My Home, Mi Casa is a partnership between Jovenes, Inc. and Genesis LA. The partnership came about as a response to the foreclosure crisis and the desire to capture suddenly below market housing inventory and preserve it as affordable housing for transition-age youth. To facilitate My Home, Mi Casa, Genesis LA structured capital totaling over $2 million and developed a model that allowed My Home, Mi Casa to compete in a market dominated by “flippers” and speculators by offering all cash purchases and short contingency and closing periods. Through this effort, My Home, Mi Casa purchased and renovated 6 small properties mostly in Boyle Heights and East LA, consisting of 22 units of housing. Under the terms of the partnership, Genesis LA oversaw financing, site selection, acquisition, and renovations and continues to manage the company books. Jovenes identifies and places clients in the housing units and continues to provide services to youth, consisting of financial literacy, education and workforce preparedness, and job placement.
My Home, Mi Casa is a unique community development project for a number of reasons. First, the acquisition and rehabilitation did not rely on outside subsidies and was 100% privately financed. Second, by taking advantage of market conditions at the time and by pursuing economical renovation scopes, the project was able to bring affordable housing units online for significantly less than typical new or rehab LIHTC project. Third, under the financing terms, Genesis LA invested 25% of the capital in each project as equity, as a means to leverage other financing for the project. As an equity investor, Genesis LA agreed to share a portion of its return on equity with the youth residents. Particular youth tenants are eligible to earn a “youth equity share” equivalent to roughly 10% of their rental payments. Such a financial benefit helps to build wealth for these youth and a safety net for their future. Fourth, by operating with all private financing, My Home, Mi Casa was able to be nimble in a highly competitive market, carrying out the acquisition and redevelopment process quickly and bringing units online within 2-3 months (from site selection to move-in), significantly faster than traditional publicly-financed projects. Lastly, the project bolstered Jovenes’ capacity, by more than doubling its inventory of permanent housing units, enhancing its continuum of care service system (Jovenes also owns a shelter and transitional facility), and growing the organization’s balance sheet. This will benefit Jovenes and enhance its ability to serve its mission well into the future.
Azalea Plaza was a major public priority for the city of South Gate and County of Los Angeles. After several failed attempts to redevelop the 33-acre project site, the city wanted a project to deliver a vibrant commercial center to the community. Residents desired retail goods, dining options, and civic spaces. The city wanted a project that could help finance adjacent infrastructure improvements, provide public spaces, and add sales tax revenues to its declining general fund. Both the city and county offered financial support to help build the project. But in the midst of structuring public financing, California dissolved its 60-year redevelopment program, withdrawing the most significant economic development finance source available to local jurisdictions. Only months before a ground breaking, the project faced a financing gap in the millions. With the city and county now unable to provide gap financing, Genesis LA agreed to provide New Markets Tax Credit (“NMTC”) financing. Genesis LA made a $2.6 million predevelopment loan to allow time to structure a $30 million NMTC financing. The NMTC subsidy essentially makes up for the subsidy that previously would have been provided under the redevelopment program.
Redeveloping the Azalea Plaza site was no easy undertaking. The site required environmental remediation; the city’s crumbling streets and sidewalks surrounding the site needed to be rebuilt; new roadways, landscaping, streetlights and traffic signals were required. Today, Azalea Plaza has provided significant infrastructure improvements, a public plaza, city hall annex, police substation, and 370,000 sf of retail, including healthy foods, pharmacy, clothing, housewares, and 7 locally-owned small business franchises. The project allows the city of South Gate to capture a larger share of sales taxes generated by residents who previously would have made purchases in nearby cities due to the absence of retail establishments in their own city. This generates $2.7 million in new annual tax revenues for the city’s general fund, which support other community programs. Lastly, as part of the community benefits agreement, the developer committed to fill 20% of all construction hours worked and 35% of all permanent jobs with workers from the surrounding communities. Ultimately, more than 1,100 permanent jobs were created, over 75% of which were filled by local South Gate residents residing in low-income zip codes surrounding the project.
