Cohousing-L Mailing List: Re: Losses

[Raines Cohen (rc3-coho-L]

On Mon, Apr 21, 2008 at 1:22 AM, Nikki Sachs <nikkisachs [at] gmail.com> wrote:
>  I am a member of a cohousing group that made some decisions that ended up
>  with the group losing some money.   We are wondering if any others groups
>  have lost money and if so, how you managed to recoup those losses?  We are
>  hoping to roll the loss into a new project and wonder if others have any
>  experience along these lines or have other ideas.  Thanks.

Hi, Nikki. I can fill in some context for the list so that others can
give you some potentially more-useful recommendations, and recommend a
few resources. The following is all personal opinion as an outside
observer, not based on inside information from the group. I have not
done any work for the group, although as a regional organizer I have
cheered them on from the sidelines and coordinated events like a Green
Festival booth where they participated and contributed.

Nikki's group is in Northern California. It started with a particular
site, and spent significant funds on an option on that site, and on a
cohousing consultant for development-related services, working more
than a year.

The group wanted to "save money," so it pursued self-development; a
cohousing professional firm was invited to become a development
partner but declined, based on capacity limitations combined with the
small size of the project limiting the potential return and making it
riskier.

The group walked away from the site, and was unable to get a refund on
its option, after doing lots of work to secure entitlements, based on
a feasibility study that said there would be no way to sell the units
at market prices if it built a unit mix suitable to serve the needs of
the group. The change in local/regional/national market conditions was
a factor, as well as group dynamics that made it difficult to gather
sufficient information to make effective decisions and to work
effectively with its advisors to build on the strengths of each.

The group had set itself up as a Limited Liability Corporation (LLC)
for the purposes of investing together to acquire the property and
start the development process. Members have invested tens of thousands
of dollars per household (what I sometimes call "5-digit money",
versus the 4-digit money that typically goes toward search efforts and
the 3-digit money for workshops and 2-digit money towards dues)
towards these "sunk costs" that have no (as far as I can see)
potential value towards any future project it pursues; fortunately, it
also spent money on workshops and group-infrastructure development
that can serve it with another site and, with full-group and committee
meetings happening very frequently for a long time.

The group is now trying to reconstitute itself as a site-search group
and is engaging professional facilitation help to make difficult
decisions around site-search criteria and whether initial members have
any chance of recovering their investments. It has no marketable
assets with value to anyone else that I can see, but it does have
potential to "keep the engine running" and work together to find a new
site that it might be able to develop.

The big question to me is whether the benefit of being an
up-and-running group that's done the hard work together overcomes the
handicap of starting with a significant deficit. I know I would
personally feel reluctant to join a group knowing that it could only
consider a project large and profitable enough to absorb these "sunk
costs" in its budget. I know many people in the group and would love
to see them succeed... for their own sake, as well as for the
cohousing movement, regionally and nationally.

The one example that came to mind is Mosaic Commons in Massachusetts,
which is under construction now after what seems like nearly a decade
of a site-search process including loss of a seemingly-secured site a
few years back. Can anyone there talk about what kept the group
together and how the funds spent and invested were accounted for /
affected the final project's budget?

Perhaps members of other groups who have learned from their failures,
or found success in this realm, can comment?

Raines Cohen, Cohousing Coach
Planning for Sustainable Communities (at Berkeley (CA) Cohousing)
Northern California Cohousing Regional Organizer

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