Long-term investor relationships. They’re a lynchpin of long-term success for many Commercial Real Estate (CRE) investment firms and developers. That said, change is inevitable.
Even in the best of circumstances, access to capital fluctuates. It fluctuates due to economic cycles, how active you are with your investor community and other factors. If you are working with larger institutions for capital, even if they’ve funded your most recent project, there’s no guarantee they’ll support the next.
But one of the most significant impacts to a sustainable flow of funding is a disruption in the business or personal lives of go-to, long-time investors. Sooner or later the guard changes and the keys may pass on to new leadership, owners or family members with different interests and objectives.
So, then what? Finding the answer to this question is near the top of the list when we talk with our CRE clients about their concerns for sustainability and growth.
A healthy mix of investment sources is the best hedge against this scenario. And fortunately, there’s never been a better time to turn that dream into reality.
A new wave of FinTech companies– that compete head-on with traditional banking and financial institutions–are leveraging technology to reframe the game and create a higher level of access to financial information and management. The convenience of mobile platforms and apps, plus an increase in financial product and service offerings overall, has helped democratize people’s control over their money and investments.
And this is good news for CRE project fundraisers. In a short few years, the industry has blossomed with new technology-based platforms that make it easier for long-time investors to engage, and for aspiring investors to enter the market. Welcome to the brave new world of online multi-channel CRE fundraising.
Diversify Your Sources of Capital
You’d seek diversity in your property and assets holdings, so it’s only logical to do the same with your investment channels. At CrowdStreet, our focus is on providing access to capital via online fundraising.
It’s likely you’ve heard about online fundraising as a growing trend in CRE. But, how does it work?
An online funding model (also known as online syndication) allows you to secure institutional levels of equity capital, but without the associated restrictions. It provides you with access to a vast universe of qualified new investors. Unlike big institutions and brokers, an online crowdfunding-type platform also shares the identity of these investors so you can tap them in the future. It also holds flexibility advantages over the alternative online investing model, the Special Purpose Vehicle (SPV), which is typically an LLC formed by a crowdfunding platform to raise equity for a In commercial real estate, the sponsor is an individual or company in charge of finding, acquiring and managing the real estate property on behalf of the partnership. The sponsor is usually expected to invest anywhere from 5-20% of the total required equity capital. They are then responsible for raising the remaining funds and acquiring and managing the investment property’s day-to-day... More and comes with strict deal terms determined by the SPV, not you.
Online fundraising, or “syndication,” doesn’t replace your existing avenues; it expands your options. And it’s a pathway to new, long-term relationships that help allay the fear of losing your golden goose.
The CrowdStreet platform is exceptionally low-barrier (imagine pushing an offering live, and having an investor execute operating agreements and submit funds in as little as 15 min.). Our investor pool, coupled with the convenience of online transactions, frees you to plot a confident course for the long-term sustainability of your business. Our investment management software is designed to offer the very best investor platform and experience possible.
Tap a Whole New Pool with Regulatory Exemptions
You’re also most likely familiar with standard funding including 506(b) private offerings, as well as general-solicitation 506(c) offerings that are limited to accredited investors.
Recently, a whole new type of funding opportunity has entered the stage, in the form of regulatory exemptions. As an example, legislation in 2015 introduced “Regulation A+” funding, allowing investors of any net worth to invest up to a certain amount of their annual income in your project.
When it comes to the value of easier funding by way of a greater number of smaller investors, these changes are significant news. Now, with the market opened to the “average Joe,” funding can now come from any quarter. Consider regulatory exemption offerings as part of your mix to reach a new audience, one that can grow with you.
At CrowdStreet, we believe all investors should have access to institutional-quality CRE investment opportunities–and we’re committed to helping both sponsors and investors come up-to-speed and reap the rewards offered by these legislative changes. Watch this recent CrowdStreet webinar on Regulation A+ to learn more.