A new hotel will get erected in downtown New York thanks to $85 million raised in part through crowdfunding, reports Crain’s New York. The real estate investment firm Prodigy Network closed its purchase of a 15-story brick building where it plans to erect a glassy eight-story addition on the roof. The result: a 191-unit, extended-stay hotel.
The buyer raised more than $25 million of the purchase price through crowdfunding, notes Crain’s, a process that nets smaller sums of equity from multiple investors, rather than larger amounts from just a few. The process has been billed as a way to open up investments in assets like high-priced real estate to individuals who historically have been essentially locked out of that deal flow in favor of heavyweight institutional investors.
The crowdfunding money came from about 100 investors from 12 states and 10 countries. Each plunked down a minimum of $50,000 for a stake in the property, according to Prodigy. The property was Prodigy’s second to close within the past 12 months. It comes on the heels of the firm raising $31 million in equity through crowdfunding for its $120 million acquisition and renovation of another extended-stay hotel, AKA Wall Street. That property is currently under construction.
The Securities and Exchange Commission is reviewing a set of proposals that would relax the requirements for participating in crowdfunding, including lowering the threshold for a potential investor’s net worth. The aim is to give more people access to the capital market, though some critics caution it could prove disastrous for small, inexperienced investors.