The offer for everyday investors to own a slice of the fast-growing short-term rental market is off the table for now.
Dublin startup ReAlpha Tech Corp. has ended its first fractional ownership campaign for a vacation home in suburban Orlando, Florida, while it seeks public stock listing and transfers to a new property ownership and investment structure, according to regulatory filings.
ReAlpha is moving its properties to the tech platform and legal structure of Rhove, the complementary Columbus startup it acquired in March. Both seek to democratize the wealth-building potential of investing in commercial real estate.
"Rhove’s syndication platform enables us to offer a more seamless and efficient real estate investment experience to syndicate members," according to the latest update to ReAlpha's prospectus.
The company declined comment through a spokesman, because it is in a "quiet period" required by the U.S. Securities & Exchange Commission. ReAlpha in late April sought to register its shares for direct listing on the Nasdaq, a step that skips an IPO, and must wait for the SEC to declare the listing effective.
The company still owns the five-bedroom Orlando-area townhome, called "Jasmine," along with four other properties. It has been shrinking its real estate holdings, and thus its current short-term rental revenue, after selling off some Dallas homes during the restructuring.
Once ReAlpha is ready to buy again, it has a $200 million credit line and a pledge for a $100 million outside investment if it were to go public.
The plan is to syndicate those properties so everyday investors can buy a fraction, then get a proportionate share of free cash flow from rentals and gains on any future sale.
Typically those investments are available only to those who have the capital for down payments and access to the wholesale real estate market, according to the prospectus.
ReAlpha launched the first Jasmine campaign in mid-March, seeking to raise at least $389,000, with a ceiling of $600,000. The minimum investment was $500 at $10 a share.
The campaign raised $250,000 the first two weeks, but ended with $330,000 at the end of June – everyone was refunded.
Once ReAlpha filed to go public in April, the quiet period meant it couldn't actively market the Jasmine. For example, the company hasn't tweeted or added a video to its once-active YouTube channel since March.
Realpha Orlando Airbnb
If its stock goes public, ReAlpha also would not be able to use that particular crowdfunding structure again, the prospectus said. Instead, it is moving properties to the "Rhove strategic business unit."
Rhove had created a legal structure that allows for syndicated investments under different securities laws.
"When fully integrated with reAlpha’s platform, among other improvements, it will streamline the investment process and make the interface more user-friendly," the prospectus said. "Further, it will allow us to offer unique features such as the ability to earn rent rewards."
The company expects to complete the transition and integration by the end of September.
Fractional investment in properties would be separate from buying stock in the parent company, if the SEC approves the listing. Under the current prospectus, current stockholders are seeking to resell their shares. ReAlpha would not see proceeds unless it issued additional shares in the future.
