Real estate industry heavyweights are starting to recognize what online fundraising platforms have known for some time – that the power of the crowd is too big to ignore. Rather than leaving money on the table, enterprise real estate firms such as Blackstone are looking at ways that they can directly tap into capital held by individual investors.
As one of the largest private equity firms in the world, Blackstone is one group that doesn’t need help with fundraising. Blackstone has used its long track record of fundraising success to build a massive global real estate portfolio valued at more than $100 billion. Yet its real estate arm, Blackstone Property Partners, is an open-end fund that is only available to institutional investors. According to an article recently published by Bloomberg (link), Blackstone is reportedly exploring options to expand that reach to include individual real estate investors.
There are a growing number of companies like Blackstone, both large and small, that are recognizing the value of reaching out to individual investors. Historically, the chief hurdle to doing so has been the fact that raising capital and managing investments from a large group of individuals was extremely cumbersome and costly. However, new technology and regulatory support are providing companies with the means to perform individual fundraising more effectively and efficiently.
JOBS Act Jumpstarts Crowdfunding
The Jumpstart our Business Startups or JOBS Act, catalyzed the launch of crowdfunding and the emergence of an entirely new market for online real estate fundraising and investing. The 2015 SEC approval of new Regulation A+ rules under Title IV of the JOBS Act further enhanced fundraising opportunities with the ability to include non-accredited investors. Real estate developers, operators and capital providers (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) now have access to enormous new pools of direct real estate investors.
In addition, new technology platforms provide sponsors the ability to manage the acquisition and management of thousands of direct real estate investors without scaling sponsor staff. One example is CrowdStreet’s Sponsor Direct, a private “white label” software as a service (SaaS) solution which the company introduced in April 2015 to allow sponsors to offer online real estate investment opportunities and investor management capabilities on their own branded websites.
Sponsor Direct provides automated tools specifically designed to manage even the large volumes of online investors seen with Reg A+ real estate offerings. Advanced publishing capabilities enable sponsors to publish investment offerings directly from their existing website, while sophisticated transaction management tools process electronic investment offers and custom CRM systems manage ongoing investor relationships.
Deal sponsors can take advantage of the efficiencies of the crowdfunding marketplace, and yet still keep that fundraising “in-house” so to speak on their own websites. Many sponsors view the portal as another tool to better serve their existing pool of investors, as well as being able to Leverage is the use of various financial instruments or borrowed capital to purchase and/or increase the potential return of investment. Assume a buyer puts 20% down on a $5M property. Essentially, they paid $1M to own something worth $5M. Assuming the property appreciates at 5% per year, the sponsor’s net worth would grow to $5,250,000 in a year. Had they... More the portal to cultivate new relationships. To learn more about online real estate investing and to register for a free commercial investing account, please JOIN NOW.