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Urban Core Projects Need Participation by the Lending and Philanthropic Communities
Community Builders of Kansas City (CBKC) puts all its chips on the table to get its mixed-use commercial and multi-family projects off the ground.
That is what you do if you are a developer building competitive, high-quality projects east of Prospect and your capital stack does not include participation by banks, equity partners or the philanthropic community.
Former Fifth District City Councilwoman and attorney Alissia Canady said at a local August summit on Opportunity Zones that investors are likely to make the greatest impacts in communities where they feel least comfortable, like financing projects east of Prospect Avenue.
Part of that discomfort for equity partners is the lower return-on-investment on urban core development. A project will have the same quality design and build-out while construction costs are frequently higher and rents lower.
As an example, The Rochester is the first market-rate, multi-family development east of Prospect in generations. CBKC is intentionally working to hold monthly rents so that living in The Rochester is affordable for more families, accommodating those at 80 percent of the area medium income ($55,000 for a two-person household). While it strives to be affordably priced, The Rochester is not targeting the “affordable housing rents” that you find in Low-Income Housing Tax Credits (LIHTC) projects and which require accommodation of tenants at 60 percent of the area medium income ($41,280 for a two-person household).
To attract investment for inner city projects, equity partners would need a mission statement that included a commitment to participate in and extend opportunity to a community and its people left behind because of systemic racism and poverty. Maybe that’s the issue with the philanthropic community as well. Very few equity funds or philanthropies demonstrate that commitment by investing in projects in the urban core.
Another aspect of that discomfort is lack of familiarity with and experience in investing in Black and brown communities, particularly in projects without heavy public subsidies. Those subsidies fill the gap created by the circular rationale among banks, their boards, appraisers and the regulatory communities that leads to less favorable lending terms to the brown- and Black-owned business, developer or led organization.
An appraiser will devalue a project in a location with less desirable stats particularly as they relate to crime, education, employment and income – but not credit a project for its mitigating factors – length of track record, quality of property maintenance and management, financial performance, management experience or growth. Bankers then point to the appraisal, their obligation to stockholders and regulators and say the underwriting must reflect the higher level of risk.
The resulting higher interest rates, equity requirements and other less favorable loan terms says to an organization like CBKC that we are not as dependable or trustworthy so we will have to prove with this project that we will be successful, again, as we have been previously. Then, maybe, the next project…
“West of Troost, a project will appraise for more than the cost of development,” said Steve Weatherford, CBKC CFO. “The Rochester will cost $13 million to build but will appraise for less than $12 million. It’s just another fact of financing that we have to overcome so we can put together the resources to mitigate that kind of disadvantage.”
Andre Perry, author of Know Your Price: Valuing Black Lives and Property in American’s Black Cities, is a fellow in the Metropolitan Policy Program at Brookings, a scholar-in-residence at American University and a columnist for the Hechinger Report, a non-profit newsroom focused on education. He was featured in a November presentation hosted by The Kauffman Foundation and KC Public Library, moderated by Emmet Pierson, Jr., CBKC’s CEO. Perry’s study of metropolitan areas where the population is 50 percent or more Black, isolating for all other characteristics but race, showed that those homes are underpriced an average 23 percent or $48,000 per home.
“Homes are a metaphor for other aspects of our life and for Blacks, housing devaluation is an accomplice in the wealth disparities caused by policy,” said Perry. “Many developers struggle to get the financing to develop in neglected urban neighborhoods and uplift people.”
In Kansas City, Perry said homes in similar Black communities are underpriced 20.3 percent or an average $18,000 per home. Across the U.S., the average pencils out to $156 billion property devaluation in communities of color.
CBKC is confident of its projects and its expertise in managing these challenges and others should be, too. The non-profit has parlayed an initial $100,000 investment in 1991 into a more than $80 million diverse, real estate owned-asset portfolio that includes commercial, retail and residential holdings. The debt on the organization’s assets, all of which are located in the urban core, has always been repaid on time and in full, with interest.
“CBKC is not only the largest not-for-profit developing entity in Kansas City, we are the most diverse in our real estate holdings with commercial, retail and residential assets,” said Weatherford, who previously served in varying financial capacities at the federal and state level for the U.S. Department of Housing and Urban Development, Kansas Development Finance Authority, and Kansas Housing Resources Corporation.