City Labs Boyle Heights
City Labs Boyle Heights is a creative office hub for small businesses and nonprofits focused on serving LA’s Eastside communities. The brainchild of Alfred Fraijo, who grew up in the neighborhood, City Labs intends to provide the same kind of creative and collaborative office space found in more affluent communities, but specifically tailored to the needs and affordable price point of enterprises operating in Boyle Heights. The project converted a nearly 5,000 s.f. warehouse into 6 separate office spaces that are oriented around a shared kitchen and meeting space, all of which open directly onto a small parking lot, which will be renovated to include landscaping and seating. Also fronting this area is an existing liquor store / market, which will eventually be upgraded to provide healthier food options. City Labs also hosts neighborhood events focused on arts and culture.
City Labs is located in Boyle Heights, directly across the LA River from downtown Los Angeles. The Arts District in downtown Los Angeles has experienced a growth in the type of office space being provided at City Labs, and rents there have risen substantially, which has contributed to the migration of investors to the east side of the LA River. This has stoked fears among Boyle Heights residents and activists who worry gentrification will overwhelm their community and fail to serve existing residents. But City Labs is designed to specifically serve the types of entrepreneurs, businesses, and nonprofits that contribute to the Boyle Heights community now.
Genesis LA decided to finance City Labs, because of Mr. Fraijo’s community-oriented approach to developing such a project in Boyle Heights. Mr. Fraijo understood that investment was migrating into the neighborhood and that it wasn’t enough to fear it or fight it, but to shape it in a way that could benefit the community. Genesis LA shares in this perspective. As such, we worked collaboratively with Mr. Fraijo so that our financing was flexible enough to help him acquire the City Labs site in a market where properties sell quickly. Our speed and flexible terms ensured that City Labs could move from an idea to a reality, and could help build the capacity of a local, socially-minded entrepreneur and the businesses that will call City Labs home.
During the depths of the Great Recession, capital availability dried up and projects came to a halt. Such was the case for the Star Apartments, a 102-unit permanent supportive housing project developed by Skid Row Housing Trust (“SRHT”). SRHT is considered one of the most capable and successful supportive housing developers in Los Angeles, however, even they fell victim to the economic realities of the time, as their traditional lenders were unable to extend predevelopment financing to the Star Apartments project. Genesis LA has typically not financed these types of large-scale LIHTC projects, because a robust supply of capital is already available from other institutions and CDFIs. However, given the lack of any alternative financing, Genesis LA decided to finance the Star Apartments.
At the time, Genesis LA’s resources prevented us from fulfilling the full $1 million predevelopment loan request for the Star Apartments. However, we approved financing in the amount of $450,000 and recruited Corporation for Supportive Housing and the Low-Income Investment Fund to join us in providing the remaining financing needed. A challenging sell at the time, Genesis LA’s lead role in structuring the financing was critical to moving the Star Apartments forward.
Today, the Star Apartments provides 102 units of much needed supportive housing for the homeless, including 77 units for people living with mental illness, HIV/AIDS, substance abuse or co-occurring disorders. The project is innovative in that the six-story development was constructed with pre-fabricated efficiency units that are intricately stacked in a "Lego-style" design, cantilevered over a podium structure. Atop the podium is a variety of amenities seen in no other similar supportive housing project in Los Angeles: recreation space, jogging path, vegetable garden, and a Wellness Center that provides preventive care, nutrition, health and exercise programs and emergency care to residents.
When Mott Smith and Brian Albert explained their vision for LA Prep, a facility that would provide move-in ready kitchens for small food entrepreneurs and house a social enterprise, Genesis LA immediately jumped on board. Genesis LA was not the first CDFI to consider lending to the project, but we were the first to provide a financing commitment. “Genesis LA was the first lender to formally commit to LA Prep Kitchen, and this made all the difference to getting LA Prep off the ground,” said Mott Smith, project developer. “We are grateful to have a financial partner like Genesis.”
Genesis LA’s previous experience lending to Chef’s Center (aka Mama’s Hot Tamales), another pioneering kitchen for small businesses, had convinced us of the market demand for licensed shared kitchen space for caterers, chefs, and small food retailers. The LA Prep Kitchen was designed to take this model to the next step, by creating kitchens that were not only private and therefore available to entrepreneurs 24 hours a day, but also provided these businesses with a wholesale license, dramatically expanding their access to new markets. LA Prep would be a space for food entrepreneurs to take their business to the next level and would be the first such kitchen of its kind in Los Angeles County.
