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Fractional real estate investing startup Willow comes out of stealth – BetaKit

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PropTech startup Willow debuted its real estate investing platform, January 31, offering Canadians the chance to buy and sell fractions of property much like shares on the stock market. The startup calls its business model PropSharing.

Willow came out of stealth mode after three years, and claims it is the first and only real estate investing startup to have received Ontario Securities Commission (OSC) approval to operate as an exempt market dealer.

According to the OSC, the exempt market is a section of Canada’s capital markets where securities may be sold without the protections associated with a prospectus. The general rule under Ontario securities law is that any security offered to the public must be offered under a prospectus.

However, prospectus exemptions save companies the time and expense of preparing a prospectus.

“We believe property investment should be inclusive to all. PropSharing will offer all Canadians a unique opportunity to invest in the real estate market.”
 
 

A national registration search on the Canadian Securities Administrators’ website in fact shows that Willow Ret Financial Services Inc. has registered as an exempt market dealer in every province and territory.

Willow’s platform will include what the startup claims are handpicked, stable, rent-generating properties from across the country. These commercial and industrial properties, along with multiplexes, are split into 100,000 units of “ownership,” which are available for purchase through the platform.

Willow says it takes care of the property management and the administrative work associated with its real estate.

“With real estate prices continuing to skyrocket across the country, investing in property is becoming further out of reach for most Canadians,” said Logan Yergens, CEO and co-founder of Willow. “We believe property investment should be inclusive to all. PropSharing will offer all Canadians a unique opportunity to invest in the real estate market.”

The startup claims it has a pre-launch waitlist of 10,000 people.

Willow invests in the properties as well as manages them, something it claims makes it different from other platforms in the market. Willow said it will continue to expand its property portfolio over time.

RELATED: Unreserved closes $33 million seed round to build property auction platform

According to Yergens the startup has gone through three rounds of funding, with a fourth on the verge of closing, raising a total of $5 million. Yergens said investors in the rounds have included Montreal’s Harden family, who run a real estate development company, Starlight Investments, and “other real estate and financial services heavyweights.”

Willow currently has two properties.

Yergens said they “prefund the acquisition of those properties.” He said Willow signs a purchase and sale agreement and “tie it up is the term, so we have 75, 90, 120 days, whatever it is, where that property is agreed to be sold to us.”

In order to purchase further properties, the startup will have to wait until people begin investing in their concept. Once they’ve raised enough money, Willow plans to close on what it describes as a “backlog” of properties.

“As we onboard users and have that demand there, then we can very quickly scale up,” Yergens said.

In order to invest, customers go to Willow’s website, and create a financial profile on which Willow makes a recommendation as to how much they can invest. Customers answer a lot of questions on such things as their investment experience and “risk appetite,” and they must provide a breakdown of their assets and liabilities. The most any investor can own in an individual property is 10 percent.

The FinTech startup Flinks is used in the back end to connect customers’ bank accounts to Willow. Willow purchases the service from Flinks.

Willow has three co-founders. Yergens has worked as a director of investor relations and corporate development for the blockchain startup, Aion Networks, and in equity research and portfolio management.

Willow’s platform will include what the startup claims are handpicked, stable, rent-generating properties from across the country.

Yergens said he wanted to get an idea of where the technology was going, which is why he worked at Aion. “There, the idea of fractionalized everything, whether it’s art, collectable cards, sports memorabilia – the idea of real estate I thought was pretty interesting,” noted. “There are some inherent flaws in real estate, such a large ticket size, that makes it exclusive to only the top one percent of Canadians in the case of commercial real estate, which is what we’re investing in.

Mike Hibberd, the startup’s co-founder, chief compliance officer and COO, previously worked as a COO for a Toronto fashion brand, while co-founder and CTO Ray Johannsson has worked in software development and system design for early stage startups as well as for Dell and IBM.

Including the founders, Willow has a staff of 12.

Willow joins an already burgeoning PropTech space in Canada. According to a 2021 report, out of 300 startups surveyed, approximately 60 percent are in the early stages of their growth. Sixty-seven percent of proptech startups in Canada were founded after 2014, and of the startups studied, 59 percent are at the pre-seed, angel, or seed stage of their growth.

