Community invests in proposed West Oakland grocery store

On a warm Saturday afternoon, a group of young people tossed dice in front of Bay Area Liquors and Market on West Oakland’s San Pablo Avenue. Nearby, a few older folks walked or socialized along the street’s 3200 block, where the area’s trifecta of intergenerational community service organizations—St. Mary’s Center, St. Andrew’s Manor, and the West Oakland Youth Center, now closed—are located.

Across the way, about two dozen Bay Area residents stood around—and stood out—at the tiny, triangular St. Andrews Plaza. People chatted, occasionally grabbing flyers from a nearby rectangular plastic table. A few minutes before 3 PM, Brahm Ahmadi began laying out on the table and ground the on-the-go items—a frequent facilitator’s kit—from the back of an SUV.

Ahmadi has been holding meetings in West Oakland for over 16 years as a co-founder of the non-profit People’s Grocery in 2002, and before, working in environmental community organizing since moving up to the Bay Area from Los Angeles County. Now, Ahmadi was about to lead the group in a presentation and tour about how, for as little as $1,000, each person could buy some shares in West Oakland’s newest full-service grocery venture: Community Foods Market.

Ahmadi is able to offer the community direct partial ownership in a grocery store through what’s called a Direct Public Offering, or DPO. The financial process allows companies to sell their shares to the public without having to go through, or pay extra fees to, investment banks or brokers. Through a DPO, a company can sell either stock or debt. In the case of Community Foods Market, it’s stock. Specifically, 407,122 shares of it, at $2 each—for a total of $814,244 of possible community investment offered as of March, 2018.

Once it opens, the 14,000-square foot store will be located at 3105 San Pablo Avenue. Right now, the location is a gated site neighboring St. Matthew Missionary Baptist Church, with concrete walls overlooking stacks of wooden beams, a few parked boom lifts, dirt and some writing spray-painted on walls in the distance. But Ahmadi said, come January, the store should be finished and functional as a full-service market. That means it would have a deli, a cafe, a social hall and front porch—even though it would carry about a quarter of the products of a store like Safeway.

“Our objective is to engage the neighborhood and support them in making healthier food choices gradually,” said Ahmadi, “and that means carrying the products that they are familiar with and looking for.”

Ahmadi said they’ll carry a range of products, then push for customers to make healthier choices through education programs and financial incentives, like a 50 percent discount to customers who use CalFresh — a federal food assistance program through which low-income families purchase groceries — on qualifying fresh produce. The discount would be made possible by a grant Ahmadi secured from the U.S. Department of Agriculture. It’s part of the store’s focus on providing foods that are currently the least available in West Oakland—produce, dairy, meats, poultry and seafood—according to the offering memorandum, a legal document that lists the objectives and terms of investing in Community Foods Market.

Asked for a show of hands, about a third of the group attending the weekend tour identified themselves as residents of West Oakland, a group Ahmadi said he’s incentivizing to invest in the store through a financial assistance program. Remaining attendees said they were from other parts of Oakland, or nearby cities like Berkeley. Residents in those areas can still buy shares—any California resident can—but they don’t qualify for the subsidies like residents in the immediate neighborhood.

Between September, 2012 and January, 2017, Ahmadi had previously raised a total of $1,685,756 through five earlier DPOs of Community Foods Market shares.

From 2012 to 2014, the campaign raised $1.2 million that allowed Ahmadi to secure a construction site for the store, raise additional funds for the real estate, and acquire a construction loan. Another $850,000 came from grant funding through the Healthy Food Financing Initiative, a program of the U.S. Department of Health and Human Services, and $970,000 came from a wealthy private investor.

Another funding campaign from 2015 to 2017 secured an additional $500,000 to pay for components like land acquisition, architecture, permitting, and construction labor and equipment.

A sixth DPO was launched in early 2018 to raise an additional $800,000, and the total number of shareholders is now up to 540 people. These funds will be used to cover payroll, supplies and operating expenses in the first few years until the business can break even. To help get the word out, Ahmadi is hosting presentations and site tours on the second Saturday of every month, hosting interactive online presentations, showing up to community-led events to talk to people about the store, and sending out postcards to nearby residents with information about project investment.

