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CoOp Co-Location Project Mission Statement

The purpose of the Co-op Co-location Development Project is to unite progressive visionary businesses and non-profits in creating an environmentally and socially responsible shared location in downtown Olympia. Our goals are to:

  • Support the exchange of goods, services and ideas within an economically egalitarian and co-operative framework in order to enhance and improve the social and environmental well being of the South Sound
  • Provide a model of responsible and sustainable development
  • Create an economically viable project
  • Assist in the development of local community resources
  • Create a cooperatively and democratically managed co-location infrastructure.


Co-Op Co-Location Project Criteria for Partners

To be eligible for partnership consideration, you must meet the following criteria:

  • Be a South Sound owned business or non-profit (including local chapters of national non-profits)
  • Be a socially progressive organization
  • Have a mission that is compatible with the mission of the Olympia Food Co-op
  • Be a financially honest, reliable, and viable partner
  • Be committed to enhancing and supporting social justice
  • Be willing and able to make agreements regarding conflict resolution and communications expectations
  • Be willing and able to make agreements regarding anti-oppression process
  • Be committed to environmental sustainability
  • Have a sense of humor


Report on Co-Location to the Board

August 2008
Prepared by Harry for the Expansion Co-Coordination Team

BACKGROUND

The Co-op Board set a goal of co-locating with like minded businesses and non-profits. There are many questions that need to be answered. This report will attempt to ask questions, identify answer options, make recommendations, and in general, help us start to give conceptual form to something that sprouted from some words on a ballot. Here are some of the questions that weıll structure this around:

  • Who is part of this co-location project?
  • Who creates it?
  • Who decides who is involved in the project?
  • How is it managed?
  • How is it financed?
  • How is it structured legally?
  • Who else has done it?
I will be up front in my bias. I have been a huge proponent of Co-location. To me, it is the most exciting part of the expansion. Selling more natural foods is better for the planet and the people but itıs just not that exciting. And the bigger we get, the more complicated and difficult we become as we wrassle and struggle to balance our goal and ideals with the realities of operating a large business.

However, working to create an alternative structure and model that is more than just selling natural foods is exciting and fulfilling to the big picture part of the Co-ops mission. Creating revolutionary development that attempts to bring home our economic and social goals.....now thatıs exciting!

I also would like to acknowledge that our experience with TULIP and the Olympia FreeSchool have had an impact on how I (and TJ and Joanna too) think we should co-locate. Weıre all for cooperation but there sure is something appealing about the Co-op creating the structure and systems for start up. In other words, the basic recommendation from your Expansion Co-Coordinators is for the Co-op to create our best version of the dream and then find partners/lessors willing to participate within the parameters that we create. We can trust ourselves to do a bang up job!!!!


RESEARCH or WHO ELSE HAS DONE THIS?

We agreed to research other projects of similar intent. Trouble is, there arenıt a lot of similar projects. There is a group in New Orleans trying to create a Food Co-op and Co-Location project in a historic building but they are starting the whole project from scratch ­ the co-op has 80 members who currently buy natural foods on-line.

There are a number of projects that are the creation on non-profit center. Attached to this report is a Northwest Cooperative Development Center report on the development of nine non-profit co-location centers. As we get closer to our dream, we will certainly be able to learn more about the management and structure from some of these efforts.

I was able to find a Co-op in Toronto called Big Carrot. Turns out that they did a co-op development project in the late 1980ıs and twenty years later, itıs flourishing. I have spoken with David Walsh and he is willing to help us with whatever information he has. He is still managing the project after 20 years. I am planning to visit this project in late October when Iım on the east coast visiting family.

Below, is a description of their project lifted verbatim from their web site. They created the Carrot Common Mall:

Carrot Common is a unique partnership and structured as a joint venture with the following partners:

  • The Big Carrot - worker cooperative and its expertise with organic foods.
  • Carrot Cache - a fund to support worker co-ops and organic farmers.
  • Cooperative Resource Pool of Ontario - a cooperative venture capital group.
  • David Walsh - a private developer interested in community goals.
  • A merchant banker.
  • Local community advocacy groups.
This partnership owns Carrot Common mall which includes 17 stores (total of 21,000 square feet,; 10,000 square feet of office space, and 33 parking spaces. The mall has a central courtyard which has become a very popular neighbourhood gathering space and a busy pedestrian area.

