Development Fees - Do you include/exclude the land basis?
In the context of a large-scale build to suit scenario, is the land basis typically included/excluded in the calculations for % based development fees? Curious what the general consensus is.
[{"id": "ieh2twf", "text": "I'd say no. I'd put an acquisition fee on the land and dev fee separately on the construction cost projection.\n\nSome deals might work differently though.", "replies": [], "depth": 1}, {"id": "iehyemd", "text": "Our practice is to use total project cost, which includes land basis. I'm a hospitality developer and our capital is either friends and family or crowd sourced.", "replies": [{"id": "iehymp6", "text": "What\u2019s the size of deals that you put together? Just ballpark", "replies": [{"id": "iehz21s", "text": "$20M to $35M", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ieinkjd", "text": "I guess it depends on your LPs. Why not start by including the land and see what kind of pushback you get?", "replies": [], "depth": 1}, {"id": "ieixm90", "text": "Yes.  Unless you\u2019re calculating LIHTC equity eligible basis, which excludes land as an eligible cost.", "replies": [{"id": "iel3l0q", "text": "Ding ding this is correct", "replies": [], "depth": 2}], "depth": 1}, {"id": "iekq91i", "text": "We don\u2019t where I work. What % development fee are you using ?", "replies": [], "depth": 1}, {"id": "ifb4h9j", "text": "On the debt/equity side, projects I\u2019ve seen calculate fees on the total project cost including land (at cost).", "replies": [], "depth": 1}]