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After a decade of worrying about unpredictable rent increases and eviction, Plein Milieu is the proud owner of the building it once rented.

The Montreal drop-in centre, located in the heart of Plateau Mont-Royal, bought the multi-story building nine months ago and says the acquisition will positively impact its finances, its staff and its clients. Employees from its five current locations will be consolidated at the newly purchased St. Denis building.

“We are a drop-in centre for people who use drugs and a distribution centre for injection and inhalation equipment,” says executive director Line St. Amour, adding the organization will now be able to stay open into the evening to better serve vulnerable populations, giving 3,200 clients access to a bathroom and shower. A washer and dryer are also available.

Plein Milieu had always dreamed of owning their own building and long-time landlord Jacques Lefebvre was supportive of the nonprofit’s plan to purchase the property when he was ready to sell, but the agreement almost crumbled after Lefebvre’s sudden death. St. Amour learned about the financial tools offered by l’Initiative immobilière communautaire du Grand Montréal or the Greater Montreal Community Real Estate Initiative, just as the grass-roots organization was scrambling to pull together an offer.

It was a lifesaver.

The initiative launched in early 2021 after Centraide of Greater Montreal and Coalition des Tables de quartier de Montréal, otherwise known as the Montreal Coalition of Neighbourhood Tables, worked jointly to mobilize over a dozen philanthropic, financial, community and municipal partners. The result was an $18.6 million impact investment fund supporting social purpose organizations looking to acquire property. 

“I was among the first to raise my hand to obtain financing,” says St. Amour. “Putting together a file was easy. We knew what we needed — we had been negotiating with Jacques Lefebvre’s trustee for several months already.”

L’Initiative provided  Plein Milieu with a short-term loan worth $1.08 million, allowing them to purchase the building immediately, rather than risk losing their existing space to another buyer while trying to arrange financing. The organization now has three years to obtain a regular loan and repay l’Initiative.

Plein Milieu is hardly the only organization to have benefited from the financial support and guidance offered by l’Initiative. More than 30 nonprofits and social purpose entities, including the Iota Centre, Fondation de la visite, the Afro Youth Summit, Espace LGBTQ+ and Ateliers de la transition écologique have also received assistance.

Many crises

“We saw the need coming for custom real estate funding since 2015,” says Mario Régis, senior director of Centraide of Greater Montreal. L’Initiative is a response to the convergence of many crises, including high rents and a low vacancy rate, he adds.

For many years, community organizations had relied on their ability to rent low-cost space from local school boards. That started to change several years ago, says Marie-Andrée Painchaud, a board member of le Centre de ressources et d’action communautaire de la Petite-Patrie or La Petite-Patrie Center for Ressources and Community Action.

School boards began to take spaces back from community organizations to accommodate expanding student bodies or sold off excess space to make up for fiscal deficits. In the middle of negotiations to purchase its own space, La Petite-Patrie Center for Resources and Community Action was faced with a steeply increased asking price.

“It was impossible to increase our mortgage,” says Painchaud. “Fortunately, l’Initiative came along with its patient capital. Otherwise, 10 years of hard work to become owner would have been wasted.”

To make for a perfect storm, speculation started taking hold of the real estate market. Private landlords were reclaiming their leased space and turning it into high-income condos. 

Even tenants not at risk of eviction were hurt by skyrocketing rents. In Quebec, community organizations’ leases are not regulated by law, unlike leases for individuals, which are governed by the Administrative Rental Tribunal. Landlords can therefore impose any increase they wish. Alternative Centregens, located on Montreal’s south shore, faced a 41 percent rate increase. 

The 35-year-old Longueuil organization, which promotes self-help and social reintegration of people living or having lived through a mental health problem, also saw their rent jump. It was the catalyst for the organization to purchase its building with the help of a $575,000 from l’Initiative.  

“To respond to those crises, we [the philanthropic sector] could have raised our contributions to the community sector, but it would have been a short-term fix,” says Régis. For each dollar invested, a higher portion would pay for the local instead of filling the mission. “The time was ripe for some social innovation.”

So a few private foundations met with City of Montreal representatives and financial partners, such as workers’ fund Fondaction and le Fonds de solidarité FTQ and family office CEOS. “We needed to document the problem to imagine a relevant long-term solution,” says Régis. Montreal Neighbourhoods Round Table Coalition (CMTQ) was the voice of community organizations. 

“For example, in my borough, Pointe Saint-Charles, one-third of the organizations were at risk of losing their premises. And relocating could mean leaving the territory where the clientele is located, complicating access to services.”

Three loans created

Following community consultations, l’Initiative created three types of loans targeting the following key areas: feasibility studies, acquisition and long-term financing. Non-profits were asked what factors allowed for successful projects and what factors delayed projects to the point of failure? 

The consultations with community sector leaders converge to three following needs. First came the support: community sector managers are not real estate promoters. Then, the difficulty in raising money in a short time frame to beat an overheating market. Finally, the incapacity to cover costs between the acquisition and the completion of the renovation. These are often old buildings in need of an upgrade. “These findings translated in support for project development, building acquisition, and long-term financing,” says Régis, who conducted those informal interviews with colleagues from la Fiducie du Chantier de l’économie sociale (The Chantier de l’économie sociale trust), a significant player of Quebec social finance ecosystem. La Fiducie creates innovative patient capital products and encourages the financial participation of private and public sector partners. It is one of the financial partners of the Initiative and one of the two operators.

