Cooperatives remake neighborhoods

Real estate investment co-operatives, a new approach to grassroots economic development, are saving decaying neighborhoods and even entire towns from economic death.

In a REIC, residents pool cash to buy derelict buildings, rehab them and recruit businesses that neighbors would support to move in. The REIC then uses proceeds from rent or the sale of the building to do the same for structures nearby.

Although these ventures are profit-seeking, the real bottom line is economic revitalization. REICs can adjust rents or building prices to help make shoestring businesses viable if the neighborhood would welcome them. REICs also can attune efforts to local needs; one Canadian REIC is mulling a senior-citizen housing project, another a medical clinic.

The first REIC sprouted in Sangudo, a Canadian hamlet in Alberta that had lost so much population that its high school was about to close. Activists put up money to buy a meatpacking company whose owner wanted to retire. They expanded its trade and workforce, then used some remaining money to buy another building and foster a coffee shop in it.

A regional nonprofit and the provincial government took notice, and offered technical help and seed money. Now, Alberta boasts five REICS, with more in development. Along the way, REIC advocates noticed the co-ops qualified as investments for individuals’ self-directed retirement accounts – a $5 billion pool in Canada that REICs are eagerly tapping.

Now the idea has moved south.

In a down-at-the-heels neighborhood in north Minneapolis, five residents had enough of empty buildings and shabby storefronts. In 2011, they formed a REIC and, two years later, purchased their first building for cash. As part of the deal, a bike shop bought and moved into the building next door and the REIC rehabbed its purchase to be home to a bakery/cafe and Minnesota’s first co-op brewery.

The Minneapolis REIC is the first in the US, but shouldn’t be alone long.  In small towns losing their businesses and young people, banks see too much risk, and traditional investors see too little reward.  REICs could be an antidote to faraway corporate landlords or property owners who’ve lost cash, interest or both. They can re-energize local economies by keeping investment and consumer dollars – and decisions – at home.