Lexington Market Master Plan

www.marketventuresinc.com

118 William Street, Portland, Maine 04103 207.321.2016 tel 866.757.1705 fax

Phase 2 Report: Program, Design, Management & Finance

January 26, 2015 Table of Contents

Executive Summary ...... 4 Mission statement ...... 4 Design and development principles ...... 4 Program elements...... 5 Schematic design ...... 6 Operations and management plan ...... 7 Construction costs and phasing ...... 8 Operations pro forma ...... 9 Economic impact analysis...... 10 Financing...... 11 Conclusion ...... 11 Introduction ...... 13 Consultant team ...... 13 Mission and design & development principles ...... 14 Mission statement ...... 14 Design and development principles ...... 14 Program elements ...... 16 Market hall ...... 16 Restaurants ...... 23 Farmers’ and crafts market shed and event space ...... 23 Storage ...... 24 Education/events ...... 24 Customer seating ...... 25 Shared commercial kitchen ...... 25 Office and employee lockers ...... 26 Bathrooms ...... 26 Parking ...... 26 Building services ...... 27 Schematic design ...... 28 Existing layout ...... 28 Proposed development concept...... 32 Neighborhood improvements...... 39 Operations and management plan ...... 40 Operating schedule...... 40 Staffing ...... 40 Waste management ...... 42 Marketing ...... 42 Leasing ...... 44 Customer counts and consumer research ...... 46 Construction costs and phasing ...... 47 Phasing ...... 49 Operations pro forma ...... 55 Income...... 55 Expenses ...... 60

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 2 Construction period ...... 64 Economic impact analysis ...... 65 Methodology ...... 65 Economic impact of sales at Lexington Market ...... 66 Direct impact of construction and operations ...... 69 Financing ...... 70 Conclusion ...... 71 Benefits ...... 71 Challenges ...... 73 Next steps ...... 73 Appendix A: SWOT Analysis ...... 75 Appendix B: Multi-level public market and market sheds ...... 78 Appendix C: Construction cost estimate ...... 84 Appendix D: Finance opportunities ...... 85

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 3 Executive Summary

Mission statement

The proposed mission statement for Lexington Market is: The mission of Lexington Market is to serve Baltimore’s diverse citizens and visitors by: • Perpetuating the city’s historic public market tradition through the sale of fresh and prepared foods in a welcoming public space, • Providing affordable retailing opportunities, particularly for independent, locally‐owned businesses and regional farmers, • Contributing to community wellness through access to and education about healthy and affordable fresh and prepared foods, and • Supporting the revitalization of downtown Baltimore’s West Side.

Design and development principles

The proposed development principles are: 1. Create modern, code compliant, energy efficient public market facilities that meet the needs of Market vendors and customers while maintaining the Market’s historical character. 2. Keep a portion of the Market in operation during construction. 3. Utilize environmental design strategies inside and outside the Market to address security concerns while creating a place that welcomes the whole community. 4. Continue to serve current customers while appealing to a wide array of Baltimore area residents, downtown workers, and visitors by offering a diverse range of quality products at affordable prices, particularly local, authentic and unique fresh and prepared foods. 5. Develop the Market in a financially prudent manner so that income exceeds operating expenses, in part by designing the facilities to lower the effective costs of operations.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 4 6. Create special event and education spaces that support the Market’s wellness mission and provide new sources of revenue.

Program elements

To guide planning and ongoing leasing efforts, the consultant team recommends that Lexington Market adopt targeted percentages for each of the four vendor categories for both the number of vendors within each category and the percentage of square feet in that category.

