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In this conversation, Gene Trowbridge, a seasoned real estate attorney and syndicator, shares his journey from being a syndicator to becoming a legal expert in real estate securities law. He discusses the intricacies of real estate syndication, the importance of understanding securities laws, and the dynamics of raising capital through private placements. Gene emphasizes the significance of networking in the real estate industry and the pressures faced by syndicators in ensuring profitable investments. He also highlights the differences between public offerings and private placements, providing insights into the legalities involved in forming syndications and the impact of the Jobs Act on raising private money.

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Listen to the Audio Version of this Episode

Dylan Silver (00:01.486)
Hey folks, welcome back to the show. I’m your host, Dylan Silver. And today on the show, it’s my privilege, it’s pleasure to have a real estate securities law specialty syndicating expert and has 20 years of experience prior to become a real estate attorney. He was an experienced syndicator for 20 years. Trowbridge out of Southern California. Gene, welcome to the show.

Gene Trowbridge (00:30.268)
Hi Dylan, thanks for having me, appreciate it.

Dylan Silver (00:33.088)
It’s a pleasure to have you on the show here. Before hopping on, we were chatting about your experience and your background before becoming a real estate attorney. You became an attorney in your mid 40s.

Gene Trowbridge (00:48.222)
45, that’s right, I had just had, I had had enough of the being a syndicator part of the business where we were primarily building.

Self storage facilities in Southern California building them getting them about 10 or 20 percent occupied and then selling them that was my business and I’ve been through I’ve been doing it a long time. So I’ve been through a number of bad down cycles and great up cycles in the syndication business and 93 and 94 was another bad cycle for real estate and I just decided that I’d done that long enough and so with a

It was a wife who was working and two kids in grade school. I went off to, on a part-time basis, go to law school. And I finished in three years and passed the bar. And ever since then, all I’ve been doing is, is legal work about 30 years, 30 years actually this year. So.

Dylan Silver (01:49.944)
How was it going to law school at that time? You mentioned you got so much experience and you’re probably a little bit older than some of the people that were going to school and you’re also going to law school part time so you may be sometimes trying to muster up the energy to get everything done. Was it a difficult process?

Gene Trowbridge (02:11.77)
It was the only time in my life I was really a good student. And I had a motivation. Number one, I had to borrow some money to pay for my law school tuition. And if I didn’t pass the bar, it would have been wasted. Because no one wants, I mean, JD is an attorney. That’s great. I could have gone to work for someone else.

but I never could have opened my own practice, was what I wanted to do because I’ve always been independent. I’ve never had a W-2 job in my life. So the issue is to start my own firm. So I had to succeed. And so I was motivated and I was a good student, but that wasn’t unusual. The law school I went to had a lot of young people who couldn’t get into other schools.

Dylan Silver (02:46.412)
Wow.

Gene Trowbridge (03:05.76)
So they went there and I’m not sure how motivated they were, but there was a whole group of us in our 30s and 40s who were going to go off and start this as a second career. Just for a second, my study group was a woman who was a nurse who wanted to go into medical law for some reason. There was a cop who wanted to be a prosecutor. There was a book author who wanted

Dylan Silver (03:14.883)
Really?

Gene Trowbridge (03:35.632)
to be an IP, intellectual property attorney, and then there was a real estate syndicator who wanted to be a real estate syndicator attorney. So we were all looking to change careers into something that we already knew but use what we knew to work on our legal profession. So we all passed the bar the first time. We all passed the bar the first time.

Dylan Silver (03:40.172)
Yep.

Dylan Silver (03:51.351)
Ew.

Dylan Silver (03:57.262)
On a much smaller level, first time, was this in Southern California that you initially got? Okay. I mean, on a much smaller level, on a much smaller level I can relate because I was an AM, still a real estate wholesaler, and I was thinking about…

Gene Trowbridge (04:04.988)
Yes, yes, yes.

Dylan Silver (04:19.054)
my career path and what I was gonna do and real estate wholesale, you’re selling a contract during the executory period of the contract. And I’m always dealing with real estate agents and they kinda didn’t like dealing with, in many cases, investors and wholesalers. And they’re kind of like, well, we don’t wanna have to deal with you. So I was thinking in the back of my mind, how do I overcome this? How do I, you

Gene Trowbridge (04:37.886)
Right.

