Founded by CEO Getty Goh and CTO Seh Huan Kiat in July 2013, CoAssets is a crowdfunding platform with a difference, bringing equity crowdfunding to real estate projects. Modelled after Kickstarter and Indiegogo, the Singapore-based venture has adapted crowdfunding real estate projects into a functional business model, bringing disruptive innovation to an area with traditionally high entry barriers.
It has attracted considerable attention, given its backers. It is supported by the Media Development Authority (MDA), funded by the National Research Foundation and incubated by Expara. Jeffrey Chi, the Vice Chairman of Vickers Venture Partners and Chairman of Singapore Venture Capitalists and Private Equity Association (SVCA), is also a private investor.
While largely self-funded, the company is generating revenue with an income of more than US$639,846 in the past few months. CoAssets achieves this by aggregating retail consumers, angel investors and private equity (PE) funds onto a single platform. For consumers, it opens up access to property investment opportunities.
For angel investors, it enables risk reduction and portfolio diversification, allowing them to invest in several viable deals concurrently. For PE funds, it enables the identification of viable deals and allows financing of large opportunities alongside retail crowdfunders. By consolidating and managing legal complexities and due diligence, they’ve made crowdfunding feasible for property projects, democratising real estate funding. Unlike most crowdfunding platforms dominated by design, art and technology projects, financial requirements for property investment are capital-intensive. Risks and liabilities associated with property projects are also greater.
When asked about the origin of CoAssets, Goh explained: “Our vision is to democratise the real estate funding process by connecting those who need financial resource to those who are looking to earn high returns from attractive real estate opportunities. We are gradually realising our vision, as we have successfully administered several crowdfunding deals. One of the recent deals saw us securing pledges of more than S$700,000 (US$558,334) within one hour.”
Crowdfunding real estate? When asked about why use crowdfunding, Goh explained that individual property investors were already pooling funds and co-investing, noting that unlike other types of businesses, pooling funds for property development wasn’t unusual, as real estate ventures are capital intensive. To most investors, real estate crowdfunding and co-investing are essentially the same. However, the main difference between them are the distribution channels.
Real estate co-investing involves individuals within an immediate network, while property crowdfunding leverages on the internet to aggregate and connect like-minded investors internationally, in order to provide capital for projects they support. The scale and reach of real estate crowdfunding, correctly executed, disrupts real estate market and industry conventions.
Given the opacity of real estate funding processes, CoAssets allows people to exchange ideas, find co-investment partners and create market transparency. CoAssets functions as a targeted leads generation site, allowing users to advertise projects and connect with interested investors. However, it is not directly involved in how deals are structured.
Stakeholders directly liaise with each other. Developers can raise capital to initiate projects and generate returns for investors or proceed with projects in emerging markets (e.g. Myanmar) where construction loans are of limited availability. Crowdfunders enjoy transparency and get access to opportunities formerly reserved for institutional investors.
The future Since its launch in July 2013, the company has had projects from Thailand, Malaysia, Vietnam and Philippines, as well as America, Europe and Australia.
Acknowledging that real estate crowdfunding is a new, and perhaps misunderstood concept, CoAssets is also organising an inaugural Expo for Property Investing and Crowdfunding (EPIC) in July 2014, with the support of the Singapore Tourism Board (STB). First in the region, this event is designed to educate consumers about real estate crowdfunding and overcome the discomfort of funders dealing anonymously with developers online, allowing them to develop offline relationships.
There are concerns that need addressing, due to the crowdfunding industry’s infancy. One concern is the lack of recourse, should projects fail to materialise — though there are assets (i.e. land titles) crowdfunders can claim as recompense. Another concern cited is of the credibility of opportunity providers.
CoAssets has resolved this by allowing only registered developers, registered agents and project owners to list their projects, along with proof in the form of title or option document showing ownership. This allows funders to perform checks and cross-references. the company also provides research tools for funders to evaluate projects.
It has recently developed research tools for emerging markets (i.e. Malaysia and Vietnam) to allow funders to assess property deals, due to limited information available in such markets. Some developers have introduced measures to increase assurance, such as maintaining escrow accounts and allowing people to have charges over an asset.
No crowdfunding legislation currently exists in Singapore or the greater Asia Pacific. But given the presence of CoAssets and the growth of the crowdfunding industry, that situation looks set to change.