Tenant mix goals Target Category % vendors % SF Staple food 25% 30% Specialty food 35% 40% Prepared food 25% 20% Nonfood 15% 10% Total 100% 100%

These targets will shift Lexington Market from being mainly a place to buy fast food to being a source of predominately fresh and specialty foods. The proposed number of merchants reduces the Market’s tenant mix from 97 to 71 but the leasable square footage only drops from 41,171 to 39,046 sf, a reduction of 5%. This slight contraction of square footage will allow the Market to fit within a rebuilt East Market and thereby substantially reduce the Market’s operating costs. The plan reduces redundancy and creates larger individual vendor spaces, providing the facilities to create and display a wider array of interesting and appealing food products. While this plan has fewer vendors than today, Lexington Market will still be one of the largest public markets in the country. When implemented, this merchandise mix plan would result in a public market with more leasable square footage than Reading Terminal Market and about the same number of vendors. In addition to the market hall, key program elements include: • Restaurants • Farmers’ and crafts market shed and event space • New event and education space, including a demonstration kitchen, hands-on teaching kitchen, and meeting rooms • Shared commercial kitchen • Customer seating • Storage • Office • Bathrooms • Parking

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 5 Schematic design

Based on the proposed tenant mix program and the development principles, the consultant team recommends concentrating the market hall activity into a rebuilt East Market. This building is large enough to accommodate the entire tenant mix plan and can be operated much more efficiently, lowering the cost of operations. The team recommends maintaining the East Market building envelope but gutting the interior, creating a flat floor that stretches from Paca Street (at grade) to Eutaw Street (second story), and developing a partial lower level that has entrances at grade on Eutaw Street and staircases and perhaps escalators and elevators to bring customers to the main level. All of the Market’s plumbing, electrical, and mechanical systems should be replaced with new, efficient technologies. Vendors should have larger spaces with better sight lines, smaller display zones, improved mechanical systems appropriately sized for cooking capacity, high efficiency LED lighting, and more storage. The proposed schematic layout for the East Market (below) includes 31,713 sf of leasable area on the main floor and 7,345 sf of leasable area on the lower level. The main floor plate is 59,217 sf. This design has wider aisles, fewer doors, and flexible tenant layout options. Waste handling areas are moved from the basement to the main level. Bathrooms are relocated to the main level from the mezzanine. The farmers’ market shed is connected directly to the market hall.

The lower level is located at-grade on Eutaw Street. The gross area of the lower level is 14,990 sf and includes 7,345 sf of leasable area.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 6

The mezzanine includes the demonstration kitchen/large event room, the cooking lab for kids, and the shared commercial kitchen, plus the Market office. Surrounding the Market are a number of vacant or poorly maintained buildings, broken sidewalk sections, empty tree pits, messy tree pits with missing grates, and untended landscaping. The Market’s immediate surroundings need attention by property owners and the city. Public right-of-ways should be repaired and replanted as needed.

Operations and management plan

The consultant team recommends adding Sunday hours and extending the closing time from 6 to 7 pm. Sunday hours will greatly enhance the Market’s ability to attract customers from throughout the region. Later weekday hours will better serve the growing residential population near the Market. The Market’s physical changes provide the opportunity to shrink the security and

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 7 housekeeping staffs and increase staff resources for events, education and marketing. Waste management practices can be improved by relocating the waste handling facilities from the basement to compactors and storage rooms by the rear loading dock. The Market should implement waste recovery and recycling programs. Lexington Market would benefit from an annual, written marketing plan and sufficient resources to implement the plan. The plan should be based on market research and follow best practices from other public markets nationally and similar venues locally. The marketing plan requires strategies for the construction period, the grand reopening, and ongoing operations. Market vendors should be encouraged to develop and implement their own marketing programs, coordinated with the Market’s efforts. For the reopening, the strategy should build off of the fact that Lexington Market is well known throughout the region and many residents have positive memories of the Market from the past. This emotional affinity will need to be carefully wed with a reintroduction of the Market once the construction is complete, inviting customers back to see the major changes that have taken place in order to make the Market more like it used to be. The large nearby population at UMB provide a particularly compelling target for marketing activities. Lexington Market can also play an important role in the newly branded Bromo Arts District. The leasing effort requires a clear tenant selection process, following the proposed tenant selection criteria. Every business interested in being part of the rebuilt Market, including current tenants, should submit a written proposal. The application form should be available in multiple languages, including Korean, and assistance should be provided to help applicants prepare their proposals. Final decisions on leasing should be made by the full board of directors, based on the recommendations of the Leasing Committee.

