Introduction to Commercial Development
•Als PPT, PDF herunterladen•
1 gefällt mir•1,508 views
Slides from a two day workshop introducing commercial real estate development concepts for staff of nonprofit Community Development Corporations.
Empfohlen
Empfohlen
Weitere ähnliche Inhalte
Was ist angesagt?
Was ist angesagt? (20)
Andere mochten auch
Andere mochten auch (16)
Ähnlich wie Introduction to Commercial Development
Ähnlich wie Introduction to Commercial Development (20)
Mehr von Rick Jacobus
Mehr von Rick Jacobus (9)
Kürzlich hochgeladen
Kürzlich hochgeladen (20)
Introduction to Commercial Development
- 1. Introduction to Commercial Development Introduction to Commercial Development © 2001-2005 Local Initiatives Support Corporation Day One
- 2. Introduction to Commercial Development Course Goals • Survey of issues unique to commercial • Assumes some housing experience • Focus on nonprofit sponsored projects • Networking and discussion
- 3. Introduction to Commercial Development Agenda Day 1 • Social Objectives • Development Team • Ownership Structures • Property Management • Market Analysis • Finding Tenants Day 2 • Operating Budgets • Development Budgets • Financing Sources • Evaluating Tenants • Negotiating Leases • Tenant Improvements • Project Planning • 10 Mistakes
- 4. Introduction to Commercial Development Nonprofit Sponsored Commercial Projects • Retail – Retail center – Ground floor retail under housing – Arts related • Industrial – Incubator • Office – Nonprofit office – Social service – Health clinics
- 5. Introduction to Commercial Development Project Profiles • Bloom Lake Building – Minneapolis, MN • New Horizons Center – Bronx, NY • Swan’s Marketplace – Oakland, CA • Harlem IHOP – New York, NY • School House Station – Daily City, CA
- 6. Introduction to Commercial Development Binders 1. Social Objectives 2. Development Team 3. Joint Ventures 4. Property Management 5. Market Analysis 6. Financing Sources 7. Evaluating Tenants 8. Negotiating Leases 9. Tenant Improvements 10. Project Planning
- 7. Introduction to Commercial Development Project Objectives • Why do nonprofit developers undertake commercial projects?
- 8. Introduction to Commercial Development Bloom Lake Building 43,000 Square foot building • 3 retail storefronts – incubator graduates • Entrepreneur and Career Center • Nonprofit Arts Space • Office/workshop space for small businesses • Heart of the Beast Puppet Theater Company Sponsor: Neighborhood Development Center Location: Midtown Phillips Neighborhood, Minneapolis, MN
- 9. Introduction to Commercial Development Exercise: Social Objectives EXAMPLE: Affordable Housing Objective: To provide quality housing to families earning less than 60% of Area Median Income that costs no more than 30% of household income. Commercial Objective: • What are some potential social objectives that may have motivated the Bloom Lake Project? • How will they know whether the project ultimately meets these objectives?
- 10. Introduction to Commercial Development Social Objectives • Job Creation • Neighborhood Revitalization Community Services • Neighborhood Safety • Income Generation • Organizational Stability – Operating Support • Tenant Services – Program Support • Small Business Development/Support • Nonprofit space • Arts Space • Social Service Space • Nonprofit Office Space
- 11. Introduction to Commercial Development Social Objectives Goal Job Creation Small Business Development Measure Net new jobs provided by businesses leasing space. (Total jobs less any that existed prior to relocation) Percentage of tenants that are minority first-time entrepreneurs. Target Unit will be leased to businesses that generate at least 25 net new jobs Twenty-five percent of tenants will be disadvantaged businesses. Tracking pre-occupancy and post- occupancy surveys Questions on rental application
- 12. Introduction to Commercial Development Bloom Lake –Goals • Revitalize neighborhood retail corridor – Create Latino district • Create jobs for local residents • Generate income for Latino entrepreneurs – Provide an opportunity for expansion of incubator businesses • Support expansion of theater • Remove blight • Preserve historic building
- 13. Introduction to Commercial Development Impacts – Neighborhood Development Center Impact on Neighborhoods Each business returns on average $40,633 per year to the community in terms of rent, purchased supplies, payroll, and so on, Create Jobs for Community Residents The businesses employ an average of 1.8 persons Increased Household Income Before training, 14% made more than $3,500 a month; after training 34% reported monthly incomes over $3,500.
