Social and Economic Impact Report 2007 by Jacobs Center for Neighborhood Innovation

Social & Economic Impact Report Calendar Year 2007

The Village at Market Creek

c To Raise a Village:

Exploring the Social and Economic Impact of Market Creek

Introduction by Jennifer S. Vanica, President & CEO Jacobs Family Foundation Jacobs Center for Neighborhood Innovation

2006 was the year that Market Creek Plaza “changed ownership” — both literally and ﬁguratively — 2007 was the year that Market Creek became a village. Market Creek Plaza’s working teams became “Village Teams,” land planning and land acquisition expanded, residents and funders worked 2007 was the year in a more interconnected and comprehensive way, and the vision that Market Creek of Market Creek transformed into became a village. a large-scale cultural village.

neighborhood boundaries, across social status, and across educational levels to bring their gifts and problem-solving skills to the table. It’s about people who took great risks, who withstood great criticism, and who had the courage to believe they could create the community they wanted to live in.

Today in San Diego, it is hard to remember the corner of Market Street and Euclid Avenue of ten years ago. Widespread blight. No access to a major grocery. Few businesses operating past sundown. The toxic environment and concrete channels of Chollas Creek. When asked, residents spoke out. They wanted to remove physical blight. They wanted to reclaim public transportation. They wanted to be able to walk their neighborhoods and have safe routes to school for their children. They wanted access to healthy foods and viable housing choices It’s about people who took for their families. They great risks, who withstood wanted nice restaurants. great criticism, and who had They wanted jobs and

But that was then. The story of Market Creek and the transformation of the surrounding area is the story of a community that dared to dream. It’s about residents who had the nerve to step out of their homes and connect across cultures, across

pathways to careers. They the courage to believe they wanted great schools could create the community and quality after-school they wanted to live in. programs for their children. They wanted to celebrate their cultures and share their customs, traditions, and art. And they wanted to open the doors to ownership for themselves, their children, and their children’s children.

It is the story of resident ownership — the ownership of planning (where vision is built), the ownership of implementation (where skills and capacity are built), and the ownership of assets (where the ability to leverage future change is seeded). There is nothing remarkable or different about the dreams of these residents. Pick any city, any neighborhood, on any day, and people across the country will have the same dreams. But what feels different to people when they come to The Village at Market Creek is the result of what happens when neighbors take charge of change. It is what happens when they have the opportunity to be heard, see themselves in the vision and planning, and have permission to fail, dust off, come back, and try again. It is what happens when people are encouraged to take risks and when they won’t take no for an answer. It is what happens when people have the opportunity to experience the creativity of teamwork and take the time to celebrate each accomplishment, now matter how small. While its success may be measured by square feet they come to Market Creek is of construction, number of jobs, and value of contracts, the result of what happens when Market Creek is mostly neighbors take charge of change. about people learning how to work together, developing strong and dynamic networks, creating bridges to the larger region, and cultivating a widespread community ethos built on the belief that change is possible.

What feels different to people when

So what is the impact of Market Creek? This report details what we know about the social and economic impact of Market Creek. As part of the report, we also share some of the challenges and lessons learned during the last year as the work of the resident teams progressed and as Market Creek evolved from a plaza into a large-scale cultural village. While our team is always grappling with identifying the right success indicators, here is some of what we point to when asked, “How do you know Market Creek is working?”

Market Creek Partners, LLC Evaluating Market Creek as a business, we can point to the Plaza’s ability to recapture over $40 million in economic activity and sustain approximately 195 jobs. For Market Creek Partners, we can document $1.7 million in annual revenues, its ability to manage its debt service, and its profit (after depreciation) of about $100,000 per year. We can also point to the company’s potential for growth when the property at Market & 47th streets is developed. Jacobs Facilities, LLC Evaluating Market Creek as a community resource and gathering place, we can point to the new Joe & Vi Jacobs Center with its indoor and outdoor meeting and performance spaces, along with its 5,000-square-foot commercial kitchen. Built with the backbone infrastructure to be competitive with the top similar-sized venues in San Diego, the Center will assist residents in continuing to recapture the economic leakage associated with meetings, conferences, catering, banquet services, and other related industries. A new business that will be formed in the coming year to operate its venues and culinary academy is targeted to create an additional 200 to 250 new jobs, more than doubling Market Creek’s current employment counts. Community Ownership Evaluating Market Creek as an asset-building strategy, we can point to the ownership structure of Market Creek Partners, LLC as a mechanism for residents to benefit directly from the growing value of land in their community. We can point to the “working team” as a methodology for facilitating broad-based ownership of project planning and implementation. We can look at the “Community Development IPO” as a tool for offering community residents a financial stake in the revitalization of their own neighborhoods. We can detail the distribution of profits to our local community investors at a 10% preferred return, and to the Neighborhood Unity Foundation, which is putting those profits back into strengthening the community.

