vanguard community development corporation · real estate, rental, & leasing: 30% ......
TRANSCRIPT
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Vanguard Community
Development Corporation
Julie Car, Lenise Lyons, Sherika Mosley,
Christian Murdock, Scott Rodriguez, Jeff Vitton
Planning Practicum
Urban and Regional Planning Program
Michigan State University
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Practicum
Michigan State University Urban
and Regional Planning Program•Graduating Seniors and Graduate
Students
Community Development Projects•Vanguard CDC
•Scott Alan Davis
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Overview
• Vanguard CDC
• Our Tasks
• Methodology
• Northend Community Profile
• Small Business Incubator
• Small Business Data
• Case Studies
• Data Analysis
• Recommendations
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Vanguard Community
Development Corporation
Founded in 1994 by Reverend Edgar L. Vann, Jr.
•Vanguard Community Development Corporation is the non-
profit outreach arm of Second Ebenezer Church
Mission
“To facilitate the revitalization of the physical, social, and
economic fabric of the Northend Neighborhood”
Services
Facilitating new business investment, in-fill housing
development, and providing activities to enhance the quality of
life for adults and youth in the Northend neighborhood
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Source: Data Place
Vanguard CDC Location
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Vanguard CDC Location
Source: Google Earth
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Our Tasks
• Identify target businesses for Milwaukee
Junction Small Business Center
• Propose a sustainable financial structure
• Identify small business incubator best
practices
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What is an Incubator?• A business support process that accelerates the
successful development of new entrepreneurs
• Incubator graduates create jobs, revitalize
neighborhoods, and commercialize new technologies
• Business incubators reduce the risk of small business
failures
Source: http://www.natbi.org/about.html
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Advantages to Small Business
• Below Market Rent
• Flexibility to Expand
• Shared Office Amenities
• Networking Opportunities
• Business Planning
• Links to Financial
Resources
• Business Licensing
• Business Marketing
• Legal Advice
ServicesBenefits
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Milwaukee Junction Small
Business Center
• Single story
• 6,850 square
feet
• 12 parking
spaces in rearSource: Vanguard Practicum
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Milwaukee Junction Small
Business Center
• Interior is open
• Awaiting
renovation
Source: Vanguard Practicum
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Business Center Location
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Surrounding Attractions
Source: Google Images
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Methodology
Qualitative & Quantitative
• InterviewsSister Cathy DeSantis, Detroit
Catholic Pastoral Alliance, former Executive Director of the McAnoy Business Center
Mike Hindenach, Executive Director, Albion Industrial Incubator
Lauren Kruer-Driscoll, Hastings Economic Development Corporation Community Development Specialist, Hastings Industrial Incubator
Roger Hamlin, Michigan State University
Lawrence Molnar, University of Michigan
• Strengths, Weaknesses, Opportunities,Threats (SWOT) Analysis
• U.S. Census, and Environmental Systems Research Institute (ESRI)
• Northend Community Meeting and Survey
• Literature
• InterviewsRoni Weaver, Executive Director,
Jackson Industrial Incubator
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Northend Community Profile
• 1990-2000 Census Data
• Northend Census Tracts
• 5112, 5115, 5116, 5117,
5181
• Comparables
• City of Detroit
• Wayne County
Source: DataPlace
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Northend Population Change
11072
8339
0
2000
4000
6000
8000
10000
12000
Northend
Location
Po
pu
lati
on
1990
2000
Population Change
Northend: -25%
Source: 1990 & 2000 Census
Population Change
2111687 2061162
1027974 951270
0
500000
1000000
1500000
2000000
2500000
Detroit Wayne County
Location
Po
pu
lati
on
1990
2000
Detroit: -7%
Wayne County: -2%
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Age Distribution
Source: 2000 Census
Northend
Neighborhood
28%
43%
17%
12%9-17yrs
18-49yrs
50-69yrs
70 and older
Detroit
31%
46%
17%
9%
Wayne County
28%
46%
17%
9%
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Median Household Income
$-
$5,000.00
$10,000.00
$15,000.00
$20,000.00
$25,000.00
$30,000.00
$35,000.00
$40,000.00
$45,000.00
Northend Detroit Wayne County
Location
Inc
om
e i
n D
oll
ars
1990
2000
Income
Source: 1990-2000 Census
Median Household Income Increased
Northend Neighborhood: +81%
Detroit : +31%
Wayne County : +46%
Northend Household Income
0%
10%
20%
30%
40%
50%
Less than
$10,000
$10,000 to
$29,000
$30,000 to
$49,000
$50,000 to
$74,000
$75,000
and More
Income
Pe
rce
nt
of
Ho
us
eh
old
s
1990
2000
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S.W.O.T.