Dylan Silver (04:43.97)
beat this fatigue that they’re facing. I could never figure it out. So finally I just threw my hands in and I’ll be like, well, I guess I’ll become a real estate agent. I wasn’t, and still I’m not particularly passionate, maybe this will change, about listing properties and so on and so forth. But I just kind of saw an angle and I was like, well, how many real estate agents are out there that are actually…

Gene Trowbridge (04:51.986)
you

Dylan Silver (05:05.154)
doing what I’m doing and that are working with investors every day. And so on another level, now that I have my real estate license and we’re always interacting with title companies and specifically what I’m doing, working with investors, coming up with creative deals, having to pay attorneys for writing contracts that are very specific.

It made me think you know well I understand why people get curious about real estate law here because just like I got curious about Becoming a real estate agent. I bet there’s a lot of realtors out there who are looking at these Real estate attorneys thinking well, maybe maybe that’s gonna be me someday

Gene Trowbridge (05:41.884)
Well, might be the real estate industry is a great industry full of absolutely wonderful people.

I became a broker in 1972 and I’m still a broker now. I’m a broker in California. Keep my license current. I still am active in going to the right type of meetings where the topic that they’re going to talk about is interesting to me. And as I said, the people are just, just spectacular, very people oriented people. I’ll tell you that.

Dylan Silver (06:16.012)
That’s for sure. I’ve never… I think it’s incredible because I’ve never seen another space, I think it’s very unique to real estate where you’ll walk into rooms and people will just be an open book. Like, I’ve even questioned, like, I feel like I should be paying this person to tell me all this stuff. We’re here at like a cocktail hour and they’re giving me all of the game. They’re not hiding any gold nuggets from me, they’re just telling me everything. But then as I…

Gene Trowbridge (06:26.526)
Gene Trowbridge (06:31.582)
you

Gene Trowbridge (06:39.762)
Yeah, I hardly ever go to bar meetings. I do things virtually with the bar to learn, to study topics that I’m interested in. But getting up and going to a bar luncheon just sounds like getting a root canal, I’ll tell you.

Dylan Silver (06:59.938)
I enjoy it. It’s not as tedious for me, but I will say because I’ve had so many of these podcasts done and then also now I’m seeing the way Zoom and Google meets will integrate into your calendar. It’s just entirely possible to make so many connections just through utilizing your calendar and through digital means.

Gene Trowbridge (07:19.454)
Right.

Dylan Silver (07:24.802)
You mentioned, Gene, before we hopped on here, that you’ve been involved with some pretty well-known syndications, and that there’s really only a handful of people out there who are doing what you’re doing on the level that you’re doing it at, in the niche that you’re doing it at. For most people who are thinking about creating a real estate syndication,

Again, without giving away all the gold gene, what’s maybe some of the first processes, the foundational things that they need to do to get started with a real estate syndication?

Gene Trowbridge (07:59.314)
Well, the first thing I think they need to do is they need to understand that it’s a security. And you’re moving away from real estate law when you put together groups of investors. You become a syndicator when you don’t have enough money to buy all the real estate you want to buy yourself. And you need to look for other people’s equity. Put together a group to buy the real estate. Well, that takes you into the securities world.

Dylan Silver (08:29.506)
Okay.

Gene Trowbridge (08:30.226)
So first of all, you have to understand that there are a lot of myths out there about, well, if you have less than five people or if it’s family and friends or all that, make any difference. Find yourself a securities attorney to guide you on the way so you don’t go to jail.

Dylan Silver (08:46.626)
That would be the thing to do, right?

Gene Trowbridge (08:48.062)
That would be the thing to do because the securities laws are, it’s a criminal statute, so we need to do it right.

Dylan Silver (08:56.332)
So I’ve actually had, I want to say, at least one, possibly a handful of syndicators on the show here. There was a lady that I spoke with out of Houston, Texas. I believe she had a syndication. And one of the interesting things that I think about is there’s so many, and as a former real estate syndicator yourself, there’s so many ways to start a real estate business and to…

get capital together. can bootstrap it. You can apply for loans. You can raise capital. You can do syndications. I just had a woman on the podcast here today who was talking about she helps people establish their business credits. Each LLC that they own has a line of credit established to it that’s separate from their personal credit and then kind of walking down these.

Gene Trowbridge (09:38.938)
Dylan Silver (09:48.686)
pathways between raising capital versus real estate syndication, how is a person able to decide what’s the best path for me?

Gene Trowbridge (09:59.784)
Well, there really is no path. The fact of the matter is, if I raise money from you, just you, Dylan, and we went out to buy something and I said, I’ll be in charge. I’ll put up 10%, you put up 90%, and I’ll do everything. That’s a security. It’s as simple as that, because in plain language, the security rule says it’s an investment of money.

