Acquisition Fee

Offering documents define the fee, its base and who receives it.

A non-traded industrial real estate partnership's Form 10-K for 2025 pays its general partner an acquisition fee for sourcing, underwriting, evaluating and acquiring each property, including through co-ownership arrangements or 1031 exchanges, of up to 1.0% of the total purchase price or agreed contribution value. The same report says its acquisition, asset management and disposition fees are payable regardless of how the investments perform.

An older net lease partnership's Form 10-K for 2005 paid its general partner 4% of aggregate purchase prices plus an increment tied to debt, capped at 5% in total, and capitalized those fees into its investment in land and buildings. Rates differ widely by program, so the only number that matters is the one in the document in front of you.

For DST programs, the 2025 partnership report says the sponsor receives fees and expense reimbursement from the investors who buy DST interests for acquiring and contributing the property to the trust. A non-traded REIT's 2025 annual report says its DST program costs are funded by investors through purchase price mark-ups of the properties' initial estimated fair value, fees at the time of investment, or deductions from distributions.

In a worked example, the fee sits inside the price of your interest.

Hypothetical: a DST buys a $20,000,000 building with a $10,000,000 loan and charges a 2% acquisition fee, $400,000, which the equity raise must cover along with other offering costs. If you buy 10% of the beneficial interests for $1,100,000, your share of the fee is $40,000 before commissions and other costs. Run your own numbers with your CPA.

When you buy property directly, Reg. section 1.263(a)-2(f) requires you to capitalize amounts paid to facilitate the acquisition of real property, so your own acquisition costs go into basis rather than being deducted. How a DST's embedded fee is reflected in each investor's basis is set out in the sponsor's tax reporting; confirm it with your CPA.

It bites when you compare total load across offerings and against buying direct.

Form D shows only part of the picture: Item 15 reports sales commissions and finders' fees, and Item 16 the gross proceeds used for payments to executive officers, directors or promoters, where an affiliate's acquisition fee may or may not appear. A fee taken as a price mark-up appears in neither, so read the private placement memorandum's compensation disclosures. See reading a DST PPM and Form D.

Add the acquisition fee to commissions, offering costs and financing fees to get the total load, then compare it with the tax you would pay by not exchanging. The arithmetic is laid out in DST fees and loads and closing costs when buying a DST.