What is a syndicate?
A syndicate is usually a structure whereby passive investors that are limited partners (typically accredited) invest in a specific property where the syndicator is the general partner. The general partner is the one who makes most of the decisions with the syndication.
The syndicator puts out a flyer or offering about the specific property they want the passive accredited investors to invest in. The syndicator then fields inquiries about investing from the investors on their list. There usually is a subscription agreement followed
by an operating agreement the investor signs that spells out the syndicate structure, any management fees, percentage ownerships, if someone wants to sell their share early, etc. Basically it covers a lot of possible events that may or may not happen in the future.
With a syndication it’s important to know the experience level of the sponsor for the specific asset class offering the accredited investor wants to put money into.
Each syndicator has a different niche they focus on.
For NNN INVEST our main focus is value add STNL properties. We like to buy those for cash at good pricing and then work to lease up the property with a new tenant and improve the value of the property substantially. Our usual timeline is 1 year to stabilize and an exit in 3 years or refinance and hold.
We offer a 7% preferred return to ACCREDITED investors once the property has a tenant in and the property is cash flowing. Until then there is not a cash distribution. If someone needs a return payout in the first 30 days, we ARE NOT the right choice or option for an ACCREDITED INVESTOR to invest with us. Our investors understand that we often get a higher cash flow and equity multiple once a tenant is in and leased up and they do not have to have the return right away when the overall return tends to be higher over time. So as an example if a stabilized value add NNN STNL property had a starting 14% cash on cash return then 7% would go to the passive investors first and then the remaining cash flow would be split 50/50 between the investor and the sponsor for NNN INVEST. So 7% passive investor plus 3.5% = 10.5% return to investor (limited partner) and a 3.5% to NNN INVEST the sponsor (general partner). The property upside after return of capital to the passive investors would be split 50/50 with the sponsor.
We like STNL because the property prices tend to be smaller and lots of the buyers on the exit tend to be all cash buyers or very low leverage. They are buying to be passive and or for retirement and estate planning so often will pay a premium for the property. Conversely there are other asset classes where the properties are so expensive and so big that they can be heavily affected on resale value in the future with interest rates as carrying a big load of debt. We like the small ball stuff as we call it. We like to be nimble and invested in multiple markets nationally for geo-diversification.