Asking for 25% of GP equity for doing the fundraising?

[Anders Jax]

The GP is just two guys and myself, who put to work about $5-10m in equity a year. I may be able to bring an LP who is willing to commit essentially more capital than we could possibly put to use with the size of the projects, and would allow the GP to deploy probably $30-$40m a year if the opportunities could be found. I haven't yet finalized my compensation structure with the GP, and I have done some sensitivity tables of what I would earn based on potential IRR's of the project. I could obviously get basically nothing if the GP screws up with the operations, or the market turns sour, and we don't earn our promote (but would earn part of the 1% asset management fee). So I think the added risk is worth tacking on 10 points, rather than taking 15% of the GP, which would probably put me in line with an otherwise 4% asset raise fee.

But I've taken a ton of meetings, done a lot of work on the presentations, gotten some great interested parties, and the GP is unwilling to settle our end of the contract (and I think would be very dumb to not do so) right now. We are halting discussions until we can come to an agreement on our end. I think for the amount of work I'm doing, the risk I am taking by not taking cash compensation, additional risk I am taking by not being in the LP box, but rather taking a share of the GP, 25% is not unreasonable. In terms of the value I'm bringing, it's probably half the value, and in terms of the amount of work, it will probably be 15-20% as much work as the investment team does. Then again, they will be compensated outside of me for a lot of that work, acquisitions and disposition fees, development fees, etc.

What do you think?