Estate Baron pulls a crowd to fund its first two developments
Estate Baron, the crowdfunding platform backed by investors Adrian Stone and Benni Aroni, says it has closed Australia's first two funding rounds for residential developments.
Like a syndicated loan only smaller – $5000 is the minimum investment in this case – crowdfunding is well-established elsewhere, including in China, but less so here.
Software-based crowdfunding is one of a number of new approaches being taken to raise capital for residential development in Australia. Separately in Melbourne, a group of architects is developing projects funded by small individual investors.
Estate Baron is starting with baby steps. The first two projects to be funded by the tech platform are a two-townhouse development in Melbourne's Caulfield and a nine-studio-apartment building in Frankston, south east of the city.
It wasn't even trying to raise the full cost. The Caulfield development has a $2.4 million price tag, but they only sought to raise $1m, with Equity Baron's investors providing the balance, co-founder Moresh Kokane told The Australian Financial Review on Wednesday.
"We could have raised $2.4 million but we weren't sure what sort of response we would get," Mr Kokane said. "That project was filled up within three days."
It took longer to raise the $500,000 – half of the total needed – for the Frankston project, in part because would-be investors were cautious about putting money into the area, he said.
"People are still emotionally involved," he said. "Frankston is a rougher neighbourhood."
Victorian builder Watersun is due to start construction on the Caulfield project in September.
The $500,000 raised for the Frankston project by 22 investors is matched by a further $500,000 in debt guaranteed by Ricard Securities principal Michael Van Cuylenburg.
Mr van Cuylenburg is trustee of funds in the managed investment scheme investors have bought into. He is overseeing the project and financial governance.
Estate Baron now hopes to get the licences that will allow it to accept more investors and expand the size of its projects.
"By the end of the year we are looking at a major tower," Mr Kokane said.