Professional Documents
Culture Documents
Originally
published
May
24,
2013
Revised
August
7,
2013
Executive
Summary
The
best
option
for
ongoing
community
wealth
building
in
Northeast
Greensboro
is
for
the
City
to
allow
the
community
to
purchase
the
Renaissance
Center.
This
document
maps
out
several
pathways
to
that
end.
Community
ownership
is
made
possible
by
the
development
of
a
Community
Land
Trust.
This
community-owned
and
controlled
entity
would
buy
the
shopping
center
from
the
City
using
a
combination
of
financing
including
accumulated
profit
from
the
operation
of
the
Renaissance
Community
Coop,
financing
from
Self-Help
Credit
Union
and,
in
some
scenarios,
loan
assistance
from
the
City
of
Greensboro.
Debt
service
would
be
repaid
using
the
net
operating
income
of
the
Center,
leaving
a
balance
of
funds
available
to
finance
other
community
projects.
This
analysis
includes
provision
for
vacancy
rates
and
fulfilling
the
existing
lease
agreement
to
Family
Dollar
Store.
Four
scenarios
of
purchase
and
ownership
are
included,
each
having
different
dates
for
purchase
of
the
property
and
retirement
of
all
debt.
Also
analyzed
is
the
rate
and
amount
of
accumulation
of
community
wealth
under
each
scenario.
Spreadsheets
are
attached
that
summarize
these
scenarios.
This
document
also
looks
at
the
process
of
preparation
of
the
community
to
exercise
the
responsibilities
of
ownership
through
a
Community
Land
Trust.
Our
hope
is
that
this
document
will
illustrate
possible
pathways
to
community
ownership
of
the
Renaissance
Center
and
help
the
City
Council
to
be
able
to
evaluate
community
ownership
of
the
Renaissance
Center
as
a
serious
option
as
they
decide
the
fate
of
the
Renaissance
Center.
Background
For
more
than
a
decade,
residents
of
Northeast
Greensboro
have
been
faced
with
the
run- down,
nearly
empty
Renaissance
Center
(formerly
the
Bessemer
Center).
In
its
current
decaying
shape,
the
Renaissance
Center
is
an
eyesore
and
a
symbol
of
economic
desolation.
The
City
of
Greensboro,
recognizing
the
need
to
turn
this
situation
around,
committed
to
improving
the
area.
In
2008,
the
City
purchased
the
Center,
and
then
built
the
beautiful
McGirt-Horton
branch
library
on
the
front
quarter
of
the
property.
Extensive
community
discussions
and
negotiations
with
the
City
established
several
ways
the
community
wished
to
see
the
balance
of
the
buildings
and
property
be
put
to
use.
Concerned
Citizens
of
Northeast
Greensboro,
Citizens
for
Economic
and
Environmental
Justice
(CEEJ)
and
others
who
participated
in
the
many
forums,
charrettes
and
endless
meetings
believed
that
they
were
on
the
road
to
a
vibrant,
healthy
facility
that
would
meet
a
range
of
community
needs,
including
a
full-service
grocery
store,
a
health
facility,
job
training,
and
other
retail
and
commercial
opportunities.
Sadly,
these
efforts
to
turn
the
shopping
center
around
sputtered
and
stalled.
Taking
matters
into
their
own
hands,
residents
of
Northeast
Greensboro
began
working
together
to
meet
the
long-standing
community
need
for
a
full-service
grocery
store.
They
formed
themselves
into
the
Renaissance
Cooperative
Committee
and
are
making
great
strides
towards
turning
their
dream
into
a
reality.
The
Committee
is
on
track
to
open
the
Renaissance
Community
Cooperative
(RCC)
Grocery
Store
by
June
of
2014.
They
completed
a
market
study
and
pro
forma
business
projections
that
establish
the
viability
of
the
project.
