Seduced by Syndication

[Jorge De Jesus]

I’m dangerously curious about sponsors and how they become that. What value do they bring aside from perhaps finding the deal and having some skin in the game also? Are they expected to have the ability to put all systems in place? What kind of real estate background would make an investor say “Yea! I’ll park my money with you!” Or is this essentially a Billy Mays type that goes around with a prospectus pitching “Have I got a deal for you!”?

[Brian Burke]

Syndication sponsors add a wide range of value. On one extreme you have the ones that have done a couple of SFR rentals and now want to syndicate their first multifamily deal because they want to grow big. Arguably this profile adds no value to the investor. Of course this sponsor asserts that they found the deal so that adds value. Sadly, there is a high probability that they wouldn't know a "deal" if it bit them in the face, much less be properly prepared to manage it and successfully execute the business plan (if they even have one).

On the other end of the spectrum there are those of us that have bought and sold hundreds of properties and even thousands of units, have survived market cycles, have advanced forecasting and modeling tools, have the financial strength and experience to qualify for the debt, and have the time and team to find opportunities and properly manage them.  And then there is the ability to not only write, but execute a business plan and a proven track record of having done so repeatedly.  Sponsors in this category also have a broad base of investors already so they won’t have a false start (inability to raise the capital), have extensive broker and seller relationships, quality deal flow and an operational footprint in their markets.  Those things add a ton af value for the passive investor that wants to invest their money in real estate but lacks all of those things just mentioned.