Development Associate - Salary Stack: Equity/Bonuses
Yeah, I called it a Salary Stack. I hate myself, too.

Looking for advice/insight on salary. Currently a development manager with 5 years of experience on $140m plus of class A multifamily development. Have been offered an associate role for $100,000 (less than what I make now), with offers of $10k in equity per deal, 1.5% commission capped at $50k for any off market deals or PE I bring in, and up to $25k in bonus. I'd prefer to have no cap and base it on a tiered structure and have chance of either equity or cash.

This company is similar to a start up. Has 3 deals in their pipeline, but not closed. Steady growth over the last decade with 3 partners. More importantly, they just seem like fun/smart people to work with. Unlike my current role.

I've been interviewing for a long time trying to find the right next step for my career and was expecting a salary base of at least $125k if not more plus interest.

My question is, how can I predict what that $10k could even out to? Can someone explain it to me like I'm 5? I do cash flow models, I get it. I get where the money is going and coming from, but I don't have all of the information to truly model it and understand that in year X I will get $ and that feels risky to me.

Additionally, moving from a family run firm that doesn't have any specific structure like this, so this is my first time negotiating this type of salary. Any input on best practice/favored salary stack is appreciated. I don't want anything tied to the performance/schedule of a deal. But, assuming that salary grows each year, 1/2 of bonus, plus acquisitions average 2-3 per year, I anticipate an extra $30k at some point. But, the payout would not be any time soon.

Hopefully this is clear. Thanks in advance.

Edit to say: I don't think this is necessarily career advice. More finance related, but if it's not the right group/against the rules, I'll post elsewhere! Thanks.
[{"id": "i3a2n01", "text": "Couldn\u2019t you just look at the underwriting and determine the future value of your $10k equity based on the equity multiple? Also, important to know if your $10k goes on the GP or LP side.", "replies": [{"id": "i3a8sj9", "text": "It's LP and I don't have any additional information on their underwrite. I will ask for more specifics.", "replies": [{"id": "i3akebv", "text": "Always ask for a model during the interview process so you can validate their underwriting and assumptions. I\u2019ve found this to be pretty valuable.", "replies": [{"id": "i3amrmf", "text": "I didn't know I could! Which is short sighted of me now that I think about it. Thank you.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i3a3edq", "text": "Developers make money on the developer fee, acquisition fee, asset management fee (if vertically integrated firm), and even construction. The main source of income being the developer fee which is what keeps the lights on. This fee gets charged throughout the construction of the project (months 0-24). The other money (majority of it) doesn\u2019t come until a capital event (refi or sale) materializes (promotes and ownership splits between GP/LP). Your 10K (and other comp) will probably come from the acquisition/developers fee, which is usually paid out at closing (acquisition fee) and/or until the project is stabilized (0-24 months). This is not much and I would try to negotiate on a percentage of equity per deal, given it looks like you will be taking a pay cut to join this company which is also a start up. Most of the money really comes from the GP/LP splits at exit one of the project and the corresponding promotes. However, these don\u2019t come for 5-10 years depending on the hold period (usually 10 years).\n\nThere could be huge opportunities if the partners have a good investor base and can maintain solid deal flow. At the very least, I would push on the 10k to 15 or 20. That 10k is hard to put into numbers given we don\u2019t know the GP/LP ownership structure of the deals and what the promote breakdowns will be. But 10k on a $140mm deal is peanuts to what the developer takes from hitting the promotes. Especially on $140MM deal sizes. \n\nIf the firm is growing and getting traction, you will learn a ton and be in a position to lead some of the developments where you can negotiate a larger stake (percentage wise rather than flat number) of the equity in the project. That\u2019s where the money is, especially if you\u2019re working on larger development deals.", "replies": [{"id": "i3ae8oq", "text": "&gt;This is not much and I would try to negotiate on a percentage of equity per deal, given it looks like you will be taking a pay cut to join this company which is also a start up. Most of the money really comes from the GP/LP splits at exit one of the project and the corresponding promotes. However, these don\u2019t come for 5-10 years depending on the hold period (usually 10 years).\n\nThank you for the thorough response. Definitely aware of the fees based on my current project. I'm not familiar with their structure outside of refi at stabilization, which means I'm on my base salary for at least 3 years assuming minimal cost of living increase. My assumptions are an equity multiple of 2 and a refi at year 3. But, obviously I will need to clarify their promote structure. I do know they have two sources of outside investment outside of their own. \n\nIs there an industry standard percentage if I don't have it as base dollar amount? That's exactly what I was trying to get at in my post... $10k on any the size that they do is total pennies. Would be a shame to shortchange on that if I should negotiate more. Pun not intended, but it works... \n\nI think at the end of the day, I need to weigh my personal risk/reward tolerance/patience on additional income. And also my risk tolerance on their company performance. I'm going from a big, but totally unstructured company, to a smile, but semi structured firm. \n\nI've been burned before because of my lack of education on negotiating bonus and wanted to make sure I'm asking for the best terms for my role/future. \n\nThank you.", "replies": [], "depth": 2}], "depth": 1}, {"id": "i3a7c5e", "text": "This seems structure seems pretty cool. I have never worked in PE however I interviewed with a small firm in my market. They were targeting 1.8x to 2.0x equity multiple upon exit. You would need to find out how many deals you are doing a year however this couple mean if you are doing a couple a quarter you would be looking at more than doubling your base. There would be a ramp up period however because the deals you would be looking at today wouldn\u2019t be sold until the soonest probably 2 years from now. I also like the bonus attached to bringing in your own equity. I don\u2019t think it would be hard to find investors to reach your cap which equates to around $3.5MM in equity brought into the firm. You would be looking at total comp of 300k if you the firm sells 8 deals a year at the equity multiple I said and you hit your commission target.", "replies": [], "depth": 1}, {"id": "i3cj25p", "text": "Deal bonuses and salary are great but getting a piece of the deal is where you can start really getting paid (imo). With LP equity are you capped out at your initial $10k slice or is there risk of further capital calls down the road if things go sideways? Conservatively you can assume an 8-15% pref on your equity but they can likely tell you the splits.", "replies": [], "depth": 1}]