Standard Rates for Capital Raisers

[Shafi Noss]

Hi everyone,

I've found several investors interested in apartment communities, about 720k worth. I've been talking with syndicators who offer GP membership in exchange for bringing some of the investment capital.

One person I've spoken with gave these stats

-2.2MM Raise

-20% GP reserved for capital raisers

-120k acquisition fee

-10% equity for GP

So, 100k raised is 1% of the GP

The deal will be cashflow-poor so most of the profit will be from acquisition fee and the sale, maybe an 8 year hold.

I basically trust these guys to be competent and honest, but I'm interested in what other people think. Is there anything else I should be thinking about?

[Brian Burke]

Something to consider before you start counting your money...if the syndicator is using the assistance of outside capital raisers, there is a possibility that they are doing so because they can’t raise the capital from their existing clients.  This might be because they don’t have the experience or track record to have built a robust enough investor base to fund their deals, or they might be growing beyond their organic growth path.

This could mean that there is a higher chance of deal failure or problems that the inexperienced sponsor is ill-equipped to handle. So the question is, if the deal blows up and investors start suing the GPs, what is at stake for you?

Don’t get me wrong, everything might turn out just fine.  But don’t ignore the risks—they are not only very real, they are also largely outside of your control because you aren’t running the deal.