Construction costs and phasing

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 8 Market open while construction takes place on the other one-half or one-third. The Arcade would remain in place during construction and be demolished once the East Market is complete. Option 3 entails relocating the entire market hall operation from the East Market block to new facilities located on the West Market block. The West Market block is only slightly smaller than the East Market block so the proposed development program can be readily accommodated there, including the outdoor farmers’ market shed. The southern portion of the West Market block is the preferred location for the market hall. Once the East Market and Arcade vendors are relocated to the new facility, the Arcade should be torn down in order to create a strong pedestrian linkage between Paca and Eutaw Streets, making access to public transportation easy for Market patrons. The East Market block can then be redeveloped, ideally with uses that complement Lexington Market, such as restaurants and other retail.

Operations pro forma

Redevelopment of the market hall provides the opportunity to restructure rents so they reinforce the Market’s mission and support the proposed tenant mix. The proposed program and spaces will produce income from new sources, including special events and education. Vendor rents should be pegged to sales potential and profitability, with staple and specialty food vendors paying a smaller percentage of expected sales than prepared food and nonfood vendors. The following chart shows the recommended rents per square foot for each vendor category:

Reasonable Rent as % Category Vendors SF Rent/SF Annual rent sales/sf sales Staple 17 11,717 $ 700 5% $ 35.00 $ 410,109 Specialty 24 15,623 $ 800 8% $ 64.00 $ 999,885 Prepared Food 21 7,812 $ 1,000 12% $ 120.00 $ 937,392 Nonfood 9 3,906 $ 750 8% $ 60.00 $ 234,348 Total 71 39,058 $ 66.10 $ 2,581,734

The pro forma includes substantial vacancy rates in the initial years since it might take time to fully lease the Market once construction is complete. The farmers’ market shed will produce income from the seasonal outdoor farmers’ market and crafts market. Events/catering, fundraising, city subsidy, and interest all provide additional sources of revenue. Staffing will remain the largest operating expense. The design improvements, new smaller facilities, and reduced public seating should mean a reduction in staffing for security and housekeeping. New staff positions will be needed for operating the outdoor farmers’ and crafts market, for events, and for education. Total operating expenses are estimated at $3.74 million in the first year of operation after construction, a significant drop from FY14 expenditures of $5.20 million. A consolidated profit and loss statement for Lexington Market is provided below, including FY14 and the five years of operations following reopening. While the Market’s

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 9 operating income is lower, operating expenses are much lower, resulting in losses shrinking from $1.2 million in FY14 to $452,000 in Year 5. Assuming parking revenues and expenses stay consistent, the Market should generate about $900,000 per year in net revenue, providing the opportunity to assume some debt to pay for capital improvements.

FY14 Year 1 Year 2 Year 3 Year 4 Year 5

Lexington Market

Adjusted Gross Income $3,982,948 $2,906,514 $3,104,299 $3,297,854 $3,497,567 $3,687,547 Operating Expenses $5,201,540 $3,735,808 $3,832,081 $3,931,342 $4,033,686 $4,139,207 Net Operating Income ($1,218,592) ($829,294) ($727,782) ($633,489) ($536,119) ($451,660)

Parking Income $1,752,255 $1,760,000 $1,760,000 $1,760,000 $1,760,000 $1,760,000 Expenses $432,914 $430,000 $430,000 $430,000 $430,000 $430,000 Net Operating Income $1,319,341 $1,330,000 $1,330,000 $1,330,000 $1,330,000 $1,330,000

Consolidated Operating Income $100,749 $500,706 $602,218 $696,511 $793,881 $878,340

During the construction period, revenues will likely decrease while most expenses will stay constant. Depending on the phasing option selected, Lexington Market might experience operating losses during construction, so these costs will need to be included in the development budget.