“The properties have performed through every economic cycle including the current pandemic,” he added. “Our headquarters office building is fully leased, our retail is going quite well and CBKC’s recent acquisition of Blue Parkway Sun Fresh is proving a success because the organization knew what it needed to do for it to perform – retain an experienced store manager, which we have in John King, and establish a good working relationship with a leading local grocer.”
Knowing what it needs to do for its properties to perform is a CBKC hallmark. The organization continues to build a strong professional team, adding in just the last 18 months King and Weatherford; Bob Langenkamp, formerly CEO of the Economic Development Corporation of Kansas City, Missouri, as chief development officer; Elizabeth Schultz as director of strategic initiatives and community development; Irving Blue, previously a regional director for multi-state developers like McCormack Baron Management, as senior real estate analyst to provide asset management; and DaRon McGee, as consultant handling community and government relations.
And for The Rochester, CBCK has assembled a first-rate team of professionals – general contractors, subs, architects and engineers – to build a quality product and make it a success. It has done so also for the Offices at Overlook. In acquiring and redeveloping this property, CBKC has removed the last blighting influence on Swope/Blue Parkway.
In an article written for the Ewing Marion Kauffman Foundation following the August Opportunity Zone Summit, Bruce Katz, director of the Nowak Metro Finance Lab at Drexel University, was cited:
“(Katz) has worked with 30 municipalities to create prospectuses for their Opportunity Zones. He’s found that people think that Opportunity Zones will bring wealth into their cities from places like Silicon Valley. However, what he sees as the most important capital is that which a city already has from its own corporations, foundations and high net-worth individuals. ‘Any project worth doing is going to have layers of finance in it. And a lot of those layers are going to come from local capital.’”
The city’s Central City Economic Development (CCED) sales tax district dedicates funds from a 1/8th cent sales tax to support development in the area bounded by 9th Street on the north; Gregory Boulevard on the south; The Paseo on the west; and Indiana Avenue on the east. This fund has supported CBKC projects previously and is the type of public subsidy still essential to the complex financing that makes any CBKC development possible. For CBKC to be successful in the future, it has to have the lending community step up and the philanthropic community buy in to its efforts to provide in Black and brown communities the same thing everyone wants in their own community – jobs that pay a living wage, grocery stores that sell fresh food, quality homes and safe neighborhoods for their kids.
CBKC Helps Community Get Out the Vote in 2020
In keeping with its goal of empowering families and communities through effective organizing, advocacy, resources, development, programs and services, Community Builders of Kansas City (CBKC) implemented a number of measures in the third and fourth quarter to facilitate the voting process for its community.
“I cannot stress how important it is for our community to get out and vote to help enact positive change and we will do whatever we can to enable that process,” said DaRon McGee, community and government relations manager for CBKC.
CBKC provided much needed meals for the Kansas City, Missouri election workers the day of the general election. Health and safety requirements driven by the pandemic diverted the majority of the state-allocated election budget to pay for personal protective equipment (PPE) and sanitizing products for election workers. The resulting budget squeeze left little to feed the volunteers so a community partner was needed to donate breakfast and lunch. CBKC was happy to fill that void, providing more than 500 meals courtesy of its grocery store, Blue Parkway Sun Fresh.
Election workers have an arduous job, which was made more so with the need to count the significant increase in the number of mail-in ballots. With a day that begins at 3:00 a.m. and continues until 7:00 p.m., the workers rely on the meals provided throughout the long day. CBKC delivered the 500-some breakfasts and lunches to 20 polling sites throughout the city including at Union Station and Arrowhead Stadium.
In addition to the election-day assistance, CBKC made available space at its 5008 Prospect building and the Blue Parkway Sun Fresh for the National Association for the Advancement of Colored People (NAACP) to notarize absentee ballots leading up to the August primary and November general election as well as to help community members complete their census forms and for voter registration and education throughout the second half of 2020.
CBKC’s commitment to voter participation will continue into 2021 and beyond.
