In This Issue

1. Our Top Story

2. News Roundup

3. New Resources

4. Site News And Commentary

5. Feedback

‼️ TOP STORY
Crowdfunding Conundrum

Of all the asset types, real estate arguably has the biggest presence in crowdfunding. There are platforms that offer opportunities to invest in properties, mortgages, loans, and more.

It’s unsurprising that real estate is also the place where the crowdfunding model will be tested first.

PeerStreet was a well-funded, fast-growing investment platform that connected investors with real estate loans. Here’s a bit of how they market themselves:

For anyone that isn’t aware, PeerStreet is currently undergoing bankruptcy proceedings. It’s been a few months since they filed in late June and the case is serving as a messy test of crowdfunding. There is a lot going on with the case and we’re not lawyers, but here’s a rundown of some key issues:

Ownership

PeerStreet provided investment opportunities in “secured real estate loans.” However, the actual structure of the investments is more complicated.

While PeerStreet may actually have a loan with first-lien position, that is not the product sold to investors. Instead investors own an unsecured financial note tied to the loan, but without the same backing.

PeerStreet’s lawyers have argued that means the company has full control over the underlying loans and should be able to sell them off to pay back their debts. Investors obviously objected. The resolution remains to be seen.

A further disappointment for investors is that all of this is happening in spite of PeerStreet’s promises to keep the assets in “bankruptcy-remote” entities and to continue payments to investors if the company ever went out of business.

Not Even Cash Is Completely Safe

You might think that investor’s cash on the platform would be an extremely straightforward matter. And it may actually be within the context of such a complex legal case. However, that still means it took 3 months for investors to get 95% of the cash they had on the platform.

PeerStreet also had an investment product called Pockets. Pockets promised to provide short-term investments with high yields. Despite the Pocket holdings reportedly being almost entirely cash at the time of the bankruptcy, investors have not seen any of it returned - and may not.

Is This Just A PeerStreet Problem?

In short - no. The model used by PeerStreet has been adopted elsewhere as well. For example, Groundfloor’s offering circular states:

Another Issue In A Bad Year

Unfortunately, the PeerStreet bankruptcy is just yet another bad development for the year.

Another large, two-side marketplace for accredited investors, CrowdStreet hosted two fraudulent offerings losing investors $63M.

Yieldstreet also just reached a $1.9M settlement with the SEC for failing to disclose important information to investors in an ill-fated $14.5M offering.

Read More

Business Insider has a good piece on the PeerStreet bankruptcy. It’s worth a read to learn more and get more context as well.

ALTERNATIVE INVESTMENT NEWS ROUNDUP
🏠 Real Estate

Lofty

Lofty investors approved a proposal to update the tax structure of investments on the platform. Investors will now receive one 1099-DIV tax form each year instead of K-1s. The change will cost $200/year from each property’s cash flow.

Lofty also debuted their strangest offering yet. For the small starting price of $225K you can own 1/10th of a Napa Valley estate. It also comes with the ability to use the property for 5 weeks per year. Is it just me, or does this sound a lot like a timeshare?

Landa

Landa added the ability to make recurring deposits. It’s not immediately clear to me what benefits that would have for investors other than to force them into a habit of putting money into investments on a regular basis.

They also shared on X that they had surpassed $1M in dividends paid to investors on the platform.

🎵 Music Royalties

Public

Public recently announced that they would have their first music royalty offering. They have an $890K offering for royalties from the Shrek franchise.

Shares are available for reservation while they work on qualifying the offering with the SEC. The offering has about a ~8.25% TTM yield. However, the investment mostly depends on sustaining the growth in payouts that occurred from late 2020. Before that it was only averaging about 4.7%.

Based on the offering page, they are also planning to have a secondary market available for the royalty shares. If so, Public would become the first platform with SEC-qualified music royalty offerings and a secondary market for them.

ANote Music

ANote Music shared on X that they had delivered their 100th royalty payout.

Royalty Exchange

Royalty Exchanged announced further updates to the user experience on their platform. They have a new Investor Dashboard that aims to make it easier than ever to see the performance of your royalty portfolio from one place.

💡 Equity Crowdfunding & Startups

Honeycomb

Honeycomb Credit shared in an email that they had reached $5M in investor repayments from 228 small businesses and 5,830 investors.

Fundrise

One of the unique things about Fundrise is that they have consistently given their users the ability to invest in the company. Now, another round of their so-called “iPO” is opening up for new investments.

🎨 Other Assets

Alt

Alt announced that CGC-graded cards would now be available on the platform.

Percent

Percent sent out a survey to investors asking about interest in a potential secondary market.

📚 NEW RESOURCES
Arrived Homes Overview

Arrived Homes is one of the most well known platforms for fractional real estate investing. We’ve got a new article that provides an introduction to this platform, details on the fees, a walkthrough of how it works, and answers to various frequently asked questions.

Take a look here

🌐 SITE

Content

I’m back from vacation, finally recovered from jet lag, and I’ve started working on getting more content out.

Since being back we’ve done a news roundup of the second half of September, published the Arrived Homes Overview mentioned above, and sent out a roundup of news from the first half of October in this newsletter.

We’d love your input on future types of content. There’s a short poll just below!

Newsletter

As you can see, I’m trying something different for the news and newsletter.

I’m testing out a new platform called Beehiiv. I’ve seen a number of other newsletters and creators switch to it throughout the year, so we’re giving it a try ourselves as well.

This is also our first time with 1) a unique and lengthy lead story and 2) combining and sending our news roundups with the newsletter. Basically this means less unique content hosted on our website specifically, but puts more news information directly into your inbox.

Featured

We spoke with Wired for their article on music royalties and JKBX.

✏️ FEEDBACK