Small investors swarm crowdfunding real estate deals

CrowdStreet saw demand rise 50% as coronavirus has shrunk supply

TRD NATIONAL /
Jun.June 09, 2020 12:30 PM
While the amount of crowdfunded real estate deals on offer has declined substantially in recent months, demand is strong for those investment opportunities that remain, such as the Renaissance Harborplace Hotel in Baltimore (iStock, Google Maps)

While the amount of crowdfunded real estate deals on offer has declined substantially in recent months, demand is strong for those investment opportunities that remain, such as the Renaissance Harborplace Hotel in Baltimore (iStock, Google Maps)

It’s not just large investment funds that are seeking out buying opportunities during the coronavirus crisis. Thousands of individual investors are looking to get in on the action through crowdfunding platforms as well.

While the amount of crowdfunded real estate deals on offer has declined substantially in recent months, demand is strong for those investment opportunities that remain, the Wall Street Journal reported. Distressed deals have already emerged in the market, with price cuts as large as 20 percent.

Crowdfunding company CrowdStreet has seen investor demand rise 50 percent as offerings have fallen 70 percent, chief investment officer Ian Formigle told the Journal. One deal, to raise $12.5 million for a $42 million apartment project in Washington, D.C., sold out in minutes, he said.

“The day we opened the investment for funding, there was well more than $25 million of demand. We had to shut it down,” Formigle said. Still, the overall decline in deal volume led the firm to cut its staff by one-fifth last week.

Developer Jamestown LP, which launched a $50 million crowdfunding fund in December, has continued to receive new investments every week, with a minimum amount of $2,500. “Investors are still looking for this kind of a product,” president Michael Phillips said.

Most coronavirus-era crowdfunding deals, including CrowdStreet’s D.C. project, have been for apartment buildings financed with government-backed debt, which are seen as safer investments in the current environment. But distressed assets in other sectors are also garnering interest.

The Renaissance Harborplace Hotel in Baltimore, which Buccini/Pollin Group had a contract to buy for $100 million before the crisis, has now seen its price cut to $80 million. And CrowdStreet is raising more than $15 million for the acquisition. [WSJ] — Kevin Sun


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