Walbrook Junction

Building Black wealth through community-owned shopping centers.

About the Project

The Chicago TREND Corporation (“TREND”, the “Manager” or the ”Sponsor”) has negotiated a contract to acquire the Walbrook Junction Shopping Center in Baltimore, MD. TREND is launching a crowdfunding campaign to allow Black entrepreneurs and community residents with as little as $1,000 to co-own the asset.

TREND will seek to engage Black professional service providers, lease to Black-owned businesses and create opportunities for local community employment. TREND is purchasing Walbrook Junction at a favorable price and will endeavor to own and operate the property with pride and integrity, becoming a “trusted neighbor” in the community.

Walbrook Junction Shopping Center is a 47,070-square-foot neighborhood shopping center, dual-anchored by Rite Aid and Save-a-Lot, and located at 3421 Clifton Ave in Baltimore, Maryland (the “Property”). Additional tenants include Rent-A-Center, Papa John’s, Metro PCS, Boost Mobile, and a mix of local retailers. Located in an Opportunity Zone at a highly trafficked, lighted intersection with excellent visibility and ample parking for tenants and customers, the center was fully redeveloped in 1991 and features a long-term, stable tenant base with strong commitment to the site and area. The essential, service-oriented tenants cater to the local community. Many of the tenants at the center have been deemed essential business and are resistant to the rise of e-commerce, providing further long-term stability.

Convenient to Downtown Baltimore, the Property offers easy access to public transportation, city thoroughfares (North Avenue, Route 40, MLK Jr. Blvd), and major highways (70, I-95, I-83, 695 and 295). The densely populated area has over 23,000 residents within a 1-mile radius and nearly 225,000 within a 3-mile radius. Nearby Hilton Parkway has traffic counts of over 36,000 vehicles per day. Download a demographic report here for further detail. 

The shopping center is 97.5% leased and the retail mix and tenancy provides cash flow with limited immediate maintenance. Based on TREND’s projections, Debt Service Coverage will average 1.33x over the first five years of ownership. Rents have been underwritten with limited rent growth over a projected hold period of 10 years. Current rents at the Property are in line with the market and bordering submarket. The peer set of comparable properties has asking rental rates between $19 and $22 per square foot, whereas the tenants at the Property currently pay rents between $17 to $21 per square foot.

Due to the term remaining on the tenant leases, TREND projects limited Leasing and Capital Costs over the first five years of ownership. Additionally, many of the tenants have opted to renew multiple times at Walbrook Junction. Therefore, TREND expects limited turnover. If turnover does occur, TREND plans to capitalize on the opportunity to strengthen the rent roll with additional credit tenants, and perhaps offer a drive-through quick-service restaurant.

While the COVID pandemic has grabbed headlines as bringing about the “death of retail,” the impact on retail centers tenanted with essential businesses has been quite the opposite. Tenants such as pharmacies and grocery stores have all performed well during the pandemic. As outlined by GlobeSt.com in an August 2020 article, “pricing has actually gotten more competitive for essential use retail properties.
 

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About Walbrook Junction
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About the Strategy

In early 2020, TREND – like countless other organizations – was compelled to reexamine and pivot its business plan to address unprecedented market conditions. The COVID-19 health crisis, recession and civil unrest (following the murder of George Floyd) combined to amplify the need for targeted economic empowerment initiatives in Black communities. As a result, TREND established three new lines of business, aligned with its mission to strengthen disinvested communities and support entrepreneurs of color:

Small business advisory services, Coaching Black-owned businesses to ensure their survival and build their capacity to thrive in the “new normal,” and advocating for impact capital to support their strategic business initiatives.

Development advisory services. Coaching, technical advice, expert referrals/networking and related services to advance high-impact real estate development projects in targeted minority neighborhoods.

Shopping center acquisition in partnership with Black entrepreneurs and community members. This is described in more detail below.

The property damage and looting of stores made it palpable to TREND that Black residents do not own commercial property in their neighborhoods. Consequently, Black communities receive no financial benefit from the profitability and appreciation of shopping centers that they frequent as customers. Moreover, Black residents have few connections to visible and accessible Black shopping center owners and commercial real estate professionals.

