54% of regulation crowdfunding firms are out of compliance with Federal regulations

Commentary August 16, 2022

We’re back with all of the real estate crowdfunding-related news that you need to know. This week on the newsletter, we’ll look at two excellent CrowdStreet deals in the heart of Texas, including a townhome project in Fort Worth and a Houston multifamily project close to several global energy HQs, including BP, Shell, and several other heavy-hitters in the energy sector.

In industry news, we’ll look at a new report, brought to us by Crowdfund Insider, that looks at the alarming trend of Regulation crowdfunding issuers not filing mandated documents. Moving on, we’ll look at some excellent recent returns from AcreTrader and finish off with a look at a podcast featuring a discussion with RealtyMogul CEO Jilliene Helman. 

Let’s get into it.

New Crowdfunding Platform Deals

First up is The Retreat Townhomes, a Fort Worth townhome project with a 10% sponsor co-invest. This project is special because it was acquired via an off-market transaction for a discounted price due to the sponsor’s professional relationships. The sponsor hopes to target the lucrative build-to-rent market, giving rents privacy, security, and the opportunity to live in high-growth markets without having to live in the close quarters of an apartment building. 

The project has a target IRR of 22.7%, a sponsor co-invest of roughly $1.2 million, and a minimum investment of 25k. You can learn more about this deal on CrowdStreet, here.

Next up is the Houston Domain by Windows, a Houston, Texas multifamily project that also has a significant sponsor co-invest of 15%. The sponsor, Keener Investments, aimed to align their interest with those of their investors, shown by the structure of the deal, in which the sponsor earns 20% promoted interest- only after investors see a 10% IRR, with no other hurdles in the waterfall structure. 

Keener Investments is also based in Houston and brings their local multifamily expertise to the project. They’ve got considerable experience acquiring, renovating, and managing apartment complexes in the Houston MSA. Interested? Find out more on CrowdStreet.

General Crowdfunding Industry News

According to a recent email from Crowdfund Capital Advisors, out of the 2,232 issuers that have raised up to $5 million via Reg CF as of the end of 2021, a full 54% have not filed at least one annual report, Form C-AR, or a notice to terminate reporting. This essentially means that these companies are not in compliance with federal regulations governing the space. 

It is an alarming figure for the nascent real estate crowdfunding industry and somewhat puzzling, considering no action has yet been taken by the SEC, with CCA positing that this may be due to the relatively small numbers involved with many Reg CF deals. To see the letter for yourself, head over to Crowdfund Insider, here.

Crowdfunding Platform Updates

Farm-focused crowdfunding AcreTrader recently released the results from three farms in their portfolio and took a hard look at how investors in AcreTrader projects are faring. Their analysis found that appreciation is typically the primary driver of returns in farmland investing, in addition to the consistent and attractive income from land leases and annual operations. 

The 3 farms they looked at outperformed expectations for several reasons, including prescient farm choice, effective management, and opportune sales timing. The firm stresses that these results are not typical, but they do represent the highest standard and the goal line for future farmland crowdfunding opportunities. Get the dish straight from the horse’s mouth on AcreTrader, here.

Multimedia Links (Videos, Podcasts, etc.)

RealtyMogul CEO Jilliene Helman seems to be everywhere these days. As a leader at one of the industry’s premier firms, Helman has a wealth of knowledge to share with real estate professionals, investors, sponsors, and anyone interested in a granular understanding of how the CF markets work. 

She recently sat down with Chris Powers on his podcast “The FORT” to discuss a 10-year overview of how crowdfunding has evolved, how she built a two-sided marketplace with sponsors and LPs, how crowdfunding works from a high level, and what we can expect to see in the space over the next decade or so. Listen to her insights here.

That’s it for this week, but we’ll see you next week with lots more RE crowdfunding stories, new deals, podcast updates, and more!