Negotiating Participation in Real Estate Deals
I currently work at a boutique RE investment/development firm. When I say boutique I mean very boutique. Besides our back of the house operations (accountants, property managers, etc.) it is the principal of the company and myself doing the deals. We use his capital and platform and leverage his capital with friends and family investors, mostly high-net worth people. We typically do deals in the $10-$50mm range. My role is to help source deals, raise capital, secure debt, and pretty much lead the acquisitions. I stay involved afterward to asset manage and execute our strategies as well. I generally bring in a portion of the LP equity and in some cases, I source the deals. We typically have acquisition fees, which I get a piece of, and I am on a base salary. We are in a smaller market and do not play in the big markets such as SF, NYC, LA, etc.
My question is regarding participation and how much of the promote I should get. We are negotiating this currently. I am not sure if it is 5% or 25% or something in between? Or more maybe? What do you guys think would be a fair compensation for these deals that I am pretty involved in. I am almost like a junior partner in the way that we function but I am technically not and I am a salaried employee so at the end of the day, I still just work for him.
Some things to keep in mind....To do our deals, we use the principal's balance sheet, his money for pursuit costs, and his reputation and platform. I sometimes source the deals but when I don't, I lead the acquisitions and I raise some of the LP capital. He raises the majority of the LP capital. I get a piece of the acquisition fee and I am on a salary. So what should I go for in terms of promote sharing? Thanks.