TREND therefore seeks to intentionally empower Black entrepreneurs and community residents to have a meaningful ownership stake in the revitalization and continued vibrancy of commercial corridors and Black shopping districts. TREND has developed and begun executing a strategy to buy profitable urban community shopping centers in partnership with Black entrepreneurs and community investors. TREND’s market intelligence, capital, expertise and industry relationships allow it to identify, acquire and improve under-valued small shopping plazas in Black neighborhoods.

Through this shopping center acquisition strategy, TREND will be purposeful about driving inclusive economic impact:

Black generational wealth will be created through ownership of real estate assets with appreciation potential.

Black entrepreneurs and investors will receive the benefits of positive cash flow projected to be generated by the real estate asset.

Black entrepreneurs will have more opportunity to operate businesses as tenants in shopping centers

TREND’s mission to strengthen communities through strategic commercial real estate development and support entrepreneurs of color is now more important and urgent than ever. To achieve goals related to inclusive economic development and growth and address the racial wealth gap in a meaningful way, it is essential that more commercial real estate and business assets located in Black communities be owned by (and build wealth for) Black entrepreneurs and community residents.

TREND aims to assemble a team of Black experts (leasing, management, architecture, insurance – even the landscaping company) to provide hands-on property management, stay on top of issues, retain existing tenants and attract new ones to improve financial performance and community impact. TREND’s culturally informed and industry-experienced ownership perspective will be able to work with economic development officials and community stakeholders to retain and attract tenants to the shopping centers it acquires. A strong property management and leasing strategy, including marketing, attractive co-tenancies, etc. will allow TREND to have positive impacts in communities, including employment of Black people and cultivation and incubation of Black-owned businesses in its shopping centers.

Executing the Strategy

In January of 2020, TREND acquired Butterfield Plaza, a 19,468 square foot shopping center located at 3212-3252 Vollmer Road, Olympia Fields, IL. The Village of Olympia Fields is a suburb of Chicago where 74% of the residents are Black and the median household income is just over $97,000. Even during the global pandemic, the pilot center is performing well. At the time of purchase, the Plaza was bank-owned and only 60% occupied. As of December 2020, Butterfield Plaza was 93% leased.

TREND then analyzed 10 shopping centers on the south side of Chicago and began to carefully select centers to acquire based on the following criteria:

Strong Community 

  • More than 100,000 residents within a three-mile radius
  • Black population exceeds 50%
  • At risk of decline or poised for positive change
  • “Cusp” location with access to both low- and high-income populations a plus

Strong Location

  • Visibility through signage, adequate street frontage and property configuration
  • Access via auto, transit and walking
  • Parking adequate for mix of uses
  • Adjacent retail

Strong Tenant Mix

  • Service- and convenience-oriented (“non Amazonable”)
  • Diverse mix
  • Average remaining lease term of three years or more

Strong Financial Deal

  • Purchase at a cap rate of 9+% on in place Net Operating Income
  • Cash flow (after debt service) is available 
  • Below-market rents
  • Potential for value appreciation as part of the TREND portfolio

In October, TREND bought its second shopping center, 8301 S. Holland Road in Chicago’s Chatham Community (“8301”). 8301 is a 9,755 square foot shopping center with four storefronts and 36 parking spaces.

Tenants include Athletico, Boost Mobile and a local dentist. Chatham has a strong history of local minority business ownership and is the birthplace of notable African American-owned firms in various sectors. Over 280,000 people live within a three-mile radius. TREND intentionally structured the transaction so that Black entrepreneurs and community residents own 49% of 8301.

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About the Change

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About Chicago TREND

TREND was established as a centralized resource for diverse real estate developers, retailers and community development organizations seeking to understand the trajectories of urban neighborhoods and invest in profitable retail and other commercial development that strengthens them. TREND catalyzes, accelerates and finances strategic commercial development led by people of color, identifying and facilitating development that moves overlooked and undervalued neighborhoods forward and drives inclusive growth.

