Born in 1969, Rodrigo Niño has spent his career trying to capitalize on the crowd. His parents ran a third-generation printing shop in Bogotá, but shuttered it every summer to spend the season in Miami along with thousands of other Latin Americans. So when he launched his first real estate firm, International Brokers, after graduating with an economics degree from Universidad de los Andes in Bogotá in 1994, Niño planned to sell Miami vacation real estate to Colombians looking to buy second homes in a safe market.
As the vice president of sales at Miami-based Fortune International Realty, Niño, who speaks English, Spanish and German, later expanded his expertise to all international buyers. In 2003, he launched another firm, Prodigy Network, which worked with more than 22,000 brokers in 13 countries to sell residential real estate in places like Panama, the Dominican Republic, Miami and New York.
Before 2008, Prodigy was selling about $1 billion worth of real estate annually. But once the crisis hit, many international buyers pulled back. So Niño ditched his residential-sales model and replaced it with a new concept: crowd funding commercial real estate projects with pools of accredited investors. The legislation behind it is jejune and the returns, at this stage, purely theoretical, but Niño isn’t worried—he believes in the power of the people.
Worth spoke to Niño in his offices on the 31st floor of the Trump Building on Wall Street.
Q: YOU’VE BEEN IN THE REAL ESTATE BIZ FOR NEARLY TWO DECADES NOW. WAS THAT ALWAYS THE PLAN?
A: Not really. My family has had their printing company for three generations. Right after graduation, I ran the business for six years because my father decided to retire.
SO WHEN DID YOU GET BITTEN BY THE PROPERTY BUG?
There was this nice neighborhood in Bogotá called Macarena with cool, French-style restaurants. I saw this building there, this beautiful building, and out of the blue, it was for sale. I got the initial down payment from friends and family—I had little money—and bought the building. I fixed it up and sold it six months later for more than double. I said, forget printing.
HOW DID YOU MAKE THE JUMP FROM PRINTING TO REAL ESTATE?
While I was running my father’s business, I opened this company, International Brokers, where I essentially invited Colombians to buy houses in Miami. Everybody had a second home in Miami.
WHY NOT SELL COLOMBIAN REAL ESTATE?
This was Colombia in the early ’90s, around when the terrorism started with Pablo Escobar. It was a little bit nasty.
WHEN DID YOU DECIDE TO MAKE THE MOVE TO MIAMI PERMANENT?
When I was working with International Brokers, I met Edgardo Defortuna, the president of a large real estate company there called Fortune. This was around 1999. I started working for Fortune and for the first time in my life was a real employee.
HOW DID BEING AN EMPLOYEE SUIT YOU?
I always was an entrepreneur’s child. I decided to open my own venture in 2003.
THE FIRST ITERATION OF PRODIGY NETWORK, RIGHT?
Prodigy was originally focused on selling residential buildings to international clients. We had listings in Miami, Panama, the Dominican Republic, Mexico. At one point, we sold $1 billion a year in apartments.
SO WHY MOVE TO NEW YORK?
In 2007 I got a call from the Trump Organization. They said, “Listen, we’re launching the Trump SoHo in New York and we want somebody with experience in international sales.” The William Beaver House, a luxury apartment building, was also launching there. I got those listings and moved to New York.
WHAT WAS IT LIKE WORKING FOR TRUMP?
Are we on the record?
YES.
It was a great experience. He is the ultimate real estate tycoon.
WHAT DID YOU LEARN FROM WORKING WITH HIM?
Marketing plays an important role in residential real estate. That is what I would say.
WHAT HAPPENED TO PRODIGY NETWORK WHEN THE RECESSION HIT?
Before the recession, I also had partners and friends coming to me to pool capital together and develop properties. At one point, I had 29 projects between the developed properties and sales projects. When the whole thing collapsed, I liquidated my investments. I let my partners buy me out, and that’s how I managed to get through the crisis.
WHAT DID YOU LEARN FROM THE EXPERIENCE?
I saw that demand for assets was not the issue—the demand was huge. The problem was that the underlying asset in the residential market wasn’t a fit for what people wanted. International buyers were looking for return, and the rent that a residential apartment provides isn’t more than a 3 or 4 percent return. But if you have $100,000, $200,000, even $600,000 to invest, all you could buy is residential.
WHAT WAS YOUR SOLUTION?
I studied. What are the most stable real estate assets in the world? Commercial real estate. Where is the best commercial real estate in the world? In Manhattan. I had it right in front of me. The Rockefellers, the Astors, the Bloombergs, the Trumps—they all invest in commercial real estate, particularly in New York, because it is safe and has huge cash flows.
OBVIOUSLY, THE CAPITAL REQUIREMENTS ARE SIGNIFICANTLY LARGER.
I said, OK, what is the price of one of these buildings? $100 million and up. How can I get my client, this guy in Argentina, or Italy, or Spain with half a million dollars to invest in a project that costs $100-plus million? It has to be a fund.
