Ten years ago, Shelterforce editor Miriam Axel-Lute took a deep dive into what was then a somewhat uncommon use for community land trusts (CLT)—commercial space. In communities such as San Francisco, New Orleans, and Albuquerque, local stakeholders were evaluating whether existing community land trusts should take on commercial properties (and if so how), and if a new commercial-focused CLT would make sense.
Community land trusts are a form of community control of land by which land is held in trust in perpetuity for community benefit, even when buildings on the land are sold. Though the very first community land trust was primarily a working farm, for most of the time since then community land trusts in the United States have been primarily focused on providing stable, permanently affordable housing.
When a community land trust develops housing for homeownership, the CLT retains ownership of the land, and sells only the house, typically with a 99-year ground lease. The sale contract also includes an agreement on a resale formula so that when the homeowner eventually sells, they have accumulated some assets. But the home also stays affordable to another household of the same income. The model balances affordability with asset building, and is designed to benefit residents as well as maintain inclusive, stable neighborhoods.
“Theoretically and practically the community land trust mechanism for preserving the availability and often the affordability of commercial properties works the same as for residential, or at least it can work that way,” says Mike Brown, a partner in Burlington Associates, a national consulting cooperative that helps nonprofit corporations develop real estate. “The goal is to assist established businesses that just need access to space, and use the classic CLT model—where the business owner owns the building, and the CLT owns and leases the land—which then hopefully allows that business to remain successful over time.” Such a model, says Brown, can support more entrepreneurship in a community. “It may be able to launch [small businesses] to transition out of that space, and that space then remains available and affordable and you start the process all over again with another incoming business.”
CLTs may also be operating commercial spaces primarily for income, to support certain kinds of community uses and needs, or to support various types of business owners and organizations.
Shelterforce checked in with some of the communities featured in our 2011 article, as well as one other trust that operates a lot of commercial spaces, to see what happened to their plans and how the idea has evolved. While all of them have the basic CLT model in place—ownership in the land—each looks at their role in and reasons for offering commercial or office space quite differently.
Crescent City Community Land Trust in New Orleans, Louisiana
Ten years ago, Crescent City CLT (CCCLT) was just forming, and its founders envisioned it as a “central server” organization that would provide back-office support for multiple neighborhood-level CLTs. Their interest in commercial properties was one of revitalization—rebuilding commercial corridors, bringing back services and amenities that were missing in areas that had experienced disinvestment, and allowing local businesses to be part of the revitalization. One of the organization’s early attempts to move into commercial properties involved a complex project attempting to open a grocery store in the Lower Ninth Ward, which did not come to fruition.
Today the central server model has been set aside; while CCCLT does work in partnership with a few other CLTs in the area, it has settled into a developer and technical assistance model that involves a focus on seven or eight neighborhoods in the center of the crescent. But the interest in commercial properties as part of what communities need has not gone away.
The organization is now helmed by Julius Kimbrough, who explains the current thinking: “Communities will organically come to desire permanently affordable residential and commercial spaces,” Kimbrough says. “Community residents and small-business owners will require technical assistance, and so the goal of an organization like CCCLT is to provide technical capacity and consulting, and potentially funding assistance for real estate development, navigating subsidies, and government partnering.”
CCCLT focuses on uplifting Black communities in New Orleans and ensuring that the city’s Black community retains its ownership stake in the city’s development—a feat in the post-Katrina era of rapid gentrification. In 2017, CCCLT debuted The Pythian, a building that comprises an affordable apartment complex above and a food hall below, which rents space to predominantly Black-owned food-related businesses. The commercial rents are market rate, but much cheaper than acquiring an entire storefront on one’s own, and CCCLT also offers the businesses training and support. “We’re not just creating space; we surround these partners with support and services,” says Kimbrough. CCCLT is currently working on two new projects: 2930 Burgundy, a mixed-income housing development with ground floor retail space in the Bywater neighborhood, and the Vaucresson Sausage Company building in the Seventh Ward, which is poised to operate as a production facility and a café, with two apartments upstairs. Along with owning the land, CCCLT owns a piece of the limited liability company that owns the building, and covenant restrictions are in place on the building so that both the residential and commercial portions will remain permanently affordable—even if Vaucresson Sausage chooses to leave the building someday. Currently, the business’s rental rate is on the lower end of the market, and the deal renovates a vacant building, creates jobs, and empowers a historically Black-owned business that would otherwise not be able to reopen its storefront.
