Event:2024/08/13 Delegates

CAST office hour - 13 August 2024 6pm-7pm

Meeting Details

• Talk at https://omnicommons.org/meet or 515-428-1108 (PIN: 465814905)
• Type at https://omnicommons.org/notes
• Send proposals to consensus@lists.omnicommons.org prior to the meeting
• Someone should go check incoming mail RIGHT NOW.

Roles

• Facilitator/s: CAST
• Stacktaker:
• Timekeeper:
• Notetaker/s: Paige

Delegates

• CCL: Patrik
• FNB:
• LL:
• SMAC: Ruby
• SM:
• SR: William

CAST facilitated discussion: buyer due diligence

• Shreya - thanks for having these more targeting meetings going into September. Today we are going to focus on buyer vetting. Exciting that there are promising leads right now. As we hold space for vetting buyers, we want to reiterate our role. Not an arbiter for governance, or a development partner, but we support y'alls thinking process. We do recommend that all formal communication remain between buyer and seller - what we are laying out here, you should bring that to the buyer (we are not brokers). Setting this session such that potential buyers won't be joining, so we can hold space for open and honest communication on these nuances with this work.
• Ken - Want to check in around on the process you imagine conducting as the delegates, functionally serving as the board. Whether that is a very open community feedback session, like the open office hours right now, or something else, it is critical that it is transparent, and you must share that you have potential parties trying to secure the space. #1 Recommended deciding now - "We will accept offers up to this date", and stick with that date. Time now for you to establish this process. #2 would ask you to document these, can be as you do now with meeting minutes #3 I would work with Jesse now to find out his availability ahead of time. Lots of paperwork to be done. I would conduct a quick check in, wanting to make sure everything is reviewed. #4 come up with a group, delegates or broader group, some consensus or agreement of what you want as terms to agree to the sale. Right now you still have the right of veto, and depending on who it is, some ability to negotiate. One thing to ask about wiggle room, and another thing to tell Jesse what you want to see happen. It's the time to codify and formalize things, transfer of title and approval process with the buyer. Someone will have hurt feelings, either one of the buyers or delegates, but encourage you to share whatever you communicate with one party, with all parties. Even if not asked.
• Cere - I wonder if a smart way to get clear about this is through a series of questions, such as: what is our time, what is a go vs. no go. Some sort of template from you would be appreciated, we are new at this and presumably you are not.
  • Ken - Yes I can share some prompts with you. Some already brought up - are there non-negotiables with the transfer of ownership? I.e Paige asked Ojan whether or not they would raise rents. Ojan I believe gave a balanced response. It's a hard promise to make. Another one that came up was, if Omni would still be in control of the door system [no not something we require]
• William - We would not like to get priced out, want some sort of appeal system, but doesn't need same governance as now
• Ken - when we were trying to do the direct funding raise, we were not planning to introduce new governance immediately, but did want a commitment to a process to figuring that out (not spelled out beforehand). From our perspective, if you asked for a guarantee, i.e. for 18 months we want a system of governance, it reverts back to what it was, we probably wouldn't agree.
• Cere - Again, it would be my natural approach to find out what questions are even relevant.
• Ken - I started every conversation with buyers asking if they would maintain space as a community space for arts. No flipping it. Thinking of it as a deed restriction, even if not a deed, but equity. Made some people walk away. But yes, I can share some more of those questions with you.
• Ken - I heard Phillip is ready to make an offer. Given that we have interest from EBPREC, it might be worth communicating with Ojan that we have a viable offer. We want to let you know and we will deliberate by this date. Timing, communication, and Phillip's readiness to put some pressure on other folks.
• William - question, I wasn't expecting to make it over the goal post, so I'm pretty surprised. Lots of conversations on LOIs, about power. What I was thinking, would it be possible to put in LOI an option for someone to buy back the loan? If we put in the document, if a party comes that can pay off the debts, they will be able to manage the building (i.e. CAST, EBPREC). There's nothing in writing to prevent Phillip from coming in and then not wanting to engage in land trusts
  • Ken - I would encourage you to ask questions like that to Phillip directly. In finance, the question often raised is "where is your money coming from?" "What are your obligations?" Could we embed the right to share in equity down the road? At that point you are also assuming the obligations of the purchasing party. Here it comes down to a game of chess, determining risk. If you are going to request ability to buy it, you may require that you are able to purchase it near the purchase price rather than market value. I think it would be hard to name which groups would be able to do this, particularly if some of you are informal. But you can name a process, by which you would participate in qualifying for the buyer. I.e. "within 6 months, 2 years, the buyer will offer ?% of equity, at an amount reflective of initial purchase price."
