Just more than a year after Indiana-based Mainstreet crowdfunded $1.6 million within a month toward a new senior living development, the property has been sold and investors have already seen a 14% return, but the developer isn’t sure if it’s a fundraising model likely to be used again.
In April 2014, the short-term rehabilitation and boutique skilled nursing facility developer Mainstreet rolled out a crowdfunding investment initiative for Stonecroft Health Campus, a short-stay transitional care and assisted living community in Bloomington, Indiana. Within weeks, Mainstreet raised $1.6 million through CrowdStreet, a crowdfunding platform that connects accredited investors with professionally managed real estate opportunities, exceeding the project’s fundraising goal of $1.5 million.
Now, Stonecroft has been sold to Health Care REIT (NYSE: HCN) and will be operated by Trilogy, and the project’s dozens of investors have received a 14% annualized return—10% of which was distributed on a quarterly basis with a 4% premium paid upon disposition of the asset.
This is an accomplishment that Mainstreet Executive Vice President of Investments Scott White believes makes Mainstreet one of the first to raise capital in this format and go through the full cycle of investment.
Despite its success, White tells SHN that he’s unsure whether Mainstreet will employ crowdfunding for future projects. The $1.6 million raised by investors, for example, contributed significantly to Stonecroft’s $13.38 million development price tag, White says, but would hardly make a dent in Mainstreet’s plans for $5 billion in post-acute development over the next five years.
“It’s not scaleable enough, and it just doesn’t move the needle that much,” he says.
Still, there’s an undeniable appeal to crowdfunding, particularly its democratic nature that opens fundraising to a “broader universe of investors,” White says.
“There’s no doubt it’s starting to grow,” he says.
Written by Kourtney Liepelt