good morning everyone my name is Jennifer Bryant and I am with project Equity we're really happy to be on the planning committee for this uh Summit today and I am joined by uh Benjamin and so for our first session we're going to really dig into what is uh shared ownership so we're going to be defining shared ownership and giving an introduction to both employee ownership and the collective ownership of Real Estate um while we fire this up is it coming on okay we're gonna do a quick uh PowerPoint presentation and while he's pointing that up just some housekeeping um if you need to use the bathroom it's out to the left past the elevators um and I wanted to point out that on the tables we have four reports and so we have a shared ownership workbook an employee ownership workbook a municipal tools report we spoke to some of you in this room folks and local government about what policy levers um the city of St Paul can use to advance um shared ownership and embed it within local government um and then we also have this report which is a um analysis of small businesses challenges and the opportunity of employee ownership uh specifically in St Paul so to kick it off this first session is defining shared ownership again my name is Jennifer Brian I'm the program manager for the black employee ownership initiative at project equity and I'll be Co co-presenting with Benjamin from Nexus Community Partners project Equity helps business owners preserve their company's legacies by transitioning to employee ownership we also help business advisors and economic development professionals and local governments spread the word about employee ownership Nexus Community Partners is a nonprofit intermediary that helps to build engaged and Powerful communities of color they Bridge across sectors to bring together multiple stakeholders to create positive change in our communities so for this first session I'm going to kick it off by talking about employee ownership Transitions and then uh Benjamin will come up and talk to us about worker own Cooperative startups community-owned real estate and the St Paul local fund so to begin what is employee ownership employee ownership is an arrangement where employees own shares in a business through capital accounts or profit sharing businesses can be employee owned from the beginning or they can transition to employee ownership when an owner sells their business to employees in whole or in part and um if you go to Project equity's website we have a whole um bunch of ownership stories and you can see that some of these businesses um like uh Proof Bakery which is a 100% Cooperative the owner converted 100% of the build the business to employee ownership but there are others where the owner may only convert 30% of the business to employee ownership and so there's a lot of flexibility in how this uh mod can be used there are three primary forms of broad-based employee ownership the first is Employee Stock ownership plans or ESO and these are retirement plans that own all or part of a company on behalf of its employees this is the largest form of employee ownership in the United States um there are a lot of huge businesses that many of us probably use all the time that are employee owned um like Cliff Bars um publ grocery stores these are esops then there are worker own cooperatives um these are fully owned by the employee owners who share and profits and elect serve and Andor serve on the board of directors um worker owner cooperatives usually feature Democratic governance um in addition to um Collective ownership and so one of the sessions that we're going to have today we're going to hear from U members of worker own cooperatives uh local worker own cooperatives in the third form of employee ownership is employee ownership trust um also known as eots these are are a more customizable form of employee ownership that can be adapted to incorporate Democratic principles and profit sharing let's go um so in the workbook this one with the teal um cover it goes a little bit deeper into each of these forms of employee ownership I'll just give a brief overview here um but a worker in a work on Cooperative it's one Member One vote um they have a board of director that's primarily made up of employee owners there's a profit sharing model via patronage that's based on ours works and so a lot of times in a work on Cooperative the workers will have in um individual um capital account that all of their profits will go into and it's helping to build wealth um for the workers this can be organized as Cooperative or at LLC um but it's a ible business form and there are tax benefits to being a Cooperative an ESOP is a qualified retirement plan like a 401k but it's invested primarily in the stock of the company um employees do not pay for their ownership stake whereas a worker on cooperatives there's usually a small buying amount that employ in uh that workers um pay to become a member of the cooperative and there are significant tax benefits um for to become an ESOP but there's also a lot of um Regulatory Compliance which is why esops are usually a form that's best for larger businesses so for we recommend that if a business is going to convert to employee to an ESOP that they have at least 40 employees lastly the employee ownership trust um a trust holds some or all of the shares of the company on behalf of the employees um it is all of the employ are members members of the ownership group again employees do not pay for their ownership stake and um they're represented in the governing bodies of the business so why does employee ownership matter now Evan touched on this a bit um in his opening