The
market
study
and
pro
forma
have
been
examined
by
experienced
grocery
professionals
(Uplift
Solutions)
and
lenders
(Self
Help)
who
believe
that
the
RCC
grocery
store
has
real
financial
viability.1
The
City
is
now
contemplating
whether
to
maintain
ownership
of
the
Renaissance
Center
or
sell
it
to
a
private
development
group
(with
the
RCC
grocery
in
the
mix
either
way).
City
Council
is
weighing
which
of
these
two
paths
will
cost-effectively
lead
to
a
turn-around
of
the
Center
and
the
communitys
economic
fortunes.
There
are
many
factors
to
be
weighed,
including
the
question
of
whether
it
is
feasible
and
appropriate
for
the
City
to
own
and
operate
a
retail
shopping
center.
There
are
also
questions
about
whether
private
ownership
of
the
Center
will
lead
to
the
kind
of
development
the
community
wantsstores
that
meet
real
community
needs
and
jobs
that
pay
a
decent
wageor
whether
private
ownership
will
result
in
extractive
slum
type
stores
that
do
little
in
the
way
of
providing
jobs
and
building
community
wealth
and
health.
The
logic
of
profit
as
the
sole
business
motivation
creates
these
types
of
stores.
This
logic
requires
that
businesses
strive
to
make
the
maximum
profit,
taking
advantage
of
every
fad,
prejudice,
weakness
and
dependency
existing
in
the
neighborhood
in
order
to
sell
at
the
highest
allowable
price
while
making
the
lowest
possible
expenditures
on
wages
and
benefits
and
providing
as
little
upkeep
and
maintenance
as
possible
to
their
facilities.
In
low-income
neighborhoods,
where
there
is
little
competition
and
a
captive
audience
with
limited
transportation,
slum-type
businesses
operating
with
profit
as
their
sole
motive
need
not
worry
about
providing
high
quality
goods
and
services.
There
is
a
Third
Option:
Community
Ownership
There
is
a
third
path,
however:
the
community
could
buy
the
Renaissance
Center
and
democratically
own
and
control
it,
using
it
as
a
major
asset
to
leverage
on
behalf
of
ongoing
community
wealth-building.
Some
people
have
raised
concerns
that
this
is
not
a
realistic
option,
saying
that
the
community
is
not
now
and
will
not
soon
become
capable
of
purchasing
or
governing
a
shopping
center.
We
at
F4DC
dispute
this
bleak
view
of
the
current
and
potential
capability
of
the
community.
After
working
closely
with
the
RCC
Steering
Committee
and
other
Northeast
Greensboro
organizations
for
more
than
a
year,
we
have
a
gained
a
good
sense
of
the
communitys
current
and
emergent
capabilities.
We
see
a
clear
pathway
to
responsible
community
ownership
of
the
Renaissance
Center
within
the
next
two
to
ten
years
within
a
range
of
financial
scenarios.
1
The RCC has a plan to obtain $2.1 million in equity and debt financing, has already secured almost $800,000 in promised lending, and is on track to raise the balance by Spring of 2014 through member equity and loans, grassroots fundraising, foundation and government grants, and City sources. The RCC has established relationships with several national groups that are working on the food desert issue, including the Food Coop Initiative (where the RCC is under consideration for a
As important as it is to select good tenants, it is also important to exclude tenants that do not contribute to the community and instead extract the communitys limited wealth. Unhealthy fast food, predatory lending establishments, high priced rent-to-own centers, and speculative businesses such as sweep-stakes parlors that prey on community members economic uncertainty do not help the community reach its full potential. Even the provision of creating jobs doesnt help very much if the jobs are at or near minimum wage and without benefits. A study done by economics professor Christopher Gunn of Hobart and William Smith Colleges, using standard industry data, shows that in a typical McDonalds franchise the total surplus exceeds the payroll and of that surplus, more than 75% is