Business Development and Employment Evaluating Market Creek as a vehicle for the development of jobs and the advancement of business, we can point to the Plaza’s ability to recruit and sustain a major grocery. We can point to the growth in sales for Food 4 Less over its seven years of operation and to the growing base of deposits at the Wells Fargo Evaluating Market Creek as a business, we can point Bank. We can to the Plaza’s ability to recapture over $40 million in point to Market Creek Plaza’s economic activity and sustain approximately 195 jobs. overall ability to achieve stable employment even though the percentage of community hiring has ﬂuctuated. In 2007, a change in Food 4 Less hiring facilitated a 14% increase in community employment over the prior year and put us back on target with Market Creek’s original goals. On the community business development front, the two largest resident-owned businesses, Magnolias and El Pollo Grill, face the daily challenge of operating in an emerging market. They are meeting that challenge by expanding their catering and events. Both are current on leases and loans. In 2007, business roundtables brought together representatives from the City Council oﬃce, the redevelopment agency, the Coalition of Neighborhood Councils, and the Diamond Business Improvement District to share ideas for expanding community support of local businesses.

c 3

The Built Environment Evaluating Market Creek from a smart-growth perspective, we can point to the investment in restoring the vitality of one of San Diego’s older urban neighborhoods. We can point to its transit orientation, the strong sense of place captured in its architecture, its walking paths, and the longer-term vision for mixed land uses with a range of housing and commercial services. Through the development of The Village at Market Creek, a 20-acre industrial brownfield has been put back into productive use, toxic apartment complexes have been removed and will be replaced, fossil filter storm drainage systems have been put into operation, and over 2,250 linear feet of wetlands have been restored. In 2007, Cats Excavating and Engineering, previously a small, unbonded company, The Village at Market Creek, served as the prime contractor a 20-acre industrial brownfield has for the Chollas Creek Encanto been put back into productive use. Tributary Restoration Project, having grown its capacity for this very specialized wetlands recovery work.

Through the development of

In the development of the new Joe & Vi Jacobs Center, we can point to alternative building materials used in framing the new building, the cool-roof system, the measures taken to ensure energy eﬃciency and air ventilation, the use of recycled and non-toxic materials, and the installation of the backbone for solar energy. 4

The impact of new construction in The Village has been signiﬁcant on our local community contractors. Over $27 million in contracts have gone to minority- and women-owned businesses — an unprecedented 76% of all contracts.

Community Building Evaluating Market Creek as a platform for building community, we can point to its network of working teams. While the impact of the teams is more challenging to quantify, these teams have helped build the capacity of people to conduct planning, ﬁnd common ground, adopt an action orientation, mobilize resources, create dialogue and greater understanding among ethnic groups, reduce tagging, and increase pride. Most importantly, these teams have stimulated a can-do spirit, a commitment to joint action, and a sense of responsibility to one another. We know that “community listening” and forums that give residents a voice are now the way business is done here. We can see the growing strength of the Coalition of Neighborhood Councils, the Diamond Business Improvement

District, and the Neighborhood Unity Foundation, and we see a growing commitment to ensure all cultures are represented. In addition, we know that San Diego’s broader philanthropic community is now actively working across areas of interest to expand organizing efforts, pilot resident-led projects, help residents mobilize safe neighborhood networks, strengthen schools, and bridge The Village to the larger region. Commitment to Shared Learning Evaluating Market Creek as a platform for learning, we can point to the hundreds of people that come each year to visit and to learn from its strategies, structures, principles, and practices, and to be inspired by what is possible. We know that the model embedded in Market Creek — resident ownership of change — is helping people grapple with the issues of equitable development in their own communities, and it is expanding the limits of how residents can benefit broadly from revitalization efforts. We know that Market Creek is becoming a gathering place for those who want to undertake large-scale cross-cultural organizing, gain site control of enough land to make a difference, and design creative financing partnerships. It is becoming a learning hub and an R&D partner for community development practitioners, foundations, and researchers trying to understand the dynamics of supporting, implementing, and sustaining community revitalization efforts.For those interested in public policy, it is becoming a place to see up-close-andpersonal the tools, laws, and regulations that either facilitate or stand in the way of change. As we enter 2008, we still are wrestling with many of the same questions and issues we started with: What strategies best facilitate the economic expansion of an under-invested area? How long does it take for an emerging market to form? How do you best support local business development without getting in the way of people’s natural problem-solving? What is the right mix of activities and services? How do you

harness the local consumer market and attract a capital market? How do you deﬁne scale at the neighborhood level and how much scale is needed for sustainability? We can also say that Market Creek has conﬁrmed our original three core beliefs about community change:  Long-term hands-on

partnership projects provide the most fertile ground for learning and capacity-building.

We know that the model embedded in Market Creek — resident ownership of change — is helping people grapple with the issues of equitable development in their own communities.

 If you want more than

a make-over, neighborhood revitalization demands the integration of grantmaking, training, community organizing, and development.  When residents own their own change,

they can develop sustaining assets while rebuilding their neighborhoods. Our founder, Joe Jacobs, encouraged us to always remember that failure can be a platform for success. He gave us the courage to keep going no matter what went wrong or what barrier was in the way. As a chemical engineer, he challenged us to be intentional about our process and stay clear about what results we were seeking. From this vantage point ten years out, we know Market Creek has made a diﬀerence. But we also learned from Joe that success, just like failure, is anyone’s interpretation of a moment in time. Business is organic. Economics can shift on a moment’s notice. He taught us to be ever vigilant. To never feel like we have arrived. To always analyze where we are and work toward improving our performance. With that in mind, let’s do the numbers…

l 2007 Highlights:

commerce

On Becoming a Village

culture community 6

The

close of 2007 marked the ten-year anniversary of the resident surveys that launched the planning for an old factory site. It was the seventh year of operation of Food 4 Less. It was the fourth year of proﬁtability for Market Creek Partners, LLC. It was the one-year anniversary of the country’s ﬁrst Community Development IPO. And it marked the transformation of Market Creek from a plaza to a cultural village.

The Village is a new way to look at the work. Moving out of individual silos of activity, residents began convening across teams and initiating a deeper conversation about elements that create great communities. Through this process, teams and partners began to discuss a larger sense of purpose and began to deﬁne their roles and goals in creating a strong, safe, and vibrant village. Capacity-building plans no longer focused on individual non-proﬁts. It focused on the ability of groups to work together in developing The Village in a cohesive way.