Economic impact analysis

Determining the economic impact of the revitalized Lexington Market requires an estimate of total sales generated at the Market both currently and once the plan is implemented. There are two expected sources of sales: the Market’s leasehold tenants and new vendors who participate in the outdoor farmers’ market shed. The consultant team believes that, on average, sales per square foot can double when the master plan is implemented. Sales for existing vendors are currently estimated at about $17.6 million and future sales will be $31.6 million. By way of comparison, Reading Terminal Market vendors reported sales of $49.1 million in 2013. Sales in the outdoor farmers’ market are estimated to reach $2.1 million in year 5 for farmers and $1.1 million for craft vendors. In total, $16.3 million in new sales generates over $30 million in annual output within the region and increases earnings by over $9 million. Lexington Market will generate 268 new jobs in the region. Over a ten year period, assuming output increases 3% each year, the future value of the aggregate impact of Lexington Market on the region would be $351 million. The total economic effects of constructing Lexington Market would represent a one-time increase of $54.2 million by all industries affected by the construction activity. Earnings in the region would increase $17.2 million and employment would increase by 377 jobs.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 10 Financing

The consultant team identified potential sources of funds to pay for master plan implementation from local, state, and federal sources, private philanthropic grants, and debt. Based on the experience of other public markets, implementation of the Transform Lexington Market initiative will require funding from multiple sources. The revitalization of Lexington Market, new programmatic features that will support education and food access, and new and expanded partnerships with health care and veterans organizations (among others) should position the Market well to attract substantial support.

Conclusion

Implementation of the master plan will lead to a wide array of benefits, including reversal of negative sales trends for Market vendors, expansion of the customer base, strengthening of the Market’s unique and historic attributes, sales of fresh, healthy foods, improvements to community wellness, and positive impact on the Downtown Westside neighborhood. Key challenges include keeping the Market in continuous operation during construction, raising the redevelopment funds, rebalancing the mix of vendors, displacing the drug dealing and other negative behavior away from the Market, and making improvements to neighboring properties. If the Lexington Market and the City of Baltimore decide to move forward with master plan implementation, some next steps include: • Selection of preferred phasing option. • Communications with vendors, customers, and the community. • Raise funds from multiple sources to cover the development budget. This will likely require assistance from the City of Baltimore, the Baltimore Development Corporation, and outside experts, as well as enhanced capability on the Lexington Market staff. • Retain an experienced architecture and engineering team to refine the schematic design, conduct design development, prepare construction drawings, and oversee construction. • Retain a construction firm to conduct additional cost estimating based on refined schematics and to manage the redevelopment process. • Retain an Owner’s Representative to help manage the development process. • Continued outreach to Market tenants, farmers, the local community, partners, and new tenants to gain their feedback and suggestions for strengthening the master plan, as well as build support for the project • Refine the leasing, business, and operating plan, working closely with the design team.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 11 Given its size, history, and prime location, Lexington Market has the potential to be transformed into one of the finest public markets in the country, recapturing its former standing as a key economic and cultural institution in Baltimore. This master plan provides a path forward to realize that vision.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 12 Introduction

As part of its Transform Lexington Market initiative, Lexington Market, Inc. retained a team of consultants led by Market Ventures, Inc. to create a master plan that will guide redevelopment of the Market’s facilities and recommend strategies for leasing and operations. During Phase 1, the consultant team performed extensive public engagement, market research, review of best practices, survey of facility conditions, analysis of the development context, and operations review. The results of that work were compiled in the Phase 1 report, which includes a description of the master plan process and methods. That report noted that it is critical to maintain the authentic, core elements that have made Lexington Market a beloved Baltimore institution for more than two centuries, while addressing the Market’s deficiencies in a strategic and cost effective manner. The Phase 1 report concluded with an analysis of the Market’s Strengths, Weaknesses, Opportunity and Threats (SWOT). The SWOT analysis is attached as Appendix A to this report. Key elements of Phase 2 included: 1. Creation of a proposed mission statement and development and design principles 2. Description of program elements and expansion opportunities, including a proposed tenant mix plan and identification of innovations and partnerships 3. Schematic design 4. Operations and management plan 5. Operations pro forma 6. Construction cost estimate and phasing 7. Financing 8. Economic impact analysis During Phase 2, the consultant team met several times with the project’s Steering Committee to review design approaches, discuss financing options, and offer recommendations. In November 2014 the consultant team updated Market merchants at four group sessions by presenting the findings of the market research, the development principles, and the design approach. The merchants’ comments were incorporated into plan refinements.

