New Real Estate Trust Wants Troubled Philly Community to Shape Its Own Economic Development – Next City

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The Bottom LineThe Bottom Line

New Real Estate Trust Wants Troubled Philly Community to Shape Its Own Economic Development

With easy transit access to downtown and nearby areas that are already gentrified, North Philly’s Kensington neighborhood could be next. (Photo by Oscar Perry Abello)

The speculators are already coming for North Philadelphia’s Kensington Avenue corridor.

Running through one of the poorest neighborhoods in the poorest big city in the country, the stretch today is mostly known for being the regional center of the opioid crisis. But right now on Zillow, you can find one-bedroom apartments listed along the corridor from $550 all the way up to $1,995 a month.

Alex Robles spent his high school years in the neighborhood and moved back to the area a few years ago to work in real estate after a successful early career in the hotel industry. “We’re two train stations north from areas that are gentrified already, so it’s only a matter of time,” Robles says. “Most of the gentrification in Philly has gone along the train lines.”

Not that long ago, there was a vibrant retail corridor here lined with mom-and-pop shops — including Robles’ mother’s hair salon. Today there are pawn shops, discount mobile phone stores, a few sneaker stores, and a lot of vacancies. For a speculator with a “buy low, sell high” mentality — who might come in and buy properties en masse, wait for the city to deal with its opioid crisis and then flip the corridor into Philly’s next hottest locale — it’s an area ripe for the picking.

Which is why the community is coming for it first — in the form of the brand new Kensington Corridor Trust. Robles is one of the founding board members.

“What we want to do is buy up as much of the real estate as possible so we have that control and we can go in and select tenants that come in who will offer products and services that the existing neighbors can consume and enjoy, in addition to getting some of those jobs,” Robles says. “There’s no doubt about it that unless someone does what [the trust] is attempting to do, which is go in and buy a lot of real estate as much of it as fast as possible to push back against the gentrification, then it’s bound to happen.”

The Kensington Corridor Trust is already considering multiple acquisition opportunities even as it continues to raise capital.

“One or two businesses a block won’t cut it,” Robles says. “It has to be more.”

Coming together only a few months ago, the founding board includes a few local residents and civic leaders as well as a cadre of real estate and community development professionals. They’ve already met twice, and they’re also raising grant dollars to cover three initial years of operating expenses, after which the plan is for the trust to be self-sufficient. So far they’ve raised enough grant dollars to start searching for an executive director to take on this work full-time — to this point, everyone working on or with the trust has been doing it on an unpaid basis.

The founding board of the trust has been very much in the mode of building the plane as it takes off. While the first step is to acquire and stabilize properties, the ultimate long-term role and operating model for the trust could still take any number of forms. It might hold onto the deeds for each property on a permanent basis, providing 99-year ground leases to chosen developers or businesses, requiring them to offer below-market rents or living wage jobs for local residents. It might eventually sell those properties to mission-aligned nonprofits or other local owners, perhaps after putting deed restrictions or easements in place to protect local benefits.

No matter how the trust gets the neighborhood there, the collective end vision for the neighborhood is clear.

“The goal is to rebuild a distressed commercial corridor that, once stabilized, will generate jobs for people in the neighborhood, it’ll also provide amenities at price points that are affordable for those residents, and will be clean enough and safe enough for people from other neighborhoods to come and visit,” Robles says.

The trust isn’t starting entirely from scratch. Casey O’Donnell, another founding board member, is CEO at Impact Services, a Kensington nonprofit founded in 1974 that provides a traditional array of workforce development programs, housing for formerly homeless veterans, and loans to local businesses in Kensington. In 2016, Impact Services launched a 14-month strategic planning process for the neighborhood, engaging more than 450 local residents, entrepreneurs and workers. The final output of that process was a community plan called “Heart of Kensington Collective Impact 2022.”

“Kensington does not have larger anchor institutions like a Penn, Drexel, Children’s Hospital of Philadelphia, or Temple University, so the network of service providers, businesses and civic leaders have really become that anchor, and that’s what’s driving this forward,” O’Donnell says. “The corridor trust is part of a bigger plan, one piece of what we’re trying to accomplish as a network.”

The Kensington Corridor Trust takes inspiration from other vehicles for mission-driven or community-driven real estate development from around the country, while also being a departure from them in some intentional ways.

Like the 200-plus community land trusts around the country, being a stalwart against gentrification and displacement of current long-term residents is part of the goal. But the Kensington Corridor Trust isn’t geared toward residents owning and protecting the homes where they live — it’s about neighbors owning commercial spaces around them, determining the shape and direction of economic development in those spaces, while also capturing the value appreciation of the properties as they revitalize the neighborhood.

“On the residential side … for some people their property values are going to grow, and they’ll have the option to sell if they’d like, it’s up to them, we can’t control that,” Robles says. “But we can do the best that we can with the fact we can control that corridor and make sure that we make this a more attractive neighborhood for the folks living there to stay.”

