Experienced investors who are used to the offline world of commercial real estate, where they had to network their way to deals, were some of the earliest adopters of the CrowdStreet Marketplace. Our platform simply took the process online, making the investment process more transparent, efficient and cost-effective. By using the Marketplace, even the most seasoned investors gained access to a level of deal flow that simply wasn’t possible when you were forced to rely on interpersonal relationships to find new opportunities.
But as the adage goes, “With great power, comes great responsibility.”
Access to more deals means more due diligence. Anecdotally, we know that this group of experienced CRE investors spends a considerable amount of time reviewing the details of each offering, evaluating which direct investment is the best for them. This kind of control is incredibly powerful, especially when you compare it to a REIT, where investors typically don’t know which exact assets their money is going into.
But after a few years of running the Marketplace, we realized that investors who are relatively new to CRE might not be ready to take up that mantle of power and control, or they simply might not have the time to review the dozen+ deals on the Marketplace at any given moment, so we launched the CrowdStreet Blended Portfolio (CSBP) in October 2018. Our goal was to create a product that makes it easier for investors to diversify their portfolio with CRE, still giving them the benefits of direct investing without asking them to manage the deal review and selection process on their own.
What we’ve found since last October is that the CSBP had a broader audience than we even realized.
To date, about 18% of the CrowdStreet investors who have joined since we launched Series I ultimately chose the CSBP as their first investment. But there is a distinct segment of investors who had been on the platform for months, if not years, that also have invested in either Series I or Series II, or both. What we are seeing is that CrowdStreet investors, experienced and novice alike, are investing in the Blended Portfolio. As of today, about one in ten CrowdStreet investors have invested in either Series I or II, collectively investing over $14 million with individual investment amounts ranging from $25,000 to $500,000.
In retrospect, the broad appeal of CSBP makes sense. To the best of our knowledge, there is no other investment product quite like this–investors gain exposure to 30-50 private CRE deals with a single investment as small as $25,000. This level of diversification in CRE would have traditionally required upwards of $1 million. In a recent survey to current CSBP investors, that level of access to broad diversification was overwhelmingly one of the key reasons behind their decision to invest.
We had a thesis about the Blended Portfolio, and it’s proving out to be stronger than we ever anticipated. It addresses the needs of both our experienced early adopters, as well as those new to our platform who struggled with where to begin. Even experienced stock market investors don’t always understand the nuances of CRE. Since they didn’t know which deal to pick, they simply picked no deal. CSBP allowed investors to not have to pick and choose amongst the deals on the Marketplace and provided them with diversification out of the gates. We are now seeing that 25% of the new investors who came into Series I have moved on into direct investments.
Our goal is and has always been, to democratize commercial real estate investing. We believe that by adding CSBP into the mix, even more investors will feel comfortable taking advantage of the Marketplace and reaping the rewards of CRE.