taken out of the community (Reclaiming Capital, Cornell University Press, 1991, 28- 29). In contrast, community ownership of the shopping center will ensure that the majority of the surplus generated by the co-op grocery and the shopping center will stay in the community. It will be controlled and managed by the people who live there, put back to work developing economic strength, quality of life, and general well-being that community desires. We think that creating good jobs and community wealth must be the objective of community economic development. The City has a commitment to help alleviate some of the long-standing inequities that are evident in the disparities shown in numerous studies, including the recent parity study, and which are reflected in the lives of Greensboro residents. The citys use of economic
incentives for job creation along with its involvement with community redevelopment efforts are expressions of that commitment. Helping to create the democratic structure and the opportunity for ownership of the Renaissance Center as a hub of the economic life of this Northeast Greensboro community will be important steps on the road to parity. Cities across the country are in similar positions. The current economic crisis increases the urgency of these efforts at equitable community development, but it did not create it. Greensboro will have the opportunity to be a model for other cities in answering a question on the minds of many: How can we best develop the economic and physical infrastructure that will allow all of our neighborhoods the chance and the means to help themselves? The balance of this document attempts to responsibly tackle this big question in the specific context of Northeast Greensboro, by addressing three questions that collectively assess whether community ownership of the Renaissance Center is a viable option: 1. Can the community raise the money to purchase the Renaissance Center? 2. Are there viable forms of legal ownership and governance that would allow a community to responsibly and democratically own and operate a shopping center? 3. How will the community gain the requisite capabilities to pull this off? By answering these questions, we will map out multiple pathways to community ownership of the Renaissance Center so it can be evaluated as a serious option while the City Council makes up its mind about the fate of the shopping center.2
Question
1:
Can
the
community
raise
the
money
to
purchase
the
Renaissance
Center?
Purchase
Price
of
the
Shopping
Center
The
first
step
in
answering
the
question
of
whether
the
community
can
raise
the
money
to
purchase
the
shopping
center
is
to
establish
an
estimate
of
its
purchase
price.
The
Citys
own
studies
show
current
fair
market
value
(FMV)
for
the
Renaissance
Center
at
$490,000,
though
this
may
be
merely
an
estimate
of
the
residual
value
of
the
land
following
the
sectioning
off
of
the
portion
used
by
McGirt
Horton
Library.
An
April
2013
report
prepared
for
the
City
by
Michael
Watts
estimates
a
projected
FMV
of
$1.9
million,
should
the
City
invest
the
roughly
$2
million
it
is
considering
investing
in
improvements.
We
assume
the
communitys
purchase
of
the
shopping
center
would
take
place
after
the
City
has
made
its
improvements,
so
we
will
use
Watts
estimate
of
$1.9
million
as
the
purchase
price.
Of
course,
if
the
Center
takes
off
over
the
next
few
years
and
becomes
a
2
Readers
should
note
that
this
document
is
speculative
in
nature,
even
as
we
attempt
to
anchor
our
speculations
in
realistic
assumptions.
It
is
not
a
prospectus,
pro-forma,
statement
of
commitment,
or
formal
feasibility
assessment.
Nor
is
it
a
business
plan.
Its
purpose
is
to
provide
rough-cut,
good
faith
estimates
and
information
that
help
to
answer
the
question
of
whether
there
is
a
realistic
pathway
for
the
community
to
assume
ownership
of
the
Renaissance
Center.
