I just wanted to give some insights into our experience with raising capital for an international resort development project.
We used a Texas based LLC to give the investors a sense of security that a U.S. based company will be owning the property as opposed to setting up an off-shore entity to hold title to the property.
Our project is individual lots with multiple units of new construction on the lots within a master planned community where we are building hotel inventory to be held for long term (3-5 years) cash flow.
Some of our observations are:
1) The majority of investors will come in at the minimum investment amount.
2) Investors need 3-5 touches before they even understand what it is that you are offering them. Even after sitting down with people for an hour individually, it took email updates and follow ups before many investors had a clear picture of the Project and investment opportunity.
3) High level education about the market is key: judicial and political structure, growth drivers, safety, etc... are huge front end educational points.
4) Some people thought that they needed to see the property - we were able to overcome this through the presentation and juxtaposing this investment with their stock holdings and their lack of knowledge of their paper asset portfolio.
5) Owning a piece of a hotel vs. a time share - this may be peculiar to our deal in the way that we are developing the property, but it took an explicit highlighting to make investors clear that they were owning a piece of a hotel (land, structures, fixtures etc...) as opposed to a time block.
6) Strike while the iron is hot - If someone is ready to invest, TAKE THEIR MONEY!!! Time dissipates energy and enthusiasm.
7) You need 2-3 times the verbal commitments than what you need to raise - People will tell you that they are going to invest, and then back out. Better to get over commitments and create a waiting list then to get verbal commitments for what you need and fall short.
For those of you with syndication experience this is old hat I am sure, it was just surprising to me how moving into a new market these things pop back up as speed bumps.
Would love feedback on other impediments that people have had to their own syndications in general and how you all overcome them.
Since this is held in a Texas LLC, hopefully you ran the whole scheme by an SEC attorney. Syndication has lots of rules and regulations in both the Texas SEC and the US Federal SEC.
Did you provide a performa? That is required for this kind of investment.
Is your company registered with the SEC in Texas and the US SEC?
You should only work with accredited investors.
Hopefully you also disclosed that Belize defaulted on their debt and the whole country is in serious financial problems.
@Eric Tait Congratulations on closing. Now the work begins on the project.
You seemed to have hit on the major sticking points. I would add start the syndication early in the process so there is less chance of delaying closing. The other point, if you do a min max raise make the min the absolute lowest you can close with, even if the sponsor needs to loan the fund some money. (From Kim Taylor).
No we raised the exact amount that we needed to fund and build and prefund expenses for a year.
This is not my first syndication, I am very familiar with U.S. Securities laws and have securities attorneys on my team.
My CIK # with the SEC is
And the Texas State Securities Board is well aware of our activities.
My PPM is over 100 pages long and all of the pertinent disclosures about the nature of the risks of our investment were of course disclosed.
As Belize is pegged to the U.S. dollar unilaterally, whether the country "defaulted" or negotiated more favorable terms from creditors has no bearing on our investment. The growth drivers (tourism and baby boomers) are independent factors, and the Island where we are developing has over an 85% occupancy rate for nightly and weekly rentals.
Hospitality operators there are making a mint.
Awesome. I'm not going to be syndicating, but this is really cool.
Where are you guys in Belize? Hopefully Ambergris Caye - that island is AMAZING.
Thanks for posting this @Eric Tait . I have an interesting opportunity in Mexico and your experience and model seems to answer alot of the reservation I had about raising money for it.
It seems like a tougher sell overall. I think your experience really shines here.
@JV - of course it is on Ambergris Caye ;)
Where else would you be at this point in Belize's development cycle? Not to say that there are not going to be other places in the country over time, but right now Ambergris is where all of the action is.
Douglas - The other thing about Mexico is that there are some places that have foreign restriction on ownership (by the coasts I think), and you will have to take some time to discuss the legal system and how it protects investors.
Belize is a British Common Law country, so there is no foreign restriction on ownership so property is held with fee simple title like in the United States and the government insures title.
Where is the investor protected in case something goes south?
That's great. Where on Ambergris?
My wife and I spent 8 days there 2 years ago and it was one of the best vacations we've ever had. It's one of the few that are worth doing again.
Also, if you wouldn't mind (you can send via PM) - what was the minimum investment and what rights came with that?
Hey @Joe Gore ,
Give me the scenario of something going south and I will give you how we will try to mitigate a permanent impairment of capital in that case.
Let's say someone invest $50K. How is their money protected is it in writing because you are investing in Belize, which has different laws then the USA and Do you show the investor how their money is used and if the investor goes after you if they lose their money, they will need to file in Belize, but I know most will say to go after the LLC in the USA which will hold no water if the investing is done in Belize and do you have a lawyer from Belize that looks over everything?
@Eric Tait I definitely agree with you about getting commitments and funding up front. I had several investors very hot for my latest deal, who promised money, etc., but when it came down to it, they could not deal with it when it came up. It did not matter, since I had one investor will to buy all unsold units, but it would have been nicer to spread ownership around among the investor group and not be so reliant on a single investor. On the next deal, I will definitely push to have money funded earlier on, when I'm on the phone with someone and they are telling me they want to invest.
@Joe Gore - So Joe, the way that we structure this deal is that if you were to hypothetically invest 50K, you would have ownership in the Texas based LLC. The Texas based LLC owns the land, the buildings, and the fixtures in the Development in Belize. Our recorded deed of ownership is in Belmopan the capital of the country. The country insures title and we are the first owners of the subdivided lots.
The PPM shows all of the uses of the money, and because we have brought down U.S. construction techniques, were are able to build out the lots within 12 weeks (the FF&E takes longer because it is imported)
Our corporate banking accounts are with Wells Fargo and the construction escrow account is also with Wells Fargo through a RE/MAX agency. All of the principles from land owner to developer are either U.S. or Canadian citizens.
I have U.S. based Securities attorneys who create the PPM, and we close escrow through the brokerage office of the #1 Real Estate Broker in the country of Belize (an American citizen), there is no need for a Belizean attorney because we are not syndicating under the laws of Belize, just owning land and they are the same laws as in the United States when it comes to property ownership. This is one of the reasons why we are invested there.
Congrats Eric, I've only heard good things about Belize from friends who have visited. I hope to vacation there over the next couple of years or so. I'd love to try out your resort when it's finished.
@Darien Gipson - Thanks, we will keep you posted! Belize is a beautiful country.
Wow this is awesome! Thank you for sharing your experience.
So each investors name will be on the LLC, and each investor will be a decision maker.
I am a broken record now can you answer the question I ask Eric if not sit down and take notes please.
I know how to use the @ to tag a BP member.
You're asking good questions.
not sure if serious.
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