FAQs
Why do we need to relocate?
All of the goals are in keeping with New Pioneer Co-op's mission statement, which we take very seriously:
Where is the new location?
How big will the new store be? What features will it have?
Will we have enough parking?
What is the cost? Can we afford this?
What is the timeframe?
Will we handle this project by ourselves?
What exactly do you want us to approve?
Can you provide more details on the location?
Can you say more about the building features?
What other sites did you look at?
Will the new store feel like a big-box supermarket?
Are we growing just for the sake of growing?
Have we chosen our partners?
What expertise will we require of our partners?
What due diligence have you done on the developer/builder?
If this will be a multi-use building, who will be the other tenants?
What potential problems might stop this project?
Can you share details of the financial model?
Will we own our share of the building outright?
Will there be a TIF or other public funding?
What financial protection would we have?
What will we do with the current store?
Why not open a third store?
Why not wait till the economy picks up?
How confident are we about sales in the new location?
What about the risk of a competitor like Whole Foods or Trader Joe's coming to the area?
How will this outlay affect our opportunity to purchase the Coralville store?
Will we stop paying member dividends? Making charitable contributions?
Why do we need to relocate?
Our relocation/expansion plan has important strategic goals, including:
- Leave the flood plain.
The possibility of a flood is a strategic risk; a flash flood could wipe us out overnight.
- Better serve members.
Our Iowa City store is at capacity. The move will enable us to relieve congestion, stock a greater variety of local items, and provide more convenient shopping.
- Provide a safe and enjoyable work environment for staff.
The new store will alleviate many undesirable working conditions prevalent in the Iowa City store, such as the absence of a loading dock and accessible storage.
- Operate a more environmentally-friendly store.
Our current building is nearly 70 years old, poorly insulated, and not at all energy efficient. A new facility will provide meaningful gains in energy efficiency and sustainability.
- Proactively protect against competition.
If we do not meet the increasing demand for natural, local, and organic products in this community, someone else will. A modern facility will position us well to either deter or combat competition from chain store groceries.
All of the goals are in keeping with New Pioneer Co-op’s mission statement, which we take very seriously:
“New Pioneer is a cooperatively owned business, fully serving the needs of the natural products consumer. We emphasize high quality, fair prices, and product information. We are an environmentally and socially responsible member of the community we serve. New Pioneer’s mission is to serve the needs of its members and to stimulate the local agricultural production of natural and organic foods by providing a market for such foods. The Cooperative fully recognizes the value and dignity of work and shall place a high priority on the health, welfare, and happiness of all its employees. The Cooperative shall strive to set a community standard for the best possible working conditions, training, wages, benefits, and opportunities for advancement for its employees.”
Where is the new location?
We propose to house the new store on the ground floor of a multi-story, mixed-use building to be constructed at the corner of Gilbert and College Streets, a location well outside the floodplain.
How big will the new store be? What features will it have?
We are targeting a store with about 20,000 square feet of gross space (14,000 sq. feet of retail space). By way of comparison, our Coralville store has 14,000 sq. feet of gross space (10,000 sq. feet of retail) and the current Iowa City store has 9,000 sq. feet (6,000 sq. feet retail). We hope to build a modern facility with:
- Abundant natural light and wide aisles
- Enough space for a sit-down indoor-outdoor cafeteria
- Larger sections for produce, bulk, and meat/seafood products, comparable or better than what is available at the Coralville store
- A larger classroom for cooking demonstrations and other gatherings
As the plans are still evolving, we do not have a schematic or blueprint to share. We welcome any input you might have on desirable features.
Will we have enough parking?
The Board recognizes that parking is important – the vast majority of our members come to the store by car. The Chauncey Swan parking garage, which is adjacent to the site, will be the main source for parking. Any store design will include direct access from the ramp to the store (e.g., a walkway or vestibule) directly from the College Street level of the ramp into the store. There will also be some on-street diagonal parking – we estimate 8-10 spaces. More discussions with the City, which has been quite receptive, would be required to finalize parking plans. We will work with the City to guarantee that 80-90 spaces in the garage, right at the College Street level (adjacent to the store entrance), be designated as short-term parking and that some of these spaces be reserved for New Pi patrons. We will expand our bicycle parking, some of which may be covered.