Consultant team

The consultant team was led by Market Ventures, Inc. of Portland, Maine, and included Ted Spitzer, President, and Senior Associates Hugh Boyd, FAIA, of Hugh A. Boyd Architects and Paul Steinke, General Manager of Reading Terminal Market in Philadelphia. The team included three subconsultants based in Baltimore: Williams Jackson Ewing, Edds Consulting, and Qodesh Engineering, as well as Economic Development Assistance Consortium of Boston.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 13 Mission and design & development principles

Mission statement

As a mission-driven entity, a public market needs to be guided by a clear and implementable mission statement that succinctly describes the market’s purpose. An effective mission statement will be frequently consulted to inform decisions about planning, development, leasing, marketing, and operations. In general, actions and expenditures that do not support the mission should not be pursued. The mission statement also provides the basis upon which to evaluate the Market’s accomplishments. At present, the Lexington Market operates without a mission statement. Based on the Phase 1 market research and the goal statement for Lexington Market that was included in the master plan request for proposals, the following mission statement is proposed for Lexington Market:

The mission of Lexington Market is to serve Baltimore’s diverse citizens and visitors by: • Perpetuating the city’s historic public market tradition through the sale of fresh and prepared foods in a welcoming public space, • Providing affordable retailing opportunities, particularly for independent, locally-owned businesses and regional farmers, • Contributing to community wellness through access to and education about healthy and affordable fresh and prepared foods, and • Supporting the revitalization of downtown Baltimore’s West Side.

This proposed master plan seeks to accomplish this mission. Since a mission statement is such a foundational aspect of operating a public market, it is recommended that the board of directors carefully review this proposal, seek input from key interested parties, adjust it if desired, and then adopt a mission. Periodically, the mission might need alterations as circumstances change.

Design and development principles

The consultant team proposes the following set of development and design principles, which derive from the market research and relevant experience with other similar public markets. These principles are meant to form the core strategies for increasing the customer base at Lexington Market and diversifying the vendors and merchandise mix, as well as improving the physical spaces and supporting the evolving district around the Market, all in an effort to accomplish the Market’s mission. The proposed development principles are:

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 14 1. Create modern, code compliant, energy efficient public market facilities that meet the needs of Market vendors and customers while maintaining the Market’s historical character. 2. Keep a portion of the Market in operation during construction. 3. Utilize environmental design strategies inside and outside the Market to address security concerns while creating a place that welcomes the whole community. 4. Continue to serve current customers while appealing to a wide array of Baltimore area residents, downtown workers, and visitors by offering a diverse range of quality products at affordable prices, particularly local, authentic and unique fresh and prepared foods. 5. Develop the Market in a financially prudent manner so that income exceeds operating expenses, in part by designing the facilities to lower the effective costs of operations. 6. Create special event and education spaces that support the Market’s wellness mission and provide new sources of revenue. These design principles were used to develop the program and schematic design.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 15 Program elements

Based on the results of the market research, the facility analysis, relevant experience with other similar facilities, and the design and development principles, the following presents a recommended program for Lexington Market, including a preferred merchandise mix and a description of new and revised activities and facilities. These program elements become the basis for the schematic design. Key program elements include:

