Crowdfunding

Eve Picker: [00:00:01] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich, or poor, beautiful, or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo in order to build better for everyone.

Eve: [00:00:48] Lyneir Richardson is building Black wealth through community owned shopping centers. He has an audacious plan to buy 16 community shopping centers and invite 1000 small investors to co-own them with his company, Chicago TREND. He’s made a sizable dent in this goal, with over 340 investors and five shopping centers in this portfolio. This will be number six. To accomplish this, Lyneir and his team have developed a rigorous set of criteria for finding and buying shopping centers in majority Black demographics that are on the cusp of change that might offer added value over time. His plan is to empower Black entrepreneurs and community residents to have a meaningful ownership stake in the revitalization and continued vibrancy of commercial corridors and Black shopping districts. But there’s so much more. Lyneir wants every neighbor to be able to say, “We own this”.

Eve: [00:00:48] Hello, Lyneir. Thanks so much for joining me again.

Lyneir Richardson: [00:02:13] Good morning. I’m happy to be with you.

Eve: [00:02:16] I’m really happy to have you back a third time, because this marks your third offering on Small Change. Very exciting.

Lyneir: [00:02:23] When you come back for a second or third serving, it must be good.

Eve: [00:02:27] It’s got to be good. Yeah, that’s really great. Just for everyone who doesn’t know you, let’s start with Chicago TREND, which is, um, a company you started. What does Chicago Trend do?

Lyneir: [00:02:37] TREND stands for Transforming Retail Economics of Neighborhood Development. We started the company in 2016, after two years of being a research project that was funded by the MacArthur Foundation and the Chicago Community Trust. The nature of our work is focusing on how to make commercial corridors and commercial properties in neighborhoods that are underserved stronger. Our belief is that the commercial corridor is the first impression of a neighborhood, and if it’s blighted or under retailed or some way underperforming, it becomes a liability for the neighborhood rather than an asset. It brings down property values. It could even attract crime. And so, our work for the last ten years now has really been focused on strategies to get capital and to get services and goods, and to articulate why commercial corridors, particularly in majority Black neighborhoods, can be viable and helping them to become assets for the community.

Eve: [00:03:43] So I think you had a light bulb during Covid and the Black Lives Matter movement about a strategy that you’re now playing out that’s going to take you a while, but it’s pretty amazing. Do you want to tell us about that?

Lyneir: [00:03:54] You know, we own five shopping centers now. And I talk about #WeOwnThis. And the ‘we’ is not even, you know, Chicago TREND and our company. And it’s not even the so far 330 community investors that have invested in our projects through the Small Change platform. We think of the ‘we’ being everyone that’s even connected to ownership for the first time. You know, that’s my grandmother or my auntie or my prom date, or my fraternity brother or my church member. They now, for the first time, have connection to ownership of an asset, commercial property in their neighborhoods. The light bulb moment was right after George Floyd was murdered. We all were at home during Covid watching TV. And I remember that there were clarion calls for racial justice investing and initiatives to close the racial wealth gap. And the next day I remember seeing a guy holding a sign up saying don’t wreck my business is Black owned. There was no civil unrest and rioting in neighborhoods of Chicago. And then it hit me. Well, you know, wealth is created by owning assets. Assets that generate revenue and appreciate over time, perhaps assets that have tax advantages. So, we really are going to close the racial wealth gap. We need to help more people of color own assets that could be homes, businesses, stocks. Again, our work was commercial corridors. So, as I mentioned, since that moment, we now own five shopping centers and on this Small Change platform, right now we’re about to launch our sixth and we will ideally own our sixth shopping center by the end of June.

Eve: [00:05:45] When you talk about owning real estate assets, what does that look like, white versus Black in this country?

Lyneir: [00:05:52] Through work that I have enjoyed doing with colleagues at the Brookings Institution, Tracy Hadden Loh and Andre Perry, I know you know them, and Tracy’s so fun to work with. And Andre is a sort of, a research rockstar, right? So, for me, it’s been fun to work with them. Research that, you know, they really have pioneered. You know, only, you know, 3% of people of color have an ownership stake in commercial real estate. You know, two thirds less than, you know, the general population.

Eve: [00:06:27] Which is, what? About 8 or 9%?

Lyneir: [00:06:28] It’s 9%. Yeah, 8 or 9%. Right. So less than 3% of people of color own commercial real estate.

Eve: [00:06:33] And also, I’ve got to add from what I understand, the value of those assets is less.

Lyneir: [00:06:39] Of course, right.

Eve: [00:06:40] Than white-owned real estate assets. There’s not even 3%. If you took it by value, it would be a much smaller percentage, right?

