How CA FreshWorks Fund Impacts CRE

By Natalie Dolce

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Novak

OAKLAND, CA-Recently, First Lady Michelle Obama revealed the launch of the California’s FreshWorks Fund, a healthy food financing initiative focused on increasing access to healthy, affordable food in underserved communities. A project of The California Endowment and a team of partners, FreshWorks is a $200-million public-private partnership loan fund created to increase access to healthy, affordable food in underserved communities, spur economic development, and inspire innovation in healthy food retailing.

The California FreshWorks Fund is modeled after the successful Pennsylvania Fresh Food Financing Initiative and developed to align with the National Healthy Food Financing Initiative, according to a prepared statement. “The fund will make communities across California healthier by working directly with grocers on developing new and improved places to buy nutritious food.  According to CAFWF partners, the new stores are expected to create or retain around 6,000 jobs in California.”

When asked about loans going for construction of new stores, NCB—a bank and investor in the fund with a $50 million commitment that will be providing financing to independent grocers so they are able to open stores in those underserved neighborhoods—tells GlobeSt.com that funds are available in different formats—new markets tax credit funds, subordinate debt and grant funds. Mike Novak, SVP and senior relationship manager at NCB’s Oakland, CA office, tells GlobeSt.com that “Funds can be used for predevelopment expenses, planning and design, professional services, capital and real estate expenses, equipment, leasehold improvements, inventory and working capital and workforce development like job training or job creation.” Novak points out that “While some retailers will use the funds to purchase real estate, other may make capital improvements or rent the property and put capital in for operations and expansion.”

When asked if independent grocers plan on buying stores in those particular communities or rent them, Novak says that they have the option of doing both. In addition, he says, the funding may not be just for the independent grocers, “but for a real estate developer, who is developing a multi-use property in a food desert,” he says. “One would qualify if at least 50% of the space goes toward a full service grocery store.” He adds that funds also can be used to develop mobile grocers or farmers markets that serve food deserts.
In terms of how much money is going towards real estate expenses, Novak says it is unknown at this time. “Funds can be used for a variety of purposes.”

When Standard & Poor's lowered the sovereign credit rating on the United States of America from its long held AAA status to AA+, many wondered what effect the downgrade would have on the community, on business, and on public-private partnerships. “The downgrade from S&P will not have impact the availability of funds for the California Freshworks fund,” explains Novak. “The funding for this program is already in place and is primarily funded through private monies.”
The goal of the program, according to Novak, is to eradicate food deserts in California. “We know this will take time, money and the commitment of many groups and individuals,” he says. “Currently the loan fund is $200 million. Since this has just launched, we don’t know exactly how many deals this will handle or if more money will be invested in the program.”

Categories: West, Retail, San Francisco