Guest Host: Christina Bellantoni

First there was Kickstarter, a crowdfunding company that raises money for new projects by asking individuals to donate in exchange for a token reward like a t-shirt or a personal thank-you note. Now by jumping through hoops in SEC regulations, entrepreneurs have set up crowdfunding platforms that allow ordinary people to invest online in local business ventures and see actual returns. With new crowdfunding rules on the horizon at the SEC, we look at how community-backed investments might shape development locally and nationwide.


  • Michael Shuman Author, "Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity;" fellow, Cutting Edge Capital, the Business Alliance for Local Living Economies (BALLE), and the Post Carbon Institute.
  • Ben Miller Founder, Fundrise; co-founder, Popularise
  • Gina Schaefer Owner of ACE Hardware stores in Washington, D.C., Baltimore and Takoma Park, Maryland; executive board member, Think Local First


  • 13:06:40

    MS. CHRISTINA BELLANTONIFrom WAMU 88.5 at American University in Washington welcome to "The Kojo Nnamdi Show," connecting your community with the world. I'm Christina Bellantoni of the PBS "NewsHour" sitting in for Kojo. Washington is changing before our eyes. Cranes dot the skyline and new businesses are sprouting on every corner. What if you could buy a piece of that project down the block?

  • 13:07:08

    MS. CHRISTINA BELLANTONID.C.'s decade-long makeover has been a story of big-time developers guessing what they think the market wants with local residents getting little say in the process. But with new crowdfunding tools, that is changing.

  • 13:07:21

    MS. CHRISTINA BELLANTONIA few hundred dollars can buy you a slither of a new business and maybe even a share of its profits. It might end up being a community's best tool for creating what they want to see in their neighborhood, whether it's a clothing store, a market or a new hipster wine bar.

  • 13:07:33

    MS. CHRISTINA BELLANTONIJoining me now to talk about how crowdfunding could shape future development, we have economist and attorney Michael Shuman. You're the author of "Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity." Ben Miller, founder of Fundrise, which is a new crowdfunding site for real estate investment and Gina Schaefer who owns several ACE Hardware stores around our region and a Fundrise investor.

  • 13:08:02

    MS. CHRISTINA BELLANTONIThank you all for being here. You can also join the conversation along with us. Call 1-800-433-8850 or email us at and tell us, have you already found ways to invest in your community? You can also get in touch on Facebook or tweet to us @kojoshow.

  • 13:08:21

    MS. CHRISTINA BELLANTONISo Ben, for the past decade, D.C. has been under construction. On the one hand, the Washington market is healthy, but you founded a startup on the premise that developers don't really get what people want in their neighborhoods. Columbia Heights, H Street, a lot of changes that we've seen, what exactly is the idea behind Fundrise?

  • 13:08:42

    MR. BEN MILLERWell, so my background is real estate development. I helped build Gallery Place at 7th and H Northwest and one of the big challenges when you're building in a neighborhood is that you have capital partners. You have a long entitlement process and the public, they're at the table, but they're not your partner technically and so that creates a lot of inefficiency in the process.

  • 13:09:09

    MR. BEN MILLERAnd so we decided that what if the public could co-invest with us and share in building real estate projects, building their neighborhood, how would that change the dynamic in local neighborhood development? And so that's really the concept behind Fundrise.

  • 13:09:24

    BELLANTONIAnd what do you think these neighborhoods would look like if communities had a greater say in that development?

  • 13:09:30

    MILLERYeah, I mean, to me, that's going to be a really interesting thing to see play out because it's sort of like Wikipedia where if I said to you ten years ago, you know, what if people could write their own encyclopedia, that would be a sort of counter-intuitive, didn't sound -- even hard to imagine and now Wikipedia is the largest information repository in history.

  • 13:09:48

    MILLERSo I think ten years from now, people will be investing in building their own neighborhoods, their own city and we're going to really change how the process works around real estate development, around building and investing in local places.

  • 13:10:00

    BELLANTONIMichael, when people hear crowdfunding, that might not have been a term that they learned a few years ago, but when they hear it now, they think about Kickstarter, Indiegogo. So these sites are online communities that help small and big projects get off the ground. But what does this even mean the crowdfunding concept?

  • 13:10:21

    MR. MICHAEL SHUMANWell, the term refers to a lot of people putting money, usually small amounts of money, into something they really love and crowdfunding comes in many flavors. So the flavor that's totally legal now is donation crowdfunding where people, say, put $25 into a wonderful project listed on Kickstarter and they'll get a t-shirt as their rate of return on it and this is not regarded as a security.

  • 13:10:49

    MR. MICHAEL SHUMANAnother kind of crowdfunding is where you do peer-to-peer lending. Some kinds of peer-to-peer lending, like, don't pay you back interest so that also is not regarded as a security. But some types of lending, like Prosper, do pay interest. They are a security and so come under the law and they've had to file millions of dollars of legal work to facilitate this.

  • 13:11:16

    MR. MICHAEL SHUMANBut what's about to happen is a fourth category of crowdfunding is soon going to be legal, probably sometime in 2014, and this will allow people, you know, with very little income, to put small amounts of money as shareholders, as equity stakeholders into companies. And the cost for doing this, which used to be unbelievably high for any business that wanted to open itself up to public investment, will suddenly become manageable.

