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REITs Break Into World of Crowdfunding

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Fundrise, which runs a crowdfunding real-estate investing platform, said Wednesday that is launching its first e-REIT.

The Fundrise real estate investment trust will invest in a diverse portfolio of U.S. commercial properties, such as apartments, shopping centers and office buildings with the aim of generating cash flows to investors in regular dividends, according to the company.

The filing for the $50 million REIT, now available on EDGAR, is “the largest-ever Regulation A+ [offering] filed under the new Jumpstart Our Business Startups Act rules,” according to the company.

“Today is a massively historic day for the Fundrise team — the result of over four years of work!” said CEO and co-founder Ben Miller, in a statement. “Soon anyone in the country will be able to access the same investments as billion-dollar institutional funds but with roughly 1/10th of the fees, heightened transparency, and low investment minimums of $1,000.”

Under the provisions of Title III of the JOBS Act, approved by the SEC on Oct. 30, investors with annual income or net worth of less than $100,000 can invest up to $2,000 (or up to 5% of the lesser of their annual income or net worth); the limit for those with more than $100,000 is 10% of the lesser of either their annual income or net worth.

The rules allow companies to raise up to $1 million through crowdfunding in a 12-month period.

“There is a great deal of enthusiasm in the marketplace for crowdfunding, and I believe these rules and proposed amendments provide smaller companies with innovative ways to raise capital and give investors the protections they need,” SEC Chair Mary Jo White said in a statement announcing the decision to permit crowdfunding.

Fundrise says it has helped thousands of investors tap into the world of real estate in “top markets around the country, including landmark projects such as 3 World Trade Center in Manhattan.”

Investors have been able to buy shares in publicly traded REITs or real-estate focused mutual funds and ETFs for some time, with or without a financial advisor. However, nontraded REITs are generally sold by advisors to “accredited investors,” those with a net worth of $1 million or income of $200,000 and up.

With an emphasis on portfolio diversification, some experts believe investor interest in e-REITs and other new products could grow.

IRA custodian Pensco Trust, for instance, says many IRA holders do not realize that they can also invest in assets that traditional financial institutions do not offer, such as limited partnerships, private equity and real estate, within their IRA.

“When we consider that $146 billion is currently held in self-directed IRAs, it is easy to see that this new course of investing is only just getting started,” said the group, which has about $10 billion in assets, in a recent report.

“At Pensco, we are watching emerging trends in the technology and investing landscapes closely, which allowed us to recognize the potential opportunity to use retirement dollars to invest in crowdfunding platforms,” explained CEO Kelly Rodriques in a statement.

— Check out For Crowdfunding Investors, It’s All About Research on ThinkAdvisor.


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