RealtyMogul’s Jilliene Helman Talks Crowdfunding
RealtyMogul.com Chief Executive Officer and Founder Jilliene Helman’s first real estate classes came in the form of dinner table conversations with her family, which was very active in the business. Those lessons stuck with her, and the Georgetown University graduate started RealtyMogul.com in 2012. More than 20,000 users have invested more than $185 million in real estate through the national online crowdfunding platform, and most recently helped raise $37.5 million with Harrison Street Real Estate Capital to fund St. Clair Holdings’ acquisition of three student housing facilities in Tennessee and North Carolina. Ms. Helman told Commercial Observer about one of RealtyMogul.com’s most exciting transactions of the year, and pointed to some of the regulatory challenges the crowdfunding industry is facing now.
Commercial Observer: You launched RealtyMogul.com in 2013. How did you know it was the right time?
Ms. Helman: I don’t think you ever know it’s the right time. Real estate is fairly archaic and I saw an opportunity to disrupt the old way of doing things. My co-founder Justin Hughes, our chief technology officer, and I started with a $110,000 real estate loan in Los Angeles. From there, our company just kept growing. We put in a lot of hard work to get it to where it is today. But we were also strategic. We saw a marketing opportunity with the Jumpstart Our Business Startups Act and also saw the success of other online marketplaces in financial services, like LendingClub in consumer credit and OnDeck in small business. We’ve also built an incredible team to support this vision.
What are some of the trends you are seeing in the crowdfunding niche right now?
The basic concept of crowdfunding has been around for a long time. You see it being applied to a number different industries, including health care, video games and even movies. Crowdfunding is the way of the future for the average consumer to collaboratively use the Internet to influence. Within the real estate industry, one of the trends I am seeing is that the “crowd” is no longer individuals—it is increasingly expanding to include institutions and institutions are actively buying whole real estate loans from the RealtyMogul.com marketplace.
This may make us one part real estate crowdfunding and one part marketplace lending, but at the end of the day it allows us to give real estate sponsors and borrowers access to the full capital stack through one online marketplace. We can originate equity through our accredited individual investors and debt through our network of institutional investors. That makes us a platform that simplifies real estate investing for all parties involved.
How is RealtyMogul.com achieving its long-term goal of being a full capital stack provider?
We’re growing RealtyMogul.com to be a one-stop shop for capital markets by financing both debt capital and equity capital. We have made it a reality with our recent Bristol transaction, as it fully demonstrated the “power of the platform.” That means that we can finance both debt and equity on the same transaction. There is no other real estate firm that I know of online or offline that has built anything like the platform we have built at RealtyMogul.com. We are using technology to provide the full capital stack for real estate transactions. In addition, we continue to nurture a variety of capital sources that are interested in purchasing different types of real estate investments along the risk and reward spectrum.
What does the platform’s user base look like?
We have over 20,000 accredited investors, over 20,000 real estate companies and significant institutional investors who have hundreds of millions of dollars to purchase real estate investments.
What does RealtyMogul.com offer institutional investors?
Deal flow. We see hundreds of transactions submitted to our online marketplace each month and spend countless hours sourcing real estate investments so institutional investors don’t have to. We also pre-vet every transaction and make the process as frictionless as possible through our technology to execute the transaction online.
What was one of the more interesting or challenging deals you worked on in 2015?
The Bristol investment was a breakthrough debt and equity combo transaction. We provided $1.5 million in equity capital through our individual accredited investor network and also originated the first mortgage, a $7.5 million bridge loan with a three-year term and two one-year extensions priced at Libor plus 5.25 percent that has now been sold to an institutional investor.
What are some of the regulations that are further defining crowdfunding right now?
The JOBS Act was signed into law on April 5, 2012 and Title II of the JOBS Act became effective Sept. 23, 2013. The latest U.S. Securities and Exchange Commission ruling, Title III of the JOBS Act was finalized in October and will allow companies to raise up to $1 million from non-accredited investors. While originally folks in real estate intended to use these new regulations, the cap on the amount of capital that can be raised makes this prohibitive to use, in my opinion.
What effect will those regulations have on RealtyMogul.com?
While the decision has the potential to change our industry by allowing non-accredited investors to invest in private transactions for the first time, it does not fundamentally change the premise behind RealtyMogul.com. Our mission is to simplify real estate investing and make it easier for real estate companies to access capital and investors to invest in real estate online, similar to how they have invested in stocks and bonds online for decades. This decision allows us to expand the scope of investors who have access to real estate transactions. With that being said, we don’t think the $1 million annual limitation per issuer is viable. Today, we are still focused on accredited investors while actively addressing our strategy for non-accredited investors.