The Real Deal Chicago

What’s old is new: Real estate private equity firms raise funds by emailing investors

Recently-adopted regulations let companies like Origin Investments solicit money with a click
April 24, 2018 12:00PM

Origin Investments’ Co-Founders David Scherer and Michael Episcope (Credit: Origin Investments and Getty Images)

A Chicago-based company is providing real estate investors with a somewhat retro way to raise capital — emailing really rich people.

Capitalizing on changes in securities regulations around raising cash, Origin Investments is using a crowdfunding-like platform to raise money from family offices and wealthy investors through email, according to Bloomberg.

The company was founded in 2007 by real estate fund managers Michael Episcope and David Scherer to invest their own money in office buildings and apartment developments in secondary U.S. cities. By last June, the partners closed a $151 million fund raised from 450 investors.

Their crowdfunding business model relies on Securities and Exchange Commission regulations, updated in 2013, that govern the way investment firms can raise money online. Investment firms are now free to market offerings to accredited investors, who are typically worth more than $1 million, through advertisements or e-blasts.

Other companies like Driftwood Acquisitions & Development, a Miami-based hotel owner, solicits investors through its website; while Cadre, a real estate investment platform, provides investors with information on closed deals and current offerings, Bloomberg reported.

Real estate fund managers have used the go-ahead to solicit a wide array of these investors for funding hotels and warehouses from Florida to Wisconsin, Bloomberg reported.

Companies such as Origin see a fertile market in the world of family offices, which on average allocate 16 percent of their portfolios to direct real estate investments, according to a 2017 report by UBS Group AG and researcher Campden Wealth Ltd. While the biggest family offices can afford to buy properties on their own, Michael Episcope said his model has the potential to bring higher-quality deals to smaller investors.

“Origin has always been designed around providing the individual investor with the same opportunities, service, and fee structure that the multibillion-dollar investors enjoy,” he told Bloomberg.

Origin’s team focus on buying and managing undervalued real estate, and target net returns of about 15 percent. That is similar to a large private equity fund focused on real estate but with lower fees than what noninstitutional investors normally pay. Origin’s technology platform gives investors real-time information about their investments and doubles as a tool for marketing to new investors, the company said. [Bloomberg]Keith Larsen