Lyneir: [00:06:48] Yeah. Exactly right. And so, the question becomes what’s the on ramp? I remember also during Covid, seeing this article in the Wall Street Journal where the former US Commerce Secretary, Penny Pritzker made a quote that said, you know, one of the reasons that there’s a racial wealth gap in America is that people of color have not been invited into good real estate deals, into good deals, right? To be equity holders into good deals. And the article in the Wall Street Journal was talking about Jay-Z and Wall Street executives and these entertainers. And I remember shooting a note to, I had a friend there who worked in her philanthropy, and I said, hey, we’re doing the same thing but, you know, our investors are charter school parents and young millennials and, you know, professionals that live near the shopping centers, and community residents. You know, we’d like to have Jay-Z and, you know, LeBron James. But we’re doing the same thing, but we’re democratizing ownership, and we’ve created a structure that allows people with $1,000 to get an on ramp into ownership. Right? My favorite moment of 2023 was, I was in the community, and we were doing an event, and this woman came up to me and she said “I have lived in this community for 43 years. I call it my own. But I’ve been a renter here. I never actually owned anything until I invested my thousand dollars in your shopping center”.

Eve: [00:08:22] Oh, isn’t that wonderful? That’s now wonderful.

Lyneir: [00:08:24] Now, that comes with a lot of responsibility, right? Obviously. And so, I think about, you know, my dream is one day everyone will receive their investment return, that the shopping center will be better, that you know, all the things that we envisioned will really come to fruition. But that moment of inspiration, of now she’s getting an investor report and understanding what it means and thinking about ownership and even communicating about ownership in a different way with her children and her family members.

Eve: [00:08:54] Yeah. So, my favorite moment with your first offering was when I got a phone call from a gentleman who said he had a young woman who cared for his wife, who lived in the neighborhood, who was so excited about Walbrook Junction that she really wanted to make an investment, but she had no money. How could he pay for her investment?

Lyneir: [00:09:15] Oh, wow!

Eve: [00:09:16] Because she was so excited about owning a piece of it. She lived there. It was really pretty wonderful.

Lyneir: [00:09:22] You know, I imagine there’s a hundred or hundreds of good stories. We’re just launching a little research project to interview the investors, to interview the CDFI lenders in the projects, to talk to some of the retailers. And I’m hoping that, you know, we’ll get some really good data points, both for why and over time, the impacts of the work.

Eve: [00:09:45] One of the things you had us do was to help you start tracking demographics of people who invested. What does that look like?

Lyneir: [00:09:52] Very cool. 53% of our investors are African American.

Eve: [00:09:56] Isn’t that fabulous?

Lyneir: [00:09:58] 58% reside in low- and moderate-income neighborhoods. 42% are women. None of those stats are indicative of commercial real estate ownership.

Eve: [00:10:10] No. Absolutely.

Lyneir: [00:10:11] Like we’re changing the game, right? And that work is incredible. Those stats are unbelievable.

Eve: [00:10:16] I think you and I are both really proud of that. We had another offering on our site, a gentleman in, down South who did a little cabin project, and he really wanted to teach his community how to invest. He ended up with 85% investors from his community, which was astounding. That’s what he worked at.

Lyneir: [00:10:38] Well, you know Eve, I have this little phrase that “intentionally inclusive does not mean exclusive”.

Eve: [00:10:47] Yes.

Lyneir: [00:10:48] So, we’re intentional about communicating that there is an opportunity to have an ownership stake. In church basements, in apartment building community rooms, in the public library. I’ve done Zoom presentations at 7 a.m. in the morning, at lunchtime and at dinnertime to parents in the charter school, the PTA, so to speak. That’s intentional, right? But I’m also excited that through Small Change, we have investors as far away from Australia.

Eve: [00:11:19] Yes.

Lyneir: [00:11:20] So we have people that want to be a part of a community development movement, that want to support something positive and get a return, right? So, this is another way of, you know, how can I, as you always say, do real estate for good? I think that’s the, you know, that’s your tagline, right?

Eve: [00:11:41] Right. So, this is a strategy to own 16 shopping centers and you will soon own your sixth. Tell me about that. How hard has it been to find them and how have you thought about it?

Lyneir: [00:11:55] Eve, it’s, the work is grueling, actually, and…

Eve: [00:11:59] But it’s a lot of fun, right?

