Eesti Maja – Estonian House - a Business: Eesti Majandus Klubi Esimees. Est/Eng. Eesti Elu
To determine the best course of action for a new Estonian House it is useful to think of it as a BUSINESS. It has a business mandate “to be financially self sustaining and operate without a subsidy”
When evaluating the opportunity presented to us on Madison Ave. we should analyze it in two parts:
1. Is it a sound business decision?
2. What is the best way to finance this acquisition.
So far, we have not been presented with relevant numbers pertaining to the investment decision. We do not know any details on the costs of acquisition, costs of construction, operating costs, carrying costs, taxes et al.
What we do know is that the facility is restricted to 23,000 square feet, with 5,000 sq. feet available for commercial leasing. The cost of the facility including acquisition of 11 Madison Ave. and the existing parking lot at 7 Madison Ave. is estimated at 18 million dollars. This does not include fit-up costs for the facility should we wish to have specific uses e.g. coffee shop, bank.
We also know that there are restrictions imposed by the city as a condition of sale for building on 7 Madison. Two thirds of the space is to be a park/parklike space with a pass through to the adjacent property. We also know that building on 7 Madison will be restricted by the two subway tunnels underneath the property. We do not know the restrictions both physical, and time wise that this will impose upon the project. There is a twofold risk associated with this constraint. Setbacks may reduce the size of our facility footprint and construction timing may be impacted by restrictions imposed by the TTC. Construction delays that are not attributed to the contractor will result in significant increases in construction costs.
IS IT A SOUND BUSINESS DECISION?The key question: We have an 18-million-dollar cost. WE have 5000 feet of commercial space which we intend to rent out to permanent commercial tenants. And we have 18,000 sq. feet of Flex space meaning space to be used by our community and space that can be marketed to the public.
Is there a detail costing and a financial plan that shows that our 18-million-dollar investment is financially sound? We know the current Eesti Maja has an operating cost of $450,000 per annum. We know that the leasing tenants in Eesti Maja pay approximately $200,000. Rental of flex space to non-Estonians adds about $100,000.
Industry standards should enable us to determine building construction costs, maintenance costs, administrative costs, taxes, security, marketing. It should be relatively straight forward to determine the probable rental income for the available space. Based on availability, market rents and space utilization.
A developer would have a financial model that allows us to examine options? How much more rentable space do we require to make the project feasible. Is there an optimal mix between commercial space and flex space? Have we identified potential clients and defined our incoming revenue streams. A basic cash flow model would prove useful and identify our risk factors.
Do we have a financial model that allows us to examine options? How much more rentable space do we require to make the project feasible. Is there an optimal mix between commercial space and flex space? Have we identified potential clients and defined our incoming revenue streams.
Comparative analysis suggests that we should be carefully examining the project. The cost of our project is $782 psf. High end office space on University Ave. (800 University at the corner of University and College) is for sale at $355 psf.
It is very difficult to build a Business case for the Madison Acquisition.
WHAT IS THE OPTIMAL FINANCING OPTION:What is the source of funds:
1. Sale of Estonian House – rollover of proceeds
2. Equity investment by Tartu College
3. Equity investment by Estonian Foundation
4. Equity investment by Estonian Credit Union
5. Mortgage by Estonian Credit Union (syndicated)
6. Private new share capital (new shares to be issued by the New Estonian House LTD.
It is highly unlikely that the sale of Estonian House will raise sufficient funds to pay for the new project. Is there a commitment by the parties to the agreement to assume an equity in the new project? If so how much? And on what terms.
If mortgage financing becomes a necessity, what will be the monthly payments? Is our projected cash flow from the new Esto House operations sufficient to cover these ongoing costs? What are the costs associated with various levels of financing? At what level does financing become an unacceptable risk? At the present time we have an Equity Line of credit with ETCU of $250.000. From our current revenues we are able to pay the interest costs but we lack sufficient funds to pay down any principal.
Much has been made of the concept of “bridge financing” in the event of the sale of Estonian House. It is obvious that the interest cost of any loan cannot be covered by operating revenues and would have to come from a draw down of our equity. This further increases the gap that would have to be financed by other sources.
How ready is our community to support a fund-raising effort, a new share offering, for the construction of the Madison Property? (risk assessment: a large segment of the population that is most able to lend financial support to the project is reluctant to do so.)
Cash flow constraints: We can entertain the concept of a leaseback option for Estonian House until the Madison Project is occupancy ready, but this is a huge expense on a razor thin operating budget. How do we finance this cost? Again the use of bridge financing is not without its costs. If we cannot afford to lease back the entire building should we lease back specific parts. Doing this will also bring to the forefront that many users of space in Estonian House are not paying for it now. Can we justify paying “rent” for space which we give out for free. Alternatively we could seek accommodation elsewhere such as the Latvian Cultural Centre.
Väino Einola
Eesti Majandus Klubi Esimees.
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no share - doubly excluded04 May 2017 14:34
"It’s not about being invited to the table; it’s about not being included in the process at all."
and
"The arrogance is so forceful that they feel entitled to make the decisions for us and everything presented to date validates this very point."
