Bloomberg Radio hosts DiversyFund CEO, Craig Cecilio
CEO, Craig Cecilio, gets interviewed by Carol Massar and Cory Johnson at Bloomberg Markets. Massar and Johnson ask Craig what is different about DiversyFund. They go over the pillars that make DiversyFund a platform that is different than the rest. Now offering new ways to invest in Real Estate for Accredited and Non-Accredited Investors.
Listen to and audio recording of this interview, above, and the following is a full-recap as well.
Carol Massar (CM)
Cory Johnson (CJ)
Craig Cecilio (CC)
Announcer: You are listening to Bloomberg Markets with Carol Massar and Cory Johnson on Bloomberg Radio.
CM: Yes, indeed, everybody! Bloomberg Markets on this Wednesday Afternoon. Crowdfunding for Real Estate investing and how about we throw something else into it with the social impact. Craig Cecilio is CEO and Founder of DiversyFund based in San Diego. In our New York studio here on this Wednesday. Nice to have you here. We’ve been talking back and forth, because he said, “Wait a minute, we do something different,” but we’ve talked to a few people who do crowdfunding in real estate. What is different about it, because you tend to know all the players in this world. What is different about what you guys are doing? And welcome.
CC: Thank you for having me on the show. We are a 100% vertically integrated platform. So that means that we are not only the developer in management of the asset but our constituents, our investors, own part of the asset as well. So that is a major difference.
CM: So, you own the projects?
CC: We own the projects. We own the property.
CJ: So, you are also managing the property, you are also managing the tenants and all that heavy lifting?
CM: Why? Why do you think that…?
CM: Exactly! There is a lot of risk in that.
CJ: There is a reason why people don’t want to manage that.
CC: I would say there is more transparency. There is better quality control. When you are using other people’s money to fund projects you would like to be able to have as much quality control as possible.
CM: So, you’ll never sell that project? Will you ever sell that property?
CC: In some cases we will for returns, we’ll sell some properties. Some properties we’ll want to hang onto. The income producing properties. We have a mixture of both types of properties in our portfolio.
CJ: So, we had these guys, last week and they talk about a similar notion of allowing some investors who aren’t so flush into these real estate deals and I wonder if there was something. If the fact that you guys are getting into this track, they are getting into it, I wonder if there was some kind of tax law changes or investments in the JOBS ACT and a law that allows these kinds of vehicles to be available to accredited investors.
CC: We got active with the vertically integrated platform in November 2016. It was the first time we took money across our platform or our website. We’ve been in the process right now of opening up to non-accredited investors which is a 9-12-month process. So, since we just started in November of 2016, we’ll probably be activated right around April of 2018. A pretty good period of time. That would open it up to non-accredited investors for as little as $500 dollars.
CM: Wow. That would open it up to non-accredited investors? Wow! That’s a really… Why do you want to do that?
CC: Why not? It’s opening up alternative investments to people who otherwise didn’t have that opportunity. So the average Joe has a chance to make money in real estate who otherwise would never have a shot at it. Nobody is going to call that person up to do their project.
CM: And these big projects you are talking about?
CC: Large projects. We are talking about 20-million-dollar plus projects. So it made sense to do that.
CJ: You are based in San Diego, but where are the deals?
CC: Throughout California and the western US.
CJ: And how do you source the deals? How do you find them? Because I’m telling you, if you want to invest, I’ve got a bridge to sell. There are a lot of deals out there. So how do you find the good ones?
CC: I’ve been in Real Estate since 1997, so I’ve formed the relationships. I came out of the market downturn with my relationships intact, so that means that all the brokers and everyone in the real estate industry knew who I was beforehand. There was a percentage of better deals upfront. It was kind of real relationship building over a long period of time. So that is actually our strength. It’s very easy for us to source deals.
CM: It’s interesting, so tell me what you guys are seeing in the Real Estate market at this point? What’s it look like?
CC: It’s a really healthy market out here with a limited supply of land to develop out here, as well as, if you are into commercial, we are very heavily invested in the mixed-use with commercial markets as well. Local areas and sub-markets, we kind of know the zoning and the ordinance in those areas. So, we have a lot opportunity to build multi-units. Just for us, it’s like the perfect storm for us.
CM: Do you want to stay in California? Or are you looking to spread?
CC: We are looking to spread just based on the markets at that point in time when we get there. Our pipeline is pretty big right now. We did 100 million the first year. This year we have up to half billion dollars pipeline. Probably could build that up to a little over a billion dollars just within the state itself.
CJ: And, as you work on these deals, give me a sense, you mentioned commercial, but what do they look like? In what kind of deals are you seeing the best value right now?
CC: The commercial deals. I love mixed-use commercial in blighted neighborhoods. Something that has a lack of inventory of housing.
CJ: Blighted neighborhoods such as?
CC: Blighted is something that is kind of transitioning into gentrification. So, it’s an older property, that maybe it’s been upzoned in the specific submarket. Where maybe traditionally you can build 20 apartments, today you can build 60 apartments. A lot of communities are like that are in California, their local governments are passing these ordinances and those zonings to allow more housing in it because of the lack of land and lack of supply of housing, so there is a lot of opportunities there.
CM: Yeah, I was just looking. That’s interesting. I mean, what, give me the breakdown of the kind of properties? What’s the majority of your properties that you are developing?
CC: I would say it’s a mixture of both. It depends on the deal that’s presented at that point in time. We do have some great relationships with the single families, but it’s got to be the right transaction. It has to be the right… everything has to come together. It has to be the right property, it has to have the right returns, and it has to have the right team involved with it. As well as the mix-use stuff -that stuff, that pipeline has grown exponentially recently. So we are going to kind of let the foot off the gas in the single families in a little bit with that.
CM: What’s been your return so far? You’ve got about a year in?
CM: And what have been your returns?
CC: The majority of returns are double digits to our investors.
CM: Double-digit teens?
CC: Double digit teens, correct.
CM: Because there is 99% and there is 15%.
CC: I always err on the side to like 10%. I always go low. I never like to say a thing like we are going to guarantee more than that and to even use that word.
CM: But you are anticipating that if you guys can lower it down to where investors can come in for under $1000 dollars, that you’ll get a lot more investors. Just got about 20 seconds.
CC: Yes, thru technology, yes.
CM: The technology makes it easy. Ready Cory? Ready to invest in a property?
CJ: Sure. Sign me up! And I’ll take a bridge too. They are nice to look at.
CM: Craig Cecilio, thank you so much for coming in and for letting us know how things are going.
CC: Thanks for having me.