What is a Real Estate Syndicator?

What is a syndicator, or more specifically, what is small-shop multifamily syndicator? There are several good sources that you can find on the web including BiggerPockets to help you understand the functions and duties of a syndicator. One of the best sources is: http://www.syndicationlawyers.com/

I learned partially through syndicated deals that I worked on as an Asset Manager and Developer at Draper and Kramer, a large Chicago owner/manager of multifamily. When I decided to create my own real estate investment firm in 2012 I didn't have the capital to fund the deals. I talked to a few people about partnering but there were issues of control (I wanted it), splitting duties (I wanted to do it all) and profits (I was willing to share equitably, but after I was compensated for my additional time). 

That's when I researched about syndications. I talked to several attorneys about structuring deals and found syndications to be the ideal vehicle to do what I wanted in real estate investment.

I saw an opportunity in the down cycle of the real estate market to invest in small multifamily buildings, rehab them, lease them up and hold them until the market improved substantially. I was already the owner of a 3-flat in my target market niche and was dumbfounded by the stream of 6-figure earning, perfect credit having, young urban professionals that wanted to lease my units (on the rare occasions when they became vacant). Without a substantial amount of capital, I would be severely limited in size and number of deals. Since I was willing to take the entrepreneurial risk to start my own company, I would need capital to grow it and to make the business large enough to make it worthwhile.

I also had former co-workers, bosses and friends that had substantial investment portfolios that were looking to diversify into real estate. Thus, a symbiotic relationship was created as the investors sought the high returns I knew my investments would generate and I received commitments for investments.

In basic terms a syndicator (also called a sponsor) pools investors' money to invest in an asset with the expectation of receiving a return on that investment. What this means in practice is that the syndicator develops relationships with potential investors, gets them onboard with plans to find a suitable investment, goes out and finds that investment, works with an attorney to create legal documents (investment documents) that satisfy SEC requirements for a security (usually an exemption from SEC registration), gets investors to subscribe (agree to be bound to making the investment) at a certain dollar amount, collects the investor funds, purchases the asset, operates the asset (or oversees the management) and gives distributions to investors as return on their investment (either as annual cash flow, refinance proceeds, or upon sale of the asset).

I will go into more detail in the future on some of these steps.

My posts will typically be short due to my workload in my business as founder and manager of Division Street Capital, LLC. I am the sole employee of the company which also does asset management, construction management, property management in addition to raising the equity for the syndicated deals. The company founded in 2012 has 32 units in the Wicker Park and Bucktown neighborhoods of Chicago valued at $8.5 million.