Pre-Con. Syndicates

Fractional Dutch Auctions of Commercial Income-Producing Real Estate Properties - TIC Plan Ownership Syndications

Pre-Construction Phase Syndicates

Investment risks and rewards... Your own high yield investment program opportunity to access businesses that operate income-producing properties that may create fungible future distributable gains ranging from 50% per annum to as high as 100% per annum for investors.

A Syndicate formed to provide equity financing for a to-be-built commercial real estate income-producing property that as yet has no construction mortgage financing loan commitment is, by definition a "Pre-Construction Phase Syndicate". The Pre-Construction Phase Syndicate differs from the "Construction Phase Syndicate" in that the Construction Phase Syndicate does have a commitment for a construction mortgage financing loan for the proposed Project. Pre-Construction Phase Syndicates represent (relative to all other types of Syndicates) the highest level of investment risk because:

The assets required to operate the new business have yet to be assembled, constructed and placed in service; and
The construction of commercial buildings and structures may subject investors to a host of risks that are beyond the control of the investors to manage for their own benefit; and
The new business may or may not be successful enough to provide an economic return to the investors.

Due to these issues, the Syndicator requires each Pre-Construction Phase Syndicate Sponsor to observe certain restrictions including limiting the access and use of the Syndicate's net proceeds for any cost other than the payment of lender commitment fees once proof of funds has been provided to the Sponsor by the lender and any legal/organizational costs of the lender that must be paid to the lender prior to closing of the construction mortgage financing loan escrow. This reduces the potential loss exposure to financing costs, but is by no means a guarantee or warranty of any kind regarding the timing and/or amount of any economic gain a Syndicate investor may come to believe he/she is entitled to receive.

These risks can be, more or less, managed for everyone's benefit by professional firms. The experience and success a provider has on similar scale and scope may be transferable to the Sponsor's Project. If they are successful then total returns of 150% to 300% of investment are possible for a three-year holding period. This is possible because the underlying cost of developing a given commercial income-producing property is always a fraction of the resulting value the capital markets place on the property's income-generating ability. Once a given income-producing property is developed, constructed, placed-in-service and then operated to the point of ongoing profitability. Once this status is obtained the capital markets (the universe of investors) places a much higher value on the property because of its potential income-generating ability that allow the "ground floor" investors - the Pre-Construction Phase Syndicate or Construction Phase Syndicate (as the case may be) investors can "cash out".

The three (3) year holding period is not an arbitrary period. Most construction mortgage finance lenders will not accept a development proposal that requires the lender to provide a construction and stabilization period of more than three (3) years. This requirement means the proposed Project must be able to complete construction phase operations (i.e.: the construction of all improvements and acquisition of all required equipment), place the Project in service and attain profitability within a projected period of three (3) years. Proposals for development streams longer than three (3) years may only be undertaken as Construction Phase Syndicates (syndicates that have a bankable firm commitment from a lender for the required construction mortgage financing loan) and subject to case-by-case approvals by the Syndicator. If you would like to see an example of how a Syndicate would work, click here and view the sample.

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