Real estate crowdfunding and investing platform RealtyShares has made it easier for investors to put money into its diverse commercial real estate portfolio. Its just announced a new diversified marketplace equity fund aimed at institutions, offices and high net worth people as an opportunity for them to increase their exposure to potential alpha-generating strategies unique to small-balance commercial real estate projects.
The move is RealtyShares' first significant outreach to larger investors, providing them with exposure to small-balance commercial real estate projects that were previously not on their radar, explained Nav Athwal, CEO of RealtyShares.
“There are attractively priced assets in many secondary markets with solid fundamentals or secular growth," Athwal said. "We believe that there is a significant market opportunity to provide access to investors who have not previously focused on this “sub-institutional” space, by leveraging the sourcing expertise and underwriting experience of RealtyShares.”
Javier Benson, VP of Business Development at RealtyShares, explained that he believes the "small-balance" space has a number of interesting characteristics that make it attractive to investors. The biggest advantage is investors can leverage the lack of liquidity in the space to realize potentially outsized returns, Benson said.
“It’s difficult and costly for investors to sift through that information, which is what creates the opportunity," he added.
Benson further explained that while the prices of larger properties have exploded, smaller commercial assets still retain significant value, particularly those in overlooked secondary markets. He said that many regions are still "playing from behind", trying to recover from significant losses seen in the last recession. A second advantage of such markets is there's usually less competition among investors, because it's significantly more difficult to deploy capital into such spaces.
"RealtyShares has started to solve that problem with technology," Benson continued. "In doing so, we will give investors access to new markets and assets that will allow them to diversify beyond their large-cap real estate investments, seeking alpha that is sometimes found in the small to mid-cap space.”
Athwal said the new Diversified Marketplace Equity Fund can be thought of as a low-fee alternative to public and private REITs. The main objective is to invest the fund in a diverse set of properties, including multifamily apartments, shopping centers, self-storage facilities, offices, single-family homes and other properties in metropolitan areas with a population of 200,000 or more. The fund will also adhere to limits relating to property type, location and minimum number of investments.
“This Fund represents yet another way that RealtyShares is connecting real estate sponsors to equity capital from accredited and institutional investors," Athwal said. "Our goal is to provide investors with access to real estate opportunities that may not have been previously accessible to them, and to remove the capital-raising burden from the shoulders of real estate companies so that they can focus on their core competencies of sourcing and operating value-add real estate projects.”