Lyneir: [00:12:02] Yeah. And you find little moments of inspiration. So, you know, the first quarter for us, we had, you know, we’re raising a fund, and our objective is to get the fund to $50 million. That fund allows us to do the due diligence and financial underwriting and to know that we can acquire the shopping centers, right? And then, once we put a property under contract, we do the Small Change offering and ultimately, you know, this investor outreach and try to democratize ownership, right? And really foster inclusive ownership and being intentional and mission based about that work. But man, raising money is hard. Getting properties under contract is hard. You know, going through a financial due diligence is, you know, so every step of the way. But you look for little moments of inspiration, right? The lady who said, you know, thank you for giving me an opportunity to be an owner, you know, a favorable article in the local newspaper where the editorial board will say, you know, hey, I think this is an interesting idea. You know, getting a green light from a new grocery store that will occupy the project, the last shopping center that we bought, a new grocery store and a national coffee shop. Like, we’re.

Eve: [00:13:16] Oh, congratulations. Because that was really great.

Lyneir: [00:13:19] We’re two minutes away from being able to publicly announce that. But those little moments of inspiration add fuel to the work.

Eve: [00:13:27] So this is really triple bottom line, right? Maybe even quadruple.

Lyneir: [00:13:32] It’s a lot of bottom line. The first is even in my class at Rutgers is being profitable. So, you know, every day the whole team struggles with this tension between mission, market opportunity and money. Right? So that shows up in our work in shopping center ownership of, you know, we want to get tenants to the shopping center that are not extractive. And so, when there’s a vacancy our first thought is what retailer or what service would be profitable here, but also would be community serving. Right? And we’ll leave a space vacant even a month or two longer as we try to work to get a tenant that we think will be accretive for the neighborhood. Sometimes the challenge is, you know, we really fought very hard to get out of Black-owned bank in back to projects. And at the end of the day, the deal didn’t happen. And we ultimately found a Black entrepreneur, a husband-and-wife team that have opened a first-class laundromat, laundry facility in the shopping center. So, the mission got carried out in a different way. We wanted to get financial services, but now we have Black entrepreneurship.

Eve: [00:14:47] You get laundry services instead, right? But what fascinates me about your plan is that you’ve always said these neighborhood shopping centers should be full of non-amazon-able service businesses, right? So, you can’t get your laundry cleaned on Amazon yet.

Lyneir: [00:15:06] And Amazon doesn’t do fingernails yet. You know, manicures yet. I always joke and someone said, well, it’s all machines, so.

Eve: [00:15:12] Right.

Lyneir: [00:15:13] This is, the shopping centers that we own these are not the mall. And we don’t own shopping centers with Best Buy and West Elm and the Cheesecake Factory, right? The shopping centers we own have the carryout pizza, the barber shop. We have 30% of our tenants now are health care, women’s health care center. We have a pediatric dentist. We have eye doctor, ear doctor that kind of stuff.

Eve: [00:15:40] Really serve the neighborhood.

Lyneir: [00:15:41] That’s right. You know, it’s where you go to eat and where you go to get services. We’re working on a day care deal now we’re really excited about. So, it’s that type of [inaudible].

Eve: [00:15:50] Wonderful. So where are your shopping centers located?

Lyneir: [00:15:53] So all the shopping centers are in majority Black neighborhoods now in Chicago and in Baltimore. The property that we’re about to acquire, enrols in the Roseland Medical district. The Roseland neighborhood is exciting for us because, you know, it has four medical tenants. It has a FQHC and a pharmacy and a dialysis center, but it also has three restaurants and a nail salon. So, it’s right down the strike zone. It’s 27,000ft². You know, our smallest property is 10,000ft². Our largest property is about 140,000ft² and growing. And we’re starting to look for, you know, as you mentioned, our aim is to acquire 16 shopping centers by the end of 2026. And so, the next couple of years, we’re trying to find the right neighborhoods where the shopping center makes a difference. It’s not just about the real estate, but where the real estate can do all of these other things, right? It’s, you know, it can be a catalyst for community development. It can, you know, it can attract new services. It can, you know, if done right, create wealth for local residents. If done right, it’ll help reduce crime. That’s how we think about it as sort of centers of influence of, you know, the shopping center as an asset.

Eve: [00:17:12] So we can’t talk about the terms of the current offering, but we can tell people, like, I was sort of really interested that it has a big piece of land attached to it as well.

Lyneir: [00:17:23] Yes. One of the ways that we strategically look to add value is to look at adjacent vacant property. I’ll give you the best example of the last project we bought.

Eve: [00:17:37] Was that Edmondson Village.

Lyneir: [00:17:39] Edmondson Village in Baltimore.

Eve: [00:17:42] Just for listeners that’s also on Small Change.

