Community investment trust: Portland, OR

Economic growth not shared across the city: During the 2010s, Portland saw significant wage growth. Unfortunately, disparities between both racial and ethnic groups and renters and homeowners persisted. By 2020, renters in Portland still earned less than half of homeowners. Similarly, while incomes increased significantly for white households, they grew only minimally for Black and Asian households.

High rates of asset poverty: Unfortunately, similar trends held true for household wealth in the Portland area. Across Multnomah County, which includes Portland, 40 percent of households of color were considered asset poor in 2019, compared to 24 percent of white households. With little wealth, asset poor households have limited financial security, and often struggle to pay for their basic needs when they experience a loss or significant reduction in income.

Limited investment options for low-asset households: As in other communities around the country, wealth building opportunities were limited for low-asset households in Portland. This was especially the case in real estate, which often requires a significant up-front investment. However, Mercy Corps’ Community Investment Trust (CIT) team knew from its past work on wealth building that many low-asset households wanted to invest in real estate.

A new investment model: The Community Investment Trust (CIT) is a real estate investment model created by a team within Mercy Corps to meet the needs of low- and moderate-income households. The CIT offers community members the opportunity to purchase low-cost, loss-protected shares of a property, as long as they live in a surrounding zip code. These investments are liquid, so community members can access them at any time.

Creating an investment opportunity in East Portland: In 2014, Mercy Corps purchased Plaza 122, a commercial retail property. Since then, 328 households have invested in the East Portland CIT Corporation (EPCIT), all through monthly investments of between $10 and $100. As the EPCIT has paid down its mortgage, and the value of the property has increased, investors have received both short and long-term returns through annual dividends and the appreciation of share prices.

Providing a financial action course: Before investing in the EPCIT, community members must take a peer-led financial action course called, “Moving from Owing to Owning.” Facilitated by trained community investors, the course focuses on goal setting, budgeting, understanding the basics of investing and risk tolerance, community building and networking, and investors’ relationship to a CIT. After completing this 6-8 hours course, community members are offered the opportunity to invest in the EPCIT.

Promoting equitable community development: After purchasing Plaza 122, the EPCIT addressed deferred maintenance on the property and began improving visual aspects of the property. With the support of professional property managers, the EPCIT stabilized leases for existing tenants and began identifying new tenants.

Taking a place-based approach: The East Portland Community Investment Trust Corporation (EPCIT) is a place-based wealth building strategy, available only to the residents of four neighboring zip codes. These zip codes were selected to create a catchment area that included a large number of renters and other low-asset households, who were the target populations for this project. The proximity between the investors and the investment property benefits the EPCIT, as investors can regularly visit Plaza 122, increasing their understanding of and trust in the model. Community investors can also more easily participate in EPCIT-sponsored events and become customers and clients at Plaza 122’s small business and non-profit tenants.

Securing a direct pay letter of credit: Access to a direct pay letter of credit is central to the success of the CIT model. The letter of credit enables the EPCIT to receive an exemption from state and federal securities registration requirements, which makes the project financially feasible. The letter of credit also enables the EPCIT to issue shares that are both liquid and loss-protected, two key features that make it attractive to low- and moderate-income households.

Offering small-dollar investments: When Mercy Corps surveyed households about why they rarely or never invested, the households pointed to the lack of financial products for those with little to invest at any given time. By offering residents the opportunity to invest for as little as $10 per month, the CIT model creates an opportunity for low-wealth households to invest in real estate, a type of investment that typically has a high barrier to entry. One reason these small-dollar investments are feasible is the CIT’s custom-built investment platform, which allows the EPCIT to efficiently manage community members’ investments, re-subscriptions, and tax documentation.

Investor-led financial literacy training: Before becoming investors, all community members take part in the EPCIT’s financial action course, “From Owing to Owning.” Each course is facilitated by a trained community leader, who is compensated for their time. To become a facilitator, an investor must complete a 6-8 hour “Train the Trainer” course to prepare them to educate potential investors on how to make informed decisions about their personal finances. As community investors themselves, these facilitators are well-positioned to build trust with potential investors.

Mercy Corps: Mercy Corps, an international humanitarian and development organization based in Portland, incubated the CIT model. Leveraging internal expertise on asset development for low-income households, and after extensive community engagement, the organization sponsored the implementation of the first CIT, the East Portland CIT (EPCIT).

