Crowdfunding REITs: a new asset class for the real estate industry?
| Pages | 84-96 |
| Date | 30 March 2020 |
| Published date | 30 March 2020 |
| DOI | https://doi.org/10.1108/JPIF-08-2019-0112 |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
| Author | Lucia Gibilaro,Gianluca Mattarocci |
Crowdfunding REITs: a new asset
class for the real estate industry?
Lucia Gibilaro
Department of Management, Economics and Quantitative Methods,
University of Bergamo, Bergamo, Italy, and
Gianluca Mattarocci
Department of Management and Law, University of Rome Tor Vergata, Rome, Italy
Abstract
Purpose –The paper aims to study the performanceof crowdfunding REITs with respect to traditional REITs
in order to evaluate the differences in the risk–return profile and their usefulness for a diversification strategy
within the indirect real estate investments.
Design/methodology/approach –The paper considers the crowdfunding REITs introduced after the JOBS
act in the United States and evaluates their performance and risk during the time period 2016–2018.
Performance achieved by crowdfunding REITs is compared with other types of REITs in order to evaluate
their usefulness for constructing an optimal portfolio strategy based on a standard mean variance approach.
Findings –Results show that the performance of crowdfunding REITs is more stable over time with respect to
other REITs and the lack of correlation with traditional REITs may be exploited for constructing a more
efficient diversified portfolio of indirect real estate investments.
Practical implications –Crowdfunding REITs have different performance with respect to standardREITs
and,especiallyindividual investors,may benefitfrom includingthis new investmentopportunityin their portfolio.
Originality/value –The paper is the first study on the performance of the crowdfunding REITs that is
evaluating their usefulness for a diversification strategy within the real estate sector.
Keywords Performance, Diversification, REITs, Risk, Crowdfunding, Optimal portfolio
Paper type Research paper
1. Introduction
Fundraising for new investment projects has changed due to the innovations introduced by
the availability of Internet-based financing solutions that allow increasing the number of
investors that may support the development of business ideas. In the real estate industry,
crowdfunding has started by exploring the opportunities of offering loans for real estate
projects to borrowers that cannot easily access the standard lending market (Gibilaro and
Mattarocci, 2018). The success of the peer-to-peer lending experience has boosted the interest
into raising funds through equity crowdfunding in the real estate sector; in light of the
average size of real estate investments and considering the limited number of accredited
investors in the US market (Scarpfs, 2015), an enabling factor for the diffusion of equity
crowdfunding has been the relaxing of regulatory investment constraints introduced with the
Jumpstart Our Business Startups Act (hereafter, JOBS act) (Schweizer and Zhou, 2017). The
opportunity offered by the JOBS Act was explored by some players in the real estate industry
to increase the number of small and unsophisticated investors (Vogel and Moll, 2014)by
leveraging technological developments and federal regulation to maximize the return and
JPIF
39,2
84
This paper forms part of a special section “PropTech and Entrepreneurship - Innovation in Real Estate
II”, guest edited by Dr Larry Wofford, Dr David Wyman, Dr Elaine Worzala.
Authors are grateful to the editor, the two anonymous referees and all participants to the EPRA panel
organized during the European Real Estate Society 2019 annual meeting for all the useful suggestions
for revising and improving the previous drafts of the paper. The article is the results of authors’
combined efforts and continuous exchange of idea. The introduction and literature review has to be
ascribed to Lucia Gibilaro and all other sections to Gianluca Mattarocci.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1463-578X.htm
Received 17 August 2019
Revised 9 February 2020
Accepted 12 February 2020
Journal of Property Investment &
Finance
Vol. 39 No. 2, 2021
pp. 84-96
© Emerald Publishing Limited
1463-578X
DOI 10.1108/JPIF-08-2019-0112
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