Syndication Distribution Notice: What to Include, With a Template
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A syndication distribution notice tells each investor what they are receiving and why, so the payment never arrives unexplained. It should include: the period the distribution covers (usually a quarter); the total distribution for the deal; the investor's own amount and their ownership percentage; the source of the cash (operations, a refinance or a sale); how the amount was split under the operating agreement's waterfall, including any preferred return paid and any still accrued and unpaid; the payment date and method; and a short tax note that the final tax character of the money is reported on the investor's K-1, not in the notice. Send it a few days before or on the payment date, and keep a copy that ties to your books. For how to decide and pay the distribution, see how to pay syndication distributions.
What to include
| Item | Example | Why |
|---|---|---|
| Deal and period | Oak Street Apartments LLC, Q3 | Ties the payment to a period |
| Total distribution | $90,000 | Shows the whole picture |
| Investor's amount and ownership | $2,250, 2.5% of Class A | Lets the investor check the math |
| Source of cash | Operations | Waterfalls treat sale and refinance cash differently |
| Waterfall detail | Preferred return paid for the quarter; any shortfall carried forward | Explains why the amount is what it is |
| Payment date and method | Paid by ACH on the date shown | Investors know when to look |
| Account last 4 digits | Account ending 1234 | Confirms where it went |
| Tax note | Tax character is reported on your K-1 | Avoids promising a tax result |
| Contact | Who to ask | Fewer support emails |
See what a preferred return is and the waterfall and promote.
A template (made-up numbers)
The deal and the numbers below are invented to show the format.
Distribution notice: Oak Street Apartments LLC, third quarter
The Manager has approved a distribution of $90,000 from operating cash flow for July through September. Your share, based on your 2.5% interest in the Class A units, is $2,250. It covers your preferred return for the quarter. There is no unpaid preferred return carried forward on your account.
Payment date: October 15, by ACH to your account ending 1234.
Distributions may be a return of capital or income for tax purposes. The tax character is reported on your Schedule K-1 after year-end. Questions: reply to this email.
When the notice says less than expected
If a distribution is lower than projected or paused, say so in the same notice or in an update sent first: what changed, what the plan is and when you expect to review it again. See investor updates and what happens when a deal underperforms.
Tax notes to keep accurate
Distributions are often partly or fully a return of capital for tax purposes, while the investor's taxable income for the year is reported separately on the K-1. Avoid telling investors a distribution is "tax-free" or "taxable" in the notice. See are syndication distributions taxable and K-1s in a syndication.
How DoorRaise fits in
On DoorRaise, the sponsor proposes a distribution by entering the amount and period, sees each investor's share before anything is sent, and investors get a notice with their amount and the payment date, for apartment buildings with 5+ units. Distributions are paid from the deal's bank account by ACH or wire. DoorRaise also prepares the standard offering documents, forms the LLC, files Form D and state notices, and delivers investor reporting. Escrow is at Enterprise Bank & Trust, an FDIC-insured bank, and investors fund by wire only. See pricing. DoorRaise is not a law firm, broker-dealer, investment adviser, funding portal or bank.
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FAQ
How often should distribution notices go out?
With every distribution. Apartment syndications usually pay quarterly, so most investors get four a year.
Should the notice include the investor's bank details?
Only the last 4 digits of the account, never the full number.
Can the notice replace the quarterly report?
It can be sent with the quarterly report, but the report covers operations, occupancy and the business plan, which the notice does not. See the quarterly investor report template.
What if an investor's share is wrong?
Correct it in the next distribution or with a separate payment, and send a corrected notice that explains the change.
Next step: see how the year-end K-1 ties to these payments in capital account statements.
Sources
- IRS, Partner's Instructions for Schedule K-1 (Form 1065)
- 26 U.S.C. 731, gain or loss on distribution
This article is general information, not legal, tax or investment advice. The example uses made-up numbers. Follow the operating agreement of each deal. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.