From the Portland Business Journal: New Mercy Corps program in S.E. Portland aims to open commercial real estate opportunities to a new class of investor, starting at just $10 a month.
For well-heeled investors, high-paid tech professionals and others in Portland with solid financial resources, Portland’s real estate market has been a good place to invest in recent years.
For people with shallower pockets, however, it hasn't been easy to get in on the action.
But a new investment opportunity from Mercy Corps intends to change the game for some Portlanders who fall into the latter category.
Mercy Corps acquired the Plaza 122 commercial property in Southeast Portland three years ago. A new program launched in October allows nearby residents who take a financial education course to invest as little as $10 into the property.
Portland and Gresham zip codes the opportunity to invest in a commercial building in the neighborhood. They can do so for as little as $10 and not more than $100 per month.
The idea for the trust came about in 2010, when the nonprofit was surveying residents in the Lents neighborhood. The surveys asked residents what kind of businesses they wanted to see in the area and also if they were saving or investing money.
“The answer was that a lot of them didn’t, typically because they don’t have money or don’t understand investing,” Haines said.
Looking to come up with an investment product that would open doors for residents in the neighborhoods, Mercy Corps turned to real estate, law and investment experts to create the CIT based off the REIT concept, which lets investors pool money in real estate properties. The nonprofit also purchased the two-building Plaza 122 commercial property about three years ago in Southeast
Portland for about $1.2 million. Funding came from a $900,000 loan and $350,000 in equity, some of which came from a private investor looking to make not only a return, but a social impact, as well.
The property, which was in foreclosure at the time, is now home to 26 business and nonprofit tenants ranging from a Latina-owned hair salon and a Somali-owned taxi company to health, wellness and financial businesses and a few nonprofits.
Through the CIT, residents who live within four zip codes — 97216, 97233, 97230 and 97236 — can invest in the building and become part of the collective ownership. Haines said the trust was structured in a way that provides liquidity and also some protection during an economic downturn. Investors are guaranteed a minimum return of 2 percent a year, and they can cash out anytime they choose.
Investors must reside within the four zip codes — an area where about 60 percent of residents are renters — and also take a financial course called “Moving from Owing to Owning” to qualify for the CIT. The class is taught by community leaders from the area, many of whom teach the class in languages other than English.
So far, almost 70 residents have taken the course, two-thirds of whom are within the four zip codes. Haines said about 10 have become investors since the trust launched at the end of October, but he’s confident the nonprofit will hit its ultimate goal of between 300 and 500 investors.
Mercy Corps plans to stick with the one commercial property for the moment, but it is also working to develop and license a tool kit about the CIT, which it could then license and make available to other nonprofits around the U.S.
“This is the first project where we really see an opportunity to replicate and share,” Haines said. “It’s a great Portland example that we hope to share with others around the country.