We’ve been overwhelmed with the responses received so far via our Expression of Interest Form. Many responses have made useful comments or raised important questions.
This post is to address some of the questions raised, both in those responses and at last Wednesday’s Town Hall meeting.
We’re still receiving Expression of Interest responses until Sunday, please fill out the form if you’re interested in the co-operative.
Q: Why choose the Hub?
Although extensively renovated, we acknowledge that the Hub building is still over 120 years old, parts of the building are inaccessible, and it won’t be as energy-efficient as a more modern sustainably designed building.
Despite these real limitations, we still think that it’s the perfect starting point:
- It is already part of our community. The values of the current tenants, owners, and the community garden match the values of the co-operative and already contribute to the wider community.
- It is already a functional operating business, and has been for over a decade. This allows us to confidently design the co-operative business model. Our draft budget was prepared using existing information about occupancy rates, rents, and expenses. (Plus additional contingencies, see the answer about Risks below.)
- It’s in an excellent location: close to the centre of town, walkable to other locations and the train station.
- There’s no better option in town in terms of location, condition, age of the building, energy efficiency, accessibility, or the existing business model. Raising additional money for new building work or renovations are not feasible at this stage.
- There is a real risk of losing the existing community benefits of the Hub. If a commercial developer purchases it then they could choose to remodel the main building for a different business purpose, raise rents to cover commercial property management costs, and/or develop property on the community garden site.
Q: How big does the Co-op need to be?
We’re anticipating around two hundred members, with a spread of investment amounts. This scale is necessary in order to raise enough money for the purchase.
With two hundred members, the average investment has to be over $10,000 each – the responses we’ve had so far vary widely, which is fantastic, but the average is close to this target.
One of the conditions for membership would be that we all reside in the local area.
We understand that a democratic organisation of this size has its own challenges for governance. There are online tools we can use to simplify democratic decision making at this scale. We also anticipate members will elect a Board who would handle day to day management, according to high-level goals or policy voted on by members.
Q: What will the minimum or maximum investment be?
We want to make the minimum investment as small as possible so the co-operative remains accessible. However, due to administration overhead the minimum will likely be $500 or $1,000. We understand that for many people in our community this is still a very significant amount of money.
A maximum investment limit prevents a single member from dominating the co-operative. Even though decision-making would follow “one member one vote”, a single large investor would still have significant informal power. The limit will likely be at most 20% of the total (i.e. several hundred thousand dollars.)
Q: How will members get their money back if they need to leave the co-op?
In the structures we are considering, members who wish to leave will sell their shares back to the co-operative and receive the price they originally paid.
There will be a time limit defined in the Rules for the co-operative to pay the member back (during this time the co-operative can sell shares to new or existing members, if necessary). The time limit will probably be in the range of six to twelve months.
Depending on the structure which is chosen, it may also be possible for members to sell shares to each other at a mutually agreed price which allows for some possibility of a capital gain or loss. We’ll decide on this soon when we start working with Cooperative Bonds to work out the best structures and rules.
If the question of capital gain is important to you either way then please mention it when you submit the form.
Q: What are the key risks?
Currently we’re considering these risks:
- Unexpected building repairs. This is a factor for any building, especially an older one such as the Hub. We’ve been provided with an independent building report from 2022, and are satisfied with it. We’ve also discussed commissioning a second report. Our budget includes a contingency for maintenance which exceeds the historical average maintenance costs that we’ve been provided by the current owners.
- Sustained vacancies. The current owners have provided historical information about occupancy rates of the offices, which have been high. Our budget assumes an average occupancy rate of 80%, much lower than the historical average. The co-operative would make sure to set aside funds to cover temporary periods with higher vacancies. As the Hub currently houses eighteen tenants, the impact of vacancies is diversified.
- Liquidity squeeze. If a large proportion of members needed to leave the co-operative in a hurry then it may become difficult for the co-operative to pay out their share values. We aim to diversify this risk as much as possible by having a wide range of member investors, rather than a few large investors.
As part of our next stages we plan to consult more widely to further evaluate these risks, and identify other risks. These will be made clear before asking for members to commit any money.
Q: What assumptions have you made for the business model?
- The business of the Hub would continue for the co-operative in a similar manner to the current owners’ business.
- The costs and other expenses provided to us by the current owners are similar to what the co-operative would pay (plus some contingency for additional maintenance or higher quotes for services like insurance.)
- Average occupancy rate of 80% (this is lower than the historical average occupancy rate).
Q: What does Community Wealth Building mean, beyond local investment and returns?
Beyond financial returns, community wealth building could mean the co-operative investing in community activities, organisations, businesses or property that bring social, environmental or cultural value and resilience to the community. We would actively support and grow the kind of community we want to be: fair and equitable, sustainable, diverse and inclusive.
For further explanation about Community Wealth Building, the organisation Ethical Fields has published this web page.
Please fill out our Expression of Interest form if you’re interested in the co-operative. We’re still collecting responses until Sunday.