Asset Management Fee

Filed documents show the base, the rate and whether the fee waits behind investors.

A non-traded industrial real estate partnership's Form 10-K for 2025 pays its general partner a monthly fee of up to one-twelfth of 1.0% of assets under management, measured at book value: purchase price plus closing costs, with no reduction for depreciation. It separately pays a property management fee of 2.00% to 4.00% of monthly gross receipts, and its risk factors note that a fee based on book value rather than performance may not give the manager an adequate incentive to run the portfolio profitably.

A non-traded REIT's Form S-11/A from November 2021 says each trust in its DST program may pay the manager a fee set as a to-be-agreed percentage of the trust's net asset value.

An older net lease partnership's Form 10-K for 2005 shows subordination: its fee of 1% of gross rental revenues was payable only after limited partners received annual distributions equal to a cumulative, non-compounded 10% return on their adjusted invested capital.

In a worked example, the same rate on a different base doubles the cost.

Hypothetical: you invest $1,000,000 in a program that is 50% leveraged, so your share of property is $2,000,000. A 1% fee on book value costs $20,000 a year, 2% of your equity; a 1% fee on equity costs $10,000. Over a ten-year hold that is $200,000 against $100,000 on the same stated rate. Run your own numbers with your CPA.

A book value base also does not fall when the market does, while a NAV base moves with the appraised value. Neither tells you whether the property is doing well, which is the case for subordination. Ask which base applies, how often it is measured, and whether the rate can change during the hold, and put the answers beside the distribution rate you are quoted.

It bites in the cash that reaches you each quarter and in co-ownership rules.

In the trust described in Rev. Rul. 2004-86, the trustee had to distribute all available cash, less reserves, every quarter in proportion to each owner's interest, so trust-level fees are paid before that cash is counted. Where the fee sits among the sponsor, trustee and master tenant layers is covered at DST management layers.

For tenant-in-common arrangements seeking an IRS ruling, Rev. Proc. 2002-22 requires that fees paid to the manager not depend in whole or in part on the income or profits of any person from the property and not exceed the fair market value of the manager's services. See Rev. Proc. 2002-22 and DST fees and loads.