ArborCrowd, a New York-based real estate crowdfunding platform, has launched a campaign to develop Biscayne 112, a luxury rental building in North Miami. The company hopes to raise $5.15 million in $35,000 increments over the next 30 days.
North Miami’s location at 11200 Biscyane Blvd, with proximity to I-95 and the Dolphin Expressway, convinced ArborCrowd to pursue crowdfunding, said Adam Kaufman, the COO and co-founder of ArborCrowd. “We know the demand in the market is high and there is not enough supply on the market,” said Kaufman.
Population growth, high demand for rental product, increasing population and a relatively low supply of luxury rentals in North Miami were selling points for ArborCrowd. The platform reviewed 500 projects this year but opted to support only two, said Kaufman. More than 55% of North Miami residents are renters and the vacancy rate of North Miami is less than 6%, according commercial real estate data provider CoStar.
The total cost of the project is $103.8 million; more than 85% of that has already been raised through other sources, said Kaufman.
Set on 6.11 acres, Biscayne 112 will encompass 402 units, with 169 one-bedrooms (leased for $1,850), 230 two-bedrooms ($2,350), and three three-bedrooms ($2,600). The building will include about 40,000 square feet of amenity space, including a gym, two swimming pools, a lounge, zen gardens and a dog park.
It is slated for completion in the fourth quarter of 2020.
The platform is part of Arbor Management Acquisition Company LLC, along with Arbor Realty Trust Inc., a publicly traded real estate investment trust. ArborCrowd chooses properties from the parent company’s development portfolio to fund via crowdsourcing. The vehicle is open only to accredited investors.
Since ArborCrowd’s 2016 launch, it has raised capital for eight real estate developments in Sioux Falls, SD, West Hartford, CT, Mobile, AL, San Antonio, TX, Brooklyn, NY and Lenox Hill, NY. The average fund-raising period is two to 30 days, according to Kaufman.
ArborCrowd also helped fund the $69.9 million Lago Paradiso, a rental community with one to two bedroom apartments at the Hammocks, a residential community in Kendall.
In recent years, crowdfunding has gained steam as an investment source for developers.
“What you see in a short period of time is an influx of crowdfunding capital in the real estate market. It’s an untapped investor base,” said Kaufman.
For investors, crowdfunded properties allow an individual investor to participate in commercial real estate deals and come with the potential of high rewards. But they also come with high risk, notes the Motley Fool.
Unlike some other real estate crowdfunders, ArborCrowd commits the capital up front and then syndicates equity positions to the crowd.
Although Arbor is one of the most well known names in the apartment industry, said South Florida commercial Property Assessed Clean Energy (PACE) specialty finance expert Adam Lipkin, “If I were to look at an investment listed on ArborCrowd, I would want to look for sponsors that have a track record of a positive return on equity investors.”
“With eight projects under their belt,” said Lipkin, “that could provide a track record to research.”
To date, only one of its investment projects has been completed. The Southern States Multifamily Portfolio [in Alabama and Mississippi] had a 29% internal rate of return, Kaufman said. The average investor put in $70,000 and saw a $30,000 profit by June 2018.
For the 112 Biscayne project, ArborCrowd is targeting a total rate of internal return of between 16% to 19% over a three-to-five-year hold. The minimum investment of $35,000 is projected to yield a profit nearly equal to that amount.
Investors are often locals. Kaufman said, “People like to invest in their own community.”