I am often asked what are market terms for sponsor fees, waterfall thresholds, and preferred returns for funds? Is the notion that there are market standards for private real estate deals an illusion? Or are each fund deal terms driven by reputation of the sponsor, track record on deals, and perhaps most importantly, by the type of risk profile in the given the fund (i.e. core, core plus, value add, opportunity, or distressed debt/mezzanine)? Private equity real estate fund returns, sponsor fees, and profit splits in the waterfall is one of the last remaining vestiges of asymmetric information in this information abundance age. 

However, private investment terms and returns still have a lack of transparency across deals (due to their inherent private nature) and don’t allow the market to see a vast sample size which would dictate market terms. The sponsor reputation and risk profile of the types of investments in the fund are critical variables that would dictate projected returns and profit splits. I found this article in NAIOP one of the more transparent disclosures of this behind the scenes world, and their downloadable white paper is an excellent and thorough breakdown. What market terms are you seeing?

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