Crowdfunding comes to property investors

by John Tenpenny on 11 Sep 2015
For investors looking to get in on large commercial developments once thought out of reach, a new crowdfunded project is ushering in a different era.

NexusCrowd Inc. has opened its online platform to accredited investors who want to contribute a minimum of $10,000 for a stake in a shopping mall in Mississauga. The company told Bloomberg News that it’s the first in Canada to partner with institutions at the real estate development stage and using crowdfunding. That investing model has become popular in the U.S. in recent years and is growing worldwide.

More Canadians are gaining access to such investments after crowdfunding guidelines were loosened this year by financial-services regulators in six provinces. The Ontario Securities Commission is developing its own set of standards, due this fall.

NexusCrowd is following the lead of players in other markets by targeting projects that are at least 50 per cent funded by a partner already. The aim is to then raise a minimum $500,000 in equity from crowdfunding. The possible returns being pointed to are in the double digits and, if pan out, are comparable to what many top-tier investors earn through their personal portfolios.

Currently, accredited investors are limited to those with annual incomes of at least $200,000 in the past two years or own financial assets worth at least $1 million or net assets totalling at least $5 million.

Rathod said the idea is to fill a gap in developer’s funding up to around $20 million, a sum that is too small for large investors such as pension funds.

“To grow beyond that, they need another vehicle, another source. That’s what we’re providing.”

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