Feasibility Analysis & Business Plan Summary In Support of Gas Bar and Convenience Store Borrowing Referendum October 2016 We the Sovereign and respected Smalqmix of the Sjukwnaquin-x are committed to preserve our Land, History, Language, Culture and Tradition, to enhance the quality of life for ourselves and future generations. Our priority is to empower ourselves to build a holistic community that is healthy, self-sufficient, independent and strong. We will create a safe environment in which we have the freedom to worship, work and play as we choose for our Greatest Resource OUR CHILDREN!
Introduction & Background This report is intended to provide the members of LSIB with a summary description of the project; what has been done to date; what resulted from the Feasibility Analysis; what recommendations form the basis of the Business Plan, and provide enough information for an informed decision on supporting the borrowing of up to. The LSIB Gas Bar and Convenience Store is a new venture proposed by the Lower Similkameen Indian Band Chief and Council. The proposed new business will employ up to 13 local residents, in a combination of full and part time positions. Payroll of $30,000 per month and over $400,000 per year will make this a cornerstone of the regional economy. It is intended to include the following 3 key components: 1. A National Brand Gas Bar that will be full service for at least a portion of the service hours. 2. A Convenience Store with a typical product mix, as well as enough basic grocery items to serve the local community and members. 3. A Café with a small eat in area, but focused on take-out options. The Feasibility Analysis conducted determined that the operation will be both sustainable and profitable. Owned by LS Holdings (LSH) and ultimately the Band, ensures that whenever possible, earnings will be used to help the Band deliver benefits and programs to the Community and its members. The Convenience Store and Café will be housed in a two thousand to twenty-five hundred square foot building. Occupying the same lot, a branded fuel sales outlet (ideally Petrocan, ESSO, or comparable) will further enhance the project s local appeal. The branded nature of the facility will allow LSH to access the significant traffic that passes the site (2,000 vehicles /day). The plan below shows the proposed site, that generally represents the intent of the Core Development Strategy. The final location for the facility will be determined following further consultation with the Community and more detailed engineering analysis of servicing and access requirements. Of critical importance for the Project will be good visibility and easy access from Highway 3. This summary presentation contains information drawn from both the Feasibility Study and Business Plan, and will address the following key issues in support of the planned borrowing referendum: Do Band Members want this Project? How was the location selected? What is the Project and what will it cost? Where will the funding come from? Can it pay its way? What happens next? The nearest fuel facilities are in Keremeos and Osoyoos, with the majority of the Community travelling to Penticton for tax exempt fuels. That means product availability, consistency and dependability are missing. The Band has taken it upon itself to remedy the situation by developing a modern convenience store and gas bar on the same property as the Band Services Complex. Competition is not expected to be a significant factor in the project s success. LSIB Gas Bar Information Package - October 2016 1
Do Band Members want this Project? As part of the research for this project it was determined that a survey of members to determine their shopping patterns, as well as to understand the Community s level of interest in developing a gas bar would be beneficial. The survey also gave an opportunity for members to provide their own recommendations for level of service, product mix, and other ideas. The survey was conducted by VisionQuest at the Band Office grand opening on April 21, 2015, and by Band staff over the subsequent month. A total of 50 responses were received from individuals, with 41 of the 50 being band members, and all respondents have status. With an average household size reported of 3 members, the survey represents over 150 members and over 30% of the total membership. The following are some of the key findings from the survey: Of the 50 responses, 36 (72%) said that it was very important that a gas bar be located on the reserve, and 44 (88%) responded that it was either very important or important. Of the 50 responses, 47 (94%) said that it was important or very important that a convenience store be part of the project and is important to members. 