- 14. Introduction to Commercial Development Financial Objectives • Double bottom line • Uses for net income/excess cash flow – Soft debt and residual receipts • Cash as a social objective – Tenant Support Services, Etc. • Unrelated Business Income Tax (UBIT)
- 15. Introduction to Commercial Development Project Profile
- 16. Introduction to Commercial Development BREAK
- 17. Introduction to Commercial Development Development Team
- 18. Introduction to Commercial Development Capacity Assessment • Project Management • Construction Management • Financing/Loan Negotiation • Project /Partnership Accounting • Asset Management • Strategic Planning • Leasing/Lease Negotiation • Small Business Tenant Support • Market Analysis Resource: Development Team Matrix
- 19. Introduction to Commercial Development Swans Marketplace Sponsor: EBALDC Location: Old Oakland Uses: • Office Space 17,000 sf • Retail 25,000 sf + 18 pkg including Housewives Market • Live/work rental 1,000 sf • 20 Cohousing condos • 18 1- and 2-bdrm apts (50-60% AMI)
- 20. Introduction to Commercial Development Consultants • Strategic Planner • Development Consultant • Market Analyst • Transportation Planner • Architect/Urban Designer • Financial Consultant • Tax Attorney • Realtor/Leasing Agent • Insurance Agent • Environmental Consultant • Historic Preservation • Real Estate Attorney • General Contractor • Property Management Company • PR/Marketing Consultant • Small Business Technical Assistance
- 21. Introduction to Commercial Development EBALDC Sequence of Projects 1. Office Space Office lease negotiations, ADA, pkg, HVAC, equip. 2. Storefront office or dry goods retail + relationship of retail entrances, security 3. Office space – multi-tenant, nonprofit + familiarity with leases, special needs clients, CAM calculations, storage, trash 3b. Office space – speculative +familiarity with market leasing, marketing, pr, etc.
- 22. Introduction to Commercial Development Continuum of project types 4. Specialized facilities + operational familiarity with specific use, e.g. noise, smells, crowds, waste, etc. 5. Food related retail + pest control, waste handling, health issues, lease turns, signage, deliveries 6. Shopping centers + marketing, security, parking, special lease agreements, vacancies, interim uses
- 23. Introduction to Commercial Development Partnerships /Joint Ventures "With a project this size, the gulf between the financial world and its demands and a very low-income community is really big. It's hard to find one organization that can span it completely." - Andy Blauvelt, project manager for Marin City USA project
- 24. Introduction to Commercial Development Mid Bronx Desperadoes • Founded in 1974 as a coalition of volunteers • Focused on Crotona Park East section of the Bronx • 2,300 units of affordable housing • Community health clinic • Job training center • Safety and open space • Community planning
- 25. Introduction to Commercial Development New Horizons Center MBD Development Corporation – The Bronx 134,000 square foot shopping center • Pathmark Supermarket • Athlete's Foot • Blockbuster Video • Paramount Home Decorators • Petland Discount Stores • Radio Shack • Rent-A-Center
- 26. Introduction to Commercial Development New Horizons Center MBD Social Objectives • Jobs for local residents • Bring life back to the community • Support local small businesses • Generate income for MBD • Build internal capacity for commercial projects
- 27. Introduction to Commercial Development Exercise Each group should answer the following questions: 1.Should MBD take on a partner in this project? 2.What kind of relationship should they have with that partner? 3.What roles should MBD expect to play in the project?
- 28. Introduction to Commercial Development New Horizons Center Development Consultant Development Advisor: Hutensky Group/ Felipe Ventegeat • Coordinate project team meetings and schedule tasks • Develop project budget • Coordinate Contract Documents, permits, and planning approvals • Monitor General Contractor • Coordinate leasing and lease negotiation
- 29. Introduction to Commercial Development New Horizons Center Development Consultant Owner Responsibilities • Representative to participate on project team • Approve budgets, change orders, etc. • Provide architect, legal and other consultants • Secure project financing • Pay advisor flat fee plus reimbursement of all direct staff and other costs.
