Charles T. Grigsby is senior vice president and fund manager of The Life Initiative, an organization established in 1998 by 11 insurance companies in Massachusetts.
Over last two decades, it is estimated that nonprofit organizations, community development corporations and nonprofits focused on special needs housing have together built more than 20,000 units of affordable housing in Massachusetts. Many CDC’s and other nonprofits started as organizers and advocates for their neighborhoods and quickly discovered that creating decent housing was a primary, unmet need. They slowly gained the expertise and financial capacity to produce housing recognizing that both rural and urban neighborhoods must develop decent housing as a first step in reversing patterns of abandonment and decay. As a result, non-profits have traditionally focused their energies on the development of affordable housing.
In recent years, a related revitalization issue has come to the fore. In many neighborhood business nodes, the same forces of ex-urban migration, mall development and demographic shifts has led to dis-investment in once-busy small commercial spaces. These buildings are usually characterized by cheap, street-level retail space, vacant or steel-shuttered spaces, boarded-up windows, unused upper levels, facades in need of cleaning and repair, and active storefronts having a mishmash of neon and low- quality signage. Yet these buildings often occupy key locations in neighborhood business districts in economically distressed areas.
Some of these buildings are privately owned while some are owned by the local municipality through tax-taking. In both cases, there is little incentive for anyone to make the investments necessary to bring them back to full use. The reasons are simple. Too frequently these buildings have lacked normal maintenance so long that the cost to a for-profit owner to do so would drive the rental price far beyond what the local market will bear. Private owners cannot risk investing in reconstruction only to find that rental income cannot service the debt required. And federal tax law no longer provides a depreciation benefit that makes such an investment worthwhile.
Local residents point to the presence of rundown commercial buildings as a barrier to the continued improvement of the quality and variety of retail services. Residents also point to the atmosphere of petty street crime and littering that usually makes the sidewalks around these buildings an unpleasant place to be, further dampening redevelopment.
In recent years, though, nonprofits have begun to concentrate on these buildings in their neighborhoods to return them to usefulness.
In Holyoke, The New England Farm Workers Council acquired a 45,000-square-foot commercial building at the center of downtown. The building had been vacant for several years. They are currently in the pre-development stage to re-hab this building as an office center serving Latino professional businesses. The Life Initiative, a fund capitalized by eleven Massachusetts life insurance companies, has made an early commitment of $575,000 to assist the Farm Workers Council in raising the total required capital.
Nearby, the Holyoke Community Health Center has completed the rehab of 26,000 square feet of space for use as the first part of the eventual rehab of a vacant building of 108,000 square feet. The building occupies a key intersection and in this case contributes to downtown vacancy because of its location and size. The Life Initiative has joined a local bank, Park West Bank in Springfield, to provide over $3.8 million in construction and equipment financing for the adaptive reuse of this building.
In both cases, these are nonprofit organizations whose primary mission is not development. Nevertheless, they have assembled development teams and a creative combination of federal, state, city and private financing to accomplish these projects.
In Boston, several CDC’s are actively working on key commercial buildings in their neighborhoods. Urban Edge undertook the redevelopment of an abandoned T station at Egleston Square in Jamaica Plain and developed a 7,000-square-foot business center that today houses a bank branch, a fast food chain and a shoe store.
In Dudley Square in Roxbury, Nuestra Comunidad recently completed the redevelopment of Palladio Hall, a 12,000-square -foot Italianate-style building that represented a full range of development challenges: vacant upper floors, shuttered storefronts, unsightly facades, and low grade retail shops. It now houses a small restaurant, professional offices and upgraded retail services.
In East Boston, NOAH, a CDC, is in the pre-development stage of a 17,000-square-foot project on the waterfront to rehab a vacant building to serve as office space for social service providers and for itself.
In all of these recent examples, the non-profit developer has faced major financial challenges. The first was identifying public funding or grants to serve as development equity. Another challenge was persuading a bank or other construction lender that there were credit-worthy tenants available. A third hurdle is supporting staff costs while deferring, or even foregoing, significantly reduced development fees.
In the end, these projects rely for success on the interest of the nonprofit, as developer, to knit a neighborhood back together again, and to improve services, whether they are social, professional or retail, for their residents and neighbors. It is that public benefit yield that ultimately drives the effort.
