One of the most interesting aspects of real estate crowdfunding is its potential as a catalyst for community-driven change.
Most commercial properties are priced out of the financial reach of people and community groups who live nearby. This is especially true in lower socioeconomic neighborhoods and in those at the beginning stages of rejuvenation. Those who care the most about these communities are on the ground with an accurate pulse of what the community needs most, whether it be social housing, a community center or perhaps a health facility.
Most commercial real estate loan decisions are made by people in an office that can be thousands of miles away from the affected neighborhood. These people have zero emotional investment in the neighborhood and will make a funding decision strictly on the basis of data.
At the beginning of the decade Ben and Dan Miller decided to look differently at commercial real estate. They wanted to redevelop an old storefront in an area few outside Washington D.C. had ever heard of, including pretty much every loan assessment officer they dealt with.
To solve that problem, the Millers created a whole new sector. Fundrise was born.
Fundrise Vice President of Real Estate Ryan Granito is a panel speaker at the second annual Fintech Global Expo which takes place on May 28 and 29 in San Diego.
The Fintech Global Expo brings together leading industry figures from around the world in such sectors as marketplace and peer-to-peer lending, real estate, alternative finance, crowdfinance, Bitcoin infrastructure and online investment platforms.
These are heady days for the fintech sector. Worldwide venture capital investment in the fintech sector has grown four times faster than the rate of overall venture capital investment in the last three years. The recent Lending Club and Ondeck IPOs; increased API connectivity, mobile device proliferation and borrowers increased use of online platforms are other reasons to be excited about the industry.
Ryan Granito recently spent a few minutes discussing real estate crowdfunding and Fundrise’s unique philosophy.
Mr. Granito has accumulated an interesting mix of experiences that blend nicely with the Fundrise philosophy. He spent several years with the San Diego Housing Commission, whose role was to provide more affordable housing in the San Diego area.
“They both have a social purpose,” Mr. Granito explained. “Fundrise as well has a social mission to engage the investor and enable them to participate in development they otherwise would not have access to.”
Mr. Granito said such an opportunity gets people to engage with their communities and have an influence in what happens there. He cites the example of Maketto, Fundrise’s maiden project that has recently opened. The Maketto complex includes a cafe, Cambodian/Taiwanese restaurant, and a variety of retail shops. It is located in an up and coming Washington, D.C. neighborhood.
“Maketto is located in a type of neighborhood that otherwise wouldn’t be able to get financing,” Mr. Granito said. “It enables these projects that are a little out of the box for larger banks and private equity firms to move forward.”
“We can go through what the community wants and desires and needs without having to check the boxes like a bank.”
Mr. Granito is based in California, an area that has seen much change in the last few years.
“San Diego and Los Angeles have seen many grassroots efforts to deliver what the business community wants and desires,” he said.
One example Mr. Granito mentioned was the Los Angeles River area in downtown Los Angeles. He said the region has a focus on locally focused opportunities and developments. It is a niche national players are not seeing, he added.
One expressed need is hybrid use space, which could mean a coffee shop with a roaster in the back, or a butcher shop and deli.
“This is what the community wants and this is what has been successful,” Mr. Granito said. “We’re excited to allow local developers to keep doing what they are doing.”
Some of those unique projects make great use of tiny spaces that many funders do not care about but which can prove to be successful, such as 400-square foot coffee shops which would lose their ambience in larger spaces.
The Fundrise approach is working, Mr. Granito added.
“We are experiencing hockey stick-like growth with more financing in this quarter than since our inception.”
Mr. Granito, a college friend of Ben Miller, has been with Fundrise’s office since it opened early this year. Their reception has been positive and they are competitive from a market basis, he said.
“We are providing opportunities to allow developers to deliver a product that makes sense,” Mr. Granito said. “We’re transparent. People like us because we are doing what we say we are going to do.”