In essence, it’s the pooling of capital to invest in a real estate opportunity. The benefit of putting this capital together is that it might make it possible to purchase and pursue opportunities that one person may not be able to acquire on their own. And as we all know bigger the deal and the unit numbers, the better.
A famous example of this was the syndication led by Helmsley & Malkin where they ran a group of investors to buy the Empire State Building in the 1960s for $65 million, many of whom contributed only $10,000 each.
How a syndication differs from a real estate fund is that with a syndication, the asset is already identified and the money is raised for that specific opportunity. With a real estate fund, it’s more of a blind trust where capital is raised based on the sponsor’s vision, track record, and reputation. After raising that capital, the fund sponsors will then go out and acquire properties.