remarks but um in the data study report that is on the table uh we pull data that shows that over half of the privately held businesses uh with employees in Minnesota are owned by baby boners and so a lot of these folks are going to be retiring over the next 10 years again that's called the silver tsunami and so we did a data breakdown of which Industries those businesses are in and um there's significant opportunity for these businesses to be transitioned to employee ownership in order to protect these jobs um to keep these businesses in the community and to um and to preserve the legacy of of the selling owner so let's talk a little bit about the benefits of employee ownership um the benefits to the selling owner they get market price for the business they get to retain influence on the pacing and exit timeline um for when they may decide to stay on for a period after they sell the business to their employees or they may choose to exit and again they get to preserve the company's Legacy employee ownership also bus benefits the business itself according to data from the national Center for employee ownership employee owned businesses have an 88.5% higher profit margin than their peers and they also tend to grow 2% faster per year and then lastly employee ownership benefits workers and we here get more during the worker ownership panel later but workers at employee own businesses tend to have 33% higher wages in their peers 53% longer job tenure and 92% higher Health higher household netw worth according again to the National Center for employee ownership so before I end I want to talk briefly about the employee ownership transition process uh so at project Equity we have a five stage process it begins by exploration and so we do a lot of webinars and events like this to talk to business owners just is to introduce employee ownership as an exit option and or as a a growth option for their business um when if a business owner is in interested then we do a free consultation call with them the next stage is to do a feasibility study where we do a deep dive into the valuation of the business the management capacity a timeline Etc um the third step is the transition that's where we structure um create the new structure for the the new employee owned business business and that includes the governance the management the sellers role Etc um then we Finance the transaction and close the the deal and then we have a program called live where we continue to work with the new employee owners for two years after the transition to ensure that the business is successful this goes a little bit into the sale of the business and how that works um so first We Begin by choosing which form of employee ownership um whether that be a work grown Cooperative or an employee ownership trust or an ESOP um and then the sales price and the deal terms are finalized we work with our partners like shared capital and others to uh attain a loan for the business we also have a catalyst fund where we um Finance these transactions and then the loan is paid off over time through future re Revenue so these are essentially leveraged buyouts and so uh the employees themselves do not have to put up their own collateral or put up their own Capital so what changes when a business becomes employee owned the day-to-day operations of the business do not change um the management of the business doesn't change although some people may shift roles if the owner decides to exit but we help set all of that up we're structuring the transaction the governance does change um so a board of directors is established or expanded and of course ownership change um because it moves from having the previous owner to all the employees some or all employees being owners lastly um how do you know if the business is a good fit for employee ownership we recommend uh we're ideally looking for businesses that have 10 or more employees um again esops are typically better for larger businesses so we look for 40 or more employees um the company should be profitable for The Last 5 Years it should be an established business um and it should have minimal debt which is important to for the transaction so with that I'll turn it over to Benjamin to talk about work on ques see yeah so again I'm Benjamin Sai I'm the director of the shared ownership somewh at Nexus and so we do support uh Co Co-op conversions like project equity but we also do support startups and work for cols and interestingly they actually are still auor up the new workfare cops in the US uh according to the last study from go um so they are a significant entry point for worker Onin um of course we we support them on a limited basis because they are I mean I what college startups are challenge M and so we do try to oops sort of make sure that they're ready and primed for Success HMR but there's there's several benefits to startups um you know you can when you're when you're doing a startup by yourself it's it's really you know a lot of work a lot of burden on a single person but with a co-op bias nature you have to have co-founders so you can share the work can share your knowledge get you know a lot more people to the table to get these projects off the ground um also with a startup sort as opposed to a conversion I mean you you can move into a new space you're not taking it on an existing business model and trying things so it can sprace for Innovation um there's you know you're not doing a buyout so you don't have usy and other inals that you're buying um and then on you know the the benefits to the employees in the long run if if it's a success uh are similar to The conversions you know so