VOL. 124 | NO. 122 | Wednesday, June 24, 2009
CCC’s Ramped Up Incentives Target ‘Fragile’ Market
By Andy Meek
CONCESSIONS: The Center City Commission has created a new office grant program to help fund commercial office tenant improvements and has changed some terms of the group’s retail forgivable loan program for new and existing businesses. -- PHOTO COURTESY OF THE CENTER CITY COMMISSION
The name of the game is feet on the street.
New and existing retail businesses Downtown, as well as office tenants who need to make physical improvements, stand to benefit from changes the Center City Commission has made to its grab bag of financial incentives.
The changes, approved this month by one of the CCC’s affiliate boards, were made to keep business brisk in the face of a national recession that threatens to take feet off the street. That recession has left Downtown’s office market “fragile,” in the words of one CCC official, and made retail ventures riskier than they might otherwise have been.
That’s why the CCC has added a new office tenant grant program to its mix of business aids that include tax breaks, grants and loans. The Downtown agency in charge of shaping real estate development and business activity in the city’s core also has changed the terms of its retail loan program.
Starting July 1, CCC officials will begin taking applications on a first-come, first-served basis for its new commercial office tenant grant program. The Center City Development Corp. decided to make $350,000 available for the program for up to one year.
It’s a pilot program of sorts and something the group has never done before. It was born out of discussions with representatives of the Downtown office market who identified tenant improvement costs as one of the stumbling blocks to getting leases signed and for keeping tenants in place.
“It goes back to our original intentions, which were … to create more incentives to bring new retail businesses Downtown.”
– Jeff Sanford
President, Center City Commission
“I have had calls from some property owners and brokers asking me if this had been approved and being very positive about the fact that this will now be available,” said CCC president Jeff Sanford. “Our goal is to roll it out and make it available in the weeks ahead, if not the days ahead.”
The program offers eligible commercial office tenants the opportunity to apply for a grant that can help pay tenant improvement costs. Those TI costs are defined as changes to the interior of a commercial property, including anything related to floor and wall coverings, ceilings, interior walls or partitions, shelves, air conditioning, toilets, fire protection and security.
The TI costs can’t include any costs related to personal property, furniture, fixtures or equipment. The one-year office grant program currently is set to expire when the funding is depleted or by June 30, 2010, whichever comes first.
“The program is designed to combat the flight from Downtown of tenants whose leases are up for renewal,” said CCDC board member Jay Lindy.
The CCC’s moves show the tightening economy may be leading Downtown office tenants to consider alternate arrangements, but it’s not the only sector the Downtown group is adjusting to help. Retailers whose customers may now find their wallets drained of disposable income, thus dragging down the stores’ bottom lines, are another source of concern.
At the same time it created the office tenant grant program, the group upped its potential loan amount under the CCC’s retail forgivable loan program for existing businesses.
Before, the group offered the business a chance to apply for the lesser of $30,000 or 5 percent of its average yearly gross sales, based on the two highest yearly totals over the previous three years. But most businesses that applied weren’t qualifying for the full $30,000.
Creation and retention
ICB’s at 651 Jefferson Ave. was one such business. The discount store in May applied for a $30,000 forgivable loan from the CCDC. Under the terms of the program, it was eligible for – and received – a loan of $22,081.
The peddler of everything from furniture to groceries to health and beauty items had found itself in the same position as other Downtown businesses fighting the recession. Looking at ICB’s past three years to find the two highest annual totals under the terms of the retail loan, the store posted sales above $583,000 in 2006. One year later, that number had fallen to a little less than $300,000.
After discussion last month by the CCDC board, members felt there wasn’t a reason to grant an exception for the full $30,000 amount and approved $22,081.
But the terms of the retail loan program now have been changed to allow businesses the opportunity to apply for $30,000 or 10 percent of the two highest yearly totals.
“It wasn’t producing enough money to be as helpful as we found we needed to be,” Sanford said about the program. “It goes back to our original intentions, which were, No. 1, to create more incentives to bring new retail businesses Downtown. And secondly, through the existing forgivable loan program, to help us retain the ones we have during a particularly turbulent economy.”