Fund.me, an international real estate investment platform, has announced a $50million real estate fund in partnership with global blockchain innovators Bloqhouse of the Netherlands, and ChromaWay of Sweden. The fund was launched at the Dubai FinTech Summit that took place at the Madinat Jumeirah in Dubai, UAE. Following the event, The Fintech Times sat down with the company’s CEO to learn why it was created and the reason for its launch at the Summit.
“This is one of the first blockchain offerings ever focused on the US housing renovation market. It has demonstrated gains of more than 40 per cent over the past five years,” said Manly Danh, founder and CEO of Fund.me. “The platform represents a pioneering approach to fintech. It gives investors access to luxury real-world assets through the power of blockchain technology within a risk-mitigated environment.”
When speaking to The Fintech Times, Danh explained how the idea for the fund came about. Historically, in a typical fund, when an investor decided to invest in a fund, there would usually be a lockup period of five to seven years. During this time, they would not be able to call their capital if needed or sell their portion of the fund. However, by using blockchain technology, these issues can be avoided.
“After a year of being in the fund, investors are able to liquidate to whomever they want. If they wish to stay in the whole term of the fund they can, but if they want, they can also sell to another investor, to their peers, or to an investor from our pool of investors,” explained Danh. “We chose to use tokenisation as we want to create a transparent way of investing into a fund. All the while giving our investors a way out if they want.”
Forming the fund
The idea came about following the last crypto bull run, Danh added. Many investors found themselves with newfound wealth and were looking for new ways to diversify their portfolios. By combining digital assets with real-world assets, and tapping into the new market, Fund.me was created.
“This fund solves an essential problem in the current financial market – access to needed capital,” says Danh. Danh launched Fund.me in 2018 with a mission to democratise access to real estate capital across the entire capital stack. “Current economic shifts make now an opportune time to invest in real estate, which has historically outperformed stocks, bonds and other investments. But most investors can’t get into deals like this. That is where the Fund.me mission comes to life.”
Avoiding typical risks
Investors in the fund will receive fractional ownership in the luxury US real estate market without the risk of a lien position.
“This is a rare structure through which investors hold a preferred position in the capital stack over two years, with a targeted annualised risk-adjusted return of 20 per cent,” Danh explained.
The fund earns its returns by taking equity positions in real estate projects through a joint-venture structure. Ultimately, it generates both pref and profit participation which combine to reach the 20 per cent target.
”Risk is mitigated through conservative underwriting, specific geographic targeting, and the inherent fund structure. This spreads investments across several projects and is secured by the transparency, security, and accessibility of blockchain technology,” Danh notes.
Collaboration is the key to success
To bring the fund to life, Fund.me formed a new partnership with software innovator Bloqhouse. The latter is known for creating products that enhance the accessibility and transparency of financial markets. The fund’s relational blockchain is provided by ChromaWay. It gives investors an online place to access and manage their investments.
By placing equity into projects as a joint-venture partner, Fund.me is capable of structuring deals up to and sometimes above 90 per cent loan-to-cost. This enables real estate developers in the most active US markets of Florida and California the flexibility they need to operate healthy businesses and bring new projects to market.
Global investors are benefiting from the high demand for US luxury homes. With this new blockchain offering, global investors now have access to projects and risk-adjusted returns.
Why launch at the Dubai Fintech Summit 2023?
Danh told The Fintech Times why the fund was launched at the Summit: “Due to the rough economic climate currently, many are reluctant to part with their capital in the US. However, outside of the US people look at things through a different lens. Instead of viewing this as a time to hold on, they see it as a time to invest.
“The biggest problem in the US is there is a shortage of inventory. Instead of ownership, a lot of institutional investors are buying rental properties and hiking up rental rates. This means people can no longer afford a home. Therefore, the problem we’re solving ultimately is not just the investment problem, but the housing supply problem.
“That’s our expertise. We know how to find opportunities, find supply and build and create supply.”
The Middle East is flourishing, with Dubai, Abu Dhabi and Saudi all competing to outperform each other. However, Danh highlights that other markets need capital. “From San Francisco to Los Angeles – these markets work, they just need revitalisation.”
The Dubai Fintech Summit 2023, under the patronage of H.H. Sheikh Maktoum bin Mohammed Al Maktoum, the Deputy Ruler of Dubai, Deputy Prime Minister, and Minister of Finance, serves as a global benchmark for enterprises and governments to explore financial innovation. The event attracts world-renowned thinkers, policy makers, and decision-makers to contribute to the development of tools, regulations, and frameworks essential for shaping the future of fintech and finance.