A newly developed fund is giving local businesses a leg up and Powell River residents a new way to invest in their community.
Sean Melrose, president and chief investment officer of Powell River Community Investment Corporation (PRCIC), has worked in finance and investing for over a decade and sits on many local non-profit boards including Powell River and District United Way, Powell River Child, Youth and Family Services Society and Powell River Community Foundation.
“I see myself as much as a community builder as I do a finance guy,” said Melrose. “I want to work with the people I’m helping with capital to make them successful...that’s the surest way that we’ll be successful.”
Melrose said the idea to establish the fund sprung out of something common to both for-profit and not-for-profit communities: the need to access capital.
He said business people borrow from the bank, relatives, or tap into government programs for aiding small businesses, but in Powell River there was no such thing as a community-sourced investment pool that could support local business and help it grow and make a decent ethical return, he said.
“I wanted to put something together that would support the local business community in a way that it wasn’t being supported so far,” he added.
The first company signed on to the community investment fund is Ecossentials Local Market, a whole-foods shop that offers home-delivered organic produce in Powell River and the Comox Valley, environmentally-friendly items and bulk refillable cleaning products to help reduce waste.
Ecossentials’ president and chief operating officer Melissa Call said the shop has been open for the past five years, but ran as part of Sunshine Organics which has been operating since 2002. Now, Ecossentials is incorporated and Sunshine Organics runs as a trade name.
Call said that business has been great and product space at her Marine Avenue location was at a premium.
“Daily we’d have customers coming into the shop asking if the store could bring in new items,” said Call, “but where were we going to put it?”
After adding the last shelf that could fit, she decided to call a staff meeting and put the idea out of finding a larger space.
A larger space was available next door on Alberni Street, so a deal to switch locations with Breakwater Books and Coffee was set.
Call created a plan to renovate the new location and asked the community to help out with the costs of the renovations and needed an additional $100,000 to set everything up.
That’s when the connection was made with Melrose’s community investment fund.
“With Sean’s help things are a little bit easier,” said Call. “That’s why you haven’t heard much about the campaign.”
Call said the community investment fund brought in the $100,000 to pay for the building renovations, for which she is very grateful. The alternative way would have meant slow progress as the space would be renovated as funds were raised.
“I want to get it all done and perfect and then open the doors,” she said. Plans include starting up a whole-foods cafe at the new location.
The deal gives Melrose a vote in company decisions and the ability to help Call grow the business. “It’s a bonus to have Sean come on board with his knowledge and expertise,” she said.
PRCIC was established in 2012 and since then Melrose has worked on developing the model and finding local businesses that seem to be a good fit.
“I put it together on faith that once I had the money I would find the business opportunities,” he said. “Melissa’s wasn’t the first business I found, but it was the right one.”
He was looking for a way to support the local community, a business opportunity and a way to support his investors.
“It’s not every business that will allow me to satisfy that criteria,” he added, “but Melissa’s was that in spades.”
The fund is charting new ground in finance circles and Melrose added that it is designed to meet the specific needs of investors as much as business and non-profits.
He has been working with his lawyers, who are experts in share structures, to come up with a way to meet the needs of the more conservative, risk-adverse investors in Powell River. “I had to come up with an innovative structure,” he said. He added that private equity funds exist, but their risk levels are high and not always the best bet for the risk-adverse.
Risk in private equity funds is generally proportional for every investor and is usually fairly high because privately held businesses are not as liquid as their publicly held counterparts and financial information about private companies is harder to come by.
The community investment fund is structured to have three tiers of shares. The first tier, which is open to investors in Powell River, makes up 50 per cent of the fund. The second and third tiers, 25 per cent each respectively, makes up the rest. The third tier is funded from some of Melrose’s long-time Albertan clients and himself. There are currently no investors in the second tier, he said.
“What I’ve designed are preferred shares with fixed rates of return,” he said.
He said that the fund is built so that investors on the first tier are protected and even if the fund lost 50 per cent of its value and wrapped up, those investors would not lose their money. He added that if the fund drops to 70 per cent in value, it will trigger the fund to stop.
Melrose estimates that there is approximately $250 million invested in mutual funds and GICs (government investment certificates) in Powell River.
First-tier investors receive a three per cent annual dividend which has a slightly higher rate of return than GICs which are thought to be one of the most stable investments available. Investors in the other tiers receive five and nine per cent annual dividends, a structure Melrose said is designed that way because the majority of the risk is being assumed by those investors.
“It’s not that we’re short of assets or people with drive, like Melissa,” he said. “I need Powell River to feel comfortable and confident that their investment is helping the local community and isn’t putting their money in harm’s way.”
