City Works : A Non-Profit Economic Development Assistance Corporation for New Jersey
CityWorks is a new, 501(c)3 corporation created to assist non-profit organizations in developing commercial and other non-residential real estate projects in economically-distressed neighborhoods throughout New Jersey.
Staffed by a team of people skilled in commercial development, CityWorks actively seeks out project opportunities and helps bring them to fruition, partnering closely with non-profit organizations, public and private financing agencies, the real estate community and businesses with an interest in the inner city.
CityWorks fills a critical void in the community economic development field, bringing jobs, needed commercial goods and services, and new economic vitality to inner city neighborhoods sorely lacking in them.
Background
In urban areas in New Jersey, and throughout the country, community-development and other non-profit organizations have become effective engines of change in poor neighborhoods, achieving impressive scale and sophistication in building affordable housing and providing vital social services.
But vibrant, functioning neighborhoods require more than just housing development and preservation. They need places where residents can shop and do business, as well as opportunities for employment and entrepreneurship.
Recently banks, retailers, and other businesses have begun to turn more serious attention to the potential of inner-city markets. According to a 1998 report by the Institute for a Competitive Inner City (ICIC) and Boston Consulting Group, America's inner cities represent over $85 billion in annual spending power, much of it untapped.
View images from CityWorks' 2005 Open House
Responding to these market opportunities, community development corporations, nationally and locally, have also begun to investigate economic and commercial development opportunities, as evidenced in part by an increase in the volume of projects in the pipeline. These development ventures focus on retail, light industrial, community service and non-residential real estate projects.
The Local Initiatives Support Corporation (LISC), the nation's largest community development lending intermediary, reported a tenfold increase in lending for commercial development projects in the last three years alone. Congress' passage, in 2001, of the $15 billion New Markets Tax Credit represents an unprecedented level of federal commitment. New Jersey, too, has devoted resources to community development corporation-sponsored, commercial, real estate projects, including funds from LISC; the New Jersey Community Loan Fund; the Housing and Community Development Network's SEED Loan Program; smaller loan funds, such as TBAC and CBAC; and the New Jersey Economic Development Authority's (EDA) Fund for Community Economic Development.
In 2003, the State's Department of Community Affairs (DCA) and LISC jointly announced the award of $500,000 in grants to increase the capacity of community development corporations to carry out community economic development activities. Through New Jersey's new Neighborhood Revitalization Tax Credit, a total of $20 million should become available during the second half of 2003 or the start of 2005, for community development corporations with DCA-approved neighborhood revitalization plans.
Local non-profits, moreover, have an interest in developing projects in their neighborhoods. All eight community development corporations funded through the DCA/LISC capacity-building program were required to identify a viable commercial development project as a condition of funding.
A number of larger projects are planned or in the wish-list stage. La Casa de Don Pedro will be working in the Lower Broadway section of Newark, and other organizations are developing plans for Cramer Hill, Parkside, and Broadway in Camden. In addition, there is a growing interest in community health, education, and social service facilities, as well as in potential sites for light manufacturing or other job-generating, industrial uses.
Not withstanding these opportunities, community development corporations in New Jersey, to date, have not developed commercial projects on any scale, nor does the pipeline of projects reflect the number and scale of viable opportunities. The EDA recently reported that of $35 million allocated for low-interest loans to non-profit-sponsored economic development projects, only $8-$9 million had been committed in over seven years.
Several forces observed in most urban communities around the country account for this limited activity, including:
- the absence of a standardized, "cookie cutter" approach to financing, unlike the situation in the housing market; each deal requires its own multi-layered mix of debt and equity financing;
- the complex process of property acquisition, often involving public disposition, eminent domain, the assembling of multiple parcels, and, at times, environmental remediation; assembly of commercial properties requires a high level of experience and sophistication;
- the strong market orientation required for commercial development, including an ability to assess market conditions, to determine appropriate uses of property, and to speak the language of business to attract tenants.
In short, the process of developing a commercial property in economically-distressed communities requires a great deal of sophistication and technical skill. But many community development corporations, even those with experience in residential development, have neither the in-house staff nor a stable of development consultants.
Most observers agree that what's lacking in New Jersey is a development consultant that is focused exclusively on commercial projects and has the technical savvy to bring them to fruition.
CityWorks was created to fill that void. This non-profit corporation is designed to take significant projects from the conceptual stage to project completion and lease up, working in close partnership with community development corporations that will sponsor, own and then manage the projects.
Mission
The role of CityWorks will vary based on the needs of the non-profit sponsor and the circumstances of project development. CityWorks may serve as a developer consultant, advising the non-profit's project management staff, or the corporation may manage the project on a turnkey basis. Where appropriate, CityWorks may become a co-venture partner or develop projects on its own.
Above all else, CityWorks will work proactively. Governed by an active board representing institutions with an investment in its projects, CityWorks will form working relationships with non-profits, public and private financing agencies, the real estate community, and businesses interested in inner-city markets.
Led by a highly experienced, commercial real estate entrepreneur, CityWorks will actively seek out and market project concepts to its prospective partners. Initially supported by grant funds, CityWorks aims to support its operations partially through fees.
CityWorks will be positioned to develop a variety of non-residential real estate projects, including retail, light industrial, and community health, education and social service facilities. Its initial focus will be on retail and light industrial projects, engaging only in a limited number of community facilities, since the latter currently benefit from a host of assistance measures.
CityWorks can assist with land use and site planning, acquisition, financing, market analysis, business tenant recruitment, project construction and lease up.
To accomplish its mission, CityWorks will also control a pool of funds for pre-development costs, including property options, environmental assessments, architectural, legal and planning costs, and other up-front cash needs. CityWorks' pre-development funds will be invested on a matching basis along with pre-development funds from New Jersey LISC and the New Jersey Community Loan Fund.
Funding and Governance
In its first three years, CityWorks will be supported by grant funds from local foundations and public sources. Over time, the organization will support a portion of its costs through developer consulting fees built into project development budgets.
CityWorks is governed by a Board of Trustees comprised of executive-level representatives from the public, private and non-profit sector with expertise in finance, development, and marketing of inner-city, commercial property. Representatives plan not only to offer their expertise, but also to invest their agencies' resources in projects developed by CityWorks' staff.
CityWorks also provides a forum for these agencies to discuss issues of common interest, such as economic development policies affecting New Jersey's economically-distressed communities.