Reg D Exemption In Jeopardy Using JVs To Capitalize Development Deals?

[Bryan Hancock]

As our east-Austin-based development organization ramps up we are taking in additional cash from partners. We already have a fund set up to take money from accredited investors and would like to organize marketing materials for a diverse set of potential investors.

What we would like to do is to have non-accredited investors loan money to partners in the east Austin development because they can't invest in our fund. The fund and each of the partners will JV on each project according to how the capital breaks out at any given point in time. The investor that procured the capital would borrow money from non-accredited investors without clouding title and that money along with the JV partner's equity would capitalize their portion of the equity in each project. Each partner will be capable of investing up to 25% of the equity in order to optimize dollars out of each project instead of ROE given that the cost of capital from the fund is far less than the AROI for the project.

Has anyone done something like this before? If there was a fund involved did you ever get a legal opinion about whether or not this is an issue with the Reg. D exemption for your fund?