Lyneir: [00:17:44] Small change as well. We closed it in August. We bought it in August. It had a vacant parcel behind it. We have signed a contract with a very well regarded non-for-profit organization called Meals on Wheels. People love Meals on Wheels, and they will build a new headquarters and distribution facility there and, you know, it was a way to add value to the property.

Eve: [00:18:08] That’s amazing. Yeah.

Lyneir: [00:18:09] And so we’re excited about that. Here at the Roseland Medical District, there’s similarly a piece of vacant property, this shopping center’s less than a block from a new announced public transit stop. The Chicago Transit Authority has announced almost a $4 billion extension of the transit station. And a new station will be, you know, less than a block away from our shopping center. And then there’s also this Roseland Medical District, where the master plan to do more medically oriented development and housing. And so, you know, part of what we will determine over the next year is how to develop that vacant parcel in a way that creates value for us as owners of this asset, but also that stimulates and catalyzes and is in concert with the other development vision that’s articulated in the master plan for the medical district. And, you know, and the big vision and big investment happening with the public transit expansion.

Eve: [00:19:14] So all those little investors in this project and in the last one get to own an additional property.

Lyneir: [00:19:22] Yeah. I mean, it’s part of the property. It’s, you know, we acquire it. It’s, you know, it’s like vacant parts, like the backyard. So, you know, we’re trying to figure out how to maximize value. I mean, one of the things I’m excited about is when you buy a 20-year-old or 30-year-old shopping center, typically there’s some concern about the roof needing repair. And so, we’ve now submitted grant applications to do solar on the roof. So now our investors are not just investors in a commercial property for the first time. In theory, as soon as we get a project done, they’re going to be investors in climate positive initiatives, right? So, you know, what does it mean to, you know, solar panels or energy efficient HVAC equipment? Or, you know, we’re aiming to put a electric charging station in the parking lot. So, all of these things are possible when you own the asset. That’s why ownership matters, right?

Eve: [00:20:14] Right. Right, right, right.

Lyneir: [00:20:15] When we #WeOwnThis, when the ownership matters, right? We’ve hired African American property managers and leasing agents. We’ve can engage in climate positive initiatives. We can do deals with, you know, local and African American owned tenants, right? So again, inclusive doesn’t mean exclusive. We have other people that are not African Americans, that are tenants and are service providers. But we, as owners can be intentional about, let’s take an extra step and see if there’s someone local, someone of color that could do this project or that we could help open a business or that can, you know, be our advisor on making climate positive improvements to the shopping centers. That’s why ownership matters.

Eve: [00:21:02] How do you finance these projects? I mean, do you have a plan in place for all of them that you repeat, you know? like, how does it work?

Lyneir: [00:21:08] Well, the structure is in theory, rinse and repeat. We raised our fund, which provides, you know, to buy a shopping center now requires 25 to 30% of equity. And so, our fund…

[00:21:20] That’s actually low.

[00:21:21] Yeah. And our fund now and because of the community development nature of the work, we’ve been able to get CDFI lenders. Or in the last two projects, we’ve assumed debt from a national lender that has allowed the loan assumption. So, that’s been the nature of the work. So, what changes every time is who the lender might be. We like working with local CDFI partners, right, that understand, that have the same mission. You know that are patient and flexible in trying to, you know, allow us to do the community investment raise. And so, the structure is the same. You identify a property that meets the investment criteria. You negotiate with the current owner to get the property under contract. You make the deposits. You make sure that we have investment, internal Investment Committee approval to move forward. As little as 51%, as much as 95% of the investment comes from, you know, our internal, you know, fund and our resources there. And then after that, we launch the crowdfunding platform, we work with the CDFI to get the loan commitment in place with the expectation that we will close on the purchase, you know, within, you know, 90 days after.

Eve: [00:22:35] So we’re not allowed to say the numbers, but basically you share the equity role with whatever investors come through Small Change, right? You could talk about how Walbrook Junction worked, you know.

Lyneir: [00:22:50] The beauty of simplicity is this that once we do the due diligence and the financial underwriting and determine this project needs $1 million of equity, or in this, in Roseland’s instance it needs $2.5 million of equity. We’re prepared to invest 95% of that equity and as little as 51% of that equity. So, we’re, what we’ve said is we believe in this. We’re going to invest in this. We’re moving forward. We’re allowing you to invest on the same terms as we are. So, Eve, if you want to invest, we’ve said we believe this is good for these reasons. Here’s, you know, we have a financial return expectation that, you know, we think we will achieve in this project. And therefore, you know if we think we’ll achieve it, you will achieve it as well. And so, in our prior projects, we worked to get to a 15%, you know, investment return. You know, our internal rate of return. We worked to get, you know, an equity multiple that looks like three in our prior projects, right? That’s the nature of our work. And so, for the 60 days we’re saying you can do this. You can join, you can invest alongside of us on the same terms.

