Funds Raised - $500,000 Days Remaining - 15
Hi All,
I hope you had a nice weekend. Mine was, as you might expect, pretty busy. We've been selling books off-site all week at the various Litquake events around town, which . . . was some work. We did 12 off-site events in 6 days. On Friday we had three different events that we were at -- two of them at the same time. And, on Wednesday, there were two simultaneous events at the same time as the Internet Archive anniversary party. That would have been fine except Jude and I were both scheduled to work at the party. So, Z'ev sold books at one event and Maddy sold them at the other while Jude and I worked the party. I'm very glad that all the management folks at Borderlands are cross-trained to work in either the bookstore or the cafe.
But that was all just a warm-up for Saturday when we hosted two events as part of the Lit Crawl, one in the bookstore and one right afterwards in the cafe, each with four authors participating. If that wasn't enough, Z'ev and I were so busy scheduling around all the events last week, we forgot to schedule extra staff at the cafe that evening. Z'ev and Isabel did an impressive job of holding down the fort in the cafe, in spite of lines that went to the door at times.
Despite all the excitement, I managed to get a fair amount of work done on the building purchase. As of now, our funding stands at $400,000 with another $100,000 in contingent funds. I've also started several conversations that may lead to additional loans (one of them well over $100,000). I'm not exactly relaxed but things do seem to be going in a positive way.
Now seems like a good time to give an overview of what we need to get done in the next 15 days. The job falls into three parts; getting financing, setting up the legal structure, and getting inspections and estimates. The discussion about inspection and estimates is long so I'm going to save that for my next update.
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Financing
I don't have much to say about this that I haven't said already. This is the make-or-break part of the whole thing. All the other stuff is comparatively straightforward and entirely within my control. This part also has a critical deadline because it must be done before I lose my ability to cancel the deal without losing the deposit. Until the 1st of November we are within what's usually called the "inspection contingency" period. It exists to allow a buyer to have a range of experts examine the building and give reports about any damage or problems. If something is found, the buyer can either ask the seller to repair the problem (or give a "credit" -- essentially cash back -- for the buyer to correct it later) or the buyer can cancel the purchase contract without a penalty (e.g. losing the deposit, which in this case is $69,000). Since something can always be found, this period can be used to cancel the purchase for just about any reason.
I'm not going to risk losing that deposit, so we've got to have all the money in the bank by that deadline. Actually, to be safe, we need to have the money in the bank by the 31st (yeah, I sent the deposit on Friday the 13th, and the go / no-go point is Halloween -- I couldn't make this up if I tried). Side note: since big checks are frequently subject to a 7 day hold, that means checks would need to be deposited in the bank no later than Tuesday, the 24th. After that point I'll have to ask for cashier's checks (not usually subject to holds) or wire transfers (which are pretty much instantaneous).
If it doesn't look like we're going to make it around then with loans at or above $100,000, I'll start asking for smaller loans. But we'll have to be pretty close, otherwise I think it will involve a bunch of paperwork and money shuffling to no good purpose. I know we can make up $100,000 or perhaps even $200,000 with loans in the $10,000-$25,000 range but I don't think we could make up a half-million that way.
Bottom line, either people are going to be willing to lend what we need or the deal is dead. The takeaway from this is -- if you're thinking about making a loan, let's start talking now so we can get the details worked out.
Legal Structure
Though on the surface it would seem to make sense for Borderlands to buy the building, I've concluded that isn't the best way to go. Creating a separate business entity to own the building is a much better plan. I'm having an attorney set up the D. D. Harriman Limited Liability Company (LLC) this week. An LLC is something similar to a corporation in that it protects the owners from liability (read - getting sued) but it's much simpler to set up and run. My reasoning for keeping Borderlands separate from the ownership of the building is this:
Once we get the building there are two major ways that things go wrong. The first possibility is that Borderlands gets into financial trouble, either as a result of getting sued or as a result of not being able to pay our bills (and then getting sued). Although I think either of those things are very unlikely, if it happened and we lost, all of Borderlands' assets could be taken or sold to pay the debts or judgement. If the building were owned by the store, the building would be at risk. However, if the building is owned by another company (which I control), then it's safe. And, because Borderlands is a corporation, a suit against it can't affect me personally and thereby threaten the building.
The other possible failure point is if I cannot manage to pay the debts that are owed on the building (mostly the debts to our sponsor and customer lenders). If that happens, I can sell the building to pay the debts. Before I did that, I can give Borderlands a three-to-five year lease on the retail space, which would persist even after the building was sold. Also, let's say that one of the tenants in the apartments upstairs decided to sue the company that owns the building. Again, unlikely but, if it happened, that suit wouldn't affect Borderlands.
The final advantage of that business structure is that it's very clean and simple. D. D. Harriman LLC only owns and operates the building. It has no employees, inventory, accounts payable, or any of the other stuff that goes along with a retail business. Also, its only debts are to the people who lent money for the purchase. If something goes wrong, the loans are secured by the building itself, without a lot of complicating factors. Borderlands would just be a tenant in the building I own.
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In closing I want to thank all the people who have gotten in touch to offer loans. Many of them said that they couldn't do $100,000 but that they could lend a smaller amount. That's a situation that I share with them. I doubt I could come up with $100,000 to lend. If I did, I'd have to scrape the bottom of every barrel I've got (which is pretty much what I had to do to make the deposit -- I do not keep $69,000 sitting in the bank.) I asked the folks who offered smaller amounts to wait and told them that they had my profound thanks for being willing to help. That willingness to help is the best part of all this.
Today I was interviewed by a local journalist about our building-buying scheme. She's been covering major events at the store ever since 2015 and we're pretty comfortable with each other. At the end of the interview she asked if there was anything I wanted to say. I burbled a bit about how wonderful and neat it is that we can even _try_ something like this.
After I was done babbling, she said, "So, here's the story. Headline: Borderlands to buy building. Copy: Owner Alan Beatts says, 'It's just so neat'. The end."
She's right. It's just so incredibly neat that we can try this. I'm happy no matter how it turns out. I hope you all are too.
Warm Regards,
Alan
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