Addy, a Vancouver-based tech company, is looking to shake up the country’s real estate investment landscape by giving Canadians tools and access to opportunities, with options to invest as little as $1.
Stephen Jagger co-founded Addy in 2018 along with the company’s CEO, Michael Stephenson. Jagger and Stephenson had been working on business ventures for the last 21 years. When an opportunity arose for Stephenson to invest in a Vancouver townhome development, the two decided to form a corporation with a few other investors in order to raise funds and meet the builder’s minimum cheque size. When one of the investors was unable to contribute the required buy-in amount, Jagger and Stephenson began to discuss why smaller investors are often barred from these types of opportunities and what they could do to change the situation.
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With Addy, the co-founders aimed to create a real estate investment platform that enables its users to make an investment ranging from $1 to $1,500 on a curated list of properties that have been vetted by Addy’s investment committee and Board of Directors. Recently, the company launched crowdfunding for Avesta Apartments in North Vancouver, a 22-suite apartment building that has garnered over 1,100 investors from across Canada to date. Addy’s investment opportunities are sourced from multiple segments of the real estate market and vary in size and type, from multi-family apartment buildings to commercial properties.
Livabl spoke with Jagger to find out more about how Addy is working to make opportunities to invest in Canadian real estate more accessible with the help of their digital platform.
Parts of this interview have been edited or removed for clarity and brevity.
Livabl: After the Vancouver townhome investment group, you and your co-founder Michael Stephenson began to talk more about the barriers to investing in real estate. Tell us how Addy got started from those discussions.
Stephen Jagger: It was that early conversation where we started to understand that there are a lot of barriers to entry for people to be able to participate in the real estate market — forget just the big picture of the housing prices generally across the country. It’s not just a Vancouver [and] Toronto problem, it’s kind of every major city in Canada. Every major city in the world seems to be talking about housing affordability issues. And so that’s one problem. Canada’s stress test is another problem, and then things like this where a minimum cheque size from an investment point of view are prohibitive for investors to be able to participate like wealthy people are.
It was that conversation that sort of kick started the idea of, ‘Well, maybe there’s a better way. Maybe we can use technology to eliminate some of these barriers and some of these costs, or drive them down so that it actually makes mathematical sense to enable Canadians to be able to invest in these opportunities literally for as little as one dollar.’ [With] Addy, the original plan was to set out and prove that. And so we put a proof of concept property on the platform in 2018. We wanted to prove that we’re not nuts and that this is a good idea and there are other people out there in the world and across the country that do see this challenge and would like to participate.
So we bought a single-family house in the east side of Vancouver — a beautiful spot that backs right out onto Trout Lake. The concept was to see, ‘Do random Canadians on the internet, when they find our website, will they make an investment decision and choose to invest a small amount of money into a specific property, a specific address, or as we call it, Addy?’ And so the overwhelming response was, ‘Yes.’ We have 305 investors in that property from British Columbia, Alberta [and] Ontario. The smallest [investment amount] was a dollar, and these people were able to participate in that specific property. After that sold out and we had these 305 investors in there, we wanted to figure out, ‘What did we learn? What was good about what we’ve done? What was bad about what we’ve done? How can we make this more scalable? How can we systemize our approach?’
We kind of ripped the business apart and put it back together through 2019 and a good chunk of 2020, and then relaunched the business in mid-2020 with the second property that we put on the platform, which was a Chilliwack commercial building, a brand-new building built for Starbucks Canada. That Starbucks was the second property that we put on the platform after a year-and-a-half delay of us literally rebuilding the software, hiring the team, building out our board of directors. [We] spent a lot of time to figure out how do we make this a sustainable business and how do we take what we learned on the first property and make sure that we’ve accounted for some of those learnings into how we take this forward.
It’s a brand new building, built for Starbucks Canada. It’s in a suburban market. It has a drive-through. It operates and still continues to operate through the pandemic. It’s been doing great with the COVID challenges that many businesses have, [which] has a lot to do with the drive-through. That one was a great success. We have 833 Canadians that invested in that property. The smallest was a dollar, the largest was $1,500, and those 833 people literally participated in that specific property and [they] get to drive by it.
It’s a really neat opportunity. Generally, buildings like that transact between wealthy individuals. One wealthy person buys it off of another wealthy person, and nobody really knows. It just sort of happens. And now we’re able to enable everybody, everyday Canadians, to be able to participate and invest in the way that the wealthy invest.
L: Talk to us about how you’re helping to break down the barrier to owning real estate.
SJ: I think the biggest one is absolute accessibility. What that means to us is we enable the crowd to invest for as little as one dollar. People sometimes think about it as a bit of a marketing gimmick or it’s something like the McDonald’s dollar menu, [but] that’s not really the point.
The point is [that] if you’re investing a dollar, sure, your returns are going to be small because it’s a small dollar amount, but what we’re trying to do is eliminate the barriers. So we don’t want to say that’s a minimum of $50 or a minimum of $100 to invest. If we said the minimum was $100 and you have $80, all of a sudden, Addy is the barrier to entry. And so, that’s why we do it at $1 to eliminate that whole barrier. So if you’re comfortable with investing $10 for a property, $50, whatever you want to do, you have the power and the control to be able to choose a prudent amount for you and your life, your financial situation. Addy is not in the way as being a barrier to that, and we have lots and lots of small investors that are investing very small dollar amounts into these properties.
L: Let’s talk about the product. How does Addy’s platform work?
SJ: The software itself, from the crowd’s point of view, is a pretty powerful tool. It’s what enables us to do what we do so we can take an investor for literally as little as a dollar.
