Where is the Rent?

It is anticipated that the first distribution will be made sixty days after the closing of title.
You may find two sentences like the ones above in your brochure, but you will not find them often together in one spot. We have arranged them that way for your con¬venience.

Title closing consists mainly of two things. The seller gives the buyer the deed to the property. The buyer gives the seller the purchase price. In the case of a syndicate, the buyer pays with your money. To pay out your money on December 15th, he will ask you to send it in at the beginning of December or sooner. Note that distribution to you starts only 60 days later.
Where is the rent which is being collected for Decem¬ber 15th to February 15th? This can be a substantial sum if rents for substantial properties are involved. Is there a mistake in the brochure? No. Every word was read by the syndicator and his attorney very carefully. Did the ten¬ants get the 2 months free as a Christmas present? No, that's not it either. Try again I Yes, this time you got it. This is one way for the syndicator to make a profit. Noth¬ing wrong with it, mind you. The syndicator discloses the information in the brochure. We only want you to be able to find that information. So look for the closing date and the date when your distribution starts.

Syndicate Participation Units for the Syndicator

Since we are on the subject of the syndicator's profit, we may as well consider additional methods employed by the syndicator to obtain his share of the profits. In the first place he could buy the property and then sell it to the syndicate at a profit. This is perfectly legal, as long as he discloses all the facts to the investors. In such a case the brochure should even state the amount of the profit realized by the syndicator.

Sometimes the syndicator gets his profit by obtaining participation units from the syndicate. Look at the fol¬lowing clause.
The partnership is capitalized at $1,235,000. Of this amount Messrs. A and B have acquired interests as General Partners to the extent of $50,000 each and as Limited Partners to the extent of $50,000 each by vir¬tue of their contributing to the capital of the partner¬ship property of an agreed value of $200,000. Such property consists of their equal undivided interest in the purchase agreement which they assigned to the partnership.

This clause says that the syndicators have obtained to¬gether a $200,000 interest in the syndicate which has a total capitalization of $1,235,000. They have not paid cash for this interest but have contributed property of an agreed value of $200,000. What does this property consist of? When the syndicators signed the purchase contract for real estate, they themselves had the legal right to ob¬tain the deed in their own name, upon payment of the balance. This right to take title they turn over to the partnership. This is the "property" for which they re¬ceive interests in the partnership valued at $200,000. Who fixed the value of this contribution at $200,000? The syndicators and their business associates did. This happened, of course, before you were asked to contribute funds to the venture. So you have no reasons to complain, as long as the facts are disclosed. You look at what is left for you and decide on that basis whether the investment will be a good one or not.

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