An Investor's Guide to Real Estate Crowdfunding
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Transcript of An Investor's Guide to Real Estate Crowdfunding
Presented on 7/7/16 by
RAI$E CONFERENCE ‘16
An Investor GuideTo Real Estate Crowdfunding
Bret ConkinChief Evangelist
Ever used….....
Crowdfundland.co @bretconkin
The Good & Bad
Source: Vision Critical
WHAT ARE WE SHARING?
Source: Vision Critical
Crowdfundland.co @bretconkin
Crowdfundland.co | @bretconkin
What is Crowdfunding?
Crowdfundland.co @bretconkin
Crowdfundland.co @bretconkin
HOW CROWDFUNDING MODELS DIFFER
DonationsHelp those in need expecting nothing in return
Rewards Pre-orders or perks for backing a project
Equity Shares or securities in companies
Lending Loans via the Crowd not banks
GLOBAL CROWDFUNDING
New CanadianCrowdfunding
Laws (2015)&
JOBS ACT (US)
WHAT IS DRIVING GROWTH
• Proof it works - in US other markets• Demand for alternative investments due to poor market
returns• Wave of internet disruption of traditional industry
inefficiencies• Wave of mobile and social network adoption• Wave of cultural disruption of people wanting to connect as
they buy, do and invest• The rise of Big Data and Analytics• Real Estate’s fit - the fastest growing altfi sector in the US
Crowdfundland.co | @bretconkin
Intro to Real Estate Crowdfunding
Crowdfundland.co @bretconkin
REAL ESTATE CROWDFUNDING
- New Crowdfunding Exemptions (CAN/US) - Liberalized Securities
Regulations - Strong performing
asset class
Transforming investing from offline to online
Crowdfundland.co @bretconkin
RE CROWDFUNDING STATS
250+ PlatformsCrowdfunding residential &
commercial projects
$100 - $100kInvestment size from investors
Est. $2.6 BillionInvested in 2015
$100k - $25 Million
Crowdfunded project size
Crowdfundland.co @bretconkin
WHO ARE THE PLAYERS?
Real Estate Focus Est. Returns Min. Investment
Commercial 5 – 20% $1,500
Commercial 15 – 25% $10,000
Commercial 12 – 14% $1,000
Cash-flowing Commercial &
Residential8 – 17% $5,000
Commercial & Residential 8 – 20% $5,000
Crowdfundland.co @bretconkin
POWER OF ONLINE CROWDFUNDING
• 80,000 members• $3B in real estate investments
• 90,000 monthly visitors to website• $130M raised for 1600 properties
• 80,000 members• $200M invested | $40M paid out
Crowdfundland.co @bretconkin
RISE OF RE CROWDFUNDING
2015 Growth
In real estate crowdfunding
market
156%
VC Raised by
Platformsto further grow
their marketplace
business
$120M
Investment by
RenReninto Fundrise in
2014
$31M
Crowdfundland.co @bretconkin
INVESTMENT SIZE | SPEED
Min. Investment of A$340,00028 Asian investors ‘presold’ into investment
Min. Investment of US$100,000*Successfully funded $150M+ Manhattan real estate400% Oversubscribed in 4hrsFundrise eREIT invests in commercial real estate, distributing cash to investors every quarter * International investors
Crowdfundland.co | @bretconkin
How does Real Estate Crowdfunding Work?
Crowdfundland.co @bretconkin
EQUITY VS. DEBT
EQUITYEquity stakes
in property or SPV.
Rental income +/orAsset appreciation.
DEBT PROS5-10+% returns.
Lower Risk.Shorter holding periods.
More liquidity.Lower on capital stack.
EQUITY PROSHigher returns!
15-25% (net)
DEBTInvesting in mortgage/
loan of property.
Interest payments + Principal Repayment.
Crowdfundland.co @bretconkin Source: Nelson Garcia, Medium.com
CROWDFUNDING STRUCTURE
Online Investors % Stake
Project Sponsors
Majority ownership
Special Purpose Vehicle
Project Investment
Crowdfundland.co @bretconkin
Crowdfundland.co @bretconkin
BENEFITS FOR INVESTORS
Diversification
Lower investment requirements allow
diversification
AccessibilityParticipate in deals
that were inaccessible before
Speed/FlexibilityOnline tools, algorithms &
analytics reduce friction
Higher Returns
New asset classes provide higher
returns via crowdfunding
TransparencyImmediate
availability of information through the
platform
Lead InvestorsSyndications/
Invest along with industry experts
Crowdfundland.co @bretconkin
Cut Out the
MiddleMen
Marketing Benefits
New base of investors
and capital
BENEFITS FOR DEVELOPERS/BUILDERS
Lower costs vs.
traditional funding
$
€¥£
Big Data Analytic
s
24/7Accessibilit
y
Crowdfundland.co | @bretconkin
Real Estate Crowdfunding Not Just a Concept
Crowdfundland.co @bretconkin
ILLUSTRATION A – HARD ROCK HOTEL PALM SPRINGS
• Kittridge Hotels & Resorts/Realty Mogul
• July 2014• $1.5M raised to
refinance/renovate• 85 investors received VIP
benefits• Customers became owners• Created evangelists to
promote hotel
ILLUSTRATION B: VESTMUNITY - FIX ‘N FLIPSouth Florida
• $50-200k loans for renovations
• Address funding gap• 18-20% Returns
Patch of Land• $61M in Loans
(2015)PeerStreet
• $40M in Loans (2015)
Crowdfundland.co @bretconkin
ILLUSTRATION C – BC BACATA TOWER
• Mixed use project in Bogota, Columbia
• $175M raised from 3500 investors
Crowdfundland.co @bretconkin
ILLUSTRATION D – AJAX LAND MORTGAGE
• Real Estate Development • Bridge Financing -
Residential condo project (Phase I)
• Mortgage Debt Investment• Partner: Downing Street• Total Debt Raised: $15.5M• Crowdfunding: $500k• Closed: 4/22/16
ILLUSTRATION D - 3 WORLD TRADE CENTER
$2.49BTotal Project Cost
$2MFunded with debt
crowdfunding
5%Tax-free interest
secured bond
One of the most iconic towers in New York City, the 3 World Trade Center, was partly funded by investments by the
crowd.