Nor are they the only PropTech startup offering fractional shares in real estate. FinTech startup BuyProperly also deals in fractional real estate.

But the competition doesn’t phase Yergens. “We’re pioneering what we’re offering,” he said. “We don’t worry about the competition.”

In the long term, Willow hopes to be able to offer fractional investments in other types of properties including solar wind farms, heritage properties, and affordable housing developments.

Photo courtesy of Willow

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Real estate: 27 per cent of homeowners accessed credit, survey finds – CTV News

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A new survey exposes balance sheet vulnerabilities for some Canadian homeowners amidst rising interest rates.

Released by BNN Bloomberg and RATESDOTCA, the survey found that 27 per cent of homeowners who participated have accessed a home equity line of credit (HELOC). Almost 80 per cent of those participants have used it, and half of them said they have done so in the last two years.

Aside from the pressure of increased interest rates, HELOCs are complicated by new real estate loan guidelines announced by the Office of the Superintendent of Financial Institutions on Tuesday. In late 2023, borrowers will be required to pay principal and interest on combined loans above 65 per cent of the property value.

Prior to these guidelines, HELOCs were an ideal way for homeowners to tap into their home equity during the prior decade’s low interest rates and high home prices, but the survey findings suggest that the Bank of Canada’s recent interest rate increases might have changed the way older Canadians leverage their home value. With HELOCs being based on variable-rate interest, borrowers will be hooked to higher payments.

Since HELOC lenders are able to demand full payment at any time, this can raise concerns for consumers who have not set aside extra money to pay down their HELOC amidst the pressure of rising interest rates.

According to the survey, 58 per cent of respondents said they have an outstanding balance on their HELOC.

Although the majority said they borrowed less than $50,000, 10 per cent said they borrowed more than $100,000. Balances of at least $50,000 were more common for Canadians aged 55 and older.

Of the 1,507 Canadians surveyed, 65 per cent said they were homeowners.

With files from BNN Bloomberg and RATESDOTCA

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In Ontario, real estate buyers are holding out for a price cut – The Globe and Mail

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A house for sale in the Riverdale area of Toronto on Sept. 29, 2021.Evan Buhler/The Canadian Press

The stalemate that is taking hold in the Ontario real estate market right now arises from a belief that is becoming more entrenched each month: buyers reckon prices have farther to fall.

House hunters see properties in some areas selling at 15 per cent or so below the high-water mark set in the first quarter and decide to hold off for an even steeper discount. Sellers either refuse to budge or feel the landscape shifting under them and rush to complete a transaction before more ground crumbles away.

The war in Ukraine, stubborn inflation and the rise in interest rates have precipitated a much more tumultuous real estate market than industry watchers were predicting even a few months ago, according to John Lusink, president of Right at Home Realty.

Mr. Lusink says sales for June are set to come in about 26-per-cent below even his conservative projections at the start of the year, continuing a trend that has been on a downward slope since February.

“We can throw that forecast out the window,” he says of his projections for 2022.

The landscape is the same across the Right at Home network, which spans 12 regions of Ontario.

The number of listings, meanwhile, is gradually increasing after a slow spring, he adds.

Mr. Lusink expects the final tally for Right at Home’s sales in June to show a 37-per-cent drop from the same month last year.

“It’s, needless to say, concerning.”

Rishi Sondhi, economist at Toronto-Dominion Bank, points out that sales and prices have fallen disproportionately in Ontario and British Columbia, where prices climbed the most during the pandemic. The retrenchment in activity is especially hard in the Greater Toronto Area, where investors have played a particularly large role in the past year.

The downturn is part of a worsening picture across Canada, as sales and prices continued to decline in May under the weight of higher interest rates, Mr. Sondhi points out. Some sales were likely pulled forward to late 2021 and early 2022 as people braced for higher rates, he adds.

The economist says some GTA buyers also likely purchased new homes before selling existing properties, expecting the market would remain hot, he adds. Those sellers may be forced to accept lower prices now in order to complete the new deal, but he expects that dynamic to run its course before too long.

Mr. Sondhi is forecasting a continuing decline in prices throughout the rest of the year as a reflection of sharply higher interest rates.

