Investments in commercial real estate assets, such as office buildings, industrial warehouses and retail shopping centers, have long been the domain of wealthy, accredited investors. Shutting out small investors means local residents rarely get to benefit from the uplift of their neighborhoods.
With “community equity,” Lyneir Richardson’s Chicago TREND is starting to dismantle that long-standing barrier. Neighborhood residents can invest — and earn real returns — in TREND’s local shopping centers on the same terms negotiated by institutional investors.
“Nobody ever invites the church member, the charter school parent, or the guy who used to do crime in the neighborhood that turned his life around to have an ownership stake in making the neighborhood better,” Richardson says on the latest episode of ImpactAlpha’s Agents of Impact podcast. “How do you democratize ownership? My belief is that you just gotta make it work for more people.”
Chicago TREND has purchased seven neighborhood shopping centers, with an eighth deal close to completion. The strip malls house health services like urgent care, eye doctors or physical therapists, as well as food outlets and nail salons. Two of the centers have grocery stores.
The 460 low- and moderate-income neighborhood investors in Chicago, Baltimore and other US cities have invested on average about $2,000, on the same terms as bigger investors. Most of them are people of color, and nearly half are women. Their capital represents as little as 5% and as much as 49% stake of each project.
He recruits residents at meetings in church basements, community halls, libraries and even barber shops. “I always say when I make my presentation, ‘When was the last time someone knocked on your door and invited you to have an ownership stake in something that you patronize in your neighborhood?”
“I have an email where a guy said I used to do crime in that neighborhood and now I’m part of the ownership,” he says. “Our investment thesis is that if people have a little ownership stake, they’ll patronize and protect and respect it in a different way.”
Matching funds
Richardson is in the final stretch of fundraising for his first commercial real estate fund, which is targeting a $15 million final close this year. The financing round is led by Pritzker Traubert Foundation, the family foundation of Penny Pritzker, the former secretary of commerce, and her husband Bryan Traubert, alongside the MacArthur, McKnight, Kresge and Surdna foundations. Other LPs include family offices and high-net-worth investors.
Richardson said he first met Pritzker after seeing her quoted in an article about NBA players investing in Harvard’s commercial real estate projects. “There’s a massive disparity in wealth creation in communities of color compared to white communities,” Pritzker told The Wall Street Journal. “And so, why is that? Well maybe it’s access to good deals.”
Richardson scored a meeting and told Pritzker that TREND’s investors were school teachers, church members, “the grandmother who lives in the neighborhood,” he said. Her response, he says, “I like this, so what are you trying to do?”
At the time, Richardson was just doing his first few deals. “I said we need $6 million and she said, ‘Okay, we’re in for 25%.” Richardson joked, “I was like, ‘Damn, I should’ve said $60 million.’”
When TREND launches its next campaign to raise capital from unaccredited neighborhood investors, some residents will receive matching funds to amplify their investments. The matching program is backed by grant capital from one of TREND’s limited partners to incentivize low- and moderate-income people that live in the zip code around the properties.
“The first fund has allowed us to prove that we can strengthen neighborhoods, strengthen corridors, drive community cohesion, but we can also earn financial returns,” Richardson says. He is already thinking about his second fund, which has a $50 million target. That would mean more opportunities to bring in neighborhoods alongside institutional investors in commercial real estate ownership.
“We’re learning every day how to do this work and how to get returns, and how to communicate with the community investors and with our institutional investors as well,” Richardson says. “Man, it’s hard work, but it’s my passion.
Buying back the block
TREND is part of a group of local strategies using shared ownership of commercial real estate to build wealth for underinvested neighborhoods. The goal is to buy back the block from speculative actors who are driving gentrification and displacement of longtime residents by acquiring properties, raising rents and pushing up neighborhood property values.
In Kansas City, LocalCode is buying blocks of mixed-use commercial real estate developments to place them into the hands of East Kansas residents. In East Portland, a Community Investment Trust allows residents to invest as little as $10 a month for an ownership stake in neighborhood shopping malls.
And in Philadelphia’s Kensington corridor, Kensington Corridor Trust has designed a Community Stewardship Trust that will allow residents to buy a stake in the 32 apartments and commercial properties in its portfolio.
TREND has already notched its first exit. In Chicago’s Chatham neighborhood, hundreds of local residents who invested in the Chatham Plaza shopping center have earned a five-fold return on their investment. Neighbors that invested as much as $5,000 received payouts of over $28,000, when Chicago TREND sold the $3.2 million property, which it acquired for $2 million in 2022, Richardson told ImpactAlpha last year.
“Our model is we’re going to make the neighborhood better, and the people that are invested are going to make a return,” he says. With the Brookings Institution, Richardson has produced “A playbook to buy back the block.”
The playbook covers questions such as, How do you form a community investment vehicle? How do you do the underwriting? How do you get site control? How do you communicate with people? How do you form an investment thesis?
“That’s how we’re going to democratize ownership,” he says. “You democratize information. You make the education and the resources available to people.”