This partnership is unusual in the way it combines the talents of:

  • A worker cooperative and its expertise with organic foods.
  • A cooperative venture capital group.
  • A private developer interested in community goals.
  • A merchant banker.
  • Local community advocacy groups.
The ownership of the development is held so that over 50% of its profits will flow to organizations that will benefit the community. The share of profits paid to Carrot Cache will fund new worker owned cooperatives, and other profits will fund a venture capital fund operated by the Cooperative Resource Pool of Ontario and a charitable fund that supports social justice and CED initiatives.

The partnership has worked well and there has been general consensus among the partners of the project. The operating success of the mall has been due in large part to the nature of the Big Carrot and its role as an anchor in the mall. The work of the developer has been important in the management of the mall. The community groups will benefit as they share in the profits. Because of the project's high financial leverage (i.e. the project's high debt ratio, due to the fact that all the capital contributed has been treated as debt), it has taken 8 years for the mall to reach a profit, but as the mortgage is paid down each year, the profits will increase substantially.

The Big Carrot is the anchor store in the Carrot Common. It was founded as a worker cooperative in 1984. They had established a very successful store across from the present location, and, after 3 years, the members were interested in expanding the space. The new development allowed them to increase the size of the store from 2,000 square feet to 7,000 square feet. The ground floor of the Mall also has a number of other very successful stores including "Robin Kay", an environmental products store; "Gifts of the Earth", "Book City", "PULP" the card store, "Garden's Path", "PEACE Flowers", "Kidaroo, "Mariko Japanese Restaurant" and others.

The partners have always had the hope of attracting more "alternative" stores, but this goal has been difficult to achieve given the shortage of such businesses and the high rents necessary to cover the start-up development costs of the project. As the mall matures, we have worked to attract a diverse range of businesses. The second floor has been developed as a natural health centre, and the partners have subsidized the rent of several community-based groups such as the Workers Ownership Development Foundation and A-Way Courier Service, which provides employment for ex-psychiatric patients. The mall has a large roof deck which is available to community groups to hold social and fund raising benefits. Carrot Common is continually looking for ways of utilizing the property for innovative ideas, such as creating a "wild garden" on the property, in partnership with the Evergreen Foundation.

In summary, the project is a demonstration of how different types of partners can be successful in creating a project that can have community development as one of its major goals in tandem with other goals such as creating a successful business venture, and promoting organic foods. The real benefits of the project will become more visible in the long term when it generates higher profits to support CED and other community causes.

Carrot Common has thrived through several recessions. The character of the development gives it a unique relationship with the community and it is often viewed as an alternative to the standard shopping malls. The development has received the City of Toronto award for the best small project in the City of Toronto.

Formation of The Partnership:
The partnership began when the Big Carrot approached David Walsh for help in purchasing a car dealership site located across from their previous store. Members of the Big Carrot were introduced to David Walsh by Marty Donkervoort who had met him in 1984 at a CED workshop sponsored by the Jesuit Centre. In undertaking the new development, the members of the Big Carrot had great difficulty borrowing money since banks and credit unions are reluctant to lend to a worker cooperative, especially one with few tangible assets. The original store had been financed on a shoestring budget with members mortgaging their houses. The Big Carrot contributed $100,000 as its share of the financing of the mall, and spent an additional $500,000 on its store improvements. It raised part of this capital by selling to local investors $264,000 of Class A non-voting, preferred shares in units of $10,000, and by arrange a loan of $250,000 with the Federal Business Development Bank which wanted everything but the kitchen sink for collateral. As well, its suppliers extended favourable credit for about $150,000 to facilitate the financing of the expanded inventory.

David Walsh was attracted by the community spirit of the Big Carrot store which he realized would make this store an excellent anchor for a neighbourhood shopping mall. He was also interested in ways the project might support other community groups or causes. The partners set out to develop the concept with the idea that David Walsh would help raise the monies and act as developer, while at the same time consulting closely with members of the Big Carrot on how the project would proceed. The form of the partnership was not defined entirely at the beginning, but, rather, it evolved over a time as the project came together. For example, Carrot Cache was not formed until two years after the project began and its mandate evolved for another two years.

Mary Lou Morgan was the first president of Carrot Common Corporation and Carrot Cache. She left the Big Carrot in 1990 to work on other cooperative and community projects, but has remained as president of Carrot Cache.