Orrick, Herrington & Sutcliffe: Orrick is a public finance law firm with an office in Portland specializing in municipal bonds and public finance law. During the incubation period for the CIT model, Orrick began providing pro bono legal assistance to the CIT team. Their work was central to identifying a federal securities exemption in Section 3(a)(2) of the Securities Act of 1933 that made the CIT model suitable for unaccredited low- and moderate-income investors.

Education and service program partners: Throughout the incubation and implementation stages, Mercy Corps and the EPCIT have leveraged the support of student interns from Reed College, Willamette University’s Atkinson Graduate School of Management, and Portland State University’s School of Business. Students at Portland State have conducted impact evaluations of the EPCIT’s work in 2021 and 2023. AmeriCorps members also provided EPCIT with increased capacity to conduct outreach and track the program’s impact.

Community-based organizations: When the EPCIT began operating, it partnered closely with other community-based organizations, like houses of worship, neighborhood groups, and affordable housing providers. Organizations that support small businesses and local immigrant communities, like the Division Midway Alliance and Rosewood Initiatives, were especially strong partners. These partners played a key role in connecting the EPCIT to the residents who would later become its first investors.

Plaza 122 tenants: The commercial and retail tenants at Plaza 122 have become key supporters and contributors toward the EPCIT. Over time, the EPCIT demonstrated the viability of its model to the original tenants, and it brought on new small business and nonprofit tenants who had interest in the model. Several of these tenants have become EPCIT investors or instructors in its “Moving from Owing to Owning” course.

East Portland residents: While designing the CIT model, Mercy Corps conducted surveys and listening sessions with area residents. Concerns that residents raised, like the need to quickly access invested funds, later informed key elements of the CIT’s design. Once the EPCIT launched, over 300 residents became investors, with several also serving in other leadership roles for the CIT (e.g., as class facilitators and on an advisory board).

Developing a diverse mix of tenants: The EPCIT intentionally sought new tenants that would diversify the tenant mix in Plaza 122. With both small business and nonprofit tenants, Plaza 122 houses a variety of services and functions for the community, from hair care to community health, accounting, tax preparation, and transportation services. This diverse tenant mix attracts a broader swath of the community, increasing residents’ familiarity with the CIT, and has made Plaza 122 more resilient to economic shocks, such as during the COVID-19 pandemic.

Leveraging external expertise and capacity: Early in designing the CIT model, the CIT team identified the need to secure additional expertise in areas like real estate, finance and banking, and securities law. With limited financial resources available, the ability of the CIT team, and later the EPCIT, to recruit volunteers and pro-bono experts in these areas proved key to incubating and implementing the CIT model.

Robust community engagement: The EPCIT recruited a strong set of initial investors through its outreach activities and relationships with community-based organizations. These early investors proved critical, as many of them became advocates for the EPCIT in their respective communities, which drove much of the project’s early growth.

A product that matches investors’ needs: When designing the CIT model, Mercy Corps surveyed renters and low-income residents about their investment goals and habits. These data demonstrated community members’ interest in investing in real estate, but identified cost and knowledge about investments as key barriers. By offering a low-cost, loss-protected, liquid security paired with a financial action course, the CIT met the needs of its target investors, making it popular among the socioeconomically diverse residents of East Portland.

Building trust with community members: From the start, the CIT model was designed for groups that have disproportionately less wealth, such as renters, recent immigrants, and people with disabilities. Early on, some members of these communities expressed skepticism toward the CIT model, which had not been implemented elsewhere. However, Mercy Corps’ positive reputation, and the EPCIT’s success recruiting community members as advocates, enabled the project to gradually build trust with area residents.

Doubt from experts and institutional actors: As the CIT team at Mercy Corps began speaking with public officials and experts in law, banking, and real estate finance, many expressed doubt that low-income residents would invest in the CIT. Others highlighted various legal and regulatory barriers a CIT would face, which the CIT had yet to resolve. Similarly, as Mercy Corps sought initial funding from private foundations, none were willing to commit to a complicated and untested model.

Using a niche financial product: To sell an investment, state and federal law requires that it be evaluated and registered by a government agency, a process that would have been financially unworkable for the CIT model. The EPCIT received an exemption from this requirement, as it guarantees the securities it issues through a direct pay letter of credit with a bank. However, the letter of credit is a rarely used community development financial product, which has limited the EPCIT’s options when searching for a banking partner. Despite this challenge, the EPCIT partnered with Northwest Bank, which was willing to issue a letter of credit under conventional loan-to-value and debt services covenants.