by Dan Rafter
Jilliene Helman calls the deal a small one for industrial real estate, but a major one for crowdfunding.
And that’s a good way to sum it up.
In late August, Realty Mogul, a real estate crowdfunding marketplace, closed the largest crowdfunded industrial real estate transaction in Indiana when the company’s investors contributed more than $1 million to acquire the Jackson Industrial Park in the east submarket of Indianapolis with Brennan Investment Group, LLC.
Helmen, chief executive officer and co-founder of Los Angeles-based Realty Mogul, said that the deal is yet another milestone in the growing relationship between crowdfunding and real estate.
“I am seeing rapid adoption of crowdfunding today in real estate,” Helmen said in an interview with Midwest Real Estate News. “If you look at other industries that have embraced crowdfunding, you’ll see that people have taken to crowdfunding in the real estate industry rather quickly. People today are more comfortable with the technology behind crowdfunding. We have had the benefit of working with investors who are already comfortable and familiar with what crowdfunding is.”
Realty Mogul has already become one of the top players in the crowdfunding business, allowing investors — either individuals or groups — to pool money online that they can use to buy shares of pre-vetted commercial real estate investments. As of Sept. 1, Realty Mogul had helped investors crowdfund the acquisition of 87 properties. Professionals have invested more than $30 million with Realty Mogul to acquire these properties.
The benefits of crowdfunding for real estate investors are enticing: By dumping a smaller amount of dollars into a larger pool, investors can gain access to real estate investments that they might not have been able to afford to buy into if they had to come up with all or most of the money by themselves. Crowdfunding also allows investors to purchase passive investments. Investors don’t have to actively manage their investment, meaning that they don’t have to worry about maintenance, trash pick-up or fielding late-night calls from angry tenants.
Because of these positives, Helman said, she expects more deals like the one the company closed in Indianapolis.
“The word is spreading about crowdfunding,” she said. “It is something that is becoming far more widely known in real estate circles today.”
The Jackson Industrial Park deal is a good example of how crowdfunding can work when it comes to real estate transactions. The investors connected by Realty Mogul didn’t put in the majority of the funds to purchase the property. Brennan Investment Group, a Chicago-based private real estate investment firm, covered the majority of the $8.7 million purchase. The private investors working through Realty Mogul — a mix of real estate professionals who are either looking to diversify their holdings in the state or gain access to a particularly attractive commercial property — contributed just more than $1 million to the deal.
That assistance, though, was important: It helped make the industrial park an affordable purchase for Brennan Investment Group.
“Our experience proves that crowdfunding is a credible way to raise equity and to gain access to an untapped source of accredited investors,” said Michael Brennan, chairman and founding partner of Brennan Investment Group, in a written statement.
Jackson Industrial Park is a 260,400-square-foot industrial portfolio made up of four buildings. The portfolio includes suite sizes ranging from 1,600 square feet to 22,500 square feet. The park’s occupancy rate stands at 77 percent.
Brennan Investment Group will create a property-management and leasing program for the property. The company will also sell the property at the end of a designated holding period.
“This is an interesting investment opportunity,” Helman said. “The property is only 77 percent occupied. This means that there is a big potential for increasing the cash flow of this property. There is a big potential for growth. And those are the investment opportunities you look for.”