How to Invest
Thanks for arriving here to further explore the possibilities of investing with Purple Vetch Properties, LLC. We are a private commercial real estate investment firm focusing on the acquisition, management, preservation, and ultimate disposition of historic green multifamily affordable housing properties. We believe that our innovative blend of, and commitment to, historic preservation, ‘green’ and ‘affordable multfamily housing’ cultivates healthy people, healthy buildings, healthy communities, and a healthy environment. We also believe that this approach provides an opportunity for YOU – the prospective investor – to put your money to work in ways that both matter to you personally, enhance your bottom line, and create the cash flow, the equity buildup, and/or positive tax ramifications that you seek in such an investment.
This 'how to invest' with PVP web page is intended to provide prospective investors with:
- Information to better understand the ‘syndication’ process in general, and the specifics of ‘how to invest’ with PVP;
- More details about the manner in which Purple Vetch Properties, LLC approaches its role as a group sponsor or syndicator of private real estate investments.
Purple Vetch Properties, LLC affords a qualified individual investor the opportunity to participate with other qualified like-minded investors in the ownership of a piece of income producing commercial real estate property through a pooling process that is often referred to as ‘syndication’. The ownership interests of the members of the ‘syndicate’ are secured by these tangible and quantifiable assets as collateral. Syndication is about leverage. Syndication enables the lone investor to participate in larger deals than he or she (or business entity) might otherwise partake, take advantage of economies of scale, pool cash reserves, diversify investments, and spread out the risk of investment across a group of qualified investors. Also, for investors who don’t have the time or inclination to learn every aspect of owning and managing a commercial real estate investment, syndication enables the investor to leverage the skills and experience of other individuals in the real estate arena and be a passive investor. Although syndicates are formed to buy airplanes, shopping centers, and even lotteries, our primary focus in on pre-existing multifamily properties.
Purple Vetch Properties, LLC or an Affiliate, as the group sponsor of the real estate transactions under consideration, typically receives financial benefit from each project in three ways:
- Organization and Due Diligence Fee – compensation for finding the deal, conducting due diligence, and structuring the deal;
- Asset Management Fee – compensation for oversight of property managers, supervision of plans for affordable housing and sustainability implementation, and oversight of all aspects of investor relations;
- Equity Participation/Distributable Cash – cash flow and property appreciation in proportion to PVP’s share of the real estate deal, which may vary depending on the amount of anticipated work and the deal parameters.
Purple Vetch Properties, LLC takes its role as group sponsor very seriously, and strives to maintain the highest standards of care with respect to oversight of your investment and the acquisition, management, and disposition of the subject property.
’10 Things You Should Know Before Investing in a Real Estate Syndication’
Courtesy of: Trowbridge & Taylor LLP
Preferred Entity for Holding Title: The “Property” LLC
There are many legal business entities that are regularly used for individuals and businesses to come together and pool resources and expertise for a common enterprise:
- General Partnerships
- Limited Partnerships
- Limited Liability Companies
Although the legal structure of a syndication can take on many forms, the two most widely used entities for ownership in real estate through syndication are the Limited Partnership (LP) and the Limited Liability Company (LLC). However, the LLC, since the 1990’s, has become the preferred choice of entity for group real estate investments as it affords limited liability to both the LLC Members and the LLC Manager and is acceptable, and in many cases preferred, by many commercial lenders. Another benefit of the limited liability company over a limited partnership from an investor standpoint is that in a limited partnership, limited partners are prohibited from engaging in management decisions or they jeopardize their limited liability status, whereas in an LLC, the Members may be able to vote on certain decisions (as described in the LLC’s operating agreement) with no adverse affect on their limited liability and/or tax status.
Here at PVP, we typically choose to employ the flexible LLC structure as the entity that holds title to the real estate. The investors capitalize this LLC by buying “Units” (versus shares in a corporation or limited partnership interests) and become “Members” (i.e., owners) of this LLC. Once a property has been identified, PVP will form a single-asset LLC in the state where the property is located, and the LLC will take title to the property on behalf of the Member-investors. We call this entity the ‘Property LLC’.
Preferred Entity for Managing the Asset: The “Manager” LLC
A separate limited liability company (the “Manager” LLC), or possibly a corporation, will serve as the Manager of the Property LLC whose job it will be to manage the Property LLC and to oversee operation and management of the property itself, on behalf of the investors. PVP typically uses the Manager LLC structure, rather than a corporate ‘manager’. The actual “Property Manager” will likely be a local professional property management company and/or affiliate of the Manager LLC, who maintains offices in the area where the property is located. Mitch Genser, as Principal of PVP, will be the person ultimately making investment and management decisions, and oversee local Property Managers on behalf of investors through the Manager LLC.
Syndicating a Real Estate Project
Equity members (investors) purchase
**Receives a pro-rata share of cash distributions from Property LLC and fees
Minimum Investment with PVP
The minimum investment in any of the commercial real estate opportunities that become available through Purple Vetch Properties, LLC is typically: $50,000
However, there may be instances when lesser minimum investment amounts are offered.
This minimum investment amount can be sourced from:
For more information about either of these options, contact us, and we will be happy to provide you with guidance about how these funding mechanisms can work with your investment in a PVP property.
