1. This project was
started in Summer of 2014 by Royce Hamer who was helping
some friends and family obtain organic food from local
Soon after, Jim Namaste started
assisting with both organizational development and web
presence. Jim's was interested in advancing the concept
of co-operative organization by increasing member
collaboration with the new technologies.
knew a family that owned a farm property who were
interested in selling.
OFC's first goal was to
organize and recruit enough members to obtain the equity
capital and loan that would make it possible to purchase
the farm. This was done by establishing a co-operative
form, a multi-stakeholder co-operative, with one class
of members, the land-owners, who would each own part of
the property (land-owner positions or LOP's).
In time, it became clear that traditional financing
organizations, such as banks, were not likely to loan
the necessary funding because of the unique nature of
However, by early 2016 the
group had grown enough to be able to attract private
lending. Unfortunately, a dispute arose among the
members regarding the property that was targeted for
purchase, which setback the group's progress. Even so,
the group continued to grow slowly.
4. Then, in
early 2017, the owners of the targeted property decided
not to sell, and suddenly a new property had to be
Royce spend considerable time looking
for another farm and in April found the property at 2692
#9 Haldimand Road, York, Ontario N0A1R0, which is the
most attractive value Royce has found since the project
By mid-May, after some back-and-forth, an
offer was made by Royce, representing OFC, that was
accepted with a purchase price of $1,277,000, a deposit
of $50,000 and a sign-off date by May 29 with closing
scheduled for mid-June.
5. At that point we
started to increase efforts to bring in more land-owners
as interest increased due to the fact that an offer was
in place. Modest Facebook advertising was started that
started to generate excellent results.
early 2017 the organization had assets totaling about
$100K in cash assets, or cash commitments, plus about
$200K in purchase notes. However, when the first
property was taken off the market three persons took
out cash totaling as much as $55,000. Those funds
were replenished by mid-May in part due to Facebook
Property Acquisition and Financing
1. As negotiations took place to acquire the
property, Royce had been in touch with a mortgage
broker, Justin McIntyre, who found at least two lenders
who were willing to loan the balance of the purchase
price, depending on the outcome of a final appraisal.
The acquisition would proceed as follows:
Purchase price is set at $1,277,000 (2) Sellers hold
a first mortgage for $527,000.00 (3) Lender holds
second mortgage for $700,000 (4) OFC will pay $50,000
down plus ~$40,000 in closing costs
included equipment with an approximate replacement value
estimated at $90,000. [Both Royce Hamer and Richard
Archambault, a member of the Co-op's Organizing Board,
are experienced equipment appraisers.]
2. As of
May 19, 2017 the property was appraised at $1,185,000 by
Bill Boros, AACI, P.App., AIMA of iAppraise, Oakville,
Ontario L6M 0K8. This appraised amount is therefore
$92,000 less than the purchase price.
the appraisal did not account for updated improvements
worth at least $25,000 or more that were made since 1998
AND it did not include a value for the equipment.
This omission was pointed out by the sellers' agent
and evidently occurred due to some miscommunication.
In any case, in practical terms, the purchase price
and the appraisal, once corrected for the omission of
equipment and updates are quite comparable.
or about May 25, the lenders, not being informed about
the appraisal issues told Mr. McIntyre that the group
had to increase their equity stake by as much as
$150,000 to $200,000.
Suddenly, there were only a
few days left to complete the property purchase. Several
people sprang into action and by May 27 close to $80,000
in cash, cash commitments and LOP's came in, with
$10,000 of that coming from a person in Kansas, in the
On May 27 Facebook advertising was
increased and 2-3 inquires regarding the land-owner
positions were made for practically every hour that the
advertising was running.
In addition, 5-10
persons per hour were joining the Co-op's Facebook
Group. Of course, the follow-up communication and
related activities are time-consuming.
the Co-op holds ~$300,000+ in purchase notes assets, it
was decided to offer at least $100,000 of those notes as
five(5) bundles of $20,000 each with interest of 7%
calculated over 5 years.
We are also seeking to
finance the equipment for $75,000 again at 7% interest
over 5 years or less.
These offers are made with
highly secure terms and the Co-op is open to negotiating
some attractive premiums as well.
5. As of
today's date, with the additional cash that has been
raised and committed, the financing situation is as
The purchase price for the property
(1) Purchase price is set at $1,277,000 (2)
Sellers hold a first mortgage for $527,000.00 (3)
Lender holds second mortgage for $570,000 (4) OFC
will pay $180,000 down plus ~$40,000 in closing costs
Clearly, the group made a lot progress in barely
three days, demonstrating the power of this idea and the
demand that exists for this type of organization.
Assessment of financial risks
OFC is an
innovative Multi Stakeholder Co-operative project, but
that fact does not increase risk but rather mitigates it
significantly for the following reasons.
is an especially viable project because of the
innovative feature of having a large number of
land-owner members as one of the stakeholder classes of
With an ongoing traditional organic
farm operation, such an operation would have every
expectation to be financially successful as the premium
for organic food is close to double that of non-organic
One of the models that OFC intends to
improve upon is the non-profit organic farm example of
Farmshare Austin, which was established around 2011 and
has been quite successful in the Austin, Texas area. The
Austin metropolitan region has a population that is 1/3
that of the GTA.
multi-stakeholder co-operative operation OFC has
significant advantages as compared with both a
traditional farm operation and Farmshare Austin that
greatly reduce financial risks, assuming of course that
the Co-op is reasonably well-managed.
2. From a
business perspective, what most people do not realize is
that a Co-op such as OFC benefits from contributed labor
that is easily worth as much as $200K in cash flow. (For
example, think 80 persons contributing 5hrs/wk = 10
full-time personnel.) Further, Farmshare Austin has
proven that there are many individuals who will pay to
be trained to work on farms! This has been a growing
OFC already has a pool of more than 3,000
known supporters and prospective customers out of a
total targeted market audience of more than 250,000
individuals living in the GTA who have a strong interest
in organic food. An additional 1.5MM individuals living
in the GTA have a general interest in organic food and
OFC currently has about
100 land-owner positions committed and considerably more
persons who have very recently expressed interest in
participating due to the progress that has been made
toward acquiring a farm property. Within the last 10
days, with an advertising budget of about $200, OFC
identified ~200+ additional prospective customers and
recruited several land-owners who added $30,000 to
$35,000 to OFC's cash position and notes (bonds).
OFC has increased advertising to recruit additional
land-owners to obtain the needed cash infusion.
3. The organization is in place to move forward with
this project. What remains is to identify a lender with
the resources to help OFC complete the purchase of a
Such a lender, in addition to earning a
better-than-average rate of return, will also be able to
benefit by establishing a financial relationship with
OFC that can result in favorable future lending
opportunities for similar projects.
Jim Namaste, MPA, PhD Organizational Development
and Web Presence Consultant (Pro Bono)