- 30. Introduction to Commercial Development New Horizons Center Outcomes • 400 jobs; 85% neighborhood hires – Most hires through MBD Job Center • 22 national and regional credit tenants – No local small businesses • 2 year delay in opening • $10 million cost overrun – Excess income devoted to debt retirement for 5 years • Significant staff burnout – Two Executive Directors left
- 31. Introduction to Commercial Development New Horizons Center Lessons Learned • Most mistakes - cost overruns were avoidable • CDC carried the financial and political risk but relied on partners to lead the project • Key problems identified by CDC but ignored by the experts – Ex: Buried car on lot • CDC let partners talk them into decisions that turned out to be mistakes • Very few experts on inner city mall management – We have to become the experts
- 32. Introduction to Commercial Development Partnership Structures • General Partnership: Each partner jointly liable – share risks. • Limited Partnership: Limited partner’s liability limited to their capital contribution. Limited partners not permitted to participate actively. General partner manages. • Limited Liability Company (LLC): Limited liability for all partners – no general partner needed. Flexible management structure.
- 33. Introduction to Commercial Development Partnership Options • 50/50 Partnerships • Majority/Minority Partnerships • Custom Structures – One party controls during construction, another after – One party controls housing, another controls the retail, etc. – 3 or more partners
- 34. Introduction to Commercial Development Partnership Planning • Identification of roles and responsibilities • Consequences of performance failures • Allocation of fees • Ownership percentage/Allocation of board seats • Duties vs. decisions • Planned transfer of roles • Capacity building partnerships
- 35. Introduction to Commercial Development Chicago LISC-ULI Study Brought together private developers and CDC leaders to study completed projects in Chicago and Boston and identify keys to success: • Clear division of roles and responsibilities • Rely on the for-profit partner’s expertise in traditional development, marketing and access to capital • Rely on the CDC’s expertise to leverage government and foundation resources, obtain site control and public approvals and win community support.
- 36. Introduction to Commercial Development Chicago LISC-ULI study Partner Characteristics CDC • Already developed community consensus • Planning process completed or underway • Depth of connections with community institutions • Level of sophistication with politics, zoning, and government approvals For-profit Developer • Entrepreneurial in style and approach • Able to dedicate 1 or 2 staff to project • Financially stable • Typically a small firm with patient leader able to wait for success • Some familiarity and appreciation for nonprofit sector and the value of emerging markets
- 37. Introduction to Commercial Development Separating Uses in Mixed Use Projects Low Income Housing Tax Credits – Commercial income generally must be less than 20% of total project revenue. – Commercial Space excluded from tax credit basis – Concerns about unexpected excess income
- 38. Introduction to Commercial Development Separating Uses Ways to Separate Commercial from Housing • Physical Separation • Simple Lease • Master Lease • Condominium • Subdivision/Air Rights
- 39. Introduction to Commercial Development Property Management
- 40. Introduction to Commercial Development Management Plan Template • Staffing • General policies and procedures • Budgeting • Accounting, bookkeeping, reporting • Leasing and occupancy • Move-in procedures • Move-out procedures • Security deposits • Rent collection policies • Utility surcharge • Contracts and disbursements • Insurance • Tenant relations • Maintenance and security • Lease administration • Eviction procedures
- 41. Introduction to Commercial Development Management Plan Attachments • Customization Form • Emergency response • Grievance procedures • Inspection report • Job descriptions • Preventive maintenance schedule • Service request • Vacancy preparation • Tenant welcome letter
- 42. Introduction to Commercial Development Staffing Property Management for Commercial Projects • Who handles leasing/marketing? • Who makes decisions about lease terms? • Who signs leases? • Who approves payment work-outs? • Who monitors lease terms? • Who monitors social performance (jobs, etc.) • Who tracks/bills for reimbursables/CAM?
- 43. Introduction to Commercial Development Staffing Property Management for Commercial Projects • Who prepares budgets? • Who reviews spending reports? • Who develops maintenance schedules? • Who tracks reimbursable maintenance work? • Who approves tenant work? • Who reviews tenant insurance?
- 44. Introduction to Commercial Development Staffing Property Management for Mixed-Use Projects Property Management Department Commercial Housing Site #1 Commercial Housing Site #2 Commercial Housing Site #3
- 45. Introduction to Commercial Development Staffing Property Management for Mixed-Use Projects Property Management Department Commercial Site #1 Housing Site #2 Site #3 Site #1 Site #2 Site #3
- 46. Introduction to Commercial Development LUNCH
- 47. Introduction to Commercial Development Leasing Strategy Exercise
- 48. Introduction to Commercial Development Market Analysis
- 49. Introduction to Commercial Development Place Demand Supply What are the physical assets and constraints of the site? Is there consumer ability/willingness to purchase goods and services? Are there unmet community needs? What is the supply of businesses and real estate in the area? What is the supply of businesses and real estate in competitive districts? Understanding Markets
- 50. Introduction to Commercial Development Place What kind of information would we want to know about Place? What are the physical assets and constraints of the site?
