WASHINGTON (FNS) -- Supermarket operators have found a new partner to help them open stores in inner-city neighborhoods.
That partner is The Retail Initiative, the first corporate investment fund to provide capital to build inner-city grocery stores.
At the center of the project are 10 institutional investors that will provide $24 million to help fund the development of between 12 and 14 inner-city supermarkets in the next two to three years, according to officials from the Local Initiatives Support Corp. LISC is the sponsor of The Retail Initiative project.
LISC, which for 15 years has used corporate funding to build low-income housing, unveiled the inner-city supermarket project late last month at a news conference here. The first TRI-sponsored supermarkets are targeted for cities such as Boston, Chicago, Houston, Los Angeles, Miami, Philadelphia, Phoenix, San Diego, San Francisco, Seattle and Washington.
In one instance, TRI is helping Pathmark Stores, Woodbridge, N.J., build a supermarket in the East Harlem area of New York.
After rushing to leave inner-city locations for the more profitable suburbs in the 1980s, supermarket operators are eyeing the inner city now that many suburban markets have become saturated, according to Edie Meleski, a spokeswoman for the Food Marketing Institute here.
FMI is helping disseminate information on the development project to its retailer members.
"More cities are taking a more holistic approach to [all] development, not just housing," Celia Slater, a communications manager for FMI, said. "In addition to providing food, supermarkets anchor other stores and provide jobs."
Although the planned stores are not the first to be built in inner cities by community developers, TRI is the first systematic, nationwide effort, and the first to use equity funding, according to sponsors.
Each store will be developed by a local, nonprofit community development corporation, which will have to round up the balance of the funding for the project.
TRI investors are expected to earn 10% annually over a 10-year period, a below-market rate for such risky equity, according to Paul Grogan, president of the community development group.
"This was a hard sell," he said.
After 10 years, the community developers hope to buy out the investors and gain 100% ownership of the sites, Grogan said.
Among the TRI investors are Prudential Insurance Co. of America, G.E. Capital Corp., Bank of America, First Interstate Bancorp., Metropolitan Life Foundation, Home Savings of America and J.P. Morgan.