Syndications and Private PlacementsBy Rich Hake Ph. D., Esq.

We Will NOT Discuss• Private Lending

• Hard Money

• Partnerships

• Subject to

• Foreclosures

• REITs

• TICs

Different Kinds of OPM

$Debt$“Private Lending”

$Equity$Syndications

$Private Placements$Hybrids

$“Convertibles”

• An organized group

• Pooling resources

• To work toward a common goal

• To achieve synergy in

• Profits, efforts, and results

What is a “Syndication”?

What Kind of Deals?• NON traditional investments

–“Basket” deals–Redevelopment projects–Subdivisions–A gold mine in Colorado

• Value Added• BIG• Uses Leverage

Real Estate Syndications

Seed the development

• Experts = expertise, decisions

• Investors = money, ROI• Opportunity = deal, “convergence”

• Purpose = exit, business plan

Team meets a DEAL

Systems and Teams

“ … after two years and a hundred thousand dollars, I thought I would have to drop this and go back to teaching… we did more in two months than in the past two years using your team and your system. Thanks again…”

David and Marc, Tomahawk, WI

• Define Ownership

• Define profit split

• Define roles

• Define value of exit

Valuation of Contributions

•Development

•Startups

•Flipping

•POOLS

Define your Purpose

Blue Sky Laws

"speculative schemes which have no more basis than so many feet of 'blue sky'";

"to stop the sale of stock in fly-by- night concerns, visionary oil wells, distant gold mines and other like fraudulent exploitations.”

SEC v. W.J. Howey Co.

• Investment of money

• In a “common enterprise”

• With “expectation of profits”

• SOLELY through the efforts of another

328 U.S. 293 (1946)

SEC v. EDWARDS

• “….an investment scheme promising a fixed rate of return can be an “investment contract” and thus a “security” subject to the federal securities laws….”

540 US 389 (2004)• Deeds of Trust as “securities”www.corp.ca.gov/enf/enforce.htm

Do’s and Don’t of Raising Capital

• Solicitation rules

• Accredited investors

• Sophisticated investors

Federal AND State

• Every state has its own too!

• Rule 147

• Government “protects” YOU from YOU!!

• “No solicitation” laws

• Do not apply to –People you know

–Referrals

–Acquaintances

–Accredited investors

Solicitation

Accredited investors—• Regulation D- 501

–Millionaires–High income earners (>200K)–Charities, trusts, corps,

partnerships (>5M)–Banks, insurance companies,

investment companies

Resources

http://www.seclaw.com/bluesky.htm

Not just ANY money

• 1031 exchanges

–TIC

• IRS and Developer – Dealer

• IRAs

LLC, Trust, IRA, Partnership, Corporation, Charity, Person (foreign or US)

C Corp

S Corp

LP

GP

LLC

A word about entities….

Which Entities should you use for raising capital?

• Any number of different interests

• Any management structure

• Any membership interest

–Can represent the different talents and contributions of the team

LLC Flexibility

• A/B

• Manager Run

• Pass through taxation

• No LP – GP problems

• Short, bright life

Why we use an LLC

Announcement

•Rock stars make it an event…•SELL TO SCARCITY

•Public payouts •Conference call announcements

• Business plan–NOT a solicitation or AD

• Generates Interest

• “If accepted….”

Announcement is…

• Offering MEMORANDUM

• Requires an RSVP–Subscription Agreement – Tellable, SELLABLE story

“We are having a PRIVATE party”

“We have not invited anyone yet”

Private Offering-PP

• Rules of engagement

• Formulaic

• The commitment test

Numbered, tracked, you want no “flunk outs”

“If you come to this event, this is what MIGHT happen…”

Offering memorandum

I understand the RULES AND RISKS of the ball, and hereby apply for a ticket…

If you accept this invitation please send me….

“Engraved invitation…”

Subscription Agreement

• Tracking

• Certifications

• Cannot pay, cannot play

Subscription Agreements allow you to accept their offer….

“Please invite me….”

Subscription = CYA

• Rules of engagement• The dirty details

–Who is in charge

–Who gets paid and when

–“What if’s”…

• When the deal ends

“Ticket to the event”

Operating Agreement

• Announcement

• Offering

• Subscription

• PPM

• Agreement

Private Placement (Recap)

• Make sure you define the deal

• Make sure you define the roles

• Make sure you have a Plan B

Before the Entity

• Think the “unthinkable”DeathDivorceBankruptcyCorruptionLawsuits

Members or the entity

Preplan…

Define rules today

Fix the $$ amount now

save $$ later

Buy - Sell

• “Bankable” package

• “Smells like success”

• Equity in deal - “loanable”

• Huge Deals work

• No “creative” way

Why use Syndications?

Tools Save Toil• Know which rules apply to your deals • (and what does not)• Get a simplified “rule book”• Get examples of the paperwork• Learn what the experts know• (and don’t know)• See one, do one, teach one• Attract money and deals

• Evaluate a Syndication

• Prepare a deal for Syndication

• Doing your own Syndication

Syndication Home Study Course

BYOB $697

Syndication Quickstart Course $1,995

Forms CD $2,495

20 HR Audio Set 20@ $250 ea.= $5,0001-1 deal consultation $2,000

Total $12,187

Syndication Quickstart $797BYOB Free

Forms CD Free

20 HR Audio Set Free

1-1 deal consultation Free

Syndication Home Study Course