Jeffrey Brown, Chairman

1Presented 3/12/2012

Delivering Entrepreneurial Solutions that Delivering Entrepreneurial Solutions that Support Underserved Communities for the Support Underserved Communities for the

Joy of a Healthy LifeJoy of a Healthy Life

Placemaking Strategies for Economic Development: Placemaking Strategies for Economic Development: View from the Private SectorView from the Private Sector

• Jeff Brown, a fourth generation Philadelphia grocer, is the founder, President and CEO

• Operates ten ShopRite supermarkets 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, 2,300 associates, 92% unionized with UFCW locals 1776, 152 and 1360

• Our average store is 60,00060,000 Square feet• Member of Wakefern Food Corp. Wakefern Food Corp.

Brown’s Super StoresBrown’s Super Stores

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• Caucasian race is expected to shrink to 50% of US population by 2050

• 12 Million more people live in poverty live in poverty than did in 2005• ObesityObesity 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

Observation and OpportunityObservation and OpportunityRace of American Population 2000 2010 2020 2030 2040 2050

Caucasian alone, ex. Hispanic 69.38 65.10 61.33 57.53 53.66 50.08 Hispanic alone 11.63 14.20 16.29 18.31 20.25 21.99 Black alone 12.70 13.09 13.51 13.87 14.26 14.61 Asian alone 3.79 4.61 5.36 6.21 7.14 7.96 All other 2.51 2.99 3.52 4.08 4.69 5.34

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49 Million People

• 23 Million Americans 23 Million Americans do not have reasonable access to fresh food at affordable costs

• These Americans are substantially more obese and unhealthier 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

Food DesertsFood Deserts

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• “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

Grocer’s ChallengeGrocer’s Challenge

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Reducing the Financial GapReducing the Financial GapLandlord – Example 1Landlord – Example 1

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/Normal Savings Net

Supermarket Building costs $ 7.80 MLand and Site costs $ 4.20 M

$12.00 MNMTC (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

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Remaining Gap $6.00 psf

Reducing the Financial GapReducing the Financial GapLandlord – Example 2Landlord – Example 2

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/Normal Savings Net

Supermarket Building costs $ 7.80 MLand and Site costs* $ 1.20 M

$ 9.00 MNMTC (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

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Remaining Gap $2.00 psf

Reducing the Financial GapReducing the Financial GapSupermarketSupermarket

Normal Goal Savings

• 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/yrTotal savings $836,400/yr

2.7% of Sales

• Debt Amortization $ 857,143/yr $ 0 $ 857,143/yrOperating Cash Flow Improvement (Ex. Balloon payment after 7th Yr.) $1,694,000/yr

5.4% of Sales

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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.

• 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

Brown’s Super Stores, Inc.Brown’s Super Stores, Inc.

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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

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• 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

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• Access to Primary/Preventive Care– In store acute health clinics– Entitlement advocacy – Health/nutrition education

• Anti-Obesity Market-Based Research

Health Innovations

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• 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

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Contact Information:Jeffrey Brown, Chairman – Jeffb@wakefern.com

Donna Leuchten, Associate Director – donnal.uplift@gmail.com

700 Delsea Drive · Westville, New Jersey 08093Office: (856) 471-2028 · Fax: (856) 471-2013

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Delivering Entrepreneurial Solutions that Support Delivering Entrepreneurial Solutions that Support Underserved Communities for the Joy of a Healthy LifeUnderserved Communities for the Joy of a Healthy Life