  • 13:11:45

    BELLANTONIAnd we're talking, Gina, you are one of those Fundrise investors, for example, in a project here in Washington. So how did that work for you?

  • 13:11:54

    MS. GINA SCHAEFERI guess I sort of randomly found Fundrise. I was very interested in one of Ben's companies called Popularise and the reason being is it really gathers information from the community about what kind of business they want to see in a space.

  • 13:12:09

    MS. GINA SCHAEFERAnd as a retailer in the district, I want to go where people want me to be, where they want my business. And so in the process of learning more about Popularise and talking to Ben about it, he mentioned Fundrise and so, to me, that was the logical next step in not only being where the community wanted us to be, but being able to invest in the development of that entire neighborhood, whether it be a city block or a, you know, a city community. It doesn't matter.

  • 13:12:35

    BELLANTONIWell, join us and tell us what you would like to see in your community, what's there now and what should be there by calling 1-800-433-8850 or send us an email to So Gina, the trend toward local goods has been picking up steam for a while and something that your business has certainly been in touch with.

  • 13:12:54

    BELLANTONIThe idea is when you buy from a local farm or a local business, you're supporting the local economy. So can community funded investment really tap into that?

  • 13:13:02

    SCHAEFERWell, I think it can and I've certainly seen it just from being involved at my level as the business owner and people telling me, coming in every day, offering suggestions of what we should carry, where we should go, who we should include in any type of programs that we do, whether it be marketing or events, the people that I hire that work with us.

  • 13:13:23

    SCHAEFERI think that, again, it's the next logical step and it will work because more and more, I'm seeing people being really invested in where they live on a personal level. This allows them a chance to sort of put their money where their mouth is.

  • 13:13:35

    BELLANTONIAnd you don't need to be a wealthy investor, right? I mean, certainly businesses or people that have invested in businesses through Fundrise might have 24 or 25-year-olds, people giving as little as $100. Right?

  • 13:13:47

    MILLERRight. Well, so the innovation that we sort of pioneered here is we filed with the SCC. We filed with the local D.C. regulators so that we could actually offer real security, real equity investment and we're offering it at $100 a share so it's very accessible.

  • 13:14:02

    MILLERI mean, typically an investment in real estate, the minimum investment might be a million dollars or $100,000, and it took us months of filings basically to make that possible. But it makes it accessible then for everybody, sort of democratizes investing in local real estate.

  • 13:14:18

    BELLANTONIAnd tell us about this H Street Northeast project. This is right near the Rock N Roll Hotel. You guys expected to sell out at over, you know, a course of a week and actually it happened in about 30 hours?

  • 13:14:28

    MILLERWell, we've done multiple offerings like these where potentially we file with the regulators in D.C. and they say, well, after getting registered in D.C. and qualifying with SCC, we can offer shares to the public. And each time it's just incredible seeing sort of this organic uptake from people. People stopping me on the street and saying, hey, I invested and showing the building to their parents. It's this wild new phenomenon.

  • 13:14:54

    BELLANTONISo Michael, is this a phenomenon that can make people money?

  • 13:14:57

    SHUMANIt can. And one of the ways to think about it is, first of all, local businesses tend to be, believe it or not, more profitable than non-local businesses. If you pull out the right page in a statistical abstract, what you find is that sole proprietorships, which most small businesses either are or start out as, are three times as profitable as C corporations, which typically publically-traded companies are.

  • 13:15:26

    SHUMANThe other thing about it is that what makes an investment really smart is personal knowledge. We know, for example, in community banking, that community banks that have real relationships with the people they're giving their loans to have a much lower default rate than the big, global banks that use, you know, incredible mathematical algorithms, but are very impersonal, to determine the credit risk.

  • 13:15:52

    SHUMANSo it's the same thing with investing in a local business, that if you can really know the entrepreneur, kind of experience the business, touch the goods, talk to the workforce, your chance of getting snared in an Enron-like fraud are much, much lower.

  • 13:16:11

    BELLANTONIYeah, we've a lot more to talk about when it comes to that fraud and sort of what the regulators are saying right now. Gina, what would you like to see in your communities and what's missing? What should there be more of in Washington?

  • 13:16:21

    SCHAEFEROh gosh, that's a hard question. All sorts of things -- Ben and I were talking earlier about the rise of the restaurant movement and how there are so many wonderful eateries in D.C. now and more coming online. And I think, from the retail perspective, I'd love to see more services and retailers, walking communities without dark spaces, meaning walking into small retail shops and mom and pop shops that really help make the community vibrant and give it a lot of personality.

  • 13:16:46

    BELLANTONIAnd when you talk about wanting to know what your customers want to see and what they want to have around, I mean, how does a community find that out? It's not like you can do a poll of everyone in Washington, D.C. right?

  • 13:16:58

    SCHAEFERFind out what people want? Well, you know, not to make this about my business, but we grew so organically because people would literally walk in and say, oh, my gosh, we want you to come to our neighborhood. It's how I ended up in Glover Park. It's how we ended up in Tenleytown. It's how we ended up in Takoma Park.

  • 13:17:13

    SCHAEFERAnd so that was really cool to me. These were people in a city. You know, we tend to forget that D.C.'s neighborhoods can be like small towns anywhere in the country and people would just walk in and say, come to our neighborhood. So I think that we're just taking that to a greater level with Fundrise.

