Decades of experience has taught Jean-Michel Wasterlain and Edward Yu that real estate funds can pay huge dividends and give an investment portfolio ballast against market volatility, but the pair found such funds were inaccessible to many investors.
Non-traded REITs typically charge high fees and have had to cut dividends because they fail to generate enough income to support them, while institutional real estate funds come with costs and minimums beyond the reach of most investors.
“The institutional funds often have minimums of $1 million to $5 million,” says Wasterlain. “Non-traded REITs have developed poor reputations so advisors often don’t offer them to investors.”
Wasterlain and Yu want to bring institutional-style real estate funds and other real estate investments to an expanded pool of investors and advisors through their new New York-based online platform CapitalFund Realty, or CAPFUNDR.
Earlier this month, the firm launched an online real estate crowdfunding platform on its website, which will allow individuals access to real estate funds that have been thoroughly vetted by industry professionals.
The founding duo have 55 years of real estate experience between them: Wasterlain was previously CEO of ORIX Capital Markets and CIO of NorthStar Realty Finance, a listed public REIT. Yu has held senior posts at Starwood Capital Group, CBRE Investors and Prudential Real Estate Investors.
While they were inspired by the recent proliferation of real estate crowdfunding investment platforms online, Yu says most tend to be marketing and distribution vehicles for investment managers built by tech startups, not real estate professionals.
“We believe that people should be investing in institutionally-managed real estate funds as opposed to alternatives like crowdfunding sites that may offer you ‘deals,’” Yu says. “It’s hard for individual investors to determine what is really a deal and what is not, but at an institutional fund you have people with the background to research the investments.”
CapitalFund plans to conduct a more thorough level of due diligence than its peers when evaluating mangers’ underwriting processes and strategies.
Wasterlain is critical of the performance of publicly traded REITs, arguing they are too-closely correlated to equity markets.