Vallarta Fresno Supermarket

Awards Vallarta Fresno Supermarket Frontage
Nominee
Award Category: 
Metro
Property Name: 
Vallarta Fresno Supermarket
Developer: 
Vallarta Food Enterprises Inc.
Owner: 
Maya Cinemas New Markets CDE LLC
Location: 
Fresno, Calif.

Category Explanation

The project is located in a highly distressed area of Fresno, California, which is the fifth largest city in California, and has a large concentration of working class Latino families. Latinos represented 30 percent of the population in 1990, and has increased to 47 percent in 2010. Fresno serves as the economic hub of Fresno County and California's San Joaquin Valley. The unincorporated area and rural cities surrounding Fresno remain predominantly tied to large-scale agricultural production.

Brief Description of Development

Vallarta Supermarkets (Vallarta) was founded in 1985 by the Gonzalez family, and remains a privately owned, Latino-owner/operator of grocery stores throughout California. Over its 30+ year history, Vallarta has been committed to bringing fresh foods, employment opportunities, and community services to the Hispanic community, a niche that has not been adequately addressed by the big chain stores. The current project, Vallarta Fresno, closed in May 2016, and the project is now under construction. The total QEI was $13 million and included two Calif.-based CDEs.  QLICI proceeds will be used for the construction, fit-out and operational site launch of the Vallarta Fresno store.

But-For Statement

The QLICIs were made to an operating business entity, Vallarta Food Enterprises Inc. for growth capital purposes.  Without NMTCs, several key aspects of this project would not have been possible. First, the NMTCs will allow Vallarta to offer ten specific community benefits for the Fresno community including: 175 new permanent jobs accessible to local low income people in a community suffering from 18 percent unemployment, at least $70,000 of scholarship awards programs for high school students enrolling in a four-year college degree program, and a new Vallarta store that includes a minimum of 40 percent of its products that are high quality and affordable fresh foods accessible to low income Latino families. Second, the rates and terms for the financing would not have been possible without the NMTCs. Favorable terms include a weighted QLICI interest rate of 2.9 percent where the QLICIs are not secured by any real property, and without any specific debt service coverage requirement. Third, the NMTCs allow a notable Latino-owned business to continue its training and skills development programs for its 4,500 FTE (at an estimated cost of $450,000 per year) and to continue their community impact programs including food donations, annual toy drives, Latino advocacy, donations to local businesses, financial support for low-income people suffering from muscular dystrophy and kids with cancer, autism and diabetes.

Narrative Statement

Mission:

As the lead CDE in the transaction, Maya Cinemas New Markets CDE LLC (Maya) was formed to provide flexible capital to Latino-owned commercial anchors in highly distressed urban communities. The rationale behind Maya’s focus is that after a decade operating in low income Latino neighborhoods, Maya has experienced first-hand the lack of flexible capital to privately owned minority business owners. The purpose of the QLICI financing was to provide Vallarta Supermarkets (Vallarta) with the most flexible, below market financing for growth of its Fresno location, and to strengthen this organization’s impact to the low income community in Fresno which suffers from a 18 percent unemployment rate and has seen a surge in Latino working families moving in. The percentage of the population in Fresno that is Latino has increased from 30 percent in 1990 to 47 percent in 2010. As one of the few Latino-owned, commercial anchors operating in this market, Vallarta was identified as a key private sector employer and community anchor for this neighborhood that has been committed to bringing fresh foods, employment opportunities, and community services to the Hispanic community, a niche that has not been adequately addressed by the big chain stores.

