Open Avenue wants to bring crowdfunding to real estate

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Gueph Mercury | By Terry Pender | January 8, 2014
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KITCHENER — A new local company wants to bring a crowdfunding platform to the real estate investment market.

Internet-based fundraising campaigns on sites such as Indiegogo and Kickstarter have helped artists, businesses and inventors raise millions for projects.

A local inventor of a pen made of magnets raised more than $800,000 in a crowdfunding campaign. Another inventor raised enough to launch the smartwatch called Pebble. A local director raised more than enough to complete the short film Suddenly Super.

Now, a company called Open Avenue wants to bring crowdfunding to real estate, but that will only happen if the Ontario Securities Commission changes its regulations. The commission published consultation papers regarding crowdfunding and held hearings last year. Proposed changes could be made public in the coming months.

Related:  OSC announces that it will publish its crowdfunding exemption proposal for public comment by Q1, 2014

Crowdfunding would allow individuals to invest in existing apartment buildings or in buildings under development — an opportunity that currently is available only to wealthy individuals or institutions. Equity crowdfunding would also allow small and medium-size businesses to raise capital without the time and expense of issuing detailed financial reports and offering shares for sale on the stock market.

Tim McKillican, president and co-founder of Open Avenue, said the terms will run for five to seven years.

McKillican said the objective is to see returns of eight per cent a year for apartment buildings that already exist, and 12 per cent for buildings under development.

The higher returns for buildings under development reflect the risk involved in buying distressed or old properties that need extensive renovations. The rate of return for new projects reflects the cost of getting the approvals, builders and tenants in place for a new development.

"We are the first real estate crowdfunding portal in Canada," McKillican said. "There are a few in the States that have done it, but we are the first to have launched in Canada."

Related:  Summary of Canadian Regulations

View:  Prodigy Network Bets Big on Crowdfunding Commercial Real Estate

McKillican joined forces with Revel Development Corp., a local developer of infill rental properties. Revel has three properties — two existing and one in development — that are included in the initial offerings for the crowdfunding proposal.

"It's a new way of being able to invest in your community for individuals that does not exist right now," McKillican said. "We are pretty excited about it."

The Revel properties are all in Kitchener, and include the Cedar Brownstones on Cedar Hill in the downtown, the Doon Village Brownstones in the south end of the city, and the proposed Lancaster Brownstones at 361 Lancaster St.

Stephen Litt, president of Revel and co-founder of Open Avenue, said investments can be made by people living in one of the units as a way of building equity, or by others who are who are not living in one of the Revel units.

"The grand vision is that anyone with any sort of money can invest in commercial-grade real estate at any dollar value," Litt said.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us | Prezi or contact us at casano@ncfacanada.org.

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