Q: Is this an official investment opportunity?
A: No, we are exploring the idea of creating a community-based investment cooperative to help purchase Voit Farm and we are strictly in the “information-gathering” phase right now. None of the numbers used to describe this opportunity should be viewed as a promise for financial return or any assurance that this opportunity will actually materialize.
Q: How would the investment cooperative be structured?
A: There are several ways to structure an investment cooperative and we are discussing all possibilities right now with attorneys. One option is to sell shares in the co-op for a given price via a Private Offering Memorandum and a Subscription Agreement. Then profits would be distributed according to the quantity of shares each member holds, but each member would still have 1 vote, regardless of how big or small their investment is.
Q: How could the co-op realize a profit?
A: Voit Farm is currently listed at $11,500,000 for 65.6 acres of land. If all 65.6 acres are considered to have monetary value, the price per foot would be: $11.5M / 2,857,536sf (i.e 65.6 acres x 43,560sf/acre) = $4.02/sf. We are currently in discussions with partner organizations that may contribute financial resources for the wetlands and urban agriculture sections of the farm (see land uses) to meet their conservation and sustainability goals. We share these values and would like to limit development to only the southern 12 acres of the farm, to preserve as much virgin soil as possible. If all partners were willing to contribute at the same $4.02/sf price, the investment cooperative could purchase the developable land at this wholesale price and realize a modest profit when the land is resold to affordable housing developers.
Q: What price would the developable land be resold at?
A: This is still to be determined, but the land would likely be resold to developers on a sliding-scale depending on the benefit of their proposed project. The below table shows the current market value for land in Madison, WI:
|Land address||Price per SF|
|724 Spruce St||$28.7/sf|
|1907-1909 Dondee Rd||$14.74/sf|
|6410 Driscoll Dr Lot 31||$13.97/sf|
|3714 Portage Rd Lot 10||$17.07/sf|
As is shown above, land prices in Madison generally range from $10 – $20/sf. If the investment cooperative purchased land at $4/sf and resold it at average of $5/sf, it would realize a 25% return on investment. However, the more likely sale price would be $0/sf (free) for projects that serve extremely low-income households and range up to $8 – $10/sf for retail or moderately priced housing.
Q: What value proposition could we offer developers?
A: Other than a below market sales price, there are a number of other features we could offer developers that are quite attractive. First, we would likely work with the City and our landscape architect to map and sub-divide the developable area, so parcels are conveniently packaged, zoned and ready to go for development. This removes a significant amount of legwork/risk for developers. Second, because affordable housing developers rely on outside funding sources such as grants and tax credits, we could offer long-term site control while they apply for funding. In other words, we would sign 12 – 18 month purchase contracts with developers, contingent on them receiving an award. If they do not receive an award, they would be let off the hook and sale would not go through. Therefore, it’s likely that some but not all of the parcels would get sold in the first year. Then we would repeat this the following year until all parcels were sold. Long term site control is a major hurdle for affordable housing developers because most Sellers wish to sell their property right away.
Q: Why should I participate in an investment cooperative?
A: In general, co-ops are the great equalizer. By working collectively, co-op members can participate in opportunities that would typically only be available to very wealthy or well-connected people. Furthermore, co-ops often value much more than just profits. An organization made by and for the people will generally prioritize many social and environmental goals–the Willy Street Co-op is a good example. The nonprofit working on this project has spent many months carefully considering its core values and will make sure that all project stakeholders live up to these commitments.