1st syndication in Little Rock, Arkansas

7 Replies

We are coming up on completing our first syndication with 102 storage units

With this being our first "syndication" deal  in terms of managing "a fund" , we aren't sure of what's to come with reaching out to the SEC to proper documentation. 

Anyone that has closed successfully, I'd love to hear some challenges or problems that we can avoid on the front end and be better equipped going through the process. 

Did you consult with an Attorney that specialize in Syndication, partnerships and the SEC?

Well, that's the fist place i would start with.

Originally posted by @Cody Dover :

We are coming up on completing our first syndication with 102 storage units

With this being our first "syndication" deal  in terms of managing "a fund" , we aren't sure of what's to come with reaching out to the SEC to proper documentation. 

Anyone that has closed successfully, I'd love to hear some challenges or problems that we can avoid on the front end and be better equipped going through the process. 

 You use the term "Syndication" which has a specific definition and which implies you are going into the marketplace to solicit funds from people you don't know to invite them to become investors. You use the plural term "we", so unless you have a chipmunk in your pocket as a partner I assume there is more than one of you. If you have your funding in place and you know all of the people involved personally, it is probably a Joint Venture or Partnership and doesn't require SEC approval. It just isn't clear if you are soliciting funds from the general public or looking for a proper entity to create to protect the interests of all involved. Either way, you want to use an attorney. A general business attorney or asset protection attorney can put together a Partnership for you, a more sophisticated attorney is needed for SEC compliance.

@Cody Dover I would like to point out that even if you know your investors, it does not mean that you can simply call your offering a Joint Venture or Partnership and avoid compliance with the SEC. 

The Supreme Court laid out a four prong test in SEC. v. W.J. Howey Co. One crucial prong being whether the sole efforts of the promoter (syndicator) or third party generate profits of the deal. Without substantial management duties, investors are investors - not your partners.

Thanks guys for the feedback. We planned on getting a lawyer, yes.

And it is just a few investors involved on a small scale that “wants to be apart” of our deals. Not much soliciting going on here.

But what was mentioned is right, we need an attorney first for them to line out these kind of things.

@Lawrence L. a note is among the  many terms defined as a security under federal law. The Supreme Court expounds upon notes in Reves v. Ernst & Young applying the "family resemblance test" to the facts in order to determine whether or not it is a security. There is no friends and family exemption to selling securities, and New York is highly regulated in that area of law. It would be prudent to speak with a NY barred attorney who specializes in this area to make sure you are in compliance.