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The Street Corner Thesis of Community Investment

BLUEPRINT LOCAL. Ross Baird | @ rossbaird | ross@blueprint-local.com. The Street Corner Thesis of Community Investment. Examples in Austin, San Antonio, and Houston. Stimulate economic activity and jobs in opportunity zones in communities across America in ways that: Build wealth

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The Street Corner Thesis of Community Investment

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  1. BLUEPRINT LOCAL Ross Baird | @rossbaird | ross@blueprint-local.com The Street Corner Thesis of Community Investment Examples in Austin, San Antonio, and Houston

  2. Stimulate economic activity and jobs in opportunity zones in communities across America in ways that: Build wealth Increase economic mobility... ...for residents currently living in the zones Vision

  3. Our Philosophy: “Invest in transformations, not transactions” NEW MODEL OLD MODEL Deal-centric Driven by big cos and government Two-pocket Domain-dependent Projects shaped by programs, subsidies, and grants Success measured by “ribbon cutting” Neighborhood-centric Entrepreneur-driven One pocket Interdisciplinary Entire capital stack shapes investment across a community Success measured by dynamic changes over time

  4. The philosophy of a “street corner” • ZIP codes better predict health than genetic code • Strong correlation between the employment rates in a census tract and rates of upward mobility for children who grow up there • “What matters are conditions in one's own immediate neighborhood rather than in nearby areas, even those just one mile away” - Raj Chetty Office space Housing Main street businesses High growth businesses

  5. Entrepreneurs will lead the development of any street corner. • Entrepreneurial activity is nearing a 40-year low. • >83% of entrepreneurs do not receive a loan or a venture capital investment. • To turn street corners around, we need new models. • Kauffman Foundation’s Capital Access Lab

  6. The Vine City Opportunity Zone • 0.3 mi from Mercedes-Benz stadium • 1 mi from downtown Atlanta • Acquirable commercial anchors • Target area for West Side Future Fund • ~40 residential properties with 4+ years of tax delinquency

  7. Vine City Plaza (Atlanta, GA) Red: Tax delinquent, vacant property (off market) Total cost to acquire street corner properties: $1.15M Yellow: Vacant, acquireable property Gray: Vacant lot owned by City of Atlanta

  8. The deal: Vine City Plaza 607 Magnolia Community anchor supportive of project 10k SF of retail/ commercial; chance to build housing - $660K acquisition - $2.6M for renovation/ housing build - $900K total equity need Redeemer Church 611 Magnolia 614 Magnolia Vacant lot owned by City; would contribute by RFP to OZ fund committed to affordable housing & owned property next door. 10k SF of retail/ commercial; chance to build housing - $380K for acquisition - $1.14M for renovation/ housing build - $365K total equity need $4.35M Magnolia St Vine St $2.5M total $625K total equity need

  9. The entrepreneurs: Vine City Plaza Possible high-growth tenants aligned with community needs ($500k-$2M equity investments): Main street commercial tenants owned by community residents (equity-like or debt): Advanced manufacturing Affordable housing Diabetes management Technology repair Laundromat Healthy, affordable food Beauty salon

  10. Financials: Vine City Plaza

  11. Blueprint Texas

  12. Our Process Brought together key stakeholders for dialogue focused on improving the livelihoods of Opportunity Zone residents. Conducted interviews with dozens of practitioners to begin “last-mile” evaluation of combinations of projects, both operating businesses and commercial real estate. Solicited feedback from local working groups to build deals that meet both community and investor needs. Interviewed investors to bridge the gap between community advocates and capital allocators Resident engagement: community-based organizations engaged residents both on overarching values for investments and specific deals. 1. 2. 3. 4. 5.