  • 13:17:33

    SHUMANAnd I think one of the real accomplishments of the local business movement is that it has identified a whole new method of economic development. I mean, rather than waste money on corrupt bribes to attract or retain a non-local business, you can nurture a local entrepreneur and, frankly, a lot of entrepreneurs like Gina are, you know, economic developers constitutionally.

  • 13:17:58

    SHUMANI mean, I'll give you one example from Ann Arbor. There's a great delicatessen there called Zingerman's and after ten years of success, they decided they had hit a real fork in the road. Were they going to become a chain like Schlotzsky's? And they decided against that because they loved the people who came in the store. They didn't want to lose those relationships and they really treasured their quality control. So they decided rather than becoming broad, they would grow deep.

  • 13:18:26

    SHUMANAnd they looked at things coming into the deli, like we serve bread for sandwiches. We can create a bakery. We serve cheese. We could create a creamery. And things coming out, we have sit-down restaurant potential here for our food and we have great customer service so in all, Zingerman's is now nine restaurants and other businesses and growing.

  • 13:18:46

    SHUMANAnd so every business, if it seeks to make itself a little bit more self-reliant, begins to fill in the marketplace. So it's not just the consumers, it also businesses being very astute about how to grow their business.

  • 13:19:00

    BELLANTONIYou can join the conversation and tell us what you'd like to see in your community. Call 1-800-433-8850. Email us at Post a comment to our Facebook page or send a tweet to @kojoshow and tell us what you'd like to see there.

  • 13:19:16

    BELLANTONIAnd we will return talking about community investment and building up development and what you'd like to see there in just a moment after a short break. You're listening to "The Kojo Nnamdi Show." I'm Christina Bellantoni sitting in for Kojo.

  • 13:21:10

    BELLANTONIWelcome back. I'm Christina Bellantoni, the PBS News Hour, sitting in on "The Kojo Nnamdi Show." And I'm talking about community development with a group of folks here. We've got author Michael Shuman, excuse me, and Anne Schaefer.

  • 13:21:25


  • 13:21:25

    BELLANTONIGina Schaefer, excuse me, and Ben Miller from Fundrise. And we're talking about what you would like to see in your community. And we've got a bunch of different callers calling in. Andrew from Arlington, Va. has been an investor in some Fundrise projects.

  • 13:21:40

    ANDREWYeah, I just wanted to say that I invested in a couple of Fundrise projects and I am by no means a large investor. I do not have a lot of money but Ben took the time to meet with me personally. And that it's just been a really great experience.

  • 13:22:00

    BELLANTONIAnd what specifically were you investing in?

  • 13:22:03

    ANDREWI invested in the Macedo (sp?) project which was, I think their first offering and also their most recent offering.

  • 13:22:14

    BELLANTONIYeah, and that's the one on H Street Northeast. Ben, tell us a little bit about how that came together and how you decided what the community wanted there?

  • 13:22:22

    MILLERWe were very active on H Street before we decided to do Fundrise. And really it came out of our experience where we were buying properties on H Street. And everybody in the neighborhood that we knew was excited about it. You know, they understood why we would be buying and what we'd be doing with them. But the capitol sources, the traditional institutional money didn't understand H Street, really didn't even know where it was, which to me was striking.

  • 13:22:47

    MILLERAnd so we said, well why don't we raise money from people who are excited about this, who are directly connected to what's happening there rather than raising money from essentially an absentee capitol source?

  • 13:22:57

    BELLANTONIAnd decided that a market, you got sort of a mixed-use project.

  • 13:23:01

    MILLERYeah well, that -- so we actually have another website called And Popularized basically allows you to crowd source questions to the public around real estate. So you can ask, you know, what would you build here? What kind of events do you want? You can ask about designs. Basically a very simple proposition where if you want to know what to build, you know, what your customers or potential residents would want, ask them.

  • 13:23:27

    MILLERAnd so we did that on H Street and we got a lot of different input. And then we also had to look at another issue, which was, who was a great operator? Who was really, you know, going to open a tremendous business? And we found that in this partnership between Erik Bruner-Yang from Toki Underground, which is a very tremendous restaurant if you've been there on H Street. And Derkel (sp?) , which is a local men's fashion line in D.C.

  • 13:23:52

    BELLANTONIOkay, that's great. Well, tell us what you'd like to see in your community. Call 1-800-433-8850 or email us at So the idea of ordinary people investing in their community doesn't sound so revolutionary, right? I mean, how is this different from a co-op?

  • 13:24:11

    SHUMANWell, co-ops have allowed this for many years. And the key issue here is securities. So we created in the early Jurassic period back in the 1930's a system of securities law which one way of understanding it is that it's a system with investor apartheid. If you're the wealthiest one percent, you're allowed to invest in anything anywhere, no questions asked.

  • 13:24:38

    SHUMANIf you're in the less wealthy 99 percent, you're only allowed to invest if the business you're investing in has done massive disclosure filings. And those disclosure filings today, prior to the fundraising reforms that we just talked about with crowd funding, could easily cost 25, 50, $100,000. And it'd probably cost more for Fundrise with your reggae filing.

  • 13:25:06

    SHUMANSo the result is that we have totally blocked off grassroots investment in local business. If you look at long term savings that people have, say in their pension fund, stocks, bonds, mutual funds, the total level of savings in the United States in those categories is $30 trillion. And probably no more than 1 percent of that money is going into local businesses, even though local businesses are more than half the economy. And it's the only part of the economy that's producing jobs.

