Investing in Central Avenue

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February 13, 2012
By: Michelle Bruch
Michelle Bruch
A new community co-op aims to attract new business activity

Ever wish you could seize the empty storefront down the block and plug in a good bookstore or coffeehouse?

A group of Northeast residents might do just that — the NorthEast Investment Cooperative (NEIC) is forming with the goal to convert vacant spaces into neighborhood businesses along the Central corridor. In the course of a month, the co-op already has about 35 members pledging $1,000 apiece.

“The idea is basically selling itself,” said Steve Sylvester, one of the group’s founding members. “I think we have just scratched the surface.”

The co-op’s operating plans are still a bit tentative — details will require input from members as the co-op grows — but the basic premise would allow residents to collectively buy, rehab and manage property. Membership shares cost $1,000, and all members have a vote in any decision subject to direct member control. Members will also receive a share of NEIC’s profits — it’s a for-profit agency — and they will have the option to run for a spot on the co-op’s board of directors.

“$1,000 is enough that it’s real money, but it’s also not so much that we’re going to be ruining too many friendships over 1,000 bucks,” Sylvester said. “Spread the risk around and hopefully we can do something positive.”

The founding members expect the first purchase to land somewhere along Central.

“Sixteen thousand cars go up and down Central every day; very few of those cars actually stop and shop on the avenue,” said co-founder Leslie Watson.

Central has great destination businesses, she said, like Holy Land and Sen Yai Sen Lek. But the sidewalks are narrow, and the market rate on Central is higher than many small businesses can afford.

“There is a lot of vacant property, and there is a lot of turnover in small businesses,” Watson said.

In some ways, Central is the perfect niche for a cooperative focus. Watson said Northeast doesn’t have the upscale population density to draw the development you’d see in Uptown. And it doesn’t have the challenges that draw public money, such as West Broadway in North Minneapolis.

“It’s kind of up to the people who live here [to invest],” she said.

NEIC isn’t the only entity taking a close look at Central at the moment. The city is rehabbing Central Avenue’s median, generating lots of interest from people in the neighborhood. And several Northeast agencies are combining forces to install artwork at vacant storefronts along Central.

“I think there is a lot of interest from people who live around here in getting a piece of Central Avenue,” Sylvester said. “Central kind of holds its own, but it could be so much better.”

The closure of Fat Boy Billiards at 1920 Central Ave. NE prompted the origins of NEIC. When the site was listed for sale, Sylvester and a few other residents considered buying the property as a partnership. Prices were low enough, and it was easy to see the avenue’s potential.

“We couldn’t quite put together enough people to put something together — we came close,” Sylvester said.

Nevertheless, the group was disappointed when a new tenant filled the vacancy and its aid was no longer needed.

“There was a huge drop-off in energy,” Sylvester said. “Then we started doing some brainstorming and thought, ‘Wait a second, there are all kinds of other properties that are for sale. And if there is interest in putting this thing together, let’s just continue.”

The four founding members of NEIC have deep roots in Northeast, and three of them already own residential rental properties.

Sylvester, who is board president of Windom Park Citizens in Action, has spent the past 10 years buying homes in Northeast — most within five blocks of his own house — and rehabbing them.  

“I like to drive past the houses after they’re done,”  he said. “I like to concentrate on the ones that are really bad, and just take them and try to make something good.”

Co-founder Amy Fields is general manager of the East Side Food Co-op. Co-founder Joe Bove owns an IT-support company in Northeast called RedTechBlue. Watson served on the East Side Food Co-op’s board for a decade, and she currently works as a freelance writer and is pursuing a master’s degree in public affairs.

“It’s a really good mix of backgrounds,” Sylvester said.

At the moment, the founders are drafting bylaws and hosting public meetings to find more members — 100 is the current target member number. They have contacted experts in co-op development, consulted with commercial property owners, and generated positive interest from banks.

Aside from managing commercial properties, the group has discussed other options, like buying troubled rental buildings or serving as an incubator for small businesses.

“Like any co-op, the people who join it and put their energy into it are going to be the ones who ultimately shape what it looks like,” Watson said.

“I don’t think anything is off the table,” Sylvester said.

Kevin Edberg, executive director of Cooperative Development Services in St. Paul, said NEIC is a unique undertaking.

“They are carving some new ground,” he said. “There are not a lot of examples of this type of community-owned investment fund.”

One group NEIC has studied is the Riverwest Investment Cooperative in Milwaukee, which buys homes to rehab and sell. Its first project in 2003 rehabbed a three-family home destroyed by arson that was sitting vacant and slated for demolition. The co-op bought the house to prevent it from becoming a vacant lot, and sold it to a family after restoration.

NEIC is also watching a co-op that started in the small Canadian town of Sangudo. According to the Alberta Community and Cooperative Association, the town is steadily losing its industry to bigger cities. To boost the local economy, the co-op bought a meatpacking plant from an owner who was retiring without a succession plan. Entrepreneurs created a butcher shop out of the old plant, and within six months, the shop’s revenue doubled and staff levels tripled. The co-op has since prevented the closure of a veterinary business, re-established a hardware store, started a restaurant, and created a senior housing project.

Of all the businesses incorporated in a given year, 60 percent of them fail within five years, Edberg said. Co-ops have a slightly better chance of success, he said, because they have a broad network to fall back on when they hit rough times. In addition, co-ops can benefit from all the extra oversight.

“When there are many eyes on a project, it increases the chance that somebody is going to find the fatal flaw,” Edberg said.

Edberg noted that NEIC has a great asset on its side: Northeast already has a success story in the Eastside Food Co-op.

“They come from a group of people that know and understand the cooperative model. They know what can be done when communities come together to pool their equity, talent and vision,” he said.

Eastside Food Co-op board members spent years lobbying to make the grocery store a reality, eventually reaching $100,000 in member loans for a down payment on the Central Avenue store. Today, nearly 3,000 households are members of the co-op.

“There is a real collective mentality in Northeast,” Sylvester said. “People really want to be part of the community. This just gives them another opportunity to do that.”

NEIC’s next informational meeting is scheduled for Feb. 29. Meeting details will be available at the group’s Facebook page and website: neic.coop.

Michelle Bruch covers Northeast for The Journal. Reach her at michellebruch82@gmail.com.