CrowdStreet™ is an up-and-coming type of crowdfunding website that’s tailored specifically to CRE (Commercial Real Estate) investors. Founded in 2013, the site pairs thousands of investors on their marketplace and pools their money to invest in different CRE properties. The benefits that CrowdStreet claims to provide are: low cost, institutional quality real estate investments that have lower fees than REITs and only include pre-vetted projects.
As of June 19th, 2021, CrowdStreet has completed 488 deals, raised $1.9B in capital, and returned $197M of investor distributions (www.CrowdStreet.com). With new deals launching every week, the CrowdStreet marketplace is also unique because it gives prospective investors the following three (3) projections on each CRE investment: (1) Targeted Investor IRR, (2) Targeted Equity Multiple, and (3) Targeted Investment Period. Keeping in mind these are all pre-vetted projects, this allows prospective investors to pick from multiple properties based on the attributes that are geared towards their goals.
Since there are many different types of real estate crowdfunding websites, CrowdStreet in particular distinguishes itself because they target CRE properties specifically. They then break-down individual prospective gains, equity multiples, and the period the investor will have their capital tied up. This allows investors to see a clearer overview of their investment return potential and the amount of time their capital will be utilized for the CRE investment, so they can make more informed decisions, as well as better manage the risk of their overall portfolio. But there’s a catch. While CrowdStreet is continuing to grow along with their user base, an investor account minimum must be $25,000 and the platform is only available to accredited investors. For seasoned CRE investors, that may not be as big of a problem. However, for the average qualifying CRE investor, CrowdStreet’s business model is viewed as highly illiquid.
Overall, while CrowdStreet offers distinct advantages to CRE investors, its limitations prevent it from reaching a wider audience. Clearly that’s their intention, but perhaps some of the requirements limit the potential success of their offerings. For example, if a non-accredited investor has a higher risk tolerance and is willing to invest the minimum amount, the CRE project may not get financing because that investor wouldn’t be accepted on CrowdStreet. Similarly, if an accredited investor is more risk averse, or is not in a position to immediately invest $25,000 in a given project over a period of years, there is no middle-ground and again, the CRE project may not receive financing. Concisely, within the limited scope of their business model, there is more CrowdStreet can do to broaden their user base and thereby pave the way for more CRE projects to receive financing.