What Is Origin Investments?
Origin Investments is a real estate investment firm that owns and operates commercial properties. Origin invests in 11 of the fastest-growing U.S. markets, including Atlanta, Austin, Charlotte, Chicago, Dallas, Denver, Houston, Nashville, Orlando, Phoenix, and Raleigh.
Origin Investments was founded in 2007 and is based in Chicago with regional offices in Charlotte, Denver, and Nashville. It has completed more than $1 billion in transactions. Origin was in business well before the JOBS Act of 2011 came into effect. Until then, its commercial real estate funds were limited to private placements with no more than 100 investors.
But the JOBS Act opened another door for Origin. Through the use of technology and crowdfunding strategies, the platform has been successful at attracting more investors. Origin expanded its investor base from personal ultra-high-net-worth relationships to accredited investors across the country, enabling the company to raise $151 million for its recent growth fund, Origin Fund III. The company is currently accepting new investors for its new offerings, the Origin IncomePlus Fund and the Origin QOZ Fund.
Origin is not really a real estate crowdfunding company. Rather, it is a private real estate investment company that now uses crowdfunding and platform technology to allow more investors to participate.
Origin’s strategy for the IncomePlus Fund is to acquire income-generating real estate with the opportunity to force property appreciation through renovations and capital improvements. The primary focus is on multi-family properties that range in size from $25 million to $75 million. This is a segment of the asset class that’s under-trafficked by large institutions and pension funds. Plus, the fund invests in preferred equity opportunities which enjoys protections similar to those of a senior lender but provides returns equivalent to an equity position.
Origin's strategy for the QOZ Fund is to construct a diversified portfolio of ground-up, multi-family development projects located within Qualified Opportunity Zones. The QOZ program was created under the Tax Cuts and Jobs Act of 2017 to incentivize investment in targeted communities in need of economic development, the QOZ's. There are significant tax advantages to investors who roll over their capital gains from other investments into a fund that invests in a QOZ.
Origin provides the opportunity to invest in two funds that are diversified across multiple properties. Origin shows the individual properties that comprise the funds, but you’re not buying a specific property. You’re buying a fund that owns a mix of the properties.
Origin’s two co-founders, David Scherer and Michael Episcope use Origin as their primary investment vehicle. This is unique to Origin’s crowdfunding business model. To date, they are the largest investors at Origin, with over $56 million committed alongside investors ensuring alignment of interest. And the team's compensation is based largely on fund performance, not acquisition volume.
And the team’s compensation is based largely on fund performance, not acquisition volume. According to Ben Harris, head of investor relations, “We don’t believe in paying people to sell our products, so our funds are not offered by commission-based advisors.”
Origin Investments Features
|Time Commitment||60 Months|
|Offering Types||Debt, Equity, Preferred Equity, Direct Ownership|
|Property Types||Commerical, Residential, Single Family, Foreign Investors|
|Regions Served||Atlanta, Austin, Charlotte, Chicago, Dallas, Denver, Houston, Nashville, Orlando, Phoenix, Raleigh|
- Distributions — Although Origin's IncomePlus Fund offers a distribution reinvestment program, Origin is targeting quarterly distributions equal to a 6% net annualized distribution yield to fund investors.
- Due Diligence — Thorough due diligence is critical to real estate investing success. It’s a largely illiquid asset with high transaction costs to both buy and sell. Origin’s team members have extensive real estate investment experience that the company harnesses to find, vet and act as the asset manager for all its real estate deals. And their selection criteria are strict. According to Origin, they look at around 1,100 deals a year and have historically purchased only six to eight of them.
- Customer Service — Although online technology is invaluable in delivering deal transparency and efficiency, each registered investor is assigned a personal contact who serves as your point-of-contact throughout the entire due diligence process. Once your accreditation is verified and you choose to invest, your personal contact will help you navigate the entire process of completing the paperwork and wiring your investment funds to an external administrator. You will also receive regular updates from the Investor Relations team regarding the performance of your investments. Investors can access details of their investments and track performance through their personal portfolio page via a secure portal. You can review detailed property descriptions, videos of the property, rehabilitation plans and photos. You also can read financial projections, details on the strategy for improving the property and all documents related to the property.
