Raising Capital For Your Real Estate Transaction
Real-estate Investor News: I'm here with Nick Jevic, the founder and who owns RealEstateCapitalPro.com, a web site focused on helping property deal sponsors cut costs when raising private capital.
First question - What can you see as the main challenges the real deal estate investment sponsor today?
Nick Jevic: What I have found is always that many real-estate sponsors can find real-estate opportunities, the way to make money from it, and also the knowhow to bring all of it to fruition. But the things they don’t have, or at best don’t have enough of, is capital.
real estate fund
In a few sectors and deal sizes, the periods remain dark and gloomy the real deal estate, but smart real-estate sponsors still find exceptional possibilities to make money in this market. Whether it's buying underperforming debt secured by real-estate, buying in to a busted development, acquiring foreclosures or tax lien auctions - they've got the deals and also the know-how to generate money together. And that’s what investors are trying to find - somebody that could make money for the kids.
REIN: Where does that leave real-estate professionals today?
NJ: When the above description describes you, then raising capital is most likely fairly at the top of your "gotta do" list. When a sponsor is out raising money to get a real estate deal or for a fund, one of the first things they’ll require is an exclusive placement memorandum, or perhaps a PPM. You may think a PPM is a thing for that corporate guys seeking to raise equity to get a business. But whenever you're raising money from investors - issuing securities (think issuing a security in return for money), in that case your activities come under state and federal securities laws. And specifically, since you are doing a private transaction you are issuing what is known as “unregistered securities,” which falls under Reg-D of the Securities Act of 1933.
Nick Jevic
REIN: If I'm assembling an actual estate deal, fund, or syndicate, how come I want a PPM?
NJ: So, not merely what is the legal requirement to comply with both federal and state securities laws, but simply by using a PPM you may provide yourself with cover from securities fraud claims. Having a defining document to your transaction, there should be no questions regarding exactly what the deal is. Furthermore, your prospective investors, if they're active in private investments, will expect to find out a PPM.
REIN: What's inside it for that investors?
NJ: The PPM can be a document that gives your prospective investors challenging information they need to produce a smart decision about whether or not to invest in your transaction or otherwise not. With a view from 30,000 feet, the PPM includes legal legends for that benefit of the investor, a term sheet that details the economics and legal provisions with the transaction, and the perils of the transaction.
REIN: Is the PPM expensive?
NJ: The task for just about any deal sponsor is that a PPM can be very expensive. To possess a consultant or attorney draft an exclusive Placement Memorandum, you can expect to repay to $30,000. And understand that it becomes an upfront expense that will get paid whether you successfully get a money raised or not. Busted deal expenses can be painful.
Fortunately, there is a more efficient and price productive way to get your PPM drafted. Using a Private Placement Memorandum Template from RealEstatecapitalPro.com, you can draft one's own placement memorandum, then have your attorney evaluate it, which is clearly an even more efficient use of your legal resources.
So keep finding those real estate opportunities and remain compliant when raising capital using a Private Placement Memorandum. Remember, it’s not just for corporate transactions.
REIN: Thanks Nick
Nick Jevic has over Thirty years of experience in banking, corporate finance, and capital markets. Through RealEstateCapitalPro.com he helps real estate sponsors navigate Reg D as well as the process of obtaining a private placement completed without spending tens of thousands of dollars.