Sarah Jersild: Businesses moving to changing neighborhoods

From the Chicago Tribune

Seeking high payback in low-income areas
In some neighborhoods with blighted reputations, low real estate costs and proximity to desired clients are luring risk-taking entrepreneurs.

By Sarah Jersild
Special to the Tribune
August 25 2003

If Chicago is a city of neighborhoods, it is also a city of neighborhood businesses--some of which aren't what, or where, you'd expect.

Neighborhoods struggling with reputations for crime and urban blight are attracting a new breed of risk-taking entrepreneurs. They are drawn by low overheads, underserved markets and the prospect of hitting a neighborhood right before it takes off.

Low real estate costs and proximity to high-profile clients such as the Peninsula Hotel drew Amy Pittman-Heglund, a pastry chef and proprietor of Do (pronounced "dough") to Humboldt Park.

"I don't think you're going to get more reasonable real estate in six minutes to the Lyric Opera or the 12 minutes to the Peninsula," she said.
Pittman-Heglund bought her building at 1043 N. California Ave. in 1999 for less than $200,000 to accommodate both her home and her business.

While the site was good, the building was far from perfect, requiring almost $130,000 in renovations.Even with that extra expense, the move from Wicker Park reduced overhead dramatically and cut the mortgage in half.

"That gave us the freedom to do what we want to do, instead of just having to keep up with the Joneses," she said.

Pittman-Heglund has one advantage over many business owners: Do, which provides high-end, special-occasion cakes, does not depend on walk-in customers. Her clients will seek her out wherever she is located.

Do's customers tend to be comfortable in an edgy neighborhood, Pittman-Heglund said. Other than a few questions about parking, she hasn't had any complaints.

Other entrepreneurs may not be as lucky. The process of establishing a business in a changing neighborhood is risky, said David Weinstein, president of the Chicagoland Entrepreneurial Center.

"It's the notion of the unknown--many [consumers] will have reservations about going into undeveloped neighborhoods," he said.
Banks can be equally leery of depressed neighborhoods and may be reluctant to lend to a business interested in locating there.

"That's a huge challenge," Weinstein said. "We [hear from] many banks where their No. 1 question [is] the site."

One of the best ways for businesses to address that concern, Weinstein said, is to show the bank that the operators are willing to invest a substantial amount of their own money in the site. Even with that, businesses may have to go through several banks before they find one that is willing to make the loan.

There are other strategies businesses can use to bolster their chances for success.

The first step, said Weinstein, is to get a strong lay of the land and know exactly what a neighborhood has to offer your business.

"Often, you're going to need some type of destination site--be it a restaurant, a museum, a historic district--and you need to leverage that with your marketing plan for your business," Weinstein said.

Bronzeville is a perfect example of such a site. The history of legendary blues clubs draws visitors from all around the world--visitors who could be a captive audience for a business owner, Weinstein said.

Pamela Johnson, owner of Bronzeville's First Bed & Breakfast, said her inn has operated at near capacity since she began operating it as a business in 1999.

"The moment we put the word out publicly that we were doing this, we have had reservations almost every single day. ... It was a stampede of people, so obviously, this was something that was needed in the community," Johnson said.

The B&B, at 3911 S. King Dr., has four guest rooms and a full-service salon in the basement. It has hosted parties, fashion shows and both neighborhood and international visitors.

Connie Rivera found another compelling destination for her prospective clients when she established Chicago CityEscape, a garden center, in Garfield Park next to the conservatory. The site is "en route to where my audience was going," said Rivera.

`Green' businesses

The business also fits well with Mayor Daley's plans to promote landscaping and other "green" businesses on the West Side.
This allowed Rivera to set up shop on park district property very quickly, and it is clearing the way for her to buy city land worth $470,000 for $150,000. The new 2.7-acre site is at Lake Street and Albany Drive.

While not all new businesses can benefit from the green city initiative, they can take advantage of many other programs, such as tax increment financing districts, empowerment zones and industrial corridor programs.

