Real Estate Crowdfunding: Is it worth the hype?

As CrowdStreet board member and venture capitalist Dino Vendetti likes to say “we are in fast moving waters at CrowdStreet”. Well, since the first of the year the floodgates opened further and the water flow increased dramatically. As evidence of this, this week Silverstein Properties and fellow crowdfunding platform Fundrise launched a crowdfunding campaign for World Trade Center 3, the 3rd tallest building in downtown New York City. This grandiose announcement confirms that crowdfunding is absolutely worth the hype, even for the world’s largest institutional real estate companies.

A couple weeks ago the CrowdStreet executive team spent four fast and furious days in Orange County, CA meeting with over 100 real estate sponsors and investors at the IMN Private Equity Real Estate Forum. Our main takeaway from the experience was that mass adoption of real estate crowdfunding was not a question of if, but when. Ian Formigle, VP of Investments, presented to a packed room of 200+ engaged audience members who were eager to learn what crowdfunding is, what the results were to date and how it could be applied to their real estate investing strategies. Ian and the other panelists explained that multiple real estate crowdfunding platform business models exist and that the different models appeal to different real estate operating companies. There is no “one size fits all” crowdfunding platform and therefore multiple platforms will succeed in carving out their niche by delivering results for their investors and clients.

Fortunately, CrowdStreet was an early entrant into the real estate crowdfunding space and has had the advantage of listening and learning from real estate companies and investors over the past three years. The CrowdStreet solutions appear to be most attractive to high-quality real estate sponsors with a track record of success who are looking to add online fundraising to their existing fundraising distribution channels. Innovative real estate companies understand that online fundraising is a reality today and the trend will continue to grow exponentially in the near future. Therefore, they are prioritizing initiatives to figure out how to incorporate crowdfunding into their 2015 plans. They correctly conclude that, while the amount of money raised per offering via “the crowd” today may be small by industry standards, that the production levels will increase to $5 million or more in the years ahead and they are getting started now in order to carve out a leadership position in the space.

Ian explained to the audience that CrowdStreet’s approach is to partner with successful companies to help them learn how to raise capital online directly from investors while simultaneously building their company’s brand internationally. Unlike other platforms, that serve the role of lender while sheltering the investor from the real estate sponsor, CrowdStreet believes in creating a direct, transparent and frictionless connection between sponsor and investor, not only on a single asset or fund offering, but for creating a long-term relationship that will produce a user-friendly and repeatable investing experience process for sponsor and investor. The power of crowdfunding is that the sponsor builds it’s direct investor network while also building its brand value.

It’s an exciting time to be in the real estate industry thanks to advancements in the regulatory, technology, marketing and financial markets that make it possible for both sponsors and investors to build more meaningful and productive relationships while reducing transaction fees and increasing investment returns. Our mission at CrowdStreet is to create the perfect commercial real estate marketplace to help foster these relationships that will ultimately transform the $400 billion dollar industry. We’re creating enormous value for our clients, investors and partners who will lead the way in online investing for commercial real estate. So yes, crowdfunding is absolutely worth the hype and the waters are moving fast.

Contact us anytime to learn more about real estate crowdfunding and to discover how you can benefit from the movement.

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