Fundrise, a crowdfunding platform for commercial real estate, is offering shares in the D.C. building to investors, not only to those in the city but in Maryland and Virginia. The developer WestMill Capital Partners plans to turn the building into a boutique retail site. Shaw, once home to jazz legend Duke Ellington, is undergoing a bit of a renaissance and Fundrise sees big opportunities.
The $1.5 million development plans to use $350,000 from crowdfunding. For as little as $100, investors can buy a share. Fundrise is projecting an eight percent return paid quarterly, with a five-year redemption. The maximum a person can invest is $2,500. As of Friday afternoon, $200,000 had been raised from 200 investors.
Karan Jain bought one $100 minimum share in the building, his second $100 investment in a crowdfunding project. Jain, 26, sees it as his entry point into real estate.
"I'm fairly young and don't really own any property myself," he said. "One thing these projects have done is democratized the process of owning a piece of the real estate deal."
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Jain's investment also comes with non-monetary rewards, like invitations to social events and the chance to have input in a project, including testing the food at a restaurant planned for a new development. "The benefits are tangible," he noted. No less tangible are the business lessons Jain can witness. He has started a crowdfunding platform of his own called Clovest, which helps D.C. businesses raise capital.
Fundrise has done 18 projects, raising more than $10 million, including nearly $1 million from three "unaccredited" deals. Projects that are unaccredited mean investors don't have to have high net worth. But the offers to unaccredited investors have been restricted by geography and dollars.
"We wanted to make sure that no one person put too many eggs in one basket," said Fundrise CEO Ben Miller. The limits are also a way to satisfy regulators. While the JOBS Act, signed into law April of 2012 promised to open up equity crowdfunding, the Securities and Exchange Commission has yet to finalize the rules.
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For Miller, that means extra time to get a deal off the ground. "We have to get every state we sell in to approve the offering. This offering we had to get the (approval of) SEC, Maryland, Virginia state securities regulators and D.C. We had four separate securities regulators to review this thing and approve it."