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Jeffrey Brown, Chairman

Placemaking Strategies for Economic Development: View from the Private Sector. Jeffrey Brown, Chairman. Delivering Entrepreneurial Solutions that Support Underserved Communities for the Joy of a Healthy Life. Presented 3/12/2012. Brown’s Super Stores.

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Jeffrey Brown, Chairman

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  1. Placemaking Strategies for Economic Development: View from the Private Sector Jeffrey Brown, Chairman Delivering Entrepreneurial Solutions that Support Underserved Communities for the Joy of a Healthy Life Presented 3/12/2012

  2. Brown’s Super Stores • Jeff Brown, a fourth generation Philadelphia grocer, is the founder, President and CEO • Operates ten ShopRite supermarkets in the Delaware Valley • 1st store opened December 1988 (23 years ago) • Two new 70,000 sf stores in development • Employs 2,300 associates, 92% unionized with UFCW locals 1776, 152 and 1360 • Our average store is 60,000 Square feet • Member of Wakefern Food Corp. 2

  3. Observation and Opportunity 49 Million People 3 • Caucasian race is expected to shrink to 50% of US population by 2050 • 12 Million more people live in poverty than did in 2005 • Obesity is deteriorating the overall health of Americans and the related cost of healthcare • Existing public policy strategies do not appear to be improving our country’s negative trends in poverty or health

  4. Food Deserts • 23 Million Americans do not have reasonable access to fresh food at affordable costs • These Americans are substantially more obese and unhealthier than the average American population, particularly children • “Food deserts” often experience many other community challenges which include: • Higher school drop out rate • Teen pregnancy • Violence • Ethnic conflict • High unemployment • Inadequate primary education • Incarceration/Re-entry challenges • Lack of access to healthcare/higher incidence of illness • Hopelessness 4

  5. Grocer’s Challenge 5 • “Food deserts” are not self correcting, as operating costs are generally higher and margins are lower • We have observed that food desert locations often experience a gap in profitability of around 5% of sales (ie. 4% loss instead of 1% profit), causes include: • Reduced average sale • Lower inbound gross profit • Reduced grocery gross profit (increase baby formula penetration) • Lower penetration of high margin department’s (Produce, Deli, General Merchandise, Gourmet) • Higher training costs and reduced productivity • Higher security and insurance costs • Higher building and maintenance costs • Filling the gap with higher pricing, lower wages or reduced standards have proven to be ineffective • This gap has resulted in high grocery store failure rates

  6. Reducing the Financial GapLandlord – Example 1 Remaining Gap $6.00 psf 6 Assumptions: 60,000 sq ft store, $130psf building cost, $100psf equipment cost, weekly sales of $600,000, NMTC proceeds of 20- 24% of total project, NMTC requires 7 year balloon, 6% interest, assumed 10 year RE tax abatement, [normal RE taxes of $3psf], assumed FFFI incentives are obtained to cover capital and/or preopening costs in excess of normal levels Gap Financing/ NormalSavingsNet Supermarket Building costs $ 7.80 M Land and Site costs $ 4.20 M $12.00 M NMTC (net benefit) $ 2.40 M $ 9.60 M Gross Rent $ 20.00 psf $ 16.00 psf Low interest/long amortization, subordinate loans Re-allocate benefit of other tenants Evaluate Brownfield, Historic, etc Goal (1/2 Market Rent) $ 10.00 psf

  7. Reducing the Financial GapLandlord – Example 2 Remaining Gap $2.00 psf 7 Assumptions: 60,000 sq ft store, $130psf building cost, $100psf equipment cost, weekly sales of $600,000, NMTC proceeds of 20- 24% of total project, NMTC requires 7 year balloon, 6% interest, assumed 10 year RE tax abatement, [normal RE taxes of $3psf], assumed FFFI incentives are obtained to cover capital and/or preopening costs in excess of normal levels Gap Financing/ NormalSavingsNet Supermarket Building costs $ 7.80 M Land and Site costs* $ 1.20 M $ 9.00 M NMTC (net benefit) $ 1.80 M $ 7.20 M Gross Rent $ 15.00 psf $ 12.00 psf Low interest/long amortization, subordinate loans Re-allocate benefit of other tenants Evaluate Brownfield, Historic, etc City Economic Development assembles the land and sells to developer for $1.2 M (Absorbing $3M in cost) Goal (1/2 Market Rent) $ 10.00 psf

  8. Reducing the Financial GapSupermarket 8 NormalGoalSavings Rent $ 20.00psf $ 10.00psf $ 1,200,000/yr $ 600,000/yr $ 600,000/yr Real Estate Tax $ 180,000/yr $ 30,000/yr $ 150,000/yr NMTC Equipment and fit out $ 6.00 M $ 4.80 M $ 1.20 M Interest Expense $ 360,000/yr 288,000/yr $ 86,400/yr Total savings $836,400/yr 2.7% of Sales Debt Amortization $ 857,143/yr $ 0 $ 857,143/yr Operating Cash Flow Improvement (Ex. Balloon payment after 7th Yr.) $1,694,000/yr 5.4% of Sales

  9. Policy Recommendations Design tools to allow for one stop shopping through city community economic development office or CDFI. Aggregate various programs for developer or retailer to overcome obstacles that prevent supermarket projects Open discussion of other obstacles: Davis-Bacon Act Federal, State and Local Regulations Etc.

  10. Brown’s Super Stores, Inc. • Mission: • Bring Joy To The Lives of The People We Serve • Brand Attributes: • Authentic Products • Affordability • Community Responsibility • Enjoyable Shopping Experience • Values: • Seek Understanding • Be Flexible • Show Respect • Act Responsibly 10

  11. UpLift Solutions Delivering Entrepreneurial Solutions that Support Underserved Communities for the Joy of a Healthy Life • Program Areas • Sustainable Food Systems • Health Innovations • Community Development 11

  12. Technical Assistance for Increased Food Access Financing new stores Public/private partnerships Low access operator higher education and certification programs Healthy Food Access Fund (HFAF) Urban Agriculture Business model innovation Local agriculture branding Alternative Energy Delivering innovative turn key solutions to improve business and environmental results Sustainable Food Systems 12

  13. Access to Primary/Preventive Care In store acute health clinics Entitlement advocacy Health/nutrition education Anti-Obesity Market-Based Research Health Innovations 13

  14. Workforce Development Re-entry Unemployed/unskilled Access to Financial Services In store credit unions Financial literacy Community Development Community micro-grants Community partnering Community Development 14

  15. Contact Information: Jeffrey Brown, Chairman – Jeffb@wakefern.com Donna Leuchten, Associate Director – donnal.uplift@gmail.com 700 Delsea Drive · Westville, New Jersey 08093 Office: (856) 471-2028 · Fax: (856) 471-2013 Delivering Entrepreneurial Solutions that Support Underserved Communities for the Joy of a Healthy Life 15

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