20% of promote to raise 4.2 of 6.5, or 2% at close. Same answer every time.

Sponsor I've co-invested with twice wants me to bring the LP equity on their next one. 6.5m of equity total, they have 2.3m soft circled internally, so my piece is 4.2m.

Two structures on the table.

A. 2% placement fee on what I bring, paid at close out of the acquisition budget. 84k, banked in month one.

B. 20% of the sponsor promote, no fee, paid as it flows.

Running B on their own base case: 8% pref, cumulative, non-compounded, 5 year hold, 70/30 above the pref. Their projected profit is roughly 5.2m on the 6.5m. Pref absorbs 2.6m. Residual 2.6m, GP side is 780k, my 20% is 156k. So B is roughly 1.9x A, spread over five years, entirely dependent on them hitting a base case that assumes exit at 25bps inside going-in cap.

If they exit flat to going-in cap, my model says profit drops to about 3.4m, residual after pref is 800k, GP 240k, my share 48k. That's below the fee. The whole gap between the two options is the exit cap assumption, which is the one number in the model nobody can defend.

What's actually bothering me: they've offered both, which tells me they've priced neither. A 2% fee out of the acquisition budget is 84k of basis the deal has to earn back. A promote share costs them nothing until there's money.

Whether I can take a transaction-based fee at all for bringing investors in is a securities question and I have a call with a securities attorney next week, so set that aside.

The live decision is whether I ask for a hybrid, 1% at close plus 10% of promote, and whether that reads as reasonable or as me hedging out loud in front of someone I want to keep working with. Anyone priced this both ways and regretted one?