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Saturday, January 26, 2013

Crowdfunding for Real Estate Development

Businessweek reports this week that NYC real estate developer Prodigy Network is experimenting with crowdfunding as means of financing real estate development.  Rather than investing in a pool of funds that finance many developments, individual investors will purchase shares of a particular development, and be entitled to a share of rents and appreciation.  Prodigy used the model successfully in Colombia to develop the nation's tallest skyscraper, but it hasn't been tried in the United States until now.  Prodigy intends to use crowdfunding to raise $26M (of about $90M it needs) to buy and improve 84 William Street in Manhattan.

Crowdfunding is all the rage in the start-up world.  The mortgage and foreclosure crisis put a serious dent in the availablity of real estate financing in the United States.  It will be interesting to see whether the crisis has left a hole in the market that crowdfunding can fill, and whether it will be a durable solution.  Any thoughts?

Mark A. Edwards

 

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