Why are pooled offers beneficial for investors?
To date, the majority of our offers have been limited to one specific development project. The typical investment process begins with a developer creating an investment offer for their project, in which investors can participate with small amounts. Investors' returns will then be linked to the performance of that specific project.
While this method gives investors choice and control, there was still a need for an investment model that could provide investors a diversified return by spreading their investment across various development projects. The investor would still be able to choose a specific strategy, such as investing in a pooled offer focusing primarily on renovations, or on short-term projects that are expected to take no more than a year to complete. Some pooled offers may offer a monthly return, while others may deliver a periodic dividend every 18 months or so. Depending on the style and type of the projects involved, the pooled offer participates in the returns and terms will differ.
From an investor's standpoint, this model provides them a diversified return rather than keeping all their financial eggs in one basket, but also allows them to address the most important questions around an investment. These most often include:
- What is the return?
- What is the money being used for?
- What is the term or duration of the investment?
- What are the risks?
From a developer standpoint, it allows them to focus more energy on their projects rather than putting together separate offer documents for each project, and all the additional paperwork and admin that goes with them.
But beyond these benefits, the pooled offer structure also opens up a whole range of new possibilities...
To date, all of our offers have been unlisted with no secondary market or liquidity, meaning that investors had to stay invested until the project was complete. Each offer was set up as a Special Purpose Vehicle, which would be shut down after the project completed, which meant that going through the additional expense of listing it on the ASX, or something similar, would be too cost prohibitive.
With a pooled offering, it is ongoing – similar to investing in a fund – while opening up the possibility of a secondary market. At Estate Baron, we are currently working on a secondary market based on the Blockchain. The eventual goal of this is to cultivate a marketplace where investors who participate in our investment offers can sell their shares to others before the project term is up – just as you would on the ASX.
There are a number of technological and regulatory challenges to be overcome in order to put this into action, but constructing the right framework for our offers has certainly set us on the right track.
We will keep you updated on the progress of our Blockchain-enabled secondary market, and soon enough, you will begin seeing a number of pooled offers listed on the Estate Platform.