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Chicago TREND
Chicago Community Trust May 26, 2015
Origins
The TREND Concept: Using Retail “Plus” to Drive Neighborhood Development
The Sweet Spot: Where Retail Accelerates
Neighborhood Transformation
RetailNeighborhood
Trajectories
Current Neighborhood
Status
3
RETAIL DEVELOPER AND BROKER ENGAGEMENT
1. Tom Bernier, Bucksbaum Retail Properties; 2. David Doig, CNI; 3. James Matanky, Matanky Realty Group; 4. Paul Stewart, Capri Capital; 5. Leon Walker, DL3 Realty; 6. Rich Warren and Randy Ross, Community Development Strategies; 7. Ken Gold, Skilken; 8. Michael Marchese, Harlem Irving Companies; 9. Edmund Woodbury, McCaffery Interests; 10. Richard Tucker, Tucker Development; 11. David Baum, Baum Realty; 12. Todd Cabanban, Cabanban, Rubin, & Mayberry; 13. Lauren Lowry, Finders Plus, 14. Mike Mallon, DKMallon
Local Field Work Completed
Developer Broker Meeting Held on May 12, 2014
Meetings with Representatives of LISC, MPC, WBC, DPD, Illinois Restaurant Association, Bronzeville Retail Initiative, Chatham Business Association, Cook County Land Bank, etc.
RETAIL DEVELOPER AND BROKER ENGAGEMENT
1. Big Boxes – Target, Walmart, Petco, Marshalls, Meijers
2. Specialty – Starbucks, Chipotle, Studio Movie Grill, Kumon, UPS Store
3. Restaurants – Panera Bread, Buffalo Wild Wings, Famous Daves, Macoroni Grill, Del Taco, Culvers, Moes Southwest Grill, Jimmy Johns, Bloomin Brands
4. Others – Save a Lot, Sears, Walgreens, CVS
National Field Work Completed
Attended ICSC Convention May, 2014 and 15 (met with 34 retailers and introduced Chicago TREND to the ICSC National Underserved Markets Initiative Committee)
Strategy
How Retail+ Can Lead: Getting to Strategic, Viable, Scale
Market Research, Analytics and Products
Leadership and Coordination; “MasterDeal Broker”
Retailer Attraction Focused Financial Tools
THE TREND TOOLBOX
8
Shopper Survey Completed
Survey firm (6,000 surveys)
The Chicago Rehab Network (1,200 surveys)
20 community/neighborhood organizations and community colleges (800 surveys)
50 local blogs
Traditional media outreach campaign
New survey to be conducted in 2015
Online Survey
Survey coverage – race distribution
Shopping destinations outside neighborhood
DNT taxonomy – updated DNT taxonomy/typology reapplied to Chicago
neighborhoods using updated 2010 data, to examine how neighborhoods changed from 2000-2010
23 input variables contributing to this classification:People Housing & Land Use Business
Median household income % single family detached # unique business types
Income Diversity % vacant housing units# social capital (normalized by population)
Age Structure (% 0-18, % 19-34, % 35-64, % 65 plus)
% owner occupied housing units
% retail businesses with more than 20 employees
% single parent householdsMedian age of housing structures
# retail establishments normalized by land area
% foreign born % residential parcels# services normalized by land area
% households moved in less than 5 years
% industrial parcels# entertainment normalized by land area
% households moved in over 10 years
% vacant parcels
FORTUNE100CLOSE, COOL,
COMMERCIALNO PLACELIKE HOME
THE TRULY DISADVANTAG
EDTRANSIENT
UNDER-DEVELOPED
lower income higher income
STABLE LOW INCOME PORT OF
ENTRYCOMING
ATTRACTIONSURBAN TAPESTRY
Taxonomy Structure
DNT taxonomy – transition 2000-2010
13
Transition Matrix – Chicago, 2000 to 2010
Count in 2010
5 87 167 97 176 7 142 92 18
Types in 2010
Types
in 2000
1 2 3 4 5 6 7 8 9
Count in
2000
1 23.08 53.85 15.38 0.00 7.69 0.00 0.00 0.00 0.00 13
2 1.12 49.44 30.34 0.00 15.73 1.12 1.12 1.12 0.00 89
3 0.73 16.79 77.37 0.00 1.46 0.00 3.65 0.00 0.00 137
4 0.00 2.26 0.75 57.14 36.09 0.75 0.75 2.26 0.00 133
5 0.00 5.30 5.30 11.36 61.36 0.76 6.06 9.09 0.76 132
