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TEDx Talks
Title: The real estate deal that could change the future of everything: Ben Miller at TEDxMidAtlantic
Published: 2014-04-17
Source: https://www.youtube.com/watch?v=RbYBmER1CB0
in the middle of the two thousand eight recession I remember wondering how are they to clean up this mess who's going to reform the financial system that's broken and little did I know that who's actually going to be all of us it wasn't just going to be federal policy top down but actually technology bottom up and it's called equity crowdfunding and we'll let you do is
invest directly into businesses and buildings in your city and fundamentally change the power dynamics of what gets built who built it the story starts with me leaving a big real estate development company I'm starting a small neighborhood on the company with my brother we wanted to work in the neighborhoods that we lived in %HESITATION renovate vacant buildings down the street from us open new restaurants and
retail and neglected parts of the city that are people really had given much love to you since the sixties and dialed we saw all of our friends moving into these areas it was a generational shift where people want to live and we wanted to be part of that when we were buying our first property in a street northeast which is like the Brooklyn of Washington DC
I'm never going across town or up to New York to meet with wealthy investment advisors are investing companies who looked at me crossways I told them what we're gonna do and more importantly where you're going to do it most of them I never been to a street northeast some of them I never heard of it and so it it felt very like a juxtaposition right why
would you be raising money for people who didn't care about this neighborhood and the other hand everybody in the neighborhood was very excited about what we were doing it was I I obvious what's happening to anybody who live there and the opportunity that we saw the vision we had I was the vision everyone else had lived in that same area and so on one hand you
have a a community a customer on resident who's excited about what we're doing other hand you had a typical money sources I didn't know what we're talking about and it made us realize that %HESITATION most people don't know how commercial real estate owned and funded so let me ask you a question the picture yourself in your city or your neighborhood there's buildings all around you who
owns your environments who profits from the place you go to who would build your city the short answer is not you I'm not telling anybody you know that's a strange notion because a hundred years ago everything that you invest in it was local and now nearly nothing else and local people local families used to own the local real estate people who invested in the community is
to be part of the decision part of the decision making of what got built so how did this happen well interestingly much of it dates back to the last financial debacle in the late nineteen eighties call the savings and loan crisis the savings and loan crisis was the largest real see failure history United States at that time totaling forty billion dollars in bad assets it used
to be a lot of money so the private capital markets dried up and financial invaders that at that period figured out that if they gather the real estate into pools they get access public markets and pension funds these pools can be known as private equity funds a real estate investment trusts and the idea really worked so in the early nineties there were very few private equity
funds or any public roast investment trusts twenty years later they own control almost a trillion dollars in local real estate if you wonder who makes the decisions and how things get who profits from them the answer is here now there are a lot of benefits to this raid that one more capital came to the rules industry but they're a lot of unintended consequences when institutional capital
took over this industry what I did was a disconnected people who live there people who are investors from actually what they're investing in critical long supply chain of how money flowed into assets and turned real estate into a commodity like a bond as opposed to a place that has meaning and has a sense of connection to people who live there so it sort of sets up
basically what are the idea was it dawned on us know what if you just went direct what if you made the people who are excited about what we were doing our partner and we raise our money from the local residents and neighbours well that was easier said than done because in two thousand ten the regulations in the past hundred years said that was impossible basically couldn't
raise money from everybody and anybody without going public like on the New York Stock Exchange like an IPO we want a lawyer after lawyer to lawyer asking them how we raise money from everybody anybody not just wealthy accredited investors were actually people who live in a neighborhood vessel hundred dollars and people told us a base camp in practical and feasible impossible finally we got a meeting
with one of the most prestigious law firms in the country this firm does the work for most of the major top %HESITATION Messin banks and die we're going up to New York to S. skyscraper in %HESITATION time square and we went to this to topple the skyscrapers commerce you're looking over your Verizon and I feeling very powerful that moment think that's the intention through looking over
the rising on telling them what we want to do and I'm wondering how the how do we do it and at the end of the meeting is just dead silence the guy says to me why would you want to buy the little people and I was still taken aback so I had to retort who can screw by Wall Street he said to me what's your opinion
so this is the middle two thousand ten right so I thought really that's just my opinion serendipitously %HESITATION a few weeks later I was sitting with a friend who worked at the securities exchange commission yes you see and I'll tell him we want to do it he said Hey why did you ask earlier my friend I know this guy's a guru he'll know he knows everything
about this type of stuff just possible you can do it is not possible you can't and I thought a guru really now I find out but I got nervous after that because I realize that what you said it wasn't possible so we I got a meeting with them we sat down and he was not what I expected he was big and it was warm and was
friendly after telling him what we wanted to he said to me first I can do that are those rags in nineteen nineties so away we went still wasn't easy but now they have a plan of what to do it felt different for the first time on the phone with the securities regulators and said we wonder sell shares of one building online everybody anybody a hundred dollars
units they were nonplussed but they worked with us went back and forth back and forth finally we got it cleared took nine months notably are offering we twelve pounds but we made it happen coincidentally through that same time period I had a baby their way past you know how it was on a real undertaking to put on the internet and the first offering race through twenty
five thousand dollars one hundred seven five local people and then we did it again to race through engine fifty thousand dollars and three and sixty one people and we did it again the first time took three months to race through and twenty five grand by the third time we had that much interest in two hours and I think that's because it's intuitive imagine if you could
invest down the street from where you live transforming building you care about actually see your money at work I own something tangible one of our investors mica told me that he that's a hundred dollars a show the Billings with mom and dad that's why I'm talking about when describing right now is the exception not the norm soon it will be because Congress and the Obama administration
pass a bipartisan bill he's amazing that will make what we're doing a lot faster lot easier school the jobs act and it's going to fundamentally transform how financial sector works it will let technology get at capital the way god at commerce and media what Twitter and blogs did too newspapers and Amazon dot com to borders books maybe crowdfunding can do to wallstreet right not just an
idea too were doing actually down the street %HESITATION within this is a big project they have about a million dollars boss off circled Portland Oregon now and %HESITATION also in Philadelphia it's amazing because you think about all this and you're going to have this power too you have this power invest in your neighborhood and build your own city and my question to you is what will
you build are gonna build a bookstore bakery skyscraper daycare center maybe affordable housing all of a sudden the Dan in exchange it's a lot like what wikipedia did encyclopedia's I said to you ten years ago the people would write their own sake appear to build the largest encyclopedia in history of art of mankind and basically eliminate as it appears as we knew them you are set
on phrase well ten years from now people will be building their own cities the way people crowdsource fundamentally it's gonna change how cities get built mayor Giuliani has this idea credits to helping rebuild inner city New York nineteen nineties it's called broken windows theory in theory went to fix the broken windows and clean up the spray paint neighborhood will look better so people were treated better
