Could you lose your accredited investor status with this SEC rule change?
This week, in the GowerCrowd Real Estate Crowdfunding Newsletter we’ve got an extra-long link list. This is because it’s been a busy week as investors look to flee to the relative safety of real estate while also preserving portfolio diversity- a perfect use case for real estate crowdfunding. We’re going to highlight two new deals at Crowdstreet, recent updates to a new cannabis fund we’ve covered in the past, and an Orlando office portfolio with a 14.8% IRR.
We’ll also take a look at the newly proposed SEC rules that may change the definition of an accredited investor, potentially cutting off millions of potential investors in the space. Finishing up, we’ll look at AcreTrader’s new Australian Citrus Report and examine the progress of Phase II of the Tulsa Real Estate Fund, the first Black-owned Regulation A+ Tier II Impact Fund.
New Crowdfunding Platform Deals
Let’s head to California’s Inland Empire, just west of Los Angeles, for a look CrowdStreet’s Rainbow Cannabis Fund II, an equity and debt fund focused on one of America’s fastest-growing industries, cannabis and cannabis products. This fund aims to fill the capital gap left by existing federal prohibitions on cannabis, which has led to serious issues raising development funds for retail and industrial cannabis operators. In a recent email, CrowdStreet revised earlier estimated return numbers upwards, which we’ll cover below.
The fund is operated by Rainbow Realty Group LLC, a real estate firm that specializes in the American cannabis industry. They provide industry participants with capital through the use of sale-leaseback transactions as well as senior secured mortgage facilities. This structure gives cannabis companies the ability to leverage their existing assets at market rates. This is in addition to the flexible structures customized for specific operator needs.
This retail/industrial deal has a targeted unlevered investor IRR of 13.1%, a targeted unlevered equity multiple of 1.5x, a targeted unlevered average cash yield of 7-10%, and a targeted investment period of 4-8 years. Take a look for yourself at CrowdStreet.
Now let’s take a trip to Orlando, Florida, for a look at an office portfolio comprised of two buildings in downtown Orlando, the GAI Building and 100 E. Pine. This fast-growing part of the city has seen a 70% increase in its residential population since 2000 and is home to several large corporations. It’s also the epitome of “work, play, live” with plenty of recreational activities, restaurants, shops, and amenities.
Both buildings total roughly 187k square feet which is already 95% leased. Tenants include a wide range of local and national tenants, with a weighted average lease term of 4.6 years. This core-plus office opportunity has a targeted investor IRR of 14.8%, a targeted equity multiple of 1.8x, a targeted average cash yield of 8.6%, and a targeted investment period of 5 years. You don’t have to catch a flight to Orlando- just click this link to learn more.
General Crowdfunding Industry News
The SEC is facing questions in response to its recent proposal to redefine who counts as an accredited investor, potentially sending shockwaves through the industry by restricting the potential pool of investors who can participate in crowdfunding deals. This move is drawing fire from some quarters due to the fact that it may have a negative impact on diversity and equity within the crowdfunding space, as well as in real estate as an asset class itself.
The move by the Biden Administration is in the name of investor protection. Regulators argue that many crowdfunding deals are too sophisticated for the average investor, and thus should only be open to a select group of high-net-worth individuals. The SEC has not yet indicated how it plans to redefine the definition of an accredited investor, or whether that would include raising dollar thresholds for eligibility.
SEC Chairman Gary Gensler has made a point of creating regulatory changes that purport to protect investors as well as create more transparency and open disclosure. Bloomberg has an excellent write-up on the potential changes and ramifications of those changes. See for yourself on Bloomberg, here.
Crowdfunding Platform Updates
As always, we’ll leave you with some crowdfunding platform updates.
AcreTrader recently released its Australian Citrus Report. The farm-focused crowdfunding platform recently expanded its offerings to include farm properties in Australia, with 3 deals currently in the books. The report offers up a deep-dive into the big questions behind Australian farmland, including why it’s attractive as an investment asset, what kind of water rights are standard in Australia, which citrus products are most profitable, as well as most every other question you might have if you’re thinking of picking up a piece of an Australian citrus farm.
Last up is a look at the progress of Phase II of the Tulsa Real Estate Fund, a Regulation A+ Tier II Impact Fund that has the distinction of being the first Black-owned fund of this type in the United States. The goal of the fund is to help resurrect Tulsa’s famed “Black Wall Street” which was destroyed in an attack of racial violence in 1921. Prior to the attacks, the Greenwood district of Tulsa was perhaps the most well-heeled Black community in the United States, with many successful entrepreneurs living and conducting business within its boundaries.
The Tulsa Real Estate Fund is trying to recapture that spirit with the start of its Phase II Development at the Legacy Center Campus, in East Point, Georgia. The 350,000 square foot property will help enhance the lives of members of local communities by offering access to capital, real estate classes, career help, co-working facilities, financial literacy training, and many other community-creating activities and services. Read about it all at EIN News, here.
That’s it for this week, but we’ll see you next time with plenty more news, new deals, platform updates, and everything else you need to know to be an informed real estate investor.
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