47 respondents (94%) said they supported the development of a gas bar and convenience store on the reserve. Of the suggestions from respondents the following were the most common requests: o A food service or deli type component be included as there are no options to serve the Community o That the gas bar should be a national brand o There should be some room or opportunity for the sale of local giftware or crafts o The store should have some basic grocery items to serve the Community All of the above information was incorporated into the Feasibility Study and Business Plan. Subsequent to the Community open house where the Survey was conducted, and throughout the advancement of the planning for the Project there has been continuous Community Consultation and information sessions to ensure that the Project continued to reflect the interests and wishes of the members of the Community. Attendance at these community meetings was always quite good, and ranged between 40 and 65 at each meeting. The following provided a brief outline of the topic of discussion at these sessions with a specific focus on the Gas Bar Project, November 10, 2015 Community Presentation and review of the Gas Bar Feasibility Study and discussion as to small scale gas bar or national brand. There was also substantial discussion about the appropriate location and decision to proceed with the national brand full size operation January 20, 2016 Open House and presentation of the Business Plan for the National Brand Gas Bar and full size Convenience Store. Upon further discussion about the proposed location, it was agree that we would review all options including the west side of the highway and return with proposed plans and analysis of relevant costs. LSIB Gas Bar Information Package - October 2016 2
April 13, 2016 In response to the January 20 th open house we presented two options for the location of the Gas Bar, including on the North Side adjacent to the Community Services building and on the west side of the highway closer to the school. After a substantial and robust discussion and analysis of the options, including input from Dan Condon the Project Architect the decision was put to a vote of the members on hand, with the result being 40 to 2 of those members in attendance voting for the proposed North Side location adjacent to the new Community Building. August 3, 2016 This meeting offered an opportunity for the team to update the Community prior to further engagement at the community level leading up to a borrowing referendum for the new Gas Bar. An update was also offered on progressing overall corporate structure for the Community Development Corporation and plans to bring that up to date to facilitate the Gas Bar. There was also a further discussion of the two proposed architectural themes for the Project, and feedback led to a general consensus as to the direction those in attendance preferred. How was the location selected? The question of location has been front and center since the beginning of the Feasibility Study. The initial core area plan anticipated the Gas Bar to be on the south side of the entrance into the new Community Service Complex. After review it was quickly determined that the combination of the relocation of the new Complex along with the location of the septic field and elevation issues ruled out that location. Further review included 4 potential locations, with that narrowed down to two that could work prior to the April 13, 2016 Community meeting where those two options were presented and discussed with those in attendance. After substantial discussion a decision to proceed with the location next to the Complex was made by those in attendance. The primary factors for that decision based on feedback at that meeting are as follows, 1. It is generally consistent with the core area plan which anticipated the Gas Bar on the east side of the highway. This plan anticipated additional commercial development as well as other Community services that would increase traffic for the benefit of all. 2. The infrastructure required for the Gas Bar will facilitate additional development planned for the area. 3. Developing the Gas Bar on the same side of the highway as the Community Complex will help with necessary improvements to make the highway access much safer for all traffic, as well as provide an opportunity to create additional parking for functions at the new Complex. These were both identified by many in attendance at the meeting. 4. The location on the west side of the highway has historically been identified as having more agricultural value and potential than the area chosen. LSIB Gas Bar Information Package - October 2016 3
What is the Project and what will it cost? Proposed Location What the Convenience Store Might Look Like LSIB Gas Bar Information Package - October 2016 4
What the Interior Layout Might Look Like Total Project Cost 1. The total proposed budget for the Gas Bar and Convenience Store including construction, equipment and working capital is $2,367,200 2. To facilitate the construction of the Gas Bar and Convenience Store there is a requirement for some off site improvements. These include the design and construction of highway intersection upgrades, the road in to service the Gas Bar and future development, and finally water sanitary sewer power and communications. These improvements may also include additional parking capacity for functions at the multi purpose building, as well as overall review of any future servicing requirements that should be included. The proposed budget for these improvements based on preliminary review is approximately $760,000 NOTE: The above Capital Budget contains allowances by category based on the current preliminary designs, our experience, as well as industry standards. Final costs and contract amounts may vary based on current market conditions and final location as well detailed design of the building and facility. We are confident however that the Project can be completed as anticipated in the Business Plan within this overall total budget. LSIB Gas Bar Information Package - October 2016 5