  • 13:25:41

    SHUMANSo this is -- it's true that co-ops, along with many other things, allow people to do very small amounts of local investing. But what was required here and has happened is a total rethinking and a breaking open of the system, a democratization, if you will, of the system.

  • 13:26:02

    BELLANTONIWell, we're going to ask Kathryn what she would like to see in her neighborhood.

  • 13:26:08


  • 13:26:09

    BELLANTONIHi, Kathryn.

  • 13:26:10

    KATHRYNHow are you? I think this is such an interesting idea. And I live in Logan Circle, which has seen just a huge transformation in the last ten years beginning with the Whole Foods and sort of all these apartment complexes which have fostered now a tremendous number of new restaurants, but not a lot of other sort of interesting things along the sort of 14th Street corridor.

  • 13:26:32

    KATHRYNAnd I'd really love to see something similar to the model that's in Seattle, Wash. where I recently moved from called the Triple door, which is a club basically that's a stage. And they bring in lots of different musical venues and shows from really all over the world. And they pare it with local restaurants so that they have food that's offered.

  • 13:26:57

    KATHRYNBut it's a great venue that can be used by businesses so you could have -- you know, a business could use it as a venue to hold, you know, a presentation or something like that. And it's also used at night as a really interesting club. And they have tickets at all levels and that sort of thing. But I love the idea of crowd sourcing and getting new ideas and having the community involved in helping to figure out what would be a good fit for that particular community. And that's just one idea that would be really nice to have around here instead of another restaurant.

  • 13:27:30

    BELLANTONIThanks, Kathryn. Gina, you're nodding and smiling. She says Logan Circle, I mean, music venues. We've got a couple good ones, Black Cat, 9:30 Club all in that general area, but we could use some more.

  • 13:27:41

    SCHAEFERWe definitely could, sure. I just wanted to piggyback on something that Michael said. I was thinking of a story. Probably four or five years ago I was sitting down with my financial advisor and we were talking about some investments. And some of the money that we were allowed to invest at the time went to a big box retailer fund that was really one of my competitors.

  • 13:27:59

    SCHAEFERAnd so I'd said to the financial investor, I want my money taken out of this fund. You know, I find it inappropriate for me. And he said, well you can't do that. Well, what do you mean you can't do that? And there were all these SEC regulations I guess, or investing regulations that didn't allow the financial advisor to pull that particular stock out of my fund.

  • 13:28:16

    KATHRYNAnd at the time it struck me like, wow I won't shop in these places and I don't live near one of these places but yet I am forced to invest in one of these places. And that's how they continue to get bigger and better and stronger. And I don't think we should have to do that.

  • 13:28:30

    BELLANTONISo when you're talking about something as simple as investing in your community you might not think you need to know all these regulations, but in some cases it sounds like there are a lot of them. And Pat in Washington wants to ask a little bit more about how this actually works. Go ahead, Pat.

  • 13:28:44

    PATYeah, what I want to know is how specifically does it work? So I live in an area calling Bloomingdale. And we're -- so it's like the new hot area just east of Logan, which I had done Logan years earlier. But at any rate I'm in Bloomingdale and near a neighborhood sort of at the intersection of Bloomingdale and Eckington, which is another neighborhood in the community, so to speak.

  • 13:29:09

    PATAnd we're sort of -- Bloomingdale and Eckington sort of surrounds North Capitol Street, that area of North Capitol. I'm talking about specifically that's within neighborhoods and not so much the commercial part of it. So we have a lot of buildings around there -- not a lot but, you know, still some that have great potential that are vacant. So does this funding method help a community or neighborhood, like, acquire the building and develop it to what it wants it to be or just how does that work?

  • 13:29:43

    BELLANTONIThanks, Pat. Well, yeah, let's take it through step one. Three's an empty building that you want to acquire. So what are the next few steps, Ben, and then how do you actually open that up to somebody like me or anyone in this room?

  • 13:29:54

    MILLERRight, right. So I think that's a very intuitive question, you know, why can't you affect your environment, you know, build places in your neighborhood that are vacant. The way we had to do it is we would actually acquire the property first because the regulatory process can take some time. So we acquire it. Then we file these documents under this exemption we use of Regulation A. And that didn't take us, you know, six months -- I mean, it's taken us even nine months at times.

  • 13:30:23

    MILLERAnd we're lucky that D.C. regulators have really worked with us because they've seen this as a potential way to bring jobs and growth to D.C., which was tremendous. Essentially though, because we have this long six-to nine month process we have to acquire it first. And then we bring the public in usually for the construction capital to take the vacant building and be part of the transformation.

  • 13:30:43

    MILLERAnd so after the filings is cleared basically at that point we can go sell shares, for example, at $100 online. So you can go online, like buying a book from Amazon. And you think about, you know, ten, fifteen years ago if I said you were going to buy a book online, that would've sounded crazy. So now basically, it's normal and essentially investing online locally, that's the next thing to happen. And it's going to be very intuitive because it's an intuitive proposition, something you can see and touch tangible, people you know. And so that's how it works.

  • 13:31:14

    BELLANTONISo someone would go to Fundrise, they could click on the project, learn more about it, put in their credit card number and give as little as $100 or as much as...

  • 13:31:23

    MILLERAs little as 100 -- I mean, there's no cap. Typically we try to have it be broadly held because it takes so much effort to get these filings public.