Market hall

Local, independent, owner-operated merchants within an open market hall are the core of the Lexington Market experience. Ideally, public market vendors sell unique items sourced or produced by the merchant, with some of the production taking place within the market to create a rich sensory customer experience. At Lexington Market, the merchants should be an authentic representation of Baltimore’s culture and rich tapestry of ethnicities. They should sell products that meet the needs of consumers from throughout the region, including inner city residents, downtown workers, suburban shoppers, and visitors. Currently Lexington Market has the following mix of staple, specialty, prepared and nonfood businesses (for purposes of analysis, the Paca Street storefronts and the restaurant are excluded from this compilation):

Existing Merchants

Category Vendors % vendors SF % SF Staple food 18 19% 6,804 17% Specialty food 12 12% 11,800 29% Prepared food 53 55% 16,517 40% Nonfood 14 14% 6,050 15% Total 97 100% 41,171 100%

The specialty food category includes Herling’s Grocery at 8,096 sf, which is an anomaly because it is so much larger than other vendors. Without Herling’s, the average size of vendor stalls in Lexington Market is only 345 sf. The three categories of food tenants have an average size of only 330 sf. Excluding Herling’s, the chart below shows that the percent of square feet devoted to specialty foods within Lexington Market drops from 29% to only 11%, or 3,704 sf, while the square footage devoted to prepared foods increases to 50%:

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 16 Existing Merchants (no Herling) Category Vendors % vendors SF % SF Ave sf Staple food 18 19% 6,804 21% 378 Specialty food 11 11% 3,704 11% 337 Prepared food 53 55% 16,517 50% 312 Nonfood 14 15% 6,050 18% 432 Total 96 100% 33,075 100% 345

A key issue in transforming Lexington Market is to rebalance the merchandise mix toward more staple and specialty foods and away from prepared/fast food, unhealthy, and nonfood products. This includes reducing the redundancy of offerings in some categories (such as the Market’s twelve delis and five fried chicken stalls) and filling the holes of missing products and vendor categories (such as specialty cheese, fresh roasted coffee, and fresh baked bread). The mix and price points must continue to appeal to low income consumers while expanding to meet the needs of other groups. The reorientation toward more fresh and specialty foods follows the market research presented in the Phase 1 report, which identified both increased consumer demand for fresh, healthy foods and the social imperative for helping to change consumers’ diets in order to address obesity and the epidemic of diet-related diseases. The rebuilding of the Market’s facilities, which includes updating and improving the equipment and merchandising of individual vendor stalls, reflects heightened public concerns and more stringent laws about food safety and strong competition from supermarkets and other retailers. Based on the increasingly competitive local market for grocery, meal replacement, and dining, Lexington Market needs to reestablish its unique place within the food sector by returning to its roots as an authentic public market that offers interesting foods sold by knowledgeable and passionate independent entrepreneurs. To guide planning and ongoing leasing efforts, the consultant team recommends that Lexington Market adopt targeted percentages for each of the four vendor categories for both the number of vendors within each category and the percentage of square feet in that category. Reading Terminal Market adopted merchandise mix targets similar to these in the 1990s to maintain the balance of fresh and prepared foods. These targets proved to be an effective way to control the merchandise mix and they are still used there to guide leasing decisions today. The proposed targets for Lexington Market include both the number of vendors and the percent of leasable square feet. These numbers are different because the average square feet varies between the categories, with staple food vendors typically needing larger stalls: Lexington Market Master Plan Tenant mix goals Target Category % vendors % SF Staple food 25% 30% Specialty food 35% 40% Prepared food 25% 20% Nonfood 15% 10% Total 100% 100%

