Highest developer fees you have seen on real deals?
What are the highest developer fees you have seen in real estate deals you have participated in or that have definitely closed? I have seen quotes from 1% - 5% of total (land/hard/soft) costs, but unsure if lenders will balk at a certain threshold.
[{"id": "hwflf2f", "text": "Lenders usually do a % of hard cost. Developer fees have to be covered by equity.\n\nEdit: Meaning that they probably won't balk at a certain % because they aren't financing it.", "replies": [{"id": "hwg8kl5", "text": "That\u2019s not necessarily true. Lenders can and do finance developer fees.", "replies": [], "depth": 2}, {"id": "hwiqzlg", "text": "Lenders finance our dev fees all the time. On hard and managed soft costs.", "replies": [{"id": "hwiznwe", "text": "That is insane to me. Very generous of them, unless the LTV is so low they are able to justify it another way.", "replies": [{"id": "hwj7343", "text": "60% LTC.  \n\nNormal national branded banks.", "replies": [{"id": "hwjgsci", "text": "What's the average project size?", "replies": [{"id": "hwjma2g", "text": "$30M?\n\nRanges from 10-200.", "replies": [{"id": "hwjzuf0", "text": "This makes more sense. When I saw the original question I was thinking with my local developer lender cap on. It sounds like you work in real estate private equity?\n\nFor local developers they usually have cash in the project themselves + some other local investors. Pulling developer fees out with the construction loan is them basically cashing out their own equity. It becomes a sponsors skin in the game problem.\n\nFor real estate private equity it's different - the firm needs to pay staff salaries. It would be unnecessarily cumbersome to have a bank say that you're not allowed to pay salaries until the project is completed in x years.", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hwgm5pc", "text": "I've seen 3-10% depending on size, complexity, and timeline but they are usually getting back equity they put in up front in a monthly draw. It's also the first line item that gets adjusted to cover a change order.", "replies": [{"id": "hwiqvtp", "text": "Before contingency?", "replies": [], "depth": 2}], "depth": 1}, {"id": "hwi4ng2", "text": "I've seen as high as 20%. They are indeed financed.", "replies": [{"id": "hwi65ni", "text": "What type of project would justify fees that high? Standard multifamily construction or something truly difficult to develop for some reason?", "replies": [{"id": "hwo66w1", "text": "Multifamily project.", "replies": [{"id": "izrxm2s", "text": "Hey, curious kid here and this is a really late comment but was it in particular a specific type of multifamily that garnered such high fees? And is it typical for that type or was it for that deal alone, thank you.", "replies": [{"id": "izu3mu2", "text": "These fees are typical in a section 42 multifamily project.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "hwj0nx0", "text": "Is this a commercial bank financing these or is it an alternative lender?", "replies": [{"id": "hwo68d4", "text": "Commercial bank", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hwiodry", "text": "My deal is 5% of hard and \u201cmanaged\u201d soft, ie excluding confingencies and developer fee.", "replies": [], "depth": 1}, {"id": "hwiqt8u", "text": "We charge 4%. In some cases less.", "replies": [], "depth": 1}, {"id": "hwisltw", "text": "For someone who only fiddles residential RE, Can someone explain what OP is asking? When do these fees come up, and in what kind of transaction.", "replies": [{"id": "hwji0nu", "text": "Development projects can take years until they are stabilized and cash flowing, so often developers charge a \"development fee\" to the project to cover their overhead/salaries during this time.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hwjs8ur", "text": "We do residential development and take 3% of projected revenue.  \n\nMy lender approved 4% recently.   I usually request 50% on funding and the rest over 12 months of the life of the project.", "replies": [], "depth": 1}]