Reprinted with permission from Real Estate Alert – February 21, 2018.
KBS Realty is tapping a crowdfunding firm for the first time to help raise equity for one of its REITs.
The Newport Beach, Calif., investment manager is working with CrowdStreet of Portland, Ore., as it drums up capital for KBS Growth & Income Real Estate Investment. The nontraded Modeled after mutual funds, a REIT (real estate investment trust) is a company that owns, operates or finances income-producing real estate. They allow individual investors to buy shares in commercial real estate portfolios.... More has a $1 billion equity goal, some $250 million of which has already been committed.
In October, KBS unveiled its own online portal, KBS Direct, which allows retail investors direct access to the Core-plus commercial real estate investments are known as “growth and income” investments. The cash flow is less predictable, but they often predict a higher rate of return than core investments. The term "core plus" was originally defined as "core" plus leverage. Leverage is the use of borrowed capital to purchase and/or increase the potential return of an investment.... More REIT. Now it is also using CrowdStreet’s Marketplace online platform to reach additional accredited investors, because it sees “a transformational trend going on right now,” said KBS president Peter Bren.
“Going on the Marketplace is really a recognition of new distribution opportunities,” added Lew Feldman, president of KBS Direct. To get its message to a broad range of investors, he said, “we have to do it via an omni-channel methodology.”
KBS chief executive Chuck Schreiber said the firm is responding to a “growing shift away from high loads and commissioned sales through broker-dealers.” KBS continues to work with those firms, but expects the KBS Direct platform to account for a larger percentage of its capital-raising over time.
Ian Formigle, vice president of investments for CrowdStreet, said institutional investment firms are starting to look at crowdfunding “because we have reached this inflection point where accredited-investor syndication is relevant enough to matter to them while [broker-dealers] continue losing relevance.”
CrowdStreet, founded in 2013, currently raises some $30 million of equity per month from its 35,000 registered investors. It projects an increase to $100 million in two years. The firm also offers an investor-relations service. Hines Securities of Houston last year became the first institutional player to announce it was using that service.