Frequently Asked Questions by Brokers (Sponsors)
What is Syndicate Path?
Syndicate Path is a financial technology company that provides a turnkey platform for commercial real estate syndication for smaller properties. We help real estate brokers to earn more than twice the typical commission from the listing of a commercial property in a shorter period of time.
What is a real estate syndication?
A syndicate is a group of investors organized to fund a venture in pursuit of income. A Syndicate Path syndication provides the down payment for a building. You will need to arrange a traditional mortgage for the rest of the purchase price from a lender.
As the broker, what are all the ways I make money?
In the normal transaction, if you list and sell this property, half the commission (typically 6%) will be shared with the buyer’s broker. With Syndicate Path you will form and lead a group of investors to purchase the property, earning and keeping all the commission. You can also manage the property on behalf of your investors, earning ongoing fees and the eventual reseller’s commission, when you sell the building in the future
Are there any eligibility requirements for the property to qualify?
Yes, the property must already exist and be producing income. A mortgage approval or commitment is also required. As the broker is keeping the building to provide value
to his investors, either the broker himself or a party identified in advance will be responsible for tenant and property management of the building. This, of course, provides another income stream.
Is there a minimum or maximum on the value of the building to qualify?
Syndicate Path syndications work best on properties in the range from $2M to $5M.
How are you different than the other commercial real estate platforms out there?
We specialize in providing small real estate brokerage firms with the same processes and services that are available to large national real estate syndication firms. Most large firms are syndicating large properties. We help smaller firms syndicate smaller local properties.
Will my property be listed along with dozens of others?
No, most platforms are focused on attracting as many properties as they can so they have multiple listings presented to a prospective investor. On our platform, your property stands apart. Your syndication page will have only your property on it. It will be accessed through your existing website. A link to the offering will be provided to prospective investors in emails that we will send out on your behalf.
The leading platforms charge from 3% to 10%and do no marketing of the issue to investors; they rely on the broker to do that. We recognize that brokers know how to sell property, not securities. We provide the expertise that you will need to find and market to real estate investors. The offering is privately labeled specifically for you. We show investors your property and your property only.
What are we paying to Syndicate Path to list and raise the money for the down payment of the building?
We have a flat fee structure for each successful closing with a required and variable deposit. This allows the broker to easily predict his expenses as he considers syndication. We include the costs of the offering in the amount that we raise so at the end of the day you’re out of pocket costs will be zero.
Are there any other fees aside upon successful funding of the down payment? Any upfront fees?
Apart from the deposit that used to pay the costs of getting the listing ready, there are no other fees due before the close. Our goal is to ensure this deposit is no more (and usually below) costs incurred attracting the buyer and closing the sale of the building without syndicating (and that sale results in only the sale half of the commission). You will also have the required fees for setting up the company that will purchase the property and the costs of acquiring a mortgage, including appraisals and inspection reports that are usually involved when purchasing a property.
Do I get any money back from Syndicate Path if the raise is unsuccessful?
No, the deposit is non-refundable. Most of the time when a building won’t sell (whether in a syndicate or not) it is because the price is out of line with the market. Syndicates usually close without a price negotiation so it’s important and rewarding to set the proper price up front.
Is there a timeframe put on the raise? Does Syndicate Path have an exclusive on the property?
As the listing broker, you have an exclusive right to sell the property, usually for 90 days. Our goal is always to help you through the process of crowdfunding the property to its new owners within 60 days. You should be able to list more properties because you will be able to tell the seller that you should be able to sell the property at the full listing price and without negotiation.
What if the required amount of money is not raised, but a significant portion of it is?
Unless the bank portion can be negotiated, all the required funds must be raised for an issue to close. Since brokers are making twice the commission that they would if they listed the same property and shared with the buyer’s broker, many brokers purchase the last few shares themselves, to close the offering and move on to the next one.
How much money needs to be raised for the down payment – 20%?
In the commercial real estate properties best suited to Syndicate Path, the bank will often lend up to 75% of the value but sometimes 80%. Investors want a good cash flow, so we often recommend that you raise more equity in order to put more down.
Is there any type of personal guarantee that has to be signed on behalf of the investor or the LLC? Who is ultimately responsible for the loan should the deal go bad?
Syndicate members and the broker (called a sponsor) in a syndicate are part of a limited liability company (LLC) or partnership (depends on locality) that owns the property. That ownership entails all the rights and responsibilities including liability for the loan from the bank. Personal guarantees are not required.
Do investors pledge the money and once the raise has been met those pledges are then converted into payments /investments?
Money is committed (deposited in escrow) by the investors until the issue is closed (the required amount is raised) and is then recorded with the appropriate certificates and documents returned to the investors. If an issue does not close, the committed funds are returned to the investors.
What if a pledge is defaulted on prior to funding?
The money must be transferred to an escrow account until the issue is closed or not, there is no chance of a pledge failing.
Is this legal? How does the corporate legal structure look? S Corp, LLC, etc.?
Syndication is legal in all jurisdictions and subject to the jurisdiction’s requirements concerning both real property and securities as well as Federal regulation from the SEC. These securities are sold under the Regulation D exemption of the 1933 Securities Act which makes available issues to verified accredited investors. The SEC furnishes guidelines on what constitutes such accreditation at this link.
Does the sponsor have to be an accredited investor or licensed in real estate?
No to both. Some brokers allow their spouse or family member to lead the property acquisition company.
What if the building currently has no tenants or just partially leased? Do commitments from tenants count?
We want to help you proceed down the Syndicate Path. We will help determine, case by case, the qualifications of any particular property. The goal is providing the 3 to 5 % above fixed income rates that investors in syndications expect after all costs and fees.