November 20, 2007

Locals air concerns about Co-Op’s fate

Emotions ran high on Sunday afternoon as between 250 and 300 area residents crowded into the Hyde Park Neighborhood Club for a community forum with the Hyde Park Co-Op Board of Directors to discuss the potential fate of the financially troubled grocery store.

The Co-Op’s shareholders will begin voting next week on two options, one of which, proposed by the University, would result in the store’s closing. A new grocer would likely move into the 55th Street Hyde Park Shopping Center space sometime in January. The board voted to recommend this option to its shareholders.

However, there appeared to be significant opposition to that plan on Sunday, even among board members, as some who addressed the audience implied that the store’s closure was not a foregone conclusion.

Under the U of C’s plan, the University, which is the landlord of the shopping center, would forgive up to $1 million in back rent owed by the Co-Op and provide additional funding to help the Co-Op pay off its vendors and creditors if the store agrees to shut down.

The other option, which received considerably more vocal support by members of the audience during Sunday’s meeting, would allow the Co-Op to file for bankruptcy and rid itself of the lease for the empty 47th Street former Co-Op retail space that board members say has been the primary cause of the store’s troubles. After filing for Chapter 11 reorganization, the Co-Op could terminate its obligations to the 47th Street landlord by paying a portion of the amount owed.

The 47th Street Co-Op closed in 2005 after just six years of operation, none of which were profitable. But the cooperative was unable to break the lease for that location, and the store has been paying about $1 million per year for the vacant property. The Co-Op’s 53rd Street location in Kimbark Plaza, also owned by the University, closed last year.

“Freed of the 47th Street lease, the Co-Op is a profitable and viable business,” said board member Rob Stanek, who pledged $5,000 during the meeting to help the store regain its financial footing if shareholders vote to endorse the bankruptcy option. The Co-Op, he said, would have to file for bankruptcy immediately following the vote in order to terminate the lease and to ensure that it was relieved of other financial obligations.

“The University, in all probability, will file for closure notice on the past due rent on that Monday [December 17, following announcement of the results December 12], and certainly no later than by the end of that week,” Stanek said. “There really is no realistic alternative way to survive” other than to file for Chapter 11 immediately, he said.

Hank Webber, vice president for government affairs and community relations at the University, would not confirm that speculation.

“I am not going to talk about the details about what the University might do. What I will say is that the Co-Op owes the University over $1 million. We have been generous to the Co-Op to a degree that you would find no private landlord would consider,” Webber said.

“If they plan to reject, we have to consider our options. I will say, we allowed them to run a $1.2 million deficit. We’ve worked with them on a bailout opportunity. The University was not responsible for the large debt they’ve been operating on…. If they reject, we’ll see what happens next,” he said.

Stanek’s concerns about the University demanding payment reflected a recognition of the University’s explicit interest in getting the Co-Op to close in order to facilitate the opening of what it believes would be a higher-quality grocer.

“Everything we’ve been trying to do has not been to keep the Co-Op afloat,” President Robert Zimmer said in an interview with the MAROON. “It’s really quite the opposite. It’s been to get them in an orderly exit.”

In recent years, the Co-Op, the only grocery store in Hyde Park’s vicinity, has faced increasing complaints about the quality and price of its food selections.

The University, Zimmer said, has been working with a number of interested grocers to line up a replacement for the Co-Op if it closes.

“There is no signed agreement,” Zimmer said. “We’ve been talking to places.”

The lack of information about the Co-Op’s successor was another concern voiced during Sunday’s forum.

“[The University] want[s] you to approve this plan without even telling you publicly what grocery…they’re getting at this point in time,” said Co-Op board member James Withrow.

“These [grocery] chains, even family-run chains, change hands often, so…we would have no idea what it would be 11 years down the road…. It could be better than the Co-Op, it could be worse than the Co-Op, or it could be the same as the Co-Op,” he said.

Although the University has not disclosed this information, it is considering doing so, Webber said, and will make that decision as conversations with potential replacements continue.

While opinions were mixed, the audience appeared overwhelmingly supportive of voting for the bankruptcy option and attempting to revive the grocery store, which, in recent days, has appeared on the brink of closure.

“I understand the sentiments [expressed at the meeting]. There were 300 people, and there are a lot of voters,” Webber said.