- 51. Introduction to Commercial Development Place General Locational Characteristics • Address, block, lot • Neighborhood characteristics – building stock, income level, demographics • Distances to downtown, major highways, commercial or industrial nodes, port/airport, competitive projects • Zoning and land use • Housing density
- 52. Introduction to Commercial Development Place Regional/Local Access • Types and conditions of roadways, number of lanes, speed zones • Traffic volume • Traffic controls • Parking availability • Public transit access
- 53. Introduction to Commercial Development Place Neighborhood Identity • General perceptions of the area • Crime rate and trends • New or proposed catalyst projects or capital improvement projects • Cultural facilities or other community assets • Important parks, plazas, etc.
- 54. Introduction to Commercial Development Place Methods for Understanding Place • Walking survey • Regulatory research • Parking and accessibility survey
- 55. Introduction to Commercial Development Demand What kind of information would we want to know about Demand? Is there consumer ability/willingness to purchase goods and services? Are there unmet community needs?
- 56. Introduction to Commercial Development Demand Residential Demographics • Population (including daytime and visitors) • Household and per capita median income • Median household size • Median age and distribution of age cohorts • Racial and ethnic makeup • Rent v. own Consumer preference
- 57. Introduction to Commercial Development Demand Methods for Understanding Demand • Demographic analysis • Consumer and merchant surveys
- 58. Introduction to Commercial Development LISC Neighborhood Market Snapshot Source:www.esribis.com
- 59. Introduction to Commercial Development Retail Spending Estimates
- 60. Introduction to Commercial Development Using Demand Data
- 61. Introduction to Commercial Development Trade Area Neighborhood Gap Ikea Disneyworld grocery
- 62. Introduction to Commercial Development Trade Area Methods for Identifying Trade Area • Rule of thumb: A neighborhood retail node of 30,000-150,000 square feet has a trade area of 3,000-25,000 people or 0.5 to 2.0 miles • License plate survey • Shopper survey • Drive Time Analysis • Gravity Models
- 63. Introduction to Commercial Development Supply What kind of information would we want to know about Supply? What is the existing and planned competitive supply of comparable retail space in the neighborhood/trade area.
- 64. Introduction to Commercial Development Competitive Supply Analysis Existing Retail • Type of stores • Size of stores • Vitality of stores • Anchors • Local v. chain stores Existing Real Estate • Rent levels • Vacancies • Rate of tenancy turnover; inquiries
- 65. Introduction to Commercial Development Competitive Supply Analysis Methods for Understanding Supply Inventory existing businesses in trade area Research Pipeline projects • Contact Local Jurisdictions • Collect Information from Brokers and Retail Developers
- 66. Introduction to Commercial Development Business Summary
- 67. Introduction to Commercial Development Leakage Analysis How well does supply match demand?
- 68. Introduction to Commercial Development Retailer Requirements What kind of requirements might retailers have for locating in your project?
- 69. Introduction to Commercial Development Retailer Requirements Site Requirements • GLA • Minimum frontage • Lot square footage • Parking • Co-tenants • Traffic averages • Freeway access Locational Criteria • Population density • Household density • Demographics – including education, lifestyle types, etc.