Eve: [00:23:56] It’s absolute equality. What you get, they get and you’re willing to give up a major slab of ownership. And however it falls out on our funding platform, that’s what you end up with.

Lyneir: [00:24:09] If we raise 10% of the equity, we’re going to put in 90%. If we raise 49% of the equity, we’re going to invest 51%. And the goal is we have other individuals. And it’s actually been strategic for us in this way. When we have looked to the municipality or state government or even philanthropy or support. I mentioned the solar demonstration project. In one of our projects, we got grants to put in, make safety improvements, new security cameras, and when we make those applications, it’s not just, you know, Chicago TREND and Small Change or, you know, Eve and Lyneir that owns the shopping center, we’re there representing 200 local investors. A much more compelling request for public support for the project, right? So that’s why the number of owners matters to us as much as the amount of capital we raise. Like, I like having 330 investors. I’m really aiming to get to a thousand. And it doesn’t matter if they, right now, our average investor has invested $2,275. That means there are a whole lot of people that have invested a thousand and a few people that have invested, you know, $20,000 or $30,000, you know, that kind of thing. But it’s about the number of individuals who are connected to feel owner. I get calls, people drive by, and they say, oh, I saw this, or what are we going to do about that? And those little messages, they’re not annoyances, they are, they’re, that’s ownership being demonstrated.

Eve: [00:25:44] Have you been able to track how many people in the neighborhood invest?

Lyneir: [00:25:48] Uh, so what we used is this metric we call investors who reside in low- and moderate-income communities. So again, all of these properties that we own are in LMI low- and moderate-income communities. And so that’s been our proxy for how local are the investors. You know, so we have 58% of the investors in our projects reside in low and moderate income.

Eve: [00:26:12] And I have to ask you, do you have repeat investors from one project to the next?

Lyneir: [00:26:17] We do, you know, again, we’re on our, this will be our third. We probably have, you know, I don’t know the exact numbers, but we have a number of repeat investors, which is the coolest thing. I’m invest. There’s a guy you may see, Eve, Otto Beatty, and I like him. He’s a, he’s an entrepreneur. Family is, you know, he’s a statesman. And Otto actually invested and then brought us to Columbus, Ohio. We’re trying to find a project together to work on, and he’s actually invested twice. And then he got some of his, you know, local other leaders and other folks who are interested in economic development to invest. So, Otto’s not only been an investor, he’s been, you know, sort of an ambassador as well.

Eve: [00:27:03] Isn’t that great?

Lyneir: [00:27:04] I owe him a dinner, probably.

Eve: [00:27:05] So I’m gonna ask you, what keeps you up at night?

Lyneir: [00:27:09] I dream about the day where people will say: He was right, they were right, the strategy was right. And so, that what that means is the project achieved its financial objectives. Again, this is not philanthropic. First. That we improve the quality of the asset. Sometimes it’s physical improvement, a new roof, a new facade. Most times it’s getting additional retailers and services and tenants there. And that ultimately the places that we have invested in, the neighborhood will be stronger. That was the impetus for our work. It wasn’t about the retail. It was about, can you do something to make the neighborhood stronger? Neighborhoods that are depopulating, neighborhoods that haven’t had, seen, you know, an uptick in new development. Can you increase property values in neighborhoods where the concern is not about gentrification? Can you bring services and amenities in that people of color will benefit from? All of that it’s the dream that is the recurring dream that you wake up and people go. He was right. Thank you. I made money on your project and thank you. Our neighborhood is better and that’s, you know, that’s not a nightmare that keeps me up. That’s a dream that I wake up going, you know. Oh, I can’t wait for that day to come.

Eve: [00:28:39] I love this Lyneir. And I really hope that I know that dream is going to come true. It’s a really good dream. Thank you so much for joining me today and good luck on the race.

Lyneir: [00:28:50] Thank you, Eve, for the opportunity.

Eve: [00:29:01] I hope you enjoyed today’s guest and our deep dive. You can find out more about this episode or others you might have missed on the show notes page at RethinkRealEstateforGood.co. There’s lots to listen to there. Please support this podcast and all the great work my guests do by sharing it with others, posting about it on social media, or leaving a rating and a review. To catch all the latest from me, you can follow me on LinkedIn. Even better, if you’re ready to dabble in some impact investing, head on over to smallchange.co where I spend most of my time. A special thanks to David Allardice for his excellent editing of this podcast and original music. And a big thanks to you for spending your time with me today. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change.