Section I
Real estate syndication 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 11 articles in this section
- 01StructuresPillarReal Estate Syndication Structure: How a Deal Is Actually OrganizedReal estate syndication structure: an LLC or LP that owns the property, a GP who runs it, passive LPs, a Reg D exemption and a capital stack. Each layer explained.
- 02StructuresLLC vs Limited Partnership: Which Entity Holds the PropertyLLC vs limited partnership in a real estate syndication: both give LPs limited liability and pass-through tax. They differ in GP exposure and paperwork.
- 03Structures506(b) vs 506(c) Syndications: What Changes for the Investor506(b) vs 506(c): one Reg D exemption forbids advertising and takes your word on accreditation; the other permits marketing and requires proof.
- 04StructuresRule 501 of Regulation D: What "Accredited Investor" MeansRule 501(a) of Regulation D defines the accredited investor with mechanical income, net worth and license tests. What each test counts, and what it ignores.
- 05StructuresForm D on EDGAR: What the Sponsor Files, and How to Find the FilingEvery Regulation D offering files a Form D on SEC EDGAR. How to search EDGAR for a sponsor's Form D filings, what each field shows, and what it leaves out.
- 06StructuresRule 506(d) Bad Actor Disqualification: Who It Covers and What It MissesA Rule 506 offering loses its exemption if a covered person has a disqualifying event. The lists of people and events are precise, and so are the gaps.
- 07StructuresWhat Is a Capital Stack? Senior Debt, Mezzanine, Preferred Equity, Common EquityThe capital stack is every claim on a property in order of priority, from senior debt to common equity. The order from most secure to least, and a worked example.
- 08StructuresPreferred 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.
- 09StructuresClass 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.
- 10StructuresFund 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.
- 11StructuresSyndication 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.