Item 5. Fees and Compensation
Real Estate Advisory Services
Barings Real Estate provides a variety of real estate advisory and management services,
primarily to institutional clients. All fees are subject to negotiation and take into
consideration the size and complexity of the mandate and reporting and servicing
requirements, among other matters. See below for information regarding the Firm’s fees
for such services.
Public Real Estate Equity Securities
As disclosed in Item 4 above, Barings Real Estate manages portfolios of public real estate
equity securities for institutional clients. Barings Real Estate does not have a set fee
schedule; however, the Firm’s fees are based on a percentage of assets under
management and may include performance-based fees in accordance with Rule 205-3 of
the Investment Advisers Act. Fees currently range from 25 basis points to 70 basis
points. Fees are negotiable based, in part, upon the specific investment strategy, account
size, and client specific reporting and servicing requirements.
Public Real Estate Debt Securities
As disclosed in Item 4 above, Barings Real Estate manages and/or advises portfolios of
public real estate debt securities (principally CMBS and REIT debt) for institutional
clients. Barings Real Estate does not have a set fee schedule; however, the Firm’s fees
are based on a percentage of assets under management and currently range from 7.26
basis points to 30.0 basis points. Fees are negotiable based, in part, upon the specific
investment strategy, account size, and client specific reporting and servicing
requirements.
Equity Investments in Real Estate
As disclosed in Item 4 above, Barings Real Estate provides advice with respect to real
estate equity investments and asset management services. Barings Real Estate does not
have a set fee schedule. All client relationships are negotiated and clients may be
charged one or more of the following types of fees in the management of the client's
direct real estate investment:
Barings Real Estate may charge an asset management fee based on a percentage of the
aggregate purchase price or market value of the investments acquired ranging from 30
basis points to 110 basis points, a percentage of the investment’s net income ranging
from 6.5% to 7.0%, or a combination thereof. In addition, Barings Real Estate may
receive incentive fees based on performance measures.
Barings Real Estate may charge a property acquisition fee equal to a percentage of the
acquisition cost of an asset. Acquisition fees generally range from 0 to 75 basis points of
the gross purchase price of the property.
Additionally, Barings Real Estate may charge a disposition fee equal to a percentage of
the net sales proceeds of a property, ranging from 0 basis points to 25 basis points.
Real Estate Debt and Alternative Investments
As disclosed in Item 4 above, Barings Real Estate provides advice with respect to real
estate related debt investments. Barings Real Estate does not have a set fee schedule, as
fees are negotiated on a case by case basis. Broadly speaking, Barings Real Estate
charges between 10 and 150 basis points of outstanding loan balances or 140 basis points
of net equity invested for ongoing management fees, depending on product strategy. In
addition, Barings Real Estate may collect a performance fee and a share of origination
and extension fees.
Mortgage Loan Servicing
For mortgage loan servicing clients, Barings Real Estate charges the following fees:
Barings Real Estate charges a primary servicing fee, based on the amount outstanding
under the mortgage loan on an annual basis that typically ranges from 0.01% to 0.45%.
In addition to the primary servicing fee, Barings Real Estate also charges a special
servicing fee when mortgage loans that Barings Real Estate services go into default.
Special servicing fees are based on the amount outstanding under the mortgage loan on
an annual basis, and typically range from 0.15% to 0.25%. All such fees are typically
negotiated on a case-by-case basis.
Funds Business
When a client purchases an interest in a Barings Real Estate sponsored fund, fees are
charged in accordance with the schedule set forth in the fund documents (e.g., limited
partnership agreement and side letters). Client fund investments are not subject to fee
schedules outside of those set forth in the fund documents.
Fees in General
Depending on the particular arrangement with each client, we will either invoice clients
or directly debit their custodial accounts.
Most fees are billed in arrears at the end of each quarter, based upon the billable balance
on the last day of the previous calendar quarter, pro-rated for additions and withdrawals.
Fees and account minimums for all services are negotiable based upon certain criteria
(i.e., anticipated future earning capacity, anticipated future additional assets, dollar
amount of assets to be managed, related accounts, account composition, negotiations with
client, service and reporting needs, etc.).
We may group certain related client accounts for the purposes of determining the account
size and/or annualized fee.
Barings Real Estate will not collect fees in excess of $1,200 per client six months or more
in advance of services rendered.
Incentive Fees
In some instances, Barings Real Estate may charge an incentive fee. Incentive fees will
be negotiated with and disclosed to the client before entering into a written advisory
agreement.
Unless otherwise set forth in the clients advisory agreement, clients who elect to
terminate their contracts will be charged an incentive-based fee based on the performance
of the account for the measuring period going back from the termination date and pro-
rated from the date on which the performance-based fee was last assessed.
In measuring the client's assets for the calculation of performance-based fees, Barings
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