An overview of Real Estate crowdfunding, what it is, why it is growing, deal structures, illustrations, limitations. Presented at Greater Vancouver Home Builders Assn event 4/16/16.

1. Presented on 4/16/16 by
CROWDFUNDING WORKSHOP
GVHBA REAL ESTATE
Bret Conkin
Chief Evangelist

2. Ever used….....

3. The Good & Bad?

4. Source: Vision
Critical

5. WHAT ARE WE
SHARING?
Source: Vision
Critical

7. TRENDS – BROKERED INDUSTRIES

8. OBJECTIVE
Learn how RE crowdfunding may fit
into your financing or business
plans

9. OVERVIEW
• WHAT IT IS
• WHY IT’S GROWING
• ILLUSTRATIONS
• BENEFITS/LIMITATIONS
• EVALUATION
• DEAL STRUCTURE
• PLATFORMS
• FOREIGN INVESTMENT
• FREE CHECKLIST AT
Crowdfundsuite.com

11. HOW CROWDFUNDING MODELS DIFFER
Donations
Help 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

12. GLOBAL CROWDFUNDING
New Canadian
Crowdfunding
Laws (2015)
&
JOBS ACT (US)

13. THE PROBLEMS
• Lack of capital for
projects
• Lack of
community
support
• Failure to grow
investor pipeline

14. REAL ESTATE CROWDFUNDING
- New Crowdfunding
Exemptions (CAN/US)
- Liberalized Securities
Regulations
Transforming investing from offline to online

15. RE CROWDFUNDING STATS
250+ Platforms
Crowdfunding
residential &
commercial projects
$100 - $100k
Investment size from
investors
Est. $2.6 Billion
Invested in 2015
$100k - $25 Million
Crowdfunded project
size

16. WHO ARE THE PLAYERS?
Real Estate Focus Est. Returns Min. Investment
Commercial 5 – 20% $1,500
Commercial 15 – 25% $10,000
Commercial 7 – 12% + Perks $100
Cash-flowing
Commercial &
Residential
8 – 17% $5,000
Commercial &
Residential
8 – 20% $5,000

17. POWER OF ONLINE CROWDFUNDING
• 80,000 members
• $3B in real estate investments
• 90,000 monthly visitors to website
• $130M raised for 1600 properties
• Raising $650,000 on SeedUps Canada
• 62% funded by accredited investors

18. RISE OF RE CROWDFUNDING
2015 Growth
In real estate
crowdfunding
market
156%
VC Raised by
Platforms
to further grow their
marketplace
business
$120M
Investment
by RenRen
into Fundrise in
2014
$31M

19. EQUITY VS. LENDING
EQUITY
Equity stakes
in property or SPV.
Rental income and/or
Asset appreciation.
DEBT PROS
5-10+% returns.
Lower Risk.
Shorter holding periods =
More liquidity.
Lower on capital stack.
EQUITY PROS
Higher returns!
15-25% (net)
DEBT
Investing in mortgage/
loan of property.
Interest payments.

20. 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

21. ILLUSTRATION B – BC BACATA TOWER
• Mixed use project in
Bogota, Columbia
• $175M raised from 3500
investors

22. ILLUSTRATION C – 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
• Closing date: 4/22/16

23. ILLUSTRATION D: PATCH OF LAND/
GOLDEN BEE PROPERTIES
West LA Fix & Flip
• $1M borrowed
• 44 investors
• $750k reno planned
• 12% interest paid
• Golden Bee profit =
$575k*
Patch of Land
• $61M in Loans (2015)
PeerStreet
• $40M in Loans (2015)
How Crowdfunding has made Flipping Houses a lot easier – LA Times Feb ‘16