The other operator of l’Initiative, le Réseau d’investissement social du Québec (Social investment network, RISQ), conducts file analysis. “We receive and analyze applications, present our recommendations to the board, and manage communications about the program and the tools,” explains Jeanne Bugnon, financial analyst at RISQ. In addition, Bugnon and her colleagues follow the criteria and investment policy established by l’Initiative, which was created as a separate organization by the founding partners. 

The first tool is a loan program for support services to help organizations secure professional support and technical assistance in developing their real estate projects. This assistance is broken down into three phases. 

Phase one supports ideation; a professional helps the organization assess its space needs. The maximum cash advance is $1000. Phase two supports the validation of the financial feasibility of the project; it is the ‘go/no go’ stage. The maximum financial assistance is $15,000. Finally, phase three focuses on technical feasibility and the actual costs. Funding is set at 25 per cent of projected revenues. “Most community organizations generate no revenue unless they rent out some of their space. So the 25 per cent is related to revenues the organization can raise,” specifies Bugnon. 

The journey from a (too) small apartment tenant to a building owner

The second tool is the Social Acquisition Fund to help quickly acquire a building, get it off the market, and ensure its purchase by the community organization, even before the project’s financial structure has been confirmed. The organization then has 36 months to complete its financing and repay the loan to l’Initiative. 

Le Sommet Jeunes Afro (Afro Youth Summit) had been in this process since March 2022, when it received a $1.8 million loan from the Social Acquisition Fund. This group of 50 organizations was founded in 2017. Through social and economic development, the summit works for social justice for Haitian, Caribbean, and Anglo-Black communities. 

“We aim for young members of Black communities to participate in Quebec economic life,” says Widlyn Dornevil, director of communications and development. “Our project RIDE, for example, will initiate 5,000 youngsters to entrepreneurship, support 300 of them while they develop enterprises, and incubate 150 to create 25 new companies by 2025.” 

In the early years, the office was located in a small office and then in a small apartment on Jarry Street, in the multi-ethnic St-Michel borough. In 2020, the summit’s success allowed a move to a space three to four times bigger — and six to seven times more expensive — in a private building with other community sector tenants. 

And now that the startup years were over, it was time to plan for the longer term. “You have to think about financial stability and community roots,” says summit president  Edouard Staco. And both of them are related to the real estate situation; when you own your building it is much easier to fulfill your mission today, and for years to come”. 

These were the concerns of the Afro Youth Summit management when renewing the lease in 2021. But, at the same time, Staco and his team heard about l’Initiative. These new financial tools were precisely what they needed, so they informed their landlord that instead of renewing their lease, they wanted to buy the building. The Summit first received a support loan of $10,000 for an economic viability study and in March 2022 they received a $1.8 million loan from the Social Acquisition Fund, which allowed them to purchase the building. After that, the organization has three years to transit toward a regular loan and repay l’Initiative.

The third tool is the Social Investment Fund designed to complete the acquisition, renovation, or construction financing. “At that stage, the organization has secured a loan and confirmed its down payment, and it needs some additional financing because all its capacity is used,” says Bugnon. 

Until now, there were no financial tools to bridge that gap. Les Ateliers de la transition écologique (The Ecological Transition Workshops) got $480,000 from the Social Investment Fund to refinance its mortgage and finance renovation needed to start activities. The $2.8 million project, initiated by six organizations, includes social housing, a Third Place, office space, a community kitchen, a bicycle repair shop, and an object loan workshop.

The next steps: Lessons learned and challenges

L’Initiative is no longer a pilot project and there’s ambition to expand to other regions in Quebec. “We will need new financial partners,” says Triollet, who is co-president of the supervision committee of l’Initiative with Régis from Centraide. “And we will have to build a network of experts to support community organizations in each region. Let’s not underestimate the real estate literacy required for those projects to succeed.” 

And to really democratize these three financial tools, Triollet says creating a management company would be a lifesaver for community organizations who want to own their premises but do not have the time, expertise, or resources to take on daily real estate duty. 

Another challenge is the rising number of applications from social enterprises. “These loans were designed for community organizations because they do not have access to the same financing as social enterprises with revenues,” explains Régis. “But the real estate crisis is affecting all organizations. And also see hybrid models at the intersection of the community sector and social economy.” 

A concern has been raised by many of the sources for this article about an undesirable impact: government disengagement in community sector financing. 

“Allowing the community sector to own its own space is one solution, but it is not for everyone, warns Triollet. The government is responsible for ensuring that space is available and accessible for community organizations. The government can’t say, ‘There’s the Initiative, we’ll let social finance take care of that dossier.”

For instance, women’s shelters suffer from a significant shortage of space. Their managers might be inclined to apply to l’Initiative to get financing to buy their own premises. After discussing this delicate issue, the partners of l’Initiative have established that it will fund a percentage corresponding to office and meeting spaces, but the government will continue to support accommodation spaces for the beneficiaries. And that would apply to homeless shelters too.

Ownership goes beyond securing a space, it signifies a  philanthropic moment, concludes Line St. Amour. “It is the opportunity to seize,” says St. Amour. “A real estate project justifies a major fundraising campaign. It makes us visible in the community and can contribute to developing a philanthropic culture in our organization.”

Diane Bérard is the Future of Good editorial fellow on social finance and impact investing for an equitable future