- 70. Introduction to Commercial Development Retailer Requirements Methods for Understanding Tenant Criteria • Retailer interviews • Published requirements
- 71. Introduction to Commercial Development Choosing Your Approach Project Type Small (<3000 s.f.) Rehab or new construction Evaluating prospective tenant Medium to Large (>3000 s.f.) or District strategy Long-term District Strategy Research Approach Quick and easy Do it yourself Detailed analysis Hire a consultant Ongoing monitoring
- 72. Introduction to Commercial Development DIY Market Analysis • Review existing market studies • Merchant survey • Resident and employee surveys • Business inventory – published data and walking tour • Competitive supply analysis
- 73. Introduction to Commercial Development Excelsior Target Tenants • Retro-themed diner/lunch counter/soda fountain place (like St. Francis ice cream parlor on 24th St.) • Sandwich and salad place • High quality/affordable ethnic restaurant • Dim sum or Chinese banquet restaurant • Men's and women's clothing - i.e. Ross, Marshall's, TJ Maxx, • Gym • Yoga/fitness/dance studio
- 74. Introduction to Commercial Development Data Sources • U.S. Census - www.census.gov • ESRI – www.esribis.com • Claritas – www.claritas.com • Dun and Bradstreet – www.dnb.com or www.zapdata.com • Trade Dimensions – www.tradedimensions.com • Urban Land Institute – www.uli.org
- 75. Introduction to Commercial Development Other Project Types How would the market analysis process be different for: – Office – Nonprofit service space – Childcare center – Industrial facility
- 76. Introduction to Commercial Development Marketing
- 77. Introduction to Commercial Development Marketing Methods • Window Signs • Flyers • Newspaper Ads • Broker Listing • Word of Mouth • Small Business Networks • Targeted Outreach
- 78. Introduction to Commercial Development Working with a Broker • Multiple Listing Service • Marketing Space • Contacting Chain Tenants • Showing Space • Consulting on offering terms, TI, etc. • Managing lease negotiation
- 79. Introduction to Commercial Development Broker Compensation • Fixed Fee Agreement • Retainer • Hourly Consulting •Commission –Ex: 3000 sq feet at $1.5 per month ($54000/yr) 7% $3,780 7% $3,780 6% $3,240 5% $2,700 4% $2,160 Total $15,660
- 80. Introduction to Commercial Development Marketing Packages Location and Amenities • Neighborhood/Customer demographics • Traffic counts, etc. • Nearby amenities • Sales data on nearby businesses Property overview • Floorplan • Façade • Existing Tenants Financial Information • Rental Rates • Services included in rent (CAM) • Tenant Improvements or TI Allowance How to Apply
- 81. Introduction to Commercial Development Leasing Material
- 82. Introduction to Commercial Development Homework You are responsible for leasing a 6000 square foot retail space. You have offers from two different tenants. 1. One wants to lease the space for $18.90 per foot per year with no rent increases for ten years. 2. The other is offering only $16.80 per foot but is willing to agree to a fixed 3% annual increase. Which tenant is offering the better deal?
Hinweis der Redaktion
- 9:00 Welcome and Introductions (15 minutes) Local Program Director provides general welcome and introduces Trainer. Ask participants to introduce themselves by providing their Name Organization Whether they are working on commercial projects currently Whether they have prior experience with commercial If participants are sitting with their co-workers, ask them to move to different tables
- 9:15Course Goals and Agenda (15) Trainer: This is an overview workshop Points to issues to learn more about Not detailed steps for each issue Assumes some background in Housing/Real Estate Focus on things that are unique to Commercial Focus on Nonprofits as developers Emphasis on discussion over lecture Interrupt as needed!
- Trainer: For the first half of today we will focus on CDC capacity and mission – why are CDCs getting involved in commercial projects and what can we do be be better prepared for the challenges? This afternoon we will look at market analysis and marketing – how do you find tenants for your commercial project, and how do you know in advance whether you will find them? Tomorrow morning will be about financing – we will build a very simple project proforma to evaluate the feasibility of a project given certain rents, financing sources etc. Tomorrow afternoon will focus on tenants – how do you tell good ones from bad ones, what kinds of lease terms are they likely to expect and how to manage the build out of tenant space?
- Trainer: What are some of the types of commercial projects that nonprofits undertake? Try to get specific examples that local CDCs have been involved in? [Reveal slide and list of types] What these different types of projects have in common is mostly that they are not housing! Developing a retail center is very very different from developing a child care center. The buildings are different, the financing is different, the lease terms are different, the risks are different and the social benefits are also very different. We are going to talk about the whole range of these projects but I will tend to focus on retail projects – mostly because they are in some sense the most complex. I will try to point out where the different project types differ the most but if you are interested in a particular type of project, please ask about it as we go.
- Trainer: Throughout the next two days I will try to give real world examples as much as possible. In particular, the workshop draws on several specific CDC projects that LISC has been involved with throughout the country. These are not necessary the best projects in the country or even necessarily appropriate models for every situation – but they are real projects with real strengths and real weaknesses which we can learn from.
- Trainer: We have put together a binder with some resources and some example materials from these sample projects. [More here once we finalize the Binder contents] Take any questions about the workshop goals and agenda
- 9:30 Setting Social and Financial Objectives (30 minutes) Trainer: Too few commercial projects have explicit social objectives Some are developed as afterthoughts Others have ten different goals and no one ever decides which is priority How do you know if you have succeeded? More Importantly: if you are receiving public funding or grants, how do you justify subsidy? Ask the group why CDCs take on commercial projects? Try to get a range of different responses.
