When looking at tenants for defined affordable commercial space, a lessor should consider social factors in addition to whether the rent will be paid. Social impacts on the community should be considered alongside financial criteria.
Common Financial Criteria
- Business history
- Financial strength
- Credit rating
- Sales performance
- Tenant mix
- Opportunity: Under what circumstance would the organization take a calculated risk, based on the unique situation of the tenant? For example, are there reasons to offer a lease to a tenant with poor credit or limited experience?
- Job creation opportunities: What kind of job will be created and for whom? This may be especially important if city or Federal funding conditions for commercial development projects require that new jobs be targeted to specific populations.
- Support social objectives: Will this business contribute to overall goals and objectives of the project? Will it serve the intended target population of the project? Will it directly compete or displace other local businesses? Will it put the project or organization at financial risk in order to achieve these social objectives?
- Providing Technical Assistance: How much assistance will the CDC provide prospects preparing a lease application? Will they refer prospects to small business assistance centers, or does the CDC staff have the competency and capacity to directly assist business owners with their financial, marketing and business plan?
- Stakeholder approval: Will the city, community groups, and other merchants support this use and/or business? Is it in alignment with the previously identified community needs? Will it negatively or adversely affect residents living directly above or adjacent to the property?
- Generating internal subsides: Can this tenant allow the CDC to support other desired uses in the project at a reduced rate? Or, does this business or service need to be subsidized at below market rents in order to be financially viable in this location?
- Long-term view: Will this tenant support long-term financial stability of the project and economic growth of neighborhood? To what extent are less desirable tenants acceptable to justify the long-term gains?
Eng, Tiffany, “Community Development Corporations: Commercial Leasing Strategies and Social Objectives.”