Crowdfunding, using online platforms to raise money from the public, has generated cash to fund projects such as movies, albums and even research.
But now it looks like it could be used to help fund commercial real estate development.
According to the Wall Street Journal, Detroit’s economic development office approved plans for Larson Development Group to redevelop the vacant Tiger Stadium site as a $32.6 million mixed-use project. The company intends to finance the project with 13 percent equity, 87 percent debt and 10 percent — about $4.3 million — by selling preferred stock to residents through an online crowdfunding platform.
Crowdfunding, which allows individuals to invest in small businesses, got a big boost in 2012 from the U.S. Jumpstart Our Business Startups Act, which loosened a Depression-era securities regulation prohibiting companies from advertising investment opportunities to the general public. The change led to the creation of dozens of crowdfunding websites that offer investors the opportunity to invest in everything from movie-production companies to design firms.
However, crowdfunding has yet to reach the masses. Regulations require that only “accredited investors” can participate, generally defined as those with an annual incomes exceeding $200,000 or a net worth, excluding primary residences, above $1 million. The Securities and Exchange Commission’s found that just 8.7 million, or 7.4 percent, of American households qualify as accredited investors.
So far this unique method of finding investors, which the developer said is a way of gaining public buy-in to the project, hasn’t been attempted in Maryland.