New York’s only real estate broadcast show – The Stoler Report – invited ArborCrowd Co-Founder Adam Kaufman to a discussion on how the real estate industry is evolving.
Crowdfunding, co-working and co-living are the emerging trends. Additional guests from startup companies the Common and The Yard, joined Kaufman to dive deep into the dynamics of how each company is influencing the changing real estate landscape.
Watch the full segment or read below for Host Michael Stoler’s interview with Kaufman.
ArborCrowd Interview with the Stoler Report
(This interview was edited and condensed for clarity)
Clockwise left to right: Brad Hargreaves, Founder & CEO, Common; Morris Levy, Founder, The Yard; Michael Stoler, Host, Stoler Report; Adam Kaufman, Co-Founder, ArborCrowd.
Stoler: Explain to my audience what is crowdfunding.
Kaufman: Crowdfunding is giving people access to invest in commercial real estate — all entirely online. Commercial real estate has typically been closed off and reserved for people who have access or are an institution. Now you can simply go to a website and see all the same information that these institutions are seeing, that these high-net-worth individuals are seeing, and you can make that investment decision on your own terms and have that access.
Stoler: I know you have done transactions in the New York City marketplace. You did a project on York Avenue and then a portfolio in Brooklyn.
Kaufman: Our sweet spot is multifamily. We look at B-plus, B-minus and C-plus assets. Every investor has a different appetite, and we look to appeal to different appetites. However, we recognize that we have an expertise in an area that we have been practicing for over 30 years.
Stoler: If somebody wanted to make an investment, you’re basically the equity provider.
Kaufman: Technically yes. But the differentiator for us is that we will never be all of the equity in one transaction. We look to partner up with sponsors who have experience in the industry so we can take the weight of managing the properties off our investor’s shoulders.
A retail investor, somebody who may be a doctor or a lawyer, doesn’t have the time on their hands to learn commercial real estate – we give them access to invest in real estate, but we say, here is your investment opportunity, you don’t have to manage it. You are partnering up with people who are managing these properties who have a significant amount of experience doing this.
Stoler: Many of the competitors in the crowdfunding space were going to people and offering opportunities as low as $1,000, and were really a form of debt as opposed to equity. Why are you into equity as opposed to debt, and what is your average size of investment?
Kaufman: Debt is a more sophisticated concept to grasp. Where equity, you understand that your dollar is going to your property. It is not once removed where your debt is. We look at equity as an opportunity for a retail investor to come in at a minimum of $25,000 and we don’t have a maximum.
Stoler: Where is the next opportunity, where is the next investment going to be?
Kaufman: We are really selective in how we choose our deals. We are constantly underwriting and looking at deals across the US. We are focused on our sweet spot in the multifamily segment.
Stoler: There were at one time an onslaught of crowdfunding companies. A number of them went out of business. They weren’t sophisticated because they didn’t have a data bank or they didn’t know commercial real estate because they were really technology companies. ArborCrowd is a technology company, but it is really a real estate business.
Kaufman: When the JOBS Act was passed so many companies struggled to get up and running and create these marketplaces – like you said, they are technology companies.
What we believe in and what we do are three things that define us – and these have been proven successful so far. Who is the sponsor? How long have they been doing what they are doing? And what is the partnership like with them?
What are you giving them (the sponsor), what are they giving you? Are they giving you all of the materials, all of the insight into the properties to make an educated investment decision that you ultimately feel comfortable with. At the end of the day, it comes down to what is their real estate experience. How long have they been doing it and is there a strong.
At the end of the day, it comes down to what is their real estate experience. How long have they been doing it and is there a strong partnership.