Fundrise

Fundrise
Industry Crowdfunded Real Estate Investing
Founded 2012
Founders Dan Miller & Ben Miller
Headquarters Washington, D.C., U.S.A.
Key people
 Ben Miller, Co-Founder & CEO[1]
Parent Rise Companies Corp.[2]
Website fundrise.com

Fundrise is an eREIT platform.[3] It facilitates transactions from individuals, allowing them to invest in real estate projects with initial investments starting at $1,000 and up to $10 million. It has been labeled as the first company to successfully crowdfund investment into the real estate market.[4]

History

Fundrise was founded in 2012 by brothers Ben and Dan Miller. They began working on the project in 2010 and launched before the passing of the JOBS Act which enacted securities regulation to streamline the process of equity crowdfunding in the United States.[3] Their father, Herb Miller of Western Development Corp., developed 20 million square feet of real estate based in Washington, D.C. The brothers began the company with the idea to allow residents in the D.C. area to invest in real estate development projects they were building.[2] Fundrise's first project, in the H Street NE Corridor in Washington D.C. raised $325,000 from 175 investors, where any resident of D.C. of Virginia could invest for as little as $100, making it the first crowdfunded real estate project in the United States.[2][4]

After the initial project, Fundrise was contacted by real estate companies looking to use the Fundrise platform to raise capital.[2] Soon thereafter, the company expanded its platform to allow conventional real estate investments from commercial developers across the United States.[2]

By May 2014 the company reported to have facilitated $15 million in investments involving 1,000+ investors[3] and by June of that same year had signed up more than 300 real estate companies looking to raise capital.[5] One of Fundrise's most publicized investments came in January 2015 when it began offering bonds for the construction of 3 World Trade Center, the location of the third tallest tower at the site of the World Trade Center in lower Manhattan.[6] The initial offering was for $2 million of the $5 million worth of bonds purchased by Fundrise for the financing of the $1 billion project. Bonds were offered for $5,000 each with a 5% tax-free gross annual return for five years.[6][7]

Fundrise also raised more capital in its first-round of Series A investment than any other crowdfunding company, totaling $38 million.[4] Funding was led by Chinese social networking company Renren who invested $31 million of the total $38 million.[8] Additional Series A investors include Guggenheim Partners, Justin Elghanayan of Rockrose Development Corporation, and James Ratner of Forest City Enterprises.[2] By February 2015, Fundrise had commitments from six institutional investors for an additional $100 million in investment into the company's real estate offerings.[9]

In February 2016, Fundrise Advisors terminated its CFO and treasurer Michael McCord for allegedly attempting to extort over $1 million from the enterprise over a claim that "the company acted inappropriately concerning two real estate deals." Although the company has denied the claims, it has hired an outside audit firm to conduct an investigation into the allegations.[10][11] McCord denied the allegations of extortion and claimed that the termination was retaliation for reporting "serious fraudulant behavior." McCord was the second top executive to leave Fundrise in six months after co-founder and president Daniel Miller, left the company in October 2015.[12]

On December 3, 2015, Fundrise launched the Fundrise Real Estate Investment Trust, the world's first "eREIT" or online real estate investment trust with an initial offering of $50 million pursuant to Regulation A+.

The Fundrise eREIT offering provides prospective investors with the opportunity to invest in an intended portfolio of properties across the United States for a minimum of $1000. The aim of the eREIT is to use new technology to give both accredited and unaccredited investors the option to invest in US real estate. This financial offering, the first of its kind, was made possible by the expansion of Regulation A under the JOBS Act.

The company subsequently opened a second eREIT™, the Fundrise Equity REIT™, in February 2016.[13]

In October 2016, Fundrise simultaneously opened three more eREITs, the Fundrise East Coast Opportunistic REIT™, the Fundrise West Coast Opportunistic REIT™, and the Fundrise Midland Opportunistic REIT™.[14][15][16]

Platform

Fundrise invests in real estate projects using funds from its own balance sheet.[17] It then allows individual investors to fund that investment through the sale of "project payment dependent notes" tied to the company's investment in a project. Individuals gain or lose based on the performance of the notes.[17] Fundrise is the entity issuing the securities as opposed to the individual project developers, requiring Fundrise to be responsible for all reporting requirements including investor disclosures.[17] Investments have ranged from $100 per share up to $10 million with reported annual returns of 12 to 16% as of September 2014.[4]

Awards

In late 2015, Fundrise was named to Forbes' annual Fintech 50 list,[18] which recognizes 50 of the most promising companies in the financial technology space.

Fundrise was selected by National Real Estate Investor as the winner for two categories of the 2016 NREI/IMN 2016 Commercial Real Estate Awards. The company received top honors in the categories of crowdfunding innovation and REIT investing.

See also

References

  1. ↑ Clabaugh, Jeff (1 October 2014). "Fundrise gets $650K for apartment development near H Street". Washington Business Journals. Retrieved 24 February 2015.
  2. 1 2 3 4 5 6 Gage, Deborah (26 September 2015). "Renren-Backed Fundrise Bulks Up In Real Estate Crowdfunding Sector". The Wall Street Journal. Retrieved 23 February 2015.
  3. 1 2 3 Cortese, Amy (27 May 2014). "Fundrise, a Crowdfunding Website, Raises $31 Million". The New York Times. Retrieved 23 February 2015.
  4. 1 2 3 4 Alois, JD (26 September 2014). "Fundrise Adds Big Name Investors Including Ratner, Elghanayan & Guggenheim: Funding Now at $38 Million". Crowdfund Insider. Retrieved 23 February 2015.
  5. ↑ Drake, David (10 June 2014). "Real Estate Crowdfunding: Post-Valuations Of $100M For Series A?". Forbes. Retrieved 24 February 2015.
  6. 1 2 Clarke, Katherine (27 January 2015). "Investors can snag a stake in 3 World Trade Center for just $5,000 with new crowd funding initiative". New York Daily News. Retrieved 24 February 2015.
  7. ↑ "Crowdfunder Fundrise marketing 3 WTC bonds". The Real Deal. 27 January 2015. Retrieved 24 February 2015.
  8. ↑ Schwartz, Eric Hal (28 May 2014). "Chinese Firm Leads $31 Million Investment in Fundrise". Streetwise. Retrieved 23 February 2015.
  9. ↑ Alois, JD (6 February 2015). "Six Institutional Funds Commit Over $100 Million to Fundrise". Crowdfund Insider. Retrieved 24 February 2015.
  10. ↑ Sernovitz, Daniel. "Fundrise chief financial officer terminated". Washington Business Journal. American City Business Journals. Retrieved 2016-02-19.
  11. ↑ "United States Securities and Exchange Commission Pursuant Regulation A of the Securities Act of 1933". SEC.gov. Securities and Exchange Commission. February 9, 2016. Retrieved 23 February 2016.
  12. ↑ O'Connell, Jonathan (7 Mar 2016). "Fundrise CFO says he was ousted after alerting crowdfunding company of 'serious fraudulent behavior'". Washington Post. Retrieved 2016-08-03.
  13. ↑ "Offering Circular".
  14. ↑ "Offering Circular".
  15. ↑ "Offering Circular".
  16. ↑ "Offering Circular".
  17. 1 2 3 Anglebrandt, Gary (11 January 2015). "Fundrise to bring real estate crowdfunding to Detroit". Crains Detroit. Retrieved 23 February 2015.
  18. ↑ "Fintech 50: The Future Of Your Money". Forbes. Retrieved 2016-11-07.

Further reading

External links

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