Financing of the Project:
In May, 1986, an option to purchase the property was arranged, and the property was purchased two months later. The property was purchased for $2,350,000 with the vendors assuming a mortgage for $1,850,000. In order to finance the purchase of the property and the cost of renovations, the development partners arranged secondary financing; the Big Carrot contributed $100,000; and the Co-op Venture Pool also contributed financing.

As the development proceeded a decision was made to make additional improvements to the building since the market for retail space indicated a demand for higher quality stores with correspondingly higher rents than originally anticipated. Because of these additional costs and because of delays in construction, an additional $1 million was required. The development partners increased their loans accordingly.

The development was completed in September, 1987. In July, 1988, when the building was fully leased, and a new first mortgage was arranged. With these monies, most debts were repaid.

Carrot Cache
Carrot Cache is a non-profit organization that is interested in 1) promoting organic & community food strategies and in 2) supporting worker co-ops. I have spoken with David Walsh and he is willing to help us with whatever information he has. He is still managing the project after 20 years. I am planning to visit this project in late October when Iım on the east coast visiting family.


WHO CREATES THE STRUCTURE & DECIDES WHO IS IN THE PROJECT

Here are some models for creating a co-location entity:

  1. The Co-op Board makes all the decisions regarding the Co-Location project. The structure, management, and partners are all determined by the Board or delegated to Co-op decision makers
  2. The Co-op finds some other person or organization to take on creation of the co-location project with the Co-op as an anchor tenant
  3. The Co-op facilitates a group of interested parties and creates a new development structure to take on the project.
We have created and consented upon a mission for our co-location project and we have already set basic pre-requisites. In the scenarios above, option 1 and/or 2 seem more appealing than option 3. Option 3 would require a great deal of work in building something from the ground up.

Option 2 is similar to what happened with the Big Carrot. They created a partnership of parties with like minded goals and developed a management system around that. I plan to pick their brains about how the partnership works, how they make decisions, how they resolve conflict, etc. We could brainstorm a list of questions about this structure.

Option 1 is the cleanest. We decide the dream and scope of the project and we retain control over its enactment and operation.


WHAT IS THE STRUCTURE?

  1. Olympia Food Co-op could be the owner of the project. This project could be another asset, just like our current properties. Upside: Total control of the project Downside: total control of the project. If we do this and co-locate, we have to develop a management tool that helps us through the tough situations (see Olympia FreeSchool)
  2. A developer could create the co-location project and manage it for profit. We could simply be a leaseholder. Upside: Less cash/loan needed and donıt have to do all the work of the development. Downside: Less say or control over the values and partners in the project.
  3. Olympia Food Co-op could choose some ownership partners and start a new corporation. Start a joint venture (similar to the Big Carrot). Upside: Separate ownership and management of the overall project; help with financing Downside: Some loss of control ­ Co-op would be represented but not solely responsible for decisions
Any of the options will also require some detailed legal analysis over what is the best legal structure. Our Co-op is incorporated as State Non-Profit (different from federal). It was a corporate status set up for co-ops in the 70ıs.

What we need to do is decide how we want our co-location plan to work and then meet with lawyers to try and match the legal structure that best fits our needs. Kind of like our medical self-insurance plan. I have had preliminary meetings with lawyers and our discussions have covered Limited Liability Corporations, Joint Ventures, Non-Profits, etc.

The Carrot Common model is extremely interesting. I donıt know how decision making and direction is set up and plan to research it more. It sounds like the Co-op and the Developer set up a separate corporation and evolved over time. They started the non-profit to deal with distributing the profit to the community from the business venture.


FINANCING

We will examine the financing tools later in this meeting. They can help us project costs and potential debt load that may ultimately impact our decision. I hope to get you some of the materials before the meeting on the 12. We will examine a couple of examples of projects.


QUESTIONS AND SUMMARY

One of the issues that the Expansion Co-Coordinators have been discussing is about how important the speed of the project is. For instance, we could say that we definitely want to co-locate and need at least 20,000 sq ft and stick to it? So if a sweet little 7500 sq ft space becomes available, do we get it and open a Co-op store only?

We havenıt reached any conclusions in our coordination group. It would be great if we (the Board) could get conclusive about the size and scope of the project. We can look at some potential financial impact and try to set a clear goal that will help us when we start evaluating site availability.