What is the cost? Can we afford this?
We anticipate the Co-op’s total cost for the project (building, equipment, initial stock, and so on) to lie between $7.5-8.5 million. As we have notified you periodically, the Co-op is in sound financial shape. We have done extensive financial analysis and believe that we can afford this outlay. Of course, we will have to borrow money. Pending approval of the project, we have not decided on the specific avenues (e.g., mix of member bonds and bank loans). We have had preliminary discussion with financial institutions who concur that our plans are sound.
As confirmed by two market studies, we do anticipate that gross sales will increase if we move to a larger facility. However, our ability to pay back loans does not depend on generating large amounts of new sales. Even if sales remain flat, we can comfortably manage this move, although money will be tight for the first few years.
Cash flow and profit for the first few years will be lower than current levels as we digest the costs of the move. Even with very conservative assumptions about growth and margins, we project generating enough cash to comfortably service the debt.
What is the timeframe?
During its meeting in November 2011, the City Council made public its intent to develop this parcel of land into a mixed-use facility. The Council hopes to issue a RFP (Request for Proposals) in May 2012. If we are part of the winning proposal, construction will take another 18-24 months. Anticipating some slippages in the process, early 2015 is a realistic target for starting operations in the new facility.
Will we handle this project by ourselves?
The Co-op is not in the business of developing (financing or constructing) property for other uses. Moreover, doing so requires experience, knowledge, and financing beyond our capacity. Thus, the only viable option is to partner with a developer. Within a partnership we will still have control over the design of our store space, on the ground floor, and would own that space once construction is complete. The developer would oversee the remainder of the project, including the financing, marketing, and design of the upper floors.
It is our desire to work with a developer who has a commitment to the downtown area and a vision with regard to environmental sustainability–someone who sees the Co-op and its mission as an integral asset to build upon. We also wish to be part of a building that contributes positively to the downtown, with its emphasis on locally owned, unique, and diverse businesses. Consistent with the City’s requirement for a multi-use facility, we would like to be part of a development that includes a mix of office space and housing for professionals or other long-term residents.
What exactly do you want us to approve?
We are asking for your approval to work with a developer or multiple developers to complete in-depth site investigations, planning, cost estimates, and various negotiations to determine if this development can meet our needs. And, assuming all details can be worked out satisfactorily, your approval authorizes the Board to enter into binding contracts. We cannot wait until later to ask you because making detailed plans and generating estimates takes many thousands of dollars and many months. No developer will complete a detailed plan until they have some commitment on our part. In short, we cannot move forward as part of a development proposal to be considered by the City in May 2012 without first getting the approval of our members. Finally, your approval authorizes investigations of feasibility and suitability only for the specific site under consideration.
Details - Location, Building, and Partners
Can you provide more details on the location?
The site comprises several parcels, three of which are owned by the City and one owned by MidAmerican Energy. One parcel currently houses the Iowa City Bicycle Library (where John Wilson’s Sporting Goods used to be); two other parcels (the old bus depot and a parking lot) are currently vacant. We chose this location because it is in the downtown area, a criterion that many of you endorsed during our open meetings in June 2010. Second, our market research indicates that this is the best site among several other prospective sites that we considered. Third, there is convenient parking next door in the ramp, which will be linked to the building. Fourth, it is difficult to find vacant space in or near downtown; except for the John Wilson Building, this site is a clean site that would not require major demolition or disruptions for existing businesses. Finally, we will also be right next to Chauncey Swan Park and the Iowa City Farmers’ Market. The three City-owned parcels, by themselves, are not enough to build a large enough store and allow for deliveries by large trucks. However, the project becomes viable if we also procure the fourth contiguous parcel (owned by MidAmerican) that is now occupied by a power substation. The City has been in talks with MidAmerican, which has indicated a willingness to move their equipment to an alternate site and sell the land. However, negotiations are ongoing and the terms of the deal have not been worked out yet. We will not move forward with the proposal unless all four parcels are made available for the development.
Finally, the Iowa City Bike Library has finalized plans to move to 700 S. Dubuque Street sometime this summer.
Can you say more about building features?