- Investing Fees — Origin’s fees are lower than the private equity industry standard, which is a 2% annual management fee.The annual fee at Origin is 1.25% of net asset value. So if you committed $100,000, you would be charged $1,250 in the first year of your investment. When first invested, amounts less than $250,000 have a one-time 2% administration fee. In other words, you’ll pay $2,000 for an investment of $100,000. If you commit more than $250,000, the fee ranges from 0.0% to 1.0%, depending on the size of your investment. These fees are used to cover fund setup fees, such as legal and accounting. In addition, there's a 0.5% acquisition fee and, for the IncomePlus Fund, there's a performance fee of 10% after a 6% preferred return with a 50/50 catchup. For the QOZ Fund, there's a performance fee of 15% after a 7% preferred return with a 50/50 catchup.
How Does Origin Investments Work?
Technology can be a wonderful thing. The process of investing in real estate deals like this used to be paperwork- and time-intensive. On Origin’s crowdfunding platform, there are three investing steps:
- Register — You need to be an accredited investor to invest, but anyone can register and review the funds.
- Research — Everything you need to know about the strategy and specifics of each fund is available for you to view and download. And it’s easy to compare investment choices against each other, thanks to smart technology.
- Invest — Origin has purposely put an emphasis on personal assistance, because the company wants to get to know you and help you understand exactly what you’re investing in. You are assigned a personal contact to walk you through the investment process. You’re working not with a “customer service rep” but with a knowledgeable member of the team who is familiar with all aspects of the properties and the processes.
Origin Investments Screenshots
How Do Origin’s Funds Differ From REITs?
You are probably familiar with real estate investment trusts (REITs). You can buy shares of REITs from any financial advisor or broker. Although some real estate crowdfunding sites offer REITs, Origin’s funds are not REITs and differ from private REITs in the following ways:
- Private REITs typically pay substantial fees to advisors to “sell” their product. Through Origin’s platform, you can invest directly. There’s no middleman to “sell” the investment. This means lower fees for the investor and more dollars invested into properties.
- You can’t examine the individual properties that comprise a private REIT. But Origin is all about transparency. You can see all the details on each fund property online 24/7. And Origin sends out quarterly updates to keep investors apprised of progress.
Origin Investments Pros & Cons
Origin Has Substantial “Skin in the Game”—The two cofounders of Origin Investments are the largest investors in every fund, ensuring alignment of interest. Most recently they co-invested $10 million in the Origin IncomePlus Fund and $7 million in the Origin QOZ Fund for a total of $56 million.
Team Expertise—The cofounders bring decades of commercial real estate experience as well as asset management experience. They know where and how to get below-market deals and do the due diligence to reduce investor risk.
Institutional Quality Properties Available to “the Crowd”—Origin was in business long before the JOBS Act made crowdfunding available. They’ve recreated the same high-quality processes valued and depended upon by high-net-worth and institutional investors in a platform with crowdfunding technology.
Transparency and Online Efficiency—Once funded, investors can access details of their investment and track performance through their personal portfolio page in a secure portal.
Diversification—Within each fund, there are dozens of properties located throughout the target markets.
No Risk of Additional Capital Needs—You will never be asked to contribute additional capital to keep the projects afloat.
High Minimum Investment—The Origin IncomePlus Fund has a minimum of $100,000 and the QOZ Fund has a minimum investment of $50,000. This might be out of range for many investors.
Number of Deals—Fund III closed June 30, 2017. Origin launched the QOZ Fund in late 2018 and the IncomePlus Fund in early 2019. There are usually only one or two funds available at once.
Final Thoughts on Origin
Good commercial investment properties take expertise to profitably acquire and manage. And it takes a sizeable investment of money to acquire. By adopting crowdfunding to its already successful model, Origin allows individual investors to get into the same sort of high-end deals that used to be available only to the super-wealthy, pension funds and large institutions. Most crowdfunding sites require investors to be accredited, and the same is true for Origin Investments.
Origin seems to cater to the wealthiest of the accredited investors with a minimum investment of $100,000 for the IncomePlus Fund and $50,000 for the QOZ Fund. Its expertise and due diligence show in its average net IRR of 24% across its first two funds.