Myth 4: Crowdfunding will provide an immediate jolt across all asset types of apartments.
Rodrigo Niño, CEO of Prodigy Network, a New York–based crowdfunding provider, wants to bring his successful crowdfunding model from Colombia to the United States, though he will no doubt face more regulatory scrutiny. In Bogotá, Prodigy helped fund three major institutional commercial real estate deals through crowdfunding. In New York, Niño funded one extended-stay hotel, with designs on more properties.
“We’re focused on core cities and on great real estate—something that an institutional investor would do,” he says. “We only do institutional-grade assets.”
Jilliene Helman, CEO of Realty Mogul, has a similar take on crowdfunding’s big-time potential.“We’ve worked on over $200 million transactions,” she says. “As our capacity grows to place and raise capital, you’re going to see huge amounts of capital formation. This is going to get very institutional very quickly.”
But Helman also acknowledges that, at this time, crowdfunding is probably more applicable for real estate companies that have $100 million to $500 million in transactions. “Most of those companies can’t get access to insurance companies and the equity coming out of pension funds,” she says.
Keith Harris, chief investment officer at Chicago-based owner–manager Laramar Group, sees short-term potential for smaller firms and leaves the door open for greater long-term growth.
“Crowdfunding is delivering a return and is a nascent business,” Harris says. “It’s hard to say what the long-term potential is, but it definitely could fill a role for start-ups.”
Dave Woodward, president of CompassRock Real Estate, a manager based in New York, thinks crowdfunding may not even be universally attractive to midlevel owners.
“I think [crowdfunding] is viable on a smaller scale—on deals that are interesting to a local group,” he says. “Maybe it’s a historical deal—something that people can rally behind—or something that’s in an emerging area.”
Crowdfunding will provide an immediate jolt across all asset types of apartments.