  • William - Since we are going to give up the building to have any autonomy in the building, how do we go about creating motivation to work with a land trust or well established org within Phillip's proposal. We are okay with giving up governance, but there's a want for giving that to an org with history on some project like this. Is there a way we can give an option for EBPREC to fully buy at a later point? Something like a "2 year cliff"? Hope that we could use this loan as a way to buy time to work with someone who has more experience with this. How do you see the motivations playing out?
  • Patrik - EBPREC not a nonprofit, a cooperative. They have a nonprofit named CALLI, but they might still be in limbo about their nonprofit standing. So there's some difficulty in selling to them
  • Ken - I don't see that as a concern, they can apply for exemptions as a for profit owner
  • Patrik - Jesse has said its a nonstandard process
  • Ken - we can help advise you on any scenario. EBPREC is the best way forward towards a collaborative trust model. Paul wouldn't go the land trust route, but also wouldnt want to flip it - he is wanting to manage as an asset. Paul has that money now, liquid, but he is being really deliberate in his choices. As I said, they came to us looking for a building 10 years ago.
• Patrik - I thought it might be useful to outline current bottlenecks to everyone here. Phillip Bell has let us know he has arranged financing, so willing to jump as soon as possible. Bottleneck with Phillip is we keep going back and forth if we can have the current community having some control of what happens to the building in certain scenarios. It wouldn't need to be current delegates in that role, or retain any of the delegates structure. These passive directors would only would have a vote in major decisions, like selling the building, or moving the majority of assets. Jesse is calling these "doomsday questions". According to Phillip even that would be too much based on the investors he's been talking to.
  • The bottleneck on EBPREC's side is timing. Ojan and Noni need to talk to their board. Ojan said the earliest they could give an answer is Aug 22. I think he may have said Aug 22 because there will be delegates meeting that week (next week) on Thursday. We should find out when their board meeting is, and then schedule ours right after. I would assume that EBPREC would fold us into their system of community owners. Haven't said anything about that, but that is how they typically work. I would like to see what that would look like
  • Ken - I would suggest reaching out to Ojan with that question now
  • Patrik - a lot is spelled out in their public bylaws. Designed to be understandable for lay people. I encourage everyone to look at EBPREC's bylaws. They include different types of owners. Could make existing communities community or investor owners. Could have a seat at the table.
  • Yar - very similar to people power solar in the past. Magical thing they also do of the cartoon bylaws.
• Ken - those not in loop, advantage of EBPREC, is they have the funds in hand. No investors
• Patrik - whereas Phillip's City in Motion proposal would be 12% loan, probably resulting in higherrents
• Ken - not necessarily, Phillip is aiming for a higher level of activation. His model is on having it full, 80-85% utilization rate, to cash flow it. He builds in months of loss. I think he has been really thoughtful. Cant speak to the level of risk, given the rate is high. All the planning and work he put in is very visible, encourage you to ask him to share.
• Patrik - in terms of what's non negotiable, do we want to make the community in the building having some say in the building non-negotiable? Then that might make Phillip's proposal out.
• Cere - Paul Dresher is planning to put in an LOI soon. I rent space at their current location. Trust him as an entity, not the first day he has done this, has been doing this for a while.
  • Ken - Includes a theater group. They came to CAST about 10 years ago. They have the capacity to utilize the ballroom. Stability of their presence would do wonders for the bottom line of the space. Do not have a direct application yet. They are interested in learning how to coexist with the community there, not sure if that means everyone, but in good shape and well intentioned people.
  • Patrik - I believe they would offer current groups 2 years, but would like to subdivide the bocce court. Would make more sense to subdivide the space into more artist spaces. They are also a nonprofit, so it makes the sale more clean.
• Ajay - I understand that LOIs are not legally binding?
  • Ken - our version was not, but Phillip's is. The LOI will state generally how quickly you need to respond and move to a PSA ("purchase of sale agreement"?)
• Patrik - how worried would you be with EBPREC giving their proposal by Aug 22? Seems very last minute
  • Ken - I wouldn't be. The paperwork is between experienced attorneys. I do not want to minimize it, but very this would be standard. The delays usually are by getting money available, and they can wire the money so that is not an issue.
• Patrik - timeline still uncertain. last we heard from foreclosure agents is 5 days before auction, Yesterday was the first day they could set an auction date. Folks at omni should check the mail. [Mail was checked and no letter received]

