Transcription:
This transcript has been edited for length and clarity.
Luis Hernandez: The Rhode Island Regional Investment Cooperative has launched a new regional investment fund. The fund aims to encourage the establishment of small and medium-sized enterprises and real estate projects in areas that have historically been excluded from traditional forms of investment. Here, Jessica David, president and CEO of the Rhode Island Regional Investment Cooperative, talks more about the fund and how it works. Jessica, thank you for your time.
Jessica David: Thanks for having me, Lewis. I’m glad to be here.
Hernandez: What is the Community Investment Fund and where did the idea come from?
David: So, in a sense, a community investment fund is exactly what it sounds like. This is an opportunity to pool funds and investments from a diverse group of Rhode Islanders who care about Rhode Island for the benefit of their communities. There are numerous community investment funds and vehicles across the country. This local return diversified community investment fund is the first of its kind in Rhode Island to invest locally and is open to all Rhode Islanders.
Hernandez: The investment goal is $3.5 million. Where did it come from?
David: Yes, our goal is to raise $3.5 million. It felt like a good goal to start with. Of course, it won’t solve every problem that every community has, but it will help us try some things, try some community investment strategies we haven’t tried before in Rhode Island, and make sure that our portfolio It gives you the opportunity to actually assemble things. of different projects across different communities. This is ambitious, but we also believe it is achievable.
Hernandez: So, my understanding is that this is not a grant. The fund will provide loans and equity investments. why is that?
David: Well, yes, grants are very important, and there are a lot of projects where that’s exactly what’s needed. But you also need an investment that will yield a return. It’s either paid back through a loan, or you get equity at some point with the proceeds of that investment, but it requires a different kind of investment than that investment, so it’s a little bit more patient in the community investing world. It’s called capital. , may have a long term horizon and be willing to accept somewhat lower returns than traditional market investments, but the financial return is not only for the investor, but also for the community neighbors who benefit. , of great social benefit.
Hernandez: I said at the beginning that this is going to help people in communities that have historically been excluded from these traditional types of funds. What does that mean exactly? How do you define it?
David: Well, we prioritize neighborhoods with poverty and diversity rates above 20%. Sure, there are many neighborhoods in the heart of the metro, like Providence, Pawtucket, Central Falls, and Woonsocket, but places like West Warwick are facing tough times and have no idea what’s going to happen next. There is also a Main Street district that I don’t know about. such as Westerly, Warren, and other communities across Rhode Island. There’s no investment in these areas, no real significant money coming into these communities. It was sporadic. Alternatively, it may actually be harmful and extractive. In other words, it could be money coming in from elsewhere, from people or organizations that don’t know the area. Properties and assets may have been acquired and removed from local control. So all of a sudden there’s a presence in the neighborhood that doesn’t really understand that community and what it needs and doesn’t benefit the people there. So we’re trying to reverse some of the more typical or traditional patterns that can emerge through finance.
Hernandez: What will be the criteria when considering how funds will be distributed and who will have access to these funds?
David: Well, we have a process in place that uses a different set of criteria than what is typically used. In traditional finance, in addition to the feasibility of a project, there are also things that are often not accessible to everyone, such as an applicant’s credit score, financial history, and collateral. Not everyone has the opportunity to obtain a good credit score, often for reasons beyond our direct control. Or maybe you haven’t had the opportunity to gain experience in real estate development or business development. So we’re really going to develop a process where we look at things like character and consider how this particular project might mean something to that particular region. How do residents feel about it? What are the benefits for local residents? Does this person or team have relationships within this community? Do they have experiences in life that suggest this is a project worth investing in? So they are certainly taking a risk. I don’t necessarily think it’s risky, but it’s a different kind of risk than traditional funds take. As part of a very important process for us, we are in the process of setting up an investment committee made up of investors in the fund, primarily people who live in the areas we are prioritizing. They’re actually going to have a say in vetting all these potential investments and developing a due diligence process that takes into account not only traditional financial metrics, but also these other criteria.
Hernandez: I just want to hear from you about what these investments are. What kind of projects would you like us to invest in?
David: We’ve identified four potential investment types. Again, we focus on real estate. We want to help small businesses that don’t own real estate or space before actually taking over ownership. Many of the small businesses we spoke to in Rhode Island rent and spend a lot of money customizing their equipment. As customers, they are beloved by their neighbors, but they are at the mercy of their landlords, who may raise their rent or move them to another tenant. Therefore, we help small business owners own their own space. The second category is those who want to help their neighbors become real estate developers themselves. This is a small, early stage real estate development. So it could be someone buying the three-story house they live in or the apartment complex next door. For many of us, real estate represents our greatest opportunity to build wealth, family wealth, and generational wealth. And it opens up that possibility to people who have never experienced something like that before. Community development projects are also being considered. We’ve been looking at things like food hubs and community centres. These are often led by nonprofit organizations. I believe that funds have a role to play in this regard. And the final category is shared models of real estate ownership. Cooperatives, housing trusts, land trusts, things like that. You don’t see that much in Rhode Island. Other communities with community investment funds are doing even more. Therefore, we would like to foster more such people here.
Hernandez: When can I start applying?
David: Not yet. We hope to raise at least the first $1 million before we begin deploying the fund. I think it will take several months. We believe we will be able to begin accepting applications by late spring or summer. People can also sign up for the list by visiting our website. Therefore, you will be notified when your application is ready to be accepted.
HERNANDEZ: We’re talking with Jessica David, president and CEO of the Rhode Island Regional Investment Cooperative. Jessica, thank you for your insight. I appreciate it
David: Well, thanks for having me, Luis.
