Crowdfunding is probably best known for Kickstarter campaigns, when artists or others that need financing for a specific project take to the Internet and get several individuals to “donate” to their endeavor. However, some crowdfunding campaigns have offered multiple investors equity in a startup company via the distribution of unlisted shares, or the chance to offer credit at specified rate of return.
Now the crowdfunding concept is starting to trickle into commercial real estate.
Last year saw the formation of San Francisco-based Realtyshares. That collaboration recently purchased Strawberry Creek, a shopping center in Sacramento. On that deal, 40 different investors put in a minimum of $5,000 each to make the transaction happen, according to the Sacramento Business Journal.
These companies aren’t only involved in the purchase of assets. Some are also involved in commercial real estate development.
One of them is Fundrise, based in Washington, D.C., which is affiliated with, via its founders, urban mixed-use development outfit WestMill Capital Partners. Fundrise and WestMill have teamed on the 370,000-square-foot Griffith, a project underway in Washington.
A Fundrise founder, Benjamin Miller, who had a commercial real estate background before starting the crowdfunding venture told NAIOP’s Development Magazine: “When we started, this was a totally novel idea. Now, everyone is talking about it and wants to do it. The biggest surprise to me is how fast the culture has changed around this idea. The norms are changing so quickly.”
Do you think the norm is changing? Will crowdfunding ever be a serious contender when it comes to commercial real estate transactions and developments, or will it remain a niche player in the industry?