Many people get lost
in the financial lingo mumbo-jumbo when it comes to syndications, so we thought
it may be a good idea to explain syndications within the context of the means
and methods used to obtain capital investment for commercial income-producing
real estate properties. This means:
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To purchase a
unit in a given syndication, you will:
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Select the
project you like and want to own; then
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Click
"Download Purchase Agreement" - this is the contract you will
fill out and submit to Real Estate Plays Dot Com, LLC (the "Syndicator"); then
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You may
submit the Purchase Agreement online, print out copies and send one
original with your check for the number of units you wish to purchase to
our SyndicatorEscrow Department. If you elect to mail it in, you should send
it either via a courier service (UPS, FedEx, etc.) or via certified U.S.
Postal delivery so that a record is kept of the transaction (in the case
of competing offers, the first one in is the one that must be accepted).
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If you purchase
and own a unit then you are a participant in a Syndicate. You own a
"fractional tenants-in-common real estate interest," in the
proposed project that went through the syndication process. Each owner
in the tenants-in-common plan will be issued a real property deed (title to
the property purchased) and will be able to participate in the ongoing
renting of the Syndicate's assets in exchange for a rental fee that is
distributed on a pro-rata basis..
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A Syndicate
is a
group of investors who all contribute money to a common purpose; in the case
of our syndication platform, the cash contributions are used to buy assets
in the form of commercial income-producing properties.
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Commercial
income-producing properties include apartment complexes, senior housing
projects, healthcare facilities, hotels, motels, retail centers, mixed-use
projects, commercial office buildings, medical office buildings and resorts
located anywhere there are protections for owners of private property that
are, more or less, equal to those of the United States of America.
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Each commercial
income-producing property transaction is structured so that as profits are
generated, these profits are automatically distributed to the Syndicate
participants (for their share) and for the Sponsor
(for their share).
The Syndicator manages the cash flows
and takes the profit generated by the project each month
and splits it up amongst all of the participants in the Syndicate
per a pre-approved plan.
Pay-outs are typically done as Automated Clearing Housing (ACH) transfers
from the Syndicate manager's bank account to each participant's bank
account.
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The primary goal
of every Syndicate is to provide distributions of income; as quickly and as
large as possible for the Syndicate participants.
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When you become a
participant in a Syndicate you are referred to as a "Buyer" (or
"Purchaser") because you are going to receive a deed for the
fractional interest you purchased in the Syndicate.
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Each new Syndicate
offers fractional ownership units for $25,000.00 each; the Sponsor
of the Syndicate adjusts the number of units - not the price of the units -
for each particular syndication (i.e.: a developer seeking to complete a
syndication for a $10,000,000 project will have twice as many units as a
developer seeking to complete a Syndicate
for $5,000,000. In both
cases, the price per unit is $25,000, so the first syndication would be for
400 units and the second syndication would be for 200 units).
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Each Syndicate
is
autonomous. The value of each Syndicate
has no bearing on any other Syndicate.
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The "holding
period" is the projected time the Syndicate
is estimated/assumed to
last three (3) years for pre-construction phase syndications and
construction phase syndications. The holding period for most
post-construction Syndicate is between 7 and 10 years.
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Each Syndicate
has an initial marketing window - a period of 90 days in which the Syndicate
must meet the minimum sales goals it has agreed upon upfront. At the
end of the marketing window, the proposal has either met the required
minimum sales requirement or it hasn't. If the project has met the
minimum sales requirement, then the Sponsor
must close once the Syndicate funds have been all collected (takes two to three days sometimes for all
funds to be "proved up"). If the project did not meet the
minimum sales requirement (again, this is agreed upon before the syndication
listing is released) then the Sponsor is not obligated to take the
financing; the Sponsor can accept it - and there are certain limitations
placed on the funds for everyone's sake - and then close when the Sponsor
has sufficient other financing commitments to fully fund the
transaction. If this does not occur within 90 days of the date of the
completion of the syndication, then the Syndicate
is not culminated and all
funds are returned to purchasers. The Sponsor
may reformat their
transaction and list it again.
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Each listing is
subject to satisfaction of certain
due diligence documentation requirements. These requirements serve
everyone's interest and must fully satisfy all questions the Syndicator
has
regarding the proposed syndication and the various aspects of the proposed
project the syndication is being organized to benefit.
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Purchasers own
real estate in the resulting Syndicate. You receive a deed that states
the fraction of ownership you own and your corresponding share of the
resulting income the transaction eventually (hopefully!) generates.
This means you do not get a registration document such as you would with an
investment in stocks or bonds that are publicly-traded or a private
placement offering memorandum in the case of placements of securities that
are not publicly-traded.
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The ongoing
business of each Syndicate will be the renting of the
Syndicate's combined
assets in exchange for a payment each month that is distributed to each of
the Syndicate unit owners of record for that month.
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The Syndicator
will
function as a third-party fiduciary (the "Fiduciary")
for the purposes of disbursing certain
sales proceeds from a commercial lock-box account that is set up by the Fiduciary for the benefit of all of the parties, to wit:Syndicator
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Disbursing
the share of proceeds required by the renter to be disbursed to the
renter in accordance with the renter's direction (check, Fedwire
transfer, ACH or other direction, but not in cash) less the costs of
said disbursement and fees due to the Fiduciary; and
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Disbursing
the share of proceeds required by the Syndicate
as the Syndicate's distributable income to all of the
Syndicate participants on a pro-rata
basis and in accordance with the direction of each Syndicate
unit
owner's requirements, less the costs of said disbursement and fees due
to the Fiduciary; and
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Disbursing
the share of proceeds due the Sponsor
as the profit reserved for the Sponsor, and to be disbursed to the Sponsor in accordance with the
Sponsor's requirements, less the costs of said disbursement and fees due
to the Fiduciary; and
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Winding up
and terminating a Syndicate as a result of the sale of the assets of the
Syndicate and receipt of the net proceeds by the
Fiduciary that will be
distributed to the terminating Syndicate
unit holders of record; and
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Distributing
all documents from the resulting business of the Syndicate
to all Syndicate unit holders of record via online posting as these documents
are received; and
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Generating a
report that compares the financial performance of the Syndicate
in terms
of the "Economic Key Milestone Goals" set forth in the
Sponsor's Business Plan and posting same to all Syndicate
unit holders
of record via the online posting as these documents are received.
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Your contract
contains a special clause that allows you to access the Syndication Platform
for the purposes of listing and reselling your unit (or units) wherein the
minimum auction bid price is determined by you. This gives you a whole
new source of liquidity through our "Make Your Playsm"
Auction Tool. You decide when you want to sell and go sell your unit
through our program that would be expected to generate a bigger audience of
prospective buyers.
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The listing fee
is $25.00 (1/10th of 1.00% of the original purchase price - we think that is
very reasonable). If you accept the final bid then 96% of the purchase
price will be passed-thru to you.
The listing can be for any period you choose up to 90 days. Each Syndicate
requires a separate listing, so if you own two (2) or more units
one Syndicate, the $25.00 listing fee is waived on additional units being
sold from the same Syndicate. By the same token, if you have two (2)
units you wish to sell and these units are units in separate Syndicates,
each Syndicate involved in the transaction shall require a separate listing
and payment of the $25.00 listing fee.
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If the Seller
accepts a bid then the transaction is settled through our system and closing
instructions are provided to the title company that are pre-approved by the
Buyer and the Seller. Once closing is complete, the
Buyer becomes the
new owner of record and all future cash flows and ownership rights are
vested therein.
Questions? Call us and be ready to make your play!
