Aug. 24--NEW HAVEN -- A decision on whether the Elm City Market will remain a cooperative will be made next week, as a group of member-owners have come forward to pledge $300,000 to boost the investment offered in one proposal to save the store up to $1 million.
The market is in default on its $3.6 million loan from Webster Bank and has also received a notice of default from its landlord, the Multi-Employer Pension Trust (MEPT), which also owns 360 State Street, the high-rise apartment building next door.
In a letter to the more than 2,200 co-op members sent Saturday, the board said it has been trying to restructure its debt for more than a year, a financial situation it blames on never having enough working capital when it opened in November 2011.
The path it favors is bringing in the National Cooperative Grocers Association, which would loan the market $700,000, to be matched with the $300,000 in local pledges for $1 million to stablilize operations.
The board says this would protect the $200 per owners co-op shares, enable all vendors and creditors to be paid in full and turn management over to the grocers association with the debts to the landlord and the bank restructured over a longer period of time.
The alternative path is what is called a "friendly foreclosure," or an Article 9 asset sale, where all the debts would be wiped out, including most of the Webster loan, the present U.S. Department of Agriculuture guarantee to the bank, the back rent to the landlord, other debt, including payment to the state Department of Economic Development and the members' investment, according to the letter.
It would then be sold to a private investor, who sources have identified as L. Linfield Simon, who runs the RISC Foundation. He plans to continue to keep the grocery store open to preserve the jobs there. Simon has not responded to a request for comment.
The board said under this second scenario, the foreclosure will cost taxpayers $3 million as 80 percent of the Webster loan is guaranteed by the USDA, but Webster would also lose the remaining 20 percent of the loan, or some $600,000. It said this option would leave numerous vendors and other creditors unpaid.
The board said the situation at Elm City Market has been analyzed by the NCGA Development Cooperative, a subsidiary of NCGA, which developed a financial plan to present to the bank.
"NCGA's credentials are impressive and unimpeachable; as a co-op itself, this business-services co-op represents 142 food co-ops in 38 states with combined annual sales of over $1.6 billion, helping each co-op optimize operations, marketing and sales through collective purchasing power," it wrote.
While making its case to go with the NCGA plan, it also recognized that the bank "may have strong incentives to favor the Article 9 sale, in particular, and not insignificantly, because it will keep the market open to continue to serve New Haven. However, we are also hopeful that the bank will remain the good friend of Elm City Market and the New Haven community that is has been since the inception of the co-op, and will consider NCGA's sound arguments and decide in favor of that plan."
There was a longtime demand for a downtown grocer to serve the needs of the increasing residential population. That population has continued to grow with some 500 apartments in the planning stage within blocks of the market.
City planners have said the presence of the market has also influenced the continuing growth of residential choices downtown.
Robynn Shrader, CEO of the National Cooperative Grocers Association, said she was excited to come into New Haven. "Everyone wants to see this work."
She said they would run the market on an interim basis until it was stabilized.
Shrader said Elm City Market is like any other small business that has difficulties at first. She said the plan would be to grow gross sales, increase memberships and investors for the long haul.
Grocery stores run on a tight margin and new management would have to understand that, financial observers said.
Pedro Soto, the treasurer on the board, said he feels the board's solution is the best for the city, the market and the creditors. "We have a prudent and conservative way forward," he said.
"I would feel terrible to have the taxpayers pay the dime on this," he said referring to the USDA guarantee kicking in. Soto said it should only be exercised as a last resort. "We feel there is a viable option," he said.
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