Across Chollas Creek, the construction of the new Joe & Vi Jacobs Center dramatically changed the landscape at Market Creek. As the next phase of The Village, this Center doubled the scope and scale of new development and catapulted the community teams into a dynamic conversation about the vision of a bustling cultural district. This new community gathering place, learning center, and magnet for arts and culture helped residents build new bridges across teams, across cultures, and across the region. Building on the lessons from Market Creek Plaza, the teams working on the new Center achieved unprecedented results in its development, financing, and construction. The permitting of the building was smooth, the tax credit financing was rapid, and the “Community Builders” program delivered an exceptional project both in the Teams and partners began to quality of the building and the discuss a larger sense of purpose use of community contractors. Teams worked on planning and began to define their roles the Center’s office space, its and goals in creating a strong, galleries, its inside and outside meeting and performance safe, and vibrant village venues, and its new plaza areas. Teams advanced the market research, program design, and financial planning for the meeting and conference center, which will be phased 7

into full operation over the next two years. They also assessed the ﬁnancing needed to complete the audio-visual and performance capabilities of the building, and worked on projecting the timelines for full sustainability of these venues. Plans were developed to bring the building to life through community space, vibrant multicultural art, and diverse activities that will give it a unique place as the heart of The Village. Work on the next three phases of The Village also advanced. East of Market Creek Plaza, the conversation among the Chollas Creek Encanto Tributary teams about “scale.” restoration project, with support from the State Water Resources Control Board and the City of San Diego, made way for the planning of a new industrial project. Planning also progressed on securing an anchor tenant for the southeast corner of Market & 47th so development can begin on this important western gateway to The Village. The Housing Team also advanced its plans for the ﬁrst Village housing community and continued preparing local residents for ownership of its 42 units.

With 2007 came a growing

The City of Villages Team, a partnership between the Coalition of Neighborhood Councils and the Jacobs Center, worked to clarify roles, increase communication in the community, and draft a prototype community beneﬁts agreement to use in The Village as it develops. 8

With 2007 came a growing conversation among the teams about “scale.” What does scale mean at a neighborhood level? How much scale is needed to impact a regional economy? How much scale is needed to sustain the management structures of The Village? How much scale is needed to create an ownership structure open to an unlimited number of stakeholders? These conversations resulted in an action plan to expand acquisition of blighted, unused, or under-utilized contiguous properties along Market Street. To support this plan, teams worked on securing low-cost working capital and other strategies for reducing the holding costs of The Village land bank.

diversity and helped residents see their neighborhood as a cultural destination.

With the vision of The Village expanding from 20 to 80 acres and working teams beginning to envision the components of a healthy and vibrant village, people moved toward greater collaborative action and began to seek new ways to deepen and broaden the voices at the table. Writerz Blok, the youth urban art project, collaborated with the local high schools on mural classes. The Teen Center collaborated with a local elementary school on recreation. The Childcare Team expanded to address the larger issues of family support. The principals of the seven surrounding schools mobilized to jointly promote a culture of learning and to strengthen services to families. Parents, youth, law enforcement, former gang members, non-proﬁt organizations, the San Diego Commission on Gang Prevention and Intervention, the Fourth District Council Oﬃce, and the San Diego Neighborhood Funders mobilized to create a Safe Neighborhoods Area Project. Those funders also initiated collaborative action to address the challenges of residents returning to the community from prison.

To support cross-cultural understanding and facilitate organizing in and across cultures, the International Outreach Team began to serve all teams. People moved toward greater collaborative Its youth-adult partnership strategy action and began to seek new ways to deepen helped organize and broaden the voices at the table. representation across cultures and connect all cultural groups with the 32 working teams that make up The Village. It was through their work that Market Creek began to take on its unique identity as a cultural village. Ten years ago, a small group of community residents teamed up to address some of the challenges of the Market-Euclid intersection. The discussion was about the diﬃculty of crossing streets, needing more activities for young people, addressing gangs and longterm disinvestment, and getting much-needed commercial services back into the area. By 2007, this discussion had grown into the large-scale planning of a village — The Village at Market Creek.

What started as a commitment to engaging community artists in the creation of public art evolved into an Artists-in-Residence Program and the engagement of people across cultures in a more comprehensive strategy for The Village. Attracting the attention and support of San Diego’s arts institutions,The Village oﬀered a platform for the broader San Diego region to experience the community’s rich 9

The Village at Market Creek Resident Engagement

Since Inception*

Formal Community Listening (Surveys and Focus Groups)

8,252

Informal Community Listening (Community Feedback Sessions)

2,400

Design and Planning Team Participation

2,860

Implementation Team Participation

1,082

Scale of The Village

2007

Goal for Acreage in The Village

60-80

Total Acres Currently in The Village

Acres of New Development Completed

Acres In Development

Acres In Temporary Use

Village Commercial and Industrial Development

2007

Goal for Square Feet of Commercial and Industrial Development

350,000

Square Feet Developed

120,000

Commercial Development in Planning or Construction

73,500

Industrial Development in Planning or Construction

20,000

Village Housing

2007

Goal for Homes in The Village

800

Homes in Planning or Construction Homes Completed

42 0

Village Community Facilities

2007

Goal for Square Feet of Community Facilities in The Village

110,000

Square Feet in Planning or Construction

75,000

Square Feet Completed

27,000

Arts and Culture Venues

2007

MCP Amphitheater

Completed

Festival Park

Completed

Joe and Vi Jacobs Center

Under Construction * Cummulative participation totals (people may be counted more than once)

