Bloomberg | Katia Dmitrieva | Sep 8, 2015

A shopping mall in northern Toronto is set to be among the first Canadian real estate projects to be financed partly through crowdfunding.

NexusCrowd Inc. is opening its online platform tomorrow to accredited investors who want to contribute a minimum of C$10,000 ($7,520) for a stake in the property. The company says it’s the first in Canada to partner with institutions at the real estate development stage to use crowdfunding, an investing model that has become popular in the U.S. in recent years and is growing worldwide.

Accredited investors in Canada haven’t had access to the equity portion of development projects, Hitesh Rathod, NexusCrowd’s chief executive officer, said in a telephone interview from Toronto.

"There’s going to be a tremendous amount of demand for that type of project," he said.

Canadians are gaining access to such investments after crowdfunding for small startups was approved in May by financial-services regulators in six provinces. The Ontario Securities Commission is developing its own set of standards, due later this year.

Partner Projects

NexusCrowd targets projects that are at least 50 percent funded by a partner already. For any investment, it aims to raise a minimum C$500,000 in equity from crowdfunding, and is targeting returns of 15 to 25 percent annually.

See:

• NexusCrowd Receives Exempt Market Dealer License from the OSC
• Group of 6 provincial securities regulators adopt start-up crowdfunding exemptions

The offerings are limited to accredited investors, which requires an individual to have annual income of at least C$200,000 in the past two years and own financial assets worth at least C$1 million or net assets totaling at least C$5 million.

The initial property is a two-story, 238,000-square-foot (23,000-square-meter) mall that will be anchored by Korean grocery store Galleria Supermarket, which also has a 50 percent stake in the development. The remaining interest is owned by closely held TerraCap Management.

NexusCrowd partnered with TerraCap with the goal of raising about C$500,000 in equity from crowdfunding. That comprises 2.5 percent of the project’s total equity portion and 0.5 percent of the project’s C$100 million size. The development is scheduled to be completed by December 2017.

Rathod, 34, and Aris Economopoulos, the company’s vice president of operations, both previously worked at investment firm Mackie Research Capital Corp. Rathod also was an investment banker at Canaccord Genuity Group Inc., focusing on real estate.

Rathod said the business idea came to him about two years ago, as he saw developers that were seeking as much as C$20 million in equity had a tough time finding established investors.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country.  NCFA Canada provides education, research, leadership, support and networking opportunities to over 1100+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada.  Learn more About Us or visit ncfacanada.org.