Centre for Social Innovation issues another set of community bonds, setting up a mortgage-free future

Toronto’s Centre for Social Innovation has set its sights on becoming entirely community-financed. 

In May, the social enterprise – which currently operates out of two large buildings in downtown Toronto – created three new types of bonds, allowing community members to invest in the future of the CSI for as little as $1000. 

According to its offering statement, CSI plans to raise over $6.1 million through community bonds in the long term. 

The bonds, combined with the sale of one of the CSI’s downtown Toronto buildings, should shift the organization’s debt entirely away from banks and to the community, said CEO Tonya Surman and Managing Director Kyle Shantz. 

“I don’t think it’s ever been done before,” Surman said. 

In an email sent to community members in early June, the CSI team wrote that 70 per cent of the bonds had already sold out. “Investments have ranged from $1000 to half a million dollars,” they added. 

How does a community bond work?

The CSI’s first community bond was created 15 years ago, giving the organization the necessary financing to purchase its first building. 

In 2014, the community bond also allowed the CSI to buy its second property, after raising $4.3 million from 227 investors. 

People who buy bonds essentially lend money to the CSI for the pre-agreed term. They will receive their principal payment and accrued interest as agreed. 

Existing bondholders can also choose to renew their bonds when they reach maturity. 

In the three new types of bonds created in 2025 – Bonds L, M and N – investors can purchase bonds that mature in 2028 or 2030. Bond L requires a $1000 minimum investment, Bond M a $5000 investment, and Bond N, which has the highest interest rate at 6 per cent, can be purchased for a minimum of $25,000. 

Bond L is based on a three-year term, with interest paid out annually. The other two are growth bonds with five-year terms, where interest will compound each year and be paid out at the end of the bond term in 2030. 

Surman prides herself on never missing an interest payment to investors or a mortgage payment, which has resulted in a great credit rating for the organization. 

“We’re basically going to our community in lieu of a mortgage,” she said. “We’re paying them in the same way that we’d be paying a bank.”

Some of the early bonds that the CSI issued had much larger minimum investments as well, Surman and Shantz added. Last year’s community bond campaign included the option of a Major Partner Bond: a $500,000 minimum investment for a 5-year term. 

“CSI can have a reasonable interest rate that is higher than what somebody would get on their savings account, but lower than what we would pay to be categorized with the rest of high-risk real estate,” Shantz said. 

“People are also really struggling right now to figure out where to put their money and where to get a decent return,” Surman added.

Tim Nash, owner of GoodInvesting.com, was one of the first buyers of a CSI bond in 2010. In a Future of Good column, he said he received interest payments each year, and has observed the growth of community bonds in the non-profit sector since. 

“That said, I don’t recommend putting a huge chunk of your portfolio into community bonds,” he wrote. “They’re riskier than traditional bonds, and they’re a bit of a pain to hold inside registered accounts like your RRSP or TFSA. 

“You buy them directly from the non-profit, so yes – you’ll pay tax on the interest.”

A mortgage-free future for a real-estate non-profit? 

The CSI’s ambition to “say goodbye to the bank” hinges on issuing these community bonds and selling CSI Annex at 720 Bathurst St. in downtown Toronto. 

The organization had previously put the property on the market, but pulled it out after receiving “extremely low-ball offers”, Surman said in a previous interview. 

The CSI has since received a conditional offer for its Annex location, and according to the bond offering statement, anticipates that the building will be sold by November 2025. 

If the building sale is completed, the CSI anticipates that its mortgage debt will be entirely paid off, leaving only community bond debts. If the sale remains incomplete, the funds raised in this bond cycle will go towards paying down some of the outstanding mortgage. 

Ten-year financial projections attached to the bond offering statement show that the sale of CSI Annex could drastically reduce the organization’s financial liabilities from $27.2 million in the current financial year to just more than $1 million in 2034-2035. 

CSI’s decision to sell its Annex location has been driven by the economic impacts of post-COVID, work-from-home culture, Surman and Shantz said. A spike in interest rates added a six-figure cost to the organization annually. 

The building is classified as Class C real estate in the city of Toronto, Shantz said. Typically, they are older buildings with anticipated maintenance costs in less desirable neighbourhoods.

“Because we are in this category, we’re being aggressively risk-priced by everyone we talk to,” Shantz said, finding that premiums were attached for mortgages in this category. 

The bond offering statement also highlights that the CSI team anticipates a “significant reduction in staff count after the sale of 720 Bathurst St. (CSI Annex) and discontinuation of TechSoup and Wasan Island operations.”

“Workplace decline, but community incline”

Surman has observed that the CSI’s bonds attract an audience who wouldn’t typically be considered investors, such as newcomers to Canada and older women. 

“Before the bond, the only way you could support an organization that you loved was through a donation,” Shantz said. “Some people can donate a small amount, but can lend a huge amount through their savings.

“Having that avenue has enabled so many non-profits and charities to get the infrastructure they need to build the sustainability that will keep them going for a long time,” he said. 

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