Dylan Silver (10:19.118)
Mm.

Gene Trowbridge (10:30.91)
in a common enterprise with an expectation of profit run by the promoter.

So you and I, you would invest money in an LLC, I’d invest my money in an LLC. There’s the investment of money in a common enterprise. We’re doing it because we think there’s gonna be a profit. And I’m in charge of your money. So the government has a vested interest in making sure I do things right and you’re protected.

Dylan Silver (11:04.258)
So even in informal situations where someone may be, you mentioned, know, pooling money together, unless this person’s on the name of the LLC, it’s a, I mean, it’s a security on some level.

Gene Trowbridge (11:17.308)
Well, if you do your own LLC, that’s not a security, but as soon as you pay money from other people and you’re in charge. Now you and I could do something together and let’s stay with the same scenario where you’re up 90 % and I’m putting up 10, but we decide to call it a member managed security. So there’s no manager, there’s no promoter. It’s just the two of us. As long as we vote,

Dylan Silver (11:23.416)
Take your money.

Gene Trowbridge (11:48.056)
equally.

you don’t have a security. If when we vote because you have 90 % of the money, you’re the one making all the decisions.

Well, there you are, you’re in charge of my money. So now it’s a security. You can have a 90-10 % equity contribution, that’s fine. But on major decisions, there’s two equal votes and nothing happens unless it’s unanimous. No one is in charge of anyone else’s money. And then that falls apart pretty quickly when you have 10 people, And just three people.

Dylan Silver (12:00.354)
Yeah.

Dylan Silver (12:23.0)
when you have 10 people. I was just about to ask that. Is there a limit? I mean, I was just about to ask that. Could you have seven people in that? But then if you need unanimity, if you need a unanimous vote, it’s kind of hard to get seven people to agree on anything.

Gene Trowbridge (12:36.402)
Yes, right.

And most of the investors don’t want to do it. They don’t know about it.

They don’t know what you know about real estate. They don’t want to be in charge of the property. And the other investors don’t want them to be in charge of the property. They want you to be in charge of the property. That’s one of the things you’re selling. It’s really a people business, Dylan. Yes, it’s great to have a piece of real estate that you’re going to buy, but it’s really a people business. How does the promoter work with the investors? And does the promoter… Does the promoter…

convey the fact that what we have here is an opportunity. The promoters found an opportunity that for one reason or another he’s not going to take or she’s not going to take all to themselves. So she goes out and finds investors who’d like to be part of this opportunity. And how you get started to do your first deal is you go and talk to the people who know

that you’re successful in your business. And they probably would love to be part of one of your deals if you just told them about it. Okay? If you keep it a secret, it doesn’t work. No. So that’s the way that goes. And that’s how I got started. I found a deal that I couldn’t buy myself. And I found four guys that I’d gone to college with and called them up and said, let’s buy this apartment building in St. Paul together. And we did. And a career was made.

Dylan Silver (13:45.014)
No. That’s proof of concept. It’s best thing.

Dylan Silver (14:07.83)
Now, when people are coming to you with, you know, they’re looking at forming a syndication, I mean, I just learned a couple things here on the show here right now talking about, you know, securities law is criminal, right? So if you could end up in jail if you’re doing the wrong thing, I don’t know if, yeah.

Gene Trowbridge (14:14.888)
Sure.

Gene Trowbridge (14:28.818)
Bernie Madoff, Bernie Madoff, the wolf of Wall Street. There are thousands of stories out there that end up in the paper where people have violated the securities laws.

Dylan Silver (14:42.498)
So most people, think, when they’re thinking about real estate syndications, they’re not thinking about Wall Street, but because it’s similar or maybe the same area of law or related, you could get into equivalent issues. So is this something kind of that you’re advising people of before they think about making a syndication?

Gene Trowbridge (15:02.78)
especially when I get what I call as a homework call. The most common homework call I get, Dylan, is, Gene, I want to put together five or six people to buy this building, and I don’t want it to be a syndication. Well, that’s a bad question, because two or more people, by definition, is a syndication.

Dylan Silver (15:22.062)
as it’s going to close.

Gene Trowbridge (15:23.538)
The question is, really, they don’t want it to be a security. So we have to go through the process. Who’s gonna be in charge of the money? Are you gonna get paid for being in charge of the money? Is this a profitable venture that you’re expecting to share with people? Well, then it’s a security. And so they need to understand that. And then we need to get started. And Wall Street versus what we do.