Since its launch, TREND has used sophisticated predictive market analytics, development facilitation services and financing tools to:

  • Identify untapped opportunities to strengthen urban neighborhoods through strategic commercial investments – the right business in the right location at the right time
  • Shorten the timeframe for commercial development
  • Share risk with business owners and developers, while also capturing up-side value
  • Provide flexible, patient capital to entrepreneurs of color

These tools create a mutually reinforcing cycle of improved retail and service amenities, enhanced community vitality and wealth creation for entrepreneurs of color. After successfully completing its two-year pilot phase, TREND embarked on a growth phase. This included scaling up activities in the Chicago market, refining its financial products, testing new financial structures, enhancing the accuracy, flexibility and predictive capacity of its analytic models, adding a full-time staff member and expanding operations to Rochester, New York.

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About the team

Lyneir Richardson is co-founder and CEO of The Chicago TREND Corporation. An experienced commercial and residential real estate developer with over 17 years of experience in urban retail development, Lyneir served as CEO of the primary economic development corporation in Newark for two different mayoral administrations. He was Vice President of Urban Development at General Growth Properties where he led the national initiative to bring quality shopping centers to ethnic neighborhoods in large U.S. cities.

Early in his career, Lyneir founded Lakeshore Development Construction Company and was recognized by the U.S. Small Business Administration as Illinois Young Entrepreneur of the Year. He started his career as a corporate attorney at the First National Bank of Chicago.

Lyneir is also a Professional Practice Instructor in the Department of Management and Global Business at Rutgers Business School in Newark, New Jersey, and the Executive Director of the Rutgers Center for Urban Entrepreneurship and Economic Development (CUEED), where he leads capacity-building programs that have assisted over 400 entrepreneurs.

Lyneir is a graduate of Bradley University and the University of Chicago Law School. He is a member of the Urban Land Institute, the International Council of Shopping Centers, and the International Economic Development Council. He serves on the Board of Directors of the International Economic Development Council, New Growth Innovation Network, Newark Arts Council and the Cook County Land Bank, and has served as Vice Chairman of the Illinois Housing Development Authority Trust Fund Board and as a Commissioner on the Chicago Plan Commission.

The Executive Team.

In addition to Lyneir Richardson, Chicago TREND’s executive team includes Gretchen Kleinert, COO, David Shryock, Benefit Director and Robert Weissbourd, Co-founder and secretary of the board.

Gretchen joined Chicago TREND in January 2019, bringing experience in community and economic development, real estate economics, project management and program design. Gretchen holds a BA in Statistics and Economics and a master’s degree in Regional Planning.

Dave has three decades of experience in financing small and minority-owned businesses. Following business school, he spent eleven years at South Shore Bank in Chicago, initially as a commercial lender and eventually as President and CEO of the Bank. Dave is a graduate of Harvard College and Yale School of Management.

Robert manages RW Ventures, LLC, an economic development firm specializing in technical analysis of urban assets and markets, and in creating the products and enterprises necessary to successfully grow urban and regional economies. He was a lead developer of the New Growth Innovation Network (NGIN), the Greater Chatham Initiative, TREND, Chicagoland Food and Beverage Network, the Center for Financial Services Innovation, MetroEdge and the Metropolitan Business Planning Initiative, which he co-managed with the Brookings Institution. He brings over thirty years of experience leading economic development work in dozens of cities and scores of neighborhoods, including serving on the Obama Transition HUD Agency Review Team, as a nonresident Senior Fellow at the Brookings Institution Metropolitan Policy Center and as adjunct professor at the University of Chicago Harris School of Public Policy.

The Property Team.

TREND aims to assemble a team of Black experts (leasing, management, insurance – even the landscaping company) to provide hands-on property management, stay on top of issues, retain existing tenants and attract new ones to improve financial performance and community impact. As an example the team in Chicago includes:

  • Emerald Partners Property Management
  • FP Commercial Advisors (leasing)
  • Property Care Management (landscaping/snow removal)
  • P2 Capital Insurance Brokers, Inc.
  • 5T Construction
  • Beehive Architects

TREND will identify a similar team in other cities in which it acquires shopping centers.

Assembling a culturally informed and industry-experienced ownership team is expected to help with tenant retention and attraction to the 8301 shopping center. A strong property management and leasing strategy, including marketing and attractive co-tenancies, will allow TREND to create added value for  the community, such as employing Black people and creating opportunities for Black-owned businesses in the shopping center and trade area.