bustling, vibrant shopping destination filled with tenants paying high rents, the FMV will go up. Thats not the scenario we have data or experience with, so in this paper, well not consider this as part of our analysis. Even if the FMV of the center goes higher, the rents that could be charged would go up accordingly, which would cover the debt service on extra financing needed to cover the increased purchase price. We note that the City will consider its own public policy, fiscal, and statutory concerns in setting a purchase price for the Renaissance Center. Some of the relevant statutes require sale at FMV as determined by three independent appraisals, whereas others allow sale at a lower price, if certain public notice and public hearing requirements are met. For purposes of this analysis, well work with the $1.9 million figure, which seems a fair estimate of FMV. Financing the Purchase of the Shopping Center: Net Operating Income from Rental of the Shopping Center Goes to Debt Service In all scenarios in which the community purchases the shopping center, the presumption is that the net operating income from the leasing of stores would be used to cover any debt service related to financing. In the attached spreadsheet, we do a quick-and-dirty, non- discounted, non-depreciated, non-inflated cash flow analysis where we calculate an annual net operating income, before debt service, of $91,414 per year. We based our revenue and expense figures on explicitly named assumptions drawn from the Michael Watts report and the May 20 proposal of New Bessemer Associates. With a healthy reserve of .35 per square foot included, we think our assumptions are conservative and responsible. Financing the Purchase of the Shopping Center: Equity To obtain the $1.9 million purchase price, the community would bring some amount of equity to the table, with the balance financed by Self Help Credit Union and, perhaps, the City. In scenarios 1-3, the community would bring a minimum of $400,000 in equity, with the largest part of the equity stake coming from surpluses generated by the RCC grocery store. RCCs cash flow analysis suggests that the RCC can contribute a minimum of $250,000 of surplus accumulated during the first five years after launch, and as much as $800,000 over ten years. In scenario 4, the fast-purchase scenario, there is less time for the RCC surplus to accumulate, so the community would bring $100,000 in equity, 20% of which comes from the RCC, and the balance from grassroots fundraising and grants. The Role of the RCC Grocery Store in Capital Formation It is important to highlight the important role of the RCC Grocery Store in the purchase and success of the overall plan for community ownership. In addition to being an anchor store that will attract other tenants to the Center, the RCC plays a critical role on the financing of the shopping center, specifically in providing equity for the down payment. Within the RCC community, there is already a great deal of support for the longer-term goal of purchasing the Renaissance Center. Members of the RCC see ownership of the shopping center as good for the co-op as well as connected to the co-ops larger mission of 7
contributing to the communitys ongoing economic development, health, and well-being. There is explicit understanding that the supportive rent figure that the RCC is seeking ($2,000 per month, or $24,000 annually$2.40 per square foot) is to be tied to community benefit, including using a portion of surplus to buy community-owned assets such as the Renaissance Center. Some people have criticized the supportive rent figure for the RCC as a financially unsupportable burden that undercuts the viability of the shopping center as a business enterprise. That may be true if the shopping center is to be owned by a private developer seeking maximum return on investment, but neither the community nor the City as owners of the Renaissance Center have such a narrow interest. In fact, it is in both the Citys and the communitys interest to set the rent figure for the RCC at a level that ensures that the Centers basic expenses are covered (lost property tax, maintenance, insurance) while allowing for the community to accumulate surplus at a faster rate. In this context, the supportive rent figure isnt a problemits part of the solution, helping the community achieve its big picture dreams of community ownership, health, and wealth while providing the City with a responsible way out of the shopping center business. Support from Foundations and Grassroots Fundraising Rounding out the RCCs contribution to equity, we are confident that we can raise additional funds in donations and grants from individuals as well as local, regional, and national foundations. In Scenarios 1-3, we estimate a minimum of $150,000 from foundations, individual donations, and government sources, such as the federal governments Healthy Food Financing Initiative. In