Spotlight: Kachuwa Impact Fund

Kachuwa Impact Fund is an investment cooperative and public benefit corporation focused on owning and operating “impact real estate” and investing in privately held “impact companies.” As a cooperative, Kachuwa is democratically owned and controlled by its members. Brady Quirk- Garvan of Natural Investments recently met with Blake Jones, founder of Kachuwa Impact Fund, to talk about what makes Kachuwa unique.

Brady Quirk-Garvan: What exactly is Kachuwa Impact Fund’s approach to investing?

Blake Jones: By design, at least 60 percent of Kachuwa’s assets are real estate and no more than 40 percent of its assets are investments. Kachuwa is like a real estate investment trust (REIT) combined with a mutual fund. Our diversified holdings have a positive impact on society and the environment. Kachuwa’s goal is not to maximize financial return; instead, it is to create positive impact while earning reasonable returns for its members that may be considered “below-market.”

BQG: What is the difference between an investment cooperative and a traditional investment company?

BJ: I’m a cooperative geek and I love the cooperative structure. No matter how much you invest, the cooperative is still intended to serve all the members in an equitable way. So we’re not going to change our investment strategy, the types of projects we take on, the returns we pursue, or our impact goals based on which investors have the most money (and therefore have the loudest voice) like a conventional company would. In our cooperative, some investors that have invested $5,000 and other investors that have invested six digits, but we don’t weight one of those voices more than the other. We try to listen to the entire chorus in charting our future course to determine what’s best for the cooperative and its members.

BQG: Many of these private investment options are only available to accredited, or wealthier investors. Why was it important to you that Kachuwa be available to all investors?

BJ: One of our goals in starting Kachuwa was to make sure that it’s available to all types of investors. And a lot of investment opportunities that are outside of Wall Street require significant wealth to even be
eligible to make those investments. That excludes the majority of Americans; that excludes Main Street. And this is part of the problem at a macro level. There are a lot of impact ventures on Main Street that are looking for mission-aligned capital and investment, and the most likely place that’s going to come from are from Main Street investors.

BQG: What are some of the obstacles for Main Street investors?

BJ: For regulatory reasons, Main Street investors aren’t even allowed to participate in most investment opportunities. That perpetuates to the problem, but we can show that there are a whole lot more Main Street investors who want to invest in Main Street companies that are doing good in the world. Kachuwa goes out of its way to reach those investors; it’s part of our mission and it’s in our DNA. We want to include all types of investors in our cooperative and make it not just accessible, but also more friendly to Main Street investors.

BQG: Can you give an example of a real estate investment that highlights the kind of impact Kachuwa can have for a company?

BJ: One of the first investments we did with a shared ownership structure was a project with Upslope Brewing, a craft brewery based in Colorado. It’s been around for more than 10 years, and it’s a certified B Corporation that is contemplating an employee ownership transition. We met them around 2010, after the economic downturn when there was a lot of available warehouse space that fit the company’s needs. Upslope got courted by landlords who expressed a desire to have a brewery in the neighborhood. The brewery ended up in a large facility in an office park because the landlord wanted a brewery there; he knew as the economy recovered, it would make his other office space around the brewery more valuable.

BQG: What kind of deal did the landlord offer?

BJ: The offer was a five-year lease and a huge budget to create a tap room and outdoor seating. And the CEO of Upslope thought the deal was too good to be true. At the time he wanted to buy a building, but he just didn’t have the money. The business was putting all its money into the company. Upslope committed to the space, built a beautiful taproom room and patio, and of course over the next five years the office park rebounded. The offices around it filled up, so the brewery helped the landlord out quite a bit by making it a desirable place to work.

BQG: What happened when the lease ran out?

BJ: The landlord notified Upslope that the rent would go up by something like double. The Upslope folks had sticker shock. Doubling the rent would have crushed the business financially, but at the same time moving would require three months to drain the tanks and install new—three months with zero revenue.

BQG: And I’m sure Upslope’s leadership was concerned it might happen again somewhere else.

BJ: That’s right. So again, they entertained the idea of buying a building but didn’t have enough money because all the profit had been poured into expanding the business. That’s when the idea of Kachuwa was born. We decided to put up the capital and buy the building for them, and share ownership.

BQG: How does that shared ownership work?

BJ: Upslope pays a reduced rent in exchange for doing a lot of the maintenance on the building, and they have equity in the building so as the property becomes more and more valuable they see some of that profit as well as Kachuwa. It has been a fantastic arrangement, and it’s one that were actively replicating.

Kachuwa Impact Fund is an investment cooperative and public benefit corporation focused on owning and operating “impact real estate” and investing in privately help “impact companies.”

  • 16 Investments in women-owned businesses
  • 8 Investments in BIPOC-owned businesses
  • 3 Women board of directors
  • $1.3M Value of investments in women-owned businesses
  • $560K Value of investments in BIPOC-owned businesses
  • 3 BIPOC directors

Photo: The Upslope brewery Flatiron Park tap room. Courtesy of Upslope Brewery

This publication is distributed to clients and friends of Natural Investments, LLC (NI). NI is an investment adviser registered with the SEC. It is for educational purposes only and is not intended to contain recommendations or solicit sales of any specific investment. Authors, representatives, or related persons of NI may own securities mentioned in here.

Tags: , ,

Brady Quirk-Garvan

Welcome to my archive of newsletter articles and blog posts. For more information on my service offerings, please go to my advisor webpage.