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Do Sponsors Charge Fees?

Sponsors do a fair amount of work to put a deal together, manage a deal throughout its life cycle, and execute on a business plan to produce a favorable outcome for stakeholders. So, it's no surprise that they want to get paid for those efforts. For real estate projects, sponsors have two primary compensation methods: 1) a profits interest or “promote” and 2) fees. Much like other investment metrics, the way the fees are structured can help to paint a picture of the overall project and provide another window on risk vs. return. In this article, we highlight the differences between fees and profit interests and provide some of the most common justifications for fees typical seen in commercial real estate investments.

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