  • 13:31:33

    BELLANTONIWell -- and Michael, I think that our -- we have a caller from Marin County, Calif. near my hometown of San Jose, Calif. This is Royce who wants to talk about what options she might have not living in Washington, D.C. Go ahead, Royce.

  • 13:31:46

    ROYCEHello. Yes. I'd like to know, is there anything like this on the west coast, particularly in the Bay Area? I am working with a group who wants to preserve this public housing site where I happen to live that was designed by Erin Green of Renowned Architect. We want to preserve it as a historical neighborhood. How can we attract, you know, crowd funding, the whole kick start? This is all new to me and so I'm gathering up the information and wanting to be led in the right direction.

  • 13:32:21

    BELLANTONIThanks, Royce.

  • 13:32:22

    SHUMANWell, I'll give part of the answer and Ben can supply the other piece. I would say if you troll around online right now, literally you will find hundreds of sights. Some are focused on particular geographic areas. Some are focused on particular types of property. Some are focused on purely donations. And it's true -- and I think the great innovation of Fundrise, as Ben was describing it, is that there have been very, very few operators focused specifically in the domain of real property. And I think that's about to change because people have seen what a success Fundrise is. And there will be imitators out there.

  • 13:33:07

    SHUMANBut what's really going to happen here -- and I think this is an important point to sort of add to this -- is that the SEC Securities and Exchange Commission was supposed to issue rules about the crowd funding exemption in December of 2012. Now most people when they're late with their homework, they lose a couple of notches in their grade. And this has not happened to the SEC. Nothing has happened and frankly we may not see this law implemented until the middle of 2014 or even later.

  • 13:33:41

    SHUMANAnd what's happening is that slowly but surely the regulators are raising the standards and making them more and more demanding, which means that anyone like Ben or anyone else who wants to operate a site like this is going to have to pay hundreds of thousands of dollars for legal compliance just to get the sites up and running.

  • 13:34:02

    SHUMANSo the businesses themselves maybe won't have to pay that much, although they ultimately have to pay the cost of the person running the site, but we are going to shake out this marketplace sadly to a small number of players who can afford the big legal bills.

  • 13:34:19

    BELLANTONIWell, we will definitely be talking a lot more about that. We're going to ask Brian in Washington, D.C. about his neighborhood in Brookland and what you'd like to see done there. Hi, Brian.

  • 13:34:29

    BRIANHi, how are you? Thanks for having -- yeah, I was just wondering, in our neighborhood right now we're having a lot of trouble for small businesses, particularly restaurants, to invest. Basically they're getting harangued by our local ANC and neighborhood protest groups. So it's very difficult for places to invest in neighborhoods like that.

  • 13:34:48

    BRIANI don't know how many other cities around the nation have such things as ANCs and I don't know if the ANCs are still necessary. So I'll take my answers offline.

  • 13:34:58

    BELLANTONIThanks, Brian. Gina, you guys were also nodding actually during that part. Regulation can be a tricky thing, right?

  • 13:35:06

    SCHAEFERYes. The guys can probably comment more on that than I can but it certainly is. And there are definitely -- people in communities have opinions. And whether you ask for everyone to provide their input, at least in Washington they're going to do it. So you have to be prepared I guess for that.

  • 13:35:22

    MILLERAnd I think this is an important point because around the country -- I'm working on the west coast and we're about to launch at Los Angeles and San Francisco -- the same process exists where a small group of people really are -- slow down the process. There's a quagmire when trying to do in-field urban development. And the majority of people are not engaged. You're not -- most people have families. They have jobs. They're not going to meetings. They're not emailing council members. This is true with local government in general.

  • 13:35:55

    MILLERAnd so the process is really broken for the developer, the small business. And even the community members feel frustrated that the type of things they want to have happen aren't happening. And one of the reasons we created Fundrise was that we feel like when people start investing, they feel differently about their power to affect change. And then also the enfranchisement. I mean, you go to a city council member and say, I have a thousand people who invested want this. That really changes the profile of what -- how it's viewed by the government and by regulators.

  • 13:36:29

    BELLANTONIAnd you're an empowered consumer too. You walk in. I'm a one-hundredth owner of this establishment, right. You might get a little bit of different treatment. So you can join the conversation. Tell us if you would participate in crowd funding and what you'd like to see in your community. You can call 1-800-433-8850 or email us at, put a comment on our Facebook page or send a Tweet to @kojoshow.

  • 13:36:54

    BELLANTONISo let's talk about the other part of this, how you can make money, the actual return on investment here. You know, on Fundrise, you guys are required to have, you know, a pretty big warning. You know, never make a small business investment that you cannot afford to lose entirely. There are risks involved. What good is it to invest in these organizations and how much money could you potentially be making?

  • 13:37:18

    SHUMANWell, here's one thing. There's a lot of interest in local investing that began in 2008. And I don't think that was a coincidence because that's when the global financial crisis really knocked the wind out of soft stock market and out of the housing market. And one of the things that I do in my book "Local Dollars, Local Sense" in the first chapter I try to use the best data to show what market rate of returns are for the stock market.

