Big commercial real estate deals are the province of institutional investors, but crowdfunding promises to open a slice of large properties to affluent individual investors.
A shopping center in Pompano Beach offers a case study in how it works. Katz Properties in March paid $46.8 million for the 238,000-square-foot Pompano Marketplace. Crowdfunding firm Acquire Real Estate bought a $369,000 stake in the property, then sold that piece to individual investors who ponied up amounts ranging from $10,000 to $125,000.
Investors are promised a 7.5 percent annual return, plus a share of any profits the landlord reaps when it sells the property. Tenants include Wal-Mart Neighborhood Market, Stein Mart, Beall’s Outlet Store, Ross Dress for Less and Jo-Ann Fabric.
Crowdfunding firms such as Acquire Real Estate and Realty Mogul pitch the investments as an alternative to buying shares in publicly traded real estate investment trusts.
“So long as Wal-Mart and Jo-Ann Fabric make their rent payments, you’re going to get your quarterly check,” said Greg Shugar, the Boca Raton-based chief marketing officer of Acquire Real Estate. “You’re not subject to the volatility of the market.”
Crowdfunding is limited to accredited investors, who must have a net worth of $1 million or an income of $200,000. The Pompano Marketplace deal is Acquire Real Estate’s second venture in Broward County; the company has yet to do any deals in Palm Beach County.