By GREGORY ZELLER // Bulked up with an added $20 million from its chief institutional investor, Great Neck-based Sharestates has cracked the top 10 of U.S. real estate crowdfunders, according to Lend Academy, the authoritative online data hub for peer-to-peer lending.
In a report published this month, Lend Academy said Sharestates funded 33 projects and originated $32.3 million in deals between June and August, recording $15.5 million in August loan originations alone.
That puts the Long Island startup in league with some of the biggest names in the business, including iFunding – with $14.67 million in August originations – and PeerStreet, which averages $7.3 million a month, according to Lend Academy.
Formed in 2013, beta-launched in 2014 and fully operative as of February, Sharestates’ rapid rise can be credited to a $30 million commitment in May by Ranger Direct Lending Fund, a London entity spun off by Dallas-based Ranger Capital Group and funded in part by London investment bank Liberum. Ranger Direct’s commitment was “bumped up” to $50 million over the summer, noted Sharestates CEO Allen Shayanfekr, giving the crowdfunding platform added cred, and more “transparency and trust.”
“Our platform was always meant to be a hybrid between individual investors and institutional investors,” Shayanfekr told Innovate LI. “The source of the capital doesn’t really matter to us. The idea is to make these investment classes available to the everyday person.”
Shayanfekr launched the firm in 2013 with title insurance veterans Radni Davoodi and Raymond Y. Davoodi, who serve now as general managing partners. The platform is designed to make it easy for investors, including individuals, to invest in quality real estate deals, while giving developers quick access to funding.
“As a crowdfunder, you need to have capital ready to go,” Shayanfekr noted. “It’s a quick-moving environment. If an investor feels there’s a possibility the deal won’t go through, it makes it much harder to invest with us, and then the developer doesn’t feel comfortable moving forward with us.
“The biggest competitive advantage in this space is access to deal flow,” he added. “Our biggest obstacle has always been having the proper investor base to bring traction to the platform. Ranger allows us to put more commitments out without fear of not being able to fund them. And we can close deals faster.”
Sharestates was on its way before Ranger bought in, having already raised $4.5 million from individual investors for 13 residential, commercial and mixed-use projects. Focused primarily on fix-and-flip loans averaging $750,000 and offering individual investment buy-ins as low as $1,000, the startup boasts projects throughout the Northeast, with a heavy concentration in New York City and New Jersey. The firm also has a few loans in Pennsylvania and Connecticut and a “sprinkling” on Long Island, Shayanfekr said.
Loans are typically for 12-month terms with an optional six-month extension. Rates range between 11 and 14 percent, significantly more than the routine 3 to 5 percent charged by banks and other traditional real-estate lenders – but those are very different kinds of loans, Shayanfekr noted.
“Traditional rates are for a longer form of financing,” he said. “[Borrowers] come to us because for one reason or another, they might not qualify for commercial financing at the time they need the loan. Banks want to know if you can service the debt, and often that means making sure the property is already generating revenue.”
That won’t work on a fixer-upper opportunity, opening the door for quick-hit opportunities like those bartered through the Sharestates platform.
“They close with us, they’re in the loan for a short period of time, they rehab the property and they lease it,” Shayanfekr added. “Then they can go and refinance with a traditional lender.”
Sharestates has been growing steadily since its 2014 beta run, but to compete with major-league rivals like Patch of Land – another top crowdfunder on Lend Academy’s list, with $26.5 million in originations between June and August – the startup reached out to “a ton of different lending institutions,” Shayanfekr said, before connecting with Ranger.
“Within a few months we had a relationship,” Shayanfekr said. “They were looking for platforms like ours to invest in.”
The original $30 million buy-in and subsequent $20 million add-on have had quick and positive effects. Providing two basic loan types – one for rent-stabilized properties already generating revenue and one for rehab/conversion projects – Sharestates has now funded 80 total projects, including 70 since Ranger first signed on, and is projecting $16 million in September originations, its biggest month yet.
And all that in what Shayanfekr called a “pretty flooded” crowdfunding market. Not only are the firm’s current projects in the black – “they’re all cash-flowing at this point,” he noted – but the firm has “a couple of big things in the works,” with announcements expected in the next month.
Another plus: A growing percentage of repeat borrowers.
“Most of them have come back for second and third loans,” Shayanfekr said. “This business is all about customer service, and our customers are happy.”