Fund or Syndication?

Question

Hi, I'm working with a church to convert their space into an apartment complex where the church will have it's meeting room on the first floor and we will build apartments above the meeting room.

I'm raising funds for the project and would like to understand if i should create a fund for investors or just do Syndication. I understand how a fund is created and it cost about $15K, but I don't know how to legally structure syndication.

Any advice on which way to proceed? If I should do the fund rasing with syndication, who should I talk to about the legal structure?

Thank you,

Eric

Andrew Freed · Answer

@Eric Michiels - Why can't you do a JV? Doing a syndication or fund sounds like it would involve expensive legal fees. I know syndications alone can run from $15-$50K in legal fees. For a cost of $15K, it doesn't seem like a good ROI. If you structure it has a JV situation, it would be a simple agreement drafted by a lawyer and save you a ton in legal fees. Just a thought.

Neil Henderson · Answer

Hi Eric, I highly doubt a fund is what you want. Most people who transition from the single-asset syndication model to a fund model have been doing them for a while and have a track record. Talk a securities attorney,  we have used Gene Trowbridge and I have also spoken to Dugan Kelly. I can provide their contact information if you are interested.

Brock Mogensen · Answer

Definitely a syndication.  A fund is for pooling several deals into one offering.  And the legal cost to set up a fund will be closer to $50K, syndication legal set up can be around $10K. You might also want to explore doing it as a JV setup..depending on whether you want a GP/LP structure.  A real estate attorney that is familiar with setting up operating agreements should be able to guide you in the right direction.

Eric Michiels · Answer

Thank you Andrew, this is great advice. I appreciate it.

Adrian Chu · Answer

We've worked with a church to purchase an office building to use as the church while generating cash flow from other office tenants.  The church raised funds from its members for the down payment and then got a commercial loan to purchase the property based on its rental income.  Then, the renovation work was done thru volunteers with some professional help.

Eric Michiels · Answer

Hi Paul I sent you a DM. Thank you.

Paul Moore · Answer

@Brian Burke

Hi @Eric Michiels.  It sounds like a fun project! I think your next step would be getting good advice from a knowledgeable attorney. It sounds like you might have one from above, however, I would like to recommend mine as well.  PM me if you would like to connect. I think my guy could guide you on whether you should do a JV or syndication. I would lean towards a JV I think, but I am not sure of all the details.  Be blessed!

Lane Kawaoka · Answer

Fund are what operators do when they have too much of a following (sponsor creep) and can do whatever. So they create a fund and throw whatever. Some times the better deals get put in a SPV or separate syndication and the junk gets thrown into the fund.

Funds don't offer good efficient use of capital since money is often sitting around bringing investors yields down in the end.

Chris Levarek · Answer

If you have 10+ investors, you definitely want to structure a syndication with a securities attorney. Have a call with a few to see pricing, it's free.

If you can do the deal with under 10, consider a simple JV and/or property held in a LLC with partners

Eric Michiels · Answer

Thank you Brock

Fund or Syndication?

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