How much does a syndication company with 1B AUM make?

Question

Hi all.

I was wondering what is realistic to make with $500M-$1B in AUM? Needless to say that I don’t expect specifics about a specific company or person on this forum, as I know some guys here are hitting those numbers, but just an estimate.

The background to this question is I’m 25, started a successful business and exited it, and as I’m learning and getting into the real estate world, one of the things I’m trying to learn and evaluate is what is possible and at what targets. For example, what would it take to make 500k a year? What would it take to make $1M a year? What would it take to make $3M a year? Etc..

Thanks in advance

Michael Le · Answer

That 20-30% part is called the promote. Also called GP split, sponsor comp, carried interest, etc.

Brock Mogensen · Answer

It really depends on how the fees and promote are structured among the deals.  2% Asset Mgmt Fee and 20% promote is a high-level way to look at it. Let's use $500M AUM as an example.  At 75% leverage let's assume $125M in EUM.  If the portfolio throws off 10% Yearly Cash that is $12,500,000 -- your 20% would be $2.5M. Plus Yearly Asset Mgmt Fees of ~$200K.  Syndication is a great business!

Paul Moore · Answer

Hey @Guy Idan. Great question.  To simplify this you can assume annual revenues in the range of ~ 2-4% of the equity you raise. This includes asset management and acquisitions fees plus profit share (promote).  This is obviously a quick guess, but you can use this number on the fly.  Happy Investing!

Guy Idan · Answer

Thanks for all the responses and feedbacks!

Todd Dexheimer · Answer

Well, some people with $1B AUM only own 1-5% of the GP and others own 50-100%.

What would the GP gross?

Around $500k-$2mm in asset management fees. Most if this likely will cover overhead, like employees, an office, etc

About $20mm in Acquisition fees, which will be split up depending on GP ownership. This will be paid as each deal closes and only 1 time

Around $0-$3mm in cash flow/year

Around $0-$10mm in sales profits/year

Zachary Inman · Answer

@Guy Idan Congrats on the business exit!

As with most things real estate-related, there are no linear paths. As others have said, sponsors have fees to keep the lights on and then get their big payday during a capital event. Typically less experienced sponsors have more investor-favored fees/splits because of the higher operational risk (inexperience) and then have more sponsor-favorable terms as they accumulate a track record of delivering (and over-delivering) returns.

Your paycheck is going to vary wildly based on how well the deal does, which is good for both investors and sponsors because it aligns the incentive structure. Because it's private equity, you can set up your structure to be whatever you want... but it still needs to be attractive to investors and competitive to the other options.

Shafi Noss · Answer

@Guy Idan One thing to keep in mind Guy, syndicators are making the majority of their profits from value-add activities, and those profits are realized only when they sell. Once sold, the asset no longer appears in the AUM measurement even though that is exactly when you get access to most of the cash.

So an important distinction is whether you would like to make $1MM a year spendable, or are you okay with $1MM a year where $800k is locked up in equity for several years.

And every investment style has a different return/liquidity/effort/risk/etc. profile. I work on developments which if sold throw of lots of cash in a moderate amount of time, has high effort and basically no cashflow. Buying and holding generates long term cashflow, moderate growth over a long time period, low effort. Syndication is in the middle, and there's many ways to tweak them, just have a good understanding of what you're doing.

Guy Idan · Answer

Hey Brock. Appreciate the response.

Can you please clarify what you mean by 20% promote? never heard about that term. I know there's an acquisition fee, management fee, disposal fee, and the 30% profit split when selling. Is the 20% promote the profit split or something else?

How much does a syndication company with 1B AUM make?

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