Event:2015/11/23 Fundraising
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Buy the Building / Until the Revolution - 23 November 2015
Attendees
- joe, yar, rob, dk
- remote-jenny, remote-Laura
Brewster
- when will we send the counter-proposal?
- yar thinks we should stop protecting his privacy and is going to openly refer to him by name from now on
- catch-up on existing proposal: open library of richmond owns LLC, so on...
- dk's main concern is that we should always be able to get a commercial loan to pay off brewster. he talked to 5 banks on the phone to get some ballparks. if we got those our monthly payment could be ~7k. high 4s to high 5s.
- rob: were you looking at 30 year?
- dk: yes
- argument about who knows what about what the proposal is or was
- joe: in practical terms it's 5%... we should go ahead and compare that to the banks
- dk: bank wants ... we have a 50/50 chance at getting an amortized 25y 5% loan. that's ~6k/mo. a 10-year term is reasonable - with a balloon payment at the end, or you can renegotiate at that point. fixed-rate.
- you pay as if it's a 25y mortgage but after 10 years you have to renegotiate. could be worse or better. because of inflation, the same dollar later is less. 6k in 5y is worth less than today. buying power is more upfront.
- anyway, you can get a 6k commitment. would probably take 2-3 months to consummate. you need pro-formas, our financial statements, rent rolls, operating expenses. all banks want that stuff. we could prepare a portfolio that would satisfy every bank's needs.
- to qualify for some grants, it's really similar. also small business or construction loans.
- every bank is evil. who owns who? it's dirty. no clean banks, except maybe coop CU. has a sheet with all this info. talked to clearinghouse cdfi (community dev stuff), self help federal, mechanics, western federal. contacted beneficial (no return) - they're the ones repossessing qilombo. bank of the west funds nuclear arms.
- SFH, Western & Mechanics do commercial loans. rob is more comfortable with this
- some have less requirements. clearinghouse person was really grilling david about our collective structure. "maybe if you were around for a few more years, but probably we'll want a guarantor". other banks were positive
- they expect break-even stuff from nonprofits. we haven't been around officially for 2 years, which is their benchmark. they say we're on the cusp, even with $1M down. others ask things like "how long have your tenants been in business"
- bookkeepers should be done in a couple weeks
- yar thinks we're better off with brewster than having a bank involved
- Laura: What is the interest rate range the banks were talking about? I'm asking becasue of justifiying a rate to Brew
- Dk: Mid-4's to high 5's (%), 25yr amortization, 5-10 terms w/ possible extensions
5% @ 25y = ~$6K/mo paying down principal & interest (for example)
- Laura: So, asking for 3.5% in our current counter proposal is bit low.
- What were the top 2 banks?
- Western Fed & Self-Help are looking the best, (and those aren both credit unions) WF is probably going to be the lowest/easiest from what I can tell so far.
- The thing about the rates is that we have been in business less than 2 years technically and this makes it tricky for banks to get lower than say the low/mid-4's, if we want a fixed rate and a reasonable term. <2y is our biggest weakness at this point, but it is not impossible, we are 'on the cusp' as I was told by 2 banks
- Laura: If we go with a bank loan maybe Brew would be our guarantor. Or giving us a loan to hold us over until we are 2 years old is another thing he would likely do.
- Dk: I think that's a good idea.
- Dk: Oh also, commercial loans are not quite as sweet as residential loans re: lowest rates, in general
- LAura: any insurance requirements on the loans? Can we get one with no prepayment penalty?
- No insurance req's, no prepayment penalty except for Clearinghouse CDFI only during the first 3-5 years on a long-term (30y) only
- Also no points on most and 1/4-pt on at least a couple (Have to look at my notes)
- CDFI wanted a guarantor, not the others (yet at least)
- what are you all trying to decide right now?
- Reading through jesse et al's draft response..
- LAura: IF he rate on the loan is about the same as the cost of capital in Brew's offer, then I don't see much advantage with going for the CU loan IF we have a pathway to owning the building. The monthly payment amount is about the same, but with the CU we will have no wiggle room - we dont pay, we get forclosed.
- yar: it's harder to get a loan without owning the building for collatoral
- Do you mean if we want to take out a loan to pay off the capital to Brew?
- yar: yeah...
- IF that loan would enable us to buy the building then it's the same as buying it from John. That's another reason why having a pathway to ownership is what we really need in the deal
- joe: i think brew's a great deal. hard to believe a bank would look favorably on our pro-forma right now. maybe in a few years... but we're failing right now. we've burned through a lot of money, we're about to be out.
- rob: typical for nonprofits
- dk: the early times are always the hard times. but for us, when your net is 15k/mo we don't even have the luxury of saving.
- rob: but that looks good for us!
- dk: showing we have a 20% margin above operating expenses makes them more confident. so look at our income, then look for a mortgage that pays just 80% of that.
- Laura: I think we should send the counter to Brew saying that we would like to set up a time ot talk about it soon. In the meantime we can pursue the top 2 possible loans so we have (hopefully) a backup ready to go if it doesn't work out with him.
- joe: yeah, our energy is going into this right now. let's get the proposal out the door and move on.
- joe & rob agree about sending the proposal
- laura: I am happy to actually do the sending. SHould I send it tomorrow?
- sure! thanks
- dk swears to god that he'll put the spreadsheet up
paying fundraiser
- are we still thinking of doing this?
- Laura: My friend didn't suggest any grant writer after I asked her a couple of times. She's really busy though and I can bug her about it at TG. We could also send out a request on our networks for someone to "apply" to be our grant writer.
rainin
- david could send them an email again
- last year was discretionary money. there's more money if you fill out the paperwork and go to meetings
- discretionary can be a quick check. no board approval.
- be ready to explain what we spent the last 10k on :)
ideas
- rob: we should beat the street and fundraise
- joe will work on hitting people up for specific things