800,000 euros for the construction of student apartments in Heilbronn - collected within a month on zinsbaustein.de.

Crowdinvesting for Properties – Just a Hype?

We asked Frank Noé from zinsbaustein.de and Florian Stadlbauer from Commerz Real AG

 

Everybody is talking about “crowdinvesting” – after all this allows even average consumers to invest their savings in property. But what are the benefits and downsides for investors, and what are the effects of this trend in investments on the property industry? Frank Noé (zinsbaustein.de) and Florian Stadlbauer (Commerz Real AG) give answers.

 

What does …

... Commerz Real AG actually do?

Commerz Real AG is the asset manager for investments in material assets in the Commerzbank group. The company boasts 45 years of market experience and a managed volume of about 32 billion euros.

… zinsbaustein.de actually do?

The zinsbaustein.de online platform allows investors to easily invest in high-yielding building loans without the need of a portfolio. Every property project undergoes a thorough selection process in which all relevant documents are assessed by experts.

 

From the point of view of a crowdinvesting startup: Mr. Noé, what are the benefits of crowdinvesting – and who reaps them?

Frank Noé, zinsbaustein.de: Property crowdinvesting clearly creates a win-win situation for both investors and developers. For small investors the property investment is democratized, because they can invest even very small amounts. For example, as opposed to funds we do not charge any costs or subscription fees for the amounts invested, because we are financed by fees from the developers. And last but not least we have realized that investors appreciate the tangibility of the projects. After all in a fund investors have little insight into how their money is invested, while we present every project in detail and give any interested investors the opportunity to get an impression themselves.

Property Investment Is Going Democratic.”

There are many investors who actually make use of this possibility, actively obtain information and even make investments, because they are convinced, because they see a purpose in the nursing center or the day care center.

This is also a great advantage for developers: Crowdinvesting is advertising their project and their company. With online marketing and intensive public relations work for each project tens of thousands of investors and property experts are made aware of it.

Are there any disadvantages? If so, what are they and who is affected?

Frank Noé: Well, at the end of the day it is an investment in subordinated loans. As with shares and bonds investors run the risk of total loss, if a project company goes bankrupt. But we inform our customers very openly.

At zinsbaustein.de we approach this problem by selecting projects very carefully and only including them on our platform if the chances clearly outweigh the risks. Nevertheless we cannot exclude the loss of a project completely. Investors should only invest funds in crowdinvesting, which they do not need to support themselves, but which are only intended to help them build wealth. Apart from the risks described above, the same applies to crowdinvesting as does to fixed-interest deposits. There is a certain period during which the capital is tied up.

Mr. Stadlbauer, how do you as an established financial institution see this type of investment for the property industry?

Florian Stadlbauer, Commerz Real AG: Crowdinvesting offers the property industry the possibility to reach new target groups which have never considered investing in property. Even with rather low volumes individuals can now invest in specific projects.

At the moment, however, we are seeing a real hype around crowdinvesting. Many platforms are emerging, not all of which are likely to establish themselves on the market. This mainly has negative effects for consumers, i.e. private investors. The large number of providers makes it very difficult to understand the market and select the right solution. We expect to see a consolidation of the property crowdinvesting industry in the medium term. Of course, the providers are also aware of this – there is great competition for awareness. Reaching awareness and being talked about improves chances to have a concept which will eventually prevail.

There is not so much a shortage of investors as one of attractive assets.”

The risk for investors is, however, that properties may be offered for crowdinvesting which create awareness and traffic on the website, but are less attractive in terms of yield and risk. This development is further supported by the current situation on the property market. There is not so much a shortage of investors as one of attractive assets.

How should established companies position themselves vs. “young players”? Is it harder for them than it is for “young players” – and if so, why?

Florian Stadlbauer: We do not see ourselves in a competition with the “young players”. In the long term those concepts which bring crowdinvesting startups together with established companies in the form of partnerships and cooperation will prevail. Established companies open up access to assets, have grown distribution networks, offer international networks and raise respectability. The young players, however, develop new concepts and can win over new target groups for investments in property. Those who can combine these benefits have the best chance of being successful on the crowdinvesting market.

Those who can combine the benefits of established companies and young players have the best chance of being successful on the crowdinvesting market.”

Mr. Stadlbauer, Mr. Noé: What do you think are the effects of crowdinvesting on the property industry as a whole?

Florian Stadlbauer: First of all crowdinvesting is forcing the property industry to seriously look into issues like digitalization and innovation. As always: Competition is good for business. This also applies to individual properties and project development. Not only do they have to be accepted – as in the past – by the few decision-makers in a company, they are also assessed again by every private investor who makes an investment decision. This may contribute to greater stability of the market. But it will probably take another two to three years until we will see this effect, i.e. until crowdinvesting will establish itself and be consolidated into a handful of well-known and respectable providers.

Frank Noé: There are great expectations in our industry! The Bundestag recently even expressed the fear that crowdinvesting could contribute to a property bubble. At the moment this is an exaggeration, the market is still in its infancy. In each of the last few years eight-digit amounts were collected – but this is nothing compared to the billions provided by banks and insurance companies every year for financing real estate projects. But it is exciting to see that market volumes double almost every year. If this growth can be maintained continuously, crowdinvesting will become a significant addition to the financing mix of the property industry in the long run.

Market volumes double almost every year.”

Another interesting aspect is that we give developers access to effective online marketing. Experience has shown that many take a conservative position and spend little time on the new media. I think we can create awareness for the advantages of digital marketing – because it works! Example: Two days after we had financed a project the developer had a call offering him another project, because an investor had noticed his project profile on the usual social media channels.

 

You are interested in the digitalization of the property industry? Read more about the digitalization trends in the trade in our blog post Digital and Yet Exciting: Commerce of the Future.

At EXPO REAL technological innovation and digitalization are also an important topic. Read more about REIN at EXPO REAL 2017 here.

You want to find out more? You will get more information in the interview with Claudia Boymanns.

 

Crowdinvesting vs. Crowdfunding

Both crowdinvesting and crowdfunding are financing methods. In crowdfunding the supporters get non-financial rewards, a sort of thank you. This variant is often applied to art or cultural projects.

Crowdinvesting is a special form of crowdfunding, in which the investors share in the project’s financial success. Microinvestments are classified as equity and are normally seen as subordinated loans in Germany. There is a risk of the total loss of the funds invested.

More information: http://www.crowdfunding.de/was-ist-crowdfunding/

http://www.crowdfunding.de/was-ist-crowdinvesting/

Florian Stadlbauer

As Head of digitalization Florian Stadlbauer is responsible for building and managing the digital unit of Commerz Real AG. Before that he ran one of the leading German developers of video games as the founder and general manager of the company. Under his management some of the video games from Germany boasting the greatest international success were produced. Stadlbauer is a counselor and jury member in various organizations and award committees. He is an economist and received a PhD from the Institute for Information Systems and New Media of the University of Munich as well as from the Schulich School of Business of York University in Toronto. Away from work he likes going on outings with his children (10, 6 and 2). To his wife’s regret he very much enjoys technical gadgets and has a passion for the “Diva from the Main River”, Eintracht Frankfurt.

Frank Noé

Frank Noé is General Manager and Chief Investment Officer of zinsbaustein.de. After working for Ernst & Young, Golding Capital Partners and Shinsei International he had last worked as an investment director for Castlelake in London. In his free time he travels to Trier once a year, in order to help a friend who has a vineyard during the grape picking season.

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