Community Investment

Tim Crabtree Development Director, Wessex Community Assets Research Associate, Cardiff University

Wessex Reinvestment Trust group

Established in 2001, the group has 5 separate structures: Wessex Reinvestment Trust, a registered charity. WRT Core Company Limited, which provides home improvement lending. Wessex Community Assets, which supports community asset development. Wessex Associates an employee-led consultancy Wessex Reinvestment Society, has provided business loans.

Wessex Community Assets

Small not for profit organisation which supports the development of community and cooperative enterprises: Renewable energy Sustainable food Affordable housing Cultural sector Workspace

Helping communities raise local finance through share issues & loans

Equity finance
Loans (or debt finance) require interest payments and the repayment of the amount borrowed (i.e. it is investment with the expectation of repayment and regular interest payments). Equity, is investment in exchange for a stake in the organisation, in the form of shares. This stake usually entitles shareholders to a share of the profits of the organisation, or payments once a certain level of earnings has been achieved. Equity finance can therefore be useful in the early stages of growth or when developing a new product or service. Unlike a loan, investors providing equity finance are effectively sharing the risk with the organisation and are likely to defer any expectation of a financial return for some time.

High Risk
Donations Grants, Equity Sunk costs: soft development capital Planning & piloting

Unsecured loans

Working Capital

Fixed assets: hard development capital Secured loan

Low Risk

The social investment market in the UK

A recent report from the Young Foundation reveals that the total volume of social investment activity in 2010 was 165 million. Just 4 institutions provided 70% of this social investment Charity Bank, Triodos UK, Ecology Building Society and Unity Trust Bank. Their preference is for low-risk, long-term, secured investments (84% of the total social investment market in 2010). Equity and quasi-equity investment accounted for just 5% of the total (10 million), with the rest comprising unsecured lending.

Equity

5%

Unsecured loans

11%

Secured loans
High Risk

84%
Low Risk

WCAs support for community investment

Community investment = Members of a community buying shares or bonds in an enterprise that serves a community purpose Members receive a fair return on their investment as well as sharing in the social and environmental benefits of the enterprise Shares make people part-owners of the organisation with voting rights Different from a donation

Community share issues using a Community Benefit Society (IPS)

Wessex have developed a set of model rules for raising share capital at low cost This means members of a community can invest directly in community projects and services It is cheap to set up and acceptable to independent financial advisors

Helping communities raise local finance through share issues and loans

152,775 raised

105,000 raised

How it works
One member one vote Maximum shareholding 20k; you decide the minimum Can pay modest interest on shares People can withdraw their investment subject to certain conditions Members elect a board to manage the business

From fundraising to investment

Recognition that some community services are best delivered through a business model Growing public appreciation that businesses can be run for a social purpose, not private profit

Historic shift in financing community enterprises: from fundraising approach (events, gifts, donations) to investment in community shares Greater autonomy for communities

Community share society registrations

100 90 80 70 60 50 40 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Jan- Jun 2011
Projected total 2011

Community share societies

Trade sector Renewable energy Community shops Post 2009 societies 34 20
Pre 2009 societies

Members 8,831

Share capital 15,304,000

13 9

2,492
3,041 10,228 8,553,000 687 1.837 318 9,222 38,530

903,000
1,908,000 1,171,000 191,275,00 0 733,000 2,114,000 25,000 26,151,000 7,345,000

Community regeneration
Food & farming (CSAs) Consumer co-operatives Pubs and brewing Community finance Community land trusts Fair trade Other Totals

14
18 10 1 7 2 9 115

9
4 20 2 9 2 1 9 78

8,629,000

247m

Members improve competitive advantage

Members roles How these roles improve competitive advantage Investor Customer Service user Activist Lower cost of capital; greater acceptance of risk Greater loyalty; accept higher prices & dividend Demonstrates support to funders; better feedback More engagement; better feedback; better targeting

Volunteer
Suppliers Workers

Lower labour costs; access to specialist skills

Greater loyalty; lower input prices Greater loyalty; lower input prices; better feedback

Directors

Access to specialist skills; lower input prices

Examples of Wessex Reinvestment Trust group activities 2010 - 2012

Housing
Wessex Core Company:

Food
Business advice , e.g.

