AKA UN opens as NYC's first crowdsourced hotel

The term "sharing economy" is being used more and more each day in reference to companies consumers are investing in. Yesterday's news that Hilton partnered with travel app Uber drew similar comparisons, but this month New York City is opening its first ever crowdfunded hotel.

The AKA United Nations, an extended-stay hotel-condominium on East 46th Street near Second Avenue, will open to guests on Sept. 10, according to Bloomberg. The hotel cost $95 million to purchase and renovate, and $12 million in funding was raised through online pledges. Rodrigo Nino, CEO of Prodigy Network (which is in the process of renovating the building alongside partners) said that it is the "first ever crowdfunded building in New York coming to completion, from A to Z."

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Today's landscape of real estate crowdfunding was created in part thanks to the 2012 Jumpstart Our Business Startups Act, which eased rules for sales of some investments. The reaction is clear: This year crowdfunding for commercial real estate will reach $2.57 billion, more than double last year's estimates. While an exciting prospect for some, it is still a drop in the ocean of New York's real estate transactions, which totaled $255.1 billion in the first half of 2015, data from Real Capital Analytics shows.

"The attention crowdfunding has received is out of proportion with its market share," Sam Chandan, president of New York-based Chandan Economics, a provider of real estate data and analysis," told Bloomberg.

Nino's Prodigy has three other crowdfunding projects at work in New York, and he claims he turned to the Internet as a means to bypass the lockdown big institutions have on commercial real estate.

"There's a ton of people making too much money and a growing number of people not making enough," Nino told Bloomberg. "In a crowd economy, you get individual growth, and the crowd gets a positive impact as well."

But according to Crain's New York Business, the payoff backers will reap depends on the demand generated for AKA UN's rooms. The hotel has 95 one-bedroom condos that range from 562 to 662 square feet, all with kitchens. The rooms will be rented as extended-stay hotel suites until they find buyers, and are each priced from $1.2 million to $1.5 million.

Part of these high prices, in some cases over three times the average monthly rate for a Manhattan condo, will subsidize hotel operations and services such as housekeeping, Brian Newman, business-development chief for Prodigy, told Crain's New York Business.

The crowdfunding campaign for AKA UN drew 116 backers pledging at least $20,000 each. These backers can expect a return on investment of 19 percent to 23 percent from sales of the hotel units and from hotel fees. Approximately 90 percent of the crowdsourced money came from outside the U.S.

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