How do Brick by Brick community bonds create wealth?
Brick by Brick manages collective resources and insures steady growth by transferring rental profits to investors for the duration of the mortgage. Collective ownership allows tenants to build equity for their benefit and for the benefit of future tenants. The property cannot be sold after the mortgage is paid. In this way it is effectively taken off the real estate market and as a result rents are controlled, low-income residents gain stability, and surplus stays in the community.
In the interest of its investor-members, Brick by Brick insures that rents are paid on time and that the property is well-maintained. And in the interest of tenant-members the fund insures that their homes remain in their control and are never sold-off.
This slow and steady growth model produces a small but nonetheless competitive interest rate that is paid out to investors as interest on their bonds.
What is a community bond?
A Community Bond is a debt instrument issued by nonprofits or charities in exchange for a reasonable rate of return over a set period of time. This bond is secured against the value of an asset (in our case, a building and some land).
An investor agrees to ‘loan’ the money to the nonprofit and the nonprofit issues a promise to pay via a bond agreement. Regular interest payments are then paid to the bondholder.
The Community Bond is available to be purchased by everyone, including unaccredited investors. This means that a Community Bond is a concrete solution for individuals to invest in their own communities, deriving revenue from a truly local and ethical investment.
Has this been done before?
Yes. Brick by Brick is part of a larger movement in the development of community credit. Recently, community organizations and small businesses alike have been issuing bonds to make up for government cutbacks and restricted access to government-backed mortgages.
In 2010, the Centre for Social Innovation purchased 720 Bathurst in downtown Toronto by issuing community bonds. Secured against the value of the building, 60 citizen investors and 3 private foundations invested in the building. At the time, they spent $6.8M for the purchase and improvements. It is now valued at $10.25M.
In 2012 in Montreal the Atelier 7 à Nous began the process of purchasing a derelict building in southern Point Saint-Charles as a response to the almost complete absence of social services, access to food and public facilities in that area. By issuing community bonds Ateliers 7 à Nous will be able to increase the standard of living for low-income residents and offer a gathering space for community activities, workspaces, as well as materials in support of popular education and urban agriculture. Check them out, they're great!
Other companies and non-profit organizations issuing community bonds include Montreal's own Cinema du Parc, Canada's leading renewable energy cooperative SolarShare, the West End Food Cooperative, the oldest local food co-op in Canada, Le Grand Costumier, and the Empress Theatre in NDG.
Take a look at what other community investment funds are up to, locate one in your province by searching this map. Click on Retail Investment Product in the Category scroll selection, and click on the fund of your choosing for further details about investment terms and conditions (minimum required investment, returns, etc.).
For Québecers seeking local community credit information, this map shows the member organizations of Réseau québecois de credit communautaire (In French).
Last but not least, find us along with other impact investment opportunities on Purpose Capital's Open Impact platform.
How is the interest rate determined?
We offer a good rate of return, well over the rates for Guaranteed Investment Certificates offered by the leading financial institution in Quebec. Our rate takes into account the mortgage our residents can afford to pay. It is a conservative figure that allows us to offer a bonus to our investors when it is possible, but that also insures that we can stay on budget.
However, the real pay back to our investors is in the social impact that they are helping to create: an accessible and empowering living environment for those members of our communities that can make the most of it.
How risky is the investment?
The property is valued at around $2M. We are issuing bonds for no more than its market value. This means that the investment is 100% secured against the current value of the building.
Not all community bond issuing organizations offer asset backing. Brick by Brick offers its real estate as a security. However this does not mean that your investment is guaranteed. Only government bonds and government backed investment certificates issued by chartered banks are 100% guaranteed. All other investment products bear at least some level of risk.
There are inherent risks in the real estate market, but we believe low-income rental property, unlike investment property, tends to be sheltered from market fluctuations in established urban centers because a greater part of its value derives from steady revenue rather than speculations regarding future value. We feel quite confident that Montreal real estate is as good as it gets in Quebec and benefits from positive real estate market trends in Canada without suffering from the potential bubbles that Toronto and Vancouver face. All in all, real estate in Montreal is steady going. For detailed information regarding the risks involved in buying a community bond, please a copy of our information document.
Can I cash my bond before it matures?
Brick by Brick reserves the right, at its discretion, to buy back a bond holder in part or in whole prior to maturity with one month’s notice. Investors who request early repayment may be granted special permission by the board of directors.
Brick by Brick bonds are also transferable with the consent of the organization. We can help you find someone to take over your Bonds.
Can I hold this in my RRSP?
Legally speaking, yes. Practically speaking, not yet. Most banks have decided that they will not process this type of bond. On a case by case basis, some banks will do it, so feel free to ask your bank.
Meanwhile, we will continue working with other community bond issuing organizations and the Territoires innovants en économie sociale et solidaire (TIESS) on their initiative to convince the Caisse de solidarite to accept community bonds in some of their RRSP offerings. After all, what better way to grow the local economy than to give Quebecers an added incentive to invest locally!