Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
I’m looking at a strip center in the $500k range. I could sell a few of my duplexes and 1031 into it but I’ve considered just syndicating it to gain some experience on a small deal.
It’s a 100% occupied 12 cap deal with what seem to be solid local tenants. I’d raise around $200k, take a 2% acquisition fee and split the deal 70/30 with 70% going to the LP’s.
There’s some upside as the leases come up in 1-3 years but it’s mostly a cash flow play in my opinion.
Is this too small of a deal to syndicate even to do it to gain experience and build a track record with some LP’s.
I’ve got a lot of small multifamily experience but very limited commercial experience. I do have access to a local guy who’s done a lot of strips though and I feel like I could very easily raise the money for this.
I agree with @Greg Dickerson. If you're looking to gain syndications experience, then go for it. Speak with several securities attorneys to help you select the best one for what you're looking to achieve.
The deal is on the smaller side, but if your game plan to get the experience then go all in!
Feel free to PM me if you have any other questions.
London · Member since 2019 · 722 posts · 386 votes
7y
Coming all the way back to the original question that started the thread.
I think some property people think too narrow or short term.
If Tesla wanted to build a car, the start up costs (legal or others costs) would not make sense to build 1 car. If Tesla wants to change an industry and planned on building many cars, then the start up costs take on a different meaning. Profits come later. The first car will never cover what it cost to get it built.
The fixed costs and other hassles for the first syndication are always going to be bigger than what might be possible if you did not syndicate. Granted, most ideas around a JV could be illegal. Better to have a higher cost burden on the GP for the first, small deal than to pick a large deal which stretches the GPs skills beyond what they are capable of.
If a person is really committed to running a business which will involve many syndicates over time, the fact that there are some front loaded expenses on the first one becomes less of a concern to the GP. The GP does need to deal with the cash flow so they can keep the lights on. How profitable the first deal is for the GP is less important. The company is building a track record by absorbing a lower GP return on a 'small deal'. Call it brand building, creating an investor database of people who have already invested, etc. There will be work, cost and hassle for the first few deals. The sooner you can turn the initial deals into successes, the better the future will be. Being overly focus on the start up costs misses the bigger picture. A 3% extra burden on 1 deal sounds bad. 3% spent on being able to say you have syndicated, you have been through the process and you have happy LPs sounds much more trivial.
The question you need to decide is, do you really want to be a syndicator and all that implies? The costs to get there are a necessary evil.
Attorney · Los Angeles, CA · Member since 2016 · 284 posts · 314 votes
7y
@Taylor White The answer you're not going to like is "it depends"--when you must file and transactional costs comes down to how efficiently you can structure the deal and still meet your overarching goals. There is no 'one size fits all' answer to structure because every client has different goals.