Multiple Syndicatiors sending out the same deal

[Matthew Nicklin]

So I have been reading up a lot on syndication lately and getting familiar with the process. I have done a lot of reading and learning and I feel pretty comfortable with the overall structure and the way these deals are setup. 

I have joined a few syndicators investor lists and attending their presentations, reading over their offering memorandums, and PPMs. As I have joined a few lists I have seen a few deals and the way they are presented. I received an email for a deal earlier this week then a follow up later that day stating they have raised all the required capital. Then today I received an email from a completely different syndicator with the same apartment complex name etc stating they are going to have a webex next week to present the deal. 

Is this common? This seems odd to me as neither one of the syndicators mentions working with the other. Is it possible that they both think they have a contract on the property? Anyway for me to vet this further? 

[Scott Mac]

Hi Matthew,

That seems like a strange situation, but it might not be.

A lot of larger complexes will share names in different cities (The Lakes, city X California, and The Lakes, city Y Arizona for instance.)

If you are interested in the offering you might want to call them and ask about it.

Good Luck!

[Matthew Nicklin]

@Scott Mac No it is the same property for sure. Same city which is a smaller sub market of Atlanta etc. The 2nd syndicator didnt send out an much detail as the first but the numbers appear to be the same. Just seems odd as the first syndicator is saying they have already received commitments to fund the deal. 

[Zach Quick]

@Matthew Nicklin Is one of the syndicates just a capital raiser only and the other is the operator? That would be my guess. 

[Matthew Nicklin]

@Zach Quick So after going back to the first sydicators email and reading over it, I dont think either one of the sydicates is an operator. I think they are both just capital raisers with some other firm, Boardwalk Wealth, possibly being the operator. Is this common to have more than one sydicate raising capital for a deal? 

If that is the case how does that typically work? The capital raiser gets the acquisition fee and the operator get the assets management fee? 

[Tony Lin]

Yeah one deal may have multiple people trying to raise money for it. Some mentor program work like this and give students a way to participate in the deal by helping to raise funds. 

Each person is allocated a certain amount of money to raise. Maybe one guy has finished raising his quota and the other still have spots available. 

[Scott Mac]

Originally posted by @Matthew Nicklin:

@Zach Quick So after going back to the first sydicators email and reading over it, I dont think either one of the sydicates is an operator. I think they are both just capital raisers with some other firm, Boardwalk Wealth, possibly being the operator. Is this common to have more than one sydicate raising capital for a deal? 

If that is the case how does that typically work? The capital raiser gets the acquisition fee and the operator get the assets management fee? 

It should be spelled out in the docs for the deal...

These are things you should probably speak directly to the offerors about vs general posting online questions, because every deal will have it's own uniqueness.

Good Luck!

[Mike Vann]

Is the deal a 506(b) or 506(c)?  If a (b), and you don’t have an SEC compliant relationship w/ any of the GPs, I wouldn’t go any further as they are putting the deal at risk of losing the Reg D exemption and jeopardizing the deal. (I am NOT an SEC attorney)  Capital Raisers are utilized by many Syndicators and a lot of them are not doing it in an SEC compliant manor.  There are many opinions on this even within the realm of SEC attorneys. The main thing to remember is that you cannot compensate a Cap Raiser based on the amt raised and they must be an active GP, not ONlY a Cap Raiser.  If the operator is not following the regulations, I would hesitate to invest with them regardless of how good the deal looks on paper.  
If it is a 506(c) then they can advertise but of course they can only take accredited investors. 
We have not used Cap Raisers so far on any of our deals but are looking into it. 
Good luck!

[Greg Dickerson]

These are probably just capital raisers looking to bring investors to somebody else’s deal. It’s a common practice these days. Some people are doing this the right way some are not. You need to make sure you read the fine print and understand who’s who.

[Matthew Nicklin]

Originally posted by @Mike Vann:

Is the deal a 506(b) or 506(c)?  If a (b), and you don’t have an SEC compliant relationship w/ any of the GPs, I wouldn’t go any further as they are putting the deal at risk of losing the Reg D exemption and jeopardizing the deal. (I am NOT an SEC attorney)  Capital Raisers are utilized by many Syndicators and a lot of them are not doing it in an SEC compliant manor.  There are many opinions on this even within the realm of SEC attorneys. The main thing to remember is that you cannot compensate a Cap Raiser based on the amt raised and they must be an active GP, not ONlY a Cap Raiser.  If the operator is not following the regulations, I would hesitate to invest with them regardless of how good the deal looks on paper.  
If it is a 506(c) then they can advertise but of course they can only take accredited investors. 
We have not used Cap Raisers so far on any of our deals but are looking into it. 
Good luck!

It is a 506(c). 

Thank you all for your input and feedback. I guess I just didn't realize that there maybe multiple capital raisers in the deal. I have never participated in a syndication deal, so I am still in the learning phase. 

[Mike Vann]

Let me know if I can be of any help. 

[Nick B.]

@Matthew Nicklin,

This is quite common practice among members of some guru programs. I don't invest in such deals because usually they have multiple sponsors (6 was the highest number I've seen) and only one or two of those sponsors have some experience. Others are money raisers who like to boast about the number of units they "own". More often than not, the "experience" partner is a guru himself but the real operator is his rookie student. That's a recipe for disaster in my opinion. Too many cooks in a kitchen and the main chef may not even be there as he has too many kitchens to attend.

Nick

[Lori Greene]

@Matthew Nicklin

What are your main reasons for wanting to use syndication as a means to invest?

If you are interested in syndication, why not use a more trusted source like FundRise.com where you can either be on the investor side (wanting to contribute funds for a good return without having to do any of the work) or on the sponsor side (the one with the deal needing to be funded)?