In all three of these endeavors, CCCLT acts as equity investor and finds a development partner to advance the project. By focusing on Black-owned businesses and incorporating housing into the mix, CCCLT ensures that these communities continue to thrive.
Sometimes renting to those businesses also “becomes an income opportunity for the CLT,” says Kimbrough. “And of course, hopefully it does, because we absolutely want to make money.”
Nonetheless, unlike a standard investor, CCCLT isn’t in it to extract value. It is committed to the businesses’ long-term success. “Stewardship is part of our standard sustainability agenda, as well as part of our mission,” says Kimbrough, “because we are cognizant of the additional struggles that some disenfranchised people face, beyond just not having enough money.” As Kimbrough sees it, prosperity among this community means leveling the playing field between what one earns and spends in housing and ensuring that housing costs aren’t keeping people from transitioning out of poverty, even when they have a good-paying job.
Japantown Cultural District in San Francisco, California
The Japantown commercial area of San Francisco has certainly not been able to avoid the typical pitfalls facing residents of San Francisco. The real estate boom being driven by the tech revolution has displaced scores of residents and businesses alike. Back in 2011, the executive director of the Japantown Task Force, Bob Hamaguchi, was concerned that the businesses lining the historic cultural district would have a difficult time staying afloat without some kind of assistance in place and was exploring the possibility of using a CLT for that purpose.
Unfortunately, little progress has been made toward developing a CLT for the area. Upon Hamaguchi’s untimely passing in 2017, Steve Nakajo—who had spent over 40 years running the Kamachi Senior Center—took the helm at the Japantown Task Force in 2018.
“When I got into this gig, my role was to assess the feasibility of creating a community land trust,” says Nakajo. He points to a study that was completed with Brown’s Burlington Associates that supports the idea that a shared-equity model would keep their properties affordable. “We are just beginning to reintroduce ourselves to that study,” Nakajo says.
In the meantime, Nakajo has been working closely with local stakeholders on a city of San Francisco initiative that grouped six cultural districts together and asked them to create focus groups and conduct interviews and research to determine how best to move their communities forward. The resulting reports, known as Cultural, History, Housing, Economic Sustainability Strategy reports (or CHHESS reports), will help the city determine strategies and design tactics specific to each community.
A CLT or community development corporation is still being pondered. Nakajo says he recognizes that a vehicle of this nature would make it far easier to maintain affordability for current Japantown businesses.
“We’re in the dilemma we’re in because we don’t own the land,” says Nakajo. “So, what I’m trying to position is a partnership with the city and county, and hopefully with developers. If we don’t have that, then we’re at the mercy of the developers to try to carve out something that’s going to work for us.”
Urban Land Conservancy in Denver, Colorado
The Urban Land Conservancy (ULC), which functions like a land trust, wasn’t covered in the 2011 article, but the organization has a lot of experience with nonresidential projects. Currently, ULC has over 60 nonprofits operating in buildings it stewards all over Denver. These organizations created over 2,500 jobs in 2019 alone. Many of them are educational or medical facilities that provide important services to the community. For example, the New Legacy charter school, which ULC developed in a vacant bowling alley facility, serves pregnant and parenting youth ages 14 to 21. ULC sells buildings or the right to build on land it owns with a 99-year ground lease, and also directly owns and manages a number of buildings that are rented to nonprofit tenants. Rents in these buildings are 30 to 70 percent below market rate.
