Last week Kyle McMahon sat down at his computer and bought a $100 share in a building on H Street NE.
It was the first time he had ever purchased a stake in a business.
“Aside from whatever my retirement plan has in it — which, sadly, I don’t know much about — this is my first time investing in anything,” said McMahon, a 29-year-old project manager at LivingSocial.
Fundrise, a District-based Web site that debuted earlier this month, allows District and Virginia residents to buy into 1351 H St. NE, a building that is to house a hybrid food and retail market when it opens early next year.
The company is selling 3,250 shares for $100 each, which account for 28 percent of the building. The rest of the property is owned by a few private investors, according to Ben Miller, co-founder of Fundrise.
Miller, 36, and his brother Dan, 25,said they first got the idea for Fundrise when they began looking for commercial real estate two years ago. (Their father is Herbert S. Miller, the developer behind Gallery Place, Georgetown Park and Washington Harbour.)
At first, they turned to traditional sources of funding, such as private equity firms and accredited investors.
“But we immediately realized they didn’t know anything about the neighborhood — didn’t know where it was, what it was like, anything,” Miller said “So we thought, maybe we have this backwards.”
The duo came up with a new business model that relied on small investments from the people who lived and worked on H Street.
“We wanted to do something we felt the neighborhood wanted,” said Miller, who started the crowd-sourcing site Popularise, with his brother in 2010. “This is a democratic way of raising money for local real estate.”
Miller filed paperwork with the Securities and Exchange Commission and with regulatory bureaus in the District and Virginia. Earlier this year, Fundrise was given the green light for its first public offering.
Within its first week, Fundrise had raised about $100,000. The company is projecting returns of 8.4 percent from rental income as well as a 30 percent share of profits for its investors.
“There’s something so gratifying about watching your community become something you want it to be,” said Julia Robey Christian, managing director of H Street Playhouse, who has bought two shares in the building. “Of course if I feel like I have ownership of something, I’m going to be proud of it.”