Is the sponsor making too much money on this deal? In this episode, CREI Collin breaks down sponsor compensation—what fees are standard, what fees should raise questions, how promotes work, and how to evaluate whether a sponsor's compensation is fair, transparent, and aligned with your success as a passive investor.

• The five main components of sponsor compensation and what each one covers

• What fees are standard vs. what fees should prompt questions

• How the promote (carried interest) ties sponsor compensation to performance

• Why GP co-investment is one of the strongest signals of alignment

• Red flags in sponsor compensation that should cause concern

• A framework for evaluating total sponsor compensation as a percentage of LP profits

[00:00] Introduction Why understanding sponsor compensation is critical for evaluating alignment and fairness

[02:20] The Five Main Components of Sponsor Compensation Acquisition fee, asset management fee, refinance fee, disposition fee, and promote

[06:40] What Fees Are Standard vs. What Should Raise Questions Industry benchmarks for fees and when to ask for clarification

[11:30] Understanding the Promote and Alignment Why the promote is the most important component and how it should be structured

[16:20] The Role of GP Co-Investment in Alignment Why skin in the game matters and what typical GP co-investment amounts look like

[20:10] Red Flags in Sponsor Compensation Fees stacked on fees, promote before preferred return, related-party fees, and vague disclosures

[23:50] How to Evaluate Total Sponsor Compensation A framework for calculating compensation as a percentage of LP profits and comparing to benchmarks

[27:10] Recap and Action Steps How to evaluate sponsor compensation in your next syndication deal

✅ Sponsor compensation typically comes from five sources: acquisition fee (1-3%), asset management fee (1-2%), refinance fee (1%), disposition fee (1-2%), and promote (20-30%)

✅ Fees within typical ranges are generally reasonable—fees above those ranges should prompt questions about the value being created

✅ The promote is the most important component because it ties sponsor compensation to performance—the LP should receive their preferred return and capital back before the sponsor takes promote

✅ GP co-investment is a strong signal of alignment—when the sponsor has their own money at risk, they're more likely to make conservative decisions

✅ Red flags include excessive fees, promote that kicks in before LP preferred return, undisclosed related-party fees, and vague or undefined fee structures

✅ Evaluate total sponsor compensation by adding up all fees and promote, calculating it as a percentage of LP profits, and comparing it to industry benchmarks and the sponsor's track record

• CREI Partners: CREIPartners.com

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This podcast is for educational and informational purposes only and does not constitute legal, tax, or investment advice. Always consult with a qualified CPA, attorney, and financial advisor before making any investment decisions.

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