Alternative Real Estate Fundraising
Alternative Real Estate Fundraising is Possible
Samana Group’s primary mission is to develop our beautiful region with full respect for its natural heritage. With the support of the Dominican government, we implement solutions that allow us to develop investments while preserving the local flora and fauna. A manifestation of our philosophy is the master plan for spatial development, which allows for construction on only 20-25% of the land, without disturbing the natural form and landscape of the remaining area. This is a radical idea in terms of real estate industry standards, and represents a reversal of typical building intensity proportions. Our decision has many consequences and requires a change in the financing model.
The real estate industry is generally characterized by a hermetic and conservative nature, with funding relying on banks, venture capital funds and investment groups. The ticket sizes, or investment amounts, are so large that investors have a significant influence on the future of projects. In practice, this allows the largest players to exert pressure to maximize profits, primarily through high intensity construction. We cannot allow this, so we had to develop a different fundraising strategy to protect our master plan.
Large investment packages from the major players are effectively a surrender of control over the project. So we want to rely on much smaller investments, but from a large number of fragmented entities. This will allow us to deliver the promised product to the market, emphasizing the concept of “living in nature, as highlighted by our CEO Marek Zmysłowski.
To achieve this, we use funding models that are more typical of startups than developers, such as investment rounds that bring together groups of investors with small tickets but significant benefits. In addition, we raise funds for specific projects within Samana Group Holding, not for the Holding itself, thus retaining control over the company. A significant part of Samana Group’s fundraising also involves flexible convertible loans, which can be cashed out after one year or reinvested in our company by converting into shares or property with a significant bonus on the loan value.
Low building intensity, the dominance of wild nature and living close to nature are arguments that may not necessarily convince conservative funds and banks. However, they are widely appreciated by private market observers, future Samana residents and individual investors. So we quickly realized that crowdfunding was almost tailor-made for our project. Our journey began with a campaign on Emiteo where individuals could buy shares in Nomad City. We then made a successful debut on the Polish crowdlending platform Crowder.pro, offering the opportunity to invest through short-term and highly profitable loans. Our first campaign exceeded its target by 66%. The next one, in November this year, was astronomically oversubscribed by 141%! The success factors are undoubtedly the exceptionally attractive interest rates of 18-20%, which may seem surprising in their magnitude. However, we see a broader potential in crowdfunding, as described by Marek Zmysłowski:
The offer of high returns from loans largely fits into the marketing costs. Our campaigns received a lot of publicity, which allowed us to reach a whole new group of potential clients. Moreover, what is difficult to see from the outside is the synergy between the cost of acquiring investors and the cost of acquiring customers. Of those who have invested with us on Emiteo or Crowder, several have gone on to buy villas or apartments from us.
The success of crowdfunding has convinced us to introduce further market innovations for private investors. Following the huge popularity of REITs around the world, we plan to launch a proprietary platform for investing in Samana Group properties like shares. This means that there will be no need to have the capital to independently purchase properties in order to benefit from vacation rentals or their growth in value. Fractional ownership will allow individuals to generate a fully passive income proportional to the number of shares purchased in a chosen property.
To sum up our crowdfunding adventure, we believe in social mechanisms because they allow us more flexibility and innovation. We choose to share the profits with individual investors who believe in our vision, with all its ambition, radical environmentalism and love for the Dominican Republic.
We want to change the rules of the game in the real estate market, and for that we need a community that supports our innovative perspective, not the pressure of large investment organizations that limit it in order to maximize profits.