Module 2 – Coops, ESOPs and real estate

As I am a bit behind in reading, digesting and reflecting I’m keeping my post short in directly answering, and more often posing more questions, the prompt questions. I really appreciated the translation of CST values to investment criteria, questions and scoring. I plan to spend some time going through the same exercise for our portfolio, using the CST themes that most resonate with our charism. I shall post that when I get to it!

Where might cooperatives and employee ownership fit in your portfolio?

  • Appreciate all the great live examples and sharing all the return, tenor, liquidity, etc. information about the deals – makes it more actionable.  Still lots to learn about the space – feels like a steep learning curve – all these examples are very informative, though.
  • Impact-First Portfolio: In answering this question for our high-impact, capital preservation, pool that has a predominant focus on immigrant populations, I began to consider how a migrant lens layers on top of a coop/employee ownership lens might look. In the migrant impact investing space – the few funds that exist are pushing for more hiring of migrant populations or supporting migrant entrepreneurs. Could they also push for cooperative/employee ownership? Too much “pushing”? What takes priority?
    • Driver’s Seat: Potential opportunity recognizing many gig economy workers are immigrants. Would want to better understand – What % are immigrants?  What are the quantifiable benefits to the workers and how likely are they to materialize? I.e. is it better to support them on a path to no longer having to be a gig worker (recertification, training programs, etc.) vs. marginally (?) improving their returns as a gig employee and hoping Driver’s Seat has a large liquidity event they benefit from?
    • Plan to revisit discussions with Amplio Ventures to see whether they’ve considered building shared ownership criteria into the PE fund focused on migrants (we’ve not invested here).
  • Finance-First Impact Portfolio: In this workshop I don’t often think about this pool of funds, but it represents the vast majority of our investment portfolio. That said, for this portfolio, I’d be interested to learn more about Apis & Heritage. Really enjoyed the video. Didn’t know there were such tax benefits for 100% ESOP ownership. 
  • Need to read through other opportunities in more detail! But think a few could be good fits!
    • Re: Kachuwa – can this scale with no paid employees?
  • Questions: I’m sure the answers are in the material somewhere, but I admit I’m still making my way through it all.
    • Why aren’t there more ESOP structures where employees have decision making power as well? 
    • What are some of the challenges to ESOP / employee ownership / coops? Challenges to financing them?
      • In my past life lending to financial institutions, the challenge lending to coops was always lack of “deep pocketed shareholder” who could provide capital in crisis. How do you rethink this challenge within a CST framework?

What about religious real estate / assets in transition? 

  • As a religious congregation that owns real estate around the world, I am approaching this question from the perspective of how we can better use our real estate in a way that aligns with our charism and CST. 
  • A few years ago, in partnership with another Catholic organization, we repurposed one of our buildings in Italy to house migrant women and children. We would gladly do more of this if the opportunities presented themselves. 
  • That said, we wonder whether we can have more impact if we sell to the highest bidder, and then use the proceeds for mission, (donations, impact investing, etc.) or if we maintain ownership of the property and work with external orgs to repurpose for something more impactful
  • I admit the obstacle to the latter is our internal bandwidth, lack of experience in project development, and lack of contacts/networks who know how to do this. (So welcome suggestions if anyone has a good idea for what to do with a vacant parking lot in Chicago!) 
  • Another constraint to maintaining ownership and repurposing is that many of our properties are in affluent neighborhoods in the US/Europe thus raising the question of whether we should focus our limited bandwidth on impactful projects in these areas, when it would be far more charismatically aligned to sell the property, and channel these funds to our works in Africa, Latin America, etc. 

Miscellaneous Comments/Thoughts

  • What can we learn from other countries, such as Croatia, that have had experience with a economy that has a higher share of worker owned coops? What worked and what did not?
  • Is a revenue-share structure the most pragmatic and simple way to embody the principal of non-extractive finance?

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