How is Origin Different Than Traditional Crowdfunding Sites?
Crowdfunding, a term coined in 1997 when a British rock band raised money online for its U.S. tour, has actually been around for hundreds of years. One of the earliest and best-known examples is publisher Joseph Pulitzer’s 1885 newspaper campaign to fund the Statue of Liberty’s base, which attracted more than 160,000 donors.
Crowdfunding found a place in the investment market years later as a result of the Jumpstart Our Business Startups (JOBS) Act, which amended federal legislation that had been in place since the great depression. This new law passed in 2012 and allowed non-public investment companies to market to the public for the first time. Sponsors turned to online crowdfunding to tap large pools of private equity investors to fund their projects. In turn, crowdfunding gives investors access to investment opportunities they wouldn’t know about otherwise, or be able to afford.
There are many well-known real estate crowdfunding platforms in the marketplace today such as RealtyMogul, Fundrise, Realty Shares, Peer Street, Patch of Land and RealCrowd. Each business model varies slightly, but their common theme is providing individuals with access to private real estate investment opportunities. Many act as the middleman between the investor and the real estate operator, adding an extra layer of fees and controlling all aspects of communication. Others, such as RealCrowd, function primarily as an introductory service, pairing investors with investment opportunities. Origin currently partners with RealCrowd as a way to introduce us to a wider network of investors who benefit from a more efficient fee structure and a direct relationship with the real estate manager.
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Origin differs from today’s real estate crowdfunding sites who act as intermediaries between the investor and the real estate operator in a few significant ways.
Most importantly, David Scherer and I founded Origin in 2007 to acquire and manage commercial real estate that could deliver high risk-adjusted returns. Our goal was to protect and grow the wealth that we accumulated in our previous careers. And to this day, we are not a middleman or an introductory service. We are a real estate operator. This means that investors who participate through our funds are directly investing in our real estate along with us. Crowdfunding sites are typically joint ventures with real estate operators, adding another layer of fees.
Additionally, we find, vet and act as the operator for all of our commercial deals. Every decision comes from our team. We decide what properties to acquire and what price to pay. We build and execute the business plans and decide when it’s time to sell. We’ve spent the last 10 years refining our risk management policies to make sure we get it right, and we know what is in the fine print of every document because we created them.
Also, we forge direct personal relationships with our investment partners. We have a direct line of communication and are frequently in touch with each of them. And there is only one manager between the property and the investor, making us one of the most direct models in the business.
We’ve always believed that an alignment of interests between our investment partners, our team and us was critical to building a better investment company. In keeping with this philosophy, we are a performance-based organization. Our team is incentivized through investment performance — not transactional volume. David and I remain the largest investors at Origin and invest significantly in every deal because we believe in our team and our strategy.
Another key differentiator is that investors don’t come to Origin and pick their own deals. We build a portfolio of commercial properties for them through a fund. Investors commit to our fund during the capital commitment period, and our job is to allocate the capital based on a strategy outlined in our private placement memorandum.
The fund strategy is a one-stop shop for investors and diversifies capital across asset type, geography and transaction size. We invest in office and apartment buildings in eight high-growth cities across the U.S. and operate in the inefficient segment of the market, where the greatest risk-adjusted returns are captured. Our minimum investment is higher than many sites at $100,000, but that capital is spread out among more than 15 deals. And each property in a fund is run as a separate business, so if one underperforms it doesn’t impact the others.
We’ve spent the last ten years building our team and honing our investment strategy. Today, we have $700 million in assets under management, four offices throughout the U.S. to offer us “boots on the ground” in eight high-growth markets, and a team of 15 highly talented professionals who came to Origin from larger institutions such as Equity Office, Starwood, and RREEF. We’ve generated more than a 25% annualized return across our first two funds, placing us in the top 10% of Preqin-ranked managers, a claim no other platform in the market can make.
In 2014, we recognized the void in the market for high-quality managers and decided to invest heavily in marketing and technology to reach potential investors online. We also added to our team to ensure we could scale while providing investors with the same high-touch level of service we have offered since our inception. Our investment platform is now available to millions of accredited investors who share our values and want to invest alongside an experienced manager.
We also pride ourselves on delivering clear, concise and timely communication. We want investors to know what we know — when we know it. Our proprietary online portal enables our partners to see the performance of their investments in real time and we deliver frequent updates as soon as new information is available. We believe the benefits of working with us are beneficial to investors, and their response substantiates our platform.