better better uh retention better wages better benefits Etc um so as I was saying you know startups want to fully acknowledge they are super hard I've done a few and you know they they have their own challenges that uh are different than conversions so we do want to really check in with folks you know we're looking for Motivated co-founders uh who have hopefully the ability to contribute some Sweat Equity because oftentimes there's not enough funding to just pay people out of the gate um relevant industry experience a good concept already um and really you know that they're already in community they have networks to pull uh to bring in and help get these things off the ground so uh and that includes hopefully some connections to Capital um and so yeah that's pretty much just wanted to introduce startups uh in addition to conversions and then shift gears into the other work we do at the Shared ownership Center uh which is community-owned real estate and this there are there are many models of community-owned real estate and I want to acknowledge that they're growing across the country and people are experimenting constantly so it's a little bit hard to pin down exactly you know all the different flavors of it but in my mind they're they all sort of share general characteristics I mean they should be accessible to community members so that to means a affordability and some some form of you know membership that they can access or ownership that they can access um and once they're in there there should be inclusive decision making options so that every everybody has some say in the governance of the project and that all of those members also share economic values and benefits um from the project so that could be profit sharing or access to more affordable space um and just the the general benefit of a more Vibrant Community as I was say saying I mean this is this is a growing area across the country but we do see a few models that are really more common um we have real estate cooperatives um examples being Northeast investment Co-op which was actually one of the first ones in the country as far as we know um and since then there have been a couple uh more in the region tapro ignite business women Investment Group to name some and they will be some of them will be speaking on a panel later today so you'll get to learn more about them uh and real estate co-ops are also growing across the country and very diverse uh you can you can look them up there's really exciting projects out in the Bay Area and really across the country but um we're going to focus on some Regional examples later also Community Land trusts um definitely a really classic example um we have Rondo and community of lakes land trust here in the Twin Cities and they um Rondo and you know they do both residential and Commercial um projects so they're covering a lot of those bases and then one other example that we that as far as I know hasn't launched quite yet here in Minnesota but uh Community investment trusts I know they're the works but um the example currently that's operational is uh it's it's a mercy core sort of model but they have uh a CIT running out in Portland Oregon so you can check that out if you want but for today I was M mainly going to just focus on these real estate investment co-ops because that's what we do at Nexus and it's sort of a growing model that we just think is really exciting and to sort of just build out one example of community ownership F all um in essence these are co-ops for community members and or business tenants um organized to co-own real estate and we we are we use this term specific to Commercial and mixed use real estate um sort of as opposed to housing co-ops which I consider much different um sector and much different model so we're going to focus on Commercial and use as when we call uh these things real estate investment coops um but in essence you know their goal is to provide affordable and stable um places for business local businesses and and residents when it's mixed use and like all co-ops the core of it is that they are democratically owned and controlled um so in this case the co-op would own the commercial real estate and the community members and or business tenants own the co-op and we do have some models here like uh IB wig which is solely business owners owning the co-op and they basically lease from the co-op an affordable space at a shopping center out in Brooklyn Park or Brooklyn Center um also you know there's this control element uh the members of these co-ops they have a vote in the governance so they generally elect the board they vote on really like important critical decisions uh for the long-term uh sort of strategy of the co-op and again sort of one Member One vote so everyone has the same amount of power you can't buy more shares and get more power at least controlling shares um and and let's see So speaking of member Buy in um we've seen a range of currently it's actually about 500 to a thousand to buy into these uh and that get gets you your voting share um there are some projects on Deck where they're going to hopefully a aim more at10 to $100 um but but again you are buying a a common stock in a in this Co-op that gets you your vote right to profit shares potentially um and the sort of the additional component that's really unique here is that once you're a member of a real estate Co-op you can also buy preferred shares which are non voting but they give you a potential access to additional returns so you can get dividends um if the co-op is profitable so there are a lot of benefits to these real estate co-ops I mean they they are values driven businesses