6 0.00 0.00 0.00 10.53 26.32 5.26 10.53 47.37 0.00 19
7 0.00 0.00 10.60 0.66 9.27 0.00 78.81 0.00 0.66 151
8 0.00 3.30 7.69 3.30 8.79 2.20 2.20 68.13 4.40 91
9 0.00 0.00 3.85 0.00 11.54 3.85 15.38 19.23 46.15 26
Truly Disadvantaged
Transient Underdeveloped
Stable Low Income
Port of Entry
Urban Tapestry
Coming Attractions
No Place Like Home
Close, Cool and Commercial
Fortune 100
Truly Disadvantaged
Transient Underdvpd
Stable Low Income
Port of Entry
Urban Tapestry
Coming Attractions
No Place Like Home
Close, Cool, Commercial
Fortune 100
Services
Discussion Draft
Services: Identifying Opportunity, Facilitating and Expediting Development
Bring “Big Data” to Neighborhood Retail Development
Identify neighborhood trajectories, high-impact and market-viable retail
Master Broker and Expediter
Nexus of information and networks, connecting developers, retailers, community organizations
Leverage synergies between retail opportunities and non-retail private and public investments (“Retail Plus”)
Work with City departments to expedite strategic deals
Retail Coalition of the Willing
Organize and nurture retailers interested in locating in urban neighborhoods, similar to a trade organization
Develop and implement co-tenancy and clustering strategies to reduce risk
15
Trend Tool Concepts
Tenant Attraction Program
Facilitating Retail DevelopmentTypical Retail Development Process in Chicago for Projects More Than 150,000 SF
Step Typical Time Required Can Trend Help?
Market Analysis 1-3 Months YES
Site(s) Identification, Due Diligence & Final Selection 2-6 Months YES
Preliminary Financial Feasibility Analysis & Financial 1-2 Months YES
Site Control 2-10 Months YES
Preliminary Design & Cost Estimates 2-4 Months
Secure Pre Development Financing 2-4 Months YES
Anchor Tenant Letters of Interest (40-50% SF) 3-6 Months YES
Approvals, Entitlement Process 4-8 Months YES
Securing Tenants Leases 3-12 Months YES
Design, Construction Bids 1-3 Months
Final Financial Feasibility Analysis 1-2 Months
Obtain Firm Financial Commitments 2-3 Months YES
Securing Permits 2-6 Months YES
Close on Property & Financing 1-4 Months YES
Construction and Construction Management 12-18 Months
Marketing, Final Leasing 3-5 Months YES
Opening: Total Time from Initial Market Assessment 42-96 Months YES
Coalition of the Willing – The Big Guys
Anchor Attraction
Credit Tenants
25,000+ SF
Trend Tool Concepts
Coalition of the Willing – Special Second Store Expansion
Well Run Local Favorites
Add Interest to Mix
Support Entrepreneurial Growth
Trend Tool Concepts
Coalition of the Willing - Sit-down National Restaurant Franchises
Now Spending Leaves City
Operator Identification and Training
Liquidity and Net Worth
Trend Tool Concepts
Coalition of the Willing - Alternative Tenants
Non-retail tenants to round out mix
Service Oriented Establishments
Trend Tool Concepts
Gap Financing Program
Subordinate Loans for Retail Development
Flexible to Secure Key Retailer
Patient (20 year term) but Higher Return (5%)
$1M Maximum Per Project
Trend Tool Concepts
Provided to developers for pre-development costs, construction costs, tenant improvements. Could cover development of outlots or tenant improvements.
Tenant Attraction Program
$2M Recoverable Grant Program
Rent Subsidy to Attract Desired “Key” Tenants
Up to $500,000 per tenant lease over five year term The maximum annual rent subsidy will be based on a five year declining scale of $5-$4-$3-$2-$1. (For example – for a 5,000 sq. ft. retail space the incentive would be $25,000; $20,000; $15,000; $10,000; $5,000 for a total of $75,000)
Provided to developers or landlords to pass on to tenants to subsidize costs during first five years. Funds can be used for tenant improvements or to cover for low sales.