"There are so many resources," said Norman Bolden, who is renovating several buildings in the Kenwood neighborhood, one of which he plans to turn into a bistro. "Do your homework. The dollars are there for businesses. Any assistance that the city or state or federal government are offering, you want to take advantage of."

Once a business obtains funding, another challenge it may face in a changing neighborhood is how to avoid accusations of gentrification.

"Any entrepreneur who is thinking of moving into a less established neighborhood needs to do some strong community and neighborhood outreach," Weinstein said. He points to Chicago CityEscape as a model for others to follow.

Rivera met with aldermen, community activists and residents to explain the business and make sure no one felt shut out.

"When you have an alderman or a community activist who really has the pulse of the neighborhood, and you go to them and tell them your plan ahead of time, make them feel a part of the process, I guarantee you some of those hostilities will go down," Weinstein said. "You'll never be able to eliminate all of that, but you clearly can mitigate a huge component of that."

Hiring from the neighborhood can help ease tensions between new businesses and community residents. All of the employees at the Bronzeville B&B are neighborhood residents, Johnson said--and she grew up in the neighborhood as well.

"Everybody we hire is from the community. We strongly believe in that," said Johnson.

Any neighborhood can be a source of great employees, Weinstein said.

"There are diamonds everywhere; you've just got to find them. Any business going into a community is going to have to think of strategies of how to tap into the resources there--like the people, like the schools."

Rivera is using her relationship with the Garfield Park conservatory to identify possible employees in the near future. She has made a commitment to employ at least 29 people at the end of three years, and she expects to draw most of those employees from the surrounding neighborhood. She is working with the conservatory's docent program to hire students who have had some experience with the care of plants for the summer and weekend work.

Despite the frustrations it can pose, operating in a changing neighborhood can bring benefits beyond low overheads, said Weinstein. "You have the ability to really distinguish yourself that you wouldn't have in a crowded neighborhood," he said.

Weinstein warns that not every business would benefit from moving to a changing neighborhood, however. Specialized business-consulting firms or other service businesses should not make the move, he said.

"If you took A.T. Kearney and put it on the West Side of Chicago and had to have his clients go there, I don't think that would work," he said.

However, margin-dependent businesses that are willing to take the risk can really benefit.

Johnson agrees.

"There's something really liberating in being the underdog. The expectations are not the same. ... You're able to come through and surprise people with what you've got," said Johnson. "I'm sure people thought I was crazy for [opening an inn] on 39th Street. But it has been the best move that anybody could ever make."

Finding a location

The Department of Planning and Development offers more than 20 programs to help businesses in the city. The following, according to department communications director Peter Scales, are the most widely utilized:

Program: Tax increment financing (TIF)
What it is: Reimburses companies for costs such as land purchase, building rehab or job training.
Who can use it: Any company in one of the 129 TIF districts in the city. Scales calls this the city's most successful business development program.

Program: Cook County Class 6b tax incentive
What it is: Lowers the tax assessment rate from 36 percent to 16 percent for the first 10 years, 23 percent in the 11th year and 30 percent in the 12th year.
Who can use it: Manufacturing or industrial businesses; requires new construction, substantial rehabilitation, or reutilization of abandoned buildings.

Program: Bank participation loans
What it is: The city, working with a bank, helps finance between 20 percent to 50 percent of a project with interest rates as low as 3 percent.
Who can use it: Any retail or service business that creates jobs.

Program: City land sales
What it is: Not an organized program per se, but businesses may be able to purchase vacant city land at deep discounts--as little as $1 per parcel, depending on the land and the project.
Who can use it: Any business that will be creating jobs. "There's a lot of vacant property in our inventory. If we find that a project is in need of land, we think that selling them the property at a discount will meet their funding gap and we find out it's a worthy thing, we'll do it," Scales said.

Program: Enterprise zones and empowerment zones
What it is: These joint federal/state/city programs encourage development in specific areas with tax credits for building materials, major equipment, and each employee hired.
Who can use it: Any business located in any of Chicago's three empowerment zones or six enterprise zones.

