Crowdfunding – real estate projects with safest track record

We reported in last month’s issue of REFIRE on CommerzReal’s newly-acquired 24.9% stake in crowdinvesting platform Bergfürst, making it the second-largest shareholder behind Bergfüst founder and board member Guido Sandler.

Despite one of Bergfürst’s projects (in Bernburg, Saxony-Anhalt) recently filing for insolvency, crowdfunding as a financing vehicle has nonetheless firmly established itself in Germany, with real estate as a total of all projects proving the most popular.

A new study by Germany’s Ifo-Institut and the University of Bremen have analysed the crowdfunding market from 2011 to April 2018. The total raised in that time has been €364m, of which €220m was for real estate projects. Other projects being crowdfunded included start-ups, social and ecological projects, and movies. Thanks to real estate, the market grew at 194% a year over the period – without real estate, the rate would only have been 141%, say the researchers.

Of 134 real estate projects that were crowdinvested, the researchers examined from what sources the capital came to altogether realise the project: 12% was raised by crowdfunding, 28% came from equity capital, and 60% came from banks and other large investors.

Of all crowdfunding projects examined, the rate of failure in real estate projects was good, with only one insolvency (by April 2018), whereas of the 743 other projects crowdfinanced, in 72 cases the project went bust.

The market leader in Germany is the Hamburg-based Exporo, who had financed €137m by April 2018, followed by Companisto at €44m, and Seedmatch at €36m.

The market has developed fast even since then, as highlighted by CommerzReal’s stakebuilding in Bergfürst. Founded in 2011, Bergfürst offers project developers and the holders of real estate portfolios standardised access to mezzanine financing. Bergfürst currently has more than 35,000 clients and to date has successfully financed more than 50 real estate projects with a total volume of over €54m.

Andreas Muschter, the CEO of Commerz Real said the shareholding is “a further step to becoming a digital asset manager”. He added, “This also includes identifying and developing alternative, new business models. In recent years crowd-investing and equity crowdfunding have developed as alternative investment and financing forms and are being used by more and more investors and project developers.”

Bergrürst’s Sandler commented: “In addition to an expansion of the client network, Bergfürst also expects that the speed, number and volume per issue can be increased significantly in the short term. Furthermore, we are profiting from the expertise of the leading asset manager in the real estate sector and naturally this cooperation will also foster greater trust with a view to our acquisition of new clients.”