Trend Tool Concepts
Neighborhood Retail Equity Fund
$50M Fund; $10M invested by Chicago TREND
Established Real Estate Equity Fund to be GP Partner; Chicago TREND to be LPs.
Initiate Projects with Refined Market Data and Predictive Analytics (Master Deal Broker)
Attract Developers and Retailers on the Leading Edge
Higher Risk and Higher Equity Return
Trend Tool Concepts
Neighborhood Retail Bank Debt Program
$10M Loan Program for Small Retailer Expansion or Improvement (working capital, tenant fit out, equipment;)
Consortium Banks to invest $8M; $2M invested by Chicago TREND (25% subordinate loan participation)
$250,000 maximum loan amount
Trend Tool Concepts
Implementation Plan and Goals
Discussion Draft
Milestones
By end of Year 1:
Organizational milestones:
● Steering committee organized and meeting
● Fiscal agent and host agent selected and operational
● Investment and operating policies developed and approved
● Staff positions filled
● Contracts and operating procedures finalized with service providers
● Phase I financial tools operational
27
Discussion Draft
Milestones
By end of Year 1:
Development milestones:
● 8,500 additional Shopper Choice survey responses received and the results incorporated into models and analytic tools
● Complete estimation of shopper and neighborhood choice models and simulation tools to predict impact of investments on shopper choices, neighborhood attributes, and neighborhood trajectory
● Retail Coalition of the Willing operational, albeit informally
● Recommendations delivered to at least two developers about types of retailers to solicit to lease uncommitted space and achieve desired community change
● Provide data and offers of financial assistance that leads to new leases at developments currently underway or infill in priority commercial corridors
28
Discussion Draft
Milestones
By end of Year 2:
Organizational milestones:
● Partners identified for Phase II financing tools and formalized by memoranda of agreement
● Strategy, services and priorities re-assessed and recommendations prepared for funders
● Phase II funding secured
29
Discussion Draft
Milestones
By end of Year 2:
Development milestones
● Predictive model developed and tested
● Retail Coalition of the Willing formalized and functioning
● Commit or fund approximately $5 million in financing to impact three strategic neighborhood retail developments and directly secure an estimated 13 key retail tenant leases
● Working with City of Chicago and Cook County officials for expediting approvals, licenses, land assembly, etc.
30
Organization Structure and Governance
Founding Entrepreneur: Lyneir Richardson
Executive Director, Center for Urban Entrepreneurship and Economic Development, Rutgers Business School, Newark, NJ (current)
Chief Executive Officer, Brick City Development Corporation, Newark, NJ (2009-2014)
Vice President-Urban Development, General Growth Properties, Inc., Chicago, IL (2004-2009)
Founder, Lakeshore Development & Construction Company, Chicago, IL (1995-2004)
Vice President, Thrush Construction, Inc., Chicago, IL (1993-1995)
Attorney, First National Bank of Chicago, Chicago, IL (1990-1993)
Entrepreneurial projects include consulting and commercial real estate advisory services for property owners
32
Discussion Draft
Organizational Structure Steering Committee of 15-20 members representing retailers, developers, brokers, CBOs,
investors and banking partners, city, data partners, civic and trade organizations.
33
Steering Committee
Executive Director
Financial or Banking
Data
Legal
Financial Analyst
Data Analyst
Admin Assistant
Fiscal Sponsor/Agent
Partners Staff
Lead Partners: ICSC, Neilsen, LISC, ULI, CCLF,, Econsult, RES, ….
Organization and Ecosystem
Accelerating Desired Neighborhood Transformation
Steering Committee (Investors) Retail and
Mixed-Used Developers
Retailers (Coalition of the Willing)
Retail Brokers
CHICAGO TREND
(4 people)Data and Financial
Tools
Civic and Community
Organizations
Public Sector
Banks
Core Staffing; Distributed Product Delivery; Fiscal Agent
Discussion Draft
Next Steps / How You Can Help
Identify pilot projects with goal of making first investments in approximately six months
Identify and help secure key retailer engagement (e.g. Walgreens, Chipotle, Starbucks, FedxOffice, Target, TGI Fridays)
Identify potential members and help establish Steering Committee -- senior leadership with credibility, relevant expertise, key partners
Seek lead operating partners to administer financial products in first and second phase
Engage bank, additional foundation, retailer, other investors: secure PRI loan and fund operating grant
35
Chicago TREND
Chicago Community Trust May 26, 2015