Australia’s real estate crowdfunding scene has been a hot topic in recent news, including the launch of real estate crowdfunding platform, CrowdfundUp, offering both debt and equity investment opportunities to investors of all types. But the Outback is also home to another online real estate platform: Estate Baron, which offers wholesale investors the chance to buy shares into pre-vetted property investments. Recently, Crowdfund Insider spoke with Moresh Kokane, Estate Baron’s co-founder, for more details on the equity real estate platform. As Kokane said,
“I believe our model [Estate Baron] is similar to CrowdfundUp in its regulatory framework and for that matter every real estate focused equity crowdfunding startups model is the same. We have partnered with an AFSL provider and are focused on Melbourne-based property developments.”
Currently, Estate Baron has three listings live on its website, with a minimum investment of $10,000.
Midori: Please share how Estate Baron was founded.
Moresh Kokane: I have worked in the Finance and Tech industry for about ten years in the US, primarily in Chicago and Boston. Originally from India, the visa regime in the US prevented me from working full time on my own business so my wife and I decided to move to Australia after making a few trips here and falling in love with the country and the weather.
After moving here for good a year back, I spent a few months trying to understand the landscape and realized that property as an asset class is far more attractive to Australians than in the US. I have been following the Realty Mogul and Fundrise story in the US and was aware of how things are shaping up there. Australia is ripe for this sort of disruption in property finance
After studying the regulation (and it is incredibly tougher than in the US) I reached out and aligned myself with the right people to get the compliance structure in place and then we got the right property team, tech team together to make things happen. So far we have crossed $ 2 million AUD in our book builds and we have received a strong response to what we are doing with purely word of mouth and zero marketing.
Midori: Who are the founders and what are their backgrounds?
Moresh Kokane: That would be me. I have done tech startups before. My first startup which was (right after getting out of Engineering) executed projects for US based companies and built online banking security related products. I made a small fortune from it. Later I moved to renewable (Solar), the tech worked but after burning much capital on it we realized that the tech is not yet commercially viable.
I am an Engineer by training and have worked in the finance industry as a Business Analyst for the past ten years.
Mario Zorovic is a Kiwi in Melbourne and is my marketing partner. I met him after moving here and he is my co-conspirator in getting the message out and alliances secured.
Michael Van Cuylenberg is our seed investor and holds the Australian Financial Services License to make all our offerings. He is principal at Ricard Securities.
Peter Corica is a licensed Real Estate Agent and provides us much needed property domain expertise.
Tanveer Bal is a recent hire who will be leading our digital marketing strategy. He comes from a startup background as well and has prior background in Real Estate.
We have a couple of Developers who do the tech and a couple more interns who have recently come in as well. So it is a growing venture.
Separately we have allied partners who do the Due Diligence for each project before listing and have strong expertise in the property development sector.
Midori: Is your platform offering Debt/ Equity/ Other in Real Estate?
Moresh Kokane: It is primarily Equity at this stage, we are not looking at debt models at this stage. It takes the form of units in a trust.
Midori: Who is your target investor?
Moresh Kokane: As of now we target those who are classified as wholesale or sophisticated investors under Australian law given the wholesale license we currently have access to. But recently we have concluded a partnership with a Australian Financial Services Retail License provider which will allow us to go after everyone who is interested in property investments but would like to diversify by investing smaller amounts.
Midori: How many deals have you completed? What is the total amount raised to date?
Moresh Kokane: We have three projects listed currently and have raised a total of $2 million in commitments across them. One project whose target is $500,000 has been fully filled and we are in the process of closing it down. This is since going live in late Feb 2015.
Midori: How do you source deals? What is your due diligence process?
Moresh Kokane: Our focus is currently on Melbourne and Developers submit their project details for which they are trying to raise finance to us via the website. We usually meet them in person after that and the property team including Michael, Peter and the people from Thinc, Collie and Prowse do physical inspections of the site and the project that is being proposed. All permits and papers have to check out and we usually go in along with a Bank as the bank usually has done their own due diligence as well.
When we start doing our retail offerings next month, we are onboarding stronger due diligence procedures from other auditors before making public offers. Once the Due Diligence is done, Ricard Securities determines if it is an attractive enough offering and then the listing goes live on our site.
At a later stage we will expand interstate.
Midori: How many developers have you partnered with?
Moresh Kokane: A total of 3 Developers so far. Along with the profitability of the deal we also try to see if there is a social aspect to it and how the project helps the local community. For instance one of the project we are currently helping raise funds for is WestWyck, which is Australia’s first One planet community. The people living there make a commitment to sustainable living, organic vegetable gardens, pledge to shop only from fair trade shops.one-planet-living
In their own words,
“WestWyck aims to create ‘community’ within and to be an active part of the community around it. Many people expressing interest about living at WestWyck or buying into the new dwellings are attracted by the thought of living in a connected way to others. In one way or another, we are all escapees from the alienating impact of 21st century urban living.”
So it’s not just the financial aspect of the deal but also the net benefit the community gets from the fund raising effort that factors in our decision making process. We want to make money but also make the world a better place.
Midori: What do you think about the current regulatory regime in Australia?
Moresh Kokane: Australia is certainly a laggard among other OECD countries which have deregulated crowdfunding regimes. We have much to learn from the New Zealand experience. While regulatory concern is understandable there is a definete need to keep pace with new developments without which Australian companies will be left at a disadvantage. People like Equitize are already finding ways to work around the system. It’Ees better to make the current system work than force people to go outside.
Midori: Will you be expanding your platform outside of Australia?
Moresh Kokane: No current plans, for the simple reason while we are at the vanguard in Australia, much of the world has similar systems in place. New Zealand perhaps but that would be it.
Midori: How do you see crowdfunding impacting traditional finance in Australia?
Moresh Kokane: I don’t foresee disruption in the near future. It will stay limited due to the nature and scale of things here. But I sincerely believe that investing in local projects is safer than investing in Collateralized Debt Obligations which no one had any clue about. Simply put, investing in your community is a safer and more productive way than making a punt in stock markets where money goes more towards making the bonuses of fat cats.