Steen says the offerings eliminate the need to review and invest on an individual property basis.
PORTLAND, OR—According to Forbes, the real estate crowdfunding industry will be valued at more than $300 billion by 2025. Clearly, this phenomenon offering an alternative to the stock market and other investment vehicles is not going anywhere any time soon.
A recent example of crowdfunding's added value is CrowdStreet's raise of $25 million in its first CrowdStreet blended portfolio I series I investment offering. To provide individual investors and registered investment advisors another way to diversify investments with commercial real estate, the company plans a series of diversified and specialty portfolio investment options that will collectively raise and invest up to $170 million for a series of funds.
The portfolio's proceeds will be deployed across 30 to 50 pre-vetted projects on the CrowdStreet marketplace, representing a broad range of commercial and multifamily asset types, risk profiles and geographies. The portfolio simplifies investing in commercial real estate and opens the door for more people to access the market with diversification, which minimizes risk. The vehicle is in direct response to needs from both existing and prospective investors, as well as registered investment advisors who recommend that clients allocate a portion of assets to institutional-quality commercial real estate.
“Our investors have seen incredible returns on our marketplace and we're now opening up this asset class to new people with unprecedented simplicity and transparency,” said Tore Steen, CrowdStreet CEO. “Undertaking your own due diligence as a first-time real estate investor can be daunting. Even for those familiar with the market, the race to review and invest across so many deals can be hard. Our new blended portfolio brings further simplicity, and investors and their advisors can access a wide range of pre-vetted and sought-after CrowdStreet marketplace offerings without the need to review and invest on an individual property basis. It's diversification with one click at a low cost.”
CrowdStreet operates one of the largest and diversified online marketplaces for direct equity investment in US commercial real estate. More than 100,000 investors and more than 250 real estate operators and developers are on the CrowdStreet platform. Since its inception, more than $8.5 billion of commercial and multifamily properties have been listed on the CrowdStreet marketplace, which makes private equity real estate investing accessible to millions of people.
“We've heard from some investors and investment advisors that they want to invest in real estate, but have a hard time making sense of cap rates, leverage ratios and other intricacies of commercial real estate investing,” Steen tells GlobeSt.com. “So we created a way for individual investors to directly invest in multiple real estate offerings in a single transaction. That's the basis of CrowdStreet's new blended portfolio line of products for individual investors.”
Notably, CrowdStreet focuses on the so-called middle market of properties valued between $15 million and $50 million, a market underserved by large financial institutions, which helps create opportunities for private investors to fill equity gaps with the potential for above-average risk-adjusted returns. Fully realized offerings on CrowdStreet have produced an average annualized return of 36.3% XIRR and a 1.6x equity multiple on a 1.9-year holding period since the company's founding.
“The benefits of the new blended portfolio series extend to both sides of our marketplace, as the demand for diversified investment products is expected to raise more capital on the CrowdStreet platform, helping sponsors hit targets sooner and with greater certainty,” Steen says. “Removing friction from individual investors seeking diversification and from project sponsors seeking capital will accelerate growth of the marketplace as investors and sponsors build wealth together at a time when diversification is especially important.”
The risk profile is core, core plus, value-add and opportunistic in mainly secondary US markets. The target investment period is 5 to 10 years with a target IRR of 16% to 18%.
“All the volatility in the stock market right now is a reminder why it's important for individual investors to diversify into commercial real estate, which is the third largest asset class in the US but is underrepresented in individual investors' portfolios,” Steen tells GlobeSt.com. “The individual investor market is massive, but it's historically been hard for individuals to access institutional-quality commercial real estate without knowing someone who knows someone who knows someone. Now they can access the market directly with CrowdStreet and achieve immediate diversification with the CrowdStreet blended portfolio product.”
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
