The Mensch & Schlemiel of the Week

Mensch:

Noun, informal. A decent, upright, mature and responsible person.

Schlemiel:

Noun, slang. An awkward, clumsy, or unlucky person whose endeavors tend to fail; a loser. 

50b198f0e4b05036d3adf82e The Mensch & Schlemiel of the WeekMensch of the Week:  

CrowdMason

A couple weeks ago, in one of our Week in Review posts, I discussed an article that explained how last year’s Jumpstart Our Business Startups Act (JOBS Act) might influence commercial real estate investment. This securities law, intended to bring increased investment capital to start-ups of all kinds, is expected to promote a more “democratic” investment community.

How?

By lowering the capital requirements for “accredited” investors, so that one doesn’t have to be a bona fide millionaire in order to invest in a CRE or other venture. Now, fund managers don’t have to rely on high net worth, corporate, or institutional investors, but can amass needed equity through lots of smaller contributions from investors in lower tax brackets. This “crowdfunding” approach (similar in structure to “crowdsourcing”) will hopefully strengthen the investor base of companies and funds not lucky enough to have Blackstone Group or a Saudi prince in their Rolodex.

Not that anyone uses Rolodexes anymore.

We asked our readers whether or not they approved of crowdfunding in a Llenrock poll. While the response wasn’t overwhelmingly positive, the Yay’s beat the Nay’s with well over 50%, showing some promise for this new investment tool.

Which brings me to CrowdMason, an online start-up working to promote commercial real estate investment on a more public level.

The website/service, which announces it is currently in “beta,” describes itself as a

real estate crowdfunding platform for accredited investors.  CrowdMason streamlines the process of identifying, reviewing, investing and monitoring commercial real estate investments thru [sic] private placements.

Of course, up until now, “accredited” indicated an investor had a net worth of at least a million dollars, or an annual income well above the U.S. average. As the JOBS act (and SEC, in implementing the law) revises what it means to be accredited, there is a new opportunity for us “little people” to invest in an asset class that was previously too capital-intensive.

CrowdMason stands to benefit significantly from the JOBS Act, since this legislation will increase its potential customer base exponentially.

Bear in mind, however, the JOBS act is very new. As with much legislation, it will be some time before we can get a sense of how the law translates from paper to actuality. Also, know that CrowdMason’s Mensch-hood is not an endorsement of the company (we don’t do endorsements here, except for this excellent product which we highly recommend to you and all your friends).

Still, the commercial real estate sector has great potential (and appeal) for lower-net individuals. Once accessible to the E*Trade crowd, CRE stands to gain a great deal of new investment–as do the first companies to facilitate this opportunity.

Schlemiel of the Week:

A Well-Performing Commercial Real Estate Market

Bear with me here. This will take some explaining.

In fact, I don’t think I’m up to the task. I’ll let the Wall Street Journal explain:

A new worry is threatening the rally in the rebounding market for commercial mortgage-backed securities: Property owners have started to pick up the pace of resolving problems with distressed loans.

That is bad news for bondholders who paid up to buy such securities on the assumption they would keep paying a high interest rate for a longer period.

Some investors can’t win. They bet on high-value CRE assets and prices tank; they bet on distressed assets and prices rise.

In 2011 and much of last year, investors and commentators did a lot of hand-wringing over the potential default of pre-recession CMBS (of which there was an abundance coming due). While there have, of course, been delinquencies, many building owners have managed to refinance their properties–even if their mortgages were previously underwater–thanks to the overall recovery in the CRE market.

Which means those who bought up CMBS issued during the market’s peak specifically for their lack of value (and hence, higher interest rates) are seeing the assets attached to these securities being refinanced. Thus, the original loans are being paid back. For some investors, the unexpected value of their CMBS is proving costly. Ironic, isn’t it?

2 comments for “The Mensch & Schlemiel of the Week

  1. Larry Mason
    February 26, 2013 at 2:57 pm

    Recently I posted an “idea” on a nationally famous coffee purveyor’s web site. They have an idea page that included many subject areas, one of them community development. I thought that maybe communities could apply to partnership with them in areas where they were be about to open a retail outlet. Localized or micro financing a shop in the neighborhood, giving people with a small amount of money to invest in local ventures. Naive of me I know… but it seemed to me that if we could somehow get the big corporate players with resource, experience and know how, to work with local neighborhood “like-to-be-investors” in successful neighborhood ventures who know local conditions and could provide a backbone of local community support, and be involved in how the local outlet was run, what a wonderful synergy might result. I realize the idea has many legal, and complex financial implications. It is sort of an antifragile idea one could say.

  2. Larry Mason
    February 26, 2013 at 2:59 pm

    Oh btw, I forgot to mention that my idea was not well received on the idea site… so I have to keep thinking how this might work ;-]

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