Key Takeaways:
- A successful real estate development syndication follows a clear, repeatable lifecycle, from deal sourcing through final sale.
- Founder Investment Theory (FIT) is critical at the business plan stage, ensuring the project has a compelling vision and investor appeal.
- Development syndications are team-driven efforts, requiring experienced operators, consultants, and advisors to build investor confidence.
- Legal structuring and compliance are central to syndication success, including PPMs, operating agreements, subscriptions, and SEC filings.
- Investor communication throughout construction and execution directly impacts future capital raises, not just the current deal’s outcome.
Transcript
Breaking Down a Development Syndication Into Eight Steps
If I had to boil down the syndication of a real estate development project into eight steps, what would those eight steps be? Let’s go through them.
My name is Tilden Moschetti. I am a real estate syndication attorney with the Moschetti Syndication Law Group. I’m also a real estate syndicator and developer myself. I thought it would be interesting to break down and distill into an eight-step model what a real estate development syndication project would look like from a very high level.
Step One: Identify a Property and Create a Business Plan
Find a suitable property and create a business plan. Obviously, if you’re going to develop something, you’ve got to have something to develop on. And you’ve got to know what you’re developing, right? For the piece on the business plan, I like to rely on the FIT (Founder Investment Theory). What you’re actually going to be building should have a compelling vision behind it, a reason for why an investor would want to invest in this.
Then you obviously need to find that property where you can do that. And you need to make sure all the numbers line up. So the business plan needs to be complete with exactly how you’re going to do it in terms of costs.
Step Two: Assemble a Competent Development Team
Start assembling your team. You cannot do development alone. Development is a big team effort. This team is also going to be important for your investors to know who they are because you’re using their resumes in addition to yours as reasons for them to invest.
The more great people that you’ve got, the more interested investors are going to be to be involved. Mostly, you need to make sure that it’s competent and capable of delivering on investor expectations.
Step Three: Find and Engage Investors
Find investors. You should have been looking all along. You should always be looking for investors every day of the week, every week of the year. This is the stage where you’re actively getting soft commitments and validating that the business plan can move forward.
Step Four: Arrange Financing for the Project
Arrange for financing. You’re most likely not paying all cash. Most developers use bank loans, hard money loans, or other financing sources. You need to build relationships with lenders and understand interest rates, terms, and capital stack structure.
Step Five: Put the Syndication Together
Put the syndication together. This includes preparing the private placement memorandum, operating agreement, subscription agreements, and marketing materials. It also includes collecting commitments, signatures, and investor funds and preparing for Form D filings.
Step Six: Obtain Required Approvals
Get necessary approvals. Development requires approvals from multiple authorities. These approvals must be handled proactively to avoid project delays that can derail timelines and investor confidence.
Step Seven: Manage Construction and Execution
Manage the construction. This is where the project comes to life. Construction management is paired with ongoing investor communication to keep investors engaged and excited—especially for future projects.
Step Eight: Marketing and Sale of the Completed Project
Marketing and sales. This refers to marketing the completed asset for sale or lease. Whether the project is built to sell or built to rent, this step culminates in exit, investor payouts, and completion of the syndication lifecycle.
Closing: Bringing the Development Syndication Full Circle
And that is the basic process. Identify a suitable property and create a business plan. Assemble a team. Find investors. Arrange for financing. Put together the syndication. Obtain necessary approvals. Manage the construction. Marketing and sales of the underlying asset itself.
My name is Tilden Moschetti. I hope you found that helpful and a little bit enlightening, looking at the development process and syndication together from a high level about how it all comes together. If we can help you with your real estate syndication development or any kind of private equity fund you’re putting together, give us a call. We’d be happy to talk with you.