That Small Town Investing Magic

July 18, 2019

That Small Town Investing Magic

It’s magic to watch impact investing happen in a small town. In June, a group of local people met in Missoula, Montana for 90 minutes and crafted a $300,000 loan enabling a nonprofit organization to buy land for an innovative affordable housing development. Their transaction paves the way for Homeword to develop up to 72 new homes and support services that are sorely needed in Missoula. 

I love seeing how impact investing plays to the strengths of small communities. For starters, everyone involved is familiar with the neighborhood and the property involved. But the real magic is that the investors have long-time relationships as professionals and friends. They trust each other. They can be open and transparent, and frankly, they can work pretty fast. 

Missoula is also lucky to have sustained leadership from a local foundation. A few years ago Dawn McGee, the CEO of High Stakes Foundation simply started hosting women friends who wanted to discuss investing. The first meeting included general talk about everyone’s goals for their money, and discussion of some modest nonprofit real estate investments that a couple of women had made.  

Over several sporadically-convened meetings, the group’s confidence grew, and a collective direction emerged. It was clear that together, the women had plenty of investment knowledge. They began to focus on homes people can afford as a possible opportunity. 

Importantly, the CEO of High Stakes was willing to take an informal lead investor role. She could analyze financial documents and share her work. She could also preview investment structures and securitization and translate any unfamiliar terms for the group. 

The first move for many members was to invest from $5,000 to $50,000 in NeighborWorks Montana, which has a revolving loan fund for Montana affordable housing developers. (These were generally four-year loans at 2-4%.) More women became interested in the next investment – a few group members bought and held a piece of land owned by the local food bank, which Homeword eventually bought and developed with small homes for sale to those earning approximately $35,000 annually.  

All of this led to this summer’s transaction, helping Homeword buy land for this significant development. It will take about a year to finalize the multi-million dollar budget including private and government financing. So for now, the local Missoula group is simply partnering with a local credit union to acquire and hold the land. Repayment will occur when the formal project financing kicks in. 

You don’t have to be a big town to experience and benefit from impact investing – in fact you may be able to rely on some small-town trust advantages as Missoula investors did. This story shows that a local foundation doesn’t have to be huge to play a critical leadership role. If you want to learn more, contact us at Philanthropy Northwest. We are committed to spreading the magic. 

An Executive in Residence at Philanthropy Northwest, as well as a Senior Advisor with The Giving Practice, Rosalie Sheehy Cates works with foundation trustees and executive staff to solve investing issues and set up impact investing programs.