fund or syndication?

Question

We closed on one piece of land in Columbus Ohio for a 54 unit apartment hotel project (bookings under 28 days permitted) and we have a secondary site which is under contract to close in June. At this point we have a big land gain on the first after entitlement (more than 500k) and we want to setup the proper structure to raise capital. My question is what is the best structure and any referrals for this fund?

We were going to target potentially a two parcel fund. Both are within 750' of each other. One is a dedicated parking structure and the other is the asset itself. For anyone who has done this what was the best structure? Our target raise is 3.5 million to close construction. this is a two parcels that would be rolled in. Please let me know. Also if you could review the structure of yours and initial fees which we outlined below it would be much appreciated. We are the sponsor but need LP equity or CO GP equity invested and are looking for the best structure. This is also in an CRa and could be organized as an OZ fund. Who did you use to create your fund? The last question is to organize in ohio or delaware and what we should expect this to run. This is new construction ground up.

1. Entity Formation & Legal Costs

Expense

Low Estimate ($)

High Estimate ($)

Notes

SPV Formation (LLC or LP)

$300

$1,500

Delaware LLC (~$300), legal service fees vary

Operating Agreement

$500

$2,500

Template (~$500) or custom legal work

Private Placement Memorandum (PPM)

$2,500

$15,000

Off-the-shelf ($2,500) vs. custom legal

Securities Filings (Reg D 506(b) or 506(c))

$500

$2,500

SEC & state Blue Sky filings

Accredited Investor Verification (506(c))

$1,500

$3,000

Performed by third-party verification services

Subtotal: $5,300 – $24,500

Greg Scott · Answer

Calling it a "Fund" means you haven't identified a potential purchase target.  Many people won't invest in funds, including myself, and those that do only invest with people that have a long track record.  You are much better off talking about this as a "portfolio" of two properties that you have already identified. You can either put the portfolio into one LLC or create two LLCs, one for each property.

Getting a good SEC attorney is more important than the cost.  In some respects, you get what you pay for.  On the other hand $24K would be ridiculously high.  I would expect to pay somewhere between $10K and $15K for the PPM and filings given your capital raise. (Local PSA work being separate.) If you have a 506(b) offering, you won't need to do the accredited verifications, but then you cannot advertise the deal.

I've worked with three different SEC attorneys. None of them ever considered a Delaware entity.

Expense	Low Estimate ($)	High Estimate ($)	Notes
SPV Formation (LLC or LP)	$300	$1,500	Delaware LLC (~$300), legal service fees vary
Operating Agreement	$500	$2,500	Template (~$500) or custom legal work
Private Placement Memorandum (PPM)	$2,500	$15,000	Off-the-shelf ($2,500) vs. custom legal
Securities Filings (Reg D 506(b) or 506(c))	$500	$2,500	SEC & state Blue Sky filings
Accredited Investor Verification (506(c))	$1,500	$3,000	Performed by third-party verification services