Scenario 4, the fast-purchase scenario, we do not have as much time to do the grant-seeking and fundraising, so this figure is smaller, at $80,000. It may well be possible to raise considerably more financial support from foundations and government sources, which would be applied toward increasing the equity stake: there is a great deal of interest nationally and regionally in the use of community land trusts as a tool for turning around blighted areas and rebuilding local economies. However, in the interest of presenting responsible scenarios, were holding to the conservative range of $80,000 to $150,000 for donor, foundation, and government support. Financing the Purchase of the Shopping Center - Lending F4DC has had a preliminary conversation with Self-Help; they have indicated that they could bring financing of up to $1,500,000 into a deal in which the community purchases the shopping center from the City, holding the land and buildings as collateral. While Self-Help has the capacity and interest to meet all the need for outside lending, the debt service on $1.5 million is too big to be covered by the annual net operating income from the center. That shortfall can be addressed in two ways: (1) the City of Greensboro could participate as a 0% interest lender in a subordinate position to Self Help, thus 8
lowering the cost of borrowing, or (2) the community can wait longer to purchase the shopping center, which would allow more time for a larger equity stake to be raised (from RCC surpluses). Lots of Ways to Accomplish The Purchase: Four Possible Financing Scenarios Please see the attached spreadsheet in which we compare four different financing scenarios, with different timelines and implications for cash flow. Scenario 1: The community is able to purchase the shopping center in 5 years and pay off the debt within 40 years of purchase (45 years from now). Down-Payment: $400,000 (21% equity) $250,000 from accumulated surplus from grocery store $150,000 in donations and grants from local, regional, and national foundations
Lending: $1,500,000 (79% financing) $800,000 @ 4% over 20 years from Self-Help (annual debt service in years 1-20 is $58,174) $700,000 @ 0% over 40 years from the City of Greensboro (annual debt service in years 21-40 following payoff of Self Help note is $35,000)
In Scenario 1, the debt to Self-Help is retired before the Citys debt begins to be paid off. Scenario 2: The community is able to purchase the shopping center in 10 years and pay off the debt within 15 years of purchase (25 years from now). Down-Payment: $950,000 (50% equity) $800,000 from accumulated surplus from grocery store $150,000 in donations and grants from local, regional, and national foundations
Lending: $950,000 (50% financing) $500,000 @ 4% over 15 years from Self-Help (annual debt service in years 1-15 is $44,381) $450,000 @ 0% over 15 years from the City of Greensboro (annual debt service in years 1-15 is $30,000)
In Scenario 2, both the City and Self Help are paid back within 15 years of purchase. Scenario 3: The community is able to purchase the shopping center in 10 years and pay off the debt within 20 years of purchase (30 years from now) Down-Payment: $950,000 (50% equity) $800,000 from accumulated surplus from grocery store 9
$150,000 in donations and grants from local, regional, and national foundations
Lending: $950,000 (50% financing) $950,000 @ 4% over 20 years from Self-Help (annual debt service in years 1-20 is $69,082)
The City does not participate as a lender in Scenario 3. Self Help is paid back within 20 years of purchase. Scenario 4: (Fast Purchase Scenario): The community is able to purchase the shopping center in 2 years and pay off the debt within 30 years of purchase (32 years from now) Down-Payment: $100,000 (6% equity) $20,000 from accumulated surplus from grocery store $80,000 in donations and grants from local, regional, and national foundations
Lending: $1,800,000 (94% financing) $300,000 @ 4% over 5 years from Self-Help (annual debt service in years 1-15 is $66,299.52) $1,500,000 @ 0% over 15 years from the City of Greensboro (annual debt service in years 6-30 is $60,000)
In Scenario 4, the debt to Self Help is retired first, in years 1 5. The debt to the City is retired over the next 25 years (Years 6-30). Community Wealth Building The four scenarios have different implications for the goal of building community wealth, as can be seen in some detail in the Comparison spreadsheet. From the perspective of community wealth-building alone, Scenario 2 is both the fastest and most effective, achieving debt retirement by 2038 (20 years earlier than Scenario 1, five years earlier than Scenario 3, and seven years earlier than Scenario 4), and generating almost $2.5 million in cash by 2058.
Question
2:
Are
there
viable
forms
of
legal
ownership
and
governance
that
would
allow
a
community
to
responsibly
and
democratically
own
and
operate
a
shopping
center?
