The John Marshall Opportunity Hub
The John Marshall Neighborhood Opportunity Hub on the far eastside of Indianapolis solves a list of community needs with private-public collaboration at an abandoned high school in one of the city’s most highly populated distressed neighborhoods.
John Marshall priorities set by community members in community engagement sessions.
We have found that the best way to jumpstart a distressed neighborhood is to design a specific development project that is usually less than 50 acres.
The general public underestimates the evaluation and planning that goes into the real estate development process. Whether a project is market-rate or distressed-neighborhood focused. it must be right for the legacy of people in the community.
Issues like gentrification have arisen from careless development. In such cases, developers are often accused of chasing residents out of their neighborhoods with high cash rewards for selling their homes for a big profit.
Often, these efforts are shortsighted as the DNA of a neighborhood culture runs deep. A developer can’t, nor should expect, to change the demographics of a neighborhood overnight.
The bad outcome is that residents end up tempted to sell their homes for a pay day which ends up being quickly spent without the financial literacy to know how to reinvest into the next best investment for prosperity.
Meanwhile, the surrounding neighborhoods are deeply enmeshed in their common histories. The developers’ dreams of any big return on investment can quickly go to waste without the careful upfront and meaningful planning for the families who have lived there.
Projects in distressed neighborhoods must be strategically located and armed with a clear business plan, proforma, professional developers, investors, service providers and municipal leaders that are aligned and equally interested in turning around a neighborhood that has otherwise lost faith yet hoping for change.
The John Marshall Neighborhood
Like many poor-performing schools in distressed neighborhoods, the John Marshall building has already lived many lives. It opened first as a high school in 1968, before closing its doors in 1986 due to a drop in population following the Unigov decision that created Marion County’s 11 school districts.
Indianapolis Public Schools reopened the building in 1993, using it first as a middle school, then a high school, and finally a middle school again before permanently closing the building in 2018 due in part to poor academic performance.
The perceptions of the area are not strong to outsiders based on impressions of high crime. Within a three-mile radius there are 32,000 households and 85,000 residents - equivalent to the sixth largest city in Indiana.
30% of the population is 15-24 years of age
The unemployment rate was 28% pre-Covid
34% of households earn 60% of the area median income or less
Sub-areas transitioned from low to high poverty from 1980 to 2018
There are 591 businesses with 20 or more employees within a 10-minute drive of the proposed John Marshall Opportunity Hub
The area is perceived to be a “desert of all kinds” including food desert, healthcare desert, library desert and banking desert
Nutritional needs are evident for desires to start gardens, provide classes for how to sop for cooking, how to cook healthy meals, and how to make healthy food choices
There is an inconsistency in educational options and opportunities for economic and workforce development to attract light industry for living wage jobs, expand training opportunities, develop ex-offender re-entry programs
The Project Design
As a partner of the project’s master developer team, we have scoped the 340,000 sf, 40-acre property to include the following partners and services. Over three to five years the neighborhood opportunity hub site could range between a $30-50 million project. Adaptive and re-use development expertise is required for successful implementation.
76,800 sf of education and training space
37,600 sf of business development space
17,600 sf of support services
165,000 sf of conventional leasable space
Gym, auditorium, kitchen food hub and entrepreneurial spaces
Two to three development pads for active open spaces
75-100 transitional housing units for economically challenged households with immediate access to service, training and jobs
6-8 acres of business park focused on minority and veteran business development
Active park and neighborhood entrance that is neighborhood designed and implemented
Outdoor playground and track and field facility
Neighborhood pop-up retail
Community garden and engineered wetland
The initial programming of the site emphasizes the implementation of training and support services within the first two years. The education and business accelerator elements are the focus for after the second year. The John Marshall Opportunity Hub tenants and master developer will focus on identifying complementary partners to lease space that fits the community needs.
In 2019, Urban Land Institute completed a Technical Assistance Panel to assist with assessing and making these site recommendations for this 40-acre site.
Anticipated Outcomes
Within the first three years the project goals include achieving the following outcomes:
Engage 7,500 or more residents
Serve up to 4,000 residents
Train and job place up to 1,500 residents
Establish career pathways for up to 250 residents
Provide technical assistance to 250 businesses
Serve up to 50 entrepreneurs
Startup at least 15 businesses representing approximately 100,000 sf of the project’s space
The Partners
The John Marshall middle/high school building is 340,000 square foot and has been programmed with up to two dozen opportunity providers such as the following core partners who will service the surrounding community to meet their needs.
Ivy Tech Community College - short and long-term training including “earn and learn”, certificates and badges.
Gleaners Food Bank - food distribution and logistics training.
Eskenazi Health - food preparation and measuring wellness determinants in the community as well as training and enterprise development.
Next Studios - existing businesses resiliency and enterprise development.
CAFE’ - neighborhood-based support services and training.
