CROWDFUNDING:

THE NEXT TOOL FOR COMMUNITY

DEVELOPMENT FINANCE?

Nat M. Zorach, LEED GA

BPI BA, RESNET RFI

THE HANDBUILT CITY

CHICAGO, USA
 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
 A BRIEF HISTORY OF
CAPITAL
¡ W hy crowdfunding exists
¡ C ycles of capital
innovation
¡ S tock market– the original
crowdfunding marketplace
¡ T he tech revolution, 2008,
& impacts on finance
¡ Taking a turn off the one-
way street of capital
SCOPE, LIMITS, STRATEGY
¡ L ocal leverage of information and
support
¡ A ccountable, affordable, flexible capital
¡ B uilding a better model for equity
¡ I nvest locally, profit locally, reinvest
locally
¡ S avings accounts have a lousy interest
rate
¡ E volving regulatory environment
 WHO’S DOING WHAT
¡ G roundfloor (Raleigh, NC)
¡ P atch Of Land (CA)– “P2PRE”
lending
¡ R ealty Mogul (CA): Accredited only
¡ F undrise (DC): Making tracks, $31
million in venture capital / Series A
¡ D on’t be fooled by imitations– equity
crowdfunding vs., say, snake oil
sales
 FUNDRISE
¡ P latform to crowdfund real estate investment
¡ S EC Regulation A investment offerings
 STEP 1: BUILDING A
NETWORK
¡ O utreach & invitations
¡ S upport for a project vs. for the platform
¡ A ccredited versus unaccredited
investors
 STEP 2: CREATING AN
OFFERING
¡ 1 . Determining the scope of the project
§ $ 250,000+
¡ 2 . Understanding the capital stack
¡ 3 . Preparing documentation
§ W hat Fundrise does for you
§ S tate-by-state filings
§ T he private placement memorandum
¡ T hen what? Payback, reporting, etc.
STEP 3: PACKAGING THE
OFFERING
STEP 3: PACKAGING THE
OFFERING
STEP 3: PACKAGING THE
OFFERING
 CASE STUDIES
¡ “ The Dumbbell” (Portland, OR)
§ $ 3.9m raised (“test the waters” offering,
exceeded target size by more than double)
§ 1 0-12% return, 3-5 year payback
¡ 9 65 Florida NW (Washington, DC)
§ $ 974k raised, exceeded $300k target
§ 8 -10% return, 3-5 year payback
 CASE STUDIES,
CONT’D.
¡ M arcus Books, San Francisco
§ F irst affordable housing offering ever
launched
§ S an Francisco Community Land Trust
§ P urchase + affordable housing preservation
§ S an Francisco: affordable = $3,200 / month
rent
§ H ighly leveraged deal; <2% principal’s equity
§ 4 % return offered to accredited investors
 PROPOSED
OFFERINGS
¡ G ARY, INDIANA
§ 2 2 affordable units
(rehabs)
§ E nergy efficiency
§ Waste diversion
§ $ 376k project; $17k / unit
§ S trong rental market
 NEW CONSTRUCTION
¡ 2 8 lots, 371k ft 2 of land in the Lakeshore
¡ A ffordable sale prices of $115-165k apiece
¡ R efinance upon completion
¡ R ental for $700-1400
 DOWNSIDES: MACRO
¡ L iquidity of capital: You can spend
cash, but not, say, bricks or scrap
copper (North St. Louis excepted, of
course)
¡ Time to build individual relationships
¡ D ifficulty of getting skin in the game
¡ R egulation–we know it can work, but
how universally can it work?
DOWNSIDES: RISK
 LET’S DO IT
¡ C an we do this in Chicago? St. Louis?
Gary?
¡ M obilizing cash for better models of
equity
¡ D eveloping the right project
¡ P utting skin in the game
¡ W hat exactly I am doing here
 THANKS!
¡ Get in touch: nathaniel@handbuiltcity.org
¡ Our network on Fundrise:
https://fundrise.com/networks/the-handbuilt-city/view