Closing the Deal: 7 Tips on Making it Happen

By Elizabeth Duffrin
Published: August 23, 2010

Getting to the finish line on any kind of real estate deal takes stamina and creativity. It can be even harder when the project is in a community of color, because many developers undervalue the opportunities there, says Bernita Johnson-Gabriel, executive director of Quad Communities Development Corporation (QCDC).

Her group serves four predominantly African-American neighborhoods on Chicago’s South Side. It's a mixed-income area with few retail anchors, but that didn't stop the organization from brokering a deal to bring in 46,000 square feet of retail space, plus new housing, to create 300 permanent new jobs.

At a 2010 training session, Johnson-Gabriel shared some strategies for choosing projects and attracting developers even in tough economic times.

1. Select the Site and Project

If the commercial district is largely undeveloped, the first site needs to make a big impression.

Make it visible. Choose a project and site that are large and visible enough to attract the attention of shoppers—and additional developers. “You could more easily get someone to come in and do a small project,” said Johnson-Gabriel, “but it may not generate interest in other development.” QCDC’s “Shops & Lofts at 47,” shown in the rendering above, will be located on one of the neighborhood’s busiest intersections. “That was a better option than the middle of the block,” she explained. “The Shops are visible from four different directions.”
Find a site you can acquire. People often assume that vacant land is publicly owned—but that’s not always the case. Before presenting a site to a developer, identify the owner and make sure a sale is possible. Some properties have multiple private owners, which can further complicate a potential deal. “Make sure you do your homework,” she said.

2. Build the Relationships

Bernita Johnson-Gabriel, right, at a community event with local alderman Toni Preckwinkle.

Photo by Alex Fledderjohn

Being on good terms with your local elected officials can make winning approval for your project a simpler task. In Chicago, nothing gets built without the approval of the local alderman. But regardless of your location, your elected officials can advocate for your project with the local planning department, spearhead needed zoning changes and assist in winning community support.

Getting to know your city’s planning department staff is also worthwhile. They can help you shape your vision for the entire business corridor. “I talk to my planner at least twice a week,” said Johnson-Gabriel. Her group even invited city planners to join with the community in its quality-of-life planning process. “They were at the table when we all agreed to this vision [for the business district.] So they had some ownership too.”

Other relationships worth cultivating are with real estate service providers, funders and lenders, local property owners, and community groups, she added. “It’s important that everyone is on the same page about what you want the development to look like.”

3. Collect the Data

To sell a developer on your project, you need to present as much information as possible to support its feasibility. Here are some examples:

A master plan for the corridor. A long-term development plan for your corridor can be very reassuring to developers, said Johnson-Gabriel. “It’s tough to come to some of these communities in the shape they are in now and want to make an investment if you don’t think anything is going to change.”
A physical assessment. QCDC asked the city to hire an architectural engineering firm to do a physical assessment of the main commercial corridor that included the acreage, amount of vacant land and the possible dimensions on different building sites. Knowing the lay of the land helps a developer see the area’s long-term potential.
A market study. QCDC also hired LISC MetroEdge (www.metroedge.org) to complete a market study. The study demonstrated the buying power of the community surrounding the commercial corridor and calculated unmet need for different types of goods and services. “It helped us to overcome the stereotype that there’s no money in this community because it’s a community of color.”

4. Bring a Financial Toolbox

Developers are not always aware of the financial tools available to them in low-to-moderate income neighborhoods. Here are some you can help them explore: .

Predevelopment grants or loans. Developers often need money to cover pre-construction costs such as environmental testing and remediation. But banks are rarely interested in lending money to a project that may not prove feasible. Predevelopment loans or grants to cover these costs are available through LISC, foundations or other sources.
Tax Increment Financing (TIF). Many cities have districts where some property taxes are set aside for local development. In some neighborhoods, a TIF council, made up of local residents, makes recommendations to approve or reject the funding of particular projects. To secure TIF money for your project, the developer may need to make a presentation to the TIF council, the local community or another organization. Your role is to ensure the developer is prepared, answers questions fully and then revises plans as necessary to address the community’s concerns.
New Market Tax Credit financing. These tax credits were created by the federal government to help finance economic development projects in low- to moderate-income communities. Make sure that someone on your staff understands this complex financial tool or find a consultant who does. You can take a class on New Market Tax Credits through the National Development Council.
Community Reinvestment Act loans. Banks in low- to moderate-income census tracts are obligated by federal law to support housing and commercial development in their communities. That could give your project an edge in securing a loan. Introduce your developer to loan officers in your neighborhood. Banks are often more receptive to a developer that has the support of the local community development corporation.
Commercial Revitalization Deduction. This is a tax incentive for a developers or owners redeveloping property and is available only in certain census tracts. Check HUD's website to see if your area qualifies.

5. Apply the Cosmetics

One of many banners that brighten up Cottage Grove Avenue in Chicago.

Photo by Alex Fledderjohn

It’s hard for an outsider to fully appreciate the potential of a trash-filled corridor. So do your part to make your business district as attractive as possible while creating plans for further improvement. “I call this the lipstick and the eyeliner,” said Johnson-Gabriel.

Street cleaning. QCDC hired a non-profit called Cleanslate to give its main business district a daily cleaning. As an additional benefit, the non-profit employs local residents who have had difficulty securing employment, such as the formerly incarcerated.
Beautification. Plant some flowers, hang banners with your neighborhood’s logo, ask business owners to spruce up their façades. “Give your neighborhood a sense of destination and let the developer know you care about your community,” Johnson-Gabriel advised.
Streetscape guidelines. QCDC asked its city planner to hire a consultant to write guidelines for the corridor. The guidelines gave the alderman and city planning department control over lighting, landscaping, signage, awnings and even building materials in order to give the district a more cohesive look. It also let the developer know upfront what local officials wanted and streamlined the approval process.

6. Negotiate the Deal

You want to ensure that the developer is clear on your goals for the project, and that those goals are attainable. For example, QCDC knew from residents and the MetroEdge market study which goods and services residents wanted, which ones were lacking, and what kind of businesses the neighborhood could support financially. “It would be unreasonable to ask a developer to bring an Ann Taylor store to the corner of 47^th St. and Cottage Grove,” said Johnson-Gabriel, “But it would be reasonable to ask him to make sure that the retailer would provide high-quality clothing for the neighborhood.”

QCDC also had a list of businesses that were unacceptable, including beauty salons and beauty supply stores—which were already abundantly available—as well as liquor stores and restaurants selling unhealthy fast food.

Finally, they wanted the developer to agree to hire a certain percentage of community residents for the construction crew. But they didn’t expect the developer to do the necessary recruiting on its own. Rather, QCDC promised to host job fairs and to work with the nearby Center for Working Families to encourage local applicants.

7. Revise as needed

Even the best laid plans can go awry. The Shops & Lofts at 47—which initially included 161 condos—was nearly a done deal when the economy tanked and along with it, the condo market. QCDC didn’t want to make the development purely commercial as a major goal of the project was to bring more people to the street. The group suggested rental units, but the developer had no desire to do property management.

So, Johnson-Gabriel introduced their developer to The Community Builders, Inc., a non-profit developer responsible for managing the Quad Communities’ largest mixed-income housing developments. “They hit it off and before we knew it, they had developed a joint venture and the deal was back on the table,” Johnson-Gabriel recalled.

The Shops & Lofts at 47, which now includes 130 rental units in place of the condos, is slated to break ground by mid-2011.

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