Please please help address this question on syndication deal

[Dharm Mehta]

Hey guys, I have recently received an offer from Syndication of 12 units townhomes. Question is when deal is divided between limited partners($ investors) and General partners (realtor + mgmt company with not single $ invested) Deal 70% Limited partners and 30% for General partners- with 6% preferred on your share of invested dollars which general partners will not collect however, will divide NOI (70/30) with you getting your shared percentage investment (lets say 15%) of 70% on yearly basis; and later on sale of property (70/30) again.

My question, if any expert can please help; is if the General partners are not bringing any dollar to the down payment, is it reasonable for them to charge property management fees of 5% as long as they run the property and is it also ok for the other general partner to collect Realtor fees at the end when property sale occurs taking 3% of sale price. 

Need help to know if this is common practice of collection by General partners (as they are not bringing dollar to the table, but bringing their expertise; taking liability on the remaining of the loan and also finding a deal) ((( but collection through out holding the property by the personally owned management company and at the and sale price collected as realtor fees are steep !!!) 

Please shed some light on this syndication deal, any expert advise would be highly appreciated. 

[Spencer Gray]

It's not uncommon for the GP to bring little to no cash in a deal, although 5-10% is very common. As @Taylor L. mentioned lenders often want to see the GP have some skin in the game besides loan guarantees. 

One of the general partners being a broker is more unique, although not unheard of as is him getting an automatic commission for selling. It's not a deal killer, but I would be curious if the GP is a residential realtor or an actual commercial real estate broker who might be more qualified to market and sell the deal. 

Paying a property management fee to the GP if they are actually managing the property is standard since they are providing the service. 

There are other fees that are typical that you didn't mention such as an acquisition fee, finance fee, asset management fees, and sometimes disposition fees. 

I also wanted to clarify that when you say 70/30 after NOI, keep in mind that the mortgage payment, capital expenses, and adequate reserves have to be paid prior to free distributable cash-flow.

6% pref is on the low side of market but not unreasonable by any means.