Estate Baron Adds White Label Option

Estate Baron, a Melbourne-based crowdfunding startup, has announced an initiative to allow property developers the ability to crowdfund their property development projects online by using the Estate Baron platform as a white label service. Estate Baron co-founder, Moresh Kokane, says that the concept will provide a “revolutionary step forward in how developers raise capital for their developments.”

“Property developers are facing a funding gap. Bank policies and pre-sales requirements are getting tighter, and equity and mezzanine funding for property development is harder to find. Property Crowdfunding is a much easier, cost effective way to raise capital for property development,” says Kokane.

Estate Baron can now provide developers with the technology to create their own customizable crowdfunding platform, giving them the opportunity to promote their projects online.

Providing a promotable customised offer document, white label enables property developers to raise any amount of money from an unlimited number of investors, while also providing them access to an extensive user base of thousands of interested investors. The White Label product is said to have already hosted property developments projects in both Sydney and Gosford.

Estate Baron recently closed a successful investment round in which they raised over $500,000 from investors to build the Mount Waverley Townhouse development.

Update: Australia’s Estate Baron Lowers Minimum Investment to $2,000; No Limit On Number Of Participating Investors

estate baron mount waverley

Estate Baron, an Australian real estate crowdfunding platform, now has no limit on the number of investors that can participate, which has allowed the company to bring the minimum investment down to $2,000.

Founder Moresh Kokane explains this means Estate Baron has made one of the first true retail property crowdfunding offers possible. He writes that last year, the company did two projects under a wholesale Australian Financial Services License (AFSL).moresh kokane

While those offers helped us test the concept, we were limited to 20 investors only under current regulation in Australia. Since then we have been hard at work, instead of waiting for deregulation we put in the grunt work and have secured a Retail AFSL and a full PDS [Product Disclosure Statement] for our upcoming offers.

In a LinkedIn Pulse post, Kokane clarified what is necessary for a full retail crowdfunding offer in Australia:

Sydney Australia1) You need a Retail Australian Financial Services License
If you are in the business of promoting offers then you need a financial services license. This is whether or not you are promoting to wholesale or retail investors. If you are only restricting yourself to wholesale investors the burden of compliance is lower and such Australian Financial Services Licenses (AFSL) are easier to obtain.

But if your offer is being made to Retail investors then you are held to a higher benchmark and ASIC goes out of its way to ensure investors are protected. So you need what is called as a Retail AFSL.

2) A Registered Managed Investment Scheme (MIS)
The MIS you setup to structure the investment needs to be Registered with ASIC if you are going to take more than 20 investors. ASIC reviews it and then assuming everything is ok you get your signoff. This process can take months or even years. And it is extremely crucial that you get this right. Any changes to the structure again need to be reviewed and signed off by ASIC.

estate baron logoEstate Baron also has a new offering, Mount Waverley Townhouse Development, with funds being raised to construct two architecturally designed townhouses in Mount Waverley, Victoria. Kokane notes that this offer is special because it is one of the first offers of its kind in Australia and is open to everyone, not just big investors. It allows the platform to take on more than 20 investors, as it is a Registered Retail MIS under a full retail AFSL. The total required is $500,000, and as of this writing $250,000 has been raised, with 75 investors interested.

Q&A: Estate Baron Co-Founder Moresh Kokane Talks Access To New Australian Financial Services License & Real Estate Crowdfunding

Melbourne Australia Skyline Estate Baron
Australia’s crowdfunding scene recently took the spotlight with the news that CoAssets, a Singapore-based real estate crowdfunding platform, would publicly trade shares on NSX, an Australian stock exchange. On the investment side, Aussie real estate crowdfunding platform Estate Baron has recently secured backing of note: from Benni Aroni, founder of WaterSun Homes and lead developer for Australia 108 and Eureka Towers, among the tallest towers in Melbourne and Australia; and Adrian Stone, founder of Angel Cube, a local Melbourne tech accelerator for startups modelled after TechStars and Y Combinator in the United States.
moresh-kokane
Currently, Estate Baron has $ 560,000 of funds invested, 312 investors and two live projects. Estate Baron’s co-founder, Moresh Kokane, recently shared the platform’s latest updates with Crowdfund Insider.

