Acquisition Through Crowdfunding

Castille at Carillon

This August in conjunction with our partner, Tower Realty Partners, we completed our first acquisition with outside investors through the CrowdStreet Marketplace, a crowdfunding platform. Crowdfunding is changing the face of commercial real estate investing enabling small and mid-size investors to own a piece of commercial real estate. The need for a consistent and flexible source of equity is the most time-consuming part of growing a commercial real estate company. Feldman Equities puts up a healthy chunk of our own money in every deal, but we often need to bring in third parties to fill the balance of the equity requirement. With crowdfunding, investors are able to access the same kind of returns that were previously only accessible to multi-million dollar funds. It’s a better deal for us as the operator, and better for them as the investor.  Crowdfunding allows investors to target specific deals at a lower cost while diversifying their portfolios. We reached our goal of seeking to raise $6 million from outside investors for the purchase of Castille at Carillon, two Class A office buildings located in Carillon Office Park in the Gateway submarket of St. Petersburg.

The Castille transaction exemplifies how technology can disintermediate traditional real estate capital sources. Going forward crowdfunding class A real estate may become a more prominent investment and more accessible for the real estate investor. Social media marketing allowed us to reach a very broad group of investors within a short amount of time. It was an excellent platform to educate prospective investors on this type of investment. With crowdfunding, we are able to access a pool of small to mid-size investors. We especially like the idea of having a pool of Tampa Bay area investors where people know us, and who understand the exciting changes happening in the region. We invest alongside other investors, and earn exactly what investors earn, up to a certain internal rate of return threshold. Projections in the Castille deal call for investors to earn a 9.1% cash yield with a 14.3% internal rate of return target.

We were able to acquire Castille at Carillon at a significant discount to replacement cost. Replacement cost is more important as vacancies continue to decline. It’s an incredibly well-located property with high ceilings, great tenants, and high-end finishes throughout, but there are areas where we can add value. We are planning to invest $2 million in the building for what’s become our signature renovation — updating the lobby and arrival experience and adding amenities like a tenant lounge and fitness center.

The location in the Gateway market is very dense with thousands of people working, so tenants get that semi-urban node outside of downtown St. Pete. Our buildings in downtown St. Pete are becoming very full and rents are rising at a rapid clip. Tenants who live closer to the Gateway market will look at this as a lower-priced alternative in very high-end buildings.

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