CH 17 RE syndicates and real estate

A Mortgage Trust

A company that invests in mortgages and other types of real estate loans/obligations

There are two types of REITs:

An Equity Trust A Mortgage Trust

a person the chance to channel his or her private savings into real estate investments for which other financing cannot be obtained or is not available because of the large amount of money involved.

Real estate syndication

This form of syndication allows limited liability for the investors but has negative tax features. Which form fits the description?

The Corporate Form

What is the correct order of regulatory agency jurisdiction changes to non-corporate California real estate syndicates since The Real Estate Syndicate Act's inception in 1970?

The Department of Corporations, The California Department of Real Estate, The Department of Corporations

real estate syndication

combines the money of individual investors, along with the management of a sponsor, to invest in real estate and achieve a good rate of return on that investment.

the Real Estate Syndicate Act was repealed

eight years later

The Department of Corporations regulates all REITs

has the authority to grant either a permit or an exemption in deciding whether a given form of business for pooling investment money constitutes a securities offering.

An Equity Trust

A company that invests in real estate itself or in several real estate projects

Qualification as a Trust

1. The REIT must be beneficially owned by at least 100 investors. 2. No five, or fewer, persons may hold more than 50 percent of the beneficial interests. 3. Transferable shares or certificates of interest must prove the beneficial interest. 4. In California, each share or certificate of interest must carry with it an equivalent vote.

Marita tells Alexandra they must obtain their broker-dealer license from the Department of Corporations to engage in the sale of real estate syndicate security interests. Alexandra disagrees with Marita, explaining they both have their broker licenses and that is sufficient. Who is correct and why?

Alexandra is correct. Section 25206 was added to the Corporations Code making obtaining a broker-dealer license optional.

This form of syndication avoids double taxation but has a lack of centralized management. Which form fits the description?

Both B and C

Syndications forms

Corporate Form; General Partnership (Joint Venture); Limited Partnership and Limited Liability Company.

Alexandra and Marita are forming a real estate syndicate. They have their initial investments and are ready to proceed. What happens next?

Origination, Operation, Completion or Liquidation

HOW, exactly, this is done. Syndication is accomplished through three phases

Origination, Operation, Completion or Liquidation

This is the most frequently used organizational form for real estate syndicates. Which form fits the description?

The Limited Partnership

A small group of investors are in the initial stages of putting together a real estate investment trust (REIT). Which of the following is not a qualification?

The company must distribute at least 85% or more of its income to its shareholders.

Alexandra and Marita's company has qualified as a trust. It has distributed 96% of its income to its shareholders. Which earnings require the payment of federal taxes?

The company only pays federal taxes on the retained earnings, which are taxed at corporate rates.

A real estate investment trust, also known as a REIT,

a type of company that sells securities specializing in real estate ventures, and requires a minimum of 100 investors.

A real estate investment trust (REIT) is

a type of company that sells securities specializing in real estate ventures.

Combination trusts:

companies that engage in both of the aforementioned.

In 1977, Section 25206 was added to the Corporations Code,

permitting real estate brokers to engage in the sale of real estate syndicate security interests without having to obtain a broker-dealer license from the Department of Corporations.

The Real Estate Syndicate Act

went into effect in 1970. law handed the jurisdiction of some non-corporate syndicates from the Department of Corporations to the Department of Real Estate

Professional management

which is a service that might not be within the financial reach of the smaller investor

Alexandra and Marita have formed a REIT. They have their investors and resources and are ready for business. The REIT will be investing in an assorted portfolio of real estate and mortgage investments. What type of REIT have Alexandra and Marita formed?

A Combination Trust Combination trusts are trust companies that engage in both equity and mortgage trust investments and are not as prevalent as either equity trusts or mortgage trusts.

Marita and Alexandra set up a Limited Partnership. Marita is named General Partner and Alexandra is named Limited Partner. Marita embezzles funds from the investors. Is Alexandra liable for Marita's indiscretion?

Alexandra is only liable if she is named as a general partner in the certificate or if she participates in control of the business.