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 17

These targets represent a significant shift from the current percentages. If implemented, these targets will reorient Lexington Market from being mainly a place to buy fast food to being a source of predominately fresh and specialty foods (60% of vendors and 70% of square feet). At the same time, these targets will not substantially limit customer access to prepared foods within the Market because we recommend allowing fresh and specialty food vendors to sell some prepared foods. This change, creating more “hybrid businesses” that are primarily fresh or specialty food businesses but sell some prepared foods, will increase the profitability of fresh and specialty food vendors while reducing the number of businesses that only sell fast foods. An important affect of this change is that it makes fewer businesses highly reliant on the lunch trade. A danger in creating hybrid businesses is that, without strict prohibitions that prevent staple or specialty food businesses from selling prepared foods, they will morph over time into fast food vendors. To prevent this from happening, Lexington Market should utilize lease and design controls that explicitly limit how much space within each stall is devoted to cooking and which mandate the sale of fresh and/specialty foods. Guidelines are needed to define each type of vendor. Suggested definitions for each product category include: a. Staple foods, including meat, poultry, seafood, produce, and dairy. The focus here is on offering an abundance of raw, fresh products, with limited frozen items. Vendors should provide added-value services within their stalls, such as custom butchering and fish filleting. To differentiate the Market from other retailers and support the region’s farmers, vendors should be encouraged to carry locally raised products. To increase profitability, staple food vendors should be permitted a small amount of area and equipment to make prepared foods. While rents for staple food vendors should generally be the lowest in the Market, staple food vendors who have prepared food areas can support higher rents. b. Specialty foods, including baked goods, cheese, coffee, pasta, chocolate and candy, nuts, condiments, spices, deli meats/charcuterie, ice cream, wine and beer, etc. Where practical, food production (and innovation) should be encouraged within the Market, including bread baking, cheese making, sausage making, ice cream production, pasta making, pickling, etc. Again, a limited amount of food to eat on premises should be permitted. c. Prepared food. Customers like to eat within public markets and a substantial range of prepared foods should be offered, mindful that the Market should not be a food court. Prepared foods concepts should reflect Baltimore’s ethnic and cultural mix, with particularly attention to healthy products. To ensure authenticity, merchants should have deep experience and connection to the ethnic foods they sell. Ideally, prepared food vendors will offer some specialty or grocery items as well which correspond to the merchandising theme. d. Nonfood, including hand-made crafts, services, and general merchandise. Vendors who fall under the craft category should sell only items hand-made by the vendor or local artists. Craft vendors should be selected for the quality and variety of their

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 18 products. Service items might include ATMs, shoe shine, and barber. General merchandise should predominately relate to food and cooking, such as a cookbook store or cookware, and exclude unrelated products such as telephone services. Unhealthy products, such as tobacco and e-cigarettes, should be excluded from the Market.

Merchandise mix The chart below shows a proposed tenant mix, which achieves the goal of rebalancing the merchandise to include a greater percentage of fresh and specialty foods, and fewer prepared food and nonfood vendors. The chart includes Lexington Market’s existing mix of merchants in the pink columns, the merchandise mix at Reading Terminal Market in the blue columns (as a point of reference), and the proposed mix for Lexington Market in the green columns. The total number of merchants drops from 97 to 71 but the leasable square footage only drops from 41,171 to 39,046 sf, a reduction of 5%. This slight contraction of square footage will allow the Market to fit within a rebuilt East Market (discussed in the Schematic Design section) and thereby substantially reduce the Market’s operating costs. The plan reduces redundancy and creates larger individual vendor spaces, providing the facilities to create and display a wider array of interesting and appealing food products. While this plan has fewer vendors than today, Lexington Market will still be one of the largest public markets in the country. When implemented, this merchandise mix plan would result in a public market with more leasable square footage than Reading Terminal Market and about the same number of vendors.

Existing LM Merchants Reading Terminal Mkt Proposed LM

Category Vendors SF Vendors SF Vendors SF Staple food 18 6,804 14 8,588 17 11,696 Dairy 0 - 1 341 1 400 Meat 3 1,170 5 1,705 4 2,600 Poultry 5 1,560 1 542 4 2,400 Produce 5 1,713 4 4,051 4 3,600 Seafood 5 2,361 3 1,949 4 2,696

Specialty food 12 11,800 23 10,397 24 14,800 Bakery 6 2,121 7 2,846 6 3,300 Candy/chocolate 2 630 3 1,808 3 1,800 Cheese 0 - 2 967 2 1,600 Coffee/tea 0 3 863 2 1,600 Deli* 3 1,800 Grocery 1 8,096 1 560 0 - Ice cream 1 360 1 377 1 400 Nuts 1 220 1 658 1 500 Pasta 0 1 757 1 750

