Section I
Deal Structures
The entity, the securities exemption and the capital stack that sit underneath the property.
A syndication is two things stacked on top of each other, and most of the confusion about them comes from treating it as one. Underneath there is a property, financed the way commercial property is always financed, with senior debt at the bottom and equity absorbing whatever is left. On top of that there is a securities offering: an interest in a limited liability company or a limited partnership, sold under an exemption from registration that the sponsor has to claim correctly and file for. The entity determines who controls the asset and who can be removed. The exemption determines who is allowed to invest, whether the sponsor may advertise the deal, and what has to be verified about you before your money is accepted. The capital stack determines the order in which the property's cash reaches anybody at all. This section works through all three, one document and one instrument at a time.
All 10 articles in this section
- 01StructuresPillarHow a Real Estate Syndication Is Actually StructuredA syndication is two things stacked on each other: a piece of commercial property finance, and a securities offering sold under an exemption from registration.
- 02StructuresLLC vs Limited Partnership: Which Entity Holds the PropertyBoth give passive investors limited liability and pass-through taxation. The differences are the sponsor's exposure and which document to ask for.
- 03StructuresRegulation D 506(b) vs 506(c): What Changes for the InvestorOne exemption forbids advertising and takes your word on accreditation. The other permits public marketing and requires documentary proof.
- 04StructuresWhat "Accredited Investor" Means Under Rule 501(a)The definition is a list of mechanical tests, not a judgment about competence. Meeting one gives access to private offerings; it does not confer readiness.
- 05StructuresForm D: What the Sponsor Files, and How to Pull It from EDGAREvery Regulation D offering leaves a public trail on the SEC's filing system. It is the cheapest diligence available on a sponsor, and almost nobody uses it.
- 06StructuresThe Capital Stack: Senior Debt, Mezzanine, Preferred Equity, Common EquityPayment flows from the bottom of the stack up and losses are absorbed from the top down. Everything else about priority follows from that one sentence.
- 07StructuresPreferred Equity vs Mezzanine Debt: Who Gets Paid, and What Happens on DefaultBoth sit between the mortgage and the common equity. They differ in what they are secured by, what remedies they carry, and how fast control can change hands.
- 08StructuresClass A and Class B LP Units: Two Ways to Take the Same DealOne class takes a higher preferred return and less upside; the other takes the reverse. Which is better depends on an outcome nobody knows at subscription.
- 09StructuresFund of Funds and SPVs: When Your LP Interest Is in Something ElseAn aggregator gets you below a sponsor's minimum. It also adds a second layer of fees, a second manager, and a question about who is being paid to introduce you.
- 10StructuresSyndication vs Joint Venture vs REIT: Three Wrappers ComparedThe same real estate reaches investors through three wrappers, and the wrapper decides liquidity, control, taxation and what you can verify.