WLewisBurger.com

Are you a Real Estate Syndicator?

Proposed Legislation and Real Estate Syndication

This is a re-print (with permission of course) of an article written by Gene Trowbridge, Esq., CCIM.

I’ve attended several seminars on raising private funds including Gene’s Real Estate Syndication/Raising Capital course; in March 2007. Gene’s in the only one I can recommend.

Gene’s course in not for beginners. It is very high level and detailed.

As you can see, Gene is an attorney and a CCIM. He teaches others the legal aspect of raising capital, raises capital for his own transactions and acts as legal counsel for others.

I recommend you visit Gene’s sites:   TrowbridgeCurriculum.com and  GroupSponsor.com . He is the only one (that I know of) that is educating RE Syndicators to do it the right way!

You should also join Gene’s LinkedIN Group: Gene Trowbridge: Commercial Real Estate Syndication Expert

FYI – I’ve received absolutely no compensation for endorsing Gene.

Regards.

W. Lewis Burger, CCIM

Gene’s Article:

Proposed Legislation and Real Estate Syndication

The pending legislation being voted on in the House and the Senate this week has three areas that will affect the real estate syndication business.

First, you have all heard about the “Carried Interest” issue where income that has been classified as capital gains may now be treated as ordinary income. Actually, I am not so concerned about that for my clients, as most of the transactions we work with are structured so that the income reported by the syndicator is already going to be classified as ordinary income, in that our syndicators never pay anything for what they receive, and as such it is ordinary income. Most of my clients do invest in their syndications, but they buy units just like everyone else. It is the fees or cash distributions we set up for the sponsor that is targeted by this bill. There certainly are other types of funds that will be impacted by this change and the commentators are suggesting the increase in taxes may cause sponsors to increase their fees, which could slow down money raising.

The second issue is that, going forward, the equity in an investor’s personal residence may not be used in determining whether the investor is accredited, by virtue of having more than $1MM in net worth.  This will cause us some problems as it should reduce the number of people who will be determined to be accredited under the net worth standard. The income standard for accredited investors ($200,000/$300,000) remains the same. What I expect we will see is more syndicators using the standard of a “Sophisticated” investor in their Rule 506 offerings or doing Rule 505 offerings where non-accredited investors are allowed.

The third issue is that at the last minute there was an amendment added to the bill that will require a PPM be developed for every syndication and given to every investor. You may remember that in a Rule 506 offering where everyone is accredited, there was no statutory requirement for a PPM. Most, if not all of our clients already develop and deliver PPMs to their clients. There was some discussion that the standard for disclosures in the PPM might be strengthened, but I will be looking to read the final language if the bill actually passes both the House and the Senate.

We’ll probably be talking about these issues at the Ultimate Workshop we are having in San Diego July 13 through 15 and we should know the final outcome of the legislative process by then. If you have already registered I will see you there. If you are not registered and are interested in joining us for that workshop, let me know.

Gene Trowbridge, Esq., CCIM

Gene@GeneTrowbridge.com
Trowbridge & Taylor LLP

25422 Trabuco Rd., #105-244

Lake Forest, CA 92630

949-855-8399 Voice

949-855-4013 Fax

CA DRE   756977

CA BAR  170570

Bankable Knowledge

Visit  Gene Trowbridge Curriculum Blog for license renewal courses and for real estate syndication information.

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction(s) or tax-related matter(s) addressed herein.  This communication may not be forwarded (other than within the recipient to which it has been sent) without our express written consent.

Your email:

 

Popularity: 61% [?]