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 19 Existing LM Merchants Reading Terminal Mkt Proposed LM

Category Vendors SF Vendors SF Vendors SF Specialty food/Spices 0 2 582 2 1,200 Supplements 1 373 1 179 1 250 Wine/beer 0 1 800 2 1,600

P repared food 53 16,517 27 10,983 21 8,750 Carry out 22 6,349 12 4,824 8 3,200 Deli* 12 3,550 3 1,609 3 1,650 Fried chicken 5 1,366 0 2 700 International 14 5,252 12 4,550 8 3,200

Nonfood 14 6,050 9 2,317 9 3,800 Beauty 2 580 1 146 1 350 Flowers 1 654 1 391 1 650 Gifts 0 - 0 1 250 Jewelry 1 180 2 339 0 - Liquor 1 280 0 0 - Retail 1 240 4 1,401 3 1,500 Service 6 3,209 1 40 3 1,050 Tobacco 2 907 0 0 -

TOTAL 97 41,171 73 32,285 71 39,046

For the staple and specialty food vendors, the consultant team recommends increasing the average square feet per stall. These averages are only targets: they will likely change during the design and leasing process. Furthermore, the Market should be designed so there is flexibility to meet the needs of new vendors who might need more or less space than proposed. The following two charts summarize the merchandise mix plan by categories of products and by both the number of vendors and the square feet proposed for each category. The charts below provide a graphic representation of the information:

Number Vendors Existing Merchants Reading Terminal Market Proposed LM Category Vendors % vendors Vendors % vendors Vendors % vendors Staple food 18 19% 14 19% 17 24% Specialty food 12 12% 23 32% 24 34% Prepared food 53 55% 27 37% 21 30% Nonfood 14 14% 9 12% 9 13% Total 97 100% 73 100% 71 100%

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 20

SF of Vendors Existing Merchants Reading Terminal Market Proposed LM Category SF % SF SF % SF SF % SF Staple food 6,804 17% 8,588 27% 11,696 30% Specialty food 11,800 29% 10,397 32% 14,800 38% Prepared food 16,517 40% 10,983 34% 8,750 22% Nonfood 6,050 15% 2,317 7% 3,800 10% Total 41,171 100% 32,285 100% 39,046 100%

Number of Vendors Lexington Market Master Plan 100

90 18 80 12 70 14 17 60 Staple food

50 Specialty food 23 40 53 24 Prepared food Nonfood 30 27 20 21 10 14 9 9 - Lexington Mkt Reading Terminal Proposed

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 21 Leased Square Feet Lexington Market Master Plan 45,000

40,000 6,804 35,000 11,696 30,000 11,800 8,588 Staple food 25,000 Specialty food 20,000 14,800 Prepared food 10,397 Nonfood 15,000 16,517

10,000 10,983 8,750 5,000 6,050 2,317 3,800 - Lex Mkt Reading Terminal Proposed

% of Vendors Lexington Market Master Plan 100% 19% 90% 19% 24% 25% 80% 12% 70% 32% Staple food 60% 34% 35% 50% Specialty food 40% 55% Prepared food 37% 30% 30% 25% Nonfood 20% 10% 14% 12% 13% 15% 0% Lexington Mkt Reading Terminal Proposed Goal

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 22

% of Vendor Square Feet Lexington Market Master Plan 100% 90% 17% 27% 30% 80% 35%

70% 29% 60% Staple food 32% 50% 38% Specialty food 40% 40% Prepared food 40% 30% Nonfood 34% 20% 22% 20% 10% 15% 7% 10% 0% 5% Lexington Mkt Reading Terminal Proposed Goal

Restaurants

The expansion of University of Maryland Baltimore and new housing in downtown’s west side provide the opportunity for additional space devoted to restaurants. Like the Market’s current restaurant tenant Memsahib, restaurants should have