US crowdfunding site RealtyShares has quickly taken the opportunity to start expanding following its recent capital raising with introduction of a new diversified equity fund designed to benefit institutional investors.
As reported the company raised $20 million in a Series B financing round in February led by Union Square Ventures (USV), a leading venture capital firm in the fintech space.
The New York-based firm has previously taken part in financing rounds for other well-known crowdfunding platforms such as LendingClub, Kickstarter and Funding Circle.
USV partner John Buttrick will join its board of directors as part of the deal.
In terms of its new offering, RealtyShares says it has already seen an "uptick in interest" from institutional capital sources, such as hedge funds and pension funds.
"With the launch of this latest equity fund, we’re hoping to target a segment of the real estate investing market
that we believe is drastically underserved," says RealtyShares CEO Nav Athwal .
"Specifically, our focus is on the ‘small-balance’ commercial real estate sector that includes properties valued at $50 million or below.
"This move is part of a foundational effort to form relationships with institutional capital sources, which have yet to venture into real estate crowdfunding on a large scale," Athwal says.
"The introduction of institutional capital would allow us to continue to broaden our network while enhancing the scope of investment opportunities we’re able to offer. As an industry leader, we’re wholeheartedly embracing this
challenge of filling a major gap in the marketplace.
Continuing to shake up the real estate industry in general is also on the agenda for 2016 and beyond.
“As we continue to grow, we’ll also continue to work on how technology can aid in the disruption of real estate investing — an 'old school' space where historical ways of doing business still predominate,” Athwal says.
"Since launching our online marketplace to connect accredited and institutional investors with private real estate deals in 2013, we’ve worked hard to stand out in the crowd.
To date, RealtyShares has raised over $130 million in funding involving more than 1,500 properties. Deals have been offered in over 60 different cities across 25 states.
Less than a year ago, RealtyShares announced a $10 million Series A round of funding led by venture capital firm Menlo Ventures. That deal also included participation from previous investor General Catalyst, which fronted $1.9
million in funding to expand operations back in 2014.
"The Series A financing allowed us to expand our team while simultaneously streamlining our underwriting and vetting processes," Nav Athwal says.
"As we watched demand for our services continue to grow, we recognized the need for a more efficient way of screening investment opportunities to ensure that only the highest-quality deals were being passed on to our investors.
"Those high standards are still firmly in place, with only 5 per cent of deals getting our seal of approval."
With this newest round of financing, Athwal says the focus remains on expansion and improvement, particularly where investment opportunities are concerned.
"The goal, Athwal, says is for RealtyShares to become a “one-stop shop” for capital for real estate transactions in the debt, equity and mezzanine financing categories.
“We’ll use this funding to continue our marketing outreach, the company’s technology efforts, and our overall hiring efforts,” he says Athwal.
“We see some data-driven opportunities in this space, but also want to maintain our focus on originating investment opportunities in the sub-institutional area – where some of the best investment opportunities may often be found.
"We already offer one of the broadest product lines in the industry, and we plan to increase our product offerings in the very near future,” Athwal reveals.
he says existing options are designed to fit the portfolio of any accredited investor who’s seeking to gain entry into the market.
In addition to equity and debt investments involving a range of property types, including office, industrial, retail and hospitality facilities as well as multi-family residential properties, also featured are multiple fund offerings to provide an additional layer of diversity to investors.
"These offerings include regional funds, with investments spread across a range of properties within a larger portfolio as well as funds involving a single sponsor," Athwal explains.
SHOW ME THE MONEY
RealtyShares says it has returned approximately $16 million to the more than 10,000 investors who use its site, an achievement the company is immensely proud of.
"In the last two years, we’ve seen our investor base grow by nearly 90 per cent and the numbers continue to increase,' Athwal says.
"RealtyShares recently hit another major milestone when we crossed the $30 million mark in real estate investments for the third quarter of 2015 alone. Those achievements are evidence of how we’ve managed to stay on top in a competitive market.
He says the implementation of Title III provisions of the JOBS Act may open even more doors for RealtyShares and the real estate crowdfunding industry as a whole in the coming year.
In October 2015, the SEC granted crowdfunding platforms the green light to allow participation from non-accredited investors under Title III provisions of the JOBS Act.
That landmark move opened up a previously inaccessible asset class to millions of new investors and it marks another major shift for real estate and crowdfunding as a whole.
"While RealtyShares caters exclusively to accredited investors at this time, the addition of non-accredited investors is something we’re exploring for the future,' Athwal says.
"As we move into 2016, we’re enthusiastic about the positive changes in store and we’re looking forward to connecting with an even larger audience of investors and sponsors who can benefit from our products and services.
"With our Series B funding in place, we’re moving full steam ahead with our efforts to broaden our investor base while creating some much-needed disruption within the real estate industry."