post CAST office hour discussion

• Azadeh - for us to come to our non-negotiables, we should work on what is really important to us once we let go of governance.
• William - Would like to come back to my prior proposal - making an exit plan for Phillip, where he will have to abide by, allowing us to buy him out if it meets a certain criteria.
• Paige - EBPREC does restriction on sale, must be to an indigenous land trust at below market rate. We could use that as a model.
• Jake - since Ken isn't worried about waiting til Aug 22, then I don't think we should be worried. a 12% loan is an exploitative rate. Any lender demanding 12% isnt going to agree to limiting the sale. Seems clear we should pin our hopes on EBPREC.
• Paige - i agree EBPREC has the best proposal, but Phillips proposal is in our court right now, whereas we are waiting on EBPREC.
  • Yar - I don't agree there's nothing to do with EBPREC. Planning an onsite Thursday - we could strategize what questions we are wanting to ask them then.
• William - there's a lot we are taking from Phillip at his word. Realistically, there are there deadlines that are pressing. We could communicate that we are waiting til the 22nd to both him and Paul. Also should ask Paul to share a proposal.
  • Paige - lets check with Jesse to confirm whether the 22nd is enough time to finalize.
• Yar - Main thing I was agreeing to, one of the decisions the delegates should be deciding on right now, is how long is Omni willing to wait? We should game it out with a flow chart, day by day. I.e. if we don't hear back by EBPREC by Thursday or Friday, then do [ ]...

proposal on how to collaborate online

• William - we should have a contact person for all of the buyers. And trello cards for each buyer's conversations. To be organized. Then communicate the next message internally.
• William - Alternatively, we could have two threads for each proposal. One for internal discussions and one with the buyer party.
• Azadeh - I think Trello is a good option so people who can see who are doing what
• William - I'm seeing a ton to read from Patrik and Phil, feel hesitant to jump in.
• Paige - worried it'll be hard to get people on board in time. What about emails, and texting someone if there response to email is urgent?

