An Investor's Guide to Real Estate Crowdfunding

Presented on 7/7/16 by

RAI$E CONFERENCE ‘16

An Investor GuideTo Real Estate Crowdfunding

Bret ConkinChief Evangelist

Ever used….....

Crowdfundland.co @bretconkin

The Good & Bad

Source: Vision Critical

WHAT ARE WE SHARING?

Source: Vision Critical


Crowdfundland.co | @bretconkin

What is Crowdfunding?



HOW CROWDFUNDING MODELS DIFFER

DonationsHelp those in need expecting nothing in return

Rewards Pre-orders or perks for backing a project

Equity Shares or securities in companies

Lending Loans via the Crowd not banks

GLOBAL CROWDFUNDING

New CanadianCrowdfunding

Laws (2015)&

JOBS ACT (US)

WHAT IS DRIVING GROWTH

• Proof it works - in US other markets• Demand for alternative investments due to poor market

returns• Wave of internet disruption of traditional industry

inefficiencies• Wave of mobile and social network adoption• Wave of cultural disruption of people wanting to connect as

they buy, do and invest• The rise of Big Data and Analytics• Real Estate’s fit - the fastest growing altfi sector in the US


Intro to Real Estate Crowdfunding


REAL ESTATE CROWDFUNDING

- New Crowdfunding Exemptions (CAN/US) - Liberalized Securities

Regulations - Strong performing

asset class

Transforming investing from offline to online


RE CROWDFUNDING STATS

250+ PlatformsCrowdfunding residential &

commercial projects

$100 - $100kInvestment size from investors

Est. $2.6 BillionInvested in 2015

$100k - $25 Million

Crowdfunded project size


WHO ARE THE PLAYERS?

Real Estate Focus Est. Returns Min. Investment

Commercial 5 – 20% $1,500

Commercial 15 – 25% $10,000

Commercial 12 – 14% $1,000

Cash-flowing Commercial &

Residential8 – 17% $5,000

Commercial & Residential 8 – 20% $5,000


POWER OF ONLINE CROWDFUNDING

• 80,000 members• $3B in real estate investments

• 90,000 monthly visitors to website• $130M raised for 1600 properties

• 80,000 members• $200M invested | $40M paid out


RISE OF RE CROWDFUNDING

2015 Growth

In real estate crowdfunding

market

156%

VC Raised by

Platformsto further grow

their marketplace

business

$120M

Investment by

RenReninto Fundrise in

2014

$31M


INVESTMENT SIZE | SPEED

Min. Investment of A$340,00028 Asian investors ‘presold’ into investment

Min. Investment of US$100,000*Successfully funded $150M+ Manhattan real estate400% Oversubscribed in 4hrsFundrise eREIT invests in commercial real estate, distributing cash to investors every quarter * International investors


How does Real Estate Crowdfunding Work?


EQUITY VS. DEBT

EQUITYEquity stakes

in property or SPV.

Rental income +/orAsset appreciation.

DEBT PROS5-10+% returns.

Lower Risk.Shorter holding periods.

More liquidity.Lower on capital stack.

EQUITY PROSHigher returns!

15-25% (net)

DEBTInvesting in mortgage/

loan of property.

Interest payments + Principal Repayment.

Crowdfundland.co @bretconkin Source: Nelson Garcia, Medium.com

CROWDFUNDING STRUCTURE

Online Investors % Stake

Project Sponsors

Majority ownership

Special Purpose Vehicle

Project Investment



BENEFITS FOR INVESTORS

Diversification

Lower investment requirements allow

diversification

AccessibilityParticipate in deals

that were inaccessible before

Speed/FlexibilityOnline tools, algorithms &

analytics reduce friction

Higher Returns

New asset classes provide higher

returns via crowdfunding

TransparencyImmediate

availability of information through the

platform

Lead InvestorsSyndications/

Invest along with industry experts


Cut Out the

MiddleMen

Marketing Benefits

New base of investors

and capital

BENEFITS FOR DEVELOPERS/BUILDERS

Lower costs vs.

traditional funding

$

€¥£

Big Data Analytic

s

24/7Accessibilit

y


Real Estate Crowdfunding Not Just a Concept


ILLUSTRATION A – HARD ROCK HOTEL PALM SPRINGS

• Kittridge Hotels & Resorts/Realty Mogul

• July 2014• $1.5M raised to

refinance/renovate• 85 investors received VIP

benefits• Customers became owners• Created evangelists to

promote hotel

ILLUSTRATION B: VESTMUNITY - FIX ‘N FLIPSouth Florida

• $50-200k loans for renovations

• Address funding gap• 18-20% Returns

Patch of Land• $61M in Loans

(2015)PeerStreet

• $40M in Loans (2015)


ILLUSTRATION C – BC BACATA TOWER

• Mixed use project in Bogota, Columbia

• $175M raised from 3500 investors


ILLUSTRATION D – AJAX LAND MORTGAGE

• Real Estate Development • Bridge Financing -

Residential condo project (Phase I)

• Mortgage Debt Investment• Partner: Downing Street• Total Debt Raised: $15.5M• Crowdfunding: $500k• Closed: 4/22/16

ILLUSTRATION D - 3 WORLD TRADE CENTER

$2.49BTotal Project Cost

$2MFunded with debt

crowdfunding

5%Tax-free interest

secured bond

One of the most iconic towers in New York City, the 3 World Trade Center, was partly funded by investments by the

crowd.