Community
Land
Trusts
Across
the
U.S.,
communities
are
turning
to
community
ownership
of
real
property
to
accomplish
a
number
of
goals:
building
community
wealth,
renewing
decaying
residential
and
commercial
properties,
providing
economically
sustainable
opportunities
for
affordable
housing
and
commercial
development,
combatting
the
destabilizing
effects
of
10
gentrification, and gaining community control over the environment. Many communities are using the 501(c)3 non-profit Community Land Trust (CLT) as the legal formation to manage community ownership of shared real estate assets. The closest CLTs we know of are in Orange County (Community Home Trust) and Durham (Durham Community Land Trustees). For information about CLTs, check out these websites: Durham Community Land Trustees, www.dclt.org Community Home Trust, www.communityhometrust.org Burlington Associates, www.burlingtonassociates.com National Community Land Trust Network, www.cltnetwork.org Institute for Community Economics, www.iceclt.org
While most CLTs have focused on housing stock, some are purchasing and managing commercial property as well. Governance In this preliminary discussion, we dont want to go too far in specifying the details of how the land trust should be set up or governedthese are matters that have to be worked out in the community among the people who take the responsibility of forming the land trust, working with knowledgeable legal and financial experts. However, we think its appropriate to talk about the need for authentic democratic governance structures and practices to be in place, embedded within a strong Policy Governance framework. We are sometimes asked how it is possible for a whole community to operate a grocery store, a shopping center, or any kind of business. Some people believe that if there are not one or two people at the top, then all decisions will be labored and fraught, requiring far too much patience and taking far too much time. Policy Governance is a system of governance that clarifies the roles and relationships of membership, board, and management. Policy Governance is widespread in the cooperative movement, because it allows for coherent, flexible, and effective day-to-day management of business operations, while long-term policy, strategy, and direction are determined by the membership, either directly in the annual meeting, or through their elected representatives, the Board. Roughly, Policy Governance applied to community ownership of the shopping center would work like this: the CLT would be established as a non-profit membership-based organization, consistent with North Carolina and federal non-profit law. The membership would elect the Board and decide major strategic direction in an annual meeting. The Board would follow that strategy in establishing policy. The Board would contract with a professional property management firm to handle day-to day operations of the shopping center, following policies outlined by the Board. Management is accountable to the Board. The Board is accountable to the Membership. This model affords tremendous flexibility to management. As long as the management successfully enacts the strategic direction and
11
follows the policies established by the Board and the membership, it is free to carry out operations in any way that works. This enables the daily operations to be carried out efficiently and effectively. (For more on Policy Governance see www.governancecoach.com.) If you remain skeptical of the effectiveness of Policy Governance in a business setting, consider the success of Weaver Street Market (annual revenue $14 million) and Company Shops Market (annual revenue $5 million), both of which utilize Policy Governance structures and practices. Authentic Democracy and Community Control Broad membership, anchored in the immediate neighborhood and joined by allies from across the city, is the starting point for democratic functioning of the CLT. The membership in the CLT can begin rather small (say 50 to 100 people) and easily grow to 500 to 1,000 or more people. It will be important for members to have financial or time commitment requirements as an expression of their seriousness about the organization. There are various ways other CLTs have decided membership, but ultimately these requirements will be decided by the community. Any resident of North Carolina could become a member, but membership recruitment would be focused on the area immediately surrounding the shopping center, with secondary attention to the wider community of Greensboro. We propose that the CLTs board be elected entirely from its members. The majority of board seats would be reserved for members who live within a 1-2 mile radius of the shopping center. This would ensure that the shopping center would be operated with the concerns of the immediate community most in mind. Two to three seats could be reserved for members who live outside the immediate community, to bring in outside perspectives, expertise, and connections to complement those of the immediate community. Taking its cues from the membership meeting, the Board will need to set policy on a number of issues, starting with the question of what needs of the community are to be met by the shopping center, by whom, and at what cost. The Board will also have to set policy around uses of the community space that is in the shopping center, and guidelines for the recruitment of tenants and the setting of lease terms that sustain the CLT while encouraging appropriate community economic development. The Annual Membership Meeting would need to be conducted in a substantive, democratic way, so that members have real say about the strategic direction and questions facing the CLT. The cooperative movement can provide many examples of annual meetings with large memberships where serious matters are decided by the membership. One key question that should be addressed in each annual meeting will be whether and how to spend any annual surplus. The CLTs bylaws will almost certainly restrict certain kinds of expenditures, to prohibit self-dealing and ensure maintenance of a charitable and community focus for the CLT. Throughout the year, there need to be ways for members of the CLT to affect policy and day-to-day practices, while building community among members. For example, members can serve on committees, attend sponsored social and educational events, and volunteer 12
for community improvement efforts sponsored by the nonprofit land trust. Non-members who live in the immediate community should be invited to at least one event each quarter, designed to strengthen the CLTs connection to the immediate community and to hear about any issues or opportunities facing the community. The CLT should also conscientiously interact with other community organizations and institutions in the area, including CEEJ, Concerned Citizens, Woodmere Park Neighborhood Association, Peeler Recreation Center, and McGirt-Horton Library. As stated earlier, it isnt appropriate in this paper to specify all aspects of the governance of the CLT: its critical that members of the community be engaged in deciding how they want the land trust to be structured. Whats key, though, is an initial and sustained commitment to authentic democracy. That means governance structures and practices that are inclusive, transparent, and accountable, backed up by well-understood and agreed-upon decision making processes. Its not enough to get articles of incorporation and bylaws in placeits about building a living, dynamic capacity for practicing authentic democracy.
