New Syndication Forum!

Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes

I am very excited that we have a special forum for syndication and fundraising for CRE now. There has been a group on BP for about a year that has grown considerably, but now we will have a forum on the main page.

I encourage everyone interested in raising funds for CRE to post here so that we can all learn from each other and get some money flowing to deals.

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Jilliene H.

Los Angeles, CA · Member since 2012 · 58 posts · 31 votes

12y

I've looked at $700 million in syndicated real estate transactions across 50 syndications in the last few months, so would be happy to share my experience if anybody needs help. We recently analyzed $315MM of that $700MM - few stats that may be interesting:

- Most real estate syndications have a preferred return to investors and a promote so that additional cash flow and appreciation is split between the investor and the sponsor

- Average preferred return was 8.5% (most common was 8%).

- Average promote was 67/33 - albeit none of them were actually 67/33, but there were a lot of 70/30 and 60/40 (i.e. 70% to investor, 30% to sponsor, etc.)

- Most include an acquisition fee of 1-2% paid to the sponsor

- Disposition fees are rare

- For sponsors that are not doing active property management, there was sometimes a 1-2% asset management fee paid on gross or effective gross revenues

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James Hiddle
Altus, OK · Member since 2008 · 2k+ posts · 690 votes
15y
Signing in.
0 Reply
James Vermillion
Lexington, KY · Member since 2009 · 2k+ posts · 1k+ votes
15y
I will try to get involved as well. CRE is not my focus...yet, but I plan to start learning what I can now.
0 Reply
Greg B.
Homeowner · Burleson, TX · Member since 2008 · 756 posts · 376 votes
15y
Interested as well.
0 Reply
Ryan Schroder
Property Manager · St Paul, MN · Member since 2011 · 4 posts · 1 vote
15y
I too would be interested in such a forum
0 Reply
Bryan Hancock
OP
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
15y
Good thing it exists guys...you're posting in it!
1 Reply
Mark UpdegraffBusiness Member
Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 692 votes
15y
Syndication newbie here. How exactly does it work? Equity partners? Any text references to catch up to speed would be appreciated. I've been in residential for about 5 years and look forward to getting a commercial deal under my belt.
Podcast Guest on Show #112
Updegraff Group Realty4.746 Reviews
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Bryan Hancock
OP
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
15y
Mark....there are some great threads on this in the main board and there is also a BP Syndication Group. I would suggest looking there first.

I haven't found any great books on the subject. It is very hard to account for all scenarios and is really something better to learn by doing...like typing. Gene Trowbridge and Sam Freshman have some books if you would like to check them out. There is also a BP thread about syndication books if you do a quick search.
1 Reply
Adam A.
Real Estate Broker · West Toluca Lake, CA · Member since 2011 · 2 posts · 1 vote
15y
Is this group forum dead. No action in months. Anyone still here?
0 Reply
Joshua D.Pro Member
BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votes
15y
Adam - The forum was created only a month ago. The older posts were migrated in. We had several members pushing us to open this forum, and we've seen little activity in it, as you can tell. If this area continues to see no growth, we will unfortunately be forced to close it down. I hope the community jumps in and gets active around here!
Podcast Guest on Show #100
1 Reply
Bryan Hancock
OP
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
14y
There have been some fantastic syndication threads lately. I asked Josh if he could merge the posts from my old Syndication Group with this new forum so that we can hopefully add to the recent uptick in activity. I know there are tons of people out there looking for this information so we just need to keep the conversation moving forward to keep the forum up and running.

Please post away!
0 Reply
Tyson Cross
Investor · Portland, OR · Member since 2013 · 133 posts · 88 votes
13y
So I am learning all I can about syndication right and I know there is a ton of information out there. I'm sure things are changing with the new JOBS Act that was passed last year. I was wondering if anyone has used any of the new websites that are designed to advertise deals for syndication such as Capdominus. I actually participated in a demo last night with someone from this site and thought it was pretty cool. I wonder if anyone has used these sites to raise capital for a deal and what their success rate has been? My feeling is it might be a great way to see who the playhers are and who would be interested in specific deals, but in the end..it's really going to come down to creating a relationship and getting that person to trust you.

Does anyone have a syndication deal in the works or recently completed one? I would be interested to hear about it.
0 Reply
Jeff Greenberg
Real Estate Consultant · Camarillo, CA · Member since 2010 · 2k+ posts · 1k+ votes
13y
We are in the process of working on a deal that should close mid Oct. 1.3 mil purchase, 700k raise. I will report in as we move along.
0 Reply
Bryan Hancock
OP
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
13y
@Tyson Cross

I tried navigating that Capmodius site this evening and I found it hard to use. Have you had any success there?
0 Reply
Will BarnardPro Member
Moderator
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
this is fantastic, I must have missed all previous attempts at such a forum thread. I am in and will keep an eye on this so it does not fall off my radar.

