This is why two industry veterans - Amar Nijjar & Chad Gemmell - have set out to “democratize” the practice by developing R2 Crowd, a technology platform backed by a Fortune 500 Global real estate services firm Jones Lang LaSalle (JLL).
This solution aims to provide direct property level and secured investments to a more expansive portion of the Canadian marketplace. "Investors can build their own diversified portfolio of investment by investing as little as $2,500 earning returns in the range of 5% to 20% with structures as senior debt to preferred equity” said R2Crowd Founder Amar Nijjar.
“The way we work is we continue to arrange senior debt to JLL, who is our strategic business partner,” said R2Crowd co-founder Chad Gemmell. “Any client who’s looking to raise capital on their project beyond a first mortgage can come to us on the R2 Crowd platform and we’ll put all their deals on it, package them as investments, and having JLL as a partner with us brings a lot of credibility to the deals”
Launched about a month ago, its existing target investors primarily consist of professionals like doctors, lawyers and business executives, typically between the ages of 30 and 45. Nijjar hopes that will soon broaden as the idea becomes more mainstream, however. R2Crowd continues to target Accredited Investors and Institutional investors on larger deals.
“The majority of the money is going to come from high net worth investors,” Nijjar said. “That’s where wealth resides, but with that being said, our goal is to democratize access to people like you and me.”
He foresees that investors will soon be able to be able to commit a minimum of $2,500 while still benefiting from 10%, 12% and 14% returns.
Real estate crowdfunding has already burgeoned to a $3 billion/year industry in the U.S., a number that’s projected to rise to $6 billion in 2016. R2Crowd is not only among the first of such portals in Canada, but it strives to stand apart from competitors.
“We are the first one at a National level, there are a few others that are very small, but they’re not real estate professionals like we are,” he said. “Some of them are also affiliated with existing property owners, so there’s a bit of a conflict of interest there, whereas we are complete intermediaries. We don’t own property, we might invest to have some skin in the game and gain more credibility, but we always remains at arms’ length from any sponsor.” Nijjar believes that “sponsor agnostic” model is the way to go.
Credibility, quality and transparency is the key - In fact, all project sponsors are vetted through a rigorous background check and credibility analysis to ensure that investments remain secure.
While it’s hard to envision where R2Crowd will be in the next five to 10 years, Nijjar expects that its impact on the market will be long-lasting.
“What Uber is to the taxicab industry, what Airbnb is to the hotel industry and what Google is to the Yellow Pages, that’s what R2Crowd hopes to become to the real estate capital raise and investment business,” he said.
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Commercial real estate has historically allowed only the "inside circle” access to good quality deals that are highly lucrative and safe investment opportunities but its high barrier to entry has traditionally precluded many demographics from accessing the market.