24. ONLINE VS OFFLINE
OFFLINE
ONLINE
Investor Exposure Transaction Cycle
180,000+
400 180 DAYS
60 Days

25. INVESTMENT SIZE | SPEED
Min. Investment of A$340,000
28 Asian investors ‘presold’ into investment
Min. Investment of US$100,000*
Successfully funded $150M+ Manhattan real estate
400% Oversubscribed in 4hrs
Fundrise eREIT invests in commercial real estate,
distributing cash to investors every quarter
* International investors

26. 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 Estate
Between 2008 to 2014, $33 billion invested
into residential and commercial
Diversifying Real Estate Investments
Not only investing into residential, but hotels,
resorts, wineries, farms, etc.
Canadian Investments on Discount
Drop in value of Canadian dollar attracts
Chinese investments

27. CHINESE CROWDFUNDING
Personal Savings
Accounts
HengXinLi launched to
give investors access to
international real estate
investments
$21
Trillion
Chinese Real Estate
Platforms In US
Chinese only platforms
for Chinese investors to
invest into US real
estate
iCross
Ydizhu
P2P Lending
Fraud in China
Lack of credibility in
Chinese platforms
$7.6
Billion

28. BENEFITS FOR INVESTORS
Diversification
Lower investment
requirements allow
diversification
Accessibility
Participate in deals
that were inaccessible
before
Speed/Flexibility
Online tools,
algorithms & analytics
reduce friction
Higher Returns
New asset classes
provide higher returns
via crowdfunding
Transparency
Immediate availability
of information through
the platform
Lead Investors
Syndications/ Invest
along with industry
experts

29. WHY NOT JUST INVEST IN A REIT?
• Ability to select
specific
geography, sector
& properties
• Not subject to stock
market’s volatility
• Fees may be lower

30. Cut Out
the
Middle
Men
Marketing
Benefits
Extend Your
Investor Reach
Online
BENEFITS FOR DEVELOPERS/BUILDERS
Lower costs vs.
traditional
funding
$
€¥
£
Big Data
Analytics
24/7
Accessibility

31. CROWDFUNDING STRUCTURE
Online
Investors
% Stake
Project Owners
Majority
ownership
Special Purpose Vehicle
Land Investment

32. CROWDFUNDING TEAM/ROLES
Platform
Due Diligence
Distribution
Reporting
Project Owners
Builder/Developer
Offering/Property/Fund
Service Providers
Legal / Strategy / PR
Campaign Management

33. DEAL STRUCTURING
Accredited Investors
Special Purpose Vehicle
Prospectus Exemptions
No splitting fees, but can not operate as
business offering securities
Small Retail Investors
Exempt Market Dealers
3-5% fee for dealers processing
investors, possible partners: Frontfundr,
Waverley

34. COST/BENEFIT
Loan Origination
Fees
Property
Listing Fees
Investment Management
Fees
Transaction or
Services Fees
$
Investor
Pipeline
Land
Appreciation

35. LIMITATIONS
Consider
Investment
Fundamentals
Choose right
platform
Consider Liquidity
Don’t forget about
Risk
$
May require
other funding
sources
Requires
platform
approval
For Investors
Early days
Requires
platform
approval
For Project Owners

36. WHO WE WORK WITH

37. About Us
o Experience – Built/operated multiple SaaS platforms
o Media – Globe & Mail, Vancouver Sun, CTV, Global
o Speaking - Canadian Crowdfunding Summit, Nail the
Numbers (SK), Canadian Resort Conference 2015
o Blogger – Investopedia, ITBusiness, Crowdfund Insider
o Ambassador - National Crowdfunding Assn of Canada
Bret Conkin on The Exchange with
Amanda Lang – CBC News
Help clients Profit
from the new
Crowd Economy
Services
o Platform Development
o Strategy
o Capital Raising
o Project Management
o Systems Integration
o Operations
o Marketing/PR
o Business Development
WHAT WE DO

38. Thank you!
CONTACT:
Bret Conkin
Chief Evangelist
bret@crowdfundsuite.com
778.323.7297
Crowdfundsuite.com
@bretconkin
@crowdfundsuite