Statement from the Co-op’s Board of Directors Concerning the Proposed Store Relocation PDF Print E-mail
D

uring the past 40 years, our Co-op has experienced amazing growth. We started as a small buying club, then evolved into a small storefront, then moved to a larger one and eventually to our present site. Today we are one of the largest natural food cooperatives in the United States with more than $27 million in sales. Last year alone, we had a five percent increase in customers and 6 percent increase in sales.

This success has lead to some growing pains. Although we have a terrific store, it is no secret that our Co-op has outgrown the current location that we lease. Our aisles often are choked, parking can be a nightmare, and we can’t provide many products and give more support to our local farmers simply because we do not have the space. The Co-op operates out of five separate buildings with six separate leases. And the term of our store lease is uncertain

That is why your Co-op’s Board directed management to begin looking for an alternative location for our store. Our charge was straightforward: find a facility as close to the current location as possible and develop a financial plan for relocation that made financial sense for the Co-op’s future.

That mission has been accomplished, and now your authorization is needed to borrow the funds that will allow the Co-op to flourish as the trusted source for natural foods in our region.

We have entered into a tentative agreement, pending owner approval, to relocate the Co-op’s store, offices and Community Learning Center to a site two blocks away on a parcel bordered by 28th and 29th Street on the west and east, and by R and S Streets on the north and south. The relocated store would open during the summer of 2014.

The new site would:

  • Consolidate all of our functions into in one building under one lease;
  • Increase retail and storage space by between 40 – 50%;
  • Double the space now used for offices and classes; and
  • More than double our automobile and bicycle parking

Project Costs and Funding

Working with the National Cooperative Grocers Association’s Development Cooperative (NCGADC), we have estimated that the cost of the project will be $6.4 million. The NCGADC bases its estimates on the experience it has gained working with many similar projects. In addition we have received preliminary estimates from the project’s General Contractor, to which we have added an additional 15 percent contingency. Of the $6.4 million, approximately $5.2 million will go towards customizing the interior of the store, and the purchase of fixtures and additional inventory. Just over $600,000 will cover the project’s “soft costs” (attorneys, architects, consultants etc.). Added to these amounts is an additional $582,000 worth of estimated contingencies to cover unplanned events.

Funding for these costs is planned to come from the following sources:

Bank Loan     

$4,000,000

Equipment Leasing

$500,000

Owner Loans: 

$250,000

Preferred Shares

$851,000

Vendor Support  

$123,000

Cash Reserves

$682,000

  • “Bank Loan”: The need to arrange a $4,000,000 bank loan is based on conservative projections of the amount needed to supplement the available cash that we would have on hand late in 2013 and early in 2014 when our work on the project would begin.

We have spoken to three financial institutions that have expressed interest in the project and our estimates of the costs of borrowing are based on the most conservative figures that we have received from them – a loan carrying a 6% rate of interest and a seven year amortization with 15 month’s of interest-only payments.

We need your approval for this loan because the Co-op’s Bylaws require owners to authorize any loan greater than the Co-op’s current Net Worth ($2,158,429 as of March 4, 2012.

  • “Equipment Leasing” is based on figures supplied to us by leasing companies.
  • “Preferred Shares” refers to the $50 B, and $500 C non-voting shares that the Co-op plans to offer for sale to its owners who are fully vested in their $300 ownership share.
  • “Vendor Support” refers to the portion of the additional inventory that we can expect to receive at discounted prices.
  • “Cash Reserve”: The balance of the project’s funding will come from the Co-op’s operating cash reserves ($1,335,667 as of March 4, 2012).

The new facility will allow us to house our store, our Community Learning Center, and all of our offices in one building. We’ll be able to expand the space given to each of our departments, provide more access to local growers, and better serve the growing number of area residents who want what we have to offer. In doing so, we will be able to make the cooperative model of business ownership a stronger force in the Sacramento community and bring more attention to the values it embodies.

 

www.sacfoodcoop.com