The nonprofit New Brooklyn Theater company has found an unusual way of raising funds to buy and restore the historic Slave Theater in Bedford-Stuyvesant.
NBT, which needs $200,000 for a down payment on the 1215 Fulton Street building, last month posted about the project on the “crowd-funding” website Kickstarter. Already, some 218 people have contributed more than $22,000 through the site, which allows users to browse through lists of projects and donate money.
More and more crowd-funding dollars are being spent on buying, renovating or leasing New York City properties, industry experts said. A group of science enthusiasts, for example, recently used the crowd-funding site Indiegogo to raise more than $1.1 million to buy inventor Nikola Tesla’s now-abandoned Long Island laboratory, with plans to convert it into a science museum. Sites like Fundrise and PropertyPeers, meanwhile, are specifically designed to help users make equity investments in real estate. The New York City Council is even getting in on the act: The city now has its own Kickstarter site, which highlights “creative ideas” and projects in low-income neighborhoods.
For a project like the Slave Theater, crowd-funding seemed like a perfect fit. Sarah Wolff, an executive producer at the theater company, said that the group used Kickstarter in lieu of courting traditional investors because it symbolizes the kind of grassroots spirit they want to cultivate. “We feel that developing a community consensus around the site’s future is more valuable than any other project catalyst,” Wolff said.
But crowd-funding’s potential for real estate is somewhat limited by SEC regulations. And the Jumpstart Our Business Startups Act, signed by president Obama last April, caps the crowd-funds a group can raise at $1 million per year — a number too low for purchases in most urban real estate markets.
Perhaps for those reasons, both Kickstarter and Indiegogo specifically ban for-profit real estate projects. But nonprofits using its crowd-sourced funds to buy real estate appears to be permissible under both sites’ terms of service. (Neither website responded to requests for comment.)
Still, when it comes to crowd-funding and real estate, a bevy of legal and logistical questions remain.
Buying property with crowd-funds “sounds so simple,” said PropertyPeers cofounder Mark Mascia, who is also CEO of Manhattan-based Mascia Development. But “there is still so much unknown due to the complexity and size of real estate transactions. It was way harder than any of us realized initially.”