  • 13:37:49

    SHUMANAnd it's really remarkable because if you spend your life as I do on a Saturday listening to horrible AM radio DJs, they will tell you, you know, leave your money in the stock market ten years, twenty years. You'll get an 8 percent rate of return or 12 percent or maybe 20 percent. And all of these numbers are made up because in point of fact, if you take out inflation and look at what a typical 12-month return is on the stock market, it is 2.6 percent. And at 2.6 percent a lot of local investments look pretty good. And these are local investments that again, you can confirm what the return is.

  • 13:38:34

    SHUMANI think it'd be useful, Ben, for you to share what the returns are if people put their money into Fundrise. I mean, some of them are quite attractive actually, the dividends.

  • 13:38:44

    MILLERWell, this is where my lawyer's sitting on my shoulder. So we have a live SEC offering. I mean, you know, it's been qualified by the regulators so -- and there are risks. That's definitely something my lawyer would want me to say. So I can tell you on the first one, that was 1351 H Street, which is the Macedo. I mean, that -- it's a good property. We bought it, I mean, at a good price. It's right next to Rock and Roll Hotel and (unintelligible) on the Shamrock.

  • 13:39:11

    MILLERIt's, you know, from a real estate point of view you start with location, location, location. And you sort of say, well, you know, do I think that that property's going to be worth more five, ten years from now than it is today? Well, if you see what's happening on H Street with the streetcar and with all the new development, thousands of apartments coming online over the next few years, you know, there's an intuitive sense that this is a -- it makes sense. But there are risks. You know, it's a real investment so, you know, you should definitely read all the documents before you do it.

  • 13:39:43

    BELLANTONIAnd we will continue talking about that. We are discussing community investing. We will continue this conversation after a short break. I'm Christina Bellantoni of the PBS News Hour and you're listening to "The Kojo Nnamdi Show."

  • 13:41:39

    BELLANTONIWelcome back. I'm Christina Bellantoni of the PBS News Hour sitting in for Kojo Nnamdi. We're talking about community investing with Gina Schaefer who owns several Ace Hardware stores around the region. Ben Miller, who is a co-founder of Fundrise, and Michael Shuman, an economist and attorney. And we've been getting a lot of feedback from our listeners. You can join the conversation as well. Call us at 1-800-433-8850, email us at, and let us know what you'd like to see in your community, and whether crowd funding could be for you.

  • 13:42:10

    BELLANTONISo we've got a tweet from Dan who says, "Fundrise is an amazing idea. I signed up, but can't invest because I'm in Maryland. What hurdles still need to be jumped to allow us in?" So we've been talking about this all hour. How does this work with people who don't live in Washington?

  • 13:42:27

    MILLERWell, so, the regulation we use is called Regulation A, and it's, you know, basically we're one of the only people in the country using it, and so when we went to the regulators with it, it was a new process for a lot of them, and took a long time. And so the SEC ultimately cleared our multiple offerings, and D.C. did, and Virginia did, but we're still working on Maryland. I mean, it's a very human process. There's a lot of -- I mean, you go back and forth with comments and questions. I feel like Maryland's, I mean, a market that totally gets what we're about -- gets what Fundrise is about, and we're going to -- we're putting our effort into it, it just hasn't been possible yet.

  • 13:43:08

    SHUMANAnd I think it's useful to clarify that what Ben used were the traditional exemptions from SEC registration, which cost a lot of money, and Reg A is one of the more expansive and one of the more difficult ones. You also -- whenever you use any of these exemptions, except for one that's called the Intrastate Exemption, you know, you have to file in every state where there are people who are buying your securities. The crowdfunding exemption did one thing that was very unusual, and it basically said, we are pre-empting all state law.

  • 13:43:44

    SHUMANSo if you do the crowdfunding exemption, you will not have to file in multiple states, and everyone, whether you live in Maryland or Virginia, if there is a listing on Ben's site that uses the crowdfunding exemption, we will all be able to invest it in, which raises, I think, the one other question which is not just what's legally permitted, but what is smart. And again, I go back to what is smart is to invest in a business that you know. We are all going to start getting besieged in our email inboxes by invitations to invest in businesses you've never heard of, hundreds or thousands of miles away, and they all should be deleted. Only invest in businesses you know and love.

  • 13:44:29

    BELLANTONIAnd so that goes right into looking at how do people invest for the long term? Are people looking for a quick buck? Is that dictating what is getting developed in an urban area like Washington?

  • 13:44:41

    SCHAEFERWell, I think for me personally, you know, I love Washington. I've been here 21 years. I have no intentions of leaving, and have built my business and life here. So in order to create a long-term investment for really the 175 employees that we have, we need to be investing in programs like Fundrise -- businesses like Fundrise that allow us to own a piece of Washington pie, so that no matter how big it gets, how expensive the city may become, we've created something for all of us to hold onto here.

  • 13:45:11

    SCHAEFERSo whether or not I get a dividend tomorrow or next week is sort of inconsequential to whether or not I'm actually building future wealth and just a good financial base for my business and employees.

  • 13:45:23

    BELLANTONIAnd you might not care if you saw a chain restaurant with graffiti in the windows, but it could be a different story if it's something that you're a part of, or your friends are a part of, or it's in your community. How do you think that community-funded development is changing the way residents view their own neighborhoods?

