CrowdStreet Inc., which operates an online marketplace for direct equity investment in commercial real estate, has raised $25 million in three hours on its platform for an opportunity zone redevelopment in Atlanta led by Parkway Property Investments LLC.
Parkway will use the proceeds of the crowdfunding to acquire and redevelop 100 Edgewood, a 17-story, 306,000 square foot Class B office building, adjacent to Hurt Park and Georgia State University in downtown Atlanta. Combined with other equity and anticipated debt, the total investment in the property is projected to be approximately $80 million.
“The [$25 million] raise happened the same week that the Dow dropped 800 points — its worst percentage drop of the year and fourth-largest point drop of all time,” said Ian Formigle, vice president of investments for CrowdStreet. “Despite market volatility, investors are seeing how a looming recession doesn’t mean they have to withhold or remove their investments.”
He added, “We’ve learned from historical trends that the NCREIF and NAREIT, the two major [commercial real estate] indexes, have low historical correlations to the S&P 500. This means that when you add [commercial real estate] to a diversified portfolio you can increase its Sharpe Ratio, which means targeted higher returns with less assumed risk.”
100 Edgewood, originally designed by architectural firm Skidmore, Owings & Merrill, was constructed in 1965 as the Atlanta regional headquarters of Hartford Insurance Company. Parkway will be redeveloping the building as a Class A office building “with amenities to attract high-quality tenants desiring creative and modern style offices.”
A qualified opportunity fund is an investment vehicle created to invest into a qualifying property or properties as defined by the Tax Cuts and Jobs Act of 2017 to incentivize investment in targeted communities called opportunity zones.
Opportunity zone investors may be able to defer capital gains through 2026 and receive up to a 15 percent tax reduction on current gains. In addition, investors can eliminate capital gains taxes on any returns generated by the opportunity zone investment, if it is held for at least 10 years.
CrowdStreet recently crossed the $700 million fundraising milestone.