When companies such as Indiegogo and Kickstarter launched in the late 2000s, no one could have predicted the monumental changes they would bring to the world of private investment. Overnight, ordinary people could pitch in money to help start a business. While they weren’t shareholders, they were usually rewarded in other ways, such as first access to new products and discounts on future purchases.
RealtyMogul is like these crowdfunding websites, offering its investors the opportunity to band together to invest in a large project. In this case, that investment is real estate. Where they differ is that RealtyMogul isn’t available to the average person—you need to have a net worth of over $1 million, among other criteria.
Still, even people worth $1 million couldn’t hope to purchase an entire shopping center. That’s why they need each other and an organization like RealtyMogul to unite their purchasing power.
Who Are They Competing With?
Competition is expansive in the commercial real estate space—everyone from wealthy individuals to major publicly traded corporations invests in commercial real estate. That said, here are a few competitors worth mentioning:
First National Realty Partners
Like RealtyMogul, First National offers individuals the chance to invest in large commercial real estate projects. One way they do this is with their FNRP Opportunity Fund. They also offer regular distributions similar to the dividend payments of publicly traded corporations, though First National and RealtyMogul are both private.
The biggest difference between First National and RealtyMogul is the minimum investment size. First National requires a minimum investment of $50,000 while RealtyMogul requires a minimum investment of only $5,000. That said, both are restricted to accredited investors with a net worth of over $1 million.
Like its brethren, First National and RealtyMogul, CrowdStreet focuses on private investment crowdfunding for commercial real estate. Also, like RealtyMogul, it allows investors to choose to invest in individual properties.
Realty Income Corp
We can’t discuss commercial real estate investment companies without talking about the major players in the game. Realty Income is the largest publicly traded commercial real estate REIT (Real Estate Investment Trust). Because it is a publicly traded stock, anyone can buy shares in Realty Income.
REITs make money for their investors by distributing large portions of their income as dividend payments to shareholders. They also use some of their income to purchase additional properties in the hopes of growing their portfolio. Realty Income Corp’s portfolio is already substantial—they are over four times the size of their nearest competitor.
Agree Realty is a top player in the commercial real estate sector. They specialize in net lease retail. While not nearly as large as Realty Income, Agree Realty’s competitors are basically the rest of the companies that fill out the top ten. They offer dividend payments similar to both Realty Income and its competitors: around a 5% annualized return.
When It All Goes Wrong
Pennsylvania Real Estate Investment Trust (stock symbol “PRET”) is a case study of what can happen when you refuse to diversify your portfolio and your management doesn’t see the writing on the wall.
While the companies mentioned above are all thriving in the commercial retail real estate investment space, PRET is bankrupt and on life support. Why? Rather than investing in shopping centers with online shopping-resistant tenants like supermarkets and convenience stores, PRET focused on shopping malls.
If you’ve left home anytime in the past ten years, we don’t need to tell you that shopping malls have been decimated by the likes of Amazon and other online retailers who can offer razor-thin margins and next-day delivery. This has crashed PRET stock from a high of around $700 per share in 2005 to around a dollar, where it currently trades. This goes to show that it’s wise to follow which way the wind blows in the market, and diversify.
All in all, the commercial real estate space is dense with companies and competitors, but RealtyMogul has continued to set itself apart.