Wishlist

• Yar - security over the doomsday questions, but also not subdividing the ballroom. I remember in looking for prospective buyers in 2016, a few people talked about turning the ballroom into a bunch of offices. I think the ballroom is such an important piece of Oakland, at the very least should be a deed restriction
  • Cere - would never have thought anyone would want to do that
  • Ruby - Yea I like this, by requiring ballroom open as an events space, a
• Azadeh - Ken suggesting we set dates - come up with a deadline, and then communicate that deadline to everyone. Can we agree to do that now? What time frame after Aug 22nd?
• Azadeh - what do we want to sustain in the space. I'm hearing, the ballroom staying a ballroom. What other things do we really want? Give everyone our best case scenarios, then in their court to give their best case to us. Gives a chance for everyone to share what they can work with and what they cannot. We did not know we would have this opportunity.
  • Yar - no cops at the building, deed restriction
  • Paige - something preventing a flip
  • Patrik - everything we put in the bylaws, can be changed, so don't think we are able to control things like that
  • Paige - I've been confused about that. Was a back and forth - I thought something like restriction of sale in LOI could get replaced by directors, but then Phillip said that was not true, it would be legally binding. If that's true, how do we secure things like this? A deed restrictions?
  • Patrik - anyone here know more about them? [no]
• Azadeh - I loved hearing about native land restriction on sale [EBPREC]. We are all saying we don't want it sold out in non-community scenarios. What would the alternative be? I.e. native land if not to the community.
  • Ruby - Phillip does have objection from any involvement from the orgs that are here, and any restrictions on making his lender's money back.
  • Cere - don't blame him because I wouldn't lay down that much money without control of it. But also why I would prefer going to someone with experience behind this, who has history of hedging bets like this.
• Paige - another avenue, is board appointees along EBPRECs model
  • William - I think its worth asking about appointing board members, but does add more risk if trying to utilize money to make money back. According to him, I think building in an exit within 6 months to 2 years. Says he wants to get it back in the hands of the community. Does Not necessarily build in any risk.
• William - another wish item that cooking food in building becomes possible, with food distribution still going on.
• Patrik - I would want some involvement of current people in the building in governance. One idea was one elected board member. Jesse's original proposal was passive directors, no voice in day to day, but do get ability to veto "doomsday" questions. Phillips thought that was too close to having delegates having control in building. I gave other ideas but still not receptive. He's willing to put restrictions on sale of the building, but not have a passive director to have a say on it. To EBPREC, I would like to know if we would automatically join one of their ownership classes in their coop. Resident owners, community owners... Would love some more people to put eyes on it. Lot to digest, not sure how it plays out in practice
  • Yar - because they are cooperative, traditional way is you own a share, i.e. can get dividends as an investor owner. EBPREC has alternatives, where instead of putting up money, you can be a stakeholder in other ways, as in ways of being a shareholder in the cooperative, having some vote in how its run. There's also a board and staff employees. They are ultimately accountable to the owners. Omni currently does have an owner group of some kind, a couple years ago Kai and I created an omni owner group to be a constituent. Don't know status anymore.
  • Patrik - 5 elected board directors, elected by different ownership classes.
• Patrik - I do think we should pass the LOI Jesse wrote, that includes passive directors to Paul. In mechanism with passive directors, I think we would end up with a small number of them, no need for every org in the Omni to have a passive director
• Azadeh - In the end I would like it to be there for the community. I'll come up with better wording. Thank you all for all this continued work but have to leave now.
• Yar - Scenario I'm nervous about with EBPREC, is making too many demands to them, given they are waiting for Ojan to convince the board. Especially given the history, things that smell like reluctance will seem like one of the things that could poison the deal.
• William - I think we should ask questions about what their governance structure proposed would be in their words.
• Cere - confused about Ken's comment about debt. Should we care about whether we would be inheriting their debt? I guess in the sense of it we stand to gain something if we were to leave?
• Paige - when Paul submit an LOI?
  • Cere - he wants to talk to us. Cause a lot of work on their end. He's asking whether omni would be willing to work with them. The thing he is attracted to is the ballroom. Actual theater space is inside a room. A big bottleneck is he can't even build out the collaborations he wants. Super excited about the fixit clinic. I think he is flexible about how he sees his art program. Don't think he falls into the bottom line capitalism thing.
• Patrik - agenda for Thursday?
• William - ask Phillip what his pressures are for the timeline. Make sure we are continuously talking to him. He's also been down on his luck recently, with car and housing and personal loss. Lots of musical equipment, music nonprofits.

End of Meeting

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