Environmental sustainability is an important criterion. Thus, we will work with the architects and the developer to include as many “green” features as possible. LEED (Leadership in Energy and Environmental Design) certification is a goal. However, we also recognize the financial side of the picture. Any evaluation will include the impact on the viability of the overall store and the project.
The building will be pedestrian- and bike-friendly, and designed to be fully accessible for the disabled. There will be street-level entrances to the store. There also will be space reserved for parking bicycles, hopefully including some covered parking spaces. The aisles will be wide enough for wheelchair access, and the building will be fully ADA compliant.
What other sites did you look at?
We considered several sites in and near downtown Iowa City. For example, we considered a proposal for re-development of the 500 block of East Washington Street, which included the property (now demolished) vacated by the Red Avocado. We also considered a proposed mixed-use development, initiated by the City of Iowa City, at the corner of Linn and Court Streets. Both of these proposals were given careful consideration but were ultimately rejected by the Board. Other properties further to the north of Van Buren were also considered. However, none of these sites had the sales potential of the proposed site. Many also posed severe logistical challenges. Some were too far away from downtown, others had issues with parking/access, and yet others disrupted the character of the neighborhood. When evaluating possibilities, we also took into account potential partners and their expertise in managing a large, complex project.
Will the new store feel like a big-box supermarket?
The new store will be a larger and more modern facility, but the fundamental elements that make New Pi so unique will all be the same. The staff will be the same, you will still run into your neighbors and friends as the customers won’t change, and the products will be the same. What will be different is that there will be enough room to meet member requests for additional products and services that our cramped Iowa City location has been unable to fulfill. With a large seating area we will have more space for conversation and gathering. And we will be very mindful of the aesthetic that we know and love in downtown Iowa City—both in our charming (but outdated and outgrown) Iowa City store and in the surrounding neighborhood.
Are we growing just for the sake of growing?
New Pioneer has existed at other places in town over the decades, and this is another step in that evolution. A relocated Iowa City location will actually be the appropriate size for our current volume and the continued growth of organic items. Any growth that New Pioneer might realize would reflect a larger share of the fixed pie of the local grocery market, a share that supports local food systems, local control, and sustainability more than any other grocer in the region. Given our mission, we firmly believe that our growth benefits the entire community.
Have we chosen our partners?
No. For the past several months we have had discussions with interested parties. For obvious competitive and confidentiality reasons, we cannot disclose identities or provide great detail at this time. However, we note that at this point, we have not signed an agreement of any kind with anyone, and much work needs to be done to flesh out a design, get price estimates, site improvements, etc. In short, this choice is yet to be finalized.
What expertise will we require of our partners?
We would like to partner with folks that share our two-fold commitment to downtown Iowa City and sustainability. We also would like them to have prior experience in building mixed-use and green projects. Solid financial standing is of course a given.
What due diligence have you done on the developer/builder?
We are in the process of collecting data on the financial, managerial, and technical capabilities of potential partners. Obtaining a viable business plan and confirmations of financing are two key parts of this process. Particularly for the architects and builders, we will look to prior experience in constructing multi-use facilities that incorporate grocery stores and in constructing green buildings.
If this will be a multi-use building, who will be the other tenants?
In order to encourage compact urban development, Iowa City’s zoning code requires that any new building in the downtown be multi-story. However, the exact nature of the other uses has not been completely agreed to by all. The concept that we are exploring calls for office space in the two floors above the store. The higher floors will have apartments designed for professional, long-term Iowa City residents.
What potential problems might stop this project?
We cannot move forward if you as members do not give us approval. There are several other factors that could derail this project even if you give us your approval. First, as stated earlier, we cannot move forward unless there is some agreement for MidAmerican to vacate their plot. Second, we (and our partners) must be successful in our bid with the City. Third, we must be able to work out suitable arrangements for parking. Finally, while we will perform all due diligence prior to submitting our proposal to the City, it is possible that sufficient financing (for us and/or our potential partner) may not come through, making the project infeasible.
Details - Financial
Can you share details of the financial model?
We cannot share many details as doing so would handicap us in negotiations and provide information to competition. Further, there are still many moving parts; we do not know exact numbers for most items. The unknowns include big-ticket items like equipment and smaller items like condo fees and parking fees. On the financing side, we also have made assumptions about the timing of loans and interest rates. While our assumptions are conservative, the values for these inputs into the model can and will change. We will refine the analysis further as more data become available. (Generating these data requires us and our partners to invest money in planning/making drawings and so on.)
