From its early days as a concept used to provide funding for innovative startup ideas, crowdfunding has since evolved into an investment vehicle used to fund million-dollar large scale projects across the globe.
In recent times, real estate has been a major hotspot for crowdfunding activities with huge amounts raised by developers across the globe to fund their projects. Through online crowdfunding platforms, developers are now able to raise funds to complement what comes from traditional sources of finance such as banks and institutional investors.
Since the JOBS Act took effect in 2012, a home run for real estate crowdfunding used to be below $3 million; however, with the infusion of institutional capital into the industry and with the increase in cross border deals, there has been a surge in the amounts raised by platforms in single transactions.
Last year, the idea that crowdfunding is “minority capital” was shattered when Prodigy Network, a leading firm in the real estate crowdfunding industry hit a milestone when it raised over $200 million from more than 4200 investors in a single transaction. The crowdfunding project, “BD Bacatá” was for the construction of the tallest building in Colombia, which became the largest crowdfunding campaign ever.
The year 2014 has also recorded huge deals with millions of dollars raised by developers from a pool of accredited and institutional investors online. Here are the top five real estate crowdfunding deals we’ve tracked, raising the largest amounts of money from the crowd in the US:
1. 17th John Street – Prodigy Network
The 17th John Street Project was facilitated by Prodigy Network, reputed as the largest real estate crowdfunding platform in the US having facilitated international deals worth over $850 million and raised $300 million in equity from investors across the globe.
17th John Street, the second facilitated deal in Manhattan by the platform was worth $85.3 million of which over $25 million was raised through crowdfunding.
The deal attracted accredited investors from over 12 different states in the U.S. and 10 nationalities who invested at least $50,000 into the project.
The 17th John Street project is located at the centre of the burgeoning financial district in Manhattan, and it has attracted additional funding from the Deutsche Bank,a top institutional player. Rodrigo Niño, the CEO of Prodigy Network believes the success of the 17th John Street further lends credence to their innovative business model in the industry.
2. AKA United Nations – Prodigy Network
Prodigy Network in partnership with Korman Communities closed on the deal, AKA United Nations, located at 234 East 46th Street in Manhattan. The property was worth $68.5 million, of which over $10 million was raised online through crowdfunding with the remaining sourced from a senior financing from the Bank of America. The campaign attracted accredited investors from different countries across the globe who invested a minimum of $50,000 online to fund the project. This was the third project by Prodigy Network to be crowdfunded in New York.
According to the Principal of Prodigy Capital Group, parent company of Prodigy Network, the success of the AKA United Nations project validates the company philosophy of making institutional-quality deals accessible to average accredited investors. In addition, the participation of banks and major institutional investors in funding the deals in the Manhattan area shows that crowdfunding is fast gaining traction in the mainstream of traditional corporate finance.
3. Condo Tower at Fulton Street - iFunding
iFunding, an innovative platform in the real estate crowdfunding industry closed on a deal for the funding of a property (a condo tower) in Fulton street in Manhattan, New York worth $250 million.
The platform successfully raised $8 million online from its investors and plans to further raise $42 million in equity once it sees the deal through. Additional funding from traditional sources will also come in form of a $150-200 million loan from a large bank. The 75-story tower represents iFunding’s largest crowdfunding campaign so far.
4. Affordable Housing Community Fund 5, LLC – Realty Mogul
Realty Mogul, a leading platform in the U.S crowdfunding industry facilitated the funding of a mobile home park in partnership with MHP Funds, LLC. The campaign raised $2.3 million from accredited investors online.
5. Senior Care-Assisted Living Facility, Indiana - CrowdStreet
CrowdStreet, an Indiana-based real estate firm, facilitated the funding of a senior care facility project by the Mainstreet Property Group through its platform online. The project offering on the CrowdStreet platform which raised $1.8 million attracted accredited investors from different cities of the country.
David Drake is an early-stage equity expert and the founder and chairman of New York-based Victoria Global with divisions LDJ Capital, a family office and private equity advisory firm, and The Soho Loft Media Group, a global financial media company involved in Corporate Communications, Publications and Conferences. You can reach him directly at David@LDJCapital.com.
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