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About the offering

The Company is engaged in two simultaneous offerings of its securities:

  • An offering under Regulation CF (where anyone can invest), which we refer to as the “Reg CF Offering”; and
  • An offering under SEC Rule 506(c) (where only “accredited Investors” can invest), which we refer to as the “Reg D Offering.”

We plan to use the proceeds of this offering, together with a loan from a bank, to purchase and operate the Walbrook Junction Shopping Center at 3411-3425 Clifton Avenue, Baltimore, MD.

It doesn’t matter how much is raised in the Reg CF Offering and how much is raised in the Reg D Offering. Thus, if we raise $1,000 in the Reg CF Offering and at least $34,000 in the Reg D Offering we will proceed, and vice versa.

In an offering under Regulation CF the issuer is required to state a “Target Amount,” meaning the minimum amount the issuer will raise in the Regulation CF offering to complete the offering. For the reason just described, our Target Amount for the Reg CF Offering is $1,000.

However, we will not complete the Reg CF Offering OR the Reg D offering unless we have raised a total of at least $35,000 (minimum goal) by April 30, 2021. If we haven’t, both offerings and all investment commitments will be cancelled, and all committed funds will be returned.

In both offerings, the minimum investment amount is $1,000 and investments above $1,000 may be made in $500 increments (e.g., $1,500 or $2,000, but not $1,536). Investors can cancel their commitment up until 11:59 pm on April 28, 2021 (2 days before the target date). After that any funds raised will be released to the Company and Investors will become members of the Company. The Company may decide to change the offering deadline but will provide at least five days’ notice of such a change to all Investors. And Investors will also be notified and asked to reconfirm their commitment if any other material changes are made to this offering.

The SEC is considering other changes to Reg CF, in addition to raising the maximum offering amount. Where applicable, we will reference possible changes in the applicable sections of this Form C, which you can download here or view as registered with the SEC here.

Investments under Reg CF are offered by NSSC Funding Portal, LLC, a licensed funding portal, while investments under Reg D are offered by NSSC Crowd, LLC.
 

 

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About the Neighborhood
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Key deal points
  • Strategic. Purchase profitable urban community shopping centers in partnership with Black entrepreneurs and community investors.
  • Building Black wealth. Providing a path for increased ownership opportunities of real estate assets.
  • Supporting Black talent. Providing opportunities to Black-owned businesses and opportunities for local community employment.
  • Scalable. Planning to provide investment opportunities in 10-100 service oriented community shopping centers.
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About the finances

TREND is structuring the transaction to intentionally give small investors and Baltimore residents an opportunity to co-own Walbrook Junction with TREND. The requested debt is 90% Loan-to-Cost at a 6.0% rate with a year of interest-only payments. The purchase price of $6.2 million results in a cap rate of 10.1% on projected year one Net Operating Income (NOI).

Total acquisition costs of approximately $6,696,000 will be financed with a bank loan of approximately $6,026,000 million, Sponsor equity of $335,000 and the Investor equity of $335,000. The financing assumptions to purchase and develop the project are as follows:

Sources    
   Equity - Small change investors 5% $335,000
   Equity - TREND 5% $335,000
   Debt 90% $6,026,000
Total sources 100% $6,696,000
Uses    
   Purchase price   $6,200,000
   Capital reserve   $310,000
   Closing costs     $186,000
Total uses   $6,696,000

TREND believes that the creditworthiness of the anchor tenants, and many of the in-line tenants, elevate the value of the Property. As a reference point, Rite Aid pharmacies frequently trade at cap rates in the 7.5% to 8.0% range, while this purchase has been negotiated at a 10.1% cap rate. The table below shows median asking cap rates for drug store properties.

Tenant Q3 2019 Q3 2020 Basis point change
Walgreens 6.06% 6.25% +19
CVS 5.60% 5.50% -10
Rite Aid 7.65% 7.80% +15

Note: The above numbers include properties with a variety of lease lengths.