Question
3:
How
will
the
community
gain
the
requisite
capabilities
to
pull
this
off?
What
capabilities
are
needed?
We
see
three
broad
capabilities
that
the
community
will
need
to
succeed:
1. Collective
and
individual
skills
and
aptitudes
related
to
democratic
Policy
Governance
of
a
CLT
that
owns
a
substantial
asset
2. A
moderate
level
of
community
cohesiveness
and
trust,
enhanced
by
soft
skills
in
community
engagement
and
community
building
3. Specific
knowledge
and
skills
related
to
owning
and
operating
a
shopping
center
Where
will
the
community
get
these
capabilities?
Keep
in
mind
that
there
are
different
spheres
and
contexts
in
which
the
needed
capabilities
can
reside:
In
the
community
as
a
whole
(e.g.,
,
a
shared
sense
of
community
trust
has
to
be
held
in
the
community
at
large
or
it
isnt
authentic)
In
individual
community
leaders
(e.g.,
skill
at
engaging
people
in
the
community,
knowledge
of
policy
governance
and
how
it
applies
to
this
situation,
etc.)
Within
hired
experts
(e.g.,
real
estate
attorneys,
CPAs,
board
development
consultants,
etc.)
Our experience organizing in Northeast Greensboro on the grocery store project has taught us that theres more capability already present in the community than it is generally
13
credited with. The RCC experience is not a fluke: after all, the same community came together in a highly effective way to stop the re-opening of the White Street Landfill. CEEJ and Concerned Citizens have proven themselves to be well-organized, purposeful, hard- working, and in it for the long-haul. So there is clearly a solid set of capabilities to work from. We are also confident that the experience of launching and operating a cooperatively owned grocery store will prove to be a valuable training ground for both individual leaders and the larger community in the areas of democratic functioning, community engagement, finance, retail operations, etc. In fact, we see the next few years of RCC start-up and operations as essential to getting the community ready for the larger project of owning a community asset like the shopping center. Frankly, were suspicious of other proposals that have suggested giving part or all of the shopping center to the community, without any serious consideration of the communitys preparation to take on that responsibility, or who, exactly, represents the community. Without an extended, concrete opportunity for learning and practice at democratic governance of a business and in the absence of an organization with a mechanism in place to carry this out, we dont see how the community will be able to identify its most important goals in owning the Center, elect an accountable Board, and secure and supervise appropriate qualified management. We have sketched out four scenarios for community ownership, three of which provide five to ten years for the development of capacity, leadership, and democratic organizational structures to assume responsible ownership of the Renaissance center. These longer-term scenarios are needed to raise larger equity stakes, but they also have the benefit of providing ample time for community development. The fourth scenario, in which the community land trust is able to purchase the shopping center in two years, is achievable, but requires an acceleration of community development activities and a more serious commitment on the part of the City to creating a supportive environment for that work. In both the RCC grocery store project and the shopping center project, F4DC is willing to commit significant staff time and some financial resource to supporting ongoing individual and community capacity building. Through our relationships with national and regional non-profits and cooperative development agencies, we can provide workshops, consultants, and trainers who can help prepare the community and its chosen leaders in the various tasks and roles required. We believe that other foundations in the region would also like to participate in these kinds of capacity-building efforts ensuring that the community and its leaders will have ample support to grow the capacities they need to succeed.
