What makes it a syndication?

[Sarah Msuya]

I am putting together a large deal using capital from one private investor. Does this classify as a syndication or is there a less complicated structure that can be used? 

[Greg Scott]

That is a great question for your attorney.  You will need one regardless of what structure you use, so ask.

If someone gives you money with the idea that you are going to do all the work and give them a profit, then you have technically created a security, and would need to use one of the SEC exemptions under Reg D.  Most people that have one private investor, that investor has a pretty big voice in how the deal is run.  In that case, it might not require a Reg D exemption.  Seek qualified advice.

[Brock Mogensen]

Syndications mean a General Partner / Limited Partner structure. Where the GP does all the work (and is compensated with free equity) and LP is a silent partner.  If you are just going to be splitting equity based on capital invested, you likely want a Joint Venture structure.  A good attorney familiar with Operating Agreements will be able to provide further insight. 

[Evan Polaski]

Syndication vs JV is a topic for your attorney. I would agree with Greg, that typically a single investor would have enough say in the deal to allow for a JV structure, but not always. Regardless, of the legal structure, i.e. syndication and sale of securities or JV with active partners. You can set out within your agreement how you can share in profits beyond any equity you invest.

But the point is: talk with a securities attorney.  They will not only be able to help with whether you are issuing securities, but generally most any attorney can draw up basic partnership agreements.  The inverse is not true: i.e. a business formations and partnerships attorney may not know securities law.

[Ronald Rohde]

Syndication I'd define as a SEC raise requiring registration or exempt e.g. 506(c), etc.

One investor is probably just a JV.

[Zack Gill]

Whats a typical structure for something like this? Not trying to hijack but am just curious as OP said large deal with one investor... hypothetical question of say the deal is 1mm purchase price with some value add opportunity to then be able to raise rents/value to say 2mm over two years and have good cashflow. How does each the GP/LP or if structured like a few have mentioned just a JV each get paid? Say the one investor is the cash down and the GP does all the work, is there a general expectation in the industry of each partners return? Or after a few years do you cashout refi and payoff your original investor?!

[John Mazzella]

@Sarah Msuya I agree with what was said above about contacting a securities attorney. If you can make the case that the investor is an activate participant in the deal you likely will not need to run the deal as a syndication. 

[Ronald Rohde]

Quote from @Zack Gill:

Whats a typical structure for something like this? Not trying to hijack but am just curious as OP said large deal with one investor... hypothetical question of say the deal is 1mm purchase price with some value add opportunity to then be able to raise rents/value to say 2mm over two years and have good cashflow. How does each the GP/LP or if structured like a few have mentioned just a JV each get paid? Say the one investor is the cash down and the GP does all the work, is there a general expectation in the industry of each partners return? Or after a few years do you cashout refi and payoff your original investor?!

80/20 capital, 50/50 profit
Fees are additional

[Zack Gill]

When you say 80/20 capital, do you mean the investor gets 80% of the cashflow and then 50/50 split profit if its sold? 

Then yes fees. 

[Paul Moore]

Hi @Sarah Msuya! I would have thought this would just be a joint venture, and I have done many of these in years past. However there may be things an attorney can tell you that you should know. I've done many JV's and syndications as well. If you can make it a JV I recommend you do. Good luck!

[Chris Levarek]

@Sarah Msuya I'd say a joint venture will work. The key is simply ensuring the private investor has active involvement. So this could mean a monthly meeting with a docusign termed "monthly minutes" for example, scheduled email updates, etc. 

In the end, it's Active participation versus simply passive investment. How you choose to do define that separation, that is up to you but it should be defined. Consult an attorney of course, the above are just recommendations from experience.

It's also worth mentioning, if they don't have ownership, you aren't really selling a security. If you aren't selling a share but using debt instead(private lender), thats not a security. Sounds like you are though...

[Daniel Apke]

Syndications mean a General Partner / Limited Partner structure. Where the GP does all the work (and is compensated with free equity) and LP is a silent partner. Get with a RE accountant and attorney for something like this if you want to make it a legitimate Syndication. If you're just collecting money from friends and family to invest get with an attorney to figure out legalities but it does not need to be as formal as traditional syndications. 

[Ronald Rohde]

Quote from @Zack Gill:

When you say 80/20 capital, do you mean the investor gets 80% of the cashflow and then 50/50 split profit if its sold? 

Then yes fees. 

 80% of contributed equity, 50% of all distributions, losses, and tax benefits

[Steve Vaughan]

Quote from @Sarah Msuya:

I am putting together a large deal using capital from one private investor. Does this classify as a syndication or is there a less complicated structure that can be used? 

 Mine is just a lender, but they are older and don't care for equity.  That's probably simplest,  if they just have a mortgage. 

Another option may be to own as tenants in common and have a JV agreement. Certainly wouldn't think one partner requires a lot of compliance, especially if you know them.