Mr Getty Goh has a Masters in Real Estate from the National University of Singapore (NUS) and he is the CEO of CoAssets.com, South East Asia’s first crowdfunding website. Mr Goh is also a director with Ascendant Assets Pte Ltd, a real estate research consultancy and think tank.
1. What is crowdfunding in one sentence?
Crowdfunding is defined as the pooling of funds via the Internet to support projects initiated by individuals or companies.
2. Why would property developers seek crowdfunding?
Unlike other types of business, property development tends to be more capital intensive. While it could cost just several hundred thousand dollars to get most businesses off the ground, it would typically cost several million dollars to kick-start a development project. Most aspiring property developers would have some seed capital to buy the land and get the project started. However, they often require additional funds to keep the project going. This is especially true for countries where construction loans for foreign developers are not available (e.g. Myanmar, Cambodia, Thailand, etc.).
Although approaching banks for such financing needs may seem like the obvious choice, these financial institutions are typically not interested in deals that are less than S$5million, as the fees from making those loans may not be commensurate with the effort. Another possible funding avenue could be from wealthy individuals. However, even if they find the project attractive, many of them would not be keen to take the huge financial risk of investing several million dollars in a single project. Hence we realize that there is currently a gap for developers who are looking for funds of between S$1million and S$5million.
This is where real estate crowdfunding comes in – crowdfunding offers property developers an alternative way to raise funds by allowing them to reach out and connecting with strategic partners and investors through an online platform.
3. What are the benefits for the crowdfunders?
The most immediate benefit to users would be to give them access to opportunities that were once reserved for banks, financial institutions and/or wealthy individuals. For example, one of the recent UK opportunities listed on CoAssets gave funders attractive annual returns of between 9% and 11%. On top of that, funders could opt for annual or monthly payout (source article). Such returns are significantly more than what banks are currently offering, hence it was not surprising that this deal received much interests.
Apart from that, crowdfunding reduces investors’ risk exposure by allowing them to diversify their investments. This is because each funder would have to come up with less capital to take part in the deal. Unlike regular real estate investments, crowdfunders do not have to invest in whole units and can diversify their risks by putting their money in different projects at the same time.
4. What are the risks in crowdfunding?
Having been around for only the last 2 to 3 years, the crowdfunding industry is still in the infancy stage. One of the common concerns relating to crowdfunding is the lack of recourse should the project fail to materialize. Interestingly, this is actually less of an issue for real estate crowdfunding as there is usually some form of asset (i.e. land title) that crowdfunders can stake a claim to.
Some people are also concerned about fraud and the credibility of the opportunity providers. That is something we are concerned about as well and to manage the risks, only those who are registered developers, registered agents and project owners can list on CoAssets. Project owners will have to show proof, in the form of a title or option document, that they own the land. This means that there is some form of paper trail that funders can use to do checks and cross-references.
While we curate who can list opportunities, funders should ultimately do their own due diligence before jumping into a deal. That is why we place a lot of emphasis in providing robust research tools. For example, we recently developed research tools for the Malaysian and Vietnamese real estate market to assess whether property deals there are worthwhile. Some users find such tools particularly useful, as there is presently not much information in these developing markets
Figure 1: Screen capture of research tools on CoAssets
Interestingly, while we do not dictate what developers should do, we noticed that some projects have started offering funders greater assurances by incorporating escrow accounts as well as allowing people to have a charge over an asset to give funders greater assurance. All these are positive developments that will ultimately give funders greater confidence in this whole initiative.
5. You founded Coassets.com and it is Singapore’s first property crowdfunding platform. What role does CoAssets play at the moment?
As there is currently no legislation that is similar to the JOBS act in Singapore, CoAssets is simply a targeted leads generation site that connects opportunity providers (i.e. developers, bulk sellers, etc.) and users. Akin to any regular property site, we do not get involved in the deal and any arrangement is directly between the stakeholders.