  13. Timeline Investor Feedback Deal sourcing, vetting and community engagement Refined prospectus. November December January February March April Engage live projects with active investors Have developed this process through simultaneous engagements in Austin, Houston, San Antonio, Atlanta, Kansas City, and Baltimore Creating a a rigorous, disciplined routine both with local partners and national best practices

  14. Austin

  15. In 1928, an Austin City Council plan recommended creating a “Negro District.” “In our studies in Austin we have found that the Negroes are present in small numbers, in practically all sections of the city, excepting the area just east of East Avenue and south of the City Cemetery. This area seems to be all Negro population. It is our recommendation that the nearest approach to the solution of the race segregation problem will be the recommendation of this district as a Negro district.This will eliminate the necessity of duplication of white and black schools, white and black parks, and other duplicate facilities.” -Koch and Fowler to the Austin City Council, 1928

  16. Today, Austin is the most economically segregated city in the country.

  17. East Austin History & Demographics Focus Area 22.5% 26.5% 47.4% 25% $46,037 26% Austin Average 49% 7% 35% 15.4% $63,717 49% % White % Black % Hispanic % Below Poverty Median Household Income % Bachelor’s Degree or higher

  18. East Austin Challenges Population health and wellness is poor and community infrastructure is sparse. Health Care Grocery

  19. While there has been strong economic momentum, residents wonder how the developments will help them. Several business headquarters and distribution centers Close proximity to Downtown Austin with strong entrepreneurial activity Headquarters Strong existing network of small business owners and main street tenants Distribution Center 4 miles from Austin Airport

  20. East Austin “Street Corner” FIRST PROJECT Health and Wellness “Node” SUBSEQUENT PROJECTS Health node (cont.) Housing Local businesses

  21. The “Street Corner”: A health and wellness node Health Node • $7M phase 1 equity • $17.5M total equity • $46M debt • Philanthropy-credit guarantee, programming

  22. Growing businesses in Austin that impact population health Local businesses that meet community needs Creative office for small businesses and nonprofits Grocery store Child care Mental health

  23. Tenant mix

  24. The deal Potential returns No NMTC: 11.5% IRR With NMTC: 18.7% IRR

  25. How we’ll measure impact: -Jobs created, and quality of jobs (both via training and employers) -Wealth-building for residents (e.g. “lease to own”) -Changes in community health metrics over time

  26. San Antonio: Downtown

  27. In 1968, San Antonio bulldozed 1,300 buildings and displaced over 1,600 people, predominantly African-American, Latino, and German/Czech immigrants, from a middle-class neighborhood in downtown in order to build Hemisfair, a park for the World’s Fair.

  28. Downtown San Antonio History & Demographics Focus Area 11.9% 4.6% 81.5% 39.8% $26,201 10% SA Average 25% 7% 64% 18.6% $49,711 25.7% Growing population of downtown San Antonio: +126% growth in residents since 2010 % White % Black % Hispanic % Below Poverty Median Household Income % Bachelor’s Degree or higher

  29. Downtown San Antonio Momentum $125 million San Pedro Creek Improvement Project Geekdom, Emerging Tech Corridor, Graham Weston Developments $90 million UTSA Downtown Campus Expansion - Over 10 years adding a School of Data Science, a School of Entrepreneurship & several research centers $450 million Alamo Master Improvement Plan Approved by City Hall $384.1 million San Antonio River Improvements Project - Investment in flood control, amenities, ecosystem restoration and recreational improvements along 13 miles of the SA River Three-Phase Hemisfair Park Redevelopment Project

  30. Operating businesses ready to take on investment Local, main street businesses High growth commercial tenants Health Care Clinics Local coffee shop FinTech Local restaurant GovTech $ B2B Software

  31. Downtown San Antonio “Street Corner” Hemisfair Park Phase Two Scobey Building 2019 PROJECTS Several large downtown urban buildings Hemisphere Phase 2 • Originally, a historic neighborhood stood in the location of Hemisfair Park. • Bulldozed in 1968, when World’s Fair came to SA. • Hemisfair Redevelopment Corp was formed and created a three phase plan to develop the park. • Office and retail, approximately $3m initial investment Hemisphere Phase 3

  32. Houston’s 2nd Ward

  33. Houston’s Second Ward: from ”interstate injustice” to Harvey 2nd Ward

  34. Houston Second Ward “Street Corner”

  35. A street corner can be a corridor $40M private investment for small business-fueled commercial corridor, public push for a park with a swimming hole

  36. There are thousands of street corners like these in America.Questions?Ross Baird@rossbairdross@blueprint-local.com

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