Syndicates can be a useful tool for pursuing real estate ventures that each member would not have been able to pursue individually. But as you may well know, their formation involves more than just a handshake and a nod to go ahead. There are objectives to be decided, capital to be raised, and legal documents to be drafted. Many times their biggest concerns involve one of the following:
- How to get the syndication done in the time frame required
- How to put a deal together where the syndicator makes money too
- How to covey a message to investors that their money is in good hands
Moschetti Law Group serves early-stage companies by helping them assess the hidden obstacles to capital-raising success. Our experience comes from syndications we have formed and successfully run from inception to final disbursement to investors. Our team of real estate attorneys works only with syndicated real estate investments—it is what we know and do every day. But the art of our counsel also includes a deep understanding of what accredited and institutional investors want and need to see from the marketing materials to inspire investment interest.
Andy and James are real estate agents with a great sense of a ‘good deal’ and sales ability. The team are top producers in luxury real estate and have a client roster that includes celebrities and business moguls. A great apartment building was available through a client relationship, but they didn’t have the capital to take it down themselves.
We worked with the team, built a business strategy that would be successful, drafted their legal documents, and guided them through the minefield of what they could and couldn’t do. Andy and James are now the managing members of their syndication, and their investors want more.
What is a syndication?
Real estate syndication brings together multiple investors to fund a project they would not individually take on.
Syndication partners may be investors, developers, or business people who come together to invest in an opportunity. Their relationships and their roles may differ, but they work together to realize a real estate enterprise.
What types of properties can be syndicated?
Syndication has a very broad utility. While the most common syndication use is commercial real estate ventures like apartment complexes, office or retail space, and industrial sites, syndication can also be used for a single-family residence, land, or debt.
How does syndication benefit the sponsor financially?
The original investor, or “Sponsor,” may charge subsequent investors the following types of fees:
- due diligence
- asset management
- property management
These fees can come in the form of a percentage of capital raised or a percentage of gross revenue and are charged at various points over the investment cycle.
Will you help me market for investors?
No, not directly. What we will do when reviewing a client’s marketing package, Moschetti Law Group focuses on areas that will increase their ability to raise capital. This can mean suggestions for improving elements of the package from the perspective of a potential funder. We are experienced with marketing packages geared toward generating capital through private or public funding sources, including real estate crowdfunding.
What type of services do you provide when I consult with you for syndication formation?
Our real estate syndication attorneys can assist with the following aspects of forming your syndication:
- Goals and objectives – creation and clarification
- Business plan – creation and clarification
- Capital raising – best practices and best sources
- Capital raising strategy development
- Due diligence
- A network of underwriters for referral
- The legal offering – structuring and drafting
- Review of current protections
- Company securities – selecting the type and infrastructure for sale
Can you help me figure out the laws and regulations?
Absolutely. Your syndication needs to stay abreast of applicable laws and regulations that restrict and open opportunities for your real estate venture in the formation process. These laws and regulations can seem daunting to the unfamiliar, and assistance from an experienced real estate attorney can make following these guidelines possible and profitable. Some of the legal considerations surrounding syndication include:
- Regulation D – raising capital using public advertising to specific funding amounts and from specified investor types
- Regulation D Rule 506 – exemptions from registration that allow un-capped capital raising potential
- Regulation A – caps on how much capital can be raised in a year and rules on how you market your offerings to raise that capital
- Regulation CF – offering and selling securities through crowdfunding