Spurred By New Legislation, RealtyMogul Launches Crowdfunding REIT

RealtyMogul, one of the fastest-growing platforms in the real estate crowdfunding market, just kicked off its first commercial real estate fund, MogulREIT I.

The crowdfunding platform has surpassed $200M in investments since its inception more than three years ago.

Bisnow caught up with RealtyMogul CEO Jilliene Helman to find out more about the REIT and why this is the right time for it.

Until recently, most retail investors have not been able to invest in private investment markets, but new legislation, including the SEC's Regulation A+, makes it possible for accredited and non-accredited investors who make less than $200k/year to invest in private companies.

Heritage Capital Ventures CEO Lewis Feldman, who is also a board member of the UCLA Ziman Center for Real Estate, says he thinks what RealtyMogul is offering will "have an additive role to the crowdfunding market."

With Regulation A+, which requires a mini-registration statement, "it makes it easy for somebody who wants to raise up to $50M a year to file this registration statement, and then they have an ability to go out and do projects, and I think that's what RealtyMogul is doing," he says.

Since "there is more governmental-required disclosure, it makes it more certain the government feels comfortable the proper disclosures are being made and, therefore, they allow investors who are smaller-denomination investors to invest their money," according to Lew.

Just as crowdfunding has taken off across the industry, the new regulations have fostered interest in these types of REITs. Real estate crowdfunding firm Fundrise just announced it has raised more than $70M from individual investors through its eREITs, launched last year. 

Since REITs have typically been sold through a broker network, they can come at a higher cost while RealtyMogul’s ability to “distribute directly on the internet” can mean lower fees for the investor, she says.

“We cap offering expenses at 3% compared to other non-traded REITs, which can be as high as 15%.”

There are no sales commissions.

RealtyMogul’s REIT is focusing on cash-flow transactions and will not finance raw land use or ground-up development, Jilliene says.

While there may be some who have invested in the past, the REIT will provide those with limited or no exposure to commercial real estate the ability to get in, according to Jilliene, fulfilling RealtyMogul’s core purpose of “access through innovation.”

Some have questioned what it will mean for the industry as more inexperienced investors put their money into commercial real estate. The success of crowdfunding platforms, however, shows there is strong demand, and Fundrise's eREITs sold out in minutes. 

RealtyMogul's REIT requires a minimum $2,500 investment and will offer a diversified offering with at least 55% in debt/mortgage and related securities and up to 45% in equity across different property types, Jilliene says.

It also will be advantageous for investors who are technologically savvy since they’ll have online access to their dashboards and can watch investments in real time.

One of the main differences the REIT offers compared to more traditional REITs is distribution.

“We’re attracting more of an investor who wants to do it themselves” as opposed to working with big broker-dealers or middle men, Jilliene says.