According to Ahmadi, a majority of these shareholders are Oakland residents, with about 20 percent from West Oakland. “We’ve actually seen a lot more people from the local neighborhood buying stock more recently,” he said. “I think because it’s becoming very real to them, and they know it’s going to be their neighborhood store.”

The average purchase so far has been $3,000, with a few $50,000 being the largest purchases, according to Ahmadi. Although community shareholders get no voting power, according to Community Foods Market’s memorandum, they do receive 3 percent annual interest and 1 percent in store credit.

Ahmadi said he had no choice but to fundraise from residents, rather than taking a more traditional path such as a loan from a bank. On paper, the project showed a high risk of failure “both because it’s a start-up and a low-margin business—also because of the perceptions of the challenges of the neighborhood,” said Ahmadi.

According to the offering memorandum, some of these risks include the potential for construction or labor costing more than originally estimated, the company being unable to maintain its lease, or an unforeseen increase in competition in the area through new or existing businesses—or a number of other circumstances all potentially leading to a reduction in profits.

But right now, there aren’t that many competing grocery businesses in West Oakland. About two miles south of the San Pablo Avenue location is Mandela Foods Cooperative, a worker-owned cooperative of 10 staffers with a focus on organic foods, and currently one of only two running grocery stores in the area. The other is Produce Pro on San Pablo and 23rd Street. Each is no larger than 5,000 square feet.

Advocates for healthy food access, like Ahmadi, say that’s a problem, because for about 25,000 West Oakland residents, these are the only two options for fresh produce. This chunk of West Oakland—the McCylmonds, Hoover-Foster, and Clawson neighborhoods—hasn’t had a full-service grocery store since the late 1970’s, according to Ahmadi.

That means that, according to Ahmadi, residents spend about $42 million a year on groceries in other cities. And because many residents rely on public transit to do their grocery shopping, they often spend 30 percent of their food budget on transportation costs.

Once it opens, Ahmadi expects to hire 50 staffers to start, with 35 as full time employees. Although employees won’t be able to buy shares in the store right away, Ahmadi anticipates launching an employee stock ownership program after a few years, with additional paid educational opportunities in business management and entrepreneurship.

Meanwhile, Ahmadi is offering a subsidy program to help residents of West Oakland purchase shares in the store regardless of income level. Ahmadi said this was made possible by a $25,000 anonymous grant from a foundation in the South Bay that wanted to support neighbors who would not be able to invest on their own. The funds have allowed the group to accept less than the $1,000 minimum purchase required from residents of West Oakland, paying between $250 and $900 to supplement the residents’ funds. As of mid-October, Ahmadi said the store had approximately 30 subsidized shareholders, with $12,000 of the grant funding remaining for additional subsidies. They also offer assistance in filling out the legal paperwork.

At the Saturday tour, Ahmadi announced that a $10 million deal to refinance the group’s $5.4 million construction loan. The initial loan was acquired from Self-Help Credit Union and the Northern California Loan Fund. The refinancing will include funds to purchase the land from the current landlord, and a partner of the grocery store, the East Bay Asian Local Development Corporation (EBALDC). That means the store’s leadership team will be replacing one loan with another larger one, with funds built in for the land purchase.

Oakland resident Reisa Jaffe has lived in the area for almost four decades. Jaffe—who was wearing a Cat Brooks T-shirt and passing out flyers supporting Brooks’ mayoral campaign—had shown up to learn more about buying shares in the new store. “I believe rich white men have too much power and own too much and I want the people to share in what goes in,” said Jaffe, “so I want to support community projects—especially projects that have a high involvement of people of color.”

Jaffe said that she looks forward to Community Foods Market working with nonprofits to run educational food programs at the store. By the end of the tour, she said she would definitely be purchasing shares. “It’s going to be smaller, but it’s going to be convenient for people in the community,” said Jaffe.