Reinventing Real Estate Investments Trusts

Mercy Corps, an anti-poverty group in Portland, Oregon, has created a new kind of real estate investment trust (REIT) aimed at low-income investors. Once held primarily by pension funds and other institutional investors, Mercy Corps’ restructured REIT pilot is aimed at being accessible to retail investors in specific neighborhoods.

 

“We want to turn the REIT model on its head by creating a small, safe, local and low-dollar investment opportunity for all within a community to participate in,” says Sven Gatchev, Mercy Corps Northwest’s community investment trust business analyst.

 

Mercy Corps' first investment is based on a Community Investment Trust (CIT) concept. Purchasing a strip mall in an area where low-income renters are being pushed out of other neighborhoods due to rising rents and house prices, Mercy Corps will make shares available to people who live in several nearby zip codes. They later plan to sell its entire equity share to local, low-income residents. It’s also sponsoring financial education courses for residents.

 

For $10 to $100 a month, anyone in the nearby four zip codes will be able to invest, a model that is a departure from traditional REITs, which often require a minimum annual income to invest. Another difference is that investors in this project will be able to easily cash out in case of an emergency.

 

Mercy Corps is not the only organization looking to create a restructured REIT. The Housing Partnership Network, using an initial pool of $100 million provided by members MacArthur Foundation and the Ford Foundation, among others, is also moving to secure funding for a number of nonprofit owners of affordable housing.