A new platform that uses blockchain technology and AI to democratize investing in commercial real estate launched this week, and according to its president and co-founder, gone are the days when small-time investors were turned away from potentially lucrative opportunities.
“Commercial real estate requires a huge amount of cash upfront to gain entry and that ranges from $500,000 to $1 million-plus, so a common investor who doesn’t have that much cash won’t be able to enter these opportunities,” said AcreageWay’s Aditya Koparde. “Where we come into the picture is we’re fractionalizing these opportunities so they can invest.”
Commercial investments have indeed been financially prohibitive for common investors for a few reasons, says Sunny Sharma of the Sunny Sharma Commercial Team and co-owner of Century 21 Leading Edge VIP Realty.
“If there’s a block fee and the investor needs $1 million to buy one share, unfortunately, if you’re a developer, do you want to deal with 50 investors or 10 investors? Ten investors are easier to deal with than 50,” said Sharma.
AcreageWay uses tokens that are worth $1,000, $5,000 or $10,000 in what’s tantamount to equity shares in developments, which range from shopping malls, industrial facilities, redevelopments, and new residential complexes. The company scales from $5 million to $100 million, and that opens the door to a lot of small- and medium-sized investors, says Koparde.
“There’s a $13 million deal we’re currently working on where the issuer needs to raise $7 million, so the common investor will be told $30,000 isn’t valuable and they’re accepting no less than $100,000 per person, and that’s where we’re democratizing the process,” he said.
AcreageWay is licensed by the Ontario Security Commission (OSC), which requires the company to put prospective investors through full due diligence to ascertain their risk threshold, and that will determine their suitability for certain projects. Being licensed by the OSC means AcreageWay isn’t limited to crowdfunding; it can source all kinds of investors from accredited and retail-eligible to friends and family and, of course, institutional.
It also forgoes the need for proof of funding and credit scores, and provides investment portfolios as short as three months. Koparde says the returns on investment are higher and faster than what flips and new builds offer over longer terms.
“What blockchain technology enables us to do is issue fractional token ownership linked back to the corporation, and it defines what kind of shares or control the investor has on a per-token basis,” said Koparde. “It’s nothing but representation of a share in the class in which the investor is investing, and we allow investors to invest in multiple opportunities. When you can invest fractionally into assets, there’s a better chance to diversify.”