If a couple of neighborhood organizations get their way, residents of Southeast Colorado Springs could someday have the opportunity to invest directly in their community.
There are not many opportunities out there for so-called “small investors,” or people who have between $10 and $100 a month to put toward acquiring equity. A Portland, Oregon-based global aid organization, Mercy Corps, sought to change that about two years ago — and Colorado Springs could be the first community in the country to replicate its neighborhood-centric economic development model.
Mercy Corps set up a Community Investment Trust, or CIT, allowing community members to purchase a strip mall in a lower-income, highly diverse Portland neighborhood.
Residents must attend a couple of two-hour classes to learn about investing and budgeting before signing on as investors. When they do, they can choose a dollar amount — between $10 and $100 — to invest each month in the strip mall. There’s no risk of losing money for residents, and they can withdraw at any time.
“We looked for a neighborhood where it was predominantly renters, where it was diverse, where there were potential impacts of displacement, gentrification — and where people could find a value in owning a long-term asset,” said John Haines, the executive director of the Portland CIT. “Renters and people who hadn’t engaged in ownership were very interested in the prospect of being part of something larger in their neighborhood, such as owning a part of a strip mall.”
The Council of Neighbors and Organizations in Colorado Springs picked up on the idea when a Southeast resident sent CONO’s program director, Max Cupp, an article about Portland’s CIT.
After holding conversations with community members, CONO determined there was enough interest in the project to hire Haines as a consultant (with the help of the Pikes Peak Community Foundation and the Urban Land Institute Building Healthy Places Initiative) to visit Colorado Springs and offer advice on how to replicate Portland’s model.
On Oct. 10, around three dozen Southeast community members were present at the Deerfield Hills Community Center to hear Haines’ pitch. Afterward, they split into focus groups and provided feedback to CONO and Haines.
Haines explained that after attending the investing classes (which would be taught by community members who’d be paid a stipend), residents would be able to pick a small monthly dollar amount to invest in owning part of the strip mall. Investors are paid dividends based on profits and the property’s appraised value.
It’s a no-risk investment: With this type of bank loan, the community investors are free to take out their money at any time, even if the building were to lose money.
Most said they would be interested in investing $10 to $100 a month in a strip mall or part of one, though a question hung in the air: Is this too good to be true?
“We really need to ensure that we have the trust of the community in rolling out the classes, and especially in presenting the investment opportunity,” Cupp said. “Some people at first kind of said, ‘Well, it kind of seems like it could be like a get-rich-quick thing.’”
The community members also said they’d want to know more about the investment opportunity before committing.
The project is still a ways down the road. First, CONO wants to collect surveys from Southeast community members (available online at tinyurl.com/community-trust-survey). It’s also working to complete a feasibility study to get a better idea of whether a real estate investment could provide returns for investors, and which buildings might work. Two possibilities might be the Mission Trace Shopping Center, or Astrozon Plaza. That study should be done within the next couple of months.
The project would also need an “impact investor,” a group of investors or a foundation to help cover the initial down payment on the building.
In Portland, Mercy Corps provided $220,000 and a philanthropist $230,000 for an initial down payment on a $1.2 million building. CONO’s looking to purchase a similarly priced piece of real estate, but fundraising for the down payment may look slightly different.
While Cupp is quick to caution that a Southeast CIT is not a done deal, he’s optimistic that acquiring enough for a down payment won’t be too much of a problem in Colorado Springs.
“We had a meeting with potential investors and stakeholders, and then several other kinds of one-on-one meetings just talking about the topic and gauging interest of people who could potentially be funders, and there was a lot of interest, to be honest,” Cupp said. “… I definitely think it could come from within this community, whether it’s one person, a foundation, or potentially a small group of investors.”