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CROWDFUNDING:
Nat M. Zorach, LEED GA BPI BA, RESNET RFI THE HANDBUILT CITY CHICAGO, USA
THE NEXT TOOL FOR COMMUNITY DEVELOPMENT FINANCE?
HANDBUILT: WHO WE ARE
¡ Real estate development
¡ Craft, creativity, capital ¡ Affordable housing ¡ 400+ units acquired, or
renovated with partners
¡ Investor network on the Fundrise platform with 182 members
¡ Why crowdfunding exists ¡ Cycles of capital
innovation ¡ Stock market– the original
crowdfunding marketplace ¡ The tech revolution, 2008, & impacts on finance ¡ Taking a turn off the one-
way street of capital
A BRIEF HISTORY OF CAPITAL
¡ Local leverage of information and support
¡ Accountable, affordable, flexible capital ¡ Building a better model for equity ¡ Invest locally, profit locally, reinvest
locally ¡ Savings accounts have a lousy interest
rate ¡ Evolving regulatory environment
SCOPE, LIMITS, STRATEGY
¡ Groundfloor (Raleigh, NC) ¡ Patch Of Land (CA)– “P2PRE”
lending ¡ Realty Mogul (CA): Accredited only ¡ Fundrise (DC): Making tracks, $31
million in venture capital / Series A ¡ Don’t be fooled by imitations– equity
crowdfunding vs., say, snake oil sales
WHO’S DOING WHAT
¡ Platform to crowdfund real estate investment ¡ SEC Regulation A investment offerings
FUNDRISE
¡ Outreach & invitations ¡ Support for a project vs. for the platform ¡ Accredited versus unaccredited
investors
STEP 1: BUILDING A NETWORK
STEP 2: CREATING AN OFFERING
¡ 1. Determining the scope of the project § $250,000+
¡ 2. Understanding the capital stack ¡ 3. Preparing documentation § What Fundrise does for you § State-by-state filings § The private placement memorandum
¡ Then what? Payback, reporting, etc.
STEP 3: PACKAGING THE OFFERING
STEP 3: PACKAGING THE OFFERING
STEP 3: PACKAGING THE OFFERING
¡ “The Dumbbell” (Portland, OR) § $3.9m raised (“test the waters” offering, exceeded target size by more than double)
§ 10-12% return, 3-5 year payback ¡ 965 Florida NW (Washington, DC) § $974k raised, exceeded $300k target § 8-10% return, 3-5 year payback
CASE STUDIES
¡ Marcus Books, San Francisco § First affordable housing offering ever launched
§ San Francisco Community Land Trust § Purchase + affordable housing preservation § San Francisco: affordable = $3,200 / month rent
§ Highly leveraged deal; <2% principal’s equity § 4% return offered to accredited investors
CASE STUDIES, CONT’D.
¡ GARY, INDIANA § 22 affordable units (rehabs)
§ Energy efficiency § Waste diversion § $376k project; $17k / unit § Strong rental market
PROPOSED OFFERINGS
¡ 28 lots, 371k ft2 of land in the Lakeshore ¡ Affordable sale prices of $115-165k apiece ¡ Refinance upon completion ¡ Rental for $700-1400
NEW CONSTRUCTION
¡ Liquidity of capital: You can spend cash, but not, say, bricks or scrap copper (North St. Louis excepted, of course)
¡ Time to build individual relationships ¡ Difficulty of getting skin in the game ¡ Regulation–we know it can work, but
how universally can it work?
DOWNSIDES: MACRO
DOWNSIDES: RISK
¡ Can we do this in Chicago? St. Louis? Gary?
¡ Mobilizing cash for better models of equity
¡ Developing the right project ¡ Putting skin in the game ¡ What exactly I am doing here
LET’S DO IT
¡ Get in touch: [email protected] ¡ Our network on Fundrise:
https://fundrise.com/networks/the-handbuilt-city/view
THANKS!