Real Estate Private Equity is changing how they are raising capital. Creating an opportunity for investors to cut costs and increase yield over traditional expensive REITs and mutual funds.
The trend is spurred by a recent move, the Wall Street Journal reports that Calpers is preparing to cut its number of external real estate managers by over 70%. According to the Journal, the California Public Employees’ Retirement System is raising the performance bar for all external fund and managers. Calpers paid over $ 1 billion in 2014 in investment firm fees.
For large pension funds, this signals a new trend, but that trickledown effect is limited for small investors going into traditional investments like REITs, ETFs and mutual funds.
Feeding the growing investor demand of non-volatile unlisted funds and leaving real estate private equity firms like Triovest, Trebuchet Capital Partners, Toronto’s Onyx, and behemoth Blackstone are finding themselves consistently oversubscribed.
Traditionally these types of offerings were targeted towards large single investments from High net worth individuals, endowment, foundations and institutional buyers. That demographic is changing, even amongst established funds.
Leading the charge and exploiting this technology boom, FT reports that Dalian Wanda Group, China’s largest commercial developer by sales is turning to crowdfunding for its upcoming 1000 shopping malls. Crowdfunding was initially intended to match small investors to small developers. Companies like Fundrise and Realty Mogul are now seeing progressively larger transactions and venture capitalists like Y-combinator are pouring capital into this lucrative segment.
William Sipple MD at HVSCC recently launched a specialty crowdfunding site aimed at Hospitality industry investment stating that it democratize real estate capital and states that capital raises this way dramatically lowers the cost of capital. For developers and asset managers looking to replace traditional mezzanine and debt capital.
It’s estimated by the Huffington Post that there is over 75 platforms raising capital today.
From a recent article, HuffPo compiled list of the first 75 RE crowdfunding platforms in the United States:
* Acquire Real Estate
* American Colonial Capital
* American Homeowner Preservation
* AssetAvenue
* Becovillage
* Blackhawk Investments Corp
* Carlton Accredited Equity Crowdfunding
* Creative Equity Group
* Crowdflipr
* CrowdMason
* CrowdStreet
* CrowdTranche
* CrowdTrustDeed
* CrowdVested
* CRWD
* Deitscho
* DiversyFund
* Equidy
* EquityHunt
* FullCapitalStack
* Funding Hamptons
* Funding Roots
* Fundrise
* Global GroupFund
* GroundBreaker
* Groundfloor
* High Income Real Estate
* Hotel Innvestor
* iFunding
* Inner 10 Capital
* KB Holdings
* KC iFund
* Lendea
* LendZoan
* Loquidity
* MacroCrowd
* Money360
* MultiFamilyInvestment
* Nexregen
* Open Source Capital
* PassiveFlow
* Patch of Land
* PeerRealty
* PeerStreet
* Peloton Street
* Primarq
* Prodigy Network
* ProHatch
* PropFunds
* Propellr
* Property Pool
* PropertyPeers
* Razr Ventures
* Real Circle
* Real Liquidity
* RealCrowd
* RealPartner
* Realquidity
* Realty Mogul
* RealtyShares
* RealtyWealth
* Reamerge
* Rich-Uncles
* Sequorum
* Sharestates
* Silver Capital Portal
* Stake.com
* Terra Funda
* The NNN Crowd
* TripleNetZeroDebt
* Tycoon Real Estate
* Vestor
* Wealth Migrate
* We Are Crowdfunding
* Yield Crowd
*
Additionally, here are 15 platforms under development:
* CrowdFundsRealEstate
* Crowdland
* CrowdPad
* CrowdRealty Co.
* Equityroots
* Fund That Flip
* HomeFunded
* InvestPeer
* Manzyll
* Our Street
* RealConnex
* RoundVIP
* Selequity
* Small Change
* Sourced Capital
Will online crowdfunding displace traditional private placements and institutional equity? Ben Miller CEO at Fundrise thinks so and states “Real estate crowdfunding is a fundamental change in investment paradigm.” Which also squares with Alternative asset manager Tim MicKey CFP at Monument Wealth Management who feels that REIT shares are not correlated with actual property values but with broad economic conditions, which explains the popularity of these off market alternative investments.