Projects Raising Specter of Mayor Conflicts

December 17, 2013 – In The News
Argus Leader

Paul R. Wassgren was quoted in the Argus Leader article “Projects Raising Specter of Mayor Conflicts.” While the full text can be found in the December 17, 2013, issue of the Argus Leader, a synopsis is noted below.

A mayor’s investment in a private real estate development in Sioux Falls has raised the concerns of a citizen group fighting against a similar proposal because of ties between organizers of both deals.

The development is utilizing a model called a “real estate syndicate,” which uses a sponsor as the face of the deal, whose name appears on public filings.

The investors, typically a pool of about 35, put enough money into the project to raise equity so that a bank will help finance the remainder of the project. A project typically needs 20 percent equity before a bank will loan the money, Paul Wassgren said.

Investors purchase “units” in the project, which are similar to shares of stock, and investors can earn money from the project through annual payments or when the project is sold at a profit, Wassgren said.

“Typically there’s very limited information on this type of investment,” Wassgren said. “Generally there’s a pretty hefty demand, especially if the sponsor has a proven track record on making money in these projects.”