Tom Morgan works with apartment syndication and funds for Sherman & Howard. He’s been there for about 8 years, after serving in a similar practice for 15 years prior. He has a background in taxes and securities. 

(13:20) “I draw on that to structure the transactions, because they’re both intertwined, because of how you structure the cash flow, the deal, the flow of funds, and then also how you make it complaint to raise money from the investors,” said Morgan. 

His current practice focuses on capital markets, securities, finance, real estate mergers and acquisitions, and corporate and transactional law. 

Tanner Bickelhaupt also works in acquisitions and says Morgan is his go-to guy anytime he’s involved in that process.


(:50) – Tanner Bickelhaupt says once Tanbic decided to get going on a project, his attorney, Tom Morgan, was his very first call. Once he’s set up the trust fund, he sat down with his lawyers to figure out the path forward, including things like who would be the investor and what disclosures and other forms are needed.

(2:47) – Morgan says getting a company’s goals and focus in line is a crucial first step. Consider whether you’re looking for a value add, low-income housing, whatever it may be – there are many different types of multifamily investing. Also consider how many investors will be involved and in what capacity.

Lender financing is another piece of the puzzle to be solved.

“Is it a traditional Fannie-Freddie, a CMO loan – which Tanner loves, I know – they’re much more complicated, with many more fees and restrictions involved than your traditional Fannies and Freddies. And I think I’ve already said, but where’s the asset? What is the asset? Do you have it already? Are you planning on trying to raise money then go out and buy something? Are you looking to do one property or multiple properties? All those questions are the initial mix of things you’d need to know to see where to go with the project,” said Morgan. 

(5:50) – The team is very important.

Morgan brings up that there are all sorts of disciplines. One is securities regulation, which is Morgan’s specialty. That’s focused on compliance, disclosures, filings with the SEC and various states, and the finance portion of dealing with lenders and loan structure. Then there’s the straight buying of the real estate and getting to work on a construction project. Buying an existing apartment complex is a separate discipline. 

(7:50) – Bickelhaupt says this is the one spot you can’t cut corners. It’s important to be prepared and put a good team around you.

Morgan says he’ll see people cut and paste from samples without understanding what goes into it. Lots of people bite themselves in the foot that way. 

(11:14) – If you aren’t in compliance with securities laws, you’re basically guaranteed to fail your investors. Investors can ask for their money back if you don’t present the right information, if you omitted material information, or if anything was misleading.

(14:35) – Most of Morgan’s work involves repeat clients. He says he likes startups and hopes they end up doing multiple deals.

“It is an educational learning process of what I need to get the information in order for me to do what I need to do for you. We have questionnaires that you fill out. There’s all kinds of compliance questions that you nee to answer to make sure you’re not disqualified from the line on the normal exemptions that we rely on from registering whatever interest we’re selling under the securities law. All of these are targeted to be non-registered to get the exemption. The exemption is 9 out of 10 times a 506,” said Morgan.

He continued, “Are they a wannabe in the industry or are they the real deal? If you have a real deal, then we need to get focused on how you implement that.”

(17:55) – There are two different types of questionnaires Morgan might go over.

“One type are the Bad Boy provisions – do you have a security violations in your past or other issues? Has a state administrator every banned you from selling securities? All of those are potentially disqualifying events to qualify for a Rate B offering,” said Morgan. “The other type of questionnaires are you background; what’s your educational background, where have you worked for, what’s your bio in effect, so we can develop the description of what we need to describe about you as the syndicator in the transaction.”

From there, Morgan will also look into what the deal looks like. Is there a contract ready to go? Do you have an option? What’s the timing for the project once you go into escrow? 

Bickelhaupt points out that after you raise the money, you still have obligations in your reporting. The PPM protects the developer as much as the sponsor. Having a good attorney makes the whole process a lot smoother.

(21:40) – Bickelhaupt says it’s important to be in frequent communication with your lawyer. But things get more serious once they have the LOI.

“He’s my quarterback, if you will. I just want to vision up the ideas and the product and go, and he is protecting everyone around that. It’s a continuous process. You don’t just get the money and off you go,” said Bickelhaupt.

(24:30) – Morgan works with mergers and acquisitions too. Right now, he’s working for a ma and pa shop that wants to cash out and move.

“One of the things with syndicators that I’ve seen happen a lot is, once you enter the PSA, whether you’re the buyer or the seller, you now have another attorney introduced. So you now have this LOI agreement where everything is, ‘Hey, this is our intent, this is great,’ and then – brokers can speak to this a lot, they see it often times – once you’re trying to put the deal together on the PSA, elbows come up. So you have an attorney that might be trying to flex over here, we’ve had experience where it’s a newer firm, the attorney is trying to earn their business so he’s really aggressive, and it can kill the deal,” said Bickelhaupt. 

Bickelhaupt says it’s important to remember if there’s a buyer and seller, it’s in both their interests to close the deal. A great way to get that done is with a simple phone call involving all parties, rather than trying to hammer everything out over email.

Deal Structure

(30:11) – The current tax structure is flow-through, Morgan says.

“So you don’t have an entity that’s taxed and then you’re taxed on the distribution. Those can come in the form of a partnership, limited partnership, LLC, Sub S corporation. Sub S corporation is not very efficient for real estate because you can’t do promoted interests. It’s one share, all treated the same; you can’t have two classes of shares. So that leaves the LLCs and the limited partnerships, because you want protection from liability for the investors.”