Strengths Weaknesses
Opportunities Threats
Location
Easy access to highways
Decreasing population
Perception of crime
Prices below market rate
Proximity to cultural,
educational, and business
institutions
Inaccurate pricing
Proximity to New Center and
Downtown
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Community MeetingFebruary 16, 2006
Survey Response
• Identified community attitudes
about small businesses
– Services desired
– Problems and threats
– Reasons for locating in
Northend
– Need for Vanguard
leadership
Purpose
• Community Input
• Inform the community of plans
Method
• Surveys
• Group discussion
• Interactive questions
Survey Participants
• 16
• Current Business Owners
• Potential Business Owners
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Small Business Data
• Identify Small
Business
Opportunities
– Business trends
– Contracting
opportunities
• Local and Regional
Office Market
– Lease Rates
– Revenue Calculations
Source: Vanguard Practicum
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County Business
Patterns
From 1998 to 2003 this
zip code lost:
•5,361 employees,
representing $252
million in annual
payroll; averaging
$47,000 per employee.
•It also lost a total of 36
establishments, a
substantial portion of
which had 10 or more
employees
48202 Zip Code Data
Key
48202
48211
Northend
Neighborhood
Vanguard
CDC
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•Total number of establishment with 1 to 4 employees stayed
constant at 208.
•Notable Increases in establishments with 1 to 4 employees:
Professional, scientific, & technical services: 82%
Construction: 50%
Real estate, rental, & leasing: 30%
•Notable decreases in establishments with 1 to 4 employees:
Wholesale trade: -50%
Educational services: -50%
Administrative, support, waste management, & remediation: -50%
•Industry descriptions with twenty or more 1 to 4 employee
establishments:
Retail trade, Professional scientific & technical services, Health care
& social assistance, Accommodation & food services
48202 Zip Code DataFrom 1998 – 2003:
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Wayne County
Non-Employer Statistics11 out of 16 categories experienced growth from 1998 to
2003
Top five industry descriptions by number of establishments in 2003
1. Other services: 15,372 2. Health care and social assistance: 13,289 3. Professional, scientific, and technical services: 9,545 4. Real estate, rental, and leasing: 8,933 5. Construction: 7,881
Declining industry descriptions by percent change
1. Forestry, Fishing, Hunting, & Agriculture Support –35%
2. Wholesale Trade –10%
3. Finance and Insurance –8%
4. Professional and Scientific –3%
5. Manufacturing -2%
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General Business Climate
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ESRI Data
At an one-mile radius:
Total Businesses: 774
Total Employees: 28,409
Total Population: 10,600
Daytime to Nighttime Ratio: 2.68
At a two-mile radius:
Total Businesses: 2,514
Total Employees: 92,826
Total Population: 74,330
Daytime to Nighttime Ratio: 1.25
At a five-mile radius:
Total Businesses: 12,219
Total Employees: 248,040
Total Population: 450,296
Daytime to Nighttime Ratio: 0.55
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Shift-Share Analysis
Effective tool to elicit industries with relative strength in local and regional markets
Compare Detroit to Consolidated Metropolitan Statistical Area (CMSA)
Utilized readily available U.S. Census Bureau Economic Census Data
•Number of businesses per 3- and 4-digit NAICS industrial classification
•1997 and 2002 data available
•19 out of 212 NAICS codes reclassified, majority of these codes stem from Information Technology sector
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Shift-Share Analysis
ABOVE AVERAGE
LOCAL LEVEL
GROWTH
BELOW AVERAGE
LOCAL LEVEL
GROWTH
ABOVE AVERAGE
REFERENCE
ECONOMY
GROWTH
TIER I Accounting,
Management &
Scientific Consultants
TIER II Scientific research &
development services
BELOW AVERAGE
REFERENCE
ECONOMY
GROWTH
TIER IV Office administrative
services
TIER III Plastics & Rubber
Products mfg
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DLEG Forecast
• Detroit CMSA
Employment
Forecast 2002
to 2012
• Identifies
Growth
Industries-10
-5
0
5
10
15
20
25
30
Goods - P
roducin
g In
dustrie
s
Manufa
ctu
ring
Info
rmatio
n
Serv
ice - P
rovid
ers
Constru
ctio
n
Pro
fessio
nal-B
usin
ess S
erv
ices
Industry
Perc
en
t C
han
ge
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Small Business Data Findings
• Overall these industries performed well
– Professional, Scientific, Technical
– Real Estate
– Information
• Overall the only category that declined
consistently was Manufacturing
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Identification of Businesses
Architectural & Design Services
Accounting, Tax Preparation,
Bookkeeping, & Payroll services
Advertising & Related Services
Building Inspection
Business Support Services
Computer Systems Design
Document Preparation Services
Engineering
Janitorial Services
Landscaping
Leasers
Management, Scientific, & Technical
Consulting
Office Administrative Services
Offices of Lawyers
Promoters of Performing Arts, Sports,
& Similar Events
Property Managers
Real Estate Brokers
Specialized Design Services
Translation & Interpretation Services
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Financial Estimates
Assessed several factors• Potential revenue, likely expenses, and market
conditions
Conservative estimates used• Building size: 6,850 sq. ft.
• Leasable space per proposed floor plan: ~2,900 sq. ft.
