Crowdfunding Real Estate: Design First, Funding Second.

One of the key tenants of UrbanLens Planning is the integration of urban planning with the new economy. In general, the new economy is about not buying but renting; sharing rather than owning; pooling resources through collaboration, not isolation. For UrbanLens Planning, it is further referenced in our portfolio of projects, an interest in benefit corporations and our approach to doing business differently.

One of the areas that these concepts has just begun to see more daylight is in the collaboration for development funding. Traditionally, direct investment in real estate is out of the reach of average investors: the price to sit at the table is much higher than an average investor can make. Kevin Cavenaugh with Guerrilla Development, is developing the Fair-Haired Dumbbell (FHD) with a portion of the project investment coming from small investments. The FHD is two six-story office buildings connected by skybridges at each floor. What the FHD project has done is changed the methodology enabling small investors to become part in the project. 

Let’s be clear about what that part is--as part of Design Week Portland, I listened to Kevin speak about the FHD as part of the on-going series with Creative Mornings.  Kevin has a very renegade style towards his approach to projects—he is open-sourced and encourages others to review and borrow his pro formae. It is my understanding that investors to the FHD are not able to provide feedback or input on design or tenant choices or other issues that (neighbors) appreciate having the opportunity to provide input on. What it does provide is an equity stake in local development. It provides community members with the opportunity to directly invest locally, rather than REITs, which can be aggregated nationally.

Note: Whether or not a REIT is aggregated nationally depends on the terms of the REIT.  For example, the Fundrise (www.fundrise.com) model is to cull both accredited and unaccredited investors into REITs that feed projects across the county (and investors don’t know what projects they’re investing in when they make their investments).  But similarly, Guerrilla could (and might) create a similar model where it was understood and illustrated what properties and projects were fed by the REIT (i.e., all in Portland, all done in the “Guerrilla Style” which would include social experimentation, adventurous architectural style, public art, etc.[1]

Although his previous projects like the Ocean, Box and One, the Zipper and others are very community-design oriented through their features and programming, Kevin’s mindset and his methodology is more on the independent side. The end result of his projects reflect a community perspective—designs with “third spaces” and design elements that communities crave, like fire pits, that function as places to meet, with tenants that have live-work spaces.  These design elements lend to community, but the design-driver is the developer, not via community input.

Building and construction in Portland right now is a frenzied development environment, where building and construction of all types is being done at speeds that does not create incentives for details and care.  Neighborhoods have pushed back, but can linking financial investments at a small scale, like the Fair-Haired Dumbbell (FHD) create projects with a stronger sense of community? Or maybe more importantly, community buy-in/acceptance?

Another project that comes to mind is the Café au Play—This Cooperative modeled project was developed by a community of volunteers as a response to creating a place for meaningful community for families with children. The project closed in 2015, but its closing had more to do with operational challenges, rather than development ones.

So, what if, a project was developed in your neighborhood that you had provided a small part of the funding for and established an equity stake in? Although you may not have a say in the final design—would that provide enough of a link for you to feel invested? Would you frequent the businesses, knowing that their successes transitioned into successes for your own investment?  Can this type of model be scaled in different ways, to allow for other examples like cooperatives, where return on investment is not the highest motivation? 

I think that this funding model changes the perceptions of development—especially in light of a concern about out of town development, but the design of the project, and its ability to affect community is the responsibility of the development team.  

Additional reading:

Guerrilla Development

Curbed, Can Crowdfunding Change Real Estate Development?

Crowdfundinsider: Oregon’s Guerrilla Development Completes Reg A+ Tier 1 Crowdfunding Deal For the Unusual Fair-Haired Dumbbell Building

[1] Special thanks to Anna Mackay, Guerrilla Development for this additional information.

Graphic courtesy of Guerrilla Development (2016)

UrbanLens Planning, LLC

UrbanLens Planning, Portland, Oregon 97202, USA