Plaza 122

Mercy Corps Northwest wants to sell shares in this East Portland strip mall to nearby residents as a low-barrier way to invest in real estate and build wealth.

(Elliot Njus/Staff)

Glendy Folwick hadn't given much thought to the Southeast Portland strip mall up the street from her income-restricted apartment building. It's nondescript, one story, with a busy hair salon but mostly offices.

But Folwick has been taking a harder look at the property, 1515 S.E. 122nd Ave., recently because she, along with several hundred neighbors, might soon become its owner.

The antipoverty nonprofit Mercy Corps Northwest plans to sell shares of the property it acquired in 2014 for $1.2 million, with a focus on reaching residents of nearby affordable housing complexes. Eventually, it will cede all its equity to investors.

It's an effort to help low-income residents of East Portland build wealth, which can otherwise be out of reach for those who live paycheck-to-paycheck and can't afford a home or other investments.

It also gives those residents a literal stake in the neighborhood -- one they can see, visit and patronize.

"What we heard early on is that's exactly what people want," said John Haines, Mercy Corps Northwest's executive director. "Even if you're buying stock in a company with a store down the street, that's a little elusive. That's a little different than knowing, 'That building is mine.'"

And if it works, Haines hopes the model can be replicated across the country.

The project would take the form of a real estate investment trust, a type of company that allows groups of generally well-off investors -- think doctors, lawyers or executives -- to pool their money and buy real estate. It's generally a hands-off investment managed by the REIT (pronounced reet).

"My instincts were to turn that on its head, and drive the price point down to where anybody could be included," Haines said. Mercy Corps Northwest is calling its spin on the financial tool a "community investment trust."

For $10 to $100 a month, anyone in four nearby ZIP codes would be able to invest in the property. That includes low-income residents who would have nowhere near the $200,000-a-year income usually required to invest in REITs.

Those low-income residents are, in fact, the target. The investment is paired with financial literacy training, and together they're intended to get residents in the habit of long-term saving while building wealth.

Most of the taxable income from the property would be distributed to shareholders, and they will also build equity in the property over time.

The structure of the offering will aim to minimize the risk inherent in investment, Haines said, by working with a community bank to backstop investors.

Most middle-class Americans build wealth primarily through homeownership, but that's increasingly out of reach for many low-income residents thanks to rising housing prices, up 9.7 percent in the last year alone.

Folwick, who is a real estate broker, hopes investing in a small piece of commercial property could help put her on a path to homeownership.

"In the length of time we've been here, just in the past two years, it's much more difficult to become a homeowner," she said. "This would be a good way to start. It's baby steps, but you have to plant the seed."

And the chance to invest in a neighborhood asset, she said, could help ground residents in a place where they might otherwise feel like outsiders.

"It becomes a sense of belonging," Folwick said. "An individual, if they can get involved with even just a small piece of the property, they feel like they belong there."

The model is untested, and it's complicated. Mercy Corps Northwest has enlisted the help of pro bono attorneys to structure the program and avoid running afoul of financial regulations. Even so, it's taken six years to near fruition.

But if it works in East Portland, Haines said, the organization might try to license it to other groups across the country.

"Our model for this really is to do this one right, and then to allow a community of practice where we'd help the group

David Rothwell, an assistant professor at Oregon State University who studies poverty, said Mercy Corps' approach is an innovative one that's likely to attract national attention if it works.

Asset poverty, or the inability to draw upon savings for emergencies or major household expenses, can force people to rely more on credit and loans.

"They can become, not in all cases but in many cases, more financially vulnerable," Rothwell said. "It's surprising how thin the ice is for so many people."

Having assets to draw on can help smooth out those expenses, resulting in more stability and opportunity.

But a program like Mercy Corps' REIT could distract from other worthwhile investments that are important for financial stability, Rothwell said, such as building an emergency fund or paying down debt.

Haines said investors would be able to easily cash out in an emergency.

"We're hoping through education and individual planning that people do, on a family level, commit to something longer-term, and therefore get some value out of the commitment," he said.

-- Elliot Njus

enjus@oregonian.com

503-294-5034

@enjus