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

Retail Neighborhood Trajectories

Current Neighborhood

Status

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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

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

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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 households Median 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

ED TRANSIENT UNDER-

DEVELOPED

lower income higher income

STABLE LOW INCOME PORT OF

ENTRYCOMING

ATTRACTIONSURBAN TAPESTRY

Taxonomy Structure

DNT taxonomy – transition 2000-2010

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  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

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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 YESSite(s) Identification, Due Diligence & Final Selection 2-6 Months YESPreliminary Financial Feasibility Analysis & Financial 1-2 Months YESSite Control 2-10 Months YESPreliminary Design & Cost Estimates 2-4 MonthsSecure Pre Development Financing 2-4 Months YESAnchor Tenant Letters of Interest (40-50% SF) 3-6 Months YESApprovals, Entitlement Process 4-8 Months YESSecuring Tenants Leases 3-12 Months YESDesign, Construction Bids 1-3 Months

Final Financial Feasibility Analysis 1-2 MonthsObtain Firm Financial Commitments 2-3 Months YESSecuring Permits 2-6 Months YESClose on Property & Financing 1-4 Months YESConstruction and Construction Management 12-18 MonthsMarketing, Final Leasing 3-5 Months YESOpening: 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

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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

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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

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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.

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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

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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.

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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

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Chicago TREND

Chicago Community Trust May 26, 2015