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Comparison of four scenarios in which a Comunity Land Trust purchases Renaissance Center
Purchase Price of Shopping center Years to save down payment Year of purchase Years to pay off (Term) Year paid off Last year City is owed money Initial Equity Stake Amount of down payment from RCC Amount of down payment - other sources Amount of Financing Needed Financing from Self Help @ 4% Financing from City @ 0% Annual NOI before debt service Annual Debt Service Years 1-5 Years 6-15 Years 16-20 Years 21-30 Years 31-40 Annual NOI after debt service Years 1-5 Years 1-15 Years 16-20 Years 21-30 Years 31-40 Accumulated Cash relative to purchase date Year 3 Year 5 Year 10 Year 15 Year 20 Year 25 Year 30 Year 35 Year 40 Year 45 Accumulated cash by year 2018 2023 2028 2033 2038 2043 2048 2053 2058 2063
Scenario 1 $1,900,000 5 2018 40 2058 2058 $400,000 $250,000 $150,000 $1,500,000 $800,000 $700,000 $91,414 $58,174 $58,174 $58,174 $35,000 $35,000
Scenario 2 $1,900,000 10 2023 15 2038 2038 $950,000 $800,000 $150,000 $950,000 $500,000 $450,000 $91,414 $74,381 $74,381 $0 $0 $0
Scenario 3 $1,900,000 10 2023 20 2043 N/A $950,000 $800,000 $150,000 $950,000 $950,000 $0 $91,414 $69,082 $69,082 $69,082 $0 $0
Scenario 4 $1,900,000 2 2015 30 2045 2045 $100,000 $20,000 $80,000 $1,800,000 $300,000 $1,500,000 $91,414 $66,300 $60,000 $60,000 $60,000 $0
$75,343 $125,572 $282,642 $439,712 $596,782 $753,852 $910,922 $1,367,992 $1,825,062 $2,282,132
$75,343 $219,814 $376,884 $533,954 $691,024 $848,094 $1,185,164 $1,642,234 $2,099,304 $2,556,374
Rough Cut Annual Net Operating Income Statement for Shopping Center Annual Income from Rents Family Dollar RCC 19,000 remaining square feet Annual max income Revenue lost to vacancy Gross income from rents Annual Expenses Management Insurance Maintenance Utilities Taxes Reserves Total expenses Net Operating Income before Debt Service $39,680.00 $24,000.00 $140,600.00 $204,280.00 -$32,560.00 $171,720.00
$8,586.00 $7,920.00 $39,600.00 $8,800.00 $0.00 If community owns as a non-profit land trust, then no taxes due. Otherwise $26,184 $15,400.00 $80,306.00 $91,414.00
Assumptions Sq footage of grocery store/comm'y space Grocery store rent per yr Family Dollar sq footage Family Dollar rent per yr Total sq footage of center Remaining sq footage Annual sq ft rental price Vacancy rate management costs Insurance per sq ft Maintenance per sq ft Utilities per sq ft Reserve per sq ft
15,000 $24,000.00 10,000 $40,000.00 44,000 19,000 $7.40 10% 5% $0.18 $0.90 $0.20 $0.35
see assumptions used by New bessemer Associates in 5/20 submission likely given long-term leases signed by Family Dollar and RCC see assumptions used in Michael Watts 4/23 report to City see assumptions used in Michael Watts 4/23 report to City see assumptions used in Michael Watts 4/23 report to City see assumptions used in Michael Watts 4/23 report to City see assumptions used in Michael Watts 4/23 report to City