Michelle Mitchell Brings a Legacy of Leon’s Thriftway to Blue Parkway Sun Fresh
The legacy of Leon’s Thriftway lives on in Blue Parkway Sun Fresh. Michelle Mitchell is a granddaughter of Leon Stapleton, the owner of what was one of the oldest Black-owned grocery stores in the country and where she worked until it closed in 2019. She now serves as the Blue Parkway grocery store’s perishable manager and she feels right at home.
“I met with Mr. King (John King, Blue Parkway Sun Fresh store manager) and fell in love with his values,” Mitchell said. “I saw that he was in the business to serve the community. I really took to his leadership style and thought coming here would be, for me, a match made in heaven.”
Like many of her family members, Mitchell grew up working in her grandfather’s grocery store, which closed its 4400 E. 39th location in 2019 after serving its community for more than 50 years. She says she missed being in the grocery industry.
“I was out about a year after Leon’s closed,” she said. “I missed people. Now some of the same customers that we served at Leon’s come to Blue Parkway Sun Fresh. Working here, I am able to stay in the community and serve many of the same customers we did before and more.”
Mitchell said customers grow to be like family. “You feel good and they feel good when you know their names, families, ask after their kids,” she added. “You want to hug them even though you’re not supposed to because of COVID. There’s something about really knowing your customers. Warms your heart.”
She’s excited about store manager King’s plan to grow and develop Blue Parkway Sun Fresh – bringing more product choice, remodeling, improving customer service. As perishable department manager, Mitchell has overseen an increase in the variety of offerings, for example, more seafood, types of meat cuts and bakery items.
“What I have found at Blue Parkway Sun Fresh is an updated grocery model with the heart and culture of Leon’s Thriftway,” Mitchell said.
She said she started at Leon’s as a cashier at age 12. She graduated high school from Lincoln Academy and then went on to Langston University – Langston Oklahoma, the only historically Black college or university (HBCU) in the state. And then she came back home.
“Growing up, working with family, it was a wonderful experience,” Mitchell said. “At Leon’s we had a little motto, ‘Our family serving yours.’ Working in a neighborhood store, it gave me an appreciation that our work is a service, not just a job. I get to continue that commitment to serve my community here, at Blue Parkway Sun Fresh.”
CBKC Goes Deep into The Community
Community Builders of Kansas City’s outreach into its community is growing, even during the pandemic, with the more visible aspect of this work being a series of events begun this summer and continuing into the fall. On a surprisingly chilly Friday night September 11, the organization hosted Movie Night at Starlight, partnering with Kansas City Public Schools, to bring a free, socially-distanced outing for kids and families. Blue Parkway Sun Fresh provided free food and beverages for all attendees.
Coming October 3 in the parking lot of CBKC offices 4001 Blue Parkway, is a free outdoor concert by Kansas City Symphony musicians. All are welcome and encouraged to bring lawn chairs and blankets and partake of the fare offered by the food trucks which will be on hand.
The series kicked off in mid-summer. On a beautiful, sunny and hot Saturday, July 18, Community Builders of Kansas City (CBKC) hosted a free food distribution and COVID-19 testing drive thru event for residents of its urban communities. Nearly 1,500 adults, children and seniors in more than 400 households received boxes of meat, dairy and fresh fruit and vegetables provided by Harvesters Community Food Network while another 225 were able to be tested by Swope Health for COVID-19.
“While CBKC is best known as the area’s largest urban developer, community service and advocacy are equally important parts of our mission,” said Emmet Pierson, Jr., CBKC president and CEO. “CBKC hosting this free distribution and COVID-19 testing event is just one example of that.”
CBKC board members and staff, local and state elected officials and special guests including NFL Hall of Famer and former Kansas City Chief Willie Lanier and Congressman Emanuel Cleaver II were among the dozens of attendees and volunteers who turned out in support of this community event held at the former Zion Grove Baptist Church at 2801 Swope Parkway.
The event got off to an early start as cars were lined up well before the official start time of 9 a.m. As each driver approached, windshields were marked as to the number of families the vehicle was collecting for, which guided the volunteers as to how many boxes were to be loaded in. All volunteers wore face masks and gloves as, although they were outside, social distancing was not always possible.