The Village at Market Creek (cont.) Jobs Created in The Village

2007

Goal for Jobs in The Village

800

Jobs on The Village Acres at Purchase Jobs as of 12/31/07

Village Construction Projects

7 415

2007

Chollas Creek Restoration Project - Restoration

Complete

Elementary Institute of Science - New Construction

Complete

Market Creek Plaza - New Construction

Complete

BRYCO Business Park - Renovation

Complete

Chollas Creek Encanto Tributary Restoration Project - Restoration

80% Complete

Joe & Vi Jacobs Center - New Construction

80% Complete

Community Contracting

Since Inception

Total Value of Village Construction Contracts

$36,185,000

Contracts to Minority- or Women-Owned Businesses

$27,378,000

Percentage of Minority- or Women-Owned Contractors

Capital Investment in The Village Total Capital Investment in The Village as of 12/31/07

76%

Since Inception $85,000,000

The Village at Market Creek Northwest Village — Rental Housing

Joe & Vi Jacobs Center • Construction • Interior design • Tenant improvements first and third floors • Second floor planning • Business plan for new social enterprise to operate first floor

• Conceptual plan

Northwest Village — Homeownership • Conceptual plan • Temporary use — Writerz Blok until 2009

Market & 47th Village Gateway

• Anchor letter-of-intent • Site plan • Continue land aquisition

Youth World • Conceptual plan for moving Youth World to this site

Southwest Village • Continue land acquisition • Temporary use — Festival Park until 2011 • Zone change

West Village • Zone change • Lot line for parcel separation from the Joe & Vi Jacobs Center

Guymon Apartments • Demolition • Zone change • Temporary use until 2010 — Guymon Youth Park

Northwest Village - Commercial • Hold for lease expiration • Zone change • Temporary uses until 2012

Light Industrial Project • Architect Selection • Massing and Zoning Studies • Grading

BRYCO Business Park • Interior renovation • Leasing program design • Leasing • Exterior renovation plan

Housing Pilot • Working Team planning • Architectural design • Homeownership ﬁnancing structure • Zone change • Homebuyer readiness

2007

Development Overview 13

q 2007 Highlights:

development

Market Creek Partners, LLC

Overview

Market Creek Partners, LLC is a community development limited-liability company that unites diverse communities in creating social and economic strength. This innovative resident-owned company owns

Market Creek Plaza, a 10-acre community-planned project anchored by Food 4 Less, restaurants, retail shops, and venues for multicultural art and entertainment. The company also owns a parcel of land at Market & 47th streets scheduled for development in 2008. Community plans call for recruitment of a major drug store to anchor this project.

service 14

The Work in 2007 The work during the past year focused on four areas: 1) the proﬁtability of the company, 2) achieving a 10% preferred return for the community investors, 3) securing an anchor tenant for the property at Market & 47th, and 4) assuring quality property management and security.

Key Challenge

Key Milestones =

 Market Creek Plaza is more than a

shopping center; it is a cultural destination and a community gathering place. The small businesses located at the Plaza can’t bear the cost of this added level of security and maintenance. We need a diﬀerent strategy and funding mechanism to keep common area maintenance costs low. We also need greater scale to spread administrative and training costs.

= =

Key Learning  Because of the emerging market location

of the Plaza, it is more important than ever to keep it inviting, safe, and beautiful. Proactive maintenance schedules, stronger trouble-shooting, and a higher level of expertise for training and mentoring are critical. This requires a diﬀerent type of funding short-term, and the ability to take The Village to scale long-term.

Market Creek Partners, LLC was profitable in FY 2007, closing the fiscal year with cash of $745,000 after debt service and $111,000 after depreciation and lease amortization. All loans are current. With the close of the public offering December 31, 2006, Diamond Community Investors were owners for six months at the close of the fiscal year; members received their first distribution of profits at a 10% preferred return for that six months of ownership.

q Neighborhood Unity Foundation owned 20,000 units during the ﬁrst six months of the ﬁscal year and its full 50,000 units for the second six months; NUF received its 10% preferred return based on its ownership share. The team worked on securing an anchor tenant for the property at Market & 47th streets, ending the year in negotiations on a letter-of-intent.

To improve the quality of property management and reduce the cost of maintenance, functions previously contracted were brought in-house, adding ﬁve permanent jobs for community residents. Training was increased for the Market Creek Ambassadors Team in working with the public; strong relationships were developed with San Diego Police Department southeastern division and gang unit.

Market Creek Partners, LLC Overview Date Acquired Land Total Square Footage to be Developed

New Construction or Rehab Percentage of Project Complete Expected Completion Date

Development Costs Budgeted Development Cost Costs to Date

Projected Costs at Completion Source of Original Development Financing Appraised Value of Project

Permanent Financing

Market & 47th

05/05/1998

07/13/2000

104,082 Includes 25,000 square feet of groundlease

18,000 Groundlease

New

100%

Completed

June 2010

Market Creek Plaza

Market & 47th

$23,500,000

$300,000

$23,600,000 $2,500,000 in capitalized interest was not included in original budget

$24,000,000 Includes capitalized interest

$300,000

Wells Fargo Bank and JCNI loans paid off Will be reported beginning one year after the close of the IPO; appraisal will be initiated at close of FY 2008

Date

Amount

Program Related Investments (PRI) Jacobs Family Foundation F.B. Heron Foundation Rockefeller Foundation The Legler Benbough Foundation Jacobs Center for Neighborhood Innovation Annie E. Casey Foundation Annie E. Casey Foundation

June 2002 September 2003 October 2003 October 2004 June 2005 August 2005 December 2005

