Fundrise Launches, Allows DC and Virginia Residents to Buy Into Local Businesses

• August 8, 2012
• 5 Comments

by Shilpi Paul

Fundrise

A couple weeks ago, we wrote about the various ways DC residents are trying to have an impact on the retail landscape of their neighborhood. Now, the folks behind Popularise have come up with a direct route for community members to buy into retail and commercial real estate in their area: Fundrise.

Fundrise is an online platform that allows residents to actually invest in local real estate and businesses. If residents believe that a business will succeed in their neighborhood, Fundrise gives them a way to buy shares. The funds help get the business started, and if the owners are correct about the viability of the business, everyone shares in the profits.

Founder Ben Miller hinted at the new venture when UrbanTurf talked to him several weeks ago.

“There should be a model where neighborhoods come together and actually own commercial real estate,” Miller said. “They need to pool capital and take power into their own hands. If they are right, they profit from it. It’s a new kind of community development, almost like it was 100 years ago. What I’m saying sounds really dreamy, but I think it’s very feasible.”

What UrbanTurf did not know at the time was that Miller and his partners were finalizing Fundrise. The website is now live, and the first project on the boards is Maketto, the food and fashion market located at 1351 H Street NE (map), which was Popularise’s first project as well. They bought the space last year and started polling residents to determine what kind of business should occupy the space. From the suggestions, Popularise decided to go with an eatery/store run by the folks behind Toki Underground and DURKL, which is aiming for a Spring 2013 opening.

Fundrise’s first project: Maketto

In fact, Fundrise came about as a result of that project. Once Popularise was ready to start building Maketto, the team was hesitant to seek funding from a big bank. They instead decided to reach out to the community, and, after figuring out the financing and registering with the SEC, Fundrise was born. The hope is that the platform will work with other projects as well.

Here is how Fundrise set up the Maketto project: Investors, who must be DC or VA residents, can buy anywhere from one to 100 shares of Maketto with the click of a mouse for $100 apiece. The shareholders in total have a right to 30 percent of the business’ profits and will benefit from any increases in the property value. In the case of Maketto, there are also a few non-monetary perks, like party invites and free gear.

“I think this is the future of neighborhood development — neighbors build it themselves,” said Miller. “It won’t take that much money, and if they have enough momentum, people will join on.”

This article originally published at http://dc.urbanturf.com/articles/blog/buy_shares_in_local_businesses_through_fundrise/5878

5 Comments

1. Mark said at 9:53 am on Wednesday August 8, 2012:

   I think that Fundrise would find more investors if it opened the opportunity to Maryland and Virginia residents. I personally live in Maryland right on the DC border and as a result, frequent Washington businesses. I feel this is the way for many people in the DMV.

1. Elysia said at 10:07 am on Wednesday August 8, 2012:

   Why isn’t this open to Maryland residents too?

1. Fundrise said at 11:00 am on Wednesday August 8, 2012:

   Hi Mark and Elysia - Each of our offerings must be registered with each state’s securities regulators. The first offering, Fundrise 1351 H Street, LLC (Fundrise 1351), was qualified with the Securities and Exchange Commission (the SEC) and registered with the securities regulators in Virginia and the District of Columbia.  In the future,  we would like to expand our offers in other states, such as Maryland.

1. vahoya said at 12:16 pm on Wednesday August 8, 2012:

   Great idea on its face, but this seems like an investment and logistical nightmare.  Not sure how you go about administering the investment, ensuring transparency, reporting to investors, etc.  What’s the fee structure?  How do you efficiently administer an investment and properly disclose earnings, etc. with little to no scale or efficiencies, particularly with investors who have a stake as small as $100?  How do you manage expectations with retail investors that have little knowledge of how real estate financials work?  Just some of the many questions and issues that come to mind.  Seems like a lawsuit waiting to happen once things don’t go as planned.  Particularly in a town like DC where every other person seems like they are a lawyer.

   Best of luck, but I’m very skeptical that this will work, is a cost effective way of raising money or is scalable.

1. Char said at 5:47 pm on Friday May 3, 2013:

   Well, could you please tell me what could possibly hinder maryland residents from participating in opportunities such as this? I am not understanding why the State of Maryland is having such a problem with getting on board with something that could be beneficial to maryland residents as well. I’d truly appreciate your input.

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