Wall Street is public offerings. They’re in the newspaper. They get coverage by the press. They talk about what they’re doing. The private placement world is different. Every security needs to be registered with the SEC. Dylan, unless it’s exempt.

And so that’s the area in which I work in exempt securities. There are rules that make it so darn easy to get started in the securities business if you work in the exempt field. But let me just give you some facts. Last year in the exempt world of private placements, there was over $3 trillion raised. In the public world,

Dylan Silver (16:33.166)
Hmm.

Gene Trowbridge (16:48.216)
IPO’s, initial public offerings last year, 1.5 trillion. The business is in the private placement world where you don’t have to go to Wall Street. Now, if you’re going to raise $100 billion, you have to go to Wall Street because you have to advertise. You have to make it public. But if you’re raising $6 million,

Dylan Silver (17:07.106)
Yeah.

Gene Trowbridge (17:12.286)
You can do it privately. You don’t need to advertise. I mean, there ways that you can and it’s still a private offering, but this is the business. This is where money is raised for small businesses in the United States. And if you read all about it, businesses with 500 employees or less, small business, that’s the heart of our economy. And this is where the equity comes from in our world private placements. as we talked about,

I’ve done professional hockey team, I’ve done race horses, stable of race horses, I’ve done avocado groves, I’ve done medical equipment that now needs to be produced and sold. I helped a guy do a chain of hair salons where he went in and rented real estate from someone else and needed to do all the fixtures. there’s all sorts of, and lending, I mean you might be interested, I’ve done some lending offerings where the

that people are doing throughout really alone, it’s in advance, you come to me with your receivables, I give you some money on your receivables, and then as you receive payment on your receivables, you’re paying me back. I’ve done that, and just lending, know, bridge loans to people who are flipping houses. Think things like that.

Dylan Silver (18:25.262)
Yeah.

Dylan Silver (18:33.24)
Now with exempt secur- this is kind of mind blowing to me. So I’m unaware until right now, and I think most people are unaware, who are on the outside looking in, that exempt securities are, you said three trillion versus IPOs one trillion. It’s twice as much. It’s a huge difference. So when people are-

Gene Trowbridge (18:51.502)
one and a half trillion, twice as much.

Dylan Silver (18:58.454)
talking about private equity and when people are talking about you know these large groups coming in and you know doing mergers and acquisitions and this type of thing our syndication two different worlds entirely

Gene Trowbridge (19:08.744)
two different rules.

Two different worlds. Mergers and acquisitions are probably in the public realm and other things are in the private realm. Now just because it’s private doesn’t mean it’s always small. The details from the SEC will tell you that the median of private placements, the median is about five million.

Dylan Silver (19:19.713)
Okay.

Gene Trowbridge (19:39.422)
So half of them are over five million and half of them are under five million. And there’s a lot of, there’s a lot there is in the 60 or 70,000 number of offerings every year. So there are a lot of small offerings. We’ve done offerings up to 130 million and we’ve done offerings as low as 350,000. So there’s quite a range, but our business, most of the people who do business like me, the four or five of us are out there.

are raising maybe working with clients who raise less than 10 million each time.

Dylan Silver (20:15.438)
I want to get granular here and don’t give away all the gold, Gene, but maybe give away some of it. When folks talk about private money and talk about raising tens of millions or a hundred million dollars, I’m imagining that now that I’m aware of exempt securities, that in many cases that could be from a syndication of some kind that is an exempt security, which is the source of the private money.

Gene Trowbridge (20:39.036)
Yes. And then private money is often thought of as friends and family. You’ve heard that term, friends and family. Okay, private money, everyone who invests.

Dylan Silver (20:49.634)
Yeah.

Gene Trowbridge (20:58.916)
is known to you before you start raising your money. And there’s two avenues in private money since the Jobs Act. One avenue is everyone who invests with you

had a pre-existing relationship with you before you started raising that money. That doesn’t mean they’re friends and family. It just means that they know you ahead of time. The Jobs Act in 2012 came along and said, yeah, you know, there are a lot of really rich people. There are a lot of accredited investors out there who need to find these good deals and want to be able to invest in these deals. And if they’re friends and family, they’ll never find them because there’s no

advertising. So they came up with another rule, a secondary rule that says okay you can advertise and you see it now on the web all the time people saying 15 % IRR.

Dylan Silver (21:45.687)
Yeah.