Assuming that the Rite Aid store was a standalone store and traded at the Q3 2020 average cap rate of 7.80%, it would yield $1.86M, or $186 per square foot across Rite Aid’s 10,000 square feet in the shopping center. By that measure, TREND is acquiring the “remainder” of the center at an 11.0% cap rate equating to $117 per square foot. See chart below:

Metric Rite Aid All other Total
Projected revenue $155,412 $513,262 $668,674
% of revenue 23.2% 76.8% 100.0%
Allocated NOI $144,960 $478,744 $623,705
Cap rate 7.8% 11.03% 10.06%
Allocated purchase price $1,858,466 $4,341,534 $6,200,000
Allocated price per s.f. $186 $117 $132

Also, recent local sales comparables have traded between a range of $125 to $220 per square foot, placing this purchase at the lower end of that range.

TREND is expecting to refinance the Property in the fifth year of operations and sell it in year 10. Total free cash available for distribution over the 10-year holding period is expected to be over $3.5 million. For further details, download a 10-year Operating Pro-forma here.

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About investor return

Within thirty (30) days after the end of each calendar year, the Company shall distribute its Available Cash, as follows:

  1. 49% to the Investor Members, in proportion to each Investor Member’s ownership of Investor Shares; and
  2. 51% to the Sponsor.

The table below illustrates our estimate of the return an Investor may expect to receive if the property is sold in Year 10.

Total investment of $335,000 Total

49% to investors

Year 1 - 10 operating cash flow $1,676,976 $821,718
Year 5 - refinance proceeds $176,200 $86,338
Year 10 - sale proceeds $3,395,6060 $1,663,847
Totals $5,248,782 $2,571,903

An investor who invests $1,000, may expect to have $7,677 returned over the period of 10 years if all goes well. Or an investor who invests $5,000 may expect to have $38,387 returned.

Caution:  This table is merely an illustration based on current assumptions and estimates as of the date of this offering and may change at any time based on market or other conditions and may not come to pass. All investments carry risk of loss and there is no assurance that an investment will provide a positive return. Many things could go wrong with this offering, including those listed in About the Risks.

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About the risks

A crowdfunding investment involves risk. You should not invest any funds in this offering unless you can afford to lose your entire investment. 

In making an investment decision, Investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. These securities have not been recommended or approved by any federal or state securities commission or regulatory authority. Furthermore, these authorities have not passed upon the accuracy or adequacy of this document.

The U.S. Securities and Exchange Commission does not pass upon the merits of any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering document or literature.

These securities are offered under an exemption from registration; however, the U.S. Securities and Exchange Commission has not made an independent determination that these securities are exempt from registration.

Additional statement

There are numerous risks to consider when making an investment such as this one and financial projections are just that - projections. Returns are not guaranteed. Conditions that may affect your investment include unforeseen construction costs, changes in market conditions, and potential disasters that are not covered by insurance. You can download more detailed Risks of Investing here for a more expansive list of potential risks associated with an investment in this Company.

Unless otherwise noted, the images on the offering page are used to convey the personality of the neighborhood in which the project is planned. Properties shown in these images are not included in the offering and Investors will not receive an interest in any of them.

COVID19 Disclosure

Operations at the shopping centers currently owned by TREND were impacted by shutdowns enacted because of the COVID-19 pandemic in 2020. A small number of tenants requested rent relief, and a small number negotiated short-term deferrals of rent and CAM charges. As of December 2020, 100% of tenants are paying their rent in accordance with their leases or their agreed-upon deferral arrangements. 

TREND’s experience has been that service-oriented tenants, especially those owned by single-store operators and small entrepreneurs, have been those most likely to continue to pay rent and other charges on time, diligently avoiding risk of default. However, the ongoing COVID-19 pandemic could ultimately cause certain small businesses to close. If that were to happen, TREND’s leasing agents would aggressively seek to relet any vacant spaces. Interest in existing vacant spaces at TREND's shopping centers has remained robust during the pandemic. 

For future shopping center acquisitions, TREND will bring to bear its experience in negotiating and managing tenant requests for relief. It will also conservatively underwrite the acquisition of new shopping plazas with respect to assumptions regarding center vacancy and other operating parameters.

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