On May 22, a meeting of representatives of the investment community on attracting funding, "Real Estate Investments: The Era of Private Capital. Reaching the Private Investor" took place in downtown Moscow.
As part of her presentation on current and effective ways to attract investment, a member of the company Coldy’s Board of Directors drew attention to the opportunities and successful cases of long-term business growth through attracting private investment with such tools as bank loans, mezzanine loans, closed-end real estate unit investment funds, IPO and crowdfunding.
In her discussion with the event participants, Elena Oreshkina pointed out that in 2018, 83% of all the transactions in the real estate market were made by private buyers, who spent 619 billion rubles in total. At the same time, the cost of attracting comparable investments after transiting to project financing will amount to additional 37 to 55 billion rubles for developers.
“Under the influence of information technology, the world economy is still rapidly transforming, creating new segments within it, and changing the established ideas about financial instruments. In Russia, loans and credit lines are still the major source of external financing. Under new conditions, developers will need to spend more to attract the necessary financial resources for project implementation. However, the companies that want to make a quantum leap are interested in more affordable and cheaper financing. At the same time, many private and some corporate investors are willing to invest on early stages. IPO can become one of the solutions for obtaining additional financing for companies,” Oreshkina said.
According to her, the availability of shares in free float allows an assessment of the company value through the introduction of stock exchange listing. The market capitalization indicator can be used to assess the performance of a company’s senior executives, but it should be borne in mind that when forming a stock price, the speculative component usually has a significant influence. During periods of market growth, the stock is overpriced, and in periods of decline it is undervalued. The IPO is beneficial to companies that are ready for publicity, have sufficient capital of 500 million USD or more and financial stability for stock exchange listing. This is a very important step for a company on the path of strategic development. With increasing market transparency, an increasing number of developers will consider IPO as an alternative option to raise capital.
“To determine the goals of organizing an IPO, it should be understood that depending on the type of capital placement, the objectives will also differ. Therefore, such a step requires careful and lengthy study to prevent a dilution of capital and loss of control over the company. IPO has not yet sufficiently proven itself as a reliable means for attracting investment in a development project in Russia, but having a choice is always an advantage,” explained the company Coldy’s Head of Sales.
Crowdfunding, with its rapidly growing market, can become another interesting and promising way of financing large projects. Today, there are only two notable crowdfunding platforms in Russia, with minimum investment amounts of about 500 thousand rubles; the turnover of this market is 14 to 15 billion rubles a year. According to the Bank of Russia’s forecast, the crowdfunding market will grow to 1 trillion rubles in five years.