Renewable Energy
Business advice , e.g.

Home Improvement Lending

Workspace & Community Assets

Business advice , e.g.

The Real Food Store, Exeter The Community Farm, Bristol North Dorset Food Incubator & Training Network

Housing
Somerset, Devon & Dorset Community Land Trust Project

Bridport Energy Services Ltd: Zero carbon food production Partnership with SW Protected Landscapes Forum: Social Forestry

Lyme Regis Development Trust Red Brick Building Centre, Glastonbury

Enterprise St. Michaels, Bridport

Wessex Community Assets

Food

North Dorset Food Incubator Centre

Customers

Key elements of the Local Food Hub

Managed Workspace

Processing & Catering Facility

Distribution Facility

Education & Training Facility

Market garden

Recycling/Renewables

Retail

Cafe

Suppliers

152,775 raised

105,000 raised

REAL FOOD EXETER: Analysis of the share register on closure at 30 September 2010
Amount Subscribed Number of Subscribers 157 Totals at each Subscription Level 15,700

100

200

47

9,400

500

36

18,000

1000

21

21,000

20,000

40,000

WCA research into community investors

The most important factor to most people when
deciding to buy community shares is that the organisation has a social purpose (63% ranked this as very important), followed by environmental benefits (57% ranked this as very important) being important (35% - neither important nor unimportant; 28% - not really important; 23% not important at all)

Receiving a good financial return was not seen as

WCA identified 3 categories of community investor

1. The Local Community Investor
- Those living in, or connected to, an area - Looking for social return

2. The Community of Interest Investor

- Those with an interest in the project - Looking for social return

3. The Social / Ethical Investor

- An institution or high net worth individual - Looking for social and financial return - Sometimes motivated by democratic
structures and ideology

Background
In November 2010, the Community Farm launched their community share offer inviting members of the public to invest in a 22 acre horticulture operation. By the end of March 2011, 409 people had invested 126,000 in the Community Farm. This investment has enabled The Farm to take over the established veg box scheme, organic growing and wholesale business of the Better Food Company.

Key activities
Grow organic vegetables and fruit in the Chew Valley Run an organic vegetable box scheme Run a wholesale business supplying restaurants and shops Hold open days

And for investors and annual members:

Give a 10% discount on vegetable box orders Offer volunteering days on a regular basis Hold special events Ask them to take part in some of the decision making

Renewable Energy

West Oxford Community Renewables

Investors Funds

WOCR

LCWO
Sustainable Living

Solar PV

Reducing energy bills Low carbon travel Planting trees

Local food projects Reducing waste

Hydro

Financial, carbon and social return to investors

Wind

Sharing resources

Wood

Green energy

IPS

CHARITY

Success of first share issue

98kW community-owned solar power station has been completed 307,000 raised 85% from the local community

Bridport Renewable Energy Group

With WCA have established BESCO (Bridport Energy Services Company) Secured DECC funding for pilot anaerobic digestion scheme purchase of mobile digester Will work with local farms to research potential to integrate food waste recycling and renewable energy generation Will design low cost DIY scheme

Bridport Renewable Energy Group the first stage in the development of a zero carbon cafe

The Primordial Soup

Stage 2 portable Anaerobic Digester and mobile catering trailer

Community Supported Forestry

BREG and WCA also working with SW Protected Landscapes Forum to explore the potential for community engagement in woodland management. Would involve elements of the CSA and Care Farming approaches West Dorset woodfuel co-op to be established as IPS. In the long term could be share issue to purchase woodland Tamar AONB exploring pilot

