Co-op hopes to become tenant in its old store
Food Front members approve selling, but this may not be what they had in mind
Food Front members approve selling, but this may not be what they had in mind
Members of the Food Front Cooperative Grocery voted 394-42 to sell the store and underlying property to K-5 Urban Holdings LLC last month.
How did a membership “overwhelmingly” favoring a sale to Market of Choice, according to a survey last December, go all-in on a deal offering no assurance of a grocery store, the unquestionably desired outcome of all co-op factions?
They had no choice.
That’s how Caroline Skinner, a longtime Food Front member and adamant Market of Choice backer, explained why she went along with the majority.
“They only gave one choice, so I voted yes because I want this to be over,” Skinner wrote in an email to the NW Examiner.
“I was a big supporter of MOC because I thought they gave a very strong argument for why they could do well there. The current survey is only a straight-up yes or no vote on K-5, not a choice between two or three options. At least that made it easy to decide.”
The board is now floating the idea that a sale could provide an avenue for reopening the co-op as a tenant in its old home at 2375 NW Thurman St.
That was exactly what Skinner hoped to avoid, as she clarified in an email sent to the board in July.
“I'm very concerned that we make a pragmatic decision quickly. At this point, it means taking the offer most likely to go to completion …I almost don't care who buys it at this point, as long as it's a clean sale with NO entanglements. I want to see the Food Front building sold as soon as possible before anything really expensive happens on top of our current costs.”
The board drew a different message from the vote.
“We thank our owners for the overwhelming support we have received for this crucial vote for the co-op,” a board email read. “This overwhelming support gives the board confidence in our decision, which we believe is the best for our co-op.”
Skinner’s skepticism was affirmed by many, if not most, of the respondents to a follow-up survey of members held later in the month.
Asked if they wanted Food Front to explore the option of reopening the store, 100 disagreed and 82 were in favor.
Comments on this course were also mostly negative, many vehemently so.
“I want Food Front co-op to cease to exist. I dislike how the board is trying to cling to the life of a failed business venture. It was not sustainable. I want no part of any effort to try to restart the co-op. Do NOT attempt to reopen!!!”
“The incompetency and unpleasantness shown to date, plus closure for a number of years without a solution and coercion into the vote to sell, points to any involvement being a bad idea for the success of the venture. I understood that selling meant Food Front had no further involvement and the choice of new tenant was in the hands of the new owners.”
“Food Front had demonstrated its inability to run and successfully operate a grocery. Do NOT try it again.”
“Terrible idea. Seductive fantasy. Get out now. Distribute the proceeds honestly and transparently to owners.”
“Food Front has broken my trust. I want Food Front to sell to Market of Choice or another grocer so that a legitimate local market can operate in that space and serve the community.”
Skinner wanted no part of efforts to revive the co-op or partner with an entity holding out this hope. She did not understand the board’s spurning of a $1.9 million offer from Market of Choice for a potential $2.55 million from K-5.
“If the board is so concerned about money, why is it dragging this out? It seems extravagant to be spending $16,000 of our money per month on a building we no longer need or can use. It's time to get out from under this large debt.”
In the 15 months since the co-op store closed and defaulted on its loan, Skinner saw an organization incapable of recovery or even prudent planning. The board covered its existing debt with a $1 million hard-money loan involving monthly payments of $9,400. Missing a payment would make the entire balance due immediately, risking foreclosure of all co-op assets.
Food Front also has regular expenses to insure and maintain the property, property taxes and legal expenses. Board President Roman Shvarts reported in March that total expenses are about $15,000 a month.
Co-op member Dan Anderson inspected Food Front’s financial records Aug. 8 and observed a bank balance of about $156,000.
Without a source of income, the co-op approaches a financial cliff within a year, a vulnerability compounded by a potential buyer knowing Food Front’s predicament. A letter of intent signed by K-5 involves a leisurely pace, with up to 240 days for the buyer to commit to the purchase.
The buyer would also retain the right to sell the property to another party at any time.
“I believe the remaining Food Front community is not strong enough to … have a say or stake in the future of the property,” Skinner concluded. “I am deeply regretful that we couldn’t rally overwhelming support for MOC, but it’s under the bridge now.”
Board got played
Hopes and wishes are not going to be enough to reopen Food Front, in the view of Blaine Whitney, a partner in Columbia Capital Group, a Portland-based commercial real estate acquisition and development company.
“As a developer, I can tell you with 100 percent certainty that K-5 isn’t going to lease it to a grocery store,” Whitney said. “The reason they are paying more is they are underwriting to the residual land value of the development. Market of Choice underwrote it as a grocery store and having to do huge capital improvements to get it up to their standards.”
K-5 has particular interest in this site because it adjoins three houses it owns directly north on Northwest 23rd Place. Combined, the lots form more than a half-acre zoned to allow residential or commercial development.
“There are zero grocery store tenants who are going to lease that space. It's going to be scraped, along with the houses, and you'll get an L-shaped double- loaded multifamily building with maybe some ground floor parking, but likely not.
“The co-op got played,” he concluded. “There will be no grocery store here. It's a screamingly, painfully obvious.”
That is also the conclusion of Kathleen Keppinger, daughter of Leo Keppinger, who accumulated rental properties mostly in Northwest Portland until his death two years ago. K-5 is a creation of her stepmother, Angelina, and her halfsister, Kristine McGehee, and does not include Kathleen and her siblings.
Kathleen Keppinger doubts a grocery store is anywhere in K-5’s plans. That company’s acquisition of two houses adjoining the Food Front parking lot within in the past five years is a clear signal to her of intent to assemble a larger parcel for redevelopment.
“I see Food Front as being sold a bill of goods,” Keppinger said.
Her father would not have done business this way, she said.
“I know that this is going to tarnish his name.”
Nevertheless, the Food Front board is forming committees to explore a future in food sales. Members have been asked to comment on four options:
Reopening a grocery store at the current location as a tenant.
Mergers/partnerships with other entities compatible with Food Front ideals or goals.
A public market “where local vendors sell produce, meats, dairy, baked goods and specialty foods to consumers.”
A food hub for “storage, processing, distribution and/or marketing of locally/regionally produced food products.”
The board particularly likes the fourth option:
“Food hubs are part of the agricultural food chain model and often share common values related to conservation and environmental regeneration, healthy food access and supporting local farmers.”
