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RealtyShares launches equity fund focused on larger investors

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RealtyShares is launching a diversified marketplace equity fund aimed at providing institutions, single-family offices and high net worth individuals with increased exposure to the potential alpha-generating strategies unique to small-balance commercial real estate projects.

“This fund represents our first significant outreach to larger investors, and will provide them with exposure to small-balance commercial real estate projects that may not previously have been a focus for those investors due to the smaller check sizes these projects typically require,” says Nav Athwal, CEO of RealtyShares. “There are attractively priced assets in many secondary markets with solid fundamentals or secular growth. The challenge is to find the right developers and operators to take advantage of the opportunities. We are aiming for a diversified pool of mainly commercial projects with a value-add approach, many of them already generating attractive cash flow. We believe that there is a significant market opportunity to provide access to investors who have not previously focused on this “sub-institutional” space, by leveraging the sourcing expertise and underwriting experience of RealtyShares.”

“The small-balance space has a number of interesting characteristics, namely that investors can take advantage of the lack of liquidity in this sub-institutional stratum to potentially realise outsized returns, which is further augmented by the high occurrence of asymmetrical information in this space,” says Javier Benson, VP of Business Development at RealtyShares. “It’s difficult and costly for investors to sift through that information, which is what creates the opportunity.

"The prices of larger properties have raced ahead, but we believe that significant value remains in smaller commercial assets located in attractive, but perhaps overlooked secondary markets (including 18-hour cities). Some regions, for example, are still ‘playing from behind,’ continuing to recover from the significant losses experienced during the recession. These markets may also attract less investor competition, since global and other larger investors typically find it less efficient to deploy capital into this space; RealtyShares has started to solve that problem with technology. In doing so, we will give investors access to new markets and assets that will allow them to diversify beyond their large-cap real estate investments, seeking alpha that is sometimes found in the small to mid-cap space.

“Our Diversified Marketplace Equity Fund is meant to be a low-fee alternative to public and private REITs,” says Athwal. “The Fund’s objective is to invest across a diverse set of properties, including multifamily apartment complexes, retail shopping centres, self-storage facilities, office buildings, single-family residences and other properties located predominantly in metropolitan areas with populations greater than 200,000. The fund must also adhere to certain concentration limits relating to property type, location and minimum number of investments.

“This Fund represents yet another way that RealtyShares is connecting real estate sponsors to equity capital from accredited and institutional investors. Our goal is to provide investors with access to real estate opportunities that may not have been previously accessible to them, and to remove the capital-raising burden from the shoulders of real estate companies so that they can focus on their core competencies of sourcing and operating value-add real estate projects.”

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