Property Crowdfunding Comes to Canada With Toronto Mall

  • NexusCrowd to open platform with minimum C$10,000 investment
  • Development to be among first in the country to use model

A shopping mall in Mississauga is set to be among the first Canadian real estate projects to be financed partly through crowdfunding.

NexusCrowd Inc. is opening its online platform tomorrow to accredited investors who want to contribute a minimum of C$10,000 ($7,520) for a stake in the property. The company says it’s the first in Canada to partner with institutions at the real estate development stage to use crowdfunding, an investing model that has become popular in the U.S. in recent years and is growing worldwide.

Accredited investors in Canada haven’t had access to the equity portion of development projects, Hitesh Rathod, NexusCrowd’s chief executive officer, said in a telephone interview from Toronto.

"There’s going to be a tremendous amount of demand for that type of project," he said.

NexusCrowd is opening at a time when demand for real estate from everyday investors is growing. This year, property crowdfunding is set to climb to $2.57 billion globally from $1.01 billion last year and $396.4 million in 2013, according to researcher Massolution.

Canadians are gaining access to such investments after crowdfunding for small startups was approved in May by financial-services regulators in six provinces. The Ontario Securities Commission is developing its own set of standards, due later this year.

Partner Projects

NexusCrowd targets projects that are at least 50 percent funded by a partner already. For any investment, it aims to raise a minimum C$500,000 in equity from crowdfunding, and is targeting returns of 15 to 25 percent annually.

The offerings are limited to accredited investors, which requires an individual to have annual income of at least C$200,000 in the past two years or own financial assets worth at least C$1 million or net assets totaling at least C$5 million.

The initial property is a two-story, 238,000-square-foot (23,000-square-meter) mall that will be anchored by Korean grocery store Galleria Supermarket, which also has a 50 percent stake in the development. The remaining interest is owned by closely held TerraCap Management.

NexusCrowd partnered with TerraCap with the goal of raising about C$500,000 in equity from crowdfunding. That comprises 2.5 percent of the project’s total equity portion and 0.5 percent of the project’s C$100 million size. The development is scheduled to be completed by December 2017.

Rathod, 34, and Aris Economopoulos, the company’s vice president of operations, both previously worked at investment firm Mackie Research Capital Corp. Rathod also was an investment banker at Canaccord Genuity Group Inc., focusing on real estate.

Rathod said the business idea came to him about two years ago, as he saw developers that were seeking as much as C$20 million in equity had a tough time finding established investors.

"They can’t draw capital from the larger institutions like pension funds because the amount just isn’t large enough, and their actual networks are limited in terms of how much capital they can provide," Rathod said. "To grow beyond that, they need another vehicle, another source. That’s what we’re providing."

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