Gene Trowbridge (21:58.92)
Mobile Home Park in Tuscaloosa, Alabama. And you’re wondering why is that on the web? Well, that’s this new plan that allows you to advertise. And when you advertise, you take people you don’t know. Well, there’s some specific rules about that. You can imagine that the rules are going to be more severe if the government says you’re raising money from people that you don’t know and they don’t know you, as opposed to if you’re

you’re raising money from people with whom you have a relationship with. You can imagine that little two sets of rules on their arm.

Dylan Silver (22:34.222)
Correct.

The penalties are going to be more severe when there’s no, it’s like completely arm’s length and it’s more or less a stranger to you versus someone who has face-to-face contact with you or can, you know, knock on your door.

Gene Trowbridge (22:50.258)
The biggest problem in the securities laws is fraud and misrepresentation.

Dylan Silver (22:58.082)
So.

Gene Trowbridge (22:59.0)
That’s what you need to do. You need to be careful.

Dylan Silver (23:02.38)
So when I’m thinking about that, in a syndication and whoever is managing this syndication, of course their interest is in making sure that everyone doesn’t lose their money and then make sure that they make money. So when they’re going and investing in, let’s call it a startup, we’re in real estate, so let’s say it’s a real estate startup. I’ve been a part of real estate startups. There’s a lot of pressure on the people who are involved in the real estate startups.

Gene Trowbridge (23:13.694)
Sure.

Dylan Silver (23:27.502)
But that also, and we sometimes think, well, it’s on our level, it’s because we’re small and we’re having to make sure that the investors are happy with our performance. But there’s also in that same scenario, there’s a lot of pressure on the syndicator itself, or him or herself to make sure that what they’re investing in is profitable as well. Because if their neck is on the line, if things go south. I think a lot of times, and I’m thinking about this right now,

When you’re starting a business and you’re looking at taking on maybe private money or these external capital, we think about the pressure that we’re going to be under, but the syndicator itself is under some pressure in those situations as well.

Gene Trowbridge (24:11.312)
absolutely. And I’ve said.

in this conversation, the reason you become a syndicator is you don’t have enough money to buy all the real estate you’d like to buy yourself. So the number one thing a syndicator needs to do is to find a deal that they would buy themselves. Underwrite it, do all the due diligence and say, you know, if I had the money, I’d buy this. I don’t, let’s find some other investors and share the opportunity. If you found a deal that you said,

well that really isn’t something for me. Well don’t syndicate it. That’s one of the biggest problems a syndicator has is one of the biggest mistakes I guess is that when you syndicate deals you make money.

So you don’t want to go six, seven, eight months without being syndicating a deal because your flow of income to you has just dried up. And that’s a problem that syndicators have. They always think they have to have something out there to sell. They don’t.

Dylan Silver (25:20.962)
Yeah, because then that’s how you lose money and that’s not a situation you want to be in as a syndicator. Gene, are coming up on time here. Where can folks go maybe to get in contact with you or to reach out to you?

Gene Trowbridge (25:34.864)
Okay, my website is, very simple. It’s of course, www.and then it’s T as in Tom, N as in Nancy, LLP.com.

tnllp.com and on that website you can schedule a free consultation with me. Right. You can get a free PDF of my book and I’m going to show it on the screen here. This book is called It’s a Whole New Business.

and I’m in the fourth edition of this book. It gets changed every time there’s a securities law change. And this is really a very good self-starter book for anyone who wants to be a syndicator. And on my website, you can get a free PDF of the book. You can buy it on Amazon if you want, or you can listen to my audible version on Amazon. And the title is, It’s a Whole New Business.

And the reason it’s called that is when I wrote it first. I wrote it strictly for real estate agents so that they understood when they were going out and putting groups of people to buy these deals that they liked, that they were leaving the real estate business and going into the securities business. And the securities business doesn’t care what the asset is. Doesn’t care at all. The securities business is a people business.

Dylan Silver (27:03.047)
Cheers.

Gene Trowbridge (27:12.242)
raise money from people, how do you treat people fairly, and that’s what the securities world is. Not whether you’re doing a hockey team or an avocado grove or anything that’s nothing like that. So that’s how you can get me my website.

TNLLP.com. Sign up for a free consultation. Call the website and they’ll put you through to me directly and the numbers on the website so that’s fine.

Dylan Silver (27:42.476)
Gene, thank you so much for coming on the show today. I appreciate having you on and talking with us about real estate syndications and your journey in the space.

Gene Trowbridge (27:51.582)
Well, you’re welcome. Thanks and good luck to you as you continue on with Real Estate Pros. It’s good for you.

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