What is a Club deal in real estate? Comparison with crowdfunding and syndication
Wissens | February 27, 2019
At BrickVest, our investment opportunities are structured as club deals. A club deal brings together a limited number of private investors who will collectively invest into one or more properties. These are most often commercial real estate (office, industrial, retail, hotel, etc.) and, more rarely, residential. It allows investors to raise more capital for investments into properties, which typically an individual investor would not have access to. By doing so each investor can diversify their risk while also receiving an exposure to deals.
Club deals vs crowdfunding
Unlike an investment in collective real estate products or traditional fund which gathers several thousand investors and invest in various properties, a club deal concerns a limited group of individuals and a reduced number of real estate properties. These properties are therefore perfectly identified, which allows investors to better target performance and potential risks according to their expectations.
The main difference between a club deal and crowdfunding lies in the fact that in the club deal, participants are part of an exclusive and restricted group of qualified, experienced and financial investors whereas crowdfunding aims at raising money from a large number of people without any requirement and through the internet.
Club deals vs syndication
Syndication is also a way for investors to acquire economic interests in properties or to participate in real estate projects by pooling their capital together. Unlike club deals, with a syndicated loan, a lead bank or sponsor handles the management tasks and controls most decision-making while other investors bring the money and rely on the sponsor to make the project lucrative. The sponsor is compensated through fees paid by investors, and the profit is shared between investors and the sponsor through an arrangement.