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Earlier this year, an overhaul to the Jumpstart Our Busin
ess Startups Act (JOBS) opened to the doors to new sources of startup capital. Several changes are still under evaluation yet Section II, which dictates the guidelines for advertising, now allows firms to use ads to garner support from accredited investors. As a result, several commercial projects have successfully raised the funds needed to get off of the ground—some raising as much as $30 million. Leading senior housing developer, Mainstreet, successfully used crowdsourcing to jump start its Bloomington, Indiana senior rehabilitation facility.
In addition to its traditional marketing strategy, Mainstreet took advantage of the new guidelines by creating television and internet ads to garner support. The firm also partnered with CrowdStreet to get the word out about the project. CrowdStreet is a virtual marketplace where accredited investors can shop for opportunities; users find detailed information on upcoming projects and can participate with an e-signature and a predetermined minimum contribution.
Within four weeks, the duo had raised $1.6 million. “By providing access to a larger pool of accredited investors and streamlining the fundraising effort, CrowdStreet helped Mainstreet raise a large amount of capital in a very short period of time without diverting focus from their business,” said CrowdStreet Co-founder Darren Powderly. “The CrowdStreet marketplace is designed to simplify transactions between U.S. accredited investors and real estate operators like Mainstreet. This Bloomington campaign produced a tremendous result and we look forward to generating more interest and capital for Mainstreet in future projects.”
To some extent, CrowdStreet was an easy sell. Mainstreet’s proposal seems promising enough; the demand for senior care and housing facilities continues to rise. While there are several novice developers trying to clamber onto the senior bandwagon, established names like Mainstreet offer investors the security of experience. An anticipated ten percent quarterly yield and four percent special distribution at the project’s completion doesn’t sound too bad, either.
Online marketplaces such as CrowdStreet do more than connect investors with opportunities. They also facilitate the sort of transparency that investors crave.
“Investors can sign up for an account and, all while still online, read about the business, do the entire transaction cost and even sign the legal documents,” says Jilliene Helman, CEO of Realty Mogul, which has successfully crowdsourced several real estate projects. “Plus you can track your investment using the online tools. You’ve got the 1,000-ft. view of the investment all in one place. […] The ability to invest online provides a much more transparent investment experience.”
The 66,197-sq.ft. Bloomington project will be a Next Generation™ care and rehabilitation facility, a luxury resort design that furnishes guests with restaurant-style dining, leading-edge therapy and wellness equipment, and 100 spacious recovery suites. The facility is slated for completion in summer 2015.