  • 13:45:39

    MILLERWell, I think that's a very interesting question, because if you look at what WAMU was talking about last week about how did the city sell public land to private developers over the last couple decades, you know, it was a process that hasn't been maybe as transparent as it could be. This question of sort of who profits from it, and so we've been talking to the city about, you know, when you sell public property, you know, let the public co-invest in it. It really changes a sense of enfranchisement. It really democratizes the process, and it inherently makes it more transparent because, you know, the public is invested in the kind of reporting that I as a developer used to make to private equity funds or insurance companies I'm now making to the public and so the public gets to know.

  • 13:46:22

    MILLERBecause it's easy to blame, you know, a real estate company in your neighborhood for change, but if you see the forces that are buffeting them, you know, there's market forces, they have capital partners, they have permitting issues, you know. The idea is that you're all on the same side together. I think that really changes the dynamic, and also can change how people feel about local government.

  • 13:46:43

    BELLANTONIWe have a question from Frances writing in. This is a question for Ben Miller who is the founder of Fundrise. "I'm aware of these projects being successful in the H Street corridor area. Are there any plans to look at other areas in the city such as the Georgia Avenue corridor, north of the Petworth Metro?" And there's some news about Florida Avenue today as well.

  • 13:47:01

    MILLERYeah. So actually we're -- there's a project near the 930 Club on Florida, so it's sort of near the Georgia corridor, and MRP is a big developer in the city, and we're working with them. We're sort of testing the waters around this idea of if the city's going to sell a public property, let's let the public co-invest in it, and let's see sort of who is interested. I think we went out to see if there $300,000 of interest in investing in this, and I think we have something like $800,000 of interest so far.

  • 13:47:29

    SHUMANSo, there's -- you can tell that this idea that the public, you know, wants to be part of this change that's happening in DC. Everybody sees this change happening. They want to be part of it, and, you know, potentially profit from it.

  • 13:47:42

    BELLANTONIAnd so we've got email from Jarrett asking, is this age of online -- "In this of online purchasing, I'm left wondering what other type of brick and mortars are essential. Do you guys have a list you would want to share? I am so tired of more restaurants." Michael?

  • 13:48:00

    SHUMANWell, other types of bricks and mortars that are essential. I mean, I -- look, I would look at the entire scope of the economy and it's interesting that we are changing. Our economy is moving from a goods oriented economy to a services economy. That's not to say goods are irrelevant, but when I was a kid in the late 1950s, about a third of what a typical household spent its money on was on services, and now it's two-thirds. And the thing about services is -- I mean, services are everything from financial services to repair services to doctors and educational services.

  • 13:48:44

    SHUMANAnd these services, frankly, number one, locals have advantage because they are inherently people you know and you trust, and number two, they are people who actually live somewhere and have to operate somewhere. And even if they're operating out of their house it's brick and mortar. So I actually think that this, you know, entry in the service economy is a really good thing for opening up local businesses. And even if we shift to goods, you know, a lot of goods that people buy tend to be things like food and building materials and paper products.

  • 13:49:25

    SHUMANAbout three-quarters of what we buy in goods is so-called non-durable goods. Things you consume a lot of. And the characteristic of these goods is that they weigh a lot and they have a relatively low dollar value per weight. What that means is that as oil prices rise, which everyone expects is going to happen, these are the things that we're going to want to make locally as well as sell locally. So I actually think, you know, we're beginning to see people pulling out of China for very practical reasons in term of manufacturing, And I think we're on the verge of a really manufacturing revolution as we regionalize and even localize a lot of goods production.

  • 13:50:05

    BELLANTONIAnd as we see our community change, you know, a big point that has come up in Washington DC for many years is the issue of gentrification. Obviously H Street is an interesting example of this, so, you know, if it's new residents who are investing in projects like this and wanting to see change, is this just another force for gentrification? Ben Miller?

  • 13:50:23

    MILLERYeah. So I think that's another great point, because one of the big partners that we are talking to across the country are affordable housing developers. If you know anything about how affordable housing is financed, it's a torturous process. There's a lot of government capital, but it takes, you know, years to get through the process, and in California, they actually eliminated the redevelopment agency where a lot of the affordable housing capital that was designed to preserve housing came from.

  • 13:50:54

    MILLERAnd so, you know, we think that local people get investing in affordable housing, and you know, you could make a, I think, a pretty decent return doing it. So it's kind of a classic win-win when you remove a lot of the middle men you get a lot of efficiency, and you can still build affordable housing and make a decent return. And that will -- I think that's an example of how you start changing the paradigm when you start letting local people be part of the capital process.

  • 13:51:18

    BELLANTONISo who do you think should have a voice in community development? Join our conversation. You can call 1-800-433-8850, or send an email to, comment on our Facebook page, or send us tweets to So another part of Fundrise is that it's all online. We've mentioned that it's similar to buying a book on Amazon, but you also are going to need some traditional things just like other places. You guys talked about not exactly having a mechanism for sharing the profits yet and figuring out convening a shareholder meeting to figure out the best way to do that on this H Street project. So how much of that traditional thing do you need beyond the online forum?

  • 13:52:01

    MILLERWell, we had a shareholder event a few months ago, and I think -- I don't know how -- nearly a thousand people showed up, which was startling, and it was very different meeting the people who are invested, because what you find is a lot of people talk about change and being frustrated or being happy about it, but not a lot of people actually invest and put their money where their mouth is. And so we kind of have self-selected into a community of people who are doers, who are really believers in a positive idea.