ILLUSTRATION E: CROWDSTREET MARKETPLACE• Commercial real-estate

marketplace

• 48 successful offerings• $29M avg. project value• $8.9M avg. equity per offering• 17.4% avg. target IRR• 8.2% avg. cash yield/yr.• $50k avg. investment


Real Estate Crowdfunding in Asia

CHINESE INVESTMENT CLIMATE

$525 Million

$33 Billion

Diversify

Cheap Canadian Dollar

“Mainland Chinese buyer’s market”Study says 70% of YVR West Side homes sold to Mainland Chinese buyers (The Province)Invested in Canadian Real

EstateBetween 2008 to 2014, $33 billion

invested into residential and commercial Diversifying Real Estate

InvestmentsNot only investing into residential, but hotels, resorts, wineries, farms, etc.

Canadian Investments on Discount

Drop in value of Canadian dollar attracts Chinese investments


CHINESE CROWDFUNDING

Personal Savings

AccountsHengXinLi launched

to give investors access to

international real estate investments

$21Trillion

Chinese Real Estate Platforms

In USChinese only

platforms for Chinese investors to invest into US real estate

iCrossYdizhu

P2P Lending Fraud in ChinaLack of credibility

in Chinese platforms

$7.6Billion

ILLUSTRATION F - STABLE PROPERTIES

$8M AUDTotal EquityComponent

5Investors pooled

$300k into the equitycomponent

40%Projected IRR

With hold time of 18-24 months

Stable Properties had secured the site, development approval and $58M AUD senior financing from ANZ bank on the redevelopment of the old Wrigley's

chewing gum factory conversion into 99 loft apartments.


Real Estate CrowdfundingBeyond Urban Real Estate

CROWDFUNDING FARMLAND?

Farmland is a stable, scarce, income producing asset.

37

ILLUSTRATION G - CANADA ASIA SYNERGY GROUPRural Alta Land

• Canada/Asia investors

• CASG owns 51% and provides management

• $10k investment units

• 4900 shares + $5100 mortgage

ROI• 3-4% income/year• 7-9% appreciation

Tomahawk Cattle Ranch – 13,500 Deeded Acres


ONLINE VS OFFLINE

OFFLINE

ONLINE

Investor Exposure Transaction Cycle

180,000+

400 180+ DAYS

60 Days

ILLUSTRATION H: DWELLxCHANGE• Marketplace for “shared equity”• Sell equity interest in home to

investors• Promise of living mortgage

free!• $5,000 min investment• Secondary market in works• Full occupancy rights

Example• $500,000 home• $250,000 in owner equity• Sell balance of $250,000• Buyer gets payback + 50% of

equity gain upon sale


How is this different from REITS & MICs?


HOW DIFFERENT FROM A REIT?

• Ability to select specific:• Geography• Sector• Properties

• Not subject to stock market’s volatility

• Fees may be lower

MIC vs. RE CROWDFUNDINGItem MIC RECF InvestmentsProduct Debt only. Debt and Equity.

Indirect vs. Direct Blind pool investment. Project direct.

Yield 6-7% 12-20% IRR

Geography Canada only No restriction

Management Fee 1.5%-2% 1% AUM Fee

Capital Raise Fee 6-8%To EMDs (Private)To IPO fees (Public)

4% of raiseTo EMD

Pros Carefree investment.Liquid.

Higher returns.Value not vary w/ stock market.

Cons Lower returns.Value fluctuates w/ stock market.

Involved investment.Illiquid.

Source: R2CrowdCrowdfundland.co @bretconkin


Summary

THE PROMISE

Increased Transparency

New Market Accessibility

Increased Investment flexibility

Easier Due Diligence

8 - 25% returns

Convenience + Lower

Fees

Marketing Benefits

For Investors

New Financing options

Requires platform approval

For Project Owners

LIMITATIONS

Consider Investment

Fundamentals

Choose right

platform

Consider LiquidityDon’t forget about Risk

$May

require other

funding sources


For Investors

Early days


For Project Owners

Bret Conkin on The Exchange with Amanda Lang – CBC News

Help clients Profit from the Alternative Finance Economy

Serviceso Platform Developmento Strategy/Consultingo Capital Raisingo Project Managemento Systems Integrationo Operationso Marketing/PRo Business Development

WHAT WE DO

THANK YOU!

CONTACT:Bret ConkinChief Evangelist

[email protected]

778.323.7297Crowdfundland.co@bretconkin@crowdfundsuite

mailto:[email protected]

http://crowdfundland.co/