Syndications fees and costs in commercial real estate

[Elana Greer]

How are all the upfront fees handled by a syndicator? When a syndicator has a property under contract and investors on hand, I would assume that the upfront fees for the transaction such as inspections, reports and legal fees come out of pocket from the syndicator. Is that correct? And if so, how are they handled if the transaction is completed and how they handled if it fails to close?  Is it simply the risk of the job? TIA

[Brian Burke]

It varies by syndicator.  We've always covered the due diligence costs ourselves, and get reimbursed if the deal closes and eat it if the deal doesn't close.  Some sponsors follow that same principle, others might shift that burden to their investors.  Ask the sponsor of an offering that you are considering how they handle this so that you understand the risk you are taking for failed transactions.