I'm tired of these "token" meetings where apparently individual shareholder votes count. All the pre-chosen candidates had 2000+ votes (aka ECU predetermined votes ... no indication that the bank had any intention of considering people nominated at meeting) and then a drastic drop for the candidates nominated at the meeting 600+ for Väino Keelmann and 300+ for Piret Komi, Ingrid Tanner and Rob Vessmann. These last group of nominees should be put in place as the oversight committee for the 4Orgs, since they need oversight -- based on their actions to date, I don't feel that I can trust them.
Our 4Orgs "leaders" don't get it. They are the ones who are destroying our community. Build by inclusion! This is not your private club.
Building new at Broadview03 May 2017 08:04
Why won't you address the option of gutting a good chunk of the old House at Broadview and building new and modern? People prefer the old location for practical reasons (parking, commuting from afar, it's in a more calm neighbourhood). The people will financially support this.
The 3orgs have alienated a good portion of the population by forcing a poor location (a limited build option on a subway system) on the community and it will be very, very difficult to get capital campaign support from a good number of them.
To Ilo Puhm03 May 2017 01:06
Your comment on the analysis from the Eesti Majandus Klubi is disingenuous and demonstrates the Estonian House’s need for new leaders. You write: "In addition to assessing the viability of the Madison location, the business case for remaining or leaving 958 Broadview also needs consideration". You go on to list, as a business case, some personal anecdotes and conjectures.
Below, to your point, are a news report of the meeting in 2012, when the resolution to extract maximum value from Estonian House was presented to shareholders, and reaction to the 2017 "town hall" talks by Puhm and Remmel, who asked shareholders to sell it off. Plus ça change. The Greek concept of idicocy explains the failure of the EM Tulevik Committee to respond to questions.
"Mujale kolimise puhul tuleb mängu rohkem kui ainult uue sobiva asukoha leidmine, mis pole kaugeltki lihtne... Südame häält ei tohiks alahinnata. Olemasolev maja soetati mitte ainult rahakottide toel, vaid ka südamete sunnil.
[Einola: “How ready is our community to support a fund-raising effort, a new share offering, for the construction of the Madison Property”?]
Võimalikke kompromisse on välja pakutud kaks. Arhitekt Guido Laikve kava teostada olemasoleva maja ümberehitamine järk-järgult, nii et tegevuses ei tekiks katkestust, on leidnud palju positiivset vastukaja. Miks tulevikukomitee seda võimalust arvestatavaks ei pea, sellest võib olla kõneldud, KUID KÕNELUSTE TULEMUSI POLE AVALIKUSTATUD. ..
Ei suuda ka aru saada, miks on nii kergekäeliselt hüljatud Läti Kultuurikeskusega ühinemise mõte....
Koosoleku juurde tagasi tulles mõjus mõnigal määral häirivalt, et kuigi ESITATI HULGALISELT ASJALIKKE KÜSIMUSI, olid need suunatud VALEDELE ISIKUTELE. C&W esindajad olid sunnitud korduvalt seletama, et NENDE EKSPERTIIS PIIRDUB KINNISVARATURU TUNDMISEGA. Enamusele küsimustest PIDANUKS vastused andma EM Tuleviku Komitee, mille liikmeskond tunneb eesti rahva soove ja vajadusi".
"to Puhm and Remmel -AGM04 Apr 2017 10:56
Kia Puhm faced shareholders who came to find out what had happened to the last deal they had agreed to, and she said only "the numbers did not support our going forward", while projecting on screen the same "Progress to Date" visual used in 2014...
What should have been on a slide are the exact reasons, given by what authorities, their relevant qualifications, and on what basis, for deciding as far back as 2009 to treat the EM as "obsolete"....
Zoning height and use restrictions, neighbourhood opposition, and heritage designations have been issues for “development” at the Estonian House and Tartu College/VEMU locations. They are a regular part of the cost and the time frame (part of the huge cost of financial management), built into the projects of developers. Estonian House has been embroiled. To embroil is to involve deeply in an argument, conflict, or difficult situation; to bring into a state of confusion or disorder. Was it necessary? Is there a better way out?"
Your question, "Who are we keeping the [Estonian] House for anyway?", and your example of the Pistol Club, are puzzling. If it were as easy to make possible their accomodation at Madison as you say, why did David Kalm suggest they travel to Seedrioru? What does your "guess" as to how other community needs could be met in the "potential solution" of the Madison project communicate about the "we" of your question and the “dubious honour”, as you put it, of your experience at Estonian House?
The Greek concept of “idiot” refers to a “private person”. An idiot in Athenian democracy was someone who was characterized by self-centeredness and concerned almost exclusively with private—as opposed to public—affairs. Idiocy was the natural state of ignorance into which all persons were born and citizens were made through education. Declining to take part in public life, such as democratic government of the polis (city state), was considered dishonourable. Over time the term "idiot" shifted away from its original connotation of selfishness and came to refer to individuals with overall bad judgment.
In a topsy-turvy turn of events, with the last resolution, the shareholders of the Estonian House non-profit corporation were asked to surrender all decision-making, and so they have now been denied the honour, or in modern terms the right, to participate in public life, by idiots.
ESTONIAN HOUSE NEEDS A NEW LEADERSHIP.
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