Really terrific CNBC dive into 30 Yieldstreet (biggest player in the space, acq. Cadre in early '24) deals has me asking: Is CRE crowdfunding doomed by design?
• 30 deals: 4 complete wipeouts, 23 watchlisted, 3 paused distributions.
Case study: 2010 West End Avenue in Nashville (Yieldstreet/Flow deal)
• Raising $$ to purchase rate caps 👲🏽
• Promised return: 20% 🫡
• Building eventually sold to Tishman Speyer for debt 🌊
• Yieldstreet: "We are reaching out to share difficult news." - i.e. wipeout
The 
of backers/investors is something- a16z funds Cadre at an $800M valuation in '18. Yieldstreet buys Cadre for ~$100M years later. Same a16z is Flow's biggest investor. More on the pod.
No scammy allegations (a la CrowdStreet/Elie Schwartz), but it's fair to ask if crowdfunding primarily attracts the dregs- the deals that can't find funding via the usual channels.
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The data you’ve shared paints a concerning picture of the CRE crowdfunding space, particularly with Yieldstreet's track record. Here's what stands out:
Performance Issues: Out of 30 Yieldstreet deals, 4 were complete losses, 23 are on a watchlist, and 3 have paused distributions. This suggests a high level of underperformance and risk, far beyond what most investors might expect.
Case Study - 2010 West End Avenue:
Crowdfunding Attracting Riskier Deals: The broader question of whether crowdfunding platforms primarily attract deals that can’t secure traditional funding is valid. These platforms often serve as a last resort for sponsors who may not meet the underwriting standards of institutional investors or banks.
Cadre Acquisition: Yieldstreet’s acquisition of Cadre for ~$100M, after its $800M valuation in 2018, reflects a significant devaluation. This could indicate broader challenges in the crowdfunding and CRE tech space, especially as investor confidence wanes.
Investor Dynamics: The involvement of high-profile investors like a16z in both Cadre and Flow raises questions about due diligence and the sustainability of these platforms. While there are no allegations of fraud (unlike CrowdStreet/Elie Schwartz), the consistent underperformance could erode trust in the model.
In summary, while crowdfunding offers accessibility to CRE investments, the data suggests it may disproportionately attract higher-risk, lower-quality deals. Investors should approach with caution, scrutinizing deal specifics and sponsor track records.
Sources: CRE’s Brave New World, https://www.wallstreetoasis.com/forum/real-estate/state-of-the-cre-debt-markets?customgpt=1, Real Estate Mezzanine Debt - Cause for Concern?, What's the catch in CRE?, CRE’s Brave New World
Guy, there are a lot of deals in the shitter. Are you telling me this is related only to crowdfunding? Curious.
Also, chase beta, reap the rewards.
I mean, 100% yes crowdfunding is for people who can't find money anywhere else and need to hoodwink unsophisticated, greedy rubes into deals.
However, I'd also imagine there is an aspect in which syndicators or shitty operators who don't use these platforms, simply have more options to deceive their investors or string things along. So to some extent I think the crowdfunding platforms are somewhat less opaque rather tha simply less successful
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