What conditions need to be in place before we go out and look for a site? Notes from a meeting with Mark

Context

Today, 2022-06-28, @Lee and I had a long (almost three hours!) meeting with Mark, our coach. The agenda was to draft a checklist of things that need to be in place before we can go out and purchase a site for The Reef. Emphasis on “before”: in the Brussels real estate market, once you find an available site you have a week to make the decision of buying it (or not). If we are not prepared to make the purchase, we will lose that site to someone who can move faster. Hence, the need to prepare before searching. The idea is that the group will then transform this list of requirements into tasks, which it will then allocate and complete. What follows are my notes from that meeting, edited.

Checklist before looking for a site

1. Le programme

Le programme is a term from the internal jargon of Brutopia, which we adopted. It is a document, produced by the architects, that translates the needs of the group in terms of characteristics that a site must have. We need to know how many apartments we want, how large each one will be, which will the common spaces be, the garden, etc. There is quite a lot to discuss and decide here, both as a group (for the common spaces) and individually for each family (see below, the section on finance).

Recommendation: think in terms of net surfaces. The real estate market uses rather gross surfaces, including external walls, corridors, staircases, lifts etc. This will avoid surprises.

Once an available site is found, Mark recommends resisting the temptation of opening the discussion on what else could be done with it. The purchase decision is a yes/no question: if the site is compatible with the realization of le programme (and the price is right), we buy it. Only later we will re-open the building discussion, and possibly make some changes: “look, this site allows to have a large workshop that can also funcion as the common room, let’s do that!”, etc.

As a first step towards le programme, a cohousing group called Alalal realized a kind of survey. Mark has the form they used, and will share it with us. Good idea!

2. The money

We need to make sure everyone has the money to participate. Mark has a form that each member, can use to describe their situation, based on liquidity and creditworthiness. In Brutopia, this was the first step for each member to go through an individual process with le confesseur (briefly described here, item 3 of the step-by-step process description). After this process, the confesseur returns a report that, for each person, says “OK” or “some problems here”, or “not possible”, based on liquidity and creditworthiness. This could in theory be done via Immotheker, but Mark is not enthusiastic about this solution.

A key decision to make before this even starts, is how large the spread between the most expensive and the cheapest square meters is going to be. This is important, because a large spread means that the cheapest apartments will be cheaper, therefore making more space for Reeflings who are not wealthy. In Brutopia, this was the main way that they practiced inclusion: the most expensive apartments cost twice as much per square meter as the cheapest ones.

Other key decision: which information to share with whom. Not everyone is comfortable with sharing financial information beyond the “OK to go”.

Mark recommends being pessimistic on costs, so that we do not have to increase the budget. In fact, each family should be able to rely on 110% of the predicted cost of their unit. He will give us the final costs of his most recent project, De Spiegel. The Spiegel group ended up spending more than they could have, because they were particular in personalizing each unit, which for Mark brings inefficiency. To contain the costs, be boring with architecture (he used the word “repetitive”). For example, use modularity in spaces (30, 60, 90 or 120 sqm). Use the same model of solar panels, heat pumps etc.

Idea: have a dedicated meeting on the price. 4K is the average price estimated by Mark for the finished sqm, wherear Stekke & Fraas gave us CASCO estimations, ranging from 3.3 to 3.7K per square meter (gross, including common spaces and VAT).

3. Finding the site

Mark has a form that was created for l’Échappée. These forms, once filled with the details of each candidate building, go to the architects, who evaluate if the programme is doable on the sites they describe, together with Team Building. When a site passes these checks, it goes to the GA, which decides whether to approach the owner with an offer to buy.

Note: we need a very clear agreement with the architects: free feasibility studies, but certainty they will get the contract. If they don’t get it, we pay the feasibility studies.

4. Financing the purchase of the site

TL;dr: when we hit the market to buy a site, each family needs to know that they might be asked to fork out 10-20K the next day. In another scenario, the group as a whole might be asked to provide 1.5 million worth of finance in 4 months.

A minimal condition for pressing “Go” and going looking for a site is that each family has, on hand, at least 10% of its budget. Without this, they would be unable to get credit, and so would not be able to participate in the project.

