Fall 2014 Board Update
This is Robyn Morton, vice-president of the board of directors for the co-op. I'm writing you today to bring you up to speed on everything that has been happening with getting the co-op up and running ever since we achieved our initial membership goal of 600. We (the board) know that the member-owners are curious, anxious, and perhaps a bit annoyed that nothing seems to be happening. The truth is, a lot has been happening, but most of it concerns issues like property acquisitions and hiring, and consequently the details have to remain confidential for propriety (and occasionally for legal) reasons. So the first and most important thing I want to convey to all member-owners is that the appearance of lack of progress is just that-appearance. The board, steering committee, and other associated committees have actually been doing an amazing amount of work, and genuine progress is being made. That said, our progress hasn't been as fast as any of us would like. Believe me, everyone working on this wants the store opened a.s.a.p.-preferably yesterday, in fact. And while much of the details of our progress must remain confidential (for now!), we do want to apologize for not doing a better job of communicating what information we can provide. We have been very focused on the nuts & bolts of starting the store, and communication has really fallen by the wayside. I think most member-owners would agree that if we have to place our focus somewhere, having it squarely on "get the store open" is probably the right place. But as your elected board, it is our job to keep the member-owners better up-to-date on our progress. As we head into the annual meeting this year (January 2015, date TBD), we hope that this letter will serve as a way to get everyone back on the same page so that we're all ready to go when Go Time arrives.
Okay, great, so what has been done? Our work has been focused on three (overlapping) areas: hiring, property vetting and acquisition, and financing.
As many member-owners know, we began the process of looking for a general manager earlier this year. While the search for a GM was ongoing, it was becoming clear that we were not going to be able to secure a property on the timeline we had built, and as such would not be able to finance a GM for the timeframe we had expected. This was very disappointing to us; having a GM would help the entire process move much faster, and we interviewed several excellent candidates-some of whom we were (and are) very excited about. But we could not in good faith go forward with a position that we were not confident we would be able to permanently fund. So we have suspended the GM search for the time being. We are still in contact with several of the candidates for the position, and are hopeful that once a property is secured, they will again be willing to put their hats in the ring for the position. In the meanwhile, we are looking to hire a part-time person for the position of Outreach Coordinator to help us out in the communication department.
Property vetting and acquisition
By a long shot, this has occupied the bulk of the time of the board over the past year. I would conservatively estimate that we have now vetted 98.4% of the square footage of the entire downtown Terre Haute area, as well as some locations not in the downtown, attempting to find a suitable home for our co-op. This might seem like overkill, but the simple truth is that as an elected board, we have to hold a very high standard of decision-making. In other words, we can't play fast-and-loose with this project, or make snap decisions. This can work against us, as this means that progress will be slower than many are used to. However, it has the upside that once we are able to secure a property, we can all be confident that the store has the best possible chance for success in that location. There is no point in pushing the process too fast in order to get a store open, but sacrifice the due diligence that will ensure the long-term success of the project-that would be a colossal waste of all our time, money, and energy.
The property vetting process began very soon after we crossed the 600 member line. We contracted a real estate agent to help us locate properties available in the area, and then began the process of evaluating each in terms of some initial criteria such as location, access, parking availability, overall footprint, overall cost (if known), current building design (if a building is present), and other known issues with the property. Believe it or not, this has taken a very long time. Real estate in the Terre Haute area is... ahem... interesting. Properties go off and on the market weekly (sometimes it feels like hourly), some properties are not listed on the market but could be available if you ask the right people, or can work with the correct groups, and so on. We pursued some properties that were not obviously available but could be workable for our project. We pursued many properties that were part of larger projects, although typically those timelines did not work for us. We have had extensive discussions with various developers who have taken an interest in our project, both as property developers and potential project backers.
Once we had a list narrowed down, we commissioned a professional market study on three properties (more on this in the financial section). Notably, even after we had settled on three good candidates, we became aware of another very strong possibility, and had to extend the market analysis to include this property as well. This whole process has taken the better part of a year, and we are only now in the final stages of completion. This now leads us directly to...
Performing a market analysis on prospective properties is crucial for many reasons-three of which are: (1) it allows a clear comparison of the leading properties to be done so that a good decision can be made; (2) it gives banks confidence in our project; and (3) it gives us the most crucial number in the entire game-the projected sales income. With this number in place, as well as details such as property cost, construction estimates, staffing cost estimates and the like, we can construct detailed financial pro formas for each property. It is these pro formas which will ultimately determine which properties are feasible to pursue. For this process, we work with the CDS consultant Bill Gessner, who has over three decades of experience in co-op financial analysis and startup financing. When Bill says something can be safely pursued, you're in good shape. Of the four properties reviewed by the market analysis, two were at the top of the list as being the most plausible for us to go forward. As of this writing, we have finalized a pro forma on one of these two properties and are close to finishing the second. Should neither of these properties be feasible, we will then return to some properties we had set aside-and of course, who knows what will come available in the upcoming weeks and months.
If things proceed as we hope, and the second pro forma shows a feasible project, we will then begin serious negotiations on both properties. This will involve both negotiations with the owners as well as meetings with banks in order to secure promises of financing (based on certain contingencies). Why two properties (or more)? Because we need to negotiate from a position of strength and make sure if one of them falls through we still have another feasible option available to us. Obviously, this could go very quickly or very slowly, depending on how efficiently we can reach agreements with the multiple parties involved. But believe me, once this is done, you will know all about it!
From that point, as most of you probably know, the final steps in financing the co-op will be the launch of the Capital drive (to secure loans from the co-op member-owners) as well as "gap funding" to get the last bits of financing in place. Besides working with local banks and our own member-owners, we will be pursuing funding from other agencies, grants, and loans to complete the entire financing package. From where we are today, this process could still take several months to complete, and it has a lot of moving parts. The board will be working diligently on completing all of this as efficiently as possible.
Speaking on behalf of the board, I sincerely hope that this overview has helped you, the member-owner, to reconnect with this project and the magnitude of what we are working to achieve. To pursue a multi-million dollar project as a volunteer board is daunting, but my confidence is bolstered every time I think about the 700 member-owners out there who share our vision of making our town a better place to live. I know that I am not alone in my desire to strengthen our local economy, our local farms, our local families, and our local community. While this work has been exhausting, I still feel blessed that I can be a part of something that will have such a significant impact on the quality of our lives. I know you share in that vision with us. I hope that as we continue the process, and the days stretch out again, that you will have patience with those of us who are doing the footwork, that you will step up and lend a hand where you are able, and that you will be there with us and rejoice on the day that we open the store and see the fruit of all our labor as we create the community we all deserve.
And we will also truly do a better job of keeping y'all in the loop!
All my best, in cooperation, and on behalf of the board of directors for the TerreFoods Cooperative Market