BuildingBITs is a powerful alternative to investing in traditional high-yield savings vehicles. With an emphasis on newer construction, quality tenants, long-term leases and reduced transaction fees, the company offers a new class of conservative investments designed to complement all level of investment portfolios. For as little as $500, individual investors can add commercial real estate to their personal wealth strategy.
We recently spoke with Alexander Aginsky, principal shareholder, founder and CEO of BuildingBITs. He's a serial entrepreneur, investor, and seasoned executive with decades of experience in private equity, venture capital, and commercial real estate. Mr. Aginsky managed a complex commercial real estate portfolio of assets for global investors including the development of two major hotels. Prior to that he advised high-profile private companies in the US and abroad on multi-million dollar debt and equity financing, mergers and acquisitions, new market entries and other cross-border business transactions.
Mr. Aginsky was interviewed by Silvia Davi at the 2019 National Investment Banking Association Conference in New York.
Silvia Davi (SD): Thanks for being with us here at NIBA. Love to learn about your company. You’re a founder of a very interesting real estate crowdfunding platform. Explain Building Bits to us.
Alexander Aginsky (AA): BuildingBITs is the first ever commercial real estate platform that allows non accredited investors to be able to select a specific building and buy a piece of it for as little as a few hundred dollars and start to reap all the benefits of real estate ownership including recurring revenue.
SD: How did you come up with this concept?
AA: So before that for a number of years I was working with very wealthy individuals that were able to get somebody like myself and able to invest tens of millions of dollars and with a passage of some new regulations in DC this now became possible to everybody, so we applied those regulations particularly Regulation A+, to real estate, allowing people all over the world to be able to invest. Just like my former clients, but with only a few dollars.
SD: So you started the company a little bit over two years ago and you obviously benefited from some regulatory changes. So talk us through what that process was like, first from a regulatory standpoint, and then with the client acquisitions.
AA: Yeah, absolutely. So, the regulation that I'm talking about, like I said, is a Regulation A+. It came out of Obama's JOBS Act which was originally signed in 2012. The Regulation A+ was ultimately came into being in 2015. The process was very lengthy and arduous. We were the first company to apply Regulation A+ to real estate, particularly in this fashion where the investors are not investing into some "pooled" investment vehicle or large fund, they're investing into individual properties on our platform, so in essence, each building becomes a miniature IPO. And it took us about a year and a half to work with the SEC to really explain how this process would work. And you go over all the potential risk factors and educate them and allow us to really get the final qualification that we finally got in September of 2018.
SD: So you started the company during a time where I feel as if innovation in FinTech was really starting to take off in financial services - it was crowd funding and artificial intelligence, blockchain... We heard a lot about all these different technology companies that were coming to market. How has the crowdfunding industry changed business today and how does it compare to some of these other technologies?
AA: So blockchain is one type of technology that can be used across different industries, and we've looked at blockchain as well for our platform and is something that we may or may not do in the future, but we're not using blockchain today. We feel that the business model is innovative in and of itself and doesn't require the use of blockchain, but ultimately there is certainly a lot of innovation that's taking place in the industry, which bodes well for us. The more innovation that's taking place, the more accustomed to it everybody becomes... and the easier it is to ultimately sell a piece of a building to somebody that might have never seen it before, and then buys a piece of it right on their phone.
SD: So, really, you're giving access to many folks that are looking to invest and have a piece of the pie. What are the biggest markets that you do business in?
AA: Geographically speaking?
SD: Geographically, yes.
AA: So we're really all over the US, and we're now starting to bring in some investors from outside of the US as well. But what we found is that a lot of people are investing into areas that they know well so somebody might invest into a building in Minnesota simply because they live in Minnesota. But also a lot of investors are ultimately just like with any other capital markets, the capital is flowing to wherever it's most efficient, wherever it's gonna be able to get the highest return, so the best assets are the ones that are coming to the top and they're the ones that most people end up investing in regardless of where they are.
SD: And these are both commercial and residential?