Syndication is not something I have previous experience in, however, it is a logical step in the commercial direction with my RE experience and resources.

I look forward to doing deals with as many BP members as possible.

Will
Podcast Guest on Show #130
0 Reply
Tyson Cross
Investor · Portland, OR · Member since 2013 · 133 posts · 88 votes
13y
This is the most exciting form of real estate investing to me. I have a background in commercial property management and moving toward my CCIM. Would love to talk with more people interested in forming syndications and or possibly partnering to create a management/investment portfolio.

@Jeff Greenberg, where is the deal you are aquiring located?

@Bryan Hancock, I just started getting familiar with capdominus, so I don't hav emuch experience with it. Given the fact that the SEC requirements are changing, I'm curious to see how it changes the landscape of syndication investing. There will be a lot of people advertising supposed deals. However, I believe it will continue to revolve around the relationships that one builds and maintains. What has your experience been with these types of platforms?

@Will Barnard , I'm about half way through your podcast - good stuff. I think syndication is a great direction to move in down the road with your resume.
1 Reply
Jeff Greenberg
Real Estate Consultant · Camarillo, CA · Member since 2010 · 2k+ posts · 1k+ votes
13y
Tyson, This deal is in Houston. We are working on a couple of others in San Antonio.
0 Reply
Bret N.
Real Estate Broker · Woodbridge, VA · Member since 2013 · 179 posts · 33 votes
13y
Am I missing something about where to locate the forum on this. Syndication is an interesting topic I would like to Learn more about. Thanks
0 Reply
Jeff S.
Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
13y
Any advice for people considering, or already, investing in these? What are the red flags to especially look for?

Have a friend jumping in.
0 Reply
Allan Glass
Investor/Developer · Los Angeles, CA · Member since 2010 · 107 posts · 92 votes
13y
Does anyone have thoughts on how the new JOBS act which went into effect yesterday, will affect raising capital in syndications?
0 Reply
Verran Jones
Investor · Lawrenceville, GA · Member since 2013 · 123 posts · 7 votes
13y
Looking to learn to from this forum.
1 Reply
Jilliene H.
Los Angeles, CA · Member since 2012 · 58 posts · 31 votes
12y
I've looked at $700 million in syndicated real estate transactions across 50 syndications in the last few months, so would be happy to share my experience if anybody needs help. We recently analyzed $315MM of that $700MM - few stats that may be interesting:

- Most real estate syndications have a preferred return to investors and a promote so that additional cash flow and appreciation is split between the investor and the sponsor

- Average preferred return was 8.5% (most common was 8%).

- Average promote was 67/33 - albeit none of them were actually 67/33, but there were a lot of 70/30 and 60/40 (i.e. 70% to investor, 30% to sponsor, etc.)

- Most include an acquisition fee of 1-2% paid to the sponsor

- Disposition fees are rare

- For sponsors that are not doing active property management, there was sometimes a 1-2% asset management fee paid on gross or effective gross revenues
9 Reply
Jilliene H.
Los Angeles, CA · Member since 2012 · 58 posts · 31 votes
12y
@Allan Glass I am pretty familiar with the JOBS act both for general solicitation which was made legal Sept 23 and the proposed regulations for non-accredited investors. There are a variety of real estate companies who are using marketing/general solictation but I think as a whole most accredited investors do not want to share their tax return information and many service providers (CPAs, attorneys or broker/dealers) do not want to be on the hook for "certifying" their investors as accredited. Will be interesting to see how it evolves. As for non-accredited investors, I don't think there will be any final decision and implementation on that until Q1 or Q2 2014.
2 Reply

Peter Dalal

Rental Property Investor · NY, NY · Member since 2013 · 14 posts · 12 votes

12y

Dear Allan

Under Job Act There was changes in Regulation D. Under Rule 506 (c) , Syndicators may use general solicitations to Accredited investors only. The following may help you in understanding it:

http://www.sec.gov/answers/rule506.htm

Regulation D Rule 506: 506(b) vs 506(c)

In July 2013, the SEC adopted the new Regulation D Rule 506 (c), which is authorized by the JOBS Act (Title II). This new Regulation comes into effect on September 23, 2013. Under the new rule, persons (syndicators, sponsors, or promoters) that are selling "Securities" to private investors will be allowed to advertise their private investment opportunities, under certain conditions.