Pathway Resource Center - neighborhood-based soft skills training and engagement facilitation
Hancock County Economic Development Council - provides linkage to Mt. Comfort Corridor employers and job opportunities
Core project partners have included the Finish Line Youth Foundation, Glick Philanthropies, CAFE Community Alliance. Negotiations regarding the City of Indianapolis involvement are also underway.
The Structure
The John Marshall Collaborative (JMC) serves as the master developer to ensure execution of the programming and development agenda for the property. Having a master developer for these projects is critical for keeping the broad set of stakeholders focused and engaged in a timely manner to accomplish the business investment required to make it work.
The master developer team (MD) of five members partner with the nonprofit entity that will hold title to the John Marshall property. The MD team includes up to three neighborhood-based team members who are mentored for future exanded roles as the MD team phases out. The MD team reports to the John Marshall Opportunity Hub nonprofit owner and the assigned community stakeholders.
The MD fulfills the following responsibilities for the long-haul of the project:
The MD has tailored expertise to address complex needs and develop community relationships to solve challenges
Works with key stakeholders (clients) to define and execute the mission
Established development components that are consistent with the mission
Builds required partnerships to successfully implement the work program
Engages and develops leaders within the community to manage the JMC in the future
Establishes the capital budget and the operating budget for the John Marshall Opportunity Hub
Establishes the financial plan that supports building and site improvements, the development program, operations and maintenance
Oversees construction, renovation and the building process
In the case of this project, the master developer does include ownership of the site and has a defined termination point of four to five years to assure economic sustainability of the project. The MD derives compensation from the operating budget and program revenues.
Public and philanthropic funds will partner with the neighborhood and JMC to identify and implement opportunities to establish the John Marshall Opportunity Hub as a long-term anchor institution for the community.
Community Opportunity Programming Advisors will work to engage the far eastside neighborhood to define and implement longer-term opportunity programming for the opportunity hub.
The Financial Plan
The first five years of the proforma is capital-intensive which is comparable to any startup. A modest 80% occupancy rate is projected to be achieved in the first five years. Innovative financing is required to address the existing adopted deferred maintenance issues. Operational costs are covered by the lease and development revenues. The primary goal is to achieve one million or more for reserve funds in the first five years.
The key budget assumptions required for Opportunity Hubs to work and be sustainable in the future are the following:
Must monetize the site to be consistent with mission.
The project scale requires a P3 private-public partnership approach.
The project’s deferred maintenance approaches $20 million. This investment will extend building’s useful life 40-50 years.
The mixed-use model approach generates diverse income streams.
The goal is to minimize the debt carry with emphasis on programming not fundraising as the long-term funding solution.
The majority of tenants will pay gross rent ranging from $6.00-$10.00 sf. This includes leased space and utilities.
The John Marshall Opportunity Hub nonprofit owner of the property leases only – there are no space or land sales.
It is critical to build healthy reserve fund in the first five years of operation for future operating and maintenance expenses.
Venue spaces represent local business start-up opportunities.
The key budget components that support John Marshall Opportunity Hub’s self-sufficiency include:
Expedite building improvements to lower operating costs.
Achieve reasonable occupancy levels in the first five years with modest concessions. The budget assumes 80% occupancy in five years or less. Partial rent subsidy for first three years of five-year leases for first-year tenants only.
Explore innovative carry for $15m-$20 million in capital improvements, including mechanisms such as social impact loans from philanthropists.
Generate additional revenue via onsite development activity.
The funding sources for such projects should be built on various scenarios for the capital stack. To aggressively accomplish overcoming the deferred maintenance of the building, state grants can be achieved. If those are not achieved, social impact loans from philanthropists can be sought for low interest rates of usually less than five percent. The goal is to be debt free within the first 10 years of operation and to reduce the loan principle 50% by the fifth year.
The core financial strategy is to:
Reduce renovation costs by condensing the time period for implementing the improvements.
Reduce the cost of financing and limit short and long-term debt load ideally with local, state and federal grant resources - up to $20 million. Otherwise seek sources for low-interest social impact loans.
Achieve economic sustainability within five years.
Establish a healthy reserve fund for both operations and capital expenditures within five years.
The Summary
Designing and implementing Neighborhood Opportunity Hubs requires intentional leadership to understand the community and negotiate the complexities of the partnerships and finances required. The end goal is that within eight years all the opportunity components are activated and evolving to serve the community for the combination of economic, social, health, growth, and quality of life.
“Indianapolis’s Far Eastside is a working-class community 10 miles from downtown. Once an outer ring suburb, it has transformed over the last few decades into an urban neighborhood—diverse, largely residential, but with an industrial sector.
… its challenges include disinvestment abandoned residential property, school closings, crime, and insufficient access to employment.
…it needs a people-focused neighborhood investment strategy, with tangible and measurable programmatic goals that tackle poverty issues.”