Workforce Housing Developer Leverages Crowdfunding for Capital

Workforce housing developer the Urban Pacific Group of Cos. is leveraging crowdfunding platform to raise capital for construction projects. The company has partnered with crowdfunding platform Small Change for its project at 1491 Atlantic. Prior to the pandemic, traditional financing sources provided the terms and timeline needed to get deals done. Now, land sellers have become more flexible.

“We have always had an interest in using crowdfunding platforms to raise capital, generally,” Scott K. Choppin, the Urban Pacific Group of Cos., tells GlobeSt.com. “What has changed is that the timing of projects has changed in 2020. We are able to drive different timelines on new development projects, particularly in the land acquisition phase. When the market was at its peak, the land needed to be purchased more quickly than we would be able to if we paired up with a crowdfunding source. They would always tell us that we would need 90 days to raise the capital. That was a complicated endeavor when we were closing land deals quickly.”

That changed at the start of the pandemic. Many sellers were willing to renegotiate transaction terms, opening up the possibility of alternative financing. “When the market changed in March and April, the owners of several land deals that we were tracking were very insistent on getting very quick closings,” says Choppin. “When we re-approached them after the market had changed, we offered a new price and a new timeline, which was much longer. We have had several land sellers that have capitulated either on price, terms or both. That allowed us to pair up with a crowdfunding source, and we could give them the 90 days.”

While Urban Pacific was interested in crowdfunding, many platforms were hesitant to partner on a workforce housing deal. Small Change, however, focuses on social impact investment and factors projects with a social component. “Small Change has funded had developed several urban infill projects, some housing with services and attainable-by-design projects,” says Choppin. “They had that knowledge, but they also had what is called the Small Change Index, and they have a checklist with a point rating with a social impact component, you rank higher on the checklist. We naturally fit a lot of those check points because of our workforce housing model.”

Urban Pacific was already looking to pursue crowdfunding capital sources, but traditional financing sources were also disrupted during the pandemic, making an alternative capital source even more appealing. “Fundamentally, all financing is challenged during the pandemic. On a high level, everyone has been disrupted. People are pausing or they are doing fewer projects,” says Choppin. “I think that has recovered to some degree as people have re-interpreted the marketplace and the market is more stable than everyone thought it would be.”

1491 Atlantic is an Urban Town House development where each unit has five bedrooms and four bathrooms, an in-unit laundry room, and a two-car, direct access private garage.