LOCATION, LOCATION, LOCATION
The Art of Site Acquisition
-Bill Gessner, CDSCC, 612-823-4509
www.cdsconsulting.coop
BillGessner@cdsconsulting.coop
CCMA 2009 Friday June 12th 1:30 – 3:00 pm
AGENDA: When? & How?
Agenda Review, Introductions, Desired Outcome (5 min.)
WHEN is the site secured?
(15 min.)
-for start-ups
-for established co-ops looking to expand/relocate
How is the site secured?
(45 min.)
-business issues vs legal issues
-opportunities for negotiation
-timing issues
-build-out issues
Lease or Purchase?
(10 min.)
Existing Building or New Construction? (10 min.)
Wrap-Up & Evaluation
(5 min.)
Questions & Discussion Throughout!
Bill Gessner, CDS Consulting Co-op
Desired Outcome:
Participants will gain a greater understanding
of the process involved with securing a site
for a food co-op – either a start-up or an
expansion/relocation.
Participants will gain a greater understanding
of the concepts and approaches that can
result in a successfully securing a site.
Bill Gessner, CDS Consulting Co-op
Four Cornerstones in Three Stages


An overview article of the Food Co-op 500 Model is available at:
http://cdsfood.coop/fourcorner
FC500 Planning
Bill Gessner,
a Member
CDS
Loan
Consulting
Campaign
Co-op
Page 5
Three Stages: An Overview for
Start-up Food Co-ops
Stage 1: Organizing
Stage 2: Feasibility/Planning
2A: Feasibility
2B: Planning
------------------------------------------------------------Stage 3: Implementation
3A: Preconstruction____________________
3B: Construction & Renovation
3C: Preparation for Opening
3D: Sustaining - First Year & Beyond
Note: Dotted Line = Site secured w/Contingencies; Solid Line = Contingencies Removed
Bill Gessner, CDS Consulting Co-op
Four Stages: Development Timeline
for Established Food Co-ops
Stage I: Feasibility (3 months to 3+ years)
– Commitment & Planning
– Strengthening & Positioning
– Site Search & Securing
-----------------------------------------------------------------------------------
Stage II: Preparing for Leasehold Improvements &
Construction (2 to 12 months, typically 3-6 months)
______________________________________
Stage III: Leasehold Improvements or Construction
2 to 12 months, typically 3-6 months
Stage IV: Preparing for Opening (1-2 months)
Note: Dotted Line = Site secured w/Contingencies; Solid Line = Contingencies Removed
Bill Gessner, CDS Consulting Co-op
WHEN?
Most often, securing the site is not the first
thing to do in a start-up co-op or in an
expansion project for an established co-op.
Establish the development timeline for your
project and place the site search and the
securing of a site within the context of the
overall timeline.
Start-up co-ops secure a site at the end of
Stage 2.
Established co-ops secure a site at the end of
Stage 1.
Bill Gessner, CDS Consulting Co-op
DECISION POINTS / CONTINGENCY
Understand and utilize the concept of
Decision Points in your project.
Identify and understand the Key Decision
Points in the Development Timeline.
Understand the concept of Contingency and
seek a Contingency period as you secure a
site.
A contingency can be viewed as an option.
Bill Gessner, CDS Consulting Co-op
Site Search:
How?
(Key Concepts)
Be guided by the results of a professional market analysis (grocery)
Develop a team. Utilize professionals that can work effectively with your co-op
and timeline. (consultants, real estate professionals, attorney).
Professionals should bring experience and expertise with commercial real
estate (as opposed to residential). Board members are not the best searchers.
Establish site criteria.
Within a defined search area, do a systematic search considering all
possibilities, not just vacancies. Consider vacant land as well as existing
buildings. Do research. Contact owners, as opposed to tenants.
Don’t put all your eggs in one basket. Establish leverage. Plan A. Plan B
Plan the negotiation process. Identify all opportunities for negotiation.
Recognize that the negotiations have already started.
Establish parameters and policy for confidentiality within the co-op.
Foot in the Door. Build the Relationship. Sell (don’t beg). No is not the end.
The site search is confidential until the site is secured.
Be patient, but be ready to act and respond to opportunity.
Bill Gessner, CDS Consulting Co-op
Plan A or Plan B?
What is Plan A (your preferred option) today? What
might it be tomorrow, as you gain more information?
Don’t get attached. Know your walk away point. Test
and develop/build commitment.
What is Plan B (and Plan C)?
If Plan A or Option A didn’t exist what would your new
Plan A be?
Having a Plan B is useful for comparison and leverage.
Plan B may become Plan A.
Put 80% of your site search effort into Plan A, and 1520% into Plan B (and C).
Bill Gessner, CDS Consulting Co-op
Securing a Site
How?
(Key Concepts)
Establish the negotiation process; be clear on roles and authority within the
organization.