Midori Yoshimura: How much did Angel Cube founder Adrian Stone invest? 
Moresh Kokane: I have been chasing Adrian to invest in this since the inception of the company. He had refused about 8 months back, but I secured seed from someone else and kept him posted on the progress we were making regularly over the next 6 months. He also served as an informal adviser for me.
Eventually he was satisfied that we had made significant progress and he decided to invest.
Benni Aroni is an introduction from Adrian and and he has been a tremendous source of strength for us. He has taken an active interest and is opening a lot of doors for us.
While I cannot divulge the exact breakdown of the investment, I can tell you that we achieved a 2M valuation with a 400K raise.
adrian stone 2
Midori: How will you use this capital injection?
Moresh: Marketing, sales and tech development. We took some of our part timers full time and this also gives us some much needed muscle to push our marketing. Note that our promotions are limited only to Melbourne as of now. So you wont find any ads running if you are in Sydney, Perth or other cities.
My logic is simple. Real estate crowdfunding is embryonic in Australia. People are not going to go click click click and invest 10K in an online platform. They would still want to know who is standing behind these projects, we personally meet every investor and conduct a lot of meetups. Also having local investors and local projects gives investors the opportunity to visit the project personally if they wish to which should help shore up credibility.
Six months down the line we will have enough credibility and tech maturity to facilitate the processes online.
Midori: What are your thoughts on the competitive environment for real estate crowdfunding in Australia?
Moresh: We fully expect a lot of new players to enter the area. We would be worried if there was no competition. However it must be noted that both BrickX and Venture Crowd Property are essentially arms of existing financial firms rather than pure scrappy startups.
But we believe that with our retail license coverage and underwriting capabilities plus local focus we have a strong competitive advantage on the others.
In Australia currently you can only raise upto 2 million from a maximum of 20 retail people per offer in 12 months. Most real estate deals are above 500K. Which means that the minimum you need to raise from one retail investor is atleast 25K (which is not a small amount). So when we hear claims that you can buy a brick for $100 or invest with only $66 it is essentially misleading advertising. What they are really saying that you can make an offer to invest $100 but we will probably not end up accepting your offer.Estate Baron Logo 2
The only way you get beyond this is do a full retail Public Disclosure which is expensive and time consuming. But it has to be noted that Fundrise early on did the same thing to be able to reach a wider audience.
Midori: What are your thoughts on the recent announcement by CoAssets to move into Australia?
Moresh: CoAssets is going to face the same regulatory challenges as everyone else. It will help educate the market.
 Australia Currency Crowdfunding Quote
Midori: Are you considering expanding your platform into other countries?
Moresh: China already has some strong players. Wanda Dalian has made a foray in this area. But we are exploring ways in which we could connect Chinese investors to deals in Australia online. There are some regulatory hurdles we will need to cross for that. Separately India is a great opportunity, but the regulatory hurdles there are even bigger. We want to tap the large and wealthy Indian diaspora who are not governed by local regulations but yet can invest and purchase property in India. But for now we are focused on Australia, and even in that primarily Melbourne.
Midori: How many deals / amount of transactions have been completed since the platform launched?
Moresh: Completed, two. Three are about to go live.
Midori: How is deal flow?
Moresh: We have possibly the strongest partner you can ask for. Benni is handling deal flow and due diligence. You have to remember he played a key role in both Eureka and Australia 108. There is no shortage of project developers seeking finance, our focus is primarily on securing the investors interests.
Midori: What are your thoughts on the regulatory environment for new finance in Australia? 
Moresh: Some deregulation is expected and it is being discussed that we will take the New Zealand route so that there will be no limit on how many people can participate upto raises of 2 million. While I think that would be a great thing for small businesses and startups who are often cash starved early on it would be a mistake to expand it to other financial investments including property. Australians love property and we have a special class of people here who evangelize about property known as “Spruikers”. Unleashing spruikers on unsuspecting mom and dads is dangerous. All property deals need to go through full disclosure documentations.
 New Zealand Flag
Midori: You are commenting that no other crowdfunding platform in Australia also has a retail Australian Financial Services License? Why was it important for Estate Baron to pursue this? What are other distinctive characteristics of Estate Baron?
Moresh: As mentioned earlier under current Australian law you are allowed to raise only 2 million from 20 people in a year. All the other competitors are facing this limitation. There are also severe limitations on what you can promote for such offers.
In order to achieve true crowdfunding the only real option is to do a full public disclosure which removes both the restrictions on promotions as well as allows any number of retail investors to participate. This allows us to have people invest as little as $2000, we could go lower but admin cost starts getting high beyond that.
Note that we don’t have the license ourselves but have an access through our fund manager partners.
The other key thing we decided to do was this. In a real estate deal you put a deposit and settle 30, 60, 90, 120 days depending on what you negotiate. In this period the developer needs to raise the remainder or he looses the deposit. If the fund raising fails the developer will be in trouble. So we partnered with a major bank here who will underwrite every project we participate in.
This would mean that every project listed on Estate Baron is essentially prefunded, and carries no risk of fundraising failure. This is the same model Fundrise has employed and we are essentially emulating them. This is again a key differentiator for us.

Q-&-A: Estate Baron Co-founder Moresh Kokane Discusses Real Estate Crowdfunding in Australia

Real Estate Crowdfunding Australia Estate Baron

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,moresh-kokane

“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

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.

Estate Baron DealsMidori: 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.

Australia FlagMidori: 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?Estate Baron Logo 2

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.