In This Issue

1. Our Top Story - reAlpha On The NASDAQ

2. News Roundup

3. Site News and Commentary

‼️ TOP STORY
reAlpha Goes Public Out of Nowhere

What Is reAlpha?

Let’s start from the beginning. reAlpha is a proptech company that we’ve primarily known for their real estate investment platform.

Specifically, they source vacation rental properties - like what you’d find on Airbnb - and create fractional investment offerings for them. Their app allows you to invest in these offerings for a relatively high minimum investment of $500.

If this doesn’t seem revolutionary, it’s because it really isn’t. Here was an early mover in this space, followed notably by Arrived Homes. Most other fractional real estate investment platforms are dabbling with these types of properties as well with both Ark7 and Lofty having a few listings recently.

So, what’s special about reAlpha?

Well, for one, they talk about AI a lot more. The reAlphaBRAIN is a machine learning model for analyzing prospective vacation rental investment properties. It seems similar to an in-house AirDNA.

Beyond that, they currently pitch themselves as a “fully integrated, AI-driven tech stack for real estate,” pairing an AI service to generate Airbnb property listings with the BRAIN and investment app.

Previous Funding

Clearly some have seen a lot of potential in the platform for years. We first heard about it when they were trying to draw attention to their equity crowdfunding raise.

According to Kingscrowd, they managed to raise almost $5M through this campaign with a staggering $375M valuation. The raise lasted from late 2021 through the end of July 2022.

Based on their S-1 filing for their fiscal year ending April 30, 2022, the company had just $230K in revenue from rental income. Their income for the most recently reported period was $37K for 3 months, or about $150K annualized.

The equity crowdfunding investors apparently weren’t the only believers in the company as they also secured a $200M financing facility in November of 2022, followed by a $100M capital commitment in December.

How The Direct Listing Went

On October 23rd, the company announced their direct listing on the NASDAQ exchange under the ticker $AIRE.

The first few days have been pretty wild.

While TradingView has the stock’s high around $610, most outlets are tracking it as $575. A staggering number in either case. After a rapid rise, the price gapped down and has been steadily descending since.

Its October 26th closing price of $46/share gives the stock a $1.96B market cap. At peak, the market cap would have been nearly $25B.

Unfortunately, we haven’t heard any tales of equity crowdfunding investors getting rich here though.

Why It Seems Crazy

It seems like just a few months ago headlines were circulating about a major slowdown in Airbnb bookings. Actually, before seeing this news I was considering a story about the slowdown in vacation rental offerings.

Here never regained their momentum from late 2022 and has been dormant now for a few months. Even Arrived has had offerings more slowly recently. Smaller players like Fundhomes aren’t moving that much real estate either.

Also, as we already covered, reAlpha doesn’t have a huge portfolio of properties or significant revenue. In that context, even their $375M valuation from the crowdfunding round seems dubious.

Beyond any of that, there’s also the question of why such a small company would want to go public.

For years we’ve seen companies stay private for increasing lengths of time. Is the rise in interest rates and its effect on VC funding severe enough that younger, more speculative companies are once again turning to public markets? Was there a unique opportunity to capitalize on the AI buzz? Or is it something else specific to reAlpha?

Either way, it’ll be interesting to see how this plays out.

ALTERNATIVE INVESTMENT NEWS ROUNDUP
🏠 Real Estate

CrowdStreet

After the fraud in the Nightingale offerings that resulted in investors losing $63M on the platform, CrowdStreet is attempting to move forward.

They announced several changes that appear aimed to regain investor trust and to help prevent similar issues from happening again.

1. CrowdStreet offerings are now brokered by another LLC under the company, which is a registered broker deal.

2. Investment guidance is now available from licensed professionals.

3. The process of verifying accreditation is now faster and lasts longer.

4. Each offering provides investors more information.

5. More sponsors can now use the platform.

6. There is now an escrow process that prevents the direct releasing of funds to sponsors raising on the platform. The CrowdStreet Capital team will be responsible for deciding whether to make the funds available to the sponsor or not.

These seem like steps in the right direction; though many will be quick to point out some of them should have always been in place.

Groundfloor

Groundfloor recently launched a new addition and iteration to their core offerings, which they are calling Groundfloor 3.0.

For the most part it just simplifies and makes the LRO investing experience even more passive. The new Auto Investor accounts automatically invest across the full suite of LRO offerings at a minimum investment of $1.

This allows small amounts of money to be spread across many more loans, reducing the risk from concentrating into any one loan too heavily.

Groundfloor’s own account data has consistently shown diversification is the key to positive returns on the platform. A hypothetical, fully diversified portfolio across every LRO loan would return around 10%.

To use this new experience, you’ll have to open an Auto Investor account on the platform. If you have an existing account, this is basically instantaneous with a few clicks.

There is an option to automatically roll over funds from your regular account as you receive repayments for invested loans. If this doesn’t sound like it’s for you, no worries. The traditional LRO investing experience is still there as well.

Arrived

Arrived is one of the largest and most consistent platforms in fractional real estate investing. That makes their quarterly financial performance reports an interesting window into the industry as a whole.

There is a lot of data and some nice graphs to dig through, so we recommend taking a look. Here are a few things that we took note of:

• Despite reports of slowdowns in rent and shelter costs, ~80% of properties leased above Arrived’s forecast. Though that could be due to conservative forecasting.

• Vacation rentals still performed about as advertised on payouts, advertising 4.4% on average.

• A property’s gross return is unsurprisingly correlated with the months owned. From the graph provided, there’s a lot of variance and relatively low results for most properties owned for 15 months or less. There’s a sharp increase following that, with 2 properties held for 30 months topping 100% return already.

