What is a hybrid return?

OBT approaches the investments we make with the intent of earning both social returns and financial returns. Simply stated, a social return is one that provides tangible benefits to the greater community. We accomplish this through our grantmaking efforts across the Upper Midwest intended to improve lives of the people who live here. A financial return provides capital back to OBT that can then be reinvested in the community through additional grants or other investments.

But we also look at opportunities that provide a hybrid return—an investment that provides both a social and a financial return. Our majority ownership of Bremer Bank is one example of a hybrid return—the social good that banking and related financial services provide a community along with the financial return of operating a commercial enterprise. A hybrid return can also be a program-related investment (PRI), where OBT provides capital to a community project, perhaps through a low-interest loan because the organization would not qualify elsewhere to borrow money, while achieving a modest financial return. Hybrid returns also include mission-driven projects, which are unique investment opportunities that do not neatly fit our criteria for a grant or PRI but still provide a community benefit as well as a financial return to OBT.

Some recent examples of hybrid returns include our low-interest loans to the Minneapolis Public Housing Authority (MPHA), which manages more than 6,000 housing units for low-income seniors, persons with disabilities, and families, and Metropolitan Economic Development Association (Meda), which helps minority-owned businesses achieve success and profitability.

MPHA aims to combine various federal programs with new sources of capital to preserve the high-rises, townhomes, and scattered site houses across the city to help families now and in the future. The agency faces a challenging environment of constrained capital funding and increasing need for affordable housing, and intends to focus on sustainable, low- to very low-income housing. OBT provided a low-interest loan to help create and preserve critical public housing in Minneapolis.

Meda is focused on meeting the needs of minority entrepreneurs and is working to overcome a critical barrier to their growth and success: access to capital. Minority business owners are less likely to have access to market contracts and less likely to be approved for a business loan than other groups. Based on its previous success working with Meda in Minneapolis, OBT funded the expansion of the organization’s Otto Bremer Small Business Fund to support entrepreneurs in St. Paul and in greater Minnesota.