Over the past five years, we have performed research and modeling of the Community Investment Trust – REIT through expert advisors on our board of directors and teams from Willamette University, Reed College and the University of Oregon, and attorneys from the Portland office of the law firm Orrick, Herrington & Sutcliffe. We have learned the following:
• A REIT is the best ownership entity for this concept because it is scalable and offers a proven structure for investors and for replication. We will create a trust for a private REIT that uses the pooled capital of many investors to purchase and manage an income-producing property. The advantages include transparent legal regulations, capacity to hold large numbers of investors, the opportunity to have the servicing of investors outsourced and special tax designation (taxes are paid at the individual level on the disbursement of 90% of taxable income).
• Our survey shows renters are motivated to make investments for retirement, a home, their children’s education, medical and other emergencies and to pay-off debt. People indicated a demand for financial services including investments such as the REIT. The survey indicated interest in real estate investment but also confusion about how such an investment would work for them. As a result, with financial support from the JPMorgan Chase Foundation, we developed a Community Investment curriculum and have piloted the train-the-trainer materials. We’re only waiting to secure the property to move forward.
• Understanding investment options are a key to people accessing investments. An affordable price point for entry and proximity to the investment are also important components to this investment choice. We have worked with behavioral economists and marketing and psychology professor, Crystal Hall and University of Washington to understand the intersections of behavioral change in the context of economic development.
• Legal research, performed by Orrick Herrington and Sutcliffe, identifies two paths to create a security that is exempt from federal and state security laws and therefore eligible for purchase by non-accredited investors such as our targeted low-income community investors. For purposes of the REIT investment it is contemplated that MCNW will establish a special purpose LLC. The two alternatives to creating an exempt security eligible for purchase by community investors are either a government guarantee holding the investors at no risk of loss of their investment, or a bank-issued letter of credit.