ILLUSTRATION E: CROWDSTREET MARKETPLACE• Commercial real-estate
marketplace
• 48 successful offerings• $29M avg. project value• $8.9M avg. equity per offering• 17.4% avg. target IRR• 8.2% avg. cash yield/yr.• $50k avg. investment
Crowdfundland.co | @bretconkin
Real Estate Crowdfunding in Asia
CHINESE INVESTMENT CLIMATE
$525 Million
$33 Billion
Diversify
Cheap Canadian Dollar
“Mainland Chinese buyer’s market”Study says 70% of YVR West Side homes sold to Mainland Chinese buyers (The Province)Invested in Canadian Real
EstateBetween 2008 to 2014, $33 billion
invested into residential and commercial Diversifying Real Estate
InvestmentsNot only investing into residential, but hotels, resorts, wineries, farms, etc.
Canadian Investments on Discount
Drop in value of Canadian dollar attracts Chinese investments
Crowdfundland.co @bretconkin
CHINESE CROWDFUNDING
Personal Savings
AccountsHengXinLi launched
to give investors access to
international real estate investments
$21Trillion
Chinese Real Estate Platforms
In USChinese only
platforms for Chinese investors to invest into US real estate
iCrossYdizhu
P2P Lending Fraud in ChinaLack of credibility
in Chinese platforms
$7.6Billion
ILLUSTRATION F - STABLE PROPERTIES
$8M AUDTotal EquityComponent
5Investors pooled
$300k into the equitycomponent
40%Projected IRR
With hold time of 18-24 months
Stable Properties had secured the site, development approval and $58M AUD senior financing from ANZ bank on the redevelopment of the old Wrigley's
chewing gum factory conversion into 99 loft apartments.
Crowdfundland.co | @bretconkin
Real Estate CrowdfundingBeyond Urban Real Estate
CROWDFUNDING FARMLAND?
Farmland is a stable, scarce, income producing asset.
37
ILLUSTRATION G - CANADA ASIA SYNERGY GROUPRural Alta Land
• Canada/Asia investors
• CASG owns 51% and provides management
• $10k investment units
• 4900 shares + $5100 mortgage
ROI• 3-4% income/year• 7-9% appreciation
Tomahawk Cattle Ranch – 13,500 Deeded Acres
Crowdfundland.co @bretconkin
ONLINE VS OFFLINE
OFFLINE
ONLINE
Investor Exposure Transaction Cycle
180,000+
400 180+ DAYS
60 Days
ILLUSTRATION H: DWELLxCHANGE• Marketplace for “shared equity”• Sell equity interest in home to
investors• Promise of living mortgage
free!• $5,000 min investment• Secondary market in works• Full occupancy rights
Example• $500,000 home• $250,000 in owner equity• Sell balance of $250,000• Buyer gets payback + 50% of
equity gain upon sale
Crowdfundland.co | @bretconkin
How is this different from REITS & MICs?
Crowdfundland.co @bretconkin
HOW DIFFERENT FROM A REIT?
• Ability to select specific:• Geography• Sector• Properties
• Not subject to stock market’s volatility
• Fees may be lower
MIC vs. RE CROWDFUNDINGItem MIC RECF InvestmentsProduct Debt only. Debt and Equity.
Indirect vs. Direct Blind pool investment. Project direct.
Yield 6-7% 12-20% IRR
Geography Canada only No restriction
Management Fee 1.5%-2% 1% AUM Fee
Capital Raise Fee 6-8%To EMDs (Private)To IPO fees (Public)
4% of raiseTo EMD
Pros Carefree investment.Liquid.
Higher returns.Value not vary w/ stock market.
Cons Lower returns.Value fluctuates w/ stock market.
Involved investment.Illiquid.
Source: R2CrowdCrowdfundland.co @bretconkin
Crowdfundland.co | @bretconkin
Summary
THE PROMISE
Increased Transparency
New Market Accessibility
Increased Investment flexibility
Easier Due Diligence
8 - 25% returns
Convenience + Lower
Fees
Marketing Benefits
For Investors
New Financing options
Requires platform approval
For Project Owners
LIMITATIONS
Consider Investment
Fundamentals
Choose right
platform
Consider LiquidityDon’t forget about Risk
$May
require other
funding sources
Requires platform approval
For Investors
Early days
Requires platform approval
For Project Owners
Bret Conkin on The Exchange with Amanda Lang – CBC News
Help clients Profit from the Alternative Finance Economy
Serviceso Platform Developmento Strategy/Consultingo Capital Raisingo Project Managemento Systems Integrationo Operationso Marketing/PRo Business Development
WHAT WE DO
THANK YOU!
CONTACT:Bret ConkinChief Evangelist
778.323.7297Crowdfundland.co@bretconkin@crowdfundsuite