• Vacancy rate: 20%
• Lease rate: $15 per sq. ft. per year
• Operating expenses (estimated by MSU Team & Consultant)
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Revenue Calculations
Factors Considered
Northend real estate market
•High vacancy rates
•Below-average lease rates
High client expectations
•Recuperate investment within five years
•At a minimum, break even
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Revenue Expectations
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1000
0
Leasable Square Feet
Re
ve
nu
e
Revenue
Personnel Cost
•Revenue from rent will cover personnel costs at 5,417
leasable square feet, taking into account vacancy rates.
•Proposed floor plan has 2,900 leasable square feet , revenue
from rent will only pay for slightly over half of personnel
costs
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Case Studies
Literature Review• NBIA’s “Industry Best Practices” guidelines
• Erlewine and Gerl’s Ten Keys to Successful Incubation
Characteristics Identified• Services provided
• Type of incubator/ number of tenants
• Selection guidelines or criteria
• Resources
• Financial resources
• Outcomes
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IdeaWorks, LLC
Finlandia Center for Global
Design & Business
Southwest Michigan Innovation
Center
Central Michigan Research
Corporation
Jackson Industrial Incubator
Hastings Industrial Incubator
Albion Industrial Incubator
McAnoy Business Center
Selection Process
Broad Michigan Incubator Search
&
Developed Incubator Matrix
Search Engines
Reduced to 8
# of ResponsesAccess to info
Literature
Produced 18 Incubators
Eliminated Incubators
4 Incubators Applied to Matrix
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Business Incubator Matrix
Albion
Industrial
Incubator
Hastings
Industrial
Incubator
Jackson
Industrial
Incubator
McAnoy
Business
Center
Services Accounting,
human resource
training, access
to business
finance
Space Space, general
business
counseling and
services
Conference
Room, business
plan assistance,
computer,
internet access,
other business
technical
support
Number of
tenants 4 6 5 10
Selection criteria No application;
active
recruitment
process
No formal
selection
criteria
No formal
selection
criteria
Yes;
application
process
Size of facility 21,000 square
feet; 18,000
leased
44,600
square feet
54,000 square
feet; 37%
unleasable
3,200square feet
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Business Incubator MatrixAlbion
Industrial
Incubator
Hastings
Industrial
Incubator
Jackson
Industrial
Incubator
McAnoy
Business
Center
Sources of finance
Lease rates
Grants, rent, TIF,
BRA, EDC
Office: $10 per
square foot; Manuf.
$3.50 per square
foot; caged
workspace $10 per
square foot
Rent, subsidies
$3.50 per square
foot + utilities
City Block grant
funds; rent;
subsidies
$3.00 per square
foot (does not
include utilities)
Grants,
Empowerment
zone funds,
Hudson-Weber,
Black
UnitedFund,
banks
$2 below market
rate per square
foot
Staff Part-time manager Part-time manager Full-time manager Full-time
manager
Operating costs $37,200 for 2005 Not available $30,000 per year $47,000 per year
Measurable
outcomes
Does not track
graduates; other
forms of
measurement
Informal Informal 9 graduates
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Case Studies
Key Findings
• Formal and informal variations of tenant selection
• Measurable outcomes varied; tangible and non-tangible
• Adaptive and flexible based on environment and location
• Sustainability was key; minimum emphasis on subsidizing
• Physical structure is key
• Strong internal and external organizational emphasis• Internal: Qualified manager and staff
• External: Boards and advisory groups
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Disconnect Between Theory and
Practice
• Literature– Active and involved
Board of Directors
– Measurable outcomes of performance and frequent self-evaluations
– Strict tenant selection policy
– Contradictions surrounding reliance upon grants
• Case Studies
– Managers acting
autonomously
– Haphazard or non-
existent tracking of
former tenants
– “Take what you can
get” for tenants
– Reliant upon
significant third-party
financial support
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Overall Analysis
• Flexibility and adaptability are key
– Operational and management structure
– Leases
– Floor plan
– Latest market trends and research
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Recommendations
• Target Businesses
– Focus on local and regional marketing resources in
industries showing high potential of growth
• Professional, Scientific, and Technical Services
• Real Estate, Rentals, and Leasing
• Information
– Compatible with business center environment
• Accounting, design services, architects, etc.
– Conduct continuous market research
• Current small business trends
• Potential for contracting services
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Recommendations
• Best Practices
– Manager with broad knowledge of small
business entrepreneurship, current incubation
practices
• Access to educational and professional services
and network resources for tenants
• Establish guidelines for business entry and exit
• Track tenants after leaving the incubator
• Evaluate the progress of the incubator itself
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Recommendations
• Financial Considerations
– Develop an incubator financial structure that is
independent of grants for continued operation
• Maximize the amount of floor space that it may lease
• Consider partnerships to reduce the cost of operating
expenses
• Seek further support for renovation expenses via other
funding opportunities.
• Consider options that can increase the physical size of the
facility in order to create an economy of scale that can
support operating costs
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Thank You
Vanguard CDC
Scott Alan Davis
Tosha Brown
Donna Givens Williams
Albion
Mike Hindenach
Hastings
Lauren Kruer-Driscoll
Jackson
Roni Weaver
McAnoy
Sister Cathey De Santis
Professor Roger Hamlin
Professor Lawrence Molnar
Professor Rex LaMore
Professor Zenia Kotval
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Questions?