I understand that GP economics will vary from deal to deal and they can always be negotiated. But does anyone have any resources I can review to better understand how things are typically split between the GPs?
For example, if I'm able to raise $1,000,000 of the $10,000,000 total raise -- what type of % of the GP should I expect to have? Assuming the other GPs will have a much more active role in managing the assets after acquisition? Would I be entitled to the acquisition fee, asset management, and disposition?
Would the economics change if the capital raised went towards a syndication vs fund? I could see the splits being worse of someone who is not actively managing for a fund given the likely longer duration of asset management and hold time.
Syndication Expert and Investor · Indianapolis, IN · Member since 2016 · 591 posts · 808 votes
5y
@John Quan There is no standard or market for compensation as a co-gp. It's relative to what you can bring to a deal and what a sponsor needs at that moment. For a $10,000,000 equity raise, bringing 10% is nice but honestly isn't a game changer assuming the sponsor has the ability to raise the other $9M, one more million isn't much of a stretch. If you were to bring $5M, then that could be very attractive as it might allow a sponsor to keep some of his investors powder dry for another deal.
As @Larry Lemer said I would speak with an SEC attorney to make sure you have a good understanding of the rules of the road, although there is some gray area when it comes to co-gps.
You cannot receive a % based compensation or fee based on what you raise. However, if you are a principal of the company, or a member of the GP entity, and have some role in the company in addition to raising capital, then that can work.
The people that raise money for my syndication have to be an employee in order to generate a commission for fundraising. My understanding is if you are not licensed you cannot accept compensation on money raised according to the SEC. I would check with an attorney with deals on SEc law to confirm.
Syndication Expert and Investor · Indianapolis, IN · Member since 2016 · 591 posts · 808 votes
5y
@John Quan There is no standard or market for compensation as a co-gp. It's relative to what you can bring to a deal and what a sponsor needs at that moment. For a $10,000,000 equity raise, bringing 10% is nice but honestly isn't a game changer assuming the sponsor has the ability to raise the other $9M, one more million isn't much of a stretch. If you were to bring $5M, then that could be very attractive as it might allow a sponsor to keep some of his investors powder dry for another deal.
As @Larry Lemer said I would speak with an SEC attorney to make sure you have a good understanding of the rules of the road, although there is some gray area when it comes to co-gps.
You cannot receive a % based compensation or fee based on what you raise. However, if you are a principal of the company, or a member of the GP entity, and have some role in the company in addition to raising capital, then that can work.