16A — January 12 - 25, 2018 — 2018 Forecast — M id A tlantic
Real Estate Journal
www.marejournal.com
2018 F orecast By Steve Cassidy, Denholtz & Associates; and Greg Brown, NAI DiLeo-Bram
Online capital formation: Fast track to normalization
W hen we explain the process of raising capital online, we
market and solicit private se- curities for 80 years. You could not visit capital formation platforms like www.denoltzas- sociates.com or www.naidb. com/invest to find private real estate investment opportuni- ties. The regulatory change provided by the JOBS Act, amplified by the power and transparency of the internet, has given deal sponsors access to investors like never before. Demand Private investors are in search of returns. Specifi- cally, cash flow. For example, NREI conducted a survey in October of last year showing that 55% of HNWI’s (High Net Worth Individuals or Accred- ited Investors) are planning on increasing their real estate allocations in the coming year with only 9% planning on a decrease. Through providing historically unparalleled ac- cess to deals, online capital formation platforms enable investors to seamlessly merge their capital allocation goals with available investment op- portunities. With movement towards expanding the Department of Treasury’s definition of “Ac- credited Investor”, the pool of potential investors clamoring for additional ways to deploy capital will only further in- crease. The change will allow family offices, RIA’s (Registered Investment Advisors), oppor- tunity funds and other ‘profes- sional money’ to join accredited investors in accessing invest- ment opportunities that were previously difficult to source. As these “new” investors join the commercial real estate investment fold, online capital formation platforms, with their ease of use and transparency, provide an ideal gateway. As 2018 progresses and more investors look to source deals, the familiarity, access, and demand for online capital for- mation platforms will only increase. Soon they will become a tool, no different from phone calls and networking events, that will enable commercial real estate investment firms to secure more investors and close more deals. Steve Cassidy is president of Denholtz & Associates. Greg Brown is managing director of NAI DiLeo-Bram and DB Capital, and is a registered representative of Venture.co, a FINRA registered broker dealer. n
uity investment are referred to as online capital formation platforms. In recent
platforms, more deals and more investors becoming in- volved for the reasons below. Familiarity By now, most savvy real estate investors and deal spon- sors have become familiar with sites that raise capital for real estate investments. Brand names like Crowdstreet, Fun- drise, Realty Mogul and others have become familiar to most CRE professionals - even if they don’t fully understand the mechanics of how the sites work. While the growth of this normalization is hard to track, there are analogies all around
us. We should all still be able to remember a time when online brokerage accounts like eTrade or Ameritrade were seen as exotic or radical. Advances in technology alongside regula- tory changes, allow investors to track their private invest- ments online in the same manner- and even in the same account. Although widescale adoption will take time, the path forward is quickly com- ing into focus for CRE profes- sionals. Access Remember, prior to the JOBS Act, it had been illegal to
are quick to explain one simple tenet: thi s i s not crowdfund- ing. Crowd- f und i ng i s for charities, artists and people look-
years, online capital for- ma t i on f o r private real estate equity investments has shown to be more than just a biprod-
Steve Cassidy
Greg Brown
ing to raise small amounts of capital for either a product or something else of value, but not for an equity investment. Instead the tools used for eq-
uct of JOBS Act regulatory changes. In 2018 and beyond, we believe the trajectory of online capital formation will continue upward with more
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