“Let's stop criticizing our banks!”

More than ten years after the subprime mortgage crisis, all the light has not been shed, and yet the idea of ​​the guilt of the banks has taken hold firmly in people's minds. They are even blamed for the double fault, since after playing with fire and triggering the crisis, they allegedly asked for help from the States. This unanimous condemnation, the result of incomplete analyzes, is a heavy component of the bank bashing that has raged since then and unfortunately works against our interests. We are indeed at a critical moment when Europe, faced with the domination of American finance and the dollar, must develop its own financial capacities. The development of a strong pan-European financial sector is therefore essential if we particularly want to foster the emergence of future European gafas. 
If it is vain to hope for the complete disappearance of this bank bashing and, one might say, of the bashing market whose roots plunge both in history and in ignor…

The crisis, a new chapter in the history of real estate crowdfunding

Crowdfunding, and especially real estate crowdfunding, has continued to evolve over the years. A change which continues in a period of health crisis and which should benefit both project leaders and investors according to our columnist CĂ©line Mahinc, founder of the firm Eden Finances.

“Finance” comes etymologically from the old verb finer which meant to finish, to finish. And it is in this context that the first crowdfunding project, a marriage of "crowd" and "financing", was born. Thus, we can consider that it was Joseph Pulitzer who inaugurated the 1st crowdfunding project in 1884, when, through the publication of his daily New York World, he asked the American people to make financial donations so that the construction of the Statue of Liberty pedestal can be finalized. Over 125,000 people contributed and Pulitzer raised over $ 100,000 in 6 months.

Imported from the United States, the use of crowdfunding continues to grow. Originally, crowdfunding primarily aimed at financing, through donations, cultural or humanitarian projects. Today, crowdfunding is aimed at all sectors of activity, and almost all types of companies, start-ups and SMEs, and even some mid-sized companies - whose interest should develop with regard to the evolution of the fundraising ceiling -, who see it as an additional source of funding with certain unique advantages.

An obvious solution

In general, crowd funding consists of connecting, by means of a website, the holders of a defined project (purchase or set of purchases of goods or services contributing to the realization of a predefined operation in terms of object, amount and schedule) and the people financing this project. In most cases, project leaders submit them to the platform for acceptance: they then send them a presentation and a fundraising objective. After selection, the projects are put online on the platform for a determined duration and amount of funding.

Real estate crowdfunding represents the most dynamic crowdfunding segment since, in general, it benefits the most from the development of this participatory finance, with increases above the average for the sector.

The usefulness of crowdfunding in real estate

In Europe, no less than 21% of project leaders use real estate crowdfunding repeatedly. In France, more than 500 promoters have resorted to crowdfunding at least once. There are also well-known brands among carriers calling on real estate crowdfunding: crowdfunding is not reserved for carriers in financial difficulty; it must even be the opposite!

While historically real estate crowdfunding has primarily concerned the sole financing of real estate development programs, today it is appropriate to retain a definition in a broader sense, with four main classifications. Even if we still see a strong predominance - 59% of the real estate crowdfunding market in France in 2018 - for real estate development projects, we must note that this type of project is on the decline, to the benefit of purchase-resale or property dealers, which now accounts for a third of real estate crowdfunding. Then come rental real estate (6%) and corporate financing (entrepreneurial financing, 3%).

Thus, real estate crowdfunding is multifaceted, from the financing of a project leader to that of a specific project. Its development - and with it new investment solutions - is not only linked to the promise of attractive profitability. It is an unequivocal marker of new development and / or revival opportunities, complementary or exclusive to traditional solutions.



The moral of this story

Perhaps counterintuitively, real estate crowdfunding could - ultimately - emerge from this Covid period even more structured and in fact more transparent. It will first be necessary to pass the course of a weighting - stronger than usual - of late projects, even of defaulting projects… It is indeed not surprising that projects financed in 2018 or 2019 are late in 2020 and 2021, since real estate is still subject to cyclical risks, the Covid period being no exception. But in doing so, and the global economic situation being able to further accentuate these delays, it is possible that some project leaders will be put in great difficulty.

So it seems imperative that the investor - aware of the risk of loss of capital and illiquidity, and in accordance with his aversion to risk - take the time to define the types of projects he wishes to finance, the destination of these projects. , their location,… He should take the time to analyze market studies, study the characteristics of the project leader, carefully read and understand the DIRS (Synthetic Regulatory Information Document). He will thus be able to have an overview of the proposed project (typology, destination, financial structure, costs, reimbursements, etc.) and establish the benefits and risks, which seem to us to be the essential stages of his investment reflection.

This will also, we hope, promote market access for businesses and investors and thus strengthen the competitiveness of the financial center and businesses, and thus participate in the recovery.

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