  • 13:52:30

    MILLERAnd so by putting them all together, I started seeing, oh, my God, this is a new community of people who are meeting each other, excited about meeting each other because they all sort of believed in an idea that you can build your city, build your neighborhood, and actually make money doing it. So I do think in person is a critical part of this, and figuring out online and off. I mean, if everybody looks at ecommerce, the great ecommerce companies are multiple channels. They have, you know, they have -- Apple has stores, right? J. Crew has stores and online and a catalog. So it's all about multiple channels if you really want to have a rich relationship with your customer.

  • 13:53:09

    BELLANTONITim emails us to that he moved to the up and coming K Street neighborhood near Chinatown. He wants to see more restaurants and bars come to the area. Anything would do well there. There are not that many options. So when we talk about people wanting to have a say in their community, is there potential for a comeback for community forums, people weighing in? Gina, would you like to see that?

  • 13:53:32

    SCHAEFERWould I like to see it? I don't know. You know...

  • 13:53:34

    BELLANTONIIs it possible?

  • 13:53:35

    SCHAEFER...some of those meetings can get a little out of hand. I think there's definitely an opportunity, and I think that my -- what I would encourage local residents to do is to seek out entrepreneurs who want to open business, support them. Support the local businesses that are already there. Oftentimes you'll hear, oh, I'm so sad that my local book store is gone, but that local book shop owner may have only had five customers that day. So if you truly want to get involved in the neighborhood, find out who wants to open businesses, talk to the other local -- oftentimes somebody what already is in business, wants to expand, what would they like to do. What does the neighborhood want that that person is interested in doing?

  • 13:54:08

    SCHAEFERSo, I don't know necessarily if it's a big public forum for a conversation like that, but certainly lots of smaller ones can make a huge impact.

  • 13:54:16

    BELLANTONIOrlando from Arlington, Va., wants pick up on the idea Ben was mentioning about affordable housing. Go ahead, Orlando.

  • 13:54:22

    ORLANDOHi. Long time listener, great admirer of the show. I'm curious to get a distinction from your commentator about how affordable housing would be locally done. Most affordable housing actually is not done with government money. It's usually done with private sector money. That is, it's called a capital stack, and a portion -- a very small portion of it might be governmental money of some kind, but whether that's done locally here or in the case of California, I was a developer in California as well, the real issue is that that's very difficult to with a local effort.

  • 13:55:08

    ORLANDOMostly because there are issues within the deals that drive those deals when they get constructed. For example, cost completion -- I'm sorry, completion guarantees, excuse me, or cost overrun guarantees, or issues within the deal that make it very difficult for legal entities to basically back the financial scheme, the financial structure of the deal. So I'm trying to understand better how that would be helped by a local group and what financial wherewithal the commentator was thinking about. Sorry. And I'm happy to take my answer off the air.

  • 13:55:42

    BELLANTONIThanks, Orlando. Ben Miller?

  • 13:55:45

    MILLERYeah. I mean, real estate development is complicated, and affordable housing is even more complicated because there are -- there are community block grants, there's 80/20 financing, usually the financing the debt is low cost debt, lower interest rate for affordable housing. The way we view is it that it's all about a sponsor, a entrepreneur that you're backing, the developer, or a real estate company. You have to have that person who's going to be the one who's going to do the work, who's going to execute. Just like Gina is the entrepreneur who runs the Logan Hardware chain.

  • 13:56:20

    MILLERI mean, she's what makes it great. It's not great by accident. There's people who are executing, and in affordable housing, if you -- or we talk about any kind of capital fund raising. If I go to a Wall Street investment company and say, I'm going to make you, you know, ten percent return, eight percent return, you know, they will walk you out of the office nicely. If I go to a person and say I'm going to make you an eight percent return, ten percent return, and they're like oh, that's tremendous, great. How do I get into that?

  • 13:56:47

    MILLERAnd so there is a huge difference between what people want and expect in terms of capital returns, and what sort of institution, Wall Street institutions or private equity funds look for in terms of on IRR, internal rate of return.

  • 13:56:59

    BELLANTONIAnd quickly, do we think that crowdfunding could be an alternative in an recession? Is this a good way to get your local economy going? Michael?

  • 13:57:06

    SHUMANAbsolutely. I mean, look, just go back to the basics. We own -- the only companies we know reliably produce jobs are small business. And focusing our economic development, and our investment on small businesses is the single best thing you can do to pull the country forward. And I, you know, I must say, one of my regrets about the Obama stimulus package is that it was all focused on, you know, big projects, big government while elephant projects rather than nurturing small business entrepreneurs. That's why we lost ground with unemployment.

  • 13:57:45

    BELLANTONIWell, very interesting community investment conversation that will be continuing, I'm sure, here in Washington DC. Thanks so much. I'm Christina Bellantoni sitting in "The Kojo Nnamdi Show," and we have been joined by Gina Schaefer, who owns several Ace Hardware Stores, Ben Miller, the co-founder of Fundrise, and Michael Schuman, an economist and attorney.

  • 13:58:06

    BELLANTONIAnd "The Kojo Nnamdi Show" is produced by Brendan Sweeney, Michael Martinez, Ingalisa Schrobsdorff, Tayla Burney, Kathy Goldgeier, and Elizabeth Weinstein, with help from Stephannie Stokes. The engineer today is Tobey Schreiner. Christine Leggett is on the phones. Podcasts of all shows, audio archives, CDs, and free transcripts are available at our website, We encourage you to share your questions or comments with us, emailing

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