Real estate crowdfunding platform Fundrise is making a big splash in the DC multifamily market with a major new partnership. The JV between Fundrise-affiliate RSE Capital and DC-based Insight Property Group plans to invest $200M annually in DC-area real estate, largely acquiring value-add properties for repositioning.
Ben Miller, above, started Fundrise in 2011 as an online crowdfunding platform for people interested in real estate investing and he says it has been growing like crazy. He tells Bisnow Insight choosing Fundrise over a more traditional institutional capital partner shows how far his company has come.
“They chose us when they could basically have any capital partner in the country,” Ben says. “Because we are a direct to investor model we believe we have a form of capital that is better than a private equity fund that you normally go to. This is why I started Fundrise and it took me five years to fulfill the vision of trying to create something better.”
Fundrise—which is funding some big projects including 3 WTC—also recently launched a JV in the Southeastern Region with Joe Lubeck, who founded ELRH Investments and Landmark Residential. Fundrise also has a partnership in the Northwest region. Ben says Fundrise will likely enter in up to five more partnerships, but says he’s very picky about who he works with. “They’re really ethical,” Ben says of Insight. “They have integrity, even though that seems like a given it’s actually pretty exceptional in the real estate industry. The number of real estate companies who will put investors ahead of their own interests are rare, very few.”
Insight development associate Tim White, who is heavily involved with the Fundrise partnership, says the DC-based developer has been talking with the crowdfunding company for a long time and started seriously discussing the partnership about a year ago. He says Insight chose to work with Fundrise because of its team of strong real estate minds and because it didn’t have much to do with the crowdfunding platform.
“They have their act in gear as far as underwriting and making good investment decisions,” Tim says. “Although their fundraising activities may look different to the consumer, from my perspective it’s not much different.”
The first deal the JV has closed on is a $9.7M acquisition of the Canterbury Square Apartments in Alexandria, above. It’s under contract for two additional Northern Virginia multifamily assets totaling 354 units scheduled to close next month. Tim says the JV is searching for more value-add properties in the DC region, stretching its net from Richmond to Baltimore.
The value-add market is a new business line for Insight, which typically focuses on development. Tim says the fundamentals of these investments were so impressive they had to pursue the new strategy.
“It’s not going to take away anything from the development side of our business,” Tim says. “That’s still a huge focus going forward, we’re always searching for and looking to expand our development pipeline, which is pretty robust. This is complementary to our development business.” Ben says he sees Fundrise’s crowdfunding model as the future of real estate financing. Since he launched Fundrise five years ago, he says others have tried to imitate the business model, but without much success.
“I invented real estate crowdfunding so they all copied me and they all do a bad job at it,” Ben says. “They’ll all try and I doubt you’ll see many quality institutions. It’s very difficult to get to writing $10M to $20M checks through crowdfunding.”