Synapse Development Group, along with Kuwait Real Estate Company is raising capital for the Yotel Hotel in San Francisco, and they are raising funds using RealCrowd.
Real estate crowdfunding has probably been the hottest sector in the investment crowdfunding sector. Tieing stable returns to a tangible asset just makes sense. For too many years, most investors have struggled to gain access to quality real estate deals as they were only available to institutions and family offices. Now, with Title II of the JOBS Act in place, projects seeking smaller, accredited investors, can pitch their projects online.
The Yotel project, located at 1095 Market Street, in one of the hottest real estate markets in the country, is an interesting combination of perks and investment. Now, only registered investors may gain access to the details of the offering but the perks portion are viewable to all.
Kick in $25,000 and you receive a Yotel VIP card that works at Yotel’s around the world. Invest $100,000 and you gain access to an annual owner’s party each year at the rooftop bar. Participate at the $250,000 level you may receive a drink named in your honor.
Is this enough to encourage investors? Probably not on its own, but we will see if Synapse can raise the stated 10 to 20% of total equity required ($2 to $3 million) with an expected IRR of 18-20% over an estimated four-year term.
Justin Palmer, Synapse CEO spoke to CNBC recently and explained;
“We thought crowdfunding a small portion of the equity on this deal would fit with the ethos of the neighborhood, given the demographic of the young, millennial, tech-heavy crowd that is there day-to-day.”
“It’s a good way to encourage local buy-in on the project. These people can reap investment benefits as owners and also actually visit the property, go to the restaurant, the roof-top bar and get owners’ discounts on room rates.”
There have been many successful equity crowdfunding campaigns that marry perks with investment. And this is not the first (nor second) crowdfunding offer for a hotel. While t-shirts are probably not going to cut it, providing discounts and owner recognition can be a significant incentive for some committed consumers. Even more importantly, once you have an individual who is an owner or has skin in the game, they quickly migrate from customer to brand ambassador as they are determined to generating favorable returns.
So will the Yotel raise the targeted 10 to 15% from the accredited crowd? Time will tell, but this is just the beginning of affinity investing. This is only getting started.
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