Typical reason for using syndication or crowd-funding is to invest in properties you can't fund on your own or to have less risk by using other people's money.

Our favorite way to fund our deals using other people's money is the easiest, least costly and least risky possible way to do it. We use private money partners (not to be confused with private money lenders). We built our own list of private money lenders who fund all of our deals simply by saying to everyone we know and meet, "If you know anyone who wants to make a high return on their money, short-term, let me know, I'll hook them up." Ask them what a high rate of return means to them. And highlight that it would be backed by real estate with a lien. You'll be surprised at how many people will say that they're interested in REI and have a little money but don't know what to do and that they would consider 5% to 10% annual as a high rate of return. It's much cheaper than hard money and you set the terms in your contract.

[Ian Ippolito]

Originally posted by @Matthew Nicklin:

It is a 506(c). 

Thank you all for your input and feedback. I guess I just didn't realize that there maybe multiple capital raisers in the deal. I have never participated in a syndication deal, so I am still in the learning phase. 

 Actually it often is or isn't typical, depending on the type of deal/sponsor.

If you are a conservative investor who only invests in the most experienced sponsors, it's not typical at all. These types of sponsors have typically developed a huge and loyal following over  decades. So when they put out a deal to their email list of investors, it is oversubscribed very quickly. In today's environment there is much more cash then there are these types of  deals. So they do not need to pay even a single capital raiser, let alone multiple.

If you are a more aggressive investor who is fine with less experienced sponsors, then many of these do not have the deep investor base necessary to fully fund their offerings. So they may need to use a capital raiser. A small minority are known for using multiple capital raisers. So it's not unheard of but still not typical to have multiple.

Whether such a set up is perfectly fine to you, or a potential red flag, will depend on the type of investor you are and what you're looking for.

[Guifre Mora]

@Matthew Nicklin they are shopping it around to fund it.

[Trin Nagireddy]

@Matthew Nicklin can cask about the GP’s on the deal, might be more than one and both are marketing.. both seems weird that you getting emails to rise funds which are already funded.

Thanks,Trin

[Jay Hinrichs]

Originally posted by @Nick B.:

@Matthew Nicklin,

This is quite common practice among members of some guru programs. I don't invest in such deals because usually they have multiple sponsors (6 was the highest number I've seen) and only one or two of those sponsors have some experience. Others are money raisers who like to boast about the number of units they "own". More often than not, the "experience" partner is a guru himself but the real operator is his rookie student. That's a recipe for disaster in my opinion. Too many cooks in a kitchen and the main chef may not even be there as he has too many kitchens to attend.

Nick

Could not agree more  any stress on the deal and it craters .. wow..  

[Peter Tverdov]

Too many rookies running around the country acting as a syndication expert and fools tripping over themselves to throw money at them. 

[Nate Marshall]

I would do some more vetting and due diligence BUT my gut tells me not to invest in it. Too many good deals and as Neil Bawa says often.. move on! NEXT!

[Danny Randazzo]

@Matthew Nicklin it can be common for syndicators to partner up on deal and if you’ve joined all of their lists you could get the same deal twice. You need to vet anyone well who synidcates deals and if you get the same deal twice make sure all of the details are the same, if they aren’t the same that would be a red flag to me

[Ola Dantis]

@Matthew Nicklin 

Yes, this does happen for sure, and more importantly for obvious reasons, as the nature of syndication deals is to pool a large number of investors to take down a deal, which can't typically be taken down by one sponsor or one firm. 

Undoubtedly, when a sponsor has been syndicating for decades, of course (the Grant Cardones of the game), then they won't need to have capital raisers because they probably have a deep network of Private Equity money, single-check high net worth Investors, and/or Institutional capital connections. 

Expectedly, for those starting in syndication and not at the level the experienced sponsor (note even the "experienced" syndicator was once a "rookie" as they didn't wake up one day to be veteran syndicator, right?), so, yes, it is common practice to coalesce on a deal. 

Now, some investors only want to work those who have been doing this for 30 years and some want to work with someone who has a track record OR is a part of a team with a track record. It's all about preference at the end of the day just like an investor may want to buy Coca Cola stock because it is a 127-year-old company and another investor loves investing startups ran by 20 something-year-olds in Silicon Valley like Facebook was years ago. 

As for your question: you can easily vet the situation by asking questions and I'm certain the capital raiser or the sponsor will tell you who the main operator is. 

I always say even a Saudi prince with gazillion dollars will still need a team of people to help him when it comes to syndications, a complex REI strategy requiring an array of stakeholders.

[Matthew Nicklin]

Originally posted by @Nate Marshall:

I would do some more vetting and due diligence BUT my gut tells me not to invest in it. Too many good deals and as Neil Bawa says often.. move on! NEXT!

It's funny you mention Neil as he is one of the people that sent this specific deal that sparked this post. It was odd to me to see him send the same deal that I received earlier in the week from someone else. As everyone has mentioned here there maybe different allocations to a few capital raisers. Which explains why one is saying they are full while Neil is just starting to put the deal out there.

[Mike Dymski]

The capital raisers should take note of these continued, recurring posts from passive investors looking for opportunities.  They want more transparency.

[Michael Le]

Originally posted by @Ola Dantis:

@Matthew Nicklin 

Undoubtedly, when a sponsor has been syndicating for decades, of course (the Grant Cardones of the game), then they won't need to have capital raisers because they probably have a deep network of Private Equity money, single-check high net worth Investors, and/or Institutional capital connections. 

It's funny you say this because Grant just started syndicating in the last few years. 

[Diana Jing]

Can someone tell me what classifies you as an accredited investor?

[Diana Jing]

Can someone tell me what classifies you as an accredited investor?