Tilden Moschetti: It's almost a
certainty that at some point,

you will have an investor in
your syndication or your

investment fund, who wants to
redeem themselves out who wants

to get out of that investment,
get their money back and be

gone? Typically, it's because of
some life event. Now, how do you

do it? Is it loud? Is it not
allowed? Let's go through it in

this video.

So in order for an investor to
get out of there have your

syndication or investment fund,
this normally happens in one of

three different ways. And we
like to have this conversation

at the get go, when I start
working with clients and

understanding what their what
their structure is going to look

like, because it's probably
going to be part of the

paperwork somewhere. So the
three ways that we do it, first

off, is redemption. So in this
is extremely common in

investment funds, especially
open ended funds, or what I call

cyclical funds. Every year, they
kind of turn over on a regular

interval. So there'll be an
investment period where we say,

okay, investors can get all of
their money back at these

defined periods. It's in the
PPM, typically, it'll say and

said they need a notice or
something like that. Investors

need do need to recognize that
this is a revolving fund with

people's money invested, and we
can't prejudice the other

investors by people trying to
get their money out too early.

things sometimes take a little
bit longer than the notice

period requires. And they have
to understand that will do their

best to do it. Because they're
your investors, you want to take

care of them, and they could
very well be in your next fund.

Or they may very well be a
family member, whatever it is,

you want to take good care of
your investors. The second way

that investors oftentimes are
exiting funds is what I call a

sponsor buyout. A sponsored
buyout may say something like at

the end of each year, we're
going to send a notice out that

that says this is the this is an
amount of money that's available

to redeem any member who wants
to withdraw some or all of their

money can opt in to this period.
But there's only this certain

number of dollars that's
available for it. So our $10

million fund is only going to be
setting aside for this year

$750,000 For redemptions. If you
want to be redeemed, then you

raise your hand, you'd let us
know. And we will then allow you

we will buy you out. Now if
there is not enough, if there

are more people who want more
dollars than the fund is made

available for this redemption,
then we do it pro rata. So this

is also kind of the Warren
Buffett model, I've been told

this is the way that he
originally did his redemptions

for his fund early in his
career, and nobody ever took him

up on it. But this is a very
good model because people feel

safe and comfortable about it.
But it still gives you as the

sponsor the control over that
over the fun and over those

redemptions. The third and final
way for investors to get their

money back that often is happens
probably in the vast majority of

cases, is what we call a right
of first refusal, or, Hey, I

want out, right, here's how it
happens. The member calls up the

sponsor and says, Hey, I've just
had this life event, I need to

get my cash out. I'm in a really
bad situation, how can I do it?

What the best, the best method
to do is, is you tell the

member? Okay, look, I think
we'll probably be able to find

out, but I can't promise
anything. Let me go to all the

members and see if somebody
wants to buy you out. In the

meantime, you should look and
see if somebody that you know

wants to buy out your piece of
it as well. So they you call up

you let every member know, hey,
we've got this, this member will

needs to make an exit. Is that a
life event? Does anybody is

anybody interested in buying his
shares? Or it could that person

could also be you? You saw so
give them a chance in order to

find a replacement. Because at
the end of the day, you want

that person who's getting out to
be able to get top dollar. Now

what do I mean by top dollar is
this is now a market driven

activity, they're probably going
to be selling their spot at a

discount, because they're in an
urgent situation. It's just the

way it is. So most of the time,
they'll buy it at 90 cents on

the dollar. And that will be the
buyout. Now that's just a very

rough idea on what it is. But
the market itself will take care

of it. It's negotiated between
them Unless you are the one

buying and buying them out, do
not get involved in that

negotiating process at all. You
don't want anything to do with

it. You want it to be entirely
between the purchaser and the

seller. My name is Tilden
Moschetti. I am a syndication

attorney for the Moschetti
syndication Law Group. We focus

exclusively on Regulation D, and
Regulation D offerings, helping

sponsors put together compliant
offerings for themselves for

their investment funds
syndications, whether it be for

real estate or raising money for
their business, or private

equity fund or whatever it is,
as long as it's under Regulation

D if we can help you and if
you're interested in putting

together a fund or syndication,
give my office a call. We'll set

up a time to talk and we can go
from there.