While real estate crowdfunding holds much promise, risk remains. France, home of multiple real estate crowdfunding platforms, has just experienced its first big loss.
According to a report in Capital, real estate developer Terlat has used two crowdfunding platforms to finance projects. Terlat has leveraged both WiSeed and Anaxago – two prominent online marketplaces – to raise capital for six different projects. The report states the company is now at risk of bankruptcy placing approximately €2.6 million raised on crowdfunding platforms at risk.
Quoting WiSeed MD Souleymane Galadima, some money has already been collected;
“[WiSeed] has already received from Terlat a reimbursement of €300,000 out of the €560,000 loaned as part of the project Le Passage. The amount will be broken down and distributed to the investors concerned in the near future… “
Recouping funds on the other projects remains in limbo.
“The group expects a drop of nearly 1/3 of its payroll and a review of its strategy,” said Galadima. “If this [restructuring] plan is accepted, we will probably have discussions with the agent on the follow-up and management of the various receivables.”
The collapse of Terlat highlights the investment risk intrinsic to any asset class regardless of whether it is listed on an investment crowdfunding platform or not. Investors are always encouraged to diversify their investments to mitigate any risk of potential failure. WiSeed said their project review process could become stricter in the future.