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EquityMultiple

https://www.equitymultiple.com/
Real Estate
EquityMultiple is a commercial real estate investment platform originally spun out of Mission Capital, a real estate capital markets firm.
Scorecard
A
Quality of Offerings
C
Fees
C
Quantity of Offerings
B
Brand
B
Liquidity & Cash Flow
A
Risk & Diversification
Accessibility
B
Alts for All Score
4 - Good

EquityMultiple is an online real estate platform that offers accredited investors access to equity, preferred equity, and debt investments in commercial real estate properties across over 40 markets in the U.S. It is one of the few online real estate platforms backed by an established private markets real estate company, Mission Capital, providing them with strategic insight and an extensive network of sponsors, lenders, and investors. 

Within the alternative investment platform ecosystem, real estate has served as the first major avenue of investment, offering a product that has helped investors supplement or replace investments in real estate investment trusts (REITs). Instead of pooling investments like REITs, many of the sites in this space let investors select on a property-by-property basis. One of the shortcomings tied to many of these online real estate platforms, however, is that they operate as tech companies that happened to enter the real estate space. EquityMultiple, on the other hand, is run by a team with 100+ years of collective real estate experience and over $80 billion in real estate transactions. Using their deep knowledge of the industry, the site’s team provides in-depth market research in the form of white papers, articles, and quarterly updates. The team’s experience also goes beyond real estate investing, with experts in engineering and technology who add to the site’s ability to execute.  

EquityMultiple focuses on institutional-grade properties, providing exposure to more risk than other online platforms in exchange for strong cash flow. Leveraging the team’s collective networks and partnerships with Mission Capital and Growth Capital Services (a registered broker-dealer), EquityMultiple works with experienced vendors and sponsors, only considering institutional commercial real estate opportunities. These opportunities have historically outperformed residential (specifically single-family) opportunities that are listed on sites such as Roofstock and Fundrise. It must be noted, however, that EquityMultiple’s model isn’t as unique as it is made out to be – ArborCrowd employs a similar focus on institutional opportunities and is part of the Arbor Realty Trust (NYSE:ABR), a family of platforms with over $2B in assets under management. 

Only 5% of the deals EquityMultiple considers are accepted, with the site focusing on fixed-rate offerings that deliver returns in the 8-14% APR range. Of these profits, the site takes a 10% cut once the initial investment is paid off. Since inception, EquityMultiple has closed over 100 offerings, amounting to $1.3 billion in deal value and an IRR of 12.9%. An added benefit of the site is its typical investment horizon, offering investments that range from 6 months to 5 years, giving investors the flexibility to make investments that align with their current or long-term needs. Although this is not as additive as Cadre’s secondary trading feature, it stands out in a space where investment horizons can extend as far out as a decade. Distributions vary according to the terms of each offering but are most frequently provided on a monthly or quarterly basis, allowing investors to receive consistent and steady cash flow. Finally, the site provides a number of different methods for investing, with a fund model providing immediate diversification, direct investments, and tax-deferred investments in items such as Opportunity Zones. The primary detractor associated with these offerings is the required minimum, which ranges from $10-40K depending on what option one would like to invest through. 

For sophisticated investors looking to access real estate while avoiding REITs, EquityMultiple stands out as an attractive option so long as one can stomach the site’s high minimums. It provides an effective method for diversifying real estate investments across different markets, asset classes, and project types. That said, outside of its tax-deferred investing option, the site has done little to differentiate itself from ArborCrowd, which is associated with a well-respected brand and only charges fees at the sponsor level. 


Pros

  • The site is backed by an established real estate company, with several Mission Capital Principals sitting on its advisory board. It also has a strategic partnership with Growth Capital Services, a registered broker-dealer providing compliance and regulatory oversight to EquityMultiple.
  • EquityMultiple offers optionality in both types and manner of investment. You can invest through an LLC, LP, Trust, or with a joint beneficiary and can also make use of the platform’s partnership with Millennium Trust to invest via a self-directed IRA. 
  • The site has a diligent three-step vetting process and keeps an in-house underwriting team. Additionally, the investment team has extensive experience executing institutional real estate deals.
  • Real estate inherently provides strong downside protection in adverse economic conditions. 
  • If the fund amount is too low for the Sponsor or Lender to accept, all investor commitments will be refunded in full, with no fees deducted. (to date, this situation has never occurred)


Cons 

  • The site has a fee model that is both less intuitive and more costly than the one used by ArborCrowd, a key competitor. Whereas EquityMultiple charges 5% on the first $5M to sponsors, 0.5% on aggregate investments and 10% of investor profits once the initial investment is made back, ArborCrowd charges no fees to investors and the following fees at the sponsor level: 0.25% management fee; 1% acquisition fee; 1% disposition fee; and 1% refinance fee.
  • The minimum can be anywhere from $5-40K but is rarely less than $10K (the minimum investment through an IRA is $20,000). This is likely too costly for ordinary investors.
  • Investors participating in offerings on EquityMultiple purchase restricted securities, which are highly illiquid. You should expect to hold the securities you purchase until they mature or there is a liquidation event. In certain limited cases, you may be able to resell your securities in private transactions subject to the restrictions in the specific offering and provided for under the Securities Act of 1933.