Genesis LA enthusiastically supported LA Prep not only because of its innovative approach to filling a market void, but also for its potential to increase the capacity of small businesses in our market. Small food businesses face tremendous barriers to entry due to high start-up costs and rigorous licensing requirements, inhibiting many businesses from even launching, let alone growing. But LA Prep’s “turnkey” kitchen model as well as its amenities, such as shared storage, bulk purchasing of raw ingredients, and onsite advisory services, brought a whole new level of support for these businesses. Additionally, LA Prep pre-leased over one-third of its space to the LA Kitchen, a social enterprise founded by Robert Egger and modeled after his highly successful D.C. Central Kitchen. The LA Kitchen provides job training for hard-to-employ individuals, primarily those leaving incarceration, and employs them under a business model that creates healthy and culturally-sensitive meals for low-income seniors in Los Angeles. Together, LA Prep and LA Kitchen are revolutionizing LA’s small food business economy.
Friends Community Housing
Historically, California has funded privately contracted, for-profit service providers to develop and operate group homes for individuals with developmental disabilities. However, this can leave these “community care facilities” at risk of closure if an operator retires or goes out of business. With the closure of several of the state’s developmental centers and the relocation of clients into community-based settings, more individuals with disabilities are living in group homes. Given these circumstances, the South Central Los Angeles Regional Center, which administers the provision of services for individuals with disabilities, sought to acquire care facilities once, to ensure they serve individuals with disabilities in perpetuity. To do so, a nonprofit controlled affiliate, Friends Community Housing, was established to acquire, renovate, manage, and lease group homes to individual service providers. This model, now promoted by the state, provides stability for vulnerable and medically fragile individuals and allows them to age in place.
But Friends Community Housing lacked access to the capital needed to acquire and extensively renovate 10 separate houses for ADA-equivalent accessibility and onsite services. Given this unique asset class and lack of market comparables, no banks would lend to Friends Community Housing. To facilitate the transaction, Genesis LA was flexible with its credit standards. We understood that the organization was newly formed and controlled by a small nonprofit undertaking a new business model, so we looked to the value of the underlying real estate and the income sources of the service providers that operate each facility and pay rent to Friends Community Housing. This underwriting resulted in Genesis LA providing a $4.3 million leverage loan and $5.9 million in New Markets Tax Credit (“NMTC”) allocation, which, given Friends Community Housing’s lack of capital, provided 100% of the project financing. Genesis LA’s financial structuring for Friends Community Housing is considered a first-of-its-kind use of NMTC financing for a scattered-site group home project. Several other nonprofits have approached Genesis LA for advice in structuring similar projects and the project has been recognized by the New Markets Tax Credit Coalition as an innovative use of NMTCs. Today, the project serves 41 clients and employs 10 small business service providers, 8 of which are minority-owned and operating in severely underserved communities like Watts and Compton.
In addition to creatively structuring financing for Friends Community Housing, Genesis LA provided extensive development services and capacity building. We oversaw the acquisition of each property, developed the renovation scopes in collaboration with Friends Community Housing and the individual service providers, managed the contractor, and facilitated the lease up. Furthermore, Friends Community Housing had a specific desire to hire women-and-minority led contractors as part of the development of the project and Genesis LA worked hand-in-hand with these firms, resulting in approximately 60 construction jobs, 92% of which were filled by a women-and-or-minority workforce. Genesis LA’s capacity building has assisted Friends Community Housing to emerge as a fully functioning organization, with a growing balance sheet and experience in developing new group homes. Since the 10 homes were opened, Friends has independently developed another group home.
(aka Mama’s Hot Tamales)
Originally launched as a training institute for street food vendors operating in Los Angeles’ first and only legalized street vending zone around MacArthur Park, Mama’s Hot Tamales expanded its role in the incubation of small food businesses in 2008 by opening a second location. Rebranded Chef’s Center, the new location features a shared kitchen space rented for a few hours at a time to food entrepreneurs, including caterers, chefs, and food retailers selling at kiosks and famers markets throughout the region. As one of the first such kitchen incubator spaces in Southern California, Chef’s Center required a variety of financial partners, including bank financing, a CDBG loan, and a seller carry-back note on the property. Yet all of these sources were still not sufficient to complete the project. With three sources of financing ahead of Genesis LA and no remaining real estate value to serve as collateral, Genesis LA agreed to fill the financing gap by making an unsecured loan to cover the cost of the kitchen equipment and ensure that the project could move forward.