- Trainer: Lets think about a real world example Describe project Note we would use a different example in the twin cities
- Trainer: For this real project, I want us to spell out some clear social objectives. Here is an example of how we would define the social benefit of a housing project in a clear and measurable way. Working in small groups at each table, can you define several of the objectives for the Bloom Lake project as clearly? Imagine that you are the board of the CDC? Discuss in Small Groups for 10 minutes. Report back: Ask one or two of the groups to present what they came up with. Ask whether anyone came up with anything very different? If someone mentions jobs, ask: Are jobs the real reason they are doing this project? How do you know? Press for less tangible benefits like neighborhood revitalization – how do they measure that? Are there other intangibles? Take the time for a real discussion at this point.
- Trainer: Here is a list of some common goals that CDCs cite for undertaking commercial projects? How many of these are relevant to Bloom Lake? Are there others that you can think of (either for Bloom Lake or other projects you know of?) Encourage discussion with questions like: Does there have to be a “main” reason for doing a project? Should we avoid projects with too many goals?
- Trainer: In your binder is a matrix that provides some measurable objectives for some of the most common goals. For each goal there is: a measure – the thing we are going to count a target – how much of it we expect our project to generate and a tracking method – the thing we are going to do to find out whether we met our target. Discussion: How would you turn your objectives for the Bloom Lake Building into something like this? What if our real goal is something that is impossible to measure?
- Trainer: Here are the actual goals for the Bloom Lake project as described in the project plan. They actually set different goals for different floors. Discussion: are there any surprises here? Is this a clear enough list? Will they ever know whether they met these goals?
- Trainer: While they have not evaluated this project yet, the sponsor, NDC, tracks its performance in terms of several specific metrics which will be relevant to this project.
- 10:00Project Presentation (45 Minutes) Introduce guest presenter Presenter should provide an overview of their project including a discussion of their social objectives – why their CDC is doing the project. Field questions about project.
- 10:45BREAK (15 Minutes)
- 11:00 Capacity Assessment and Development Team (30 Minutes)
- Break up into the same small groups. Ask each group to answer the two questions on the slide. Small group discussion (5 minutes) Report back (10 Minutes): To what extent does commercial development require different skills than housing? How hard is it for existing staff to pick up those skills? Which roles require experienced professionals who specialize in commercial real estate?
- Trainer: In your binders is a matrix identifying some common roles in commercial development projects. It is important to think ahead about the skills required and to be strategic about what to hire out and what to build internal capacity to do.
- Trainer: Swans Marketplace is a complex mixed-use development in Oakland. It was built by the East Bay Asian Local Development Corporation, one of Oakland’s strongest CDCs and one with a relatively high level of commercial development experience. Like Bloom Lake, Swans Marketplace has several different uses under one roof: Retail, office, artist live/work, market rate housing and affordable housing. It is also a historic property.
- Trainer:Your binders include a matrix listing the Swans Marketplace Development Team. Even this experienced developer needed dozens of consultants to make this project happen. However, they also used this project as an opportunity to build their own in house capacity to play a number of roles including: Retail Leasing Financing for commercial projects Small business assistance Management of tenant improvements Retail property management
- Trainer: Joshua Simon, the Development Director at EBALDC made this chart to illustrate the idea that some types of projects require a wider set of skills than others. It is not comprehensive but it gives you an idea of a sequence from simple to more challenging.
- 11:30 Partnerships/Joint Ventures (30 Minutes) Discussion: Are there situations where it makes more sense to partner with another developer rather than building internal capacity or hiring consultants/contractors? What are the advantages of partnerships or joint ventures? Look for an answer that has to do with risk – in a partnership, the partner holds some of the risk, consultants leave all the risk on the CDC. The CDC may not know what it is getting into. An experienced partner will expect some control but will know the risks and how to mitigate them.
- Break into groups for exercise – 10 minutes (or 15 if needed) Handout MBD Organizational Overview Give people time to discuss in groups and when some of the groups start to discuss details, handout Partnership Structure Form. Report Back – 5 minutes Trainer: What would motivate MBD to give up some control over this project? What kinds of control do they need to maintain? To what extent should they look to this project to build their capacity?
