The FORT Podcast: Chris Powers – GP Fees and The Pathway to Building a World-Class REPE Operating Platform
On this episode, Chris does a full deep dive into the world of fees, including what they are, should you be charging fees at all, and when, fee misconceptions, the benefits of a profitable company, and the pathway to building a world-class REPE operating platform. Chris also answers your questions submitted on Twitter and much more!
(01:16) – Why Fees?
(02:45) – Misconceptions: GP’s Charging Fees and Making a Profit is Bad
(05:20) – Charging Market Fees and Getting Great Returns
(06:49) – What are the benefits of running a profitable company?
(10:05) – GP’s That Don’t Charge or Offer Reduced Fees are Hurting their OpCo in the Long-Run
(11:01) – The Difference Between OpCo’s and Assets
(13:18) – Understand Where Your Company is: Fee Structuring for Young Companies
(15:03) – How to Charge Fees and How to Talk About What’s Behind the Fees
(17:43) – How do we know what we can charge for and what we cannot?
(21:24) – Fort Capital’s Fee Strategy Early On
(23:35) – An Outline of How to Think About Fees and Example Scenarios
(30:27) – GP’s That Don’t Charge What They’re Worth
(31:25) – Ways to Think About What You Should Be Charging
(36:04) – Running Your Company as a Break-Even Business vs. a Profit-Generating Business
(37:53) – Specific Fees to Think About
(49:18) – Real Estate Private Equity: Fees Charged to Allocate Capital to GP’s vs. Fees Charged by GP’s Who Actually Operate
(50:47) – Charging the Right Structure of Fees for Your Business
(53:50) – Twitter Question: What’s an example of a deal you’ve done and how the fee dollars are allocated?
(59:00) – Third-Party Providers
(1:00:32) – Twitter Question: Can an established sponsor with capital charge an acquisition fee that’s equal to their contribution?
(1:04:16) – Twitter Question: How have Fort Capital’s fees changed over time?
(1:07:56) – Twitter Question: 3rd Party Management & Leasing vs. Vertically Integrating
(1:10:14) – Wrap Up
The episode unravels the multiple layers of GP fees, providing listeners with a comprehensive understanding of this critical aspect of real estate investments. The discussion, rich in detail and clarity, offers valuable insights, demystifying the complex world of GP fees and ensuring investors are well-equipped to make informed decisions.
Chris Powers, a seasoned expert in the realm of real estate, navigates the discussion with finesse, ensuring each type of fee is meticulously dissected. The episode begins with an exploration of acquisition fees, shedding light on their calculation and their impact on overall investment. Powers emphasizes the pivotal role of transparency and clear communication between General Partners and Limited Partners, ensuring all parties have a clear understanding of the fee structure.
As the conversation progresses, the focus shifts to asset management fees. Powers elucidates how these fees contribute to the operational costs of managing real estate investments. The discussion offers a clear and concise overview, helping investors navigate the often convoluted world of asset management fees with confidence and clarity.
The podcast further explores construction management fees, providing insights into the various factors that influence these fees and their correlation with overall project management. Powers’ expert guidance ensures listeners gain a robust understanding of the calculation and allocation of these fees, a critical aspect for effective investment management.
Moving forward, the episode delves into the topic of disposition fees, outlining the scenarios in which these fees apply and their subsequent impact on investment returns. Powers’ clear and concise explanation ensures that investors are well-informed about this often-overlooked aspect of real estate transactions, enhancing their investment strategy and decision-making process.
The discussion on refinancing fees adds another layer to the comprehensive overview provided in the podcast. Powers outlines the circumstances under which these fees are applicable, ensuring investors have the necessary knowledge to make informed decisions regarding refinancing and its implications for their investments.
Performance fees, another significant aspect, are explored in depth in the episode. Powers outlines the structure of these fees and their direct correlation with the performance of the investment. This detailed insight equips investors with the knowledge to effectively analyze and understand the impact of performance fees on their investment returns.
Promotion fees, an essential component of real estate transactions, are also discussed in the episode. Powers provides a detailed overview of the structure and calculation of these fees, ensuring investors are well-prepared to navigate this aspect of their investments.
In addition to the above, the podcast explores various miscellaneous fees that investors may encounter in real estate transactions. This comprehensive overview ensures investors are not caught off guard by unexpected fees, enhancing their preparedness and ensuring a smoother investment journey.
The FORT is produced by Johnny Peterson & Straight Up Podcasts