Community impact:

  • This community suffers from a high unemployment rate of 18 percent, and is a largely Latino community. Therefore, few quality job opportunities, especially for Latino women, exist in this area. This project has or will create 175 permanent FTEs once the Project is completed; 30 direct predevelopment or Construction FTE Jobs associated with the development and construction of the Project; 100 percent of the direct FTE Jobs paying $10/hour or more, and at least 80percent of the FTE jobs with be low-income persons and/or low-income residents residing within 8.5 miles of the Project. The sponsor is publicizing and advertising jobs within the Hispanic/Latino, minority and women communities, with an expectation of filling 80 percent of such jobs with Hispanic or Latinos, 80 percent of such jobs with members of minorities inclusive of Latinos, and 50 percent with women.
  • Vallarta offers employer sponsored benefits for employees: healthcare, dental, retirement plans and paid time off for all FTEs;
  • At least 3,500 sf of space at the Project will offer Fresh / Healthy products and target a minimum of 40 percent of total sales as Fresh/Healthy products such as perishable items (fresh fruits/vegetables, breads, meats, fish, etc.);
  • Jointly with Maya CDE, Vallarta will develop and administer a scholarship awards program (Scholarship Program) within 180 days after closing the NMTC financing. The Scholarship Program shall award a minimum of $10,000 in scholarship funds annually to Low-Income Persons that are high school students enrolling in a four-year college degree program, which students live in an 8.5 mile radius around the Project. The $10,000 yearly minimum for scholarship funds shall be funded from a $70,000 scholarship fund funded by Project Owner and held by Maya Cinemas Educational Fund, a California nonprofit public benefit corporation, and the Maya CDE shall not be obligated to fund any scholarships from any other source whatsoever. In addition to the $10,000 yearly minimum, Project Owner shall assist in raising additional funds locally in an effort to increase the amount of scholarship funds awarded to eligible recipients. Project Owner shall also advertise and work with Maya CDE in promotion and advertisement of the Scholarship Program.
  • By supporting the new Vallarta Fresno store, Maya has strengthened its relationship with Vallarta’s parent company that operates additional stores throughout California, and now employs more than 4,500 FTEs. The potential strategic collaborations for job training, employee recruitment, and joint community outreach activities allows the Maya-Vallarta partnership to be one of the most unique Latino-led commercial anchor partnerships that is directly targeting low income Latino communities in California. No other collaboration, as far as we are aware, has utilized NMTC financing to strengthen the linkages among for-profit, socially minded, Latino-owned companies and their joint efforts to be community anchors for low income areas.

Innovative financing:

  • QLICIs were provided to an operating company, for the site launch of the Vallarta location. There were several complications to the financing structure because the sponsor already has a senior creditor in place, and the Vallarta store location involves a long term lease, but does not offer any real property as collateral. This project is the first anchor tenant in a larger redevelopment site, and the development and landlord entity also had separate financing (non-NMTCs) involved and therefore, there was very limited hard collateral to pledge for the financing.
  • The CDEs were required to use a portion of a business approach in order to allow the borrower maximum flexibility in keeping the underlying project-entity free and clear from liens and senior/subordinated loans
  • The QLICIs were structured to be unsecured, and have a 2.9 percent blended interest rate (compared to a conventional loan of 7 percent) and do not require a mortgage of real property.
  • CDEs also waived the requirement for a minimum LTV, appraisal or DSCR, allowing the borrower to operate the new store with maximum flexibility.

Achievement of goals:

The transaction closed in May 2016. Construction is progressing on schedule with an anticipated store opening for 4Q 2016 or 1Q 2017.

Note regarding attached materials: the attached photos and video are for an existing store, narrated by Vallarta’s regional manager. The video for the meat department demonstrates the different training levels that the employees are provided. The video for the food court demonstrates the high percentage of fresh foods being offered, and the amount of employees that are hired and trained for these positions. All of the FTEs receive $10/hour with employer-sponsored benefits and training opportunities. This gives you a sense of the high quality of the stores and their emphasis on local employment opportunities for low-income Latino employees. We expect the new store to be as nice, or even nicer than the existing store shown in the files.

Photos

Awards Vallarta Fresno Supermarket Frontage
Awards Vallarta Fresno Supermarket Customer Service

Additional Materials

Site Plan