Although PVP is always open to the possibility of partnering with ‘active’ investors in the purchase of commercial real estate, our primary model focuses on the ‘passive’ investor who wishes to participate in the syndication approach that we employ. In this context, there are basically two ways to invest with PVP on our commercial real estate offerings: as a ‘debt’ investor, or as an ‘equity’ investor:
- Debt Investors – private individuals or companies that effectively 'loan' funds to PVP for a specific period of time and for a specified interest rate return on their investment and who may get either a preferred return (paid prior to other investors) or a recorded deed of trust or mortgage in the Property as security for their interest; or
- Equity Investors – individuals or companies that invest money to purchase Units in the Property LLC, and who typically receive quarterly returns on their investment from periodic cash flow distributions during operation of the property, and a return of their initial investment, plus a pro rata portion of the enhanced equity at disposition or sale of the property.
The choice belongs to the investor and each approach is uniquely suited to each individual or business entity based on a variety of factors that only the investor can determine. We are prepared to discuss these two investment approaches and will provide additional information for your consideration and ultimate decision.
Property Information Package
For properties PVP intends to purchase, a Property Information Package will be made available to pre-qualified investors upon request. The Property Information Package will:
- describe the physical and financial characteristics of the property under consideration;
- highlight the market and sub-market where the property exists;
- offer multi-year cash flow projections and projected proceeds at disposition;
- delineate the specific offering terms for an investor; and
- briefly outline preliminary plans for both affordable housing and sustainability / ‘green’ components for the project.
Private Placement Documents
Beyond the Property Information Package, if the investment opportunity is of further interest to you, PVP, will then provide you with the following documents drafted by its securities attorneys:
- Private Placement Memorandum (PPM) is the document that discloses information the investor needs to know to make an informed investment decision, including SEC required disclosures about the securities being purchased, and potential risks of the investment
- Operating Agreement which is the contractual document that governs the business of the Property LLC. It defines the rights and responsibilities of the Members and the Manager of the Property LLC. Each investor and the Manager will sign this Agreement.
- Subscription Agreement and Offeree Questionnaire, which sets forth the terms and conditions of the investment, acts as the ‘sales contract’ for the sale of securities, and asks additional information of the investor(s). This document will also be signed by the investor and returned to the Manager LLC with their investment funds.
Yes, we know. If you are new to this type of investing, you may be wondering why the mention of securities? You are thinking that things like stocks and bonds and futures are securities. Well, the definition is much wider than that. Back in 1937, the U.S. Supreme Court, in a well known case called Howey, laid out a 4 step checklist to determine whether or not a ‘security’ was under consideration:
- when there is an investment of money
- in a common enterprise
- with an expectation of profit
- solely from the efforts of the sponsor (PVP)
A security (defined in SEC and state regulations as an “investment contract”) has been created…
In the event that you participate in an investment with PVP as a ‘passive investor’, you can be rest assured that all four of these characteristics are in fact met. Therefore, according to the SEC, a ‘security’ exists. The security needs to either be registered with the SEC as a public offering (a rather costly and lengthy process!) or the security may be determined to be ‘exempt’ from registration as a ‘private’ offering, under certain circumstances. The purchase of commercial real estate initiated by PVP through a group offering or syndication follows the rules for an ‘exempt’ private offering and the transaction, at least with PVP projects, is typically completed in accordance with Rule 506 of Regulation D, promulgated by the SEC pursuant to the federal Securities Act of 1933.
Potential Investor Questionnaire
If you would like further information about how the PVP investment process works for either a Debt or Equity investor, discuss the range of financial returns PVP strives to offer investors, and explore whether there is a good investment 'match' between you and Purple Vetch Properties, please take a few minutes to download, print, and complete this brief Potential Investor Questionnaire and send it back to us via fax, scan, or ordinary mail.
Once we receive the executed Questionnaire from you, we will follow up with you by telephone just as soon as possible so we can begin to explore the possibility of your investment relationship with PVP.
One reason that we ask you to complete this Potential Investor Questionnaire is to enable PVP to determine whether you are a ‘qualified’ investor who can participate in such an ‘exempt’ private offering as an ‘accredited’ or ‘sophisticated’ investor. However, more importantly, your completion of the Potential Investor Questionnaire paves the way for us to get to know you better so we can determine whether your investment goals are compatible with those of PVP’s, and therefore, whether our future private securities offerings will be appropriate for you.
Please know that PVP is extremely careful with, and protective of, your private financial disclosures, and will retain your information for internal purposes only, and will not voluntarily disclose it to any third party.
Once your status as a ‘qualified’ investor has been established through our written and verbal communication, and PVP Principal Mitch Genser has begun to form a business relationship with you, PVP will provide you with a password, and coupled with your registered email address, you will then have the opportunity to log in to the password protected ‘Investment Opportunities’ web page where further financial information about investment opportunities with PVP will be available to you.
So there you have it. An overview of ‘how to invest’ with Purple Vetch Properties, LLC, what many of the investment terms you may encounter actually mean, and how our syndication or group investment approach actually functions. Our commitment to you is that we always want you to know what is going on, whether we are discussing the preservation of historic properties, affordable housing, ‘greening up’ a multifamily building, or dealing with a Private Placement Memorandum or a Subscription Agreement for an ‘equity’ investor.