How a Syndicate Works.

Properties For Sale & Lease.

The Benefit of Joining a Syndicate.

Previously Syndicated Projects.

DEFINITION.

If two or more individuals purchase real estate together, they form a partnership. If an organizer or promoter is involved, the partnership once formed is often referred to as a syndicate.

A syndication is truly a partnership; nothing more, nothing less, usually in the form of private corporation. When we find a property for sale that has an unusual profit potential, we canvas individuals from our client lists to find a buyer, or we may find two or more buyers willing to form a partnership to purchase the property forming a syndicate. Its the partnership agreement of a syndicate that determines what kind of syndicate it is. Our syndicates are based on simple and straight forward partnership agreements, as we deal with experienced well qualified individuals who rely on the strength and experience of their partners rather than the existence of a lengthy, convoluted and complicated partnership agreement. We use one local lawyer, experienced with our history of syndications, to prepare the agreement, and individuals in the partnership seek independent advise from there own legal counsel before entering our syndicate.

PARTICIPATION.

There isn't much time available for a buyer to decide to participate when a syndication opportunity arises. A potential partner in a syndication must be experienced enough to recognize the value of the opportunity and be capable of making a decision and have the cash on hand for the down payment. Our part in the syndication of a property is to find the profit opportunity in a property for sale, investigate it and present the facts in a logical way for your study.

For a syndication to work, the terms of the partnership agreement must be well understood and be agreeable to the parties well in advance of the creation of a syndication, or it wont work. We spend a lot of time explaining the terms of typical partnerships we have created it the past, at our informal meetings. When we find a suitable property, little salesmanship is involved. After the facts and cash proforma have been presented, It's simply a "take it or leave it" situation. When two or more purchasers are ready to proceed, they meet with the appointed lawyer who presents the articles and the terms of the partnership of the holding company, (syndicate) to be formed. If the partners can agree to the terms, the company is formed and its' bank account is funded for the purchase and capital repairs anticipated. The final meeting with the lawyer is more a formality than a negotiation, as the terms of the partnership must have been agreed too by the parties before the meeting, or the meeting doesn't happen. Obviously, this form of syndication requires that future partners must be experienced, and get to know each other before they purchase a property together.

MEETINGS.

Among our partners and past clients are some very successful investors, controlling many properties. From time to time, we find it helpful to get together and discuss the market, dissect recent deals, and discus new opportunities. These discussions help everyone in the group to develop a common understanding of our investment goals of the moment, and to recognize opportunities in the current market. If you feel you are qualified to be a syndicate member according to these descriptions, and would like to attend such a gathering, and share in the wealth of information that is passed, please contact us by E-Mail LeGrice Real Estate. E-Mail or telephone or fax us at your convenience. These meetings are small, informal, and usually last an hour or so. We often invite someone of note, to speak to us about our favorite subject - buying real estate for profit! After the formal presentation, individuals from the group usually have the details of some purchase made recently by some other group, individual or organization, to share with us. Market forecasts and statistical information measuring the health of the market are presented by our research department.

RESEARCH.

Our research department track the sales of properties sold for one million dollars or more in the (GTA). We present the facts and figures, and often the story behind the story too.

Property Reconditioning - Our Investment Philosophy.

We recommend a property only when, in our opinion, it is available at a bargain price, and the property is under leased or vacant but leasable! By under leased, we mean that a significant area of the property must be vacant, and or existing rates for leased suites are lower than market rates for the building quality within its market area. Needless to say, we are looking for a building that will give us immediate appreciation as we increase it's income, and reduce expenses. Our most recent syndication at 50 McIntosh Dr., Markham. Syndicated 1995 is a good example of combining these two features in one purchase. Our lease out period was about six months.

PROPERTY TYPES.