Be consistent with who your “front & visible” contact person is.
Develop a plan for the negotiations, including desired process and timeline.
Distinguish between business issues and legal issues.
Identify all issues for negotiation (primarily business issues) and prioritize.
Consider working towards an agreement of intent that includes agreement on
the key business issues and establishes contingency.
The negotiation have already started. Anything said by either party becomes
part of the informal record and fair game. Do not commit to paying within a
range.
All issues for negotiation need to be talked through before an agreement begins
to be built, due to the interdependency of issues.
First 3 years: Seek most favorable terms to allow a window of opportunity for
co-op to become established in new location.
Win-Win. Getting To Yes. Study/read/prepare for negotiations. Know the market.
The current market provides an opportunity to negotiate a good long-term deal.
Bill Gessner, CDS Consulting Co-op
Issues for Negotiation – a partial list
Square Feet to be leased, description of
Base Rate/Sq Ft. (per year)
Does base rate include triple net (real
estate taxes, insurance and CAM
(common area maintence)? Typically
not. Thus it is a triple net lease rather
than a gross lease.)
Bill Gessner, CDS Consulting Co-op
Issues for Negotiations
-a partial list
(continued)
Term of Lease
Option Periods (at the co-op’s option)
Rental Rate adjustments after initial period. (What is formula
for the rent schedule for the full term of lease, including option
periods.)
Possession date
Rent commencement date.
Deposit (Don’t ask. Seek no or minimal deposit, given the
improvements by tenant.)
Off-street parking (dedicated) and other site issues
Terms of Contingency (e.g. 120 days to get full financing)
Percentage rent (usually in addition to base rent)
Landlord contribution (tenant improvement allowance).
Bill Gessner, CDS Consulting Co-op
Issues for Negotiation
– a partial list
(continued)
Landlord contribution – maybe, maybe not
Landlord contribution (options for)
-Landlord provides some improvements
-Landlord agrees to free or partial rent
for a period of time
-Landlord provides a cash payment to
co-op to cover some improvements
(tenant improvement allowance)
Bill Gessner, CDS Consulting Co-op
Issues for Negotiations
-a partial list
(continued)
Finishing points (of landlord’s work)
Design and estimated cost of co-op’s improvements
Landlord responsibilities for building structure (roof,
structural integrity)
Responsibility and warranties for HVAC system that
meets tenant’s specifications
Exterior Signage
Right of first refusal – adjoining space
Right of first refusal or option to purchase
Compatibility issues with other tenants, potential
exclusions
No lease guarantee provided by tenant
Bill Gessner, CDS Consulting Co-op
Issues for Negotiations
-Examples of Legal Issues
Conditions of default
Fire Damage
Right to sublet
Notification requirements to exercise
options
Lease assignment (if required by bank)
There can be a million more
Bill Gessner, CDS Consulting Co-op
Anchor Tenant
If the co-op has the potential to be an anchor
tenant in a retail center, it is extremely
important to cultivate that position.
If the landlord acknowledges and views the
co-op as a potential anchor tenant, the
negotiating strategy should be based around
that concept: favorable location and terms
that recognize the anchor and the draw that
the co-op will be for the adjoining retail
center.
Bill Gessner, CDS Consulting Co-op
Preliminary Store Planning & Design
in relation to Lease Negotiations.
It is important to do preliminary store
planning and store design work prior to
getting too far into lease negotiations:
Preliminary store planing and design will give
the co-op an idea of the scope and costs of
leasehold improvements. These costs need
to be factored in when negotiating the buildout responsibilities of the co-op and the lease
rate.
Bill Gessner, CDS Consulting Co-op
Approaches to Lease Negotiations
Let the landlord make the first offer
Is it best to let the landlord present the initial draft of a lease, or
is best for the co-op to take the initiative and present the initial
draft of the the lease? It depends on the situation.
Is it best to use professional representation, or is it best to deal
directly? Usually it is best to use professional representation.
The concepts, issues and approaches listed here might be
foreign to the landlord you are dealing with. Be prepared, but
don’t get too fancy. Adjust to the specific situation. Be clear,
be firm, be flexible, be creative, be respectful. Prioritize what is
most important to you. Know your walk away point.
Until the deal is done – really done/finalized, all forces can and
will conspire to try to make the deal fall apart. This is a test.
Bill Gessner, CDS Consulting Co-op
Wrap-Up
Identify critical issues and key opportunities for lease
negotiations.
Establish leverage.
The negotiations have started. Be careful of careless
early commitments.
Manage the timeline.
Build the relationship.
Thank you!
Let us know if we can be of further assistance.
-Bill Gessner, 612-823-4509; www.cdsconsulting.coop
BillGessner@cdsconsulting.coop
Bill Gessner, CDS Consulting Co-op