When CrowdStreet launched the Marketplace back in 2014, our earliest investors were typically experienced in commercial real estate (CRE) investing and had relationships with local real estate operators. They were the traditional “friends and family” that many mid-size sponsors rely on to fund their projects. However, investors who only have access to local operators are, by default, overly exposed to those operators. With our Marketplace, investors have unprecedented access to different geographies, sponsors, asset classes and more. By bringing CRE investing online, investors can better diversify their portfolio and gain access to real estate opportunities that were previously out of reach.
The level of access created by real estate crowdfunding and marketplace technology is revolutionary. However, for those new to CRE investing, even for those with extensive stock market experience, commercial real estate comes with a steep learning curve.
What makes an offering the best investment for me?
I have $50k to invest, which might be enough for two deals. How do I pick just two out of the dozens on the Marketplace?
How do I ensure I’m not assuming too much risk as I build my CRE portfolio?
We heard questions like these over and over from our investors. We recognized that many would-be CRE investors needed something beyond the do-it-yourself Marketplace, so we launched the CrowdStreet Blended Portfolio (CSBP) in October 2018.
Our proprietary algorithm picks dozens of investments to create the fund, reducing concentration risk by investing in a diverse blend of asset types, geographies, risk profiles, and sponsors. To the best of our knowledge, there is no other investment product quite like this–investors are now able to gain exposure to 30-50 private CRE deals with a single investment as small as $25,000. This level of diversification in CRE would have traditionally required upwards of $1 million. Furthermore, this rules-based approach relieves investors of the work involved in evaluating one deal against another.
An important thing to note regarding the CSBP’s algorithm is that the offerings it selects for inclusion aren’t inherently better than other offerings on the marketplace–they either did or did not satisfy the requirements of the algorithm at the time.
The fundraising goal for the inaugural Series of the CSBP was set at $5 million–less than that would have negatively impacted the level of diversification the fund could achieve, in terms of the number of offerings that amount of capital would allow investment into. On the flip side, if we raised much more than that, we’d risk two possible negative consequences–that the fund might eat into the equity allocations of the deal flow we already had, impacting how much direct investing could happen on the Marketplace; and that the Series might struggle to actually deploy all the capital, if deal flow was insufficient.
Fortunately, the $9M we raised in the first Series is turning out to feel “just right.” 198 investors with an average investment of $45,458 propelled the inaugural fund to success. Interestingly, 93 investors made their first-ever investments on the CrowdStreet Marketplace into the Blended Portfolio. CSBP, it seems, was just the opportunity they were looking for.
The algorithm has so far identified 12 different deals that were eligible for CSBP inclusion, and we’re excited to announce that funds from our inaugural series are likely to be fully deployed much earlier than target. The series has already made its first investment in Virgin Hotels Nashville. Sponsored by the Buccini/Pollin Group, Inc. (BPG), the Virgin Hotels Nashville is a to-be-developed, 273,000 SF full-service hotel in the Music Row District of Downtown Nashville, at the corner of 17th Avenue and Division Street.
We are currently accepting investments in our second series, CrowdStreet Blended Portfolio – Winter 2019. In just the first three weeks, our second series raised an additional $3.1M.
If you would like more information or have questions on the CSBP please contact portfolios@crowdstreet.com