For twenty five years we have specialized in industrial, commercial and retail properties with existing incomes, or properties requiring renovation or construction to create or improve their incomes. Needless to say, no property has a profit potential unless there is a demand by tenants for space. We first establish the existence of tenant demand for any building in an area we promote. Every day that our agents complete their regular leasing activities we earn new insights about demand and keep up-to-date.

INVESTMENT REQUIREMENTS.

Properties suitable for our purposes vary in value from $1.000,000 and up. Down payments required are no less than twenty five percent, and syndications usually involve five or less partners who must share the down payment cost, and the cost of capital repairs and renovations.

Down payments required to participate range from: $150,000 to$1,500,000.
Investors require from: $50,000 to $300,000
depending upon the property value and the number of participants in the syndication and amount of capital improvement that must be made.

To participate, "You" must be able to do the following:

Invest $50,000 or more.
Demonstrate that you have previously been an investor in commercial income real estate.
Demonstrate that a "loss", if one should occur, will not cause you severe hardship.
Be prepared to offer the mortgage company sufficient collateral to satisfy them, (this usually means signing personally for the mortgage, but not if you have sufficient other assets of offer as collateral).
Indicate informally, that you are comfortable with the form of "partnership agreement" offered as an example.
Indicate informally, that you are prepared to proceed when the right property is found.
Be available on short notice to discuss the proforma provided for a property found for the group.
Be prepared to sign an agreement, and sign a cheque when the right opportunity arises.

You are never under any obligation to anyone until you are ready to become a formal partner in the syndicate that's about to immediately purchase a property.

To participate "We" must do the following:

Find a suitable property. You or anyone can help at this, once you understand the guidelines.
Investigate the property to discover a profit potential.
Prepare a detailed report on every aspect of the existing property.
Prepare a detailed report on the future possibilities including all expenses.
Prepare a detailed cash flow proforma detailing the profit potential from the income stream.
Detail a construction, management and marketing plan.
Prepare a purchase agreement proposal incorporating the plans above.
Hold a formal meeting presenting the proposal to purchase the property, and accept partners.

The work involved in preparing for the formal presentation to purchase a property is extensive, and not undertaken lightly. Although we don't charge for the preparation, our experience, our skills and hours of labour are repaid to us from our potential commission earnings from the sale of the property, and from ongoing management and leasing fees after the property is purchased. Once the syndicate is formed, the officers (partners) of the company holding title are in complete control of the property. The ongoing responsibility for property management and leasing of the property is dictated by the syndicate members. Our services in these areas are offered to the syndicate, but not a condition of purchase of the property.

Its harder to find smaller deals than larger ones. Income properties sold under "Power of Sale" today, have been neglected and properties purchased under power of sale require capital expense improvements to make them lease out efficiently, and perform according to our proforma expectations, therefore reserve cash is required by the partners, over and above their down payment contribution. Sometimes cash is recovered by refinancing the property upon reaching 100% tenancy and establishing the expected higher income levels.

Risk Levels.

Purchasing a failing property, is purchasing a property that someone else failed at managing. In this market, the possible cause of failure may have been that the previous owner suffered from a combination of too high a debt load, and insufficient cash to market the property properly. If this was the reason for the property's failure, its ideal for us. If the property failed because it's obsolete, or because it's located in a low demand area, or because of some other reason that can't be "fixed" by astute property and marketing managers, then it's not the property for you or us. Therein lies the risk. Are we experienced enough to buy it at the right price, and fix the marketing problems to make a profit?

This form of investment is considered high risk. It should be reserved for experienced investors who can afford a loss if they make a mistake. When we ask you if you are an experienced investor, we mean to ask four questions:

Have you owned more than one investment property before?
have you learned from your previous mistakes (losses)?
Can you afford it if you make another mistake?
Have you made money investing despite your mistakes?

If you can answer yes to all of the above, and have read and understood what we have written here then we probably understand one another, and you will likely get along with our other client partners, and have no problems with our simple and straight forward form of syndication.

E-Mail Legrice Real Estate.