More information on other businesses development programs is available by calling Business Express at (312) 744-CITY.

Sarah Jersild Writer \| Editor \| Proofreader \| Content developer
Home	Writing samples	Resume	E-mail
From the Chicago Tribune Seeking high payback in low-income areas In some neighborhoods with blighted reputations, low real estate costs and proximity to desired clients are luring risk-taking entrepreneurs. By Sarah Jersild Special to the Tribune August 25 2003 If Chicago is a city of neighborhoods, it is also a city of neighborhood businesses--some of which aren't what, or where, you'd expect. Neighborhoods struggling with reputations for crime and urban blight are attracting a new breed of risk-taking entrepreneurs. They are drawn by low overheads, underserved markets and the prospect of hitting a neighborhood right before it takes off. Low real estate costs and proximity to high-profile clients such as the Peninsula Hotel drew Amy Pittman-Heglund, a pastry chef and proprietor of Do (pronounced "dough") to Humboldt Park. "I don't think you're going to get more reasonable real estate in six minutes to the Lyric Opera or the 12 minutes to the Peninsula," she said. Pittman-Heglund bought her building at 1043 N. California Ave. in 1999 for less than $200,000 to accommodate both her home and her business. While the site was good, the building was far from perfect, requiring almost $130,000 in renovations.Even with that extra expense, the move from Wicker Park reduced overhead dramatically and cut the mortgage in half. "That gave us the freedom to do what we want to do, instead of just having to keep up with the Joneses," she said. Pittman-Heglund has one advantage over many business owners: Do, which provides high-end, special-occasion cakes, does not depend on walk-in customers. Her clients will seek her out wherever she is located. Do's customers tend to be comfortable in an edgy neighborhood, Pittman-Heglund said. Other than a few questions about parking, she hasn't had any complaints. Other entrepreneurs may not be as lucky. The process of establishing a business in a changing neighborhood is risky, said David Weinstein, president of the Chicagoland Entrepreneurial Center. "It's the notion of the unknown--many [consumers] will have reservations about going into undeveloped neighborhoods," he said. Banks can be equally leery of depressed neighborhoods and may be reluctant to lend to a business interested in locating there. "That's a huge challenge," Weinstein said. "We [hear from] many banks where their No. 1 question [is] the site." One of the best ways for businesses to address that concern, Weinstein said, is to show the bank that the operators are willing to invest a substantial amount of their own money in the site. Even with that, businesses may have to go through several banks before they find one that is willing to make the loan. There are other strategies businesses can use to bolster their chances for success. The first step, said Weinstein, is to get a strong lay of the land and know exactly what a neighborhood has to offer your business. "Often, you're going to need some type of destination site--be it a restaurant, a museum, a historic district--and you need to leverage that with your marketing plan for your business," Weinstein said. Bronzeville is a perfect example of such a site. The history of legendary blues clubs draws visitors from all around the world--visitors who could be a captive audience for a business owner, Weinstein said. Pamela Johnson, owner of Bronzeville's First Bed & Breakfast, said her inn has operated at near capacity since she began operating it as a business in 1999. "The moment we put the word out publicly that we were doing this, we have had reservations almost every single day. ... It was a stampede of people, so obviously, this was something that was needed in the community," Johnson said. The B&B, at 3911 S. King Dr., has four guest rooms and a full-service salon in the basement. It has hosted parties, fashion shows and both neighborhood and international visitors. Connie Rivera found another compelling destination for her prospective clients when she established Chicago CityEscape, a garden center, in Garfield Park next to the conservatory. The site is "en route to where my audience was going," said Rivera. `Green' businesses The business also fits well with Mayor Daley's plans to promote landscaping and other "green" businesses on the West Side. This allowed Rivera to set up shop on park district property very quickly, and it is clearing the way for her to buy city land worth $470,000 for $150,000. The new 2.7-acre site is at Lake Street and Albany Drive. While not all new businesses can benefit from the green city initiative, they can take advantage of many other programs, such as tax increment financing districts, empowerment zones and industrial corridor programs. "There are so many resources," said Norman Bolden, who is renovating several buildings in the Kenwood neighborhood, one of which he plans to turn into a bistro. "Do your homework. The dollars