There are two ways that the purchase can happen. The first: we, through The Reef ASBL, sign an option to buy the site, conditional on the building permit being approved (and, in Brussels, almost always on de-polluting the site). In this way, 12-18 months pass between the signature of the option and the full purchase. The latter will be a transaction between the landlord (seller) and Reefling families (buyers). In this case, we will need to pay immediately (through the ASBL) 10% of the price of the site: the architects estimate the latter in 1.5 million, so 10% would be 150K. This money should be in the ASBL’s bank account, recorded as a loan, as we start the search for a site.

The second: the owner wants the money immediately, so the option is very short (~ 4 months). In that case, the purchase is a transaction between the landlord (seller) and a maatschap / société civile created by the Reeflings. In this case, a large sum will have to be found to cover the remaining ~ 1.35 million. This can be done via credit of various kinds. The maatschap would then sell to the individual Reeflings. The disadvantage here is that there are two transaction, so the notary’s fees have to be paid twice. Risks are limited, because even in the worst case scenario that the project does not continue, the maatschap will still own real estate in Brussels, which is a safe investment and reasonably liquid. Still, we need to simulate this scenario in Team Finance: what happens if we find a good site, but we need to pay the full amount in 4 months? In L’Échappée, a wealthy member fronted all of this cost of himself!

Notice that members of a maatschap have responsibilité solidaire, which makes it imperative that all the funds are in locked accounts before the construction starts. All this is well known to the notaries, who will make sure everyone understands the risk.

There are also variants within the two pathways: for example, the landlord could be willing to wait after the option, but demand interest, etc. The notary is key to propose the best solution for both the group and the landlord. We will need a good notary. Mark knows some, including Anna Verhaegen. Idea: organize a meeting with a notary, as soon as possible.

Next steps

Organize a meeting with Mark and the architects at Brutopia. This gives more concreteness, and the architects can speak of multifunctional solutions.

Next, do the survey; based on this, build le programme; based on this, game the two scenarios with the money (option vs direct sale), and finance the fond de roulement so that at least the option is immediately available.

Other questions we asked Mark

The second item on the meeting’s agenda was a mishmash of questions that we wanted answered.

Co-proprieté vs. cooperative

Mark favors the former. In Belgium, cooperatives are meant to be commercial companies. They are quite heavy to run, subject to taxation. Lie likes the hybrid model of De Okelaar; there are other examples, but they all imply that there are members that want to run a commercial activity.

It was difficult to find a partner for Salle Mirò in Brutopia. Everybody wanted the space, but no one wanted to buy it; they wanted to rent. In general, the way things are done in a co-housing are also incompatible with any publicly funded organization, because there is no public tender for the construction company, etc.

Team building

Team building needs to be creative, and come up with a lot of proposals to make the most of the available resources. Do not underestimate it.

Timeline

Building a cohousing is a long project. Once the site is found, it takes about one year to go from signing the option to the architect’s full project. Another year is to find a construction company and sign the contract. And then two years of construction. :frowning:

What about the ASBL

Mark recommends to keep it simple: no VAT registration, do the accounting ourselves. The main thing is keeping tabs, and that can be done with Excel.

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Thanks a lot @alberto!

I have added the attachments we received in a folder named “Documents received from Mark” in the folders of Team Finance and Team Building. Worth having a look!

Just one little nuance on your notes maybe:

My understanding was that the lack of enthusiasm about the Immotheker was more around the idea of not having a confesseur at all and instead just asking people to go to the Immotheker to ask for an estimate about their borrowing capacity. This is not a good option because then people will be self-reporting and we miss out on the certainty of the third party verification done by the confesseur.

That being said I think it could be a good idea for some people to go for a visit to the Immotheker anyway. I have only had good experiences with it. I go one in the rue Royale (near Botanique, Joost knows about The Reef), but any Immotheker will probably do (you can also do an estimation online, but it will be less accurate and possibly too conservative).

My first thought when discussing banks and credit is that sustainable bank which handles the purchase is the creditor for a good percentage of our households. These decisions and their consequnces come intersectional with the other advices Mark gave, in my opinon (think a matrix of several factors)

Thank you very much @alberto, I’ve been eager to check out notes from the meeting. Hopefully this can be a skeleton for some actions list.

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