One of Toronto’s social innovation giants is on the ropes. 

After an aborted attempt to sell one of its properties, the Centre for Social Innovation has launched a $10 million community bond campaign to shore up its finances. 

The past four years have been a “nightmare,” said Tonya Surman, CSI’s founder and CEO. “If an organization can have a dark night of the soul, this is it.” 

Like Artscape, which went into receivership in January, CSI was rocked by COVID-19 lockdowns and saw a steep drop in revenue. 

In 2019 the organization earned $4.4 million in space rental and membership fees. One year later, that sum was cut in half, according to the organization’s annual reports.

Subsequent inflation made building repairs more costly, and a rise in interest rates meant an upcoming mortgage renewal would result in additional costs. 

In September, CSI’s board decided to sell one of its two coworking space properties to cut costs. But the timing was terrible. 

“We didn’t realize that at that moment in time, the entire commercial real estate sector would also implode alongside us,” said Surman.

In July 2023, the Bank of Canada raised the policy interest rate to five per cent, where it was held for nearly one year. This made borrowing money to purchase real estate more expensive, reducing the number of prospective buyers.  

After receiving just two “extremely low-ball offers,” CSI pulled the building from the market, said Surman, and developed a new plan. 

Over the next several months, the non-profit will try to raise $10 million using community bonds, an innovative social finance tool in which investors lend some of their money to a social purpose organization for a fixed period of time at a fixed interest rate. 

Funds raised from individual and institutional investors will help CSI pay down its mortgage to Vancity Community Investment Bank and give the non-profit time to adapt its business model to the new realities of hybrid work, said Surman.  

But will it succeed? 

Community bonds a ‘win-win’

The Centre for Social Innovation is no stranger to community bonds. 

In 2010, CSI was the first organization in Canada to successfully use the tool to purchase real estate, securing $2 million from community members to acquire the property in Toronto’s Annex neighbourhood that it tried to sell last year. 

Since then, many other organizations have followed suit. 

Tapestry Community Capital, a community bond consulting firm, has supported about 60 community bond campaigns, helping organizations raise more than $100 million from more than 4,000 investors. 

Projects have supported new endeavours to get off the ground, but they’ve also supported organizations in rebuilding. 

In 2019, the Toronto-based Argonauts Rowing Club successfully raised $1.2 million from 90 supporters to help rebuild the organization’s facilities after a significant flood. 

The tool is a “win-win,” said Jennifer Bryan, Tapestry Community Capital’s campaigns director.  

When a social purpose organization launches a community bond, it can set the interest rate it pays to community members lower than what it can get from a bank or credit union, reducing the cost of debt, she said.  

Earlier this month, CSI negotiated a one-year renewal of its $18 million mortgage with VCIB at an interest rate of 6.5 per cent. 

The organization’s new, five-year community bond will offer community members an interest rate of between four and five per cent, said Surman. 

Money raised via the community bond campaign will pay down the VCIB mortgage, saving CSI hundreds of thousands of dollars, Surman said. 

But community members also benefit, said Bryan. 

With a community bond, interest payments go to community members, foundations, and other values-aligned investors—not the bank, she said. 

Though the bond’s interest rate is more modest than top-performing mutual funds or exchange-traded funds, it’s in the “ballpark for financial competitiveness” with Guaranteed Investment Certificates (or GICs), which are currently offering rates of between three to 4.25 per cent, she said.  

Are there risks? 

But unlike GICs, which, as their name suggests—offer a guaranteed rate of return—community bonds do not. 

The worst case scenario for investors would be if CSI could not increase profitability, and was forced to sell its buildings to pay back lenders during a market recession, said Tim Nash, an impact-focused financial planner. 

In such a scenario, community bondholders would not likely lose their entire investment but could take a bit of a “haircut,” he said. 

However, while every investment comes with some risk, Surman said investors are in a strong position. 

The bank-appraised values for CSI’s two properties are still well above its total debt level, she said. 

If they had to, CSI could sell its properties, pay back its lenders, and still have some surplus left over, she added. 

CSI and community bonds also have a strong track record. 

None of the organizations Tapestry has supported to raise community bond capital has defaulted, Bryan said.  

In its twenty-year history, CSI has never missed a mortgage payment, said Surman. “Not once—ever.” 

The stakes

The success of CSI’s community bond campaign could have a significant impact on hundreds of Toronto social purpose organizations, said Victor Willis, CEO of Parkdale Activity-Recreation Centre, a Toronto social service agency. 

Currently, CSI has 750 members—organizations and individuals who will lose their office space and coworking community if the organization is forced to sell its buildings. 

“I’m pretty sure that those not-for-profits will not be able to afford space in the City of Toronto if CSI does not exist,” Willis said.  

Two years ago, the Toronto Nonprofit Network surveyed nearly 400 non-profits and charities across the Greater Toronto Area about their experiences accessing space. 

Nearly 60 per cent of respondents said they lack the funds to secure and maintain affordable and suitable property. 

While the work-from-home trend has increased the availability of commercial offices, rent prices have continued to increase, according to commercial realtor Avison Young. 

This has contributed to a decline in the number of non-profits that can afford space in the downtown, Willis said. 

‘We are going to make it through’

Despite CSI’s challenges, Surman said she is hopeful. 

“CSI is going through a massive process of reinvention,” she said. “But I think we are going to make it through.” 

In addition to raising money through community bonds, the non-profit is also launching a membership drive, encouraging organizations to lease space at one of its two coworking facilities. 

This October, CSI is also hosting a fundraiser to raise $500,000. 

In a city with Toronto’s wealth, there are people with the capacity to help CSI get back on its feet, said Surman.  

“We’ve just finished 20 incredible years, but we’re going to need our community to be able to help us co-create the next 20 amazing years at CSI,” she said. 

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