Possible Syndication, Best Structure?

Question

I am looking at putting together a syndication deal for a housing development outside of Lagos, Nigeria. I am thinking I would form a domestic, US LLC and raise capital for the deal through that LLC. The domestic LLC would become a member of the Special Purpose Vehicle entity that is formed in Nigeria.

It is going to be a fairly small raise, max $500k. Probably 8-10 investors @ $50k each. We are looking at working primarily with accredited investors, though there may be 1-2 sophisticated investors. Investors will primarily be from Virginia, but we could have 1-2 in other states.

I've talked with a couple of SEC attorneys and they both quoted around $7500 to do all of the paperwork. However, that amount starts to skew the returns down given the smaller raise.

Has anyone done something like this before? What is the best way to structure it? Do we need to do a full blown PPM or could we structure it another way to help keep it more simple and the costs down?

Jeff Greenberg · Answer

$7500 is pretty reasonable these days for a PPM.  I don't think that changing the structure one way or the other is going to change your costs for the PPM. If you have all accredited investors a full PPM is not required.

Get advice from an SEC attorney. Be safe.

Jeff Greenberg · Answer

If you have all accredited investors a PPM is not required.

Understand that the PPM is protection for you as well as full disclosure to the investors.  If the  PPM does not scare off potential investors, they are at least aware that even the safest investments have risk.  This is also a CYA full disclosure document for you.

As I said $7500 is not high compared to what others are charging. In the past, I used prepaid legal in the interest of saving money and ended up paying more due to the inexperience of the lawyer.

Nate S. · Answer

Thanks Jeff.

One attorney said we did not need a PPM, only a subscription agreement, as we are raising via word of mouth and it is a small raise. The other said, yes, you need a full blown PPM. Cost was about the same either way.

I guess I am wondering if there is any other way to do things that will reduce the legal overhead and cost. This is a small raise with only 8-10 people that we know or someone we know knows.