are there for businesses. Any assistance that the city or state or federal government are offering, you want to take advantage of." Once a business obtains funding, another challenge it may face in a changing neighborhood is how to avoid accusations of gentrification. "Any entrepreneur who is thinking of moving into a less established neighborhood needs to do some strong community and neighborhood outreach," Weinstein said. He points to Chicago CityEscape as a model for others to follow. Rivera met with aldermen, community activists and residents to explain the business and make sure no one felt shut out. "When you have an alderman or a community activist who really has the pulse of the neighborhood, and you go to them and tell them your plan ahead of time, make them feel a part of the process, I guarantee you some of those hostilities will go down," Weinstein said. "You'll never be able to eliminate all of that, but you clearly can mitigate a huge component of that." Hiring from the neighborhood can help ease tensions between new businesses and community residents. All of the employees at the Bronzeville B&B are neighborhood residents, Johnson said--and she grew up in the neighborhood as well. "Everybody we hire is from the community. We strongly believe in that," said Johnson. Any neighborhood can be a source of great employees, Weinstein said. "There are diamonds everywhere; you've just got to find them. Any business going into a community is going to have to think of strategies of how to tap into the resources there--like the people, like the schools." Rivera is using her relationship with the Garfield Park conservatory to identify possible employees in the near future. She has made a commitment to employ at least 29 people at the end of three years, and she expects to draw most of those employees from the surrounding neighborhood. She is working with the conservatory's docent program to hire students who have had some experience with the care of plants for the summer and weekend work. Despite the frustrations it can pose, operating in a changing neighborhood can bring benefits beyond low overheads, said Weinstein. "You have the ability to really distinguish yourself that you wouldn't have in a crowded neighborhood," he said. Weinstein warns that not every business would benefit from moving to a changing neighborhood, however. Specialized business-consulting firms or other service businesses should not make the move, he said. "If you took A.T. Kearney and put it on the West Side of Chicago and had to have his clients go there, I don't think that would work," he said. However, margin-dependent businesses that are willing to take the risk can really benefit. Johnson agrees. "There's something really liberating in being the underdog. The expectations are not the same. ... You're able to come through and surprise people with what you've got," said Johnson. "I'm sure people thought I was crazy for [opening an inn] on 39th Street. But it has been the best move that anybody could ever make." Finding a location The Department of Planning and Development offers more than 20 programs to help businesses in the city. The following, according to department communications director Peter Scales, are the most widely utilized: Program: Tax increment financing (TIF) What it is: Reimburses companies for costs such as land purchase, building rehab or job training. Who can use it: Any company in one of the 129 TIF districts in the city. Scales calls this the city's most successful business development program. Program: Cook County Class 6b tax incentive What it is: Lowers the tax assessment rate from 36 percent to 16 percent for the first 10 years, 23 percent in the 11th year and 30 percent in the 12th year. Who can use it: Manufacturing or industrial businesses; requires new construction, substantial rehabilitation, or reutilization of abandoned buildings. Program: Bank participation loans What it is: The city, working with a bank, helps finance between 20 percent to 50 percent of a project with interest rates as low as 3 percent. Who can use it: Any retail or service business that creates jobs. Program: City land sales What it is: Not an organized program per se, but businesses may be able to purchase vacant city land at deep discounts--as little as $1 per parcel, depending on the land and the project. Who can use it: Any business that will be creating jobs. "There's a lot of vacant property in our inventory. If we find that a project is in need of land, we think that selling them the property at a discount will meet their funding gap and we find out it's a worthy thing, we'll do it," Scales said. Program: Enterprise zones and empowerment zones What it is: These joint federal/state/city programs encourage development in specific areas with tax credits for building materials, major equipment, and each employee hired. Who can use it: Any business located in any of Chicago's three empowerment zones or six enterprise zones. More information on other businesses development programs is available by calling Business Express at (312) 744-CITY.