- Trainer: What MBD ended up doing was hiring a development consultant who took day to day responsibility for most aspects of the project on a fee for service basis.
- Trainer: This left MBD with only a small list of responsibilities – basically to oversee the consultant, approve budgets and line up public financing.
- Trainer: The project has had mixed results. They created a large number of jobs for local residents but the project was late and over budget. Equally important is the fact that they burned through a number of staff members including two different Executive Directors during the course of the project. Rather than building staff capacity, it may have left them with diminished capacity. While they are preparing for another commercial project, none of the staff that will work on it worked on New Horizons!
- Trainer: The current Executive Director shared several lessons that MBD learned from the partnership. The CDC had all of the decision making authority but because they were not responsible for the day to day work they had no choice to rely on the advice of their expert consultants (and various subcontractors) even when they suspected that that advice was wrong. They had the power but lacked the necessary skills, experience and information necessary to really make decisions. One moral of the story is that there may be no alternative to the CDC becoming the expert for these projects.
- Trainer: These are some of the many issues to be clear about UP FRONT when putting together a new joint venture. Beware of partnerships between for profits and CDCs in which the for profit is supposed to train the CDC. This rarely happens because the for profit has no real inventive to provide the training and once the deal starts happening both parties want the deal to go smoothly more than they value the training. To build the CDC’s capacity, a certain role has to be their primary responsibility and their must be consequences for them if they fail (and perhaps opportunities for their partner to take over in that situation).
- Trainer: LISC and ULI in Chicago led a joint study process to research CDC partnerships with private developers. A group of CDC leaders and for profit developers looked together at projects in Chicago and Boston and identified these keys to success. The whole report is in the binders.
- Trainer: The partnerships get more complicated when the buildings themselves are mixed-use and different partners want to be responsible for different elements. You would like to be able to bring in a private partner for the ground floor retail under your housing projects but that does not seem to happen too often. More commonly, the CDC takes that space on in order to protect the private equity investor in the housing project. In a LIHTC project this has to be handled in the right way to avoid tax problems.
- Trainer: depending on the project, one of these structures can be used to isolate the commercial from the housing for tax/financial purposes. This allows the commercial space to have its own financing. With a condominium or subdivision the lender on the commercial space can even have a first position lien on a real asset.
- 12:00Planning for Property and Asset Management (30 Minutes) Trainer: When a CDC gets involved in a new (and exciting) commercial development project, one of the easiest issues to overlook is the need for entirely new ongoing property and asset management systems and potentially staff. One of the first feasibility questions should always be: What will it take to manage this project?
- Trainer: In order to scare CDCs off of commercial projects, we developed a property management plan template. The document, included in your binders, identifies a very wide range of procedures and systems that the CDC will need to manage a retail or office project. Not every project will need to address every one of these issues but some will need to deal with an even larger list.
- Trainer: To make it easier to use the management plan template, we created the attached “Customization Report” which is intended to be used as basically the agenda for a management team meeting (or series of meetings). The report asks a series of simple questions that may be very difficult to answer in a CDC that does not currently manage commercial space. Once your team can answer all of these questions, it should be easy to fill in the blanks in the management plan template.
- Trainer: One of the major challenges for CDCs that develop a lot of mixed-use projects is how to staff the management of the scattered commercial spaces. One option is to have a single on site manager deal with both the residential and retail space in each building.
- Trainer: Organizing the same work so that there is one (or more) managers focused exclusively on commercial can lead to better outcomes for the commercial space. A dedicated commercial manager can get the necessary training and build the systems that are needed to deal with commercial tenants and leasing issues.
- 12:30LUNCH (60 Minutes)
- &lt;number&gt; 1:30 Exercise:Identifying Leasing Targets (30 Minutes) Trainer: We are going spend the rest of today talking about finding tenants and understanding neighborhood real estate markets. Lets start with a real project in need of a leasing strategy. Your assignment is to make recommendations based on information in the handout. Divide into small groups – FORM NEW GROUPS. Ask each group to discuss the case and complete the worksheet (15 Minutes) Handout: Developing a Leasing Strategy Shopper Survey Results Comparative Mix Matrix Report back: Ask each group to list Strengths Weaknesses Tenant type recommendations What more do you need to know Set up three flip charts with no headers – one each for Place, Supply and Demand As participants suggest analysis steps place them on one of the lists.