Rule 506 (b)	Rule 506 (c)
Unlimited number of Accredited Investors and 35 Sophisticated Investors	Only Accredited Investors are allowed. No Sophisticated Investors
Must have a pre-existing relationship	Pre-Existing Relationship not needed. Allowed to Advertise.
Investor needs to self-certify in their Pre-Qualification form that they are either an "Accredited Investor" or "Sophisticated Investor" or neither.	Issuer must verify income of an Investor by reviewing filed tax returns for the past 2 years and written assertions from the Investor that the income is expected to continue. Issuer must also verify the assets by reviewing statements from brokerage houses or banks, etc or they have to obtain a written confirmation from a securities broker, dealer, registered investment advisor, licensed attorney or CPA, who asserts that the Issuer has taken reasonable steps to verify the Investor's accredited status within the past 3 months and that the Investor is indeed "Accredited".

New Rule - Rule 506(d)

The SEC also adopted amendments to rules 501 and 506 to be implemented on Sept 23, 2013. This will be known as Rule 506(d).

This new rule will disqualify convicted felons and "Bad Actors" (persons that have been convicted of, or subject to a cease and desist order, injunction, disciplinary order, etc, issued by certain federal financial regulatory agencies or the postal service) from claiming a Rule 506 exemption.

Disclaimer:

You are responsible to check with and follow current SEC laws. You may visit www.sec.gov for any updates. We are not registered investment advisors, tax advisors, legal advisors, nor financial advisors. Any information presented here is for Educational Purposes only. Past performance is not indicative of future results. Please consult your investment advisor/tax advisor and legal counsel before investing.

1 Reply

Peter Dalal
Rental Property Investor · NY, NY · Member since 2013 · 14 posts · 12 votes
12y
What is Syndication in Real Estate Acquisition process?

Syndication is basically the joining of parties/individuals that are engaged in an enterprise of common interest. For this particular purpose, it is for real estate. There is usually a party that is active in the management and day to day operations (most likely you) and the other party that is passive (most likely your private money partner).

Generally there are three phases in the syndication process:
1. Origination : This phase involves planning, property acquisition, registration satisfaction, disclosure, and marketing.
2. Operation : This phase is really where the sponsor handles/manages the syndication and the real property
3. Liquidation/Completion : This phase involves the resale of the property
Before jumping into the first phase, Origination, you will want to establish the company that will purchase and own the property you are looking to acquire. It is best to consult a lawyer as to what entity structure you should form for this company. However, many people form a Limited Liability Company (LLC) because there is a limit in liability as well as a stronger operating agreement. Another thing to keep in mind is you will want to form a second company that will be the managing member of the first company.

Origination

During this phase, you will want to look for the property that the investors will be investing into with the returns that they are hoping to achieve. Any property should be secured through a Letter of Intent. Once this is completed, then you can complete the Private Placement Memorandum (PPM).

*It is extremely important you follow SEC rules and regulations. You must consult your legal counsel when it comes to offering any PPM.

Operation

Operations is when you will manage the day to day operations of the company and the actual property. You must keep open communication with your investors during this phase to keep their confidence in your investments.

Here are some points when you should communicate with your investors:
- Monthly : You should send out to your investors an executive summary of what had taken place at the property over the past month, including revenues, expenses and cash flow
- Quarterly : You should have a quarterly summary of what took place at the property. You may want to consider a quarterly call with your investors.
- Annually : Annually, you should notify your investors of the tax information and budget for the following year. At this time, you should also have the Scheduled K-1s, Partner's Share of Income, Deductions, Credits, etc all distributed
Liquidation

During this phase, you are either refinancing the property or reselling. All investors, the sponsor, and any liabilities should be paid at this time. Final tax documentation should also be provided for this property.

You may want to dissolve the LLC that was created to purchase the property

Disclaimer:You are responsible to check with and follow current SEC laws. You may visit www.sec.gov for any updates. We are not registered investment advisors, tax advisors, legal advisors, nor financial advisors. Any information presented here is for Educational Purposes only. Past performance is not indicative of future results.The above article may not be 100% accurate, so please consult your investment advisor/tax advisor and legal counsel before investing.
5 Reply
Marshall Downs
Investor · Benton Harbor, MI · Member since 2013 · 257 posts · 140 votes
12y
Just getting into the conversation. I am looking to syndicate a deal now. Mixed use, distressed condo conversion. Lots of loose ends to tie up but conservative estimates show a 25% ROI to investors with about 10% to me for structuring deal as well as CM fee. I'll keep posting with progress.
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