“It was a great day,” said DaRon McGee, a consultant for CBKC who led in organizing this community event and handles community and government relations on behalf of the organization. “It is a gift in itself to be able to meet a community need. It is all the more gratifying to have so many come alongside CBKC to help us make it happen.”
The event was packed with community partners including Blue Hills Neighborhood Association, Blue Parkway Sun Fresh, Catholic Charities, Delta Sigma Theta KCMO Alumnae Chapter, Emanuel Family & Child Development Center, Greater Kansas City AFL/CIO, Jackson County, Kansas City Police Department, Teamsters National Black Caucus, Turner Construction and the Urban League of Greater Kansas City.
It is the vision of CBKC to strengthen families and transform communities. The drive-thru event was just one of the building blocks in doing so.
Irving Blue
Irving Blue, Community Builders of Kansas City’s (CBKC) new senior real estate analyst, has history with the organization, its mission and with Emmet Pierson, Jr., its CEO. While he joins CBKC to provide asset management services to the organization’s growing portfolio of residential and commercial properties, 20 some years ago he was a planner and development specialist for the city of Kansas City, Missouri, coordinating funding of block grants that Pierson managed for CBKC early in his career.
“Strong community development corporations (CDC) like CBKC are rare,” said Blue. “After cities cut program funding to CDCs, only the strong survived. You look at CBKC now and it has a strong portfolio of quality properties that are performing. I want to be a part of the organization’s continued growth plan.”
Blue, with a bachelors from Stillman College, Tuscaloosa, Alabama, and masters with a concentration in urban and regional planning from Alabama Agricultural & Mechanical University, Normal, Alabama, is a licensed real estate broker in Missouri, and has earned multiple professional certifications over the years including certified property manager (CPM) from the Institute of Real Estate Management (IREM). Over his career he has excelled in guiding properties to perform to owners’ goals, assuring a quality living or working environment for the residential of commercial tenants.
“I pray every day that I have the opportunity to make someone’s life better,” Blue said. “When monitoring management companies, I can help ensure that housing standards are above standard and that our commercial properties serve as their own centers of economic development – giving our community members entrée to the employment opportunities they provide.”
Blue has provided asset management services for properties all over the country deploying a range of services – construction/renovation planning and coordination, development management, feasibility analysis, acquisition or disposition, deal structuring as well as contributing to design guidelines, finance models and public approval process.
“Emmet said he thought our combined professional experiences, CBKC team chemistry and the pursuit for improving or enhancing communities are aligned,” said Blue. “I agreed. To create progressive, long-lasting change I believe you have to truly care about the human and community factors. When caring intersects purpose and a commitment of talent, tools and resources, you have community building.”
Development Update
Community Builders of Kansas City is continuing progress on its major developments: Offices at Overlook, The Rochester on Blue Parkway and Blue Parkway Sun Fresh.
Offices at Overlook is CBKC’s $80 – $100 million mixed-use district comprising 180,000 square feet of Class A office space, 19,000 square feet of mixed-use space and 155 multi-family units. CBKC is in the process of working with Hufft Projects to finalize the space plan and actively recruiting tenants for the space. The property, located on 11 acres, will transform the corner of Swope Parkway and Chestnut Avenue.
The Rochester on Blue Parkway is CBKC’s $12.6 million active living, intergenerational multi-family development comprising 64 units. The first market-rate apartment complex east of the Prospect in decades recently received approval by the city council on its Urban Renewal plan and the final plat currently is under review at the City.
On June 30, 2020, CBKC became owner/operator of Blue Parkway Sun Fresh following the retirement of the previous operator. Improvements already have been made such as freshening up the store’s lighting, layout and flooring and reviewing and updating product mix and pricing. In addition, signage is being installed around the store introducing the new leadership team and offering ways for customers to provide input for future store plans. CBKC’s commitment is to turn Blue Parkway Sun Fresh into a best-in-class grocery store that delivers the quality shopping experience the community deserves. Watch for additional ways to provide your input – safely in the COVID-19 environment – on store product, customer experience and supporting services such as banking and pharmacy. In time, the community’s input will inform plans we carry out for improvements throughout the store.