- 2:00 Market Analysis Trainer: We are going to talk about market analysis for retail projects but the issues are similar for office or industrial projects, etc. In retail we are concerned with two different kinds of markets: 1. The market for retail space – what retailers are going to be interested in our space and how much will they pay, etc. 2. The market for retail goods and services – who will shop at the stores in our project and how much will they spend.
- &lt;number&gt; Trainer:For any project there are certain types of questions we need to ask about a site in order to develop a leasing strategy. Arrows illustrate that market research is an iterative process Each of these categories of research informs the others, and you need some info about each in order to get deeper info; working together, they will lead to a leasing strategy And if you narrow in on a specific tenant type, you will need to go around again
- &lt;number&gt; Point to Place flipchart, write “Place” on the top and summarize existing items, and ask for additional suggestions
- &lt;number&gt; Only mention items on here that have not already been mentioned or items that others mentioned that aren’t on here
- &lt;number&gt; Only mention items on here that have not already been mentioned or items that others mentioned that aren’t on here
- &lt;number&gt; Only mention items on here that have not already been mentioned or items that others mentioned that aren’t on here
- &lt;number&gt; Walking survey – walk the district and take down information about all the components we identified; map it Regulatory research – assessor’s office and planning department will provide information on zoning and regulations around height, setback and square footage minimums or maximums Parking and accessibility survey – note accessibility, map it; count parking spots; request traffic counts from city or conduct a count In Excelsior we got volunteers with retail experience to walk the district with us and tell us what they saw – we took notes. - Main Street Manager - Revitalization Consultant - Market Researcher - Small Business Resource Person
- &lt;number&gt; Point to Demand flipchart, write “Demand” on the top and summarize existing items, and ask for additional suggestions
- &lt;number&gt; Demographics describe what people in the neighborhood could afford to purchase and what, as a demographic group, they are likely to want Consumer preference is about what people say they want or need Only mention items on here that have not already been mentioned or items that others mentioned that aren’t on here
- &lt;number&gt; Demographic Analysis Collect data Break data down to determine more specific demographic categories Consumer and Merchant Surveys Ask residents, area employees, shoppers, and merchants where they shop and what kind of stores or services they want or need Analyze information in way to make it useful For merchant survey would ask them what kind of businesses would complement theirs and whether they’d be interested in expansion Handout ESRI Reports for Excelsior Site
- &lt;number&gt; The circles represent the distance patrons would come for the products and services provided by a particular store or at a particular retail center. Usually represented as circles moving out from the retail center. These examples draw shoppers from increasingly large distances
- &lt;number&gt;
- &lt;number&gt; Point to Supply flipchart, write “Supply” on the top and summarize existing items, and ask for additional suggestions
- &lt;number&gt; Only mention items on here that have not already been mentioned or items that others mentioned that aren’t on here
- &lt;number&gt; Pipeline projects – analyze location and square footage of new commercial properties coming on line
- &lt;number&gt; Ask the group and field a few answers before moving on.
- &lt;number&gt; Only mention items on here that have not already been mentioned or items that others mentioned that aren’t on here
- &lt;number&gt;
- &lt;number&gt; Trainer: How much research you do depends on the time and resources you have
- &lt;number&gt; Review existing market studies Business inventory – Metro-Scan data; Adopt-a-Block for vacant spaces; walking tour Business cluster analysis (note concentration or lack of certain types) Merchant survey – determine how is business; what is rent; what would complementary businesses be; would they be interested in expansion Employer and resident surveys – where do people eat and shop; what is missing
- &lt;number&gt; Trainer: Trade Dimensions is where you can purchase the retail tenant directory LISC has a subscription to ESRI – ask your LISC program officer to pull a report for your site!
- Discussion: What would be different for each of these product types? Similar questions, different sources for the answers.
- 3:00 BREAK (15 Minutes) Discussion: What is the best way to let potential tenants know about your available space?
- Review list for things that no one mentioned Discussion: Should you hire a broker to lease your commercial space? Allow the discussion to get going and at some point create a two column list on the flip chart for pros and cons.
- Trainer: Here are some additional advantages.
- Trainer: You can negotiate any arrangement that works for you and your broker.
- Trainer: These are some of the things that developers commonly include in a marketing package.
- Trainer: Here is a simple one page flyer.
- Pass out handouts with homework assignment Trainer: No one should stay up all night working on this… Some time before tomorrow morning, take a look at these numbers and think about how you would go about evaluating these two offers.