On the Road Posts

Real Estate Crowdfunding 101: EarlyShares at MRES 2015

Crowdfunding isn’t just a buzzword – it’s a bona fide new way to raise capital or invest in commercial real estate. So what is this new market, and why is it seeing so much traction lately? Who can participate, and how does a commercial real estate pro get started?

This presentation delivered by Joanna Schwartz, Co-Founder & CEO of EarlyShares & Property.com, at the Miami Real Estate Symposium & Expo introduces listeners to real estate crowdfunding – a new industry achieving rapid adoption among CRE investors, sponsors, developers, and owner-operators – and outlines how it works. Check out the video, then navigate to our latest deals to see ‘CRE crowdfunding’ in action.

Real Estate Crowdfunding 101 – EarlyShares at Miami Real Estate Symposium (September 2015) from EarlyShares on Vimeo.

Which U.S. States Have the Most Private Real Estate Deal Activity?

2145676_4351be8d83_bReal estate crowdfunding is a relatively new industry, but it’s an evolution of a longstanding concept: private real estate syndication.

For decades, real estate developers and sponsors have divvied up portions of the equity or debt in their projects to investors through Regulation D ‘private placement’ offerings. Real estate crowdfunding under Regulation D Rule 506(c) is simply another way to execute a private placement deal – a better way, given that it enables real estate dealmakers to execute the capital raise process using online tools (and to publicly advertise their deals to accredited investors outside their existing networks).

How popular is private real estate syndication? More so than you may realize. According to intelligence firm Monetarex, there were $8.4 billion in private real estate offerings in the U.S. in just the second quarter of 2015. (Monterex bases its figures on Form D filings submitted to the Securities and Exchange Commission.) Monetarex found that most of the private placement offerings came from the commercial sector (38.5), followed by the residential property sector (19.2 percent), other real estate (23.4 percent), REITs (17.0 percent) and the construction sector (1.5 percent).

That $8.4 billion total far outpaces the kind of volume we’ve seen in years past. From 2009-2012, aggregate capital raised for real estate private placements accounted for $63 billion – averaging out to around $4 million a quarter. The mammoth Q2 numbers double that, indicating increasing use of syndication among developers and rapidly growing interest in real estate among investors.

So where is all of the syndication activity taking place? Largely, in one fifth of the country: The top ten states for private real estate offerings accounted for 413 deals and $6.63 billion in volume (almost 80% of the $8.4 billion Q2 total) with the top state claiming more than the next nine combined:

  1. California: $3.39 billion
  2. Maryland: $770 million
  3. Ohio: $600 million
  4. Texas: $540 million
  5. New York: $440 million
  6. Illinois: $340 million
  7. Virginia: $190 million
  8. Colorado: $160 million
  9. Washington: $100 million
  10. Massachusetts: $98 million

California has been one of the top outposts for real estate crowdfunding since the industry’s inception in 2013, so we can’t help but wonder if the rise of online platforms like EarlyShares is contributing to the state’s monster $3.39 billion total. (To access a vetted investment in California real estate, underwritten by a top institutional lender, click here.)

Either way, we think the increase in private offering activity across the country is a positive trend for the real estate industry across the board. Here’s hoping the other 40 states catch up soon!

Why the Real Estate Market in Downtown Las Vegas is Ripe for Investments

downtown-las-vegasDowntowns across the U.S. are seeing booming activity these days, as millennial renters flock to city centers to enjoy walkable streets and convenient live-work lifestyles. But something much more unique and exciting than garden-variety urban migration is happening in the formerly dormant downtown of Las Vegas – and you can now be a part of it.

Las Vegas was one of the U.S. cities hit hardest by the Great Recession, but its downtown took a beating well before that. As Las Vegas grew from its humble 1950s neon roots into the global entertainment destination we know today, its urban core was largely abandoned. By the 1980s the Las Vegas Strip had become a world-famous adult playground, but the city’s downtown (situated just seven miles north of flagship hotspots like the Bellagio and MGM Grand) had digressed into an economically depressed area of low-end casinos, seamy motels, and a small handful of neighborhood haunts.

By the early 2000s the district had become home to a swath of boarded up buildings and empty lots – but recently, a big-name investor decided to change that.

Tony Hsieh, CEO of Zappos.com, took a keen interest in Downtown Las Vegas after moving his company’s headquarters into the area – into the former Las Vegas City Hall, in fact – in 2009. In late 2011, Hsieh announced that he was personally committing $350 million to revitalize Downtown Vegas into a hub of culture and innovation.

Hsieh’s vision is being realized thanks to the Downtown Project, the entity managing his investments with the goal and purpose of making downtown Vegas a place of “Inspiration, Entrepreneurial Energy, Creativity, Innovation, Upward Mobility, and Discovery.” The Downtown Project launched in 2012 and today is an owner or investor in over 300 businesses and legal entities that collectively employ more than 900 people.

The Downtown Project is putting Hsieh’s millions to diverse use. In addition to commitments of $50 million apiece into area tech startups, arts & education, and small businesses (respectively), the project’s $200 million real estate comprises over 100 properties on 58 acres – totaling 215,000 square feet of retail space and 130,000 square feet of office space. Noteworthy developments the Project is involved with include Container Park, a sustainable indoor-outdoor shopping attraction and entertainment space, and Gold Spike, a renovated hotel-casino and event venue.

Hsieh and the Project are not the only ones investing on a new future for Downtown Las Vegas. The City and State have committed $50 million to road and street improvements in the region, including a $13 million beautification project in the Arts District, just one mile from the Downtown Project’s primary focus area of East Fremont Street.