Where Will the Funding Come From? The Business Plan looked at various options for financing the Gas Bar. The financing of the Gas Bar, including working capital on the amount of approx. $2,400,000 will be arranged for that Project and based on the Business Plan. It will include a mix of grants and contributions, Band equity, and finally a mortgage and working capital package from a traditional Bank. BMO has indicated that they are prepared to finance up to $3,000,000 for the Project. The Band will undertake to fund and/or finance the off-site infrastructure in the amount of $800,000. Application is being made for infrastructure grants and other sources to supplement the Bands contribution. Lower Similkameen Gas Bar and Convenience Store GAS BAR AND CONVENIENCE STORE PROJECT SOURCES OF CAPITAL Equity, Grants, Contributions, Foregivable Loans $ 250,000 Term Debt $ 1,867,201 Working Capital Facility or Line of Credit $ 250,000 Total Capital $ 2,367,201 APPLICATION OF CAPITAL Gas Bar and C-Store Construction $ 1,885,000 Professional Fees $ 145,503 Soft Costs and Working Capital $ 336,698 Total Application of Capital $ 2,367,201 Lower Similkameen Gas Bar and Convenience Store ROAD AND INFRASTRUCTURE IMPROVEMENTS - Band Responsibility SOURCES OF CAPITAL - Proposed Grants, Contributions, Infrastructure Funding $ 757,702 Financing $ - Total Capital $ 757,702 APPLICATION OF CAPITAL Road, Intersection and Infrastructure Planning and Construction $ 757,702 Total Application of Capital $ 757,702 GAS BAR AND CONVENIENCE STORE $ 2,367,201 ROAD AND INFRASTRUCTURE COSTS $ 757,702 $ 3,124,903 LSIB Gas Bar Information Package - October 2016 6
What Will Be Sold? The convenience store will feature a line of convenience and food products as well as a small selection of basic grocery needs that are not available anywhere near the community. The combined product lines offer complete meals for breakfast, lunch and dinner. Everything sold in the convenience store will be prepackaged (either made on site or purchased) and prepared in the kitchen. The new services are expected to be a significant draw and will have a positive impact on fuel sales at the gas bar. The gas bar will be self-serve and include regular, premium and diesel fuels as well as automotive support products. Several National Brand fuel suppliers have expressed an interest in participating in the project and discussions are ongoing. LSIB Gas Bar Information Package - October 2016 7
Financial Projection Lower Similkameen Gas Bar and Convenience Store Three Year Consolidated Revenue and Expenses Revenue Fuel Sales $ 1,575,792 $ 1,654,582 $ 1,737,311 Convenience Store $ 897,642 $ 924,571 $ 951,500 Food Service $ 402,695 $ 414,776 $ 426,857 Grocery $ 182,500 $ 187,975 $ 193,450 Total Sales $ 3,058,629 $ 3,181,904 $ 3,309,118 Cost of Sales Fuel $ 1,361,185 $ 1,429,244 $ 1,500,706 Convenience Store $ 564,834 $ 581,779 $ 598,724 Food Service $ 161,078 $ 165,910 $ 170,743 Grocery $ 136,875 $ 140,981 $ 145,088 Total Cost of Sales $ 2,223,972 $ 2,317,915 $ 2,415,260 Net Operating Revenue $ 834,658 $ 863,989 $ 893,858 Expenses Labor Costs $ 436,416 $ 449,508 $ 462,994 Variable Costs $ 113,595 $ 111,233 $ 108,719 Operating Costs $ 244,050 $ 237,503 $ 230,746 Total Expenses $ 794,061 $ 798,244 $ 802,459 Income $ 40,597 $ 65,745 $ 91,399 Is this affordable? From the Business Plan and Feasibility Analysis: Year 1 Year 2 Year 3 Funds Available: Net Profit $40,597 $65,745 $91,399 Add Back - Depreciation $ 104,820 $97,261 $90,510 Total $145,417 $163,006 $181,909 Funds Required Principle Portion of LTD $ 56,454 $ 59,343 $ 62,379 Surplus $88,963 $103,663 $119,530 Times Coverage 2.57 2.75 2.92 Simply put, the project will generate sufficient income to cover the debt with surpluses created each year. LSIB Gas Bar Information Package - October 2016 8
What Happens Next? In conjunction with ongoing planning work for the Gas Bar and Convenience store as well as the access and services required for it the following activities are underway, and have been identified as necessary steps by Chief and Council. Designation To support the planned development, the property for the Gas Bar should be designated commercial by members of the Community through the designation process. To that end Chief and Council have passed a BCR to move forward with the designation of the Gas Bar site, and work to facilitate that is underway. This work includes the required environmental, planning and survey, legal preparations, and other work with INAC required to lead to the vote. This activity will happen in conjunction with other planning work required, with a vote targeted by early spring of 2017. Borrowing Referendum This Presentation has been prepared to provide a summary of the Business Plan, and enough information required for the Community to make an informed decision with respect to moving forward with the Project and to support the borrowing of the debt portion of the Project. The next step will be the referendum to borrow up to $2,100,000 to facilitate the building and opening of the new Gas Bar, which will take place on Saturday November 26 th. To support the Referendum there will be a number of Community meetings throughout the period from now until the date of the Referendum. We invite you to watch for and attend these meetings and to learn more about this Project. For further information or if you have any questions please contact Chief Crow LSIB Gas Bar Information Package - October 2016 9