Global fintech and funding innovation ecosystem

Real estate crowdfunding in Canada: portal insights for 2017/18

IT Business | Bret Conkin | June 12, 2018

Real estate and fintech have been integrating in exciting new ways in recent years.

Real estate online investment or crowdfunding has been a sector that has attracted significant interest in the U.S. over the last several years, with more than 100 portals launched to serve rapidly growing developer and investor interest. In fact, industry research hub crowdsourcing.org estimates that the industry will be worth more than $300 billion USD by 2025.

Why would developers consider an online and alternative financing route? A big reason, beyond the capital, is the significant marketing benefits that campaigns can generate, including community building.

Check out:  GAME-CHANGERS: Crowdfunding real estate projects in the GTA

To investigate where the Canadian market for real estate crowdfunding is going in the next 12 months, we interviewed the two leading portals in Canada, online investment platform NexusCrowd and private equity firm R2 (though R2 notes that they position themselves as an online marketplace or fintech in commercial real estate, not as “crowdfunders”).

Learn more below.

Bret Conkin: How many projects and capital were raised via your portal in 2017? To date in 2018?

Amar Nijar, CEO of R2 Capital & Investments: Since our launch two years ago, R2 has funded 12 projects with $25 million of equity and more than $200 million of debt.

Hitesh Rathod, CEO of NexusCrowd Inc.: In 2017 – three deals worth $2 million. For 2018 to date – one deal worth $1 million, but we’re expecting at least two more deals near term for $3 million in additional capital raised. Keep in mind that we are very selective about the deals we put on the platform and that all deals have been fully subscribed. Of note, two deals closed within four weeks and two deals closed within 2 weeks.

ITB: What are your overall metrics now since the launch of your portal?

R2: We have 2,500-plus investors on our platform, with thousands more on our emails, newsletters, and social media platforms.

NexusCrowd: Eight deals completed, with more than $5 million raised, and more than $240 million in project value.

ITB: What (ballpark) portion of the capital stack has the “online marketplace” contributed to your recent projects?

R2: 75 per cent of the equity we funded has come via online as lead generation or execution.

NexusCrowd: We’ve contributed anywhere between 15 and 100 per cent of the total capital raise (debt or equity) for specific projects. As a percentage of total capital stack (debt and equity required for a project), between five and 20 per cent.

ITB: What was your biggest online raise to date for a project?

R2: Close to $5 million on our $90 million mixed-use project across from Bayview village Mall, located on Sheppard Avenue between Bayview Avenue and Leslie Street in Toronto’s high-end housing area.

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NexusCrowd: Two projects each raised $1 million. Deal 1 – Debt financing for a town home development in Markham, Ontario. Deal 2 – Preferred equity financing for the development of 10 luxury homes in Richmond Hill, Ontario.

ITB: Has the market for alternative finance unfolded at the pace you expected? Faster? Slower? Why?

R2: Very slow, due to the regulatory burdens of compliance. Currently Canada is not the right country for such innovation, despite the talk by politicians, as it’s not meeting the policy objectives in reality.

NexusCrowd: Slower than expected. It’s a combination of a couple of factors in my opinion – 1) Canadians are generally risk-averse and slower adopters of new products, and 2) Individuals aren’t aware of these alternative methods of investing.

ITB: What do you foresee for real estate “online marketplaces” in Canada over the next 12 months?

R2: Everybody is trying to carve his or her niche. Many think that having an online ID and password-based website with a docusign feature is an “online marketplace.” However, the players who truly engage the digital footprint with their good underlying investments, along with blockchain and security tokens, will be the clear winners over the next four years. Our current model is to provide a balanced risk-return portfolio via our online portal so investors have a dashboard to track their investments in real time. We are aiming to be the first ones in Canada to incorporate blockchain and security tokens into our platform by end of this year.

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The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to thousands of members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: ncfacanada.org

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