Community development is in its prime when a community identifies an aspiration, organizes a collaborative plan, and invests local talent, time, and money in the cause. Ideally, the community will own and control what it has created; community development practitioners know, however, that community ownership of a venture or initiative is a rarity.
image: Global News Edmonton
Not this time. In McCauley, an inner city neighbourhood defined too often by its problems of low income, homelessness, and other conditions, community members worked with the Edmonton CDC to incorporate an investment cooperative, then set about raising more than $1.1 million from neighbourhood residents to purchase The Piazza strip mall.
Why this Strip Mall?
The Piazza is located in the heart of the neighbourhood and is situated across the street from the beautiful Giovanni Caboto Park. Historically, the mall has caused the community considerable pain and frustration because of legal gambling and drug trafficking that took place in a couple of the establishments. The Edmonton Police Service was often called to this site to address these problems. The owner of the mall did not live in Edmonton.
The community’s vision for the mall is one that is family-friendly, provides opportunities for healthy social engagement, adds value to the local economy, and is no longer a place that causes social malaise.
Community residents asked the Edmonton CDC if we could buy the mall, but we could not make the numbers work on our own. We brought in another developer to see if we could partner, but the proforma didn’t work that way either. But community leaders wouldn’t give up; they were clear with us that they wanted to buy and own the strip mall.
The Edmonton CDC’s mandate is founded on undertaking development and initiatives that communities actually want. So, we got busy looking for a way to pull this off.
The short story is that the community decided to form an Opportunity Development Co-op, a legal entity that can seek investments, including RSP and TFSA transfers. Here’s what we did:
- The bylaws were drawn up by our consultants in consort with the founding co-op members and the McCauley Development Co-op (MDC) lawyer.
- We hired experts to ensure that the Edmonton CDC and our neighbourhood colleagues understood the legal and regulatory requirement of seeking, accepting, and reporting on investments made by residents and stakeholders.
- The CDC joined the Board, and our Director of Neighbourhood Development took on the role of Treasurer.
- We teamed up with a realtor to approach the owner; the property at the time was not listed for sale.
- We create proforma scenarios for the Coop to consider and decide upon.
- We worked with the lender to arrange bridge financing and long-term financing.
- The Co-op board created the marketing collateral with guidance from our consultants, and the CDC worked with the Board and consultants to create the offering memorandum.
- We coordinated the offer of purchase and due diligence activities.
- Our Director of Neighbourhood Development was on the team that approached investors; her efforts alone brought in $300,000 in investments.
So, what happened?
The community was successful! It now owns The Piazza through the McCauley Development Cooperative.
Ninety-one investors participated, including the CDC. Most investments were in the $5,000 to $10,000 range. It wasn’t easy, and there were times when all of us worried we wouldn’t pull this off, but the community raised $1.1 million IN JUST 20 DAYS!
Investors came to the table knowing they may not get a return for awhile. For many of the investors, if not the large majority, the primary drive was to own the strip mall, not to make a return on investment.
The cash allowed the MDC to finance the remainder of the sale price (which in total was just under $2.9 million) with the Social Enterprise Fund, a social finance, alternative lender, operated by the Edmonton Community Foundation.
The CDC was the backbone
The Edmonton CDC served as the community’s backbone organization. Given the opportunity, we re-jigged staff time so that the Director of Neighbourhood Development could focus 75% of her time or more for five months on this effort. We provided advice and research into best practice, brought on and paid for consultants familiar with investment co-ops, worked with lawyers and the realtor, and provided $200,000 in interest-free loans out of operating cash to cover the deposits required to close the purchase (these loans have since been paid back).
A core group of community leaders put personal cash on the line as well, given that there were due diligence costs of approximately $50,000 that had to be paid. This was money that would be lost if the deal didn’t go through. In other words, community leaders were so focused on the importance of owning the mall that they were prepared to risk personal capital. The CDC shared in that risk, and we also invested approximately $70,000 in cash and staff time to make this work.
Think of the time it took to organize, to develop promotional materials for investors, and to figure out how to provide the individual attention and transparency each investor would receive! The community members had businesses to run, jobs to go to, families to be with—and still they made the time to pull this off. That’s passion for one’s neighbourhood!
The community led and organizations supported them
The community led, and the CDC supported. Our realtor, Lizotte Real Estate, brokered the deal and nurtured a good relationship with the seller. The Social Enterprise Fund provided financing and support. It took all four groups to pull this off.
I had coffee recently with Miranda Ringma, co-owner of Zocalo and chair of the MDC. We talked about a number of things, but when we talked about the Piazza, I have to admit we both got a bit emotional.
As I walked into her shop, which is across the street from the Piazza, a couple of workers were clearing the mall’s sidewalks of snow—all the way down to the sidewalk! I said to Miranda, “Wow, that Piazza mall must have a great landlord. Look at how well they’re clearing the snow!”
The smiles on our face were…well, you had to be there—two grown-ups a tad on the teary side still basking in the afterglow of what was accomplished.
Not only did this take great effort, it demonstrated the incredible trust the community members have for one another, the strong commitment they share to their improve their neighbourhood, and the willingness of people to put up their own money for a shared purpose.
It took what we Community Development nerds called “social capital.” Imagine how much social capital exists in McCauley to be able to raise that much money. That social capital is bigger than the mall purchase; it can only benefit the neighbourhood even more in the future.
The Piazza story is not just a McCauley story; it signals to other neighbourhoods and communities, to community developers, and to political leaders what can be accomplished by citizens determined to do what the community has chosen to do.
A double tip of the hat to the McCauley community. Thank you.
This article was originally published at edmontoncdc.org