All Forum Posts by: Amy Wan

It all comes down to how the deal is structured. Some capital raisers take a part of the GP/syndicator's upside--in those cases, that doesn't affect what investors get overall. In other cases, folks will do a sub-syndication, put together their own offering that invests in someone else's offering, and take a carry. What you're basically paying them that fee for is their discretion and expertise in managing the syndicator and due diligencing to find good deals.

When it comes to securities laws, I say that if it quacks like a duck and walks like a duck, its probably a duck. It doesnt matter how you structure things like veto power or say that so-and-so is a consultant/advisor. The U.S. Supreme Court's Howey case and subsequent case law have found that an "investment contract" (aka securities offering) exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others. There is decades of case law that analyzes what exactly this all means. It sounds to me like the true intent is to allow third party investors an investment opportunity and there's a lot of thought in figuring out how to structure it so that it doesn't look like a security. For what its worth, I've seen an entire industry of folks put up fights with the SEC on arguing that something isn't a security--many of them have since spent a lot more time and 10x more on defense attorneys than if they'd just... acquiesced to regulatory jurisdiction. Sorry--I know this probably isnt the answer you were looking for.

@Farzan Setayesh you have to ask the sponsor to provide their track record and conduct your own due diligence to verify it.

Just going to say that it doesn't matter how much you're raising--I get that under $500K the transactional cost often isnt worth it, but that doesn't mean its not a security at a <$500K raise...

Syndication and crowdfunding is basically the same thing. One answers the "what" question, the latter answers the "how" question. Crowdfunding is merely a publicly marketed syndication.

In addition to a transactional real estate attorney, you will also want to hire a securities attorney since this sounds like a securities offering--even if you structure it as a TIC.

Depending on your goals for the property and how many people are coming into it, you do NOT want to structure it so that each investor's name will go on the loan, if possible. That will be a nightmare to underwrite. You need to sit down and figure out exactly who will be doing what in managing and operating the property. Do your investors have that experience? Only then can you start tackling the legal questions.

Thanks @Alina Trigub.

What you're doing sounds like a classic syndication, so you would need to comply with securities regulations. I always get questions where people ask stuff like "hey, if we meet once in a while to vote on paint and drink wine, is that enough to be an active investors?" While there is no bright line on what makes an active or passive investor (in order to differentiate between a securities offering versus a JV), someone who is active is first and foremost a business partner and is actively contributing a unique skill. They have veto power on decision-making and help drive the train--investors already have the right to meet every so often and vote on things.

Happy to chat off-line if you'd like.

@Lane Kawaoka any advice?

I echo what Mauricio said. One investor/loan is okay--more than that, and it delves into the highly regulated world of securities offerings which it sounds like you dont want to get into. You may just want to find a private lender/investor.

The industry is not quite there yet and likely the transactional costs will not make it worth it. Its very expensive to tokenize right now.