Short answer: In a syndication, a sponsor finds, controls and runs the deal, and passive investors provide most of the cash. There are usually two or more ownership classes, one for sponsors and one for investors, and investors usually aren’t on the loan. Syndications are securities offerings, so a good syndication attorney is essential.
The basic structure #
- Sponsors find the deal, control it and carry out the plan to generate cash flow and create equity. They usually sign on the loan.
- Investors bring the cash and have no operational role.
- The type of syndication determines which investors you can accept, so follow your attorney’s guidance exactly.
Competing for investors #
Investors looking at your deal are also looking at many others, across storage and other real estate. When Mark started raising money, he attended as many offering webinars and reviewed as many offerings in different asset classes as he could, to learn how to structure and underwrite his deals so they could compete.
A syndication can open access to a large pool of capital if you have a deal that works and a clear story about it. It also carries real responsibility: investors are trusting you with their money.
Related answers #
- Should you raise money for a self-storage deal from partners or investors?
- What makes a good investor or partner for a self-storage deal?
- Why should you set benchmark returns before looking at self-storage deals?
Source: Mark’s post How to Raise Private Money for Your First Self-Storage Deal