A SINGLE-ASSET REAL ESTATE FUND FOR RETAIL INVESTORS.
I came up with that notion in 2009, and I went to attorneys and to fund managers. They all said, “You’re crazy. You’re proposing a single-asset fund with a lot of retail investors—that simply does not exist.” So I dropped the idea.
BUT YOU DIDN’T GIVE UP ON THE CROWDFUNDING IDEA.
In late 2009, the Spanish developer BD Promotores called me about a project in Colombia. It was a massive skyscraper that would have commercial, residential and a hotel. They told me about derechos fiduciaros, an investment structure where essentially people buy participation in a single-asset fund. It was exactly what I was looking for that I couldn’t structure here in the States.
WHAT HAPPENED NEXT?
I signed on with these guys, and we set out to fund a $300 million project in a very small economy. We advertised in newspapers, magazines, radio, TV. The bite-size investment was $20,000. It was a huge success. We raised $265 million in the past 40 months. I have over 6,000 investors down there. To me, crowdfunding in real estate was born in Colombia.
YOU WERE HAVING SUCCESS WITH THIS NEW VERSION OF PRODIGY NETWORK IN COLOMBIA. IT WAS LEGAL THERE. WHY COME BACK TO NEW YORK?
I set out to do this model in New York. In 2012, I started analyzing where, and I realized the biggest opportunity was in the Financial District. It has a huge potential of emergence, because of the World Trade Center, because of what is going on with the [redeveloped] Fulton Street [subway] station. So I said, “Anything and everything that I can find around the World Trade Center, I will buy.”
WHERE DID YOU START?
Well, we found the project at 84 William Street [a 17-story residential building]. It was a $120 million project and we wanted to start crowdfunding it, but this was before the JOBS Act, in 2013. So we did it under the SEC’s Regulation S, which is an exception that enabled me to bring investors in from overseas. I went back to my international connections and we crowdfunded $25 million. [The remaining funds came from a joint venture with two other real estate investment firms.]
HOW DID THE JOBS ACT CHANGE PRODIGY’S APPROACH?
I was preparing to launch my second project, 17 John Street, on Regulation S. I was at a conference in Berlin and I got a call from my VP of marketing, and he said, “Wake up, they changed the law.” I decided to postpone 17 John until the bill passed [last July].
TELL ME ABOUT 17 JOHN STREET, A 15-STORY APARTMENT BUILDING TO WHICH YOU’RE ADDING EIGHT STORIES. YOU OPENED IT IN FEBRUARY TO ACCREDITED INVESTORS IN THE UNITED STATES. WHAT ARE THEY INVESTING IN?
17 John is going to be an extended-stay hotel. I like the extended-stay model in New York.
HOW DOES THE CROWDFUNDING PROCESS WORK FOR YOUR INVESTORS?
You go to our site, analyze the projects, request the information—anything you want. You need to prove that you are an accredited investor. And then you buy. 17 John is a minimum investment of $100,000, but I am trying to bring it down to $50,000. And you are going to be looking at returns north of 15 percent, distributed semiannually. We hold the project for five to seven years, depending on the asset, and then we sell it.
RETURNS OF AT LEAST 15 PERCENT—THAT’S A BIG NUMBER. HOW DID YOU COME UP WITH IT?
Very simple: You have rent and a cash flow based on the operation, which with 17 John is an extended-stay hotel. It’s a predictable cash flow.
HOW DO YOU MAKE MONEY IN THIS PROCESS?
We have an asset management fee of 2 percent. And the investors have a 6 percent preferential return. Then you have a waterfall, between 6 and 15 percent, 80 percent goes to investors and 20 percent goes to us. Beyond 15 percent, we go 50-50. So if the returns are not good, investors are protected.
WHY WOULDN’T AN INVESTOR JUST INVEST IN A REIT?
This is completely different from a pool of assets, like a REIT. In a pool of assets, you have the good, the bad and the ugly. Quite frankly, to me, investing in a REIT is not investing in real estate. This is an alternative with a more predictable cash flow derived from rent.
WHAT DOES PRODIGY’S OPERATION LOOK LIKE NOW?
We have offices in New York, Miami and Bogotá. We are close to 80 people now. And we have a portfolio of six projects, including 17 John, worth over $600 million, depending on valuations and who you ask.
ANY PLANS TO LOOK BEYOND NEW YORK AND COLOMBIA?
The United States is my priority; I am focused on big metropolitan areas with global demand. I am analyzing a couple of signature projects in Philadelphia. I am exploring options in Chicago, in Boston. I’m also interested in Mexico, Peru and Europe, starting with Spain. There are opportunities there to buy a lot of assets below market prices right now.
Do you ever worry that you are putting too much faith in the crowd?
That is the philosophy. I think that the crowd will always have a higher collective intelligence than any individual. What is the risk associated with that? Nothing.
For more information, contact Rodrigo Niño , rniñ[email protected] prodigynetwork.com