Morgan says LLCs are easier to use, because under other partnership structures, the general partner has to have a percentage of the deal, which forces them to put capital in. With an LLC, you can have a manager/operator with zero interests. 

In some cases, such as if you have foreign investors, you may have to do a limited partnership. Other nations have different tax benefits. 

Bickelhaupt says in some cases, he’s seen syndications where there’s a separate bank account so that all funds flow through that account. The LLC takes the money. There’s one set up for each property. Even if you have a fund, you’d have an LLC wholly owned by the parent fund to hold the property so that each property stands on its own for liability purposes.


(35:30) – Bickelhaupt says a lot of people have issues with disclosures. 

“It’s expensive. There’s no way around it. It’s one of the biggest expenses. But it’s so important,” said Bickelhaupt. 

Antrim points out that it may seem expensive, but getting that wrong is even more expensive.

It’s tough too because the rules change all the time, and they’re different for different types of properties and zones.

(37:20) – Morgan says being too optimistic is another issue. If your projections look like you’re going to have a great return but you haven’t counted in things like delays or possible contingencies and you’re trying to learn to do things on the fly, that causes some problems. 

“I’ve seen business plans where the word ‘guaranteed’ is used,” said Bickelhaupt. “We’ll joke sometimes that whatever range you put for the investors, they only see the top. Sometimes it’s frustrating because we’ll go through the PPM and he wants every single detail…but he’s basically backing up the theory or the claim of what you’re saying.” 

Teaming Up

(40:40) – Bickelhaupt says whoever the syndicator is should set up their entity early. Then once they find the deal they’re after, they can move quickly. 

“The problem is, you can go down the path – we’ve had a few of them where you’re negotiating PSAs or whatever and the deal doesn’t come around, but the bill still comes. That’s just part of it. As people are capitalizing themselves to go into business, they need to advocate for some legal fees,” said Bickelhaupt.

Usually, the exit is just to sell. You can split up promoted interests if you want to negotiate with someone else in the industry. Maybe you can each cover different sides of the deal. 

“It’s like a stool,” said Morgan. “There’s three legs, and if you don’t have one of the legs, it’s not going to stan dup. That’s the property, the financing, and the equity capital. If you don’t have those three, you don’t have a deal.”

Sometimes syndicators’ first capital is friends and family. Then you have to wonder whether people are supporting that person because their deal is trustworthy or because their family loves them. As you get new investors, that can lend some credibility to the deal.

(44:30) – You don’t necessarily need to have a registered investment advisor if you’re only going to be doing a few deals per year. Morgan says the rule of thumb is 3-4 deals per year before a broker dealer or investment advisor would have to get involved.

Most syndicators have an investment pool, and have their reputation. With that, they can revisit people they have an existing relationship with to raise capital.

(46:20) – The other way to raise capital is with crowd funding.

“The SEC rules changed where you’d still be considered a private placement but you could use whatever media, internet, a guy out at the corner with his sandwich board advertising whatever,” said Morgan. “Those that I’ve seen that had a lot of activity early, they’d raise capital – so the sponsor would come in with his deal, he’d have a presentation to the investors that was through the crowd-raising platform and raise capital in that fashion. They’d take less fees than a typical broker dealer. But what I’ve also seen is they weren’t as good at vetting deals. There’s been some of those platforms that have failed because they’ve just had bad deals that came along.”

For that route, you have additional securities compliance regulations to deal with.

(48:35) – A syndication is one or two specific properties you’re going after. The fund is where you’re raising money into the future to fund projects and properties moving forward.

“You have to walk before you can run,” Morgan said. It would be very odd to start a fund before you’ve bought other properties. It’s important to have background knowledge and success in the industry before you jump into something too big.

(52:00) – Of course, there are different types of investors and different ways to invest. Bickelhaupt says he invests as an LP in other people’s deals.  

“There’s a lot of opportunity out there. It mostly comes down to timing,” said Bickelhaupt.

He says the management company provides real-time data every day, which is a huge advantage. You can just follow the large publicly-traded reads. Bickelhaupt says he enjoys getting their information and performance in their quarterly reports where they set certain benchmarks. He tends to be more interested in large capital, though, and right now, that’s all headed to Phoenix.

Final Thoughts

(56:00) – From Morgan: “I do think a well-drafted set of documents is a value-add to the syndicator. I think you get into sophisticated investors and if they see something like I was talking about, with an S corporation and then an LLC and then something from the state of Delaware and then something from Nevada, that those deals probably won’t get a full read-through. Those will be cast aside. If you do have good underlying documents, a good business plan, well-thought out, at least you get in the line to be looked at.”

(58:40) – From Antrim: “When I was running 1.2 billion in real estate on the asset management side, you have a investment community, you have a team there – attorneys, lenders, CFOs, operators, marketing, broker dealers, it’s a team sport. In order to have all that go well – I mean, I can kill a deal with just one person with this team.”

Antrim points out that Bickelhaupt’s has built his company on having a large team.

“It’s not something you can do on your own.”

(1:00:00) – From Bickelhaupt: “Just be a good steward of people’s money. People are giving you their money with the intent that you’re going to do and say what you’re going to say and do. So one, just do that. But also, once you decide to take somebody’s money, the syndicators that have done that, you know everything about that relationship changes immediately. Whether it goes good, bad indifferent. The relationship changes. I’ll hear syndicators say, ‘Well, I don’t need a PPM because it’s just friends and family.’ Well, I would probably argue you probably need it a little bit more. Because you owe that to them.”

“So, just don’t cut corners. And I know it sounds silly, but do the right thing.”