Will we own our share of the building outright?
We are seeking a condo-type arrangement; thus, we will have ownership of our space. There will be a condo association for upkeep of shared space, utilities, and such.
Will there be TIF or other public funding?
As previously detailed, we will be partnering with others. The developer is the key person in this project as we are only buying part of the building. Clearly, as a major buyer, we have some influence but we do not make the decisions regarding financing, supplier selection, and so on. That said, if the public process places additional conditions upon the property (e.g., provision of low-income or affordable housing, environmental cleanup, use of local labor, or other requirements that may not be supported by the private market) the developer might seek public subsidies. This consideration will be part of a public process through the City Council and one at which the public will have opportunity to comment.
What financial protection would we have?
A project of this magnitude has multiple sources of risk. Bankruptcy or non-performance on the part of the developer is an obvious concern. Thus, we are seeking legal counsel on the best way to safeguard ourselves. At present, we visualize making a modest earnest deposit (in thousands of dollars). We also will have to execute a purchase agreement; here, we hope to specify that payment will be triggered only upon transfer of the property to us. However, the exact modalities of the contract have not been worked out. Any final contract will reflect the advice of legal counsel and will be structured in a fashion that mitigates our risk.
What will we do with the current store?
We have not made any decision on that front, although it seems reasonable to sell the current store and the former Bookery, which now houses our store managers’ offices. While we have assessed values, we do not have a firm estimate of market value. (This value can change dramatically in two years, when the sale might actually take place.) Thus, our financial models do not currently include any proceeds from the sale of this property.
Why not open a third store?
The Board considered opening a satellite store such as a 5,000-square-foot store in an outlying location. A satellite store could only stock a limited number of products. Thus, total sales or sales per square foot are not likely to reach levels comparable to our Iowa City or Coralville stores. Further, because of scale economies, the fixed costs of building and operating such a store are proportionately higher than the cost for a larger store. Our financial analysis indicates that such a store will not turn a profit within a reasonable period. In essence, making money on a new store means that we have to generate substantial sales over and above current sales. This possibility seems risky in our current economic environment. Moreover, a third store does nothing to remove the risk from a flood.
Why not wait till the economy picks up?
It is natural to wait until the future looks brighter before committing to a large expense. Fortunately, we have been spared the brunt of the downturn. We are financially quite healthy and this might be the most opportune time for us to get the project done at a lower cost when construction activity is lower and for New Pi to add further vibrancy to the downtown area. More importantly, there are only a few possible sites available in the downtown area. We have to move when the opportunity presents itself. To make full disclosure, we have been talking to the City for several months now to express our interest in this plot of land and to encourage them to consider a multi-use facility.
How confident are we about sales in the new location?
We have conducted two targeted market studies by independent firms with substantial experience with natural food and co-op grocers. The first, done about six months ago, examined several sites in and around downtown Iowa City. The Gilbert St. location dominated the surveyed sites. The second study confirms the viability of the Gilbert St. site. For our baseline financial models, we are being conservative and projecting sales below amounts estimated by market research.
What about the risk of a competitor like Whole Foods or Trader Joe’s coming to the area?
No matter what we do, there is always the risk that new competition will emerge and erode our market share. We are confident that our prices are competitive and that we offer value for the dollar. Thus, while we expect a dip in sales if Whole Foods or Trader Joe’s enters the market, we expect to get back to normal operations in short order. Further, competition will be watching our moves. Relocation will position us better to serve our members’ needs. After all, if we are not servicing customer needs, someone else will. Thus, it is reasonable to believe that the attractiveness of this market to competition would decrease if we were to relocate our store.
How will this outlay affect our opportunity to purchase the Coralville Store?
As we announced during the annual meeting in October 2011, we have secured an option to purchase the Coralville store for $2.65 million, five years hence. We are committed to this purchase and have set aside enough cash for this purpose.
Will we stop paying member dividends? Making charitable contributions?
As mentioned earlier, there is a chance of making accounting losses for a year or two after the new store opens. In that case, we are precluded from issuing dividends. We do not anticipate any cutbacks in our level of charitable contributions.
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