Partners (Number 3, 2007)
Partners (Number 3, 2007)Shopping Plaza Sparks Renaissance in Florida Community
Revitalizing an economically depressed community often hinges on the success of one key project in changing perceptions to attract other investors.
Tangerine Plaza in the Midtown area of St. Petersburg, Fla., is an example of such a project. The retail development represents a significant step forward in the rebirth of a community that had for years lacked many of the basic services most neighborhoods take for granted.
This 47,000-square-foot neighborhood shopping center is anchored by Sweetbay Supermarket, the first full-service grocery store and pharmacy in the neighborhood. The remaining retail space in the center is occupied by smaller local retail tenants.
The initial concept for the shopping center was developed in 2000 by Larry Newsome, president of Urban Development Solutions, and Darryl Rouson, a local attorney. Both were both committed to redeveloping Midtown, a low-income, predominately African-American community where 33 percent of the local residents live below the poverty line and earn on average 47 percent of the area's median income.
Multi-year project involves several partners
Complex community economic development projects like Tangerine Plaza often involve a variety of partners and multiple sources of financing. Midtown's designation as a "community redevelopment area" by the local government provides for additional powers in acquiring property and capturing increased property tax increments for future redevelopment.
The lead developer for Tangerine Plaza, Urban Development Solutions (UDS), a nonprofit organization, has had prior experience building affordable housing projects in Midtown. UDS had purchased several abandoned and condemned parcels of land in the area with the goal of building more affordable housing.
As they continued to assemble land, however, it became clear that what the community really needed was a commercial development, particularly a full-service grocery store. UDS approached the City of St. Petersburg with the shopping center proposal, and the City agreed to assist in assembling the remaining 32 parcels needed for the development.
As is typical in urban redevelopment, various obstacles had to be addressed, including nonconforming lots, inappropriate zoning classifications, and numerous lien and title problems.
The City agreed to buy the lots that UDS had purchased as well as the remaining lots required for the development. It then cleared the liens and other encumbrances against the properties, rezoned the property for neighborhood commercial development and replatted the lots into one parcel.
Once the land was ready for construction, the City agreed to lease the property to UDS for 99 years with an annual payment of $5.
Layered financing critical to project's success
Financing the development of Tangerine Plaza called for numerous partners and a complex financing package. Funds for construction for the project were provided by Neighborhood Lending Partners of West Florida (NLPWF), a statewide multi-bank lending consortium and community development financial institution (CDFI). The City and NLPWF were also instrumental in providing $1,998,000 in subordinated funds.
An additional $700,000 federal grant came from the Office of Community Services; the principals of the developer donated another $10,000; and the city provided $75,000 to fund site work such as sidewalks.
LISC (Local Initiatives Support Corporation) invested $9.2 million in the project through New Markets Tax Credit (NMTC), obtaining equity capital from BB&T and Fifth Third Bank. Through an award from the Federal Home Loan Bank of Atlanta's EDGE (Economic Development and Growth Enhancement) program, BB&T also provided permanent first mortgage financing for the project.
Leveraged financing through the NMTC funded a $200,000 reserve for a Community Outreach Program, a $500,000 reserve for tenant support (such as build-out, lease support, working capital) and $500,000 for working capital. The nonprofit developer worked with four locally owned businesses to support successful leasing and operation of space in the plaza.
Plaza development is economic catalyst
The success of Tangerine Plaza is widely recognized: in 2006, the project received the Florida Redevelopment Association's Roy F. Kenzie Award for "outstanding new building project"; it was also honored as "Best of the Best," the top redevelopment project in the state.
Construction of Tangerine Plaza was completed in November 2005. Since opening its doors, the Midtown Sweetbay supermarket has set sales records for the Florida-based company. In addition, the property tax revenue increased from $6,000 in 2000 to over $110,000 in 2006.
Because Midtown is a designated community redevelopment area, a portion of the increased tax revenue may now be utilized to fund additional redevelopment projects in the surrounding neighborhood. Sweetbay also received state job tax credits for hiring neighborhood residents.
Perhaps the project's most important achievement is the social equity it has generated in the community. Its success has also established a track record to support continued redevelopment of Midtown.
"Several new projects are planned or underway in the Midtown area. The estimated $25 million in investments will include two affordable housing developments and an office building with the community's first bank branch," says Kevin Tatreau, executive vice president at Neighborhood Lending Partners.
This article was written by Janet Hamer, regional community development director in the Atlanta Fed's Jacksonville Branch.