Syndication Challenges

[Paul Lopez]

I've been reading with great interest the articles by Ben Leybovich, especially the dilemma regarding obtaining non-recourse financing for the debt portion of  deals. I think doing the larger deals the - GP/Syndicator + Limited Partners is the old way of RE syndication. There are many of these offered through PPMs and before banking reform, some I've seen had non-recourse loans attached to them. There is a trend in equity funding using 506c accreditation standards and sites like angel.co are allowed advertise for accredited investors where these individual investors can become syndicators of their own. Many successful investors form them with a 5-15% carry and other investors "back" them so when they want to make an investment in a startup, they have the money lined up (some on the site have $3M in backed investors). I'm wondering if you can pool a 35% equity raise (profit share + syndicator carry) and 65% crowdfunded debt (coupon + something "convertible" to equity). It has worked very well in venture capital. This way you get all the funding and acquire the property without banks. You then go enhance the value and refinance, recover some capital and distribute to the investors. The tricky part would be if you wanted to hold the investment, then the revenue streams have to be allocated accordingly.