In Portland, and also in Minneapolis, there are examples of neighbors coming together to take ownership of commercial properties in their neighborhood, but those have been limited to one property at a time. Land banking multiple properties today while something like the opioid crisis is still affecting the area hearkens back to Boston’s Dudley Street Neighborhood Initiative or Buffalo’s Green Development Zone — but then again, those focused mostly on residential properties, not commercial.

Perhaps the closest prior example of what the Kensington Corridor Trust is doing today is the Cincinnati Center City Development Corporation, known as 3CDC. In 2005, that nonprofit entity began land banking abandoned, vacant, dilapidated and problem properties in a historically disinvested area of Cincinnati adjacent to downtown, then began deploying a range of public and private financing to begin revitalizing those properties.

But, although 3CDC has mostly lived up to leasing out its commercial storefronts to independently-owned businesses from the Cincinnati area, the initial wave of those business owners did not reflect the demographics of the city or the neighborhood. It took the more recent efforts of groups like MORTAR (which does get some of its funding from 3CDC) to bring more equitable development back into the picture for the neighborhood.

Taking that lesson to heart, the Kensington Corridor Trust is baking in inclusive economic development from the start. Another founding board member, Tayyib Smith, is the co-creator of the Institute of Hip-Hop Entrepreneurship, which has received headlines for its work providing technical assistance to “non-traditional” entrepreneurs in Philadelphia.

Smith has already been providing technical assistance to entrepreneurs along the Kensington Avenue corridor who were part of last year’s Kensington Storefront Challenge, a competition where the nine winners got up to a year of rent-free space in a storefront along the corridor and access to other resources for building out their space and growing their business.

Meanwhile, in the unique J-Centrel building along the corridor, where Smith’s real estate business is a co-developer, he and Institute of Hip-Hop Entrepreneurship co-creator Meegan Denenberg will be setting up the permanent home of “IF Lab” — essentially the next iteration of their institute.

“We hope to serve a wide spectrum of businesses,” Smith says. “For those who want a front-facing retail location, the corridor would be a great next step. I think the idea of a land trust with purpose is exciting, particularly with a neighborhood that has all the complications that Kensington and Harrowgate have.”

The idea for the trust really came from Smith’s co-developer on the J-Centrel building, Shift Capital.

Billing his firm as an “impact real estate firm,” Shift Capital founder Brian Murray got the inkling of the idea for the trust as his firm began having success and gaining headlines for its work in the Kensington neighborhood. Murray successfully raised private equity capital from so-called “impact investors,” those willing to accept lower returns or invest on longer time frames in exchange for reporting on the social impact of their investments, from affordable housing to energy efficient construction to living wage jobs or support for more diverse entrepreneurs.

It was Shift Capital who created last year’s Kensington storefront challenge to help intentionally populate some of the storefronts it owns along Kensington — the firm already owns about 1.7 million square feet of commercial space along the corridor.

But as Shift Capital’s work took hold, and Murray began touting its impact and the potential to invest in more impactful projects in Kensington, he encountered a question that might seem frustrating — by revitalizing properties in troubled neighborhoods, wasn’t he just accelerating gentrification around those projects by making those neighborhoods “safer” for speculators?

Instead of recoiling from that question, Murray leaned into it.

“I think that has always been the correct question to ask any group that’s doing what we’re trying to do,” Murray says. “What we figured was, we took in outside capital, we have a timeline to return that capital, but the question really is who do we sell that real estate to in order to return that capital?”

If the only answer was another, bigger, market-driven investor, it’s likely those buyers, seeking to maximize returns on their investment, would raise rents in an unstoppable upward cycle.

“But if we could take real estate at scale and move it out of, frankly, the commoditized capital market, and into another vehicle that didn’t need the same returns, that was committed to the type of impact we feel like we’re creating?” Murray says. “That is an outcome we feel like would stand the test of time, because even if the rest of the neighborhood develops, at least you preserve or keep a large chunk of the neighborhood in some kind of perpetual state outside of the capital markets.”

Murray envisioned a vehicle with community leadership and control that could eventually be positioned to acquire Shift’s properties later — if the board decided on its own to do so.

After looking at models like 3CDC and special-purpose real estate investment trusts, Murray settled on a loose vision for a “neighborhood trust” and began reaching out to private foundations to invest in the trust, and began reaching out to his networks to form a board.

Robles and Murray late last year, while Robles was finishing up his MBA in real estate at Wharton. Murray asked Robles a few months ago to join the founding board of the trust, and Robles instantly felt it aligned perfectly with his own personal mission to develop spaces where people from his neighborhood can get a job and enjoy amenities they can afford in a community that has already persevered through so much.

“Shift has done a lot of great things for the neighborhood, but ultimately Shift is a private entity,” Robles says. “People in the community who have been there for decades, have raised children there, they must have a voice at the table.”

This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi Community Development.

Oscar is Next City's senior economics correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha, and Fast Company.

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Tags: philadelphiagentrificationretail