By David Drake
(Originally published on cfi.co)
Crowdfunding is taking real estate financing by surprise and the big players are taking notice.
When Joe Rubin (FundingPost) and I were planning for this Real Estate Investing conference we knew that crowdfunding’s foray into real estate is a promising innovation to the financing and investing industry. We were compelled to bring people, entrepreneurs and investors, media and spectators, to join in the talks in order to sharpen the game.
The Hakimian Organization, developer of the stunning and luxurious 75 Wall Street condominium atop the Andaz Wall Street, chimed in and readily hosted the 150+ current and future realty entrepreneurs and investors who signed up for the event. The glorious rooftop lounge, with the astounding 360 degree view of the city from its floor to ceiling glass windows, was the perfect setting. The full day event heralded the future growth of capital formation in real estate and invigorated a new group of angel investors and venture capitalists.
“For the first time ever, I felt like all real estate companies, small, medium and those who have relied on institutional capital for decades are starting to realize that crowdfunding is going to revolutionize capital formation in real estate.”
Joe Rubin, together with five of his angel and venture capitalist friends, was excellent in the pitch workshop where he guided with the pitches that the audience practiced. Showing how real estate fund managers, investors and entrepreneurs can further hone their pitching skills is a fine art in itself.
Barry Sternlicht, CEO of Starwood Capital, is now managing $30 billion in several funds from energy to hotels globally. He shared how his trepidations and hard work had led him to where he is today. He did acknowledge that he should take more celebration in the successes yet he worries about everything. “Work hard and read” – learn what the people are saying and what the sentiments are. He reads all the time.
Kent Swig of Swig Equities and owner of Halstead Property, Helmsley Spear and Brown Harris Stevens brokerage has several thousand employees and real estate brokers in New York. He shared how he was blessed with his grandfather’s last name that had built a real estate empire in San Francisco. Still, he shared his challenges and failures and reminded us that we all need breaks – whether it was the receptionist letting you through or a doorman opening the door. It is a people business and the relationships make you a leader.
The panel on crowdfunding, that represents among them iFunding $3.5 million, Realty Mogul $8 million and Fundrise $7.75 million, got the investors’ attention as the day grew older. All 3 firms have almost raised a total of $20 million. People are looking up and taking notice of this new way to raise capital. The most interesting questions for them were mostly on how they differ from each other in terms of operations and structure. Sydney Armani of CrowdFund Beat moderated the panel as his interests are to invest in real estate Software-as-a-Service.
Jilliene Helman of Realty Mogul says, “For the first time ever, I felt like all real estate companies, small, medium and those who have relied on institutional capital for decades are starting to realize that crowdfunding is going to revolutionize capital formation in real estate. Even better, they are eager to participate. This is very different than the conversations we were having one and two years ago with real estate companies who were highly skeptical. The industry is beginning to realize crowdfunding for real estate is here to stay.”
Charles Cecil of Southwest Strategies and my friend of 18 years shared the panel with the leading Italian lawyer Alessandro Lerro. Lerro represents family offices in Europe that are looking at cash flow producing realty in the US while advising the Italian government to improve on capital formation in real estate. He is coming out with a new book this Spring on Investing in Italy which discuss the opportunities existing in real estate as well as agri-tourism and the food and wine industry.
Jake Bisenius of Amcap Fund manages $1 billion for retail and shopping center acquisitions while Teresa Martin of the Real Estate Investor Association made a strong case for new members to join. Gerard Rem, an astute investor of distressed NY properties shared his experiences at court where he picked up troubled assets the last 30 years. Investors of funds with $1-$100 million attended. Landlord of 6 buildings in SoHo John Pasquale said, “This was the best realty event I had ever encountered”.
From the audience, Robert Stillman of Creative Mortgage Resolutions LLC, said, “Having listened to Barry Sternlicht, I realized my goals aren’t set high enough. What an encouragement he was to me. Kent Swig also had a very unique presentation filled with so much common sense advice that just goes a long way toward success…. Outstanding event! The networking, the people and the information were extremely helpful in energizing me into kickstarting my business to the next level.”
Joe O’Connor from VisorPoint says, “Great event! The networking overall was very good. Having a tech background, I love the innovation coming to this industry.”
There are several interesting changes in the law that the real estate industry is pursuing. The JOBS Act now allows advertising for investors and soon the crowdfunding law may become legal. We discussed how this would affect the realty industry and the impact will be profound in the next 18 months.
The energy in that crowded room cannot be missed nor dismissed. This is a conversation that is definitely worth nurturing and pursuing. Dennis Irvin, CEO of Rockefeller Group, will be speaking at the next event in March with other movers and shakers, as well as interesting key players in the industry.
The Soho Loft will continue to trailblaze talks on capital formation that bridge institutional and alternative financing groups and models. April 3-5 we partnered with Thomson Reuters to bring together the new kids on the block and the old boys of financing under the Innovative Investing Symposium in Boston. September 17 and November 5 we collaborated with TreveriMarketSA in a series to join together Broadway Avenue and Wall Street for a meaningful discussion on the impact of the JOBS Act on the entertainment industry.
Do you have questions and topics that you want to be discussed in this growing real estate financing conversation? Send them to us. Better yet, join us this March 2014.
David Drake is an early-stage equity expert and the founder and chairman of LDJ Capital, a New York City private equity advisory firm, and The Soho Loft, a financial media company helping firms and funds to advertise to investors, QIBs and family offices in compliance with the new SEC law 506c. You can reach him directly at David@LDJCapital.com.