• Acquisition fee 2.95% of purchase price of asset • Disposition fee 1% of sale price of asset • Asset management fee: 1% of equity raised • Fund admin fee: .25% of equity raise Their waterfall is 70/30 split until 13% IRR then 50/50

@DongHui Patel. Great question. I’m not going to directly address the question because the answer depends on the track record, team, and projected profitability of the syndicator in part. (For example, if they could predictably produce 30% annual returns with low risk, many would be happy to invest.) But I am going to potentially ruin someone’s day if you haven’t thought of this… Let’s just look at the acquisition fee and the liquidation fee and let’s round those 4% total. That doesn’t seem horrible until you look at what it really cost you as the equity investor: assuming a constant loan to value ratio of 70%, the cost to you is about 13% of your equity. That is 4% / (1 minus LTV (0.7)) = 13%+. And the syndicator will get that whether they perform well or horribly, assuming they don’t lose it back to the bank of course. So I ask everyone… Does this seem like a high fee to you now? Would you pay 13% to your stock broker to enter and exit a trade?

On their own, each of those fees is a relatively reasonable figure. However, taken together, they add up to what I would consider excessive.

I've been developing a software program for analyzing all types of real estate deals and have been working heavily on the syndicating section. If anyone would like a free copy, or to help develop I can always use some help. Last week, I purchased a software online and it ended up being a spread sheet that is too difficult to use. Attached, are some screenshots for what I am working on.

I think youre not seeing the magnitude of this. a $60M acquisition at 3% fees would be = $1.8M. $1.8M!!!! What kind of upfront fees are being fronted that equate to $1.8M. That is rhetorical You can itemize the actual fees and they would be under $200k. So again, there is $1.6M upside here for no reason. This is money in their pocket, at the BEGINNING OF THE DEAL, and they keep it WHETHER THEY PERFORM OR NOT!

I'd say the accumulation of all of those fees is what makes it excessive. Also, typically the AM fee is 1-3% of the collected revenue. If this is a fund, then it's often a percentage of the money raised, but 1% is high. I am also not a fan of a disposition fee - especially as much as 1%

@Charles Seaman, they can charge what they want but I find this fee to be unfair.

Fees are too greedy. I am ok with acquisition fee and asset management fee as %% of the collected rents. However, in this case they charge asset management as %% of equity. That's not right! Catch up provision on top of it is way too greedy.

Not Waterleaf but If you would like to DM me I can chat thru it with you

This deal is a PASS! This entire deal screams of money grab. What size deal is this?

Syndication Fees Syndicate Fees- Are these normal????

Multi-Family and Apartment Investing

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Syndication Fees Syndicate Fees- Are these normal????

DongHui Patel

Member since 2021 · 95 posts · 30 votes

Acquisition fee 2.95% of purchase price of asset
Disposition fee 1% of sale price of asset
Asset management fee: 1% of equity raised
Fund admin fee: .25% of equity raise

Their waterfall is 70/30 split until 13% IRR then 50/50

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Member since 2020 · 984 posts · 1k+ votes

I think 1% for the acquisition fee since when I am explaining to investors I want to be able to speak with conviction when I tell investors my goal even if the deal goes bust is to pay the investors, first.

Supposing, you do a $5 million property at 3% = $150,00. That is a ton of money for just putting the deal together and 1% or $50,000 is still more than enough money.

A syndicators first goal is to make their investors feel safe and you pay them, first. Personally, I would not pay you 3% because syndicating and putting deals together is not all that complicated. You can either do it or maybe you should not.

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