• Share price updates ranged from -20.1% to 9.5% across 185 reappraised properties.

• Arrived reports that 64% of offerings had a decrease in share price, with an average price change across the portfolio being -1%. Anecdotally, the total value of our portfolio was barely changed after the update.

• Arrived has updated their definition of “Owner’s Revenue” for their vacation rental offerings to align with Generally Accepted Accounting Principles (GAAP).

💡 Equity Crowdfunding & Startups

StartEngine

StartEngine announced that they were finally moving to close their equity crowdfunding campaign after nearly two years. There are still a couple of weeks left to invest if you’re interested.

StartEngine Private, their crowdfunding offerings for accredited investors, officially opens for investment today. In their previous communications, they didn’t specify which investment will be “dropping” on Monday, but SpaceX was the first they accepted reservations for.

Interestingly, due to “regulatory restrictions” a maximum of 100 investors can participate in the offering.

Republic / Seedrs

Seedrs is an equity crowdfunding platform based in The UK that Republic acquired. They announced they had received new licensing under EU regulations. The company believes this will make the investment process for EU investors simpler and provide them with more opportunities.

Fundrise

Fundrise’s disruptive innovation fund made a new investment this month. Unlike previous allocations which targeted debt or equity in individual companies, the new investment is another VC fund.

They allocated $5M to Theory Ventures, a $230M fund focusing on early-stage companies in “emerging technologies” (which Fundrise seems to translate to AI and data). The fund is led by Tomasz Tunguz, who the Fundrise team believes is “among the top .01%” of VCs in this space.

If you want to invest in Fundrise, the company, their “iPO” is ending on October 31st, so the window to do so is about to close for some time.

Alternative Investment Companies Raising Funds

If you want to invest in the companies building the alternative investment platforms, we’ve found a few that have ongoing campaigns.

• [Reservations] Arrived on Wefunder ($100M pre-money valuation)

• WebStreet on Wefunder ($53.6M pre-money valuation)

• [Reservations] Nada on Wefunder ($40M valuation cap)

• Elevate Money on Wefunder ($15M valuation cap - early bird)

• [Reservations] Finlete on Wefunder ($6M valuation cap)

Alto

Alto recently announced that Alumni Ventures’ Q4 AI fund was now available for investments on their marketplace.

That brings their total marketplace offerings up to 3. This is the second focused on venture investments with the other being focused on farmland.

🎨 Other Assets

Rally

You can always count on Rally to bring unique offerings to the table. Last week they sold around 47,000 shares of the home Mickey Mantle (famous, Hall of Fame Yankee outfielder) grew up in as a child for $7 apiece. It’s got to be one of the more unique sports collectibles out there.

AcreTrader

AcreTrader announced on X that they had exited 4 more farmland offerings. The 4 Illinois properties were sold as a bundle achieving an aggregated 12.75% “preliminary IRR.” The rate of returns for the individual offerings ranged from 10.4%-16.8%.

So far they have not provided details on which 4 offerings they exited, so we don’t know how the sales aligned with the original target holding period. AcreTrader reports that their achieved returns far exceed the 7.8%-8.7% they told investors to expect.

AcreTrader is also about to open up their first Farmland Option offering.

Untapped Global

Untapped Global shared in an email that they will be updating their investment offerings starting in 2024. They will have two products:

1. Fixed Income Notes - SPV in Luxembourg, quarterly payouts, target yields ranging from 6% - 14% depending on length and senior vs junior notes

2. Digital Financial Inclusion Fund - 5 year length, 15% target return, a 1 year call and an 8% hurdle rate

This is just an abbreviated summary of some of the details of these upcoming offering types. To learn more, we’d recommend talking to their investor relations team.

Vinovest

Vinovest recently posted their Q3 Quarterly Report detailing some information about the wine market and the platform. There’s a lot in the report, so it’s worth a look. Here’s a few points we took note of:

• ~-3% return for wines based on Liv-ex 1000

• Asia-Pacific became the largest purchaser of “fine spirits” globally

• The average Vinovest account saw -5.19% performance in the quarter, the worst quarter in almost a year. This also unperformed the Liv-ex 1000. Fees may be partially to blame.

• Vinovest now has two whiskey exits. Both happened in less than a one year holding period with just over a 30% return.

• The path forward for Q4 is unclear, but the wine market appeared to have stabilized a bit in August, slowing its rate of decline

• Vinovest investors now collectively own ~$11M in whiskey through the platform

Vint

At the end of last year, Vint raised $5M in a Seed fundraising round.

It’s always interesting to think about how companies will use their new funds after raises like this. While we don’t know for sure, it’s likely some of that went to building out their latest wine and whiskey offering.

Recently, Vint has quietly launched fund offerings for accredited investors. There have been several launched with over $1M invested already. If you’re an accredited investor and are OK with a $10K minimum investment, you can request access here.

Hopefully these offerings will eventually become accessible to non-accredited investors as well. Funds could allow investors to distribute capital across a very wide range of assets with a single investment. This diversification is especially valuable for new investors in the asset class. It may also be easier than having to review multiple collections and decide which to invest in.

🌐 SITE
Thanks for reading! I am attempting to step up the frequency of the newsletter to get you more information more frequently.

I’m tentatively planning to try sending two per month instead of one.

Unfortunately, it seems hard to find an ideal timing. In a given week, the amount of news varies greatly. In one week, a lot of the time nothing much happens. Though often when looking at two weeks, too much has happened to be able to concisely cover. I also don’t know if it will be possible to have a lengthy feature story every week.

I expect things will start to quiet down around the holidays in November and December, so we’ll try to stick with two per month through the end of the year and see how the reception is.

I am also working on another overview - this time for Vinovest. That should be live on assetscholar.com in time for our next newsletter.