In my eyes, a syndication is really a form of partnership where you have at least one general partner (the syndicator) who acts as an asset manager and several limited partners, who are passive investors in a piece of real estate.
A general partner manages plans for the asset, supervises property managers, sets lease prices, and manages capital improvements for the property as well as manages the capital distributions to investors.
The limited partner, or passive investor, loans their money to the syndicator for the purchase of real estate and receives a return on their investment. This can be in the form of profit splits and interest payments for the use of their capital. While the property manager handles day-to-day activities at the property.
The most common syndications involve apartment buildings because they’re the easiest investment to get into for commercial real estate. While there are syndications for office, retail, and industrial, they’re just not as common.
You might consider investing in a syndication if you’re looking for a passive investment that will allow you to diversify your portfolio. As an investor, you receive a return on the money you invest plus a split on the profit.
The syndicator is generally compensated as follows.
|Acquisition Fee||1 – 3% of the Purchase Price|
|Asset Management Fee||1 – 2% of Gross Income|
|Refinance Fee||1 – 2% of the Refinanced Loan Amount|
|Disposition Fee||1 – 3% of the Sale Price|
|Loan Guarantor Fee||1 – 2% of the Loan|
|Construction Management||4 – 7% of the Project’s Budget|
The Responsibilities of a Real Estate Syndicator
The syndicator, or general partner, is responsible for managing the asset whereas a property manager is responsible for managing the day-to-day operations of the property.
The syndicator will work with the property manager on deciding plans for the property, such as renovations, rent increases, and any decisions that may affect the value of the property.
Outside of the management of the asset the syndicator will also find additional opportunities for the investors and continue to grow the portfolio of properties. In some cases, the asset will be held for the long term, refinanced, or sold.