The system lets a Canadian create an account, they put their personal details in [and] they can submit their government ID, which gets them a verified account. They can sign a confidentiality agreement all through the software. Once they’ve got their account set up, they can move money from their Canadian bank over to their Addy wallet. Again, they can move a dollar, $5, $50, $1,600, whatever amount they’re interested in moving, and then that money sits in their Addy wallet, in our trust account, and then as we bring properties onto the platform, they can review the property. They click on ‘Properties for sale’ in the platform and they can review some of the due diligence and read the offering memorandum that’s available for each property.
The offering memorandum breaks down the investment thesis [and] any of the material risks. That kind of stuff is all there for them to make an investment decision. If they’re interested and everything lines up, they like North Vancouver, the building, the plan, the estimated timeline [and] the rate of returns. If that all lines up for them, they can click ‘Invest’ and choose a dollar amount from $1 to $1,500 and sign the documentation digitally and complete the transaction. So start to finish, it all happens through the platform. It all happens, generally, without our involvement, and they’re able to complete an investment relatively quickly. It’s a pretty powerful tool for enabling.
We’re trying to grow into thousands of investors for a property. The last one that we did with that Calgary property with 1,141 investors in it. The North Vancouver building has just been available for over two weeks [and] we already have 1,016 people invested in it. That one is on track to have 2,000 people invested. And so the only way that this works is with the software doing what it does in streamlining and enabling this to happen.
L: How do investors make money on the platform?
SJ: So each opportunity is different. Let’s say you’ve got your account and $200 in your wallet and you’re ready to go. The North Vancouver [property] comes on, let’s say, and your job is to read about it and you make the decision — do you like North Vancouver? Do you like multi-family buildings? Do you like all of these things? And then you make a decision to invest into that specific property, and that one is going to be annual distributions that we’re expecting from it and a five-year timeline, estimated.
The Calgary opportunity, for example, was a 10-year hold with annual distributions. The Toronto one that’s coming up will be about a five-year hold with no distributions. Each one is different and the reason that there’s distributions and not distributions is different. [The] Chilliwack [property] is quarterly distributions, not annually. Each one will be different, and it’s up to the crowd investor — our Addy member — to decide what they’re interested in. When a distribution shows up, it’s essentially money that shows up back into their Addy wallet, and then they can move that money back to their Canadian bank account, or they can choose to reinvest it in whatever property they want going forward. When a property sells, that’s the capital gain.
That’s the other way that you can make money in real estate, the difference between what it was bought for and what it was sold [for] with the costs cut out, and there’s the profit or the capital gains there. That is divided amongst all investors based on their percentage of ownership. Some of them will be higher-risk, lower-risk, some of them are lower return because it’s a stabilized asset in Vancouver or Toronto that’s got super-low vacancy, [for example.]
L: Why do you cap investments at $1,500?
SJ: The $1,500 cap is our cap. It’s something we choose to do ourselves to restrict the membership that way. The reason we’re doing it is [because] we don’t want to put a million-dollar issuance on the platform and then have ten people put in $100,000 and it’s done. We’re not here for that and that’s not our goal.
Our goal is to eliminate barriers to entry, and for those people that have their $100,000, they’ve got opportunities elsewhere. We restricted it to $1,500 for exactly that reason, to make it accessible to everybody and we can spread the opportunity around to as many Canadians as possible.
L: How does Addy flip the script on traditional investing?
SJ: We’ve got these four core promises and this hits on two of them. One of them is hands-off ownership where the investor is able to own but they’re not expected to do anything. They get to be the landlord without landlording. The landlording is happening for them. Someone is managing the building, mowing the lawn, dealing with renters, collecting the rent, filing vacancies, whatever it is. But these people are able to own their slice of the building and partake in the potential capital gains and potential distributions that come out of that property like anybody else owning it.
So I think that’s one big benefit, and then [on] the other side of it, one of our other core promises is that we are expert co-owners with them. We don’t just take a property and put it onto our platform and let the crowd invest. We are investing in the property with them. In our issuance, we are invested as the largest slice in each issuance so that we are truly shoulder-to-shoulder with our members. We make money when they make money, we are the largest in the issuance. It keeps us very aligned that we are all sort of win-win or no deal.
One of our core values is that we are very much aligned to invest together, shoulder-to-shoulder. We win when the crowd wins and we kind of put our money where our mouth is. We’re fully involved in these opportunities. Those things are what makes it a bit different from having enough money yourself to go and buy your own building and do your own thing. We risk it a lot for the crowd where they can participate in whatever prudent amount makes sense to them, if it’s $50 or $500 or whatever they want. Plus, they can spread their investment amount across multiple properties.
Lots of people in Toronto don’t necessarily have any access to the Vancouver market or vice versa. Residents of Calgary or Edmonton don’t invest in Vancouver or Toronto because the pricing is crazy or they don’t know the market very well, and so our platform enables them to dabble into specific properties in specific cities and partake in those opportunities.
L: Where else in Canada are you planning to launch these Addy properties?
SJ: We’re reviewing [properties] across the country. The Trout Lake property was first, the Chilliwack Starbucks was second. We did a Toronto multi-family property already. That one was amazing and sold out very quickly. In 78 hours it was sold out. We did a Calgary commercial property. That one has 1,141 investors in it. It’s a Calgary commercial complex on the northeast side of Calgary.
Right now, we’ve got a North Vancouver apartment building available on the platform, [Avesta Apartments]. We’re about to launch two right now, one in downtown Vancouver on Granville Street, a mixed-use building, and a Toronto multi-family complex as well. They’re both launching imminently. As far as what we’re looking at, we’ve got a couple of Edmonton deals, we’ve got a Montreal thing we’re looking at. There are properties all over the place that we’re looking at. As you can imagine, Canadians generally ask us about Vancouver [and] Toronto, ‘When are properties in those cities coming next?’ but we have a lot in the pipeline.