Syndicating New Construction?

12 Replies

Quick primer:

I was involved in the site work of a luxury riverfront townhome development here in Columbia a couple years. Phase 1 had 12 units - 6 river priced at $540,000 and 6 city view priced at $430,000, all currently sold and occupied. 

Phase 2 infrastructure is in place with minimal site work needed to complete and asphalt paving.

There are currently 2 presales and 1 confirmation to purchase once activity resumes. Presales are verified, with funds in escrow. This is without any activity on the site for last 8 months.

The investor has decided he does not want to continue with Phase 2 and wants out of the project. There is significant (in my opinion) profit left in the deal and I have the opportunity to participate if I can assist in putting the funding together.

All that being said, and understanding the basics of syndication ( for apartments), is this a possibility to put this project together? Acquisition and construction are $3.5 milllion, with total sellout gross at $5.7 mil. I have no where near the wherewithal to approach a bank, nor access to individuals with this amount of capital. 

Are there people / companies to approach about funding a project of this type? I've raised capital for residential flips but never anything near this amount. 

This isn't intended as a solicitation, simply a how to.

Good Luck mate. You're doing some amazing things. Hopefully you can find a partner or sell off the remaining piece. I'd ask around to find out who's interested in this kind of project. Move fast, talk to lots of folks and perhaps get a referral from the previous investor. There are lenders who will offer bridge or gap financing. 

Sounds like you need an experienced syndication partner; i.e., someone who has done some syndications in the past on development projects, preferably in your geographic area. I suggest you try to find some local developers and pitch the project to them. 

I'll send some inquiries to a couple of clients who might have some ideas for you. I'll let you know if they do. 

You have the mid-size problem. This is huge by comparison to a flip, but small by comparison to a development. To find twenty million in debt is easier than five in most cases. The money source will need to do just as much due diligence. 

This would be a great project for a seasoned builder that has some stroke. 

Your syndication would likely be a few members of an LLC instead of a full blown structured PPM with all of the expensive documents to create it.

@Pavan Sandhu thanks. I haven't exhausted all the options so still moving forward. I'm persistent if nothing else.

@KimLisa Taylor Appreciate it. Is there a resource to help locate people or companies that do this sort of thing? I'm still working the locals and expanding the radius. But as @Clifton Kaderli stated I have that mid -size problem. What I've seen so far is there are just too many large projects going on. A $40 million dollar apartment complex is in progress 2 blocks away with several more with in a mile. Crazy building going on. My believe is the one attractive feature I have over some other projects is the fact I have approved plans, permits, Phase 1 completed, and infrastructure in place. This is almost sign and go. 

Have you ever thought of approaching those builders or entities about them doing your project while waiting for their project to materialize? Doesn’t have to be syndicated when we are talking that kind of amount.

The responders on this forum have a lot of great ideas. 

As for your question:

"Is there a resource to help locate people or companies that do this sort of thing?"

You could look at some of the deals posted on crowdfunding sites like RealCrowd or Crowdstreet and see if any sponsors with current deals posted there are doing similar projects and then contact them to see if they are interested in teaming on your proposed project. You could also check out the National Association of Home Builders or Building Industry Association and see if they have any members or chapters in your area. 

@Christopher Goldie - I think I might have the perfect guy(s) for you. Please feel free to reach out to me and I will introduce you. 

@Manolo D. We have approached a few. Again it's the mid size problem. Why mess with a $4 mil project when there's a $40 mil to work on. The other problem is I haven't exactly figured out who all the local players for this type of project would be. I know a couple that are dedicated to land deals, others to apartments, and still others to commercial. One investor that I had on the hook equated our market to a bus stop and he was waiting for the right bus. It came and apparently was better than this deal.

@Christopher Goldie True, that’s why in my opinion, it can’t be a syndication as the amount is a little low. Jeff Greenberg might want to pitch in.

@Manolo D. Thanks for the shout out, but this is out of my wheel house.  Keep talking it up on these forums and maybe someone might be interested.  

Do you have control of the remaining development. If you have the lots and approved plans "shovel ready" then can you just sell them as pre-construction to-be-built? Going straight to the end consumer may solve the money problem. They already have a model to view. 

Feel free to PM me the details. I have a colleague that invests in tax liens in SC and likes the area of your development. 

As a point of encouragement, stay persistent. I just found the right participant for a similarly sized project in San Marcos, TX. Unicorns do walk in the forest. 

@Clifton Kaderli , They're townhomes so no lots to sell. Can build the overall structure, complete the exterior facade and then start finishing individual units as they sell. There are already 2 presells, out of 12, with no marketing and no construction start date. Plan is once there is at least a verbal commitment for funding we could make a hard push on marketing and get at least 6 more presells before work starts. 

I'll send a PM with some info. Thanks

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.