Question for the big time syndicators

2 Replies

I have an opportunity to invest in the development of a high-end retirement community in Atlanta. Big project with 5-year-plus horizon for return of capital. While I have personally done a number of direct single family and small multifamily investments, this would be my first foray into a syndicated deal. 

And so here is my question: is a 60/40 profit split in favor of the sponsor within the range of reasonable "market" splits and where does it fall on the scale? I understand it varies deal to deal and sponsor to sponsor based on the strength of the deal, sponsor, etc. My impression is that the most "typical" range is from 40/60 to 60/40 and this would fall towards the higher end (and may well be justified as the sponsor has a solid history of successful projects). Also interested in the reasonable range of management and disposition fees. Syndicators, what say you? 

@Adam Hoipkemier while it varies from one deal to another, as a general practice most syndicators start out with a split that favors investors more to get some traction. So I’d say more like 30/70 or 20/80, sometimes even with pref. 

To reiterate, a lot depends on the overall returns. If they’re so significant that allow for higher percentage split then go for it. 

Best!

@Adam Hoipkemier , I agree with @Alina Trigub with the splits.  I guess what you have to weigh is what their track record is with meeting the return they are projecting.  

To speak on the second part each syndicator operates different. I have seen some charge a 1-3% disposition fee and some non at all.

Also for the management fee 1-3% is reasonable.