AA: No, we only do commercial, only income producing assets, only lease to A-credit tenants. So you can find a building like an AT&T Store on our platform that has a long term lease with a corporate guarantee from AT&T that you can now buy into.
SD: So let's talk about your own management background, your experience. It seems that you've had a robust and multifaceted career. Explain your journey and how you got to this point.
AA: I don't know if we have enough to explain my entire journey, but really before founding this business, I was in a similar business where we had an investment advisory firm and working with a lot of ultra high net worth individuals outside of the US that wanted to invest into US private equity, venture capital and primarily into commercial real estate. And so for about 10 years before founding this company that's what I was doing, I was working with family offices and high net worth individuals that wanted to get access to US opportunities. It was my job to identify those opportunities and do all the due diligence and work with them and then ultimately after the acquisition, we were responsible for managing all of those assets as well. So that's where the bulk of my real estate experience ultimately came from.
SD: Is your growth mainly organic, or have you considered over time looking at potential acquisitions? I noticed that there are a lot more companies starting to come up with some interesting real estate concepts.
AA: So we're actualy looking at some acquisitions. Now we're in the midst of some of those discussions. Unfortunately, I can't disclose some of that information just yet but we are, and that's also ultimately part of why we're here. We're looking for strategic partners to really expedite our growth exponentially.
SD: You mentioned today that you came from overseas when you were a teen, and so you are in many cases the American success story and are really, I'm sure, a mentor to many and definitely inspiration. Talk us through the advice you would give anyone that's considering becoming an entrepreneur or interested just in real estate. What advice do you have?
AA: Well, as far as becoming entrepreneur, I'd advise against it. It's a really uphill battle so you really have to be passionate, you really have to be willing to sacrifice a lot to pursue that kind of a career in my opinion, and you really have to not just be passionate about it, but feel that it's part of your calling. Otherwise, don't do it. If you're gonna do it just for the money, then certainly you shouldn't do it. As far as my general business advice, I don't know if I'm in a place to really give advice, but if I were, I'd say that ultimately at the end of the day, it's about creating value and doing that in all of your relationships, be that with employees or customers or investors. As long as you're able to provide something of value to them, those relationships are probably gonna be the ones that will last.
SD: Are you also finding that there's potential growth and a platform for residential real estate on something like this?
AA: There is and in fact there are a number of our competitors that are already pursuing that. They're doing something very similar on the residential real estate front. We decided to focus on commercial for a number of different reasons, one of which is that commercial real estate provide a recurring and very predictable, rental income stream, which residential does not. There's a lot more volatility in rental income with residential, there's potentially long periods of vacancies with the residential real estate. With commercial, typically the types of deals we're looking at have long term leases in place 10+ years - and so that makes it much easier to predict that income. I could tell my investors what they're gonna be making in year 2025, which is very difficult to do with residential real estate.
SD: That’s actually a very good and valid point. You gave us some words of advice for future entrepreneurs, or folks that are interested in residential or commercial real estate. But from a crowd funding standpoint, there are still a lot of misconceptions out there. So for investors looking for crowd funding opportunities, what are some some words of advice?
AA: Well, I think one of the most important things is to look for companies that are very transparent. There are a lot of companies doing business in commercial real estate and crowd funding. We are, as I mentioned, qualified by the SEC. That requires us to disclose all sorts of information. So you can look up my salary, you can look up all sorts of things about all of the assets, what the risks are, and what the returns are. Most companies that are in crowd funding don't have those kinds of requirements since they're not qualified by the SEC, and so as a result, you don't know exactly what you're getting with some of those other players. So my advice would be to do your own due diligence and ultimately to invest in the companies that give you all of that information in a very transparent manner.
SD: Absolutely. Transparency is key and definitely doing your homework. So you're based in Portland, Oregon?
SD: Any other locations in the country?
AA: No, right now, just in Portland.
SD: Excellent, well this has been incredibly informative, and I wish you a lot of continued luck and success. Congratulations on your journey.
AA: Thank you very much.
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