Glossary

Disposition Fee

A one-time fee paid to a GP/sponsor at sale for managing the disposition process, commonly 0.5%-1.5% of sale price, paid independently of whether the sale price achieves the investment's original underwritten return.

The disposition fee compensates the sponsor for running the sale process -- engaging a broker, managing due diligence, and closing the transaction -- and is calculated off the gross sale price rather than off any measure of profit, meaning it is earned even on a sale that underperforms the original business plan. Combined with the acquisition and asset management fees, the disposition fee completes the three-part GP fee stack that LPs evaluate alongside (not instead of) the promote when assessing a sponsor's total compensation across a deal's full life cycle.