Alongside the buyers betting that prices will slide, Mr. Lusink says, stands another cohort ready to buy – but the task has become much harder with the rise in rates. One buyer Mr. Lusink spoke with recently had obtained a fixed-rate mortgage at 4.3 per cent, which is almost double the rates buyers were able to lock in just a couple of years ago.

The mortgage “stress test” requires borrowers to show they can handle mortgage rates approaching seven per cent and above, he points out.

A recent survey commissioned by Right at Home also shows a shift in attitudes: Only 19 per cent of potential first-time homebuyers in Ontario plan to buy in the next two to three years, compared with 30 per cent who planned to buy in 2021, according to the study.

The percentage of homeowners planning to sell who are doing so to take advantage of current market conditions increased to 23 per cent this year from 11 per cent last year, the data shows.

The Maru Public Opinion Survey polled 813 Ontario adults in May and has an estimated margin of error of plus or minus three per cent 19 times out of 20.

In Burlington, Ont., real estate agent Tanya Rocca is already seeing homeowners preparing properties for sale before the fall market arrives.

“It’s very busy right now,” says the agent with Royal LePage Burloak Real Estate Services. “People are panicked.”

Ms. Rocca says prices in the area which have dropped between 12 and 15 per cent from the February peak.

The average price of a freehold property dropped to $1.431-million in May in Burlington, she says, compared with the $1.51-million buyers were paying in April and the $1.6-million in February and March.

Homes on Bessborough Drive in Toronto’s Leaside neighbourhood on May 11.Fred Lum/the Globe and Mail

The affluent city, which sits on Lake Ontario west of Toronto, was one of the many communities that saw a large influx of buyers during the pandemic as people sought more space. Burlington’s historic downtown core and large selection of detached houses with pool-sized lots have made it very popular with families.

Ms. Rocca says many buyers didn’t even have a chance at a house in the midst of ferocious bidding wars; now people have their choice of properties.

Some current sellers have been caught in the market transition, Ms. Rocca adds, because they bought a new property before selling an existing one.

“Buyers, in fairness, are getting the power back – which they love,” she says. “There are great opportunities out there because people need to sell.”

Ms. Rocca was shocked at some homeowners earlier this spring who were disappointed on offer night when they received bids that came in $300,000 or $400,000 above the asking price.

“People were debating whether they should take it.”

She recalls one pair of homeowners with a home backing onto a golf course who listed their property with an asking price of $2.5-million. The sellers were disappointed they didn’t receive a hefty amount above asking.

“They got their asking price literally the week things started to shift,” Ms. Rocca says. “They were so close to not taking it.”

As the summer begins, it’s not uncommon to see listings sitting with 30 to 50 days on market, she adds.

In the current environment, Ms. Rocca recommends setting a price near the realistic market value. She often “sharpens” it a little bit to make it more attractive compared with other competing properties in the area.

To help homeowners come to terms with the new reality, she stresses that first-quarter prices were the result of an overheated market – not an accurate reflection of value.

“This is not money they’ve lost – they never had it.”

Ms. Rocca says some people who purchased properties in Burlington at the beginning of the pandemic are now being called back to offices in Toronto. With more cars on the road and the price of gas skyrocketing, many are reluctant to commute.

“People were making such rash decisions during COVID,” she says, adding that some of those folks are now selling and moving back to the GTA.

With such an extended run-up in real estate prices while rates were low for years, the market in Ontario saw a few blips but no real correction, she points out. A move to restore balance is healthy, in her opinion.

“I think we’re going through a cycle right now which is very much needed.”

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OSFI makes real estate loan changes aimed at reducing lender risk – Investment Executive

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IIROC’s Kriegler to lead new SRO

Regulators are also forming a new advisory committee to review SRO consolidation

  • By: IE Staff
  • June 27, 2022
    June 28, 2022
  • 17:46

Ottawa lost average of $22 billion a year in unpaid tax from 2014-2018: CRA

The agency released its first report on Canada’s overall tax gap

Executive moves this week

Industry veterans are taking on new roles, including Andrew Kriegler with the forthcoming new SRO and Morningstar’s Michael Jantzi

CSA lays out priorities under incoming chair

Three-year plan focuses on CFR enforcement, dispute resolution and crypto

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