Nonetheless, this approach seems to be gaining quite a bit of interest and we have seen good traction in the past few months. Based on the infographic, more than S$20million worth of opportunities were listed on CoAssets and about S$7million were funded in the last few months. In terms of registered membership, we grew from only 200 in July 2013 to more than 2,500 in May 2014.
Due to these encouraging results, we have garnered quite a number of investors who are interested to invest into CoAssets. We are fortunate that Dr Jeffrey Chi, Chairman of Singapore Venture Capitalist and Private Equity Association (SVCA), has recently come onboard as our private investor and mentor. While CoAssets has still a long way to go, we see this as a positive sign that we are doing something right.
6. Can you tell me more about EPIC 2014?
In the course of marketing the site, we understand that many people are still not comfortable with the anonymity of dealing with opportunity providers via the Internet. Many of the funders would prefer to meet the developers before considering funding their projects. We have found that having offline contact is an important step in gaining user confidence and that is what the inaugural Expo for Property Investing & Crowdfunding 2014 (EPIC 2014) to meant to do.
EPIC 2014 is a 2-day event with 2 separate segments – a tradeshow on 18 July 2014 (Friday) and a public event on 19 July 2014 (Saturday). The tradeshow is an industry event and more than 300 delegates, comprising of developers, bulk-buyers, financiers as well as professional/retail investors, are expected to attend. Some of the key note speakers
For the tradeshow, we have prominent speakers such as the Mr Georg Chimel, CEO of the iProperty Group, and Dr Dolf De Roos, New York Times Best-Seller and world-renowned real estate expert. Dr De Roos wrote the New York Times Bestseller, Real Estate Riches.
We also have Mr Tim Kobe, a world-renowned designer who worked with Steve Jobs on the first Apple store speaking at the event (source article). Mr Kobe will be sharing the project he is building in Boracay and is using EPIC 2014 as an avenue to meet up like-minded partners. Apart from that, some of the other speakers include Mr Francis Goh, Partner with Harry Elias Partnership LLP, who will cover the legal implications of real estate crowdfunding in Singapore.
Ultimately, this event is good for developers who are looking for funds of between S$1million and S$5million, as well as funders who are looking for attractive regional opportunities. Based on what was previously listed on CoAssets, some of the opportunities can give annual returns of between 11% and 18%.
Interested parties can find out more about the event via the information kit below or via the website.
Invitation to South East Asia’s Inaugural Expo for Property Investing & Crowdfunding (EPIC)
Highlight of EPIC
EPIC connects developers who are look for financing of between $ 1 million and $10 million to both professional and private investors as well as provides real estate stakeholders updates and happenings in the real estate industry. This event is also a good avenue for fund houses and investors like yourself to connect with exclusive development opportunities from around the region. The event will be held at the DBS Auditorium, Marina Bay Financial Centre. Unlike regular property shows, EPIC has a tradeshow (B2B) component where more than 120 investors/ financiers from the region are expected to attend. There will also be developers from abroad coming to this event, hence, this event provides a platform for those looking to venture overseas to connect and explore collaboration opportunities with overseas developers. We are also privileged that the Singapore Tourism Board is supporting this event and DBS bank is one of our major sponsors.
Content covered during EPIC
As real estate crowdfunding is a fairly new area, there will be prominent international speakers to share their views about crowdfunding at the event. Some of the notable speakers include Dr Jeffery Chi, Chairperson of Singapore Venture Capitalist Association of Singapore and Vice Chairman of Vickers Capital, who will be the key note speaker. Mr FrancisGoh, a Partner from Harry Elias Partnership, will also be present to share the legal aspects of real estate crowdfunding.
How you can be part of this event?
Please visit www.CoAssets.com/EPIC
If you wish to know more about CoAssets or EPIC, you can visit the following press release as well as articles about what we do:
propertyportalwatch.com/2014/ 03/epic-first-south-east- asias-first-expo-for-property- investing-and-crowdfunding-2/
com/real-estate-crowdfunding- the-next-big-thing-for-the- regional-real-estate-markets
We hope you can join us and we look forward to having you at this EPIC event.