PALO ALTO, CA-Crowdfunding platforms are proving to be highly popular among individual investors interested in commercial real estate transactions. According to Adam Hooper, CEO of locally based crowdfunding platform RealCrowd, on which GlobeSt.com has previously reported, his startup firm has seen huge success in just a short period of time.
“In under six weeks, we have had nearly $50 million in income-producing commercial real estate assets, spanning from San Francisco to Washington, DC, go through our online platform,” Hooper tells GlobeSt.com. “We have thousands of investors subscribed to our platform, and our investor base continues to grow with each new deal.”
Hooper maintains that his firm's success is “proving that top-quality real estate deals will be funded through platforms like ours, and it's opening up a whole new realm of capital to real estate operators and developers that is virtually untapped.”
One of the bigger, albeit more controversial, benefits of platforms like RealCrowd is that the proprietary view of investor relationships is going away, Hooper adds. “We're entering a far more transparent world, and real estate is one of the last industries to move in that direction. The historic view of having your insulated bubble of high-net-worth investors—the 'country club network,' is no longer the most efficient or best way to raise capital.”
On the investor side, crowdfunding is giving a broad base of people who never would have had the opportunity to invest in high-quality deals access to do so. “Our platform and others like our can give people access to the same deals that institutional investors do,” says Hooper. “For private buyers to compete with institutions is unheard of. This works.”
In addition, with SEC regulations changing to allow general solicitations, crowdfunding platforms can disseminate information about more deals to a broader audience and allow for greater capital flow into those deals. “These investors can work with good-quality real estate deals—not just the deals that couldn't get funded,” says Hooper. The goal is to shift capital raising for these deals from offline to online, he adds.
Platforms like RealCrowd also bring greater attention to middle-market or sub-institutional transactions—those in the $5-million to $20-million range—which may be too small for institutions and too large for many individual investors. Doing so may allow these platforms to gain enough buyer power to syndicate these deals into the institutional space.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
