VentureCrowd, an equity-based crowdfunding platform, and residential property developer Clearstate have raised $900,000 for a major development in Sydney.
It’s the first time in Australia that investors have been able to buy equity of a property development before it is subdivided and sold.
The funding bought investors a total of 49% equity in the development. The money helped pay for the 1.6ha site in Riverstone East, 45 minutes north-west of Sydney, which will be subdivided for 35 new homes.
Once all the homes in the $13.4 million Garfield Road property development are sold, the VentureCrowd investors are expected to receive returns exceeding 100%. It is due for completion in mid-2017.
Rob Nankivell, CEO of VentureCrowd said around 30 investors took up the offer and more than 80% of them were drawing funds from SMSFs.
The aim of the deal was to enable higher potential returns on buyers’ investment in a shorter timeframe.
Nankivell said the deal gave wholesale investors new opportunities to passively invest in real estate developments.
“Crowdfunding has raised an estimated US$2.5 billion for real estate globally and is only expected to grow substantially in the future,” he said.
“Wholesale investors are ready and willing to invest and gain access to alternatives within the Australian property sector at an early stage on an aligned basis with the developer. We expect this to continue with a number of similar investment opportunities in the coming months.”
The Riverstone East project is the latest in a number of alternative asset class investments offered on the VentureCrowd platform, which has previously raised more than $14 million in funding for startups and high-growth companies.
Nankivell said VentureCrowd already had another development offering with Clearstate ready for the platform as soon as next week – a site in Austral, 40km south-west of Sydney which is “around 1.5 times bigger” than the Riverstone East development.
VentureCrowd also recently launched a credit offering giving wholesale investors access to the Artesian Australian Corporate Bond Fund at institutional fee structures.
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