The Arts District of downtown is an exciting, up-and-coming neighborhood that’s home to dozens of galleries, shops, restaurants, coworking spaces, and attractions. It’s also the site for a unique new real estate offering on EarlyShares from Metroplex Group: a preferred equity investment in the acquisition and redevelopment of a retail center on Main Street – the exact subject area of the above mentioned beautification project.

The sponsor of the deal has a stellar track record in the region: In just the last two years, they’ve acquired and redeveloped two commercial projects in Downtown Las Vegas, earning ROI of 111% and 200+%, respectively.

Accredited investors can get their own piece of the revitalized real estate action in Downtown Las Vegas for just a $5,000 minimum investment in the deal. With hundreds of millions of dollars betting big on this redeveloped area, you may want to consider whether a slice of Downtown Vegas belongs in your investment portfolio.

Click here and request access to learn more about the Downtown Las Vegas Redevelopment deal on EarlyShares. For more on the Downtown Project, click here.

EarlyShares at LendIt 2015: Real estate crowdfunding “creates entrepreneurs”

The world of lending has experienced exponential changes over the last 15 years as the financial industry embraced new technology. Commercial real estate finance has been the slowest sector to adopt online lending, but it’s starting to come around. How is tech innovation impacting the real estate landscape for lenders, borrowers, and brokers?

A panel at LendIt 2015, the largest annual conference about online lending, sought to find out. EarlyShares Co-Founder & CEO Joanna Schwartz served as moderator of the session, which also featured insights from Bill Fisher, Founder & CEO of Plum Lending; Adam Hooper, CEO of RealCrowd; William Skelley, Founder, Chairman & CEO of iFunding; Dan Vetter, President & Co-Founder of Money360; and Rodrigo Nino, CEO & Founder of Prodigy Network.

During the panel, which you can watch in full below, Joanna explained her passion for commercial real estate crowdfunding as being a way to “create entrepreneurs” of real estate investors. For more on the value real estate crowdfunding for investors, check out the How it Works section of EarlyShares.com.

Commercial Real Estate

EarlyShares brings Brazilian investors into US commercial real estate market with close of $930,000 fund

EarlyFund-BR-Central-PlazaAs part of its commitment to help more individuals capitalize on high-potential opportunities in the U.S. commercial real estate market, EarlyShares recently welcomed a group of international investors into a retail investment offering from Saglo Development Corporation.

Nine Brazilian investors pooled $930,000 into EarlyFund-BR Central Plaza, LLC – an EarlyShares-managed investment vehicle – which was then injected into the Central Plaza Shopping Center equity offering.

The transaction is a signifier of growing interest among international investors (specifically Latin American investors) in U.S. commercial real estate.

“When we launched the EarlyFund-BR, we aimed to raise $500,000,” said EarlyShares Co-Founder & CSO Heather Schwarz-Lopes. “We had to increase the cap just to meet demand. We received $930,000 in commitments in just two weeks.”

“We see it as indicative of the potential for international investors to play a major role in the future of U.S. real estate crowdfunding,” Schwarz-Lopes continued.

The trend of international investor activity fueling the recovering U.S. real estate market is nothing new, especially in EarlyShares’ Miami headquarters. Real estate development is booming in South Florida, and a 2014 study found that 90 percent of the demand for new condos in Miami’s Brickell, Downtown, and Edgewater neighborhoods was from foreign buyers. More than six in 10 pre-sale buyers come from Latin America.

Fueling the trend is the desire of wealthy Latin Americans to allocate money into sound investments.

“For many South American buyers, the main motivation for purchasing real estate in the USA is their intent to make a secure investment,” said Oliver Ruiz, managing parter of the Engel & Völkers agency, on Inman.com. “The stable political and economic climate in the country makes it an appealing location for investments.”

Largely, recent international investment activity in U.S. real estate has been limited to the residential market. But not all non-U.S. investors want (or are able) to put up the cash to purchase a condo or single-family home outright. On platforms like EarlyShares, real estate crowdfunding provides a new avenue for such investors.

“Before the JOBS Act Title II exemption took effect, international investors couldn’t easily access commercial deals in the $1-$50 million range,” says Schwarz-Lopes. “EarlyShares is using Title II to provide them with a unique new wealth generation opportunity.”

The success of the $930,000 EarlyFund stemmed from a multitude of factors. For one, it offered Brazilian investors the opportunity to become direct owners in an existing, cash-flow generating Florida shopping center with national corporate tenants. The Central Plaza sponsor, Saglo Development Corporation, boasts a strong record investor returns and offered them quarterly distributions to Central Plaza investors.

EarlyShares’ process also played a huge role. Not only had EarlyShares and its partners carefully vetted the Central Plaza offering – giving investors confidence in the deal’s viability and potential – but Schwarz-Lopes and colleagues coordinated with the individual investors’ attorneys, CPAs, and other advisors to ensure the transaction closed smoothly. EarlyShares will serve as the professional investment manager of the EarlyFund.

“Ultimately, we made it easy for the Brazilian investors to take advantage of the deal,” says Schwarz-Lopes, who foresees continued interest from investors in Latin American countries as the commercial real estate market in the U.S. grows.

“International investments in commercial deals will become a huge part of the real estate crowdfunding industry in coming months, and EarlyShares is one of few platforms at the forefront of the trend,” continued Schwarz-Lopes. “We’re excited to help make these investments happen.”

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