Why are wealthy NYC families snapping up distressed real estate?

Welcome back, GowerCrowders!

I’ve got quite a bit in store for you today, so buckle up.

We’re going to take a look at a new rent-to-build townhome community outside Charlotte from Foulger-Pratt, hosted by CrowdStreet, and a new North Carolina Row Crop Farm from AcreTrader. We’ll also look at a writeup from Crowdfund Insider about the 7 year anniversary of regulation CF, and why wealthy families are snapping up NYC’s empty office buildings.

We’ll also look at our exclusive SEC Filing data you’ll only find here at GowerCrowd. As is custom, we’ll finish things off with a look at two new episodes of The Real Estate Reality Show, including a talk with Mark Roderick – How can sponsors raise more money when a deal goes south?, and my discussion with Cody Charfauros – Identifying bank winners and losers as commercial real estate (CRE) values crash. 

Let’s get into it.

New Crowdfunding Platform Deals

In an opportunistic move in the rapidly growing Sunbelt region, a newly constructed build-to-rent townhome community, Forestview Crest Townhomes, is set to change hands in Gastonia, North Carolina, a suburban area of Charlotte. The acquisition, highlighted for its substantially below-market basis relative to comparables, is timed to mitigate typical development risks. 

This comes as Charlotte has been ranked the #10 Market for Real Estate Prospects in 2023 by the Urban Land Institute, underlining the potential and growth of the city’s real estate market. The deal promises to add value in an area known for its dynamic expansion and demand for residential properties. Check out this NC-located deal for yourself on CrowdStreet, here.

AcreTrader Financial is set to raise $7.245 million for the acquisition of Shiloh Farm, a 1,152-acre crop farm in Pender County, North Carolina. Known for its productive soils and robust water resources, the farm is in a region with high demand for commodities due to North Carolina’s thriving livestock industry. 

The investment includes plans for irrigation improvements and promises supplementary income from leasing storage and other outbuildings. Managed by AcreTrader Management, this core investment opportunity seeks a minimum investment of $15,000 and offers an estimated ownership duration of 5-10 years. Learn more about this opportunity directly from AcreTrader on their website, here.

General Crowdfunding Industry News

Regulation Crowdfunding (Reg CF), a key provision of the 2012 JOBS Act, has hit the seven-year mark. This revolutionary measure has been instrumental in democratizing the investment landscape, offering an equal playing field for both accredited and non-accredited investors to fund ventures via online securities offerings.

When it was first introduced, Reg CF allowed firms to raise up to $1.07 million. However, this cap was raised to $5 million in 2021, a move that significantly broadened the reach and viability of the exemption for both issuers and platforms.

According to Crowdfund Capital Advisors (CCA), a leading figure in the crowdfunding space, the impact of Reg CF has been nothing short of remarkable. Since May 2016, a staggering $1.8 billion has been raised, supporting an impressive roster of over 4,100 companies, with the backing of more than 1.7 million investors. Interestingly, about half of the funded companies represent underserved communities, showcasing the diversity and inclusivity fostered by this initiative.

The economic benefits of Reg CF have been substantial. Over 380,000 jobs have been created as a direct result of Reg CD, contributing significantly to economic growth. The ripple effect of these benefits is even more astounding, with an estimated multiplier effect of $4.7 billion. Get the rest of the scoop on Crowdfund Insider, here.

Crowdfunding Platform Updates

As the pandemic-induced high office vacancies persist in New York City, wealthy families and lesser-known investors are seizing the opportunity to invest in Manhattan’s commercial properties. The 26% decrease in the value of Manhattan office space since 2017 has made the market especially appealing. 

The last six months of 2022 saw less than half of the 11 sold buildings bought by big institutional investors, indicating a shift in buyer demographics. Despite the challenges posed by the rise of remote work, some investors see a chance for long-term gains, reminiscent of successful real estate plays in the 1990s. This trend suggests a notable change in New York City’s commercial real estate market. Find out more about the trend of wealthy families scooping up distressed assets on Robb Report, here.

SEC Filings Graphs

The number of Reg D (b) and Reg D (c) deals grew from 21 in Week 18 to 25 in Week 19. The total amount raised nearly doubled, going from $0.45 billion in Week 18 to $0.80 billion in Week 19. In a stunning upset, Illinois took the top spot from last week’s winner, California, with Illinois ranking as the top state by number of deals (5) and dollars raised ($0.30 billion). There were 17 (b) deals and 8 (c) deals, with the (b) deals worth $0.46 billion and the (c) deals worth a smaller $0.34 billion. Dig into the data for yourself on GowerCrowd, here.

Multimedia Links (Videos, Podcasts, etc.)

Finally, we’re going to look at new brand new episodes of the Real Estate Reality Show:

In the first, a discussion with real estate expert and attorney Mark Roderick, looks at what happens when a real estate deal goes south. We discuss the concept of “pre-emptive rights” and whether or not limited partners should have the right of first refusal to invest rescue capital on the same terms as anything the sponsor can bring in to save the deal. Learn how to make the best of a bad situation- and potentially defend your hard earned capital- by listening to this episode directly on GowerCrowd, here.

The second is a discussion with Cody Charfauros, Principal/Managing Director, at Slatt Capital. He’s here to warn you that commercial real estate sponsors that took out floating rate loans are in trouble. Find out why, and find out how you can save your deals from going back to the bank in foreclosure by listening to this episode of the Real Estate Reality Show, here.

That’s it for now- but I’ll see you soon with even more real estate crowdfunding news, new deals, platform updates, podcasts, and more! Until then!