Chef’s Center has evolved into a highly successful small food business incubator. More than 750 aspiring culinary entrepreneurs have been trained and 315 new businesses formed out of Chef’s Center’s training programs and kitchen facility.
Founded in 1971 in Watts, following the riots of 1965, the Sheenway School operated as a private school for 35 years, providing holistic education to children who only had access to some of the city’s worst schools. But, as fewer families in Watts were able to afford tuition, the school had to change directions. Sheenway partnered with one of the nation’s most prestigious charter school operators (Alliance College-Ready Public Schools) by providing a ground lease for a new high school to be built on the site of the old Sheenway School. This ensured that local students could continue to gain access to quality, free public education. Unfortunately, construction of the new school threatened to displace Sheenway altogether. To remain as a fixture in the community, the architect of the new Alliance school personally acquired and renovated a nuisance residential property next to the school and turned it into a new headquarters for Sheenway with one condition: that Sheenway pay him back at cost, with no profit. After approaching dozens of lenders to finance the acquisition of the home, the most interest Sheenway received from a lender was for a 50% LTV loan at 8.00% interest. Instead, in 2010, Genesis LA financed the entire cost on much more beneficial terms. The property itself was appraised for less than the project cost (an all too common trend in underserved communities) so we secured our loan on the original school site, but subordinate to the Alliance school ground lease. Our financing ensures that the Sheenway and Dolores “Aunt D” Sheen, who has operated Sheenway’s education programs for decades, will be able to provide teacher mentoring, after school programs, and enrichment classes to the new charter high school students. One of her innovative programs includes a student-run bakery where the students must develop a business plan.
In 2014, Sheenway embarked on a dream of restoring its education model in the form of a new one-room schoolhouse to serve as a laboratory school. The possibility for doing so was made possible through Genesis LA’s original financing, as the new schoolhouse was constructed on the site of Sheenway’s new headquarters. In 2015, Genesis LA extended additional credit to Sheenway to ensure the schoolhouse could be completed. The One World School House will extend Sheenway’s highly regarded enrichment programs into a full-time day school program for students. The school will provide outreach to include student and teacher exchange with local venues and with Sheenway’s international think-tank of national and global educators for the advancement of innovative and comprehensive early education. The school will also be digitally linked to a partner school in Ghana, Africa. "Genesis LA is helping to keep the Sheenway dream alive for hundreds of youth who participate in our enrichment programs,” says Dolores Sheen.
In late 2014, the Community Coalition (“CoCo”) was only a few weeks away from closing on financing to undertake a $5 million renovation of its headquarters into a first class center for community organizing. The lead lender, the Low-Income Investment Fund (“LIIF”) had approved a loan to facilitate the transaction, with CoCo having raised over $2 million in grants to round out the financing. Unfortunately, the property appraised for significantly less than expected, reducing the amount of financing that LIIF could lend to the project and creating a gap that threatened the ability of the project to move forward. CoCo had already leased temporary space to relocate during the renovation, and the clock was ticking for a quick solution.
CoCo and LIIF approached Genesis LA to help craft a solution to the financing gap and ensure that the project could move forward on schedule, as LIIF could not close with a hole in the financial structure and CoCo could not complete the project without securing funding sources to cover 100% of the budgeted costs. After close collaboration and careful financial engineering, Genesis LA was able to extend a bridge loan to CoCo within only a few short weeks of being approached to provide a rare and high-risk form of project financing.
"With a phone call at the 11th hour, Genesis LA stepped up to a difficult challenge: to provide a gap loan that was essential to moving our project forward,” said Marqueece Harris-Dawson, CoCo’s President & CEO. “We thank Genesis LA for its ability to respond quickly and to partner with Community Coalition to bring about progress.”
Under the structure, a portion of Genesis LA’s loan would be repaid through grant commitments that were to be received in future years and another portion would be repaid from grants that had been applied for, but not yet committed. The Genesis LA loan was essential to ensuring that CoCo could move forward with its renovations and expand its service delivery to the South Los Angeles community.