According to President and CEO Aaron Miripol, ULC typically offers nonprofits a ground lease on the land it develops, allowing it to remain affordable. ULC will then work with the nonprofit that plans to build or redevelop on the site, but gives it ample time to raise capital. The organization ultimately owns the building. Once an organization is ready to leave a building on ULC land, it can sell it, but the building is subject to a resale formula much like that of a CLT homeowner, which limits the sale price. A purchaser must keep the building as a community asset and their plans for the building must meet certain criteria, such as design and end use principles. Usually, ULC allows the community to weigh in on whether an incoming business makes sense for the community’s needs.
“The way we make these deals work is we get in early enough where we’re not taking on a huge amount of debt,” says Miripol. “We have to buy the site and do some remediation, but the lessees do the heavy lifting on the building.”
ULC has over $750 million leveraged in development and has invested over $120 million in developing real estate all over the city of Denver. For a business model reliant on nonprofits, including churches, schools, and community centers, the COVID-19 pandemic has created new challenges. What happens when its partners can no longer afford their planned development projects, or cannot keep up with the mortgage or rent? Miripol says he is keeping a close watch on how this might unfold.
“The place we’ve had the biggest challenge is with several of our commercial [office] buildings, because a number [of the tenants] have had to reduce space because of the pandemic,” he says. “So we’ve taken a hit on our properties—we were at 90 percent occupancy and now [are] down to 50 percent, with 15 to 20 percent of revenue down.”
Sawmill CLT in Albuquerque, New Mexico
Where ULC has focused on bringing in nonprofits that address the local community’s needs, Sawmill CLT has taken quite a different tack. Like Crescent City CLT, Sawmill’s CLT model is mixed use. The CLT owns a massive amount of acreage in Albuquerque that has both commercial and residential developments on site. Most of the commercial tenants leasing from Sawmill are entirely for-profit endeavors—hair salons, retail stores, and the like.
Former president Connie Chavez, who continues to serve as a consultant, says Sawmill CLT’s mission with its commercial properties is to uplift the community by offering important support to emerging and established businesses. Their success, she says, only benefits the community at large—both because the community gets to decide what types of businesses can enter into the CLT, and because these businesses generate economic activity for the neighborhood.
“There was always a hope to bring that economic activity to the area so that it could really become a place where people could live, work, and play,” she says.
Like Crescent City, Sawmill will often come in as a development partner when it has the financial capacity, and in exchange for a portion of the revenues of a business once its revenues exceed a predetermined threshold. This model allows the CLT to capture sustaining revenue that then gets funneled back into educational programs and resources for both residents and commercial businesses in the CLT.
“We truly work in partnership with them to help ensure that their businesses are successful,” says Chavez. Sawmill CLT has created a new position on the board for a liaison between the commercial business owners and the CLT’s decision-makers, ensuring their businesses are being propertly promoted and that they are receiving educational resources that allow them to thrive.
A Different Kind of Development
The interest in putting commercial properties into a CLT has certainly continued to grow since 2011. CLTs from Oakland to Pittsburgh have found themselves acquiring commercial properties as a way to prevent small-business displacement, and as the economic effects of the pandemic continue, there will be even more need.
But it’s also not entirely the same as residential CLTs, where when a homeowner grows out of a home the CLT simply helps them sell the house so they can move on. When a CLT retrofits a commercial space for a bakery, for example–and that bakery then decides to move–finding another bakery to take its place isn’t as simple. Suddenly, the CLT may find itself taking a loss on commercial property it is bound to either keep affordable or otherwise in service of the community. Brown of Burlington Associates also notes that it’s important for groups to take the differences in these funding streams into account. While subsidies are available for creating and preserving affordable housing, for example, none exist for venturing into commercial properties. Similarly, where residential mortgages in a CLT are typically secured by factors such as income and credit worthiness, loan-to-value (LTV) ratios and collateral, commercial lending deals entail many more factors, including the LTV, debt-service coverage, and net operating income, in order to underwrite them.
“This does not necessarily mean that CLTs that are successfully stewarding owner-occupied homes need additional staffing in order to venture into commercial stewardship,” says Brown. “But they certainly need to have a different knowledge base and greater familiarity with the details and complexities of commercial operations and financing.”
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