Plenty of people have seen crowdfunding campaigns on sites like Kickstarter. Everything from new inventions to movies has been finances by regular people.
But now a new building opening up in New York has also received the same treatment, only at a much greater scale than donating a dollar or two here and there.
AKA United Nations represents the first piece of crowdfunded property in the city. The development serves as an extended-stay hotel and condominium and is located at 234 E 46th St, just three blocks east of Grand Central Terminal.
What’s inside of AKA UN? For one thing, all condos are furnished, and that may appeal to international residents who need to rent out the condo when they’re not there.
Yet the units also cost a lot more than most New York City apartments and that’s largely due to the “carrying charge” that AKA UN has added to the overall price. A 628-square-foot condo on the second floor has a monthly carrying charge of $3,879.79, or $6.17 per square foot, which is three times more than the fee for most Manhattan condos.
But that fee adds some pretty great perks that most apartment buildings in the city don’t offer — most notably, the housekeeping services that will also serve the hotel side of the business. It’s likely the building will have plenty of other high-end features and most likely will have air conditioning, too, which is preferred by 65% of home buyers.
The developers of the project put their crowdfunding campaign up on Prodigy Network, which is geared toward securing financing for real estate projects. They were able to collect one-seventh of the $95 million they needed to buy and renovate the old hotel, which means they made $12 million from 116 backers who pledged at least $20,000 each.
Prodigy Network was founded by Rodrigo Niño, who crowdfunded the tallest tower in Bogotá, Columbia, back in 2010. Today, the site’s projects all over the world are worth more than $850 million, with $300 million in equity raised from more than 6,200 investors.
In the United States, the JOBS Act recently helped more non-accredited investors who earn less than $200,000 per year or have a net worth of less than $1 million to take part in such projects. However, about 90% of investors for AKA United Nations were outside the U.S., due in part to delays with the Act’s ruling.
Research from Massolution has shown that an estimated $2.57 billion in real estate will be crowdfunded this year, or about double what it was last year.
Although the minimum for funding AKA United Nations was $20,000, the ability to crowdfund real estate may have a “democratizing effect” on real estate investment, according to Time magazine. Niño told Bloomberg that he hopes that the movement can “break the stranglehold that big institutions and the rich elites have on commercial real estate.”