Example of existing woodfuel co-op established as Industrial & Provident Society

Next steps in West Dorset

Establish IPS or use existing (BESco) Negotiate agreements with landowners Recruit members Training Initial work sessions Explore feasibility of woodland acquisition Explore feasibility of community share issue

Workspace & Community Assets

St. Michaels Business Centre, Lyme

Wessex

secured 100,000 grant for Lyme Regis Development Trust from ChangeUp Wessex provided 13,000 loan Wessex negotiated 35,000 Programme Related Investment from Community Foundation for Bournemouth, Dorset & Poole

Bridport Area Development Trust: Methodist Chapel, West Bay

Bridport Area Development Trust: Literary & Scientific Institute

St. Michaels Enterprise

Red Brick Building Centre Glastonbury

Red Brick Building Centre

30,000 sq. ft. building Secured from SWRDA for 1 on condition that funds were raised for refurbishment 105,000 raised from local shareholders Investment Club: 5 individuals invested 215,000 40,000 from Co-operative & Community Finance Second share issue seeking 80,000

The new visitors centre has been built by volunteers out of recycled materials.

The building will become an exemplar centre of excellence for sustainable refurbishment and construction.

Housing

Wessex Home Improvement Lending

Works with 20 local authorities in the SW Provides home improvement loans to low income home owners 800 loans 4 million out on loan No bad loans

Community Land Trust Housing

Options for Delivering Homes

1. Stand-Alone CLT: CLT develops homes Partnership with a Housing Association: CLT owns land, HA develops homes under a long lease

2.

Stand Alone: Buckland Newton

Dorset: Worth Matravers CLT and Synergy Housing Group

Dorset: Symene CLT and Hastoe HA

Delivery Options

Option 1: Stand-Alone CLT

Option 2: CLT/HA Partnership

Community Ownership Finance, build and management Allocation of homes Risk and Return Time Commitment

Yes

Yes (of land)

CLT CLT CLT CLT

HA Shared Mostly with HA Shared

LA

Community
Leigh Toller Porcorum Marshwood Melcombe Bingham Bishops Caundle Maiden Newton Charlton Marshall Bourton Queen Camel

Units

Tenure
Rent Rent Rent Shared Ownership Rent and Shared Ownership Rent Rent Rent 16 Rent and 4 Shared Ownership 8 rent and 2 shared ownership, 6 for (non-grant) self build 6 Rent and 4 Shared Ownership 12 rent and 3 shared ownership 4 Rent and 3 Shared Ownership Rent and Shared Ownership Rent 8 Rent and 2 Shared Ownership Rent and Shared Ownership 8 rent and 2 shared ownership, 6 for (non-grant) self build 6 rent 12 rent and 5 (non-grant) resale covenant

West Dorset

North Dorset

9 6 10 3 7 12 10 6 20 10 10 15 7 20 10 10 8 10 6 12

South Somerset

Langport/Curry Rivel Norton Sub Hamdon

Mid-Devon

Hemyock and Clayhidon Dalwood

East Devon

Bramford Speke/Upton Pyne Bradworthy Appledore Sutcombe Moretonhampstead

Torridge

Teignbridge

Broadhempston Christow

Trust and Association:

New guide to delivery options

http://www.communitylandtrusts.org.uk/resources/publications

These examples are not just marginal enterprises

They model new ways of doing business: They have a different system DNA
Not just profit maximisation Incorporate environmental and social goals Different ownership models do not only privilege external shareholders and senior mgt.

They treat inputs differently They deal with consumers in a different way They build sustainability into their operations

Community-led enterprise

Operations:
Primary Production
Processing

Inputs: Natural Physical Human Financial

Distribution Retail/Food Service

Consumers

System DNA
Social Capital Goals & Rules Organisational structure

Waste Recycling

Financial Investment
Co-production

Contact:
Tim Crabtree
tim.crabtree@wessexca.co.uk

www.wessexca.co.uk