By Joshua Burd
NAI DiLeo-Bram & Co. has unveiled a new online equity raising platform, seeking to tap into the future of private real estate investing and expand the pool of would-be investors.
As part of its first offering, the Piscataway-based firm is raising capital to acquire a 28,000-square-foot industrial building at 108 Somogyi Court in South Plainfield. Its target is $700,000, but the new platform allows the firm’s principals to reach that goal in a way that is far different from the age-old model in commercial real estate.
“There are other firms already engaging in it, but it’s attracting new capital,” said Greg Brown, managing director with NAI DiLeo-Bram. “Before, you couldn’t invest only $25,000 in a deal unless you knew somebody, so what we’re trying to do is attract not only people that are new or foreign to private real estate, but open up other opportunities to those that are already familiar with it, but for whatever reason haven’t connected before.”
It’s an opportunity that has become available in recent years. Under decades-old federal regulations, businesses seeking to raise funds had been limited to people they knew or could be introduced to, but those restrictions were loosened under the 2012 Jumpstart Our Business Startups Act, or JOBS Act, which was largely geared toward helping small businesses.
That has allowed firms such as NAI DiLeo-Bram to essentially sell securities for an investment through means such as email blasts. In its new platform, the firm has partnered with the Burlington, Vermont-based company Venture.co, which Brown said specializes in private capital raises and is registered with the Financial Industry Regulatory Authority.
That provides an additional layer of compliance and security for investors, Brown said.
“As we look for ways to differentiate ourselves from other brokerage companies, we saw this as a strategy to offer an additional solution that is very different, because it requires us to be affiliated with a broker-dealer, (given that) we’re selling securities,” he said. “We’re not selling fee-simple interest in real estate.”
The firm, led by principals Robert DiLeo and Eric Bram Johnston, is seeking a minimum investment of $25,000, which is available to accredited investors under the federal government’s Regulation D 506C guidelines. The property on Somogyi Court is leased for five years to Everlasting Valve, which has occupied the building since it was built in 1985.
The building includes about 3,000 square feet of office space and 25,000 square feet of industrial space, NAI DiLeo-Bram said. Spanning 1.45 acres, the property features three tailboards and one drive-in door, 21-foot ceiling heights and 208-volt, 800-amp service.
Brown said the firm has seen a positive response since launching the platform last week and plans to use it for several additional offerings in 2018. And he believes it will open a new frontier for a business such as NAI DiLeo-Bram, in part by shortening the capital-raising cycle for properties that the firm would pursue under normal circumstances.
“I think it’s part of the future growth of our industry,” he said. “There are big brand names that are getting into this space, so I think this way of investing is going to become ubiquitous.”
Regardless of how long it takes, he made the analogy to the growth of online stock accounts through operators such as E-Trade or TD Ameritrade. What was previously seen as a radical way to invest is now commonplace, he said.
“I think this is also going to be very commonplace, and the shops that adopt it sooner I think are going to be well-positioned to take advantage of it,” he said.