How Buchanan Tapped Fundrise to Buy Out New Boston Fund

MANASSAS, VA—When New Boston Fund told Buchanan Partners that it was winding down its position in the three-building, 125,452 square foot Innovation Business Center here, the company was facing a dilemma -- and one it needed to solve quickly. It needed to find the capital to buy out its partner's share of the complex and it needed that capital to be flexible enough so that it could satisfy the terms in the existing mortgage, which Buchanan Partners wanted to keep in place.

It found its solution in Fundrise, the local crowdfunding commercial real estate platform, and quickly raised more than $1.5 million. It was not that the financing was cheaper than bridge capital or other short-term lending, Colin Dove, project manager with Buchanan Partners, tells GlobeSt.com. "It was actually comparable with the best rates in the market," he says. "But Fundrise allowed us to move very fast and was very flexible in working with the existing lender. That, for us, cinched the deal."

Buchanan is in talks with Fundrise for additional projects now that it has successfully navigated its first endeavor with the platform, Dove adds.

This, of course, is great news for the platform -- but the Buchanan deal is important to Fundrise for another reason as well. It was the first time the platform was used to replace institutional capital in a transaction, COO Brandon Jenkins tells GlobeSt.com.

"We always highlight how Fundrise serves as substitute for traditional institutional financing and that it is more developer-sponsor friendly," he says.

"So we would always get asked, 'show me deals in which truly institutional capital was replaced by Fundrise'. And we couldn't until now."

If the loan amount had been for more than $1.5 million, the institutional players would have been competing fiercely for the deal because of its fundamentals, Jenkins says. "It is a quality sponsor and quality asset that is fully leased and income flowing."

Fundrise investors in the project are expected to receive an annual return of 12% percent over the projected 36-month term.

Now that the first such deal has been done, Jenkins thinks Fundrise will be called upon more and more to help fill gaps left by institutional capital that are too small for the traditional markets to fund. "That has always been our sweet spot – to be providing money for deals where other players aren't. We don't want to fight for transactions."