Crowdfunding Transparency, Investor Draw

SAN FRANCISCO—Nav Athwal is co-founder and CEO of RealtyShares, a leading crowdfunding for real estate platform. Prior to founding RealtyShares, he was a real estate and land use attorney at San Francisco based Farella Braun & Martel LLP where he represented developers, fund managers, nonprofits, governmental organizations and REIT's on some of the largest mixed use residential, commercial and renewable energy projects across the country.  GlobeSt.com recently caught up with Athwal to chat about trends in crowdfunding, the types of investors in the space and anticipated trends going forward.

GlobeSt.com: Can you tell us about a specific commercial deal RealtyShares has crowdfunded?

Nav Athwal: We recently crowdfunded Strawberry Creek, an approximately 63,000-square-foot retail center in Sacramento. The center is not only shadow-anchored by Target, but also has national and regional tenants such as Starbucks, Jamba Juice, Panda Express, Subway and Rubio's.  For us, this was especially exciting because RealtyShares' Investors had an opportunity to invest alongside and on the same terms as institutional investors through Pacific Castle, a very reputable Southern California-based investment company. The opportunity offered immediate cash flow to investor's as well as upside potential at time of sale. Altogether, we had 25 investors in 13 states participate. 

GlobeSt.com: What are some other commercial deals you've funded and are you noticing any trends?

Athwal: We've crowdfunded over 40 investment opportunities across 10 states and with a total value in excess of $100 million through RealtyShares. In addition to Strawberry Creek, we've funded mixed-use assets in Phoenix, multifamily assets in Texas, Chicago and New Jersey and government leased buildings in California.

We've experienced that it's easier to fund cash flowing opportunities through the crowd than blind-pool funds and construction and ground up development projects. Thus, we are currently not funding those types of investments.

GlobeSt.com: What types of investors are you seeing using crowdfunding to invest in real estate?

Athwal: One of the benefits of crowdfunding is its transparency and level of control. Unlike REITs, our investors can select a specific asset in a specific market to match their own personal investment strategy or portfolio needs. In addition, our investors are excited about direct investments in real estate as a way to diversify their portfolio while reducing over-exposure to highly-volatile public equities.

Currently, all investors using the RealtyShares platform to invest in real estate have been Accredited US Investors, which means they meet strict standards related to their income and assets as set by the US government. Our investors range in age, occupation and location.  We have doctors, accountants, entrepreneurs, engineers, C-level executives, lawyers and others from almost every state in the US using RealtyShares. We also support investments through Self-Directed IRA's thus allowing investors to use tax-deferred dollars. 

What's even more exciting is that the JOBS Act, which was enacted in April 2012, will allow non-accredited investor's to participate in our crowdfunding platform for the first time.  That means that anyone, anywhere, could potentially take part in these real estate investment opportunities, democratizing access to these investments. We hope to see this act become operable by the end of the year.

GlobeSt.com: What sort of trends do you anticipate going forward?

Athwal: Two years ago when we started RealtyShares, most of the conversations surrounding crowdfunding for real estate were met with blank stares and skeptics. Today, it's the hottest topic in national platforms and events hosted by ICSC and ULI.  Over the last 18 months, crowdfunding platforms like RealtyShares have raised close to $100 Million of debt and equity capital for dozens of real estate projects nationwide.  This number will grow exponentially over the next few years as crowdfunding continues to gain momentum as a way for sponsors to raise capital and investors to invest in quality real estate properties. We also expect to see institutional and foreign investors become more engaged with crowdfunding platforms.

Additionally, we expect to see even higher profile commercial real estate deals come through crowdfunding platforms, and for crowdfunding to represent more of the raised capital of a completed deal. Take Strawberry Creek for example.  Although we helped raise equity capital for this investment opportunity, third party investors were also involved.   As crowdfunding continues to gain popularity, we'll see platforms like RealtyShares providing all of the equity capital (rather than only a portion) for high quality commercial real estate investments like Strawberry Creek.

GlobeSt.com: How does it work for an investor?

Athwal: Prospective Investors' can create a free RealtyShares Investment Account and get access to curated, nationwide real estate investment properties.  During the account creation process, all investors must verify their status as an accredited investor and only those meeting the minimum thresholds are provided access to active investment opportunities.

Investors can access specific information on any given property including financials, legal documents, property specific information and FAQs.  If interested in investing, the investor can complete the entire process through our secure platform signing all documents electronically and transferring funds via ACH.  Our current minimum investment amount is $5,000. Investors also have access to an investor dashboard through which they can monitor their investments, earnings, legal and tax paperwork, etc.

GlobeSt.com: How does it work for a real estate sponsor or company?

Athwal: Real Estate companies can apply to raise debt or equity capital for real estate offerings directly through our website. The online application requests information on the companies track record, deal type, size and location, dollars transacted, deal strategy (i.e. development, reposition, value-add flip, etc.) and the contact information of a company representative. 

We use this initial application to screen those companies that are not a fit due to lack of experience or a strategy that doesn't align with our investment thesis (i.e. development deals, deals located in a market we're not operating in, etc.).  If the company appears to be a fit, we'll proceed to vet the principals of the company and the deal.  This includes criminal background and credit checks on the Sponsor and underwriting the deals using our proprietary underwriting techniques.  Once an investment is curated and approved, we can fund it within 24 hours and up to three weeks depending on the size of the raise.