Every investor should have the ability to invest in the real estate market. However, access and industry knowledge keep otherwise qualified investors from putting their dollars to work on quality commercial and residential real estate projects. One way that RealtyShares is working to solve that problem is with our new Diversified Marketplace Equity Fund (the “DME Fund”).
I’m pleased to announce that RealtyShares closed the first round of our DME Fund with more than $5 million in capital commitments. The DME Fund offers an opportunity to invest across a variety of institutional-grade real estate investments through a single contribution.
What is the Diversified Marketplace Equity Fund?
The DME Fund works similarly to a private equity fund and somewhat like a mutual fund. It will invest in 10 to 20 properties available on the RealtyShares website to build a diversified portfolio that investors can participate in with a single commitment.
Through one investment, you are able to access potential diversification through the same platform our investors have come to know and enjoy without spending time to research and choose several smaller investments. The DME Fund is managed by a team of experienced real estate investment managers who have worked at major investment firms including BlackRock, Goldman Sachs, Prudential, Deutsche Bank and other reputable organizations.
Investors can also possibly benefit from DME Fund fees of only 0.85 percent of assets under management, a discounted rate compared to the standard percentage fee when investing directly through the marketplace. RealtyShares also earns the standard fee on placements from each investment.
What are the Guidelines for the Investment Fund?
The DME Fund is mandated to invest in middle market real estate transactions, which have generally outperformed the S&P over the past 25 years according to NAREIT and should offer the potential for strong investment returns. Middle market commercial real estate includes deals under $50 million in value, located in secondary geographic markets and non-core locations in primary markets. Middle market investors often find alpha in a highly fragmented market by taking advantage of information asymmetries, which makes this a potential lucrative opportunity for real estate investment returns.
Investors will own both equity and preferred equity in projects and the fund is designed to build up a sizable cash-flowing portfolio while paying quarterly distributions. Invested capital and any gains will be returned to investors over the life of the DME Fund as projects are completed, paid off and the fund is ultimately drawn down to pay out all investments and profits back to investors. There are risks to investing in the fund, including loss of capital, so it’s important to review the offering documents.
Investments are to include commercial and multifamily projects in Arizona, California, Florida, Illinois, New York, North Carolina, Texas and Virginia. We expect an average asset size ranging from $5 million to $20 million. For more details on the types of investments, risks and other important information, check out our webpage.
The DME Fund requires a minimum $250,000 investment and is open to accredited investors only.
Why is this a Potentially Favorable Deal for Investors?
- Invest in a diverse portfolio of 10-20 properties with one investment
- Discounted fees compared to directly investing in the platform
- Pass-through Delaware LLC structure can take advantage of depreciation and other tax benefits
- Expected Quarterly cash distributions during hold with upside potential from profits generated by sale of assets
- Single annual schedule K-1 instead of one K-1 per property
- Access to alpha-generating potential of middle market real estate transactions
- Investments managed by a trusted, experienced asset management team
– Amy Kirsch is the Director of Investor Relations for RealtyShares.