Donjek Project: Commercial Land Trust Feasibility

“By facilitating participation in market activity, neighborhoods expand wealth creation…A healthy neighborhood is a neighborhood that performs its functions well, connecting its residents to larger economic, social and political systems.”
– Weissbourd, Bodini, and He, “Dynamic Neighborhoods,” 2009

Dating to the mid-19th century, St. Paul’s University Avenue has matched entrepreneurial people with available space, central location, ease of access, and proximity to employees and other businesses. Central location and a mix of new ideas and longstanding networks in the community continue to stimulate entrepreneurship and business development on University Avenue. Its position in the Minneapolis Saint Paul region also frames the largest public works project in the state’s history: Construction of light rail transit service that will extend from Union Depot in downtown Saint Paul, the State Capitol, down University Avenue to the Midway, to the University of Minnesota and downtown Minneapolis. Illustrated in comparable markets, LRT service is likely to elevate demand for space and increase foot traffic substantially on University Avenue. As development increases around University Avenue, opportunities arise for business owners operating there.

At the same time, increased real estate values on and near University pose a challenge to the small and emerging businesses that help give the street its character. This report summarizes an exploration of models that could create space on University Avenue for new and existing small businesses, led by the Greater Frogtown Community Development Corporation and the Rondo Community Land Trust, and made possible by funding from the McKnight Foundation. Informal survey data suggest that 10% of business owners on University own the property in which they operate. While ownership can provide long-term stability of building cost for business owners, ownership is not a uniformly high priority – or even a uniformly desirable outcome – for businesses.

The report concludes a feasibility analysis undertaken with Donjek coordination over the last year. The project set out to address three priorities:

  • Explore the need for and interest in long-term stable-price business property ownership and leasing;
  • Identify and evaluate models for accomplishing long-term cost stability for business operators; and
  • Chart a course for accomplishing these objectives without ongoing subsidy.

Innovative models that blend ownership and leasing, public with private, may have a role to play in supporting entrepreneurs on University Avenue after light rail transit is in place. The report highlights selected strategies that allow business owners to structure more stable real estate costs, either through ownership or leasing. These strategies and a more stable cost structure for small businesses allow entrepreneurs to build reserves and working capital, invest in future projects or products, and hire more employees.