in essence um and they are very much about anti-displacement decreasing extraction um you know stability and affordability and wealth building and so as with many things you can't necessarily maximize all of these at once you have to balance you know against each other a little bit um and so often times we try to emphasize that while Community wealth building um from dividends is definitely a focus it's not about maximizing return uh as far as dollars you know wealth is really a broad concept that includes not only money but just quality of life you know um so these projects really try to cover all of the bases at once um and we you know as far as what we bring to the table to support these projects um we basically try to bring bring all of the players together and coordinate both the community members neighborhood organizations and other professional service providers that are really necessary to make these successful um specifically we try to focus on governance design organiz organizational development connecting them with capital and um other sort of technical like feasibility analysis and financial scans and stuff so with that we also wanted to raise up one awesome example of a program that is supporting both worker co-ops and um real estate or community-owned um real estate and as you've heard the city of St Paul stepped up and accessed the uh some arpa funding to start the local fund which launched earlier this year uh and Nexus is basically we're helping sort of implement it um and the program will run through September 2 2026 um and it has two sides so there's the worker ownership side um which is going to support both existing co-ops conversions and startups and then there's the community ownership side which is like the real estate Focus side which is going to support um all different kinds of community-owned real estate projects with both technical assistance and grants and I'll break those down just a little bit more uh as far as the worker ownership program um it supports eligible worker co-ops with technical assistance on both business um and financial planning services and the establishment of uh The Cooperative business structure so incorporation um and it also can bring grants to either expansions or startups um emergency financial hardship assistance from covid the arpa money is all focused around covid uh relief and also Construction Grants for the rehabilitation of commercial properties and all and one really cool unique thing for us is uh stiens for these new co-op members um who are doing the startups and the conversions and then on the community ownership or real estate side um we have technical assistance again where we bring a lot of education on Co-op governance um models but for Nexus it's specific to real estate investment co-ops but you know we we are happy to try to partner and bring in other other expertise as needed um we also work with s other professional providers for feasibility studies and financial scans that are really specific to Commercial Real Estate and then it also brings grants for two levels pre-development so that's all your sort of like legal due diligence Architects environmental there's just a ton of work that's needed to get like a commercial property off the ground um and there's also grants for acquisition Demolition and Rehabilitation I do want to talk a little bit about eligibility though um because it's coming through arpa there are quite a few sort of requirements and for the worker owner side it's I'm just gonna I'm not going to speak to all of the eligibility requirements because that will take quite some time but I'm going to do a few highlights and we can share this slide deck when we're done so if you want to read this it's also on our website but in essence um for the worker owner side you know we're looking for St Paul residents to be involved um and that these are Incorporated in St Paul um and typically they either need to be in a qualified census track or meet SBA disadvantaged business qualifications and on the community ownership side again we're looking for um St Paul residents to be involved that they're Incorporated in St Paul but they also need to be focused on commercial commercial properties that are on the city's vacant building list and also located in a qualified census tra in St Paul so those are some of the eligibility requirements um definitely check out our website for more information and it's a it's a rolling basis people are welcome to reach out to us to learn more um the the contact is on our website there's a link here um but if you go to our website and go look under the shared ownership Center you'll be able to find the local fund and so yeah if you all know of groups in your neighborhoods that are looking to do projects like this definitely tell them about what we're doing and and feel free to tell them to get in touch so we did want if there is time to take questions is there time we'll make time couple minutes okay yeah did any questions yeah you work for Traditional Bank SP I don't know that we work with yeah oftentimes you're working with the cdfis um so for example shared Capital was mentioned already and also mccd um is doing lending for shared ownership models there are some I I believe Acer might have had a Traditional Bank involved in one of their deals but often times is that right yes yes okay so there are partner they usually partner with other cdfis though because they they have much more stringent requirements and they're some of the terms that they said are a little bit more onerous um so there's when possible typically where we haven't engaged with traditional Banks quite as much