
How many other guys do they have sourcing deals? How will they treat fully marketed deals that you run point on?
If you have significant mortgage banking experience why go to a debt fund at all. You could make far more money on the advisory side with your relationship. I can tell you from experience, working on 9 figure deals on the advisory side brings in pretty big fees. Happy to chat with you about it!
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The lowball offer worries me (for the equity fund). Sure the income on fees and promote sounds good, but it’s only on deals you source. Frankly, although $75,000 base is a nice amount, if you’re in a major COL city, you can’t make rent on that for your own apartment - you’ll need a roommate. It just smells like the firm is super cheap and I would be worried. I would argue most reputable firms will pay you a higher base and than base your bonus on top of that. I would run from this firm. Run really fast. On top of that, doing deals is sales, and you can only do so many deals per year. So your compensation is effectively capped. Let’s say each acquisition fee is $300,000, and you make 7.5%, and you can only do 1 deal per quarter, you’re only making $165,000 per year. And if they can’t pay you a bigger base now, you know it’s going to be pulling teeth to get to a higher base later. Run, run like the wind. This firm is cheap as hell and probably doesn’t have a large fee base.
I know I didn’t touch on promote..but that’s a toss up that won’t pay for 3-7 years anyway.
The equity firm is looking for cheap talent and selling the dream. They need to be competitive on base at a minimum and they are not even close. If you’re entertaining this offer, I would say go work on an institutional Investment Sales team and try to drum up business. For apples to apples, 7.5% of a commission pie can be significantly larger than 7.5% of acquisitions fees and honestly, it’s a similar job.
Appreciate this response! Somewhat confirms a lot of my concerns. I'm not in a major COL city, the mortgage payment on my house is $1,400/month if that helps explain. The firm is national but may be lowballing due to the market I'm in and lack of direct experience.
I'm interested by your thoughts on doing acquisitions is sales. I see this much more of a buyside role. I'm interested in leaving the debt side because I feel like I'm sick of always selling, either to borrowers or lenders. Haha so investment sales sounds awful. However, the thought of searching for properties to buy and negotiating those sounds like the greatest job in the world.
On the equity side you’re always selling too. If you’re a GP you’re selling to LPs to back you in deals and brokers to bring you deals or award you marketed deals. If you’re an LP you’re selling to GP’s to bring you deals or choose to partner with you, and you’re selling to brokers to bring you deals. Everyone is always selling. Sure, it’s an investing role, just like debt, but in the end, you’re selling people. You’re selling lenders on why they should give you debt, and investors on why they should sign up to invest in your firm and do deals with you. Debt originations and equity acquisitions are the same job-you just play in a different part of the capital stack. And investment sales is pretty much very similar too. You are always hunting, looking for deals, trying to get clients to choose you to sell their property with, valuing assets, writing up an investment thesis to sell to your buyers, touring assets, etc. Its all selling, just in different seats.
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