$2,000,000 500,000 1,000,000 500,000 2,350,000 1,000,000 250,000

Community Investment Diamond Community Investors Neighborhood Unity Foundation

December 2006 December 2006

500,000 500,000

June 2004

15,000,000

New Markets Tax Credit Loan Clearinghouse CDFI - Wells Fargo and Company Total

Market Creek Plaza

$23,600,000

Market Creek Partners, LLC (cont.) Leasing

Market Creek Plaza

Market & 47th

12 Retail Suites 1 Groundlease

1 Groundlease

104,082 Includes 25,000 for groundlease

18,000 Groundlease

102,482

Percentage of Space Leased

100% Retail Suites 100% Groundleases

Groundlease in negotiations

Percentage of Space Occupied

100% Retail Suites 100% Groundleases

Number of Units Total Square Footage to be Developed

Total Square Footage Leased to Date

Market Creek Plaza Construction â&#x20AC;&#x201D; at Completion (For contracts controlled by JCNI/DMI)

Since Inception

Number of Contractors

Number of Contractors from the 4th District

Number of Minority or Women Contractors

Total Dollar Value of Construction/Service Contracts

$10,000,000

Value of Construction/Service Contracts to Minorityor Women-Owned Contractors

$7,868,000

Percentage of Minority- or Women-Owned Contractors Based on Value of Contracts

79%

Market Creek Partners, LLC

(cont.)

Economic Activity Generated by Market Creek Plaza

2007

2006

Total Economic Activity

$40,200,000 Reported as of 12/31/07

$34,200,000 Reported as of 12/31/06

Total Property Tax Generated

$147,393 Reported as of 6/30/07

$146,897 Reported as of 6/30/06

Economic Activity Generated by Market Creek Partners, LLC Total Revenues to MCP, LLC

FY 2007

(Reported as of 6/30/07)

Operating Expenses and Loan Interest Income After Operating Expenses and Loan Interest

744,928

(633,692) $

111,236

1,733,817 (1,025,753)

(988,985)

Depreciation and Lease Amortization Net Income

1,733,913

FY 2006

(Reported as of 6/30/06)

708,064 (608,209)

99,855

Market Creek Partners, LLC

(cont.)

Comparison to Original Projections â&#x20AC;&#x201D; First Bottom Line Total Project Costs

Original Projections

Projected for Completion

$23,200,000 Did not include capitalized interest

$24,000,000 Includes capitalized Interest

Average Rents Per Square Foot

$0.95

$1.12

Debt Service Coverage (All Rents to All Loans)

151%

230%

Debt Service Covered by National Tenants

125%

183%

$1,700,000

$1,817,000

Blended Interest Payment

$781,000

$540,000

Income after Interest Payment and Reserves

$675,000

$543,688

7.8%

8.24%

Gross Revenue

Blended Return on Investment

Comparison to Original Projections â&#x20AC;&#x201D; Second Bottom Line Resident Engagement (Since Inception) Formal Community Listening Participation (Surveys and Focus Groups) Informal Community Listening Participation (Community Feedback Sessions) Community Design and Planning Team Participation Working Team Participation Number of Working Teams Annual Economic Activity

Original Projections

Impacts as of 12/31/07

1,400 8,252 2,400 2,860 1,082 52 $31,000,000

$40,200,000

65%

79%

166

193

Percentage Employed from Neighborhood

65%

72%

Percentage of Minority Employees

65%

88%

National/Regional Tenants

Local Businesses

40%

Construction Contracts to Minorityor Women-Owned Businesses Jobs Created

Community Ownership

A 2007 Highlights:

conference

Jacobs Facilities, LLC

Overview

The Joe & Vi Jacobs Center is the next phase of development for The Village at Market Creek and

the main asset of a new community development limited-liability company called Jacobs Facilities, LLC.

This new Center in The Village is a 75,000-square-foot central resource center and gathering place at the heart of The Village with a mission of facilitating learning relationships, celebrating multicultural unity, advancing the spirit of entrepreneurship, and contributing to the social and economic strength of the community. In addition to providing oďŹ&#x192;ce space for organizations working on the revitalization of the

Diamond, the Joe & Vi Jacobs Center will be home to a multi-purpose conference and performance center, a 5,000-square-foot. commercial kitchen and culinary academy, and a multicultural gallery.

growth

 Keeping residents actively engaged in the

The Work in 2007 The work during the past year focused on four areas: 1) constructing the facility, 2) engaging community teams in planning the interior design, exterior plazas, and garden, 3) finalizing the plans for the initial art opportunities in the facility’s lobbies and cultural niches, and 4) finalizing the business plan for the new social enterprise that will run the first floor conference and banquet services business.

Key Challenges  The planning of working teams overlapped

with the actual construction process, which made it both easier and harder. It was easier in the sense that community teams could visualize decisions that needed to be made. It was more diﬃcult for our small subcontractors who were often asked to adjust plans while the building was in progress.

planning and project implementation over a long period of time is best done when planning periods are no more than 120-days and when the process allows the ﬂexibility for change as plans move from conceptual to three-dimensional. Momentum builds within the teams as work becomes more concrete and visual. Flexibility needs to be factored into the construction timelines and ﬁnancial models. Adjustments to the pace and scope of work as a project moves along enriches the vision and quality of the work, and provides an opportunity for full participation by residents in implementing that work.

Key Milestones =

 With any social enterprise, trying to secure

capital gets very complex. These businesses are for-profit structures with non-profit missions, so they require a hybrid approach to capitalization. This is easier when projects are phased. Because the square footage of Market Creek Plaza is spread out in five buildings, its construction could be phased. The Joe & Vi Jacobs Center, which is 75,000 square feet in one building, is more complicated to phase.

Key Learnings  Neighborhood change requires a new

standard and a new expectation for the quality of work. To do this without escalating the cost of space and creating a gentriﬁcation dynamic in the neighborhood requires a hybrid model of development ﬁnance.

At the end of 2007, construction on the Joe and Vi Jacobs Center was 80% complete. The Construction Working Team facilitated a careful “best bid” process that resulted in 74% of the contractors being historically under-utilized business enterprises (HUBE).

A Planning advanced for the newest Market Creek community venture — the business that will operate the first floor venues and commercial kitchen — including a gradual phase-up in the operations of the audio-visual and performance capabilities of the Center. Planning teams worked on every detail of the first and third floors, with the second foor to be planned in 2008.

Four artists selected for the Artists-in-Residence Program are working with the community on the art components of the Center, including the entryways and cultural niches.

Space was reserved and planning initiated for a gallery in collaboration with The Legler Benbough Foundation, members of the Balboa Park Cultural Partnership, and the Jacobs Center for Neighborhood Innovation. Teams advanced plans to secure an additional $5 million in private investment to bring the facility to full audio-visual and performance capability and to increase the facility’s solar capability.

Jacobs Facilities, LLC Overview

Joe & Vi Jacobs Center

Date Acquired Land

05/15/1998

Total Square Footage to be Developed

75,000

New Construction or Rehab

New

Percentage of Project Complete

80%

Expected Completion Date

Development Costs

May 2008

Joe & Vi Jacobs Center

Base Development Budget

$23,500,000

Full Conference and Performance Capability*

$5,000,000

Projected Costs at Full Completion

$28,500,000

Costs to Date at 12/31/07

$18,600,000

Permanent Financing: Joe & Vi Jacobs Center Program Related Investments (PRI) Jacobs Family Foundation Jacobs Center for Neighborhood Innovation To be raised* New Markets Tax Credit Loan Clearinghouse CDFI - U.S. Bank - Washington Mutual Bank Total

Date

Amount

November 2002 March 2006

$5,000,000 $3,500,000 $5,000,000

December 2005

$15,000,000

$28,500,000 * JCNI is currently seeking partners for grants and PRIs to assist with the added capacity.

Jacobs Facilities, LLC

(cont.)

Joe & Vi Jacobs Center Construction

2007

Since Inception

Number of Contractors

Number of Contractors from the 4th Council District

Number of Minority or Women Contractors

Total Dollar Value of Construction Contracts

$3,515,000

$16,400,000

Value of Contracts to Minority- or Women-Owned Contractors

$3,400,000

$12,100,000

Value of Construction Contract to 4th Council District Contractors

$2,640,000

$7,000,000

97%

74%

Percentage of Minority- or Women-Owned Contractors Based on Value of Contracts

y 2007 Highlights:

ownership

Community Ownership

Ownership Stategy

Community ownership is the ultimate goal of The Village at Market Creek. As The Village pilot project, Market Creek Partners, LLC was designed to maintain a balance of community and individual ownership.

The Neighborhood Unity Foundation (NUF) was formed to facilitate community ownership. Its communityresident board and volunteers raised its $500,000 ownership share and committed to putting all proﬁts back into neighborhood strengthening grants. Diamond Community Investors (DCI), the individual ownership

structure, was launched through a pioneering Community Development IPO. Today, it is made up of 415 individual neighborhood stakeholders. Diamond Management, Inc. has a small ownership share as Market Creek Partners’ management company. The ownership strategy called for JCNI to retain more than 51% of the company until all the foundation PRI partners are reﬁnanced out. The organizational documents contain a provision for full community ownership to be achieved by 2018.

residents

want to oﬀer ownership of projects without having engaged and involved residents broadly in the planning and implementation of those projects. We are uncertain about what role, if any, to play with these groups.

Key Learning  Ownership brings returns — in every sense

The Work in 2007 With the IPO complete and both Neighborhood Unity Foundation and Diamond Community Investors seated as owners, the work in 2007 focused on four primary goals: 1) evaluating the Community Development IPO, 2) connecting the new owners to the larger plan for The Village, 3) stimulating broad discussion and learning in the community about the importance of investing and asset-building, and 4) continuing to build the overall capacity of residents to own The Village.

of the word. DCI and NUF earned ﬁnancial returns from their investments in Market Creek Partners. Many wanted to put their returns back into The Village as a whole. The shared risk of ownership has returned stronger social connections and greater social responsibility. The work to create these ownership structures has spawned a broader conversation about both the power of collective investment and the importance of personal economic security.

Key Milestones =

y =

Key Challenges  Over 100 DCI members want to re-invest

their dividends and are seeking new investment tools that can leverage higher returns based on their ability to pool funds and gain a larger footprint in the market. This will require a new resident team and a new role for the Jacobs Center.  As word spreads about the Community

Development IPO, we are assessing what tools we can provide to support other groups across the country. We are concerned that in some cases groups

Elections were held and the nine-member DCI Advisory Board was seated.

The DCI Advisory Board formed four core committees: Market Creek promotions, financial education, community benefits, and governance. In November, Diamond Community Investors received their first distribution of profits.

Over 130 DCI members asked to be included in putting together a strategy for pooling their dividends for reinvestment until the next ownership opportunity is created. Investor workshops on tax preparation and “Understanding Your K1” were initiated. The IPO Evaluation Investor Survey and initial analysis were completed.

The Neighborhood Unity Foundation conducted its seventh round of grantmaking and has now distributed over $150,000 to resident-led work in southeastern San Diego; in 2008, 50% of NUF’s total grantmaking is projected to come from its dividends in Market Creek Partners.

Community Ownership Overview - Market Creek Partners, LLC

As of 6/30/07*

Total Number of Units

250,000

Number of Units Issued

250,000

Units in Community Ownership

100,000

Original Goal for Percentage of Community Ownership

40%

Current Percentage of Community Ownership

40%

Blended Return on All Outstanding Units

Diamond Community Investors (DCI)

As of 6/30/07*

Original Goal for DCI Investment in MCP, LLC

$500,000 (not to exceed)

Original Goal for Number of Community Investors

450 Investors (not to exceed)

Number of Participants in Sales Process During IPO Campaign Number of Diamond Community Investors Total Amount Invested by DCI in Market Creek Partners Total Number of DCI Units Held in Market Creek Partners

1,130 415 500,000 50,000

Original Goal for Percentage of DCI Ownership

20%

Current Percentage of DCI Ownership

20%

Return on Outstanding Units

10% * Fiscal Year End

Community Ownership

(cont.)

Neighborhood Unity Foundation (NUF)

As of 6/30/07*

Total Assets of NUF (As of 12/31/07)

$768,000

Grants Distributed to Date

$150,000

Original Goal for NUF Investment in Market Creek Partners

$500,000

Total Amount Raised and Invested by NUF in Market Creek Partners

$500,000

Total Number of NUF Units Held in Market Creek Partners

50,000

Original Goal for Percentage of Ownership

20%

Current Percentage of NUF Ownership

20%

Return on Outstanding Units

10%

Jacobs Center for Neighborhood Innovation (JCNI) and Diamond Management, Inc. (DMI)

As of 6/30/07*

Number of Units Held by JCNI

140,000

Number of Units Held by DMI

10,000

Current Percentage of JCNI Ownership

56%

Current Percentage of DMI Ownership

Return on Outstanding Units

3% * Fiscal Year End

photo / text edits to come

2007 Highlights: Business Development and Employment

Business Strategy Market Creek Plazaâ&#x20AC;&#x2122;s business strategy focused on harnessing the value of retail leakage and bringing the markets to Market Creek. The strategy called for anchoring the project with national tenants to provide stability in debt service and creating opportunities for local entrepreneurs. Community business development focused on a mix of opportunities for entrepreneurs, existing businesses, and new ventures. Various forms of business development are being tested, including manage-to-own and franchise models. A plan for employee recruitment was put in place to promote local hiring.

relationships

The Work in 2007 During the last year, the work focused on four primary goals: 1) bringing the markets to Market Creek by growing the foot traﬃc and customer base at The Plaza, 2) promoting Market Creek Plaza as the heart of a cultural business district, 3) cultivating the next round of businesses for expansion of The Village marketplace, and 4) increasing community employment at Market Creek Plaza to 65% or better.

Key Challenges  Market Creek Plaza’s national tenants

continue to have strong sales while the local businesses have not been able to generate an increase in their customer base. They continue to rely on daytime business.  Locally-owned businesses struggle to ﬁnd

the right price points and products to attract customers from the diverse cultures and income ranges in the community.  Securing and retaining employment

for residents remains challenging. For entry level positions, inadequate skills hinder candidates in interviewing and, if hired, in maintaining employment. For skilled positions, identifying community candidates with appropriate training and preparation who are seeking employment continues to be diﬃcult. A shift in hiring practices at Food 4 Less, however, did boost community employment at Market Creek Plaza to 72% in 2007.

Key Milestones =

Gross sales for MCP totaled $40.2 million.

Employment for MCP was stable at 193 employees.

= =

Community employment at MCP increased 14% from 58% to 72%. Minority employment at MCP was 88%.

The Business Team planned and piloted an openair international marketplace in conjunction with the Market Creek Plaza Arts & Culture Fest. Community Business Roundtable workshops were held to brainstorm ways to make Market Creek an evening destination.

Relationship marketing and promotions focused on business associations, major companies headquartered in the Diamond, chambers of commerce, and the Convention and Visitors Bureau. BRYCO Business Park was renovated and leased, adding 27 new jobs to The Village. Negotiations were initiated on a letter-ofintent for an anchor at Market & 47th. Total jobs in The Village are now at 415.

PHOTO TO COME

Key Learnings  Creating and sustaining community business

ownership involves changing local consumer habits and attitudes, as well as breaking regional stereotypes and perceptions. Bringing both local and regional markets to Market Creek Plaza requires suﬃcient working capital and time to develop and implement targeted marketing plans. It also challenges business owners to improve operations, test products, and explore alternative promotions strategies.

 Successful resident employment requires

a comprehensive approach connecting business owners and managers to a network of employment training and staffing agencies, trade unions, community colleges, and vocational programs. Relying on any single source for job candidates limits the pool of qualified people, the range of job readiness, and effective recruitment.  Market Creek Plaza as an isolated commercial

project will struggle to thrive. The scale of The Village is critical to its long-term success and to securing broader social and economic impacts. At $1 million dollars an acre, land is diﬃcult to acquire, but is essential in creating business synergy and assuring sustainability. Our ability to negotiate community beneﬁts with major businesses has multiplied as the scale of The Village as broadened. Site control over multiple commercial corners can increase impact. 30

Business Development & Employment Market Creek Plaza Economic Activity Total Economic Activity Percent Increase (Decrease) in Economic Activity

2007

2006

$40,200,000

$32,200,000

17.5%

40%

Key Market Creek Plaza Business Benchmarks  Economic activity at Market Creek Plaza of $402 per square foot outperformed its benchmark

by 10% ($365 for retail centers of 100,000 square feet with similar tenant mix).  Food 4 Less experienced 6% growth in gross sales for 2007.  Wells Fargo Bank reported a 34% increase in deposits.

Market Creek Plaza Employment

2007

2006

193

196

Full-time Jobs

Part-time Jobs

116

118

Employees from the Southeastern San Diego Zip Codes

138

113

Minority Employees

169

Percentage of Community Employment

72%

58%

Percentage of Minority Employees

88%

86%

2007

2006

Number of Employers Employers Providing Benefits Total Jobs

BRYCO Business Park Employment Number of Employers Number of Jobs

The Village Employment Goal for Jobs in The Village Jobs on The Village at Purchase Jobs as of 12/31/07

2007

2006

800

415

342

q 2007 Highlights: The Built Environment Smart-Growth Strategy Restoring the vitality of this older urban neighborhood requires new ways of thinking about densities, mixed-use zoning, environmental sustainability, public transportation, and use of community contractors. The Village at Market Creek is part of a growing conversation in San Diego about smart growth and regional equity. The orientation of The Village around public transit, coupled with the restoration of Chollas Creek as an environmental amenity, provide the backbone of The Village’s smart-growth strategy. As a “City of Villages” pilot project for the City of San Diego, The Village at Market Creek will bring new land-use zoning to the Diamond that will encourage mixed-use site planning, more walking paths, and increased densities. Planned on the theory that smaller footprints create more space for amenities, The Village at Market Creek is also challenging the community to plan for long-term sustainability, build for local ownership, and invest upfront for future cost savings and energy eﬃciency. Planning teams are challenged to recycle in every sense of the word. Most important is recycling beneﬁts to local residents through jobs, contracts, ownership, and business strategies.

growth 32

The Work in 2007 During the last year, the work focused on six primary goals: 1) completing the next round of development planning, including the general plan amendment and entitlements for The Village working with the City and the redevelopment agency, 2) advancing construction of the new Joe & Vi Jacobs Center, achieving at least 65% participation from HUBE contractors, 3) completing renovation of an old industrial property into a light industrial business park, 4) setting up a park as a temporary use on a site not due for development for three years, 5) completing restoration on the Chollas Creek Encanto Tributary and expanding the capacity of a local contractor in the area of wetlands recovery work, and 6) expanding the scale of The Village for greater social and economic impact.

Key Challenges  The development of a mixed-use, transit-oriented

village requires the complete alignment of financing tools, market interest, zoning, and entitlements. The zone to facilitate mixed-use, high-density development doesn’t currently exist in San Diego’s southeastern neighborhoods. To secure New Markets Tax Credit financing, projects must have a minimum of 20% commercial use if they also include rental housing. Portions of The Village plan that call for higher density homeownership or mixeduse rental housing require this new zone. Adding to the challenge, it is difficult to secure a large commercial anchor for a mixed-use development in the current San Diego market.

Key Milestones =

q =

= =

 The community contracting program requires close

supervision, supportive coaching, and constant monitoring once the contract is bid, adding to the cost and timeline of a construction project.

The next round of development planning was completed, resulting in new site plans for The Village with updated proformas and development timelines.

The redevelopment agency continued to move the general plan amendment and entitlements through the City of San Diego Planning Department on behalf of The Village; completion is anticipated in 2008. A 20-acre industrial brownﬁeld has been put back into productive use.

Fossil ﬁlter storm drainage systems have been put into operation at Market Creek Plaza.

An additional 10 acres was targeted for acquisition with four of the eight properties closed or in escrow. Four deteriorated or mold-infested apartment complexes were removed or are ready for removal; all housing will be replaced.

Over 2,250 linear feet of wetlands have been restored. A community contractor led the Chollas Creek Encanto Tributary Restoration Project, having grown its capacity for specialized wetlands recovery work. In the Joe & Vi Jacobs Center, alternative building materials were used in framing and rooﬁng, recycled and non-toxic materials were used throughout, and the backbone for solar energy was installed. On the Joe & Vi Jacobs Center, over 74% of the contracts went to historically under-utilized business enterprises or HUBE contractors, unprecedented on three-story steel construction. The renovation of the industrial building on Market Street, known as the BRYCO Business Park, surpassed its goal of 65% participation of minority and women contractors; 70% of the building is now leased.

Key Learnings  A negotiated best-value bid process

— weighted half on the dollar bid and qualifications and half on community capacity building — has worked effectively for the Construction Working Team in negotiating community benefits and assisting minority and women-owned businesses in securing contracts. For contractors outside the community, there has been an openness and willingness to participate in the community benefits program, including mentoring and joint venturing as a way to give back.

 Building “smart” is aided by building to

own rather than building to sell. Putting together a project that reflects a community’s vision and can thrive over the 30-year term of its debt service requires planning for long-term sustainability rather than shortterm profitability. The care given to how a project is planned, the quality of products selected, the efficiency with which it will function, the vibrancy and beauty of the built environment in relationship to the community around it, and the project’s sustainability over time — these conversations are at the forefront when there is a commitment to long-term community ownership.

The Built Environment Smart Growth Acres of Blight Removed Wetlands Recovery - Linear Feet of Creek Restoration Village Jobs Contiguous to Transit Public Transportation Available

As of 12/31/07 32 2,250 415 Trolley Station Major Bus Transfer

New Village Dwellings Contiguous to Transit

Goal In Planning

800 42

Annual Increase(Decrease) Public Transit Ridership (Bus and Trolley)

11%

Ten-Year Increase (Decrease) in Trolley Ridership

63%

Community Contracting

As of 12/31/07

Chollas Creek Restoration Project - Completed in 2001