Syndication
FinancingA syndication is a partnership structure where a sponsor — also called the general partner or GP — finds, underwrites, and manages a real estate deal, while passive investors (limited partners or LPs) contribute the bulk of the equity capital. The LPs own a percentage of the deal proportional to their investment; the GP earns acquisition fees, asset management fees, and a share of profits — typically through a “promote” or carried interest above a preferred return hurdle.
How it works. The GP identifies a property, negotiates the purchase, arranges debt, and raises equity from LPs — usually via a private placement memorandum (PPM) compliant with SEC Regulation D (Rule 506(b) or 506(c)). LPs invest in exchange for LP units in the owning entity (typically an LLC). Cashflow and sale proceeds are distributed according to a “waterfall”: first, LPs receive their preferred return (often 6–10%); then remaining profits split — classically 70/30 (LPs/GP) or 80/20 — up to a target IRR, after which the split may shift further in the GP’s favor.
Syndication allows investors to participate in institutional-grade assets — apartment complexes, self-storage, mobile home parks, medical office — without having to find, finance, or manage the deal themselves. They are truly passive.
Example. A sponsor finds a 40-unit apartment building listed at $4,200,000. The bank provides a $3,000,000 senior loan at 65% LTV. The sponsor raises the remaining $1,200,000 from 20 LPs investing $60,000 each. The GP puts in a co-investment of 5–10% to align interests. The property produces an 8% cash-on-cash return plus appreciation. At sale in year five, LPs receive their capital back plus their share of profits per the waterfall.
Syndication is a critical layer in the capital stack — it turns many small equity checks into one institutional-sized equity tranche.