EXCERPT: Small Change wants to help develop cities, one small investment at a time. Eve Picker has discovered that it doesn’t always pay to be first, a maxim that goes double for real estate.
The architect and urban designer has spent the last 15 years developing the Liberty Bank Building in Pittsburgh. Once an abandoned structure so run down “you could fly a plane through it,” the commercial building in the city’s East Liberty neighborhood has been redeveloped and revitalized by Picker twice, once when she bought it in 2003, and again over the last year, as she’s helped a co-working startup, Beauty Shoppe, take over and manage the entire building. Banks have been wary to fund such a move, since it’s a new business model and leasing arrangement.
Picker decided she needed to find a better way to raise capital, share risk, and get people in the community, those with the most to gain from a new business or development, engaged and involved. That’s the promise behind Small Change, a new real estate fundraising platform Picker founded that’s designed to help communities play a bigger role in their own redevelopment. Often, smaller projects rely on a grab bag of funding, including community development block grants and scores of small investors, making the process of assembling capital time-consuming. By creating a platform that anybody with enough money can use—some projects take investments as small as $500—Small Change seeks to democratize and streamline the entire funding process and help buttress “transformational” developments.
Since starting last summer, the platform has raised more than half a million dollars, and Picker was named a Global Urban Innovator by the NewCities Foundation, “Community development is stymied by banking regulations,” Picker says. “They’re not doing any favors for cities and neighborhoods that need to change, that’s for sure.”
Crowdfunding has existed for years, and other firms, such as FundRise and Realty Mogul, have focused on property development, but the Small Change model offers a new spin for the real estate space. For years, financial regulations, initially designed to protect from fraud, limited real estate investment to “accredited investors,” who are pre-approved and required to have $1 million in capital, cutting off a vast majority of potential investors. Only in the last year have regulations been loosened on so-called “equity crowdfunding” (where investors look for a return) to allow more people to get involved in these types of real estate projects. Continues…