How do you deal with oversubscribed syndications or
undersubscribed syndications? Can you do it? Is it possible?
What do I do? How do I communicate it what what has to
happen in order to be compliant? Fat is exactly what this video
is about.
My name is Tilden Moschetti. I am a syndication attorney with
the Moschetti syndication Law Group. Sometimes some of my
sponsors come to me with the great problem of, hey, I've
raised $5 million, I've raised some certain amount of money.
And I think we could raise a whole lot more and build a much
bigger fund. It was so easy, we had no problem I love when I
hear that the answer to their question that underlies it, all
of whether we can do that or not, is yes, you can do that. We
can make it so that your fund raises more. When I'm drafting a
PPM and an operating agreement, I'm always leaving in the
opportunity in order to ratchet up the amount of money that's
raised. The reason is because I want you to grow, right, so we
need to build that in. What has to happen, though, is because
the dynamics that the investors are getting, and that what
they're thinking of, they may need to know what's going on,
right? This could be a material change, and it probably is
somewhat material. So if I put together a blind pool, and I say
I'm raising $5 million, and suddenly, now I'm raising seven
$2 million more means there's a lot of other investors, there
might be increased risk, because there are more investors, there
might be, you know, a dilution over what assets there are going
to be, there's something like that, because there's this
additional amount of money. Well, the investors who have
already subscribed, they gotta know, you gotta tell them and
make sure that communication comes out. So we can help you
craft that message to make sure that it's communicated in a way
that not only is compliant, so not only are you not gonna get
in trouble for it, but make sure that it's a way that your
investors can see the bright side of what you're doing. The
Bright Side of being oversubscribed and turning it
from 5 million to 7 million, is now you've got a more diverse
portfolio. So you have a portfolio that is has the
opportunity to be able to lower the risk that one asset is going
to cause trouble. Because now you're more, you're more
diverse, you have more things going on. The other advantage is
now you can buy new level of opportunities, there might be
more assets that you're able to buy, that could generate even
greater returns, you can be a little bit more picky on the
lower performing ones, and then go for just the super performing
ones as well. So you can build in something higher. So that's
part of the strategy that we come up with, with our clients
to make sure that they've they're communicating it in the
positive way. But what you're asking about the opposite what
about in the case where I've, I've said I was raising 5
million, and now I'm only going to raise three? What about that
situation? How do we deal with that? Well, that situation has a
major bright side of it as well. So now the investors came into
this thinking that they were going to get this certain level
of ownership, right, they thought they were going to be
pegged in and you know, 10% ownership, and suddenly, now
that you need $2 million dollars less, their percentage of
ownership has just shot up. So it think of it like a share of
stock buyback, it's not the same thing, because it's not cash
going into that necessarily. But it's it's cash that it's that
overall price has gone down. So their percentage of equity goes
up higher. So it's actually quite a good thing when that can
happen. The challenge is, is how do you deal with that
communication so that they see the bright side? And also then
we need to make sure that the mechanisms. So as a syndication
attorney, I'm always thinking about how what are what are the
investors going to think? Is this a problem? Is this going to
be compliant? What are the mechanisms that are in place
that allow me to lower that amount that I'm raising? And
also, of course, how am I going to get any make money that comes
in? Because sometimes not very often, but sometimes the
situation is I only raised 3 million, and I still need that
additional 2 million. So you might use regular financing and
you might use a bank loan or you might use a hard money lender.
There's options out there in order to do it. Or maybe it's an
offering of a different kind of piece of the security. Maybe
it's just a pure fixed rate return that that some investors
can get in order to be satisfied. Whatever that is.
There's ways to bridge that gap. But we need to make sure that
investors know what's going on, because investors at the end of
the day are entitled to a full view of what this what your
investment product looks like. So I hope that helps Hope that
helps define what happens with the oversubscribed
undersubscribed, because it's still a workable situation. It
happens quite often that one of those two comes up that we need
to move things around. That's part of why you hire an
experienced syndication attorney like myself, who's been in that
situation not only as a syndication attorney, but I've
been in that set in that situation as a syndicator.
myself because I do my own deals. So my name is Tilden
Moschetti. I am a syndication attorney with the Moschetti
syndication Law Group. If you think you might be able to we
might be able to help you with your project. Give us a call.
Let's talk about what you're working on. See if there's an
opportunity for us to help you and we can go from there.