Market Auction Completed; Workers Retained

(Updated) Elm City Market will no longer be a co-op, but it will remain a downtown grocery store with the same employees, like Eddie Diaz and Lesche’ Brunson, working there — and owning a piece of the action.

The market’s assets were sold Wednesday at auction to a lone bidder, Elm City Community Market, Inc., a new company formed to take over the grocery. The company was formed with the help, and a long-term low-interest loan, from a foundation run by local philanthropist L. Linfield Simon.

Webster Bank, to which the market owed $3.6 million, hired the Murtha Cullina law firm to conduct the auction.

The new company will have two classes of shareholders. Five or six Class A shareholders, senior managers at the store, will also have voting rights. The other employees will be Class B shareholders. The new company now owns the assets; it will transition to running the store in coming days.

The store will stay open during the transition and maintain its current mission, officials said. All the 78 employees (except for perhaps a management position) will remain working there, according to Doug Berson, the market’s current manager. That workforce includes 16 people who came to work at the market through prison reentry and job-training programs like STRIVE-New Haven. The new company is looking for a new general manager to run the store.

Eric Miller (pictured), an attorney from Murtha Cullina, declared the auction completed during a 30-second noon press conference Wednesday outside the store’s Pitkin Plaza entrance. ​“There was a successful bid. There is not a competing bid situation,” Miller said, declaring the auction completed.

Another company that had considered bidding, Mrs. Green’s Natural Food Market, had failed to obtain a lease deal and therefore opted out, according to this article by the New Haven Register’s Mary O’Leary.

The bank formally announced in a 2 p.m. press release that the new company was the successful bidder.

“We will continue to have a community market serving residents of downtown and Ninth Square and Wooster Square,” said Webster Bank’s regional president, Jeff Klaus. ​“We’re happy that it’s going to continue to maintain the environment of a community market. The same people will continue to have their jobs at the market; there may be a manager or two that will come in.”

“Sweet,” Diaz, the market’s produce supervisor (pictured), remarked.

The market debuted in November 2011 as a developer-spawned cooperative with a $3.6 million Webster Bank loan, 80 percent of it guaranteed by the federal government. It grew to 2,200 members. But from the start it stumbled with financial problems as well as, in the view of some, a confused identity.

In May the landlord declared the co-op in default for owing what’s now over $500,000 in rent. Webster followed suit with a default notice on Aug. 5. That led to this week’s auction. The new owner will be able to start anew without all that debt.

Simon said Wednesday that the new company is looking at ways to ​“encourage old co-op members to continue shopping” at the market. The details of those incentives remain to be worked out. Simon declined to disclose how much the company paid for the market’s assets or the size of the loan for the new store. The loan to the company comes from New Haven Investment Fund LLC, a single-member company — whose single member is the RISK Foundation, a philanthropy run by Simon’s family.

Elm City Community Market Inc.registered with the state on Sept. 23. It struck a lease deal with 360 State’s owners. Simon’s foundation had previously lent the struggling market money, twice, to try to keep it afloat.

Organizers of the company drafted three outside directors to get it formally started: Kurt Luttecke, a senior vice-president of national sales at United Natural Foods; Arnold Margolis, who has more than 30 years’ experience as a supplier and manufacturer for the grocery trade; and STRIVE-New Haven’s director, Tony Evans. They were granted ​“nominal” shares in the company in order to get it legally off the ground. The board will eventually have up to seven directors, including two Class A shareholder-managers.

“Everything is excitedly fluid right now. Our primary focus was to make sure that the jobs stayed where they were and that we were able to continue on with the same mission that the market was originally formed with, so it can grow and thrive. It just won’t be as a cooperative,” Margolis told the Independent Wednesday.

Berson (pictured) said he decided not to become one of the shareholders. He is helping run the store in the transition but not sure what his future plans are.

“I’m looking as fast as I can to get a high-powered general manager in here. That’s what we need right now,” Berson said Wednesday during an interview in his office in the back of the store. He said his ​“original intent” was to ​“walk away when it’s in good hands”; now he’s not sure whether he’ll stay on. He has an emotional attachment to the market, which he has run since before it opened.

Berson said he has already vetted a promising leading candidate for the general-manager position.

The store will continue with its mission, a mixture of providing basic groceries to the surrounding neighborhoods as well as health-oriented natural foods, Berson said. ​“We’re going to go a little bit more toward the organic and the natural stuff,” he said.

Berson responded to criticism about the federal government footing the bill for 80 percent of the co-op’s unpaid debts to the bank. He said the store paid $2 million in wages a year over three years to workers who for the most part might not have otherwise been employed, because of their backgrounds. It also pumped $2.5 million into the local economy each year in purchases from local and regional vendors, he said.

The store worked closely with prison reentry programs like STRIVE-New Haven, which is across the street. One woman hired from that program was Lesche’ Brunson (pictured at the top of the story). She started out stocking shelves in the produce department. She’s now in charge of human resources, and plans to stay — as an owner.