Paying a syndication sponsor's (high) travel costs

[Andrey Y.]

This is something I frequently see when reviewing opportunities:

Travel and inspection costs / Asset due diligence                         $200K $300K etc.

Now, if the entity is purchasing 1 or 2 assets, how much does travel, hotels, etc. cost? There is nothing to stop the syndication sponsor from traveling first class, staying at the Plaza 5* hotels, and eating lobster and champagne every meal. If there is a huge cushion in the budget, why not? I don't blame them. Its human nature. I probably would too.

When I think about it, I want my GP in a sense to get great accommodations and be as comfortable as possible. I'm a doctor and I definitely don't travel first class most of the time. This makes me think I am in the wrong business! There is so much lee way for a sponsor to do whatever they want, human nature will come into play. There is no one auditing their actions. And the budget is very generous for these things.

A high number isn't a big deal if the LLC is raising $50MM. If its a $10M property, I'm not so sure. That said, I am considering to change careers ;)

[Jay Hinrichs]

Originally posted by @Brian Burke:

$200K to $300K is insanely high.  A clue here is it says "Travel and Inspection Costs / Due Diligence."  So could this possibly include third-party reports, lender inspections, lender's travel costs (yes, lenders bill the borrowers), and so on?  And would this be for multiple properties in a fund?  I can see maybe $50K or so per property for all of that stuff, including lender thirds, survey, zoning reports, etc.  But for sponsor travel?  No way!  I budget around $15K for DD related travel and we usually don't come close to spending all of it, meaning any remaining balance goes to cash reserves or offsets another line item that goes over budget (it happens!).

you know all those pics of successful syndicators sitting in private jets :)  someone is paying for those.. or maybe its just fluff.. ? along with lambo pulled up next to said Jet.. :)