Crowdfunding has emerged as an increasingly viable means of securing capital for large-scale construction projects in emerging economies where conventional means of financing are scarce.
Primary construction work is about to wrap up on the BD Bacata building in Bogata, Colombia – the world’s first crowdfunded skyscraper as well as the tallest structure in the Latin American nation.
The developers of BD Bacata managed to secure financing for the 67-storey, 364-room hotel with the assistance of leading crowdfunding initiative Prodigy Network, with 3,800 investors pitching in over $170 million for the project by the time construction commenced in 2013.
Each of these investors holds an equity stake in the high-rise hotel, with some already reaping returns in excess of 40 per cent of their initial outlay.
The key advantage of online crowdfunding platforms is their ability to grant developers access to capital from just about any part of the world equipped with an Internet connection. AKA United Nations, an extended-stay hotel-condominium located in Midtown Manhattan that also secured funding courtesy of Prodigy Network, obtained around 90 per cent of capital for the project from investors located outside the United States.
The hotel is the first building in New York City to obtain partial financing via crowdfunding, with 116 online investors contributing over $12 million collectively to the $95 million budget for the project.
The enhanced access to funding provided by online platforms such as Prodigy Network could have a transformative impact on the financing of building and infrastructure projects around the globe – particularly in emerging economies where capital can be hard to come by due to a lack mature finance mechanisms.
In 2012 ago the viability of crowdfunding as a project financing receive a boost from the passing into law of the JOBs (Jumpstart Our Business Startsup) Act by President Obama, which enabled companies to accept contributions from as many as 500 unaccredited investors via crowdfunding platforms.
The use of crowdfunding to finance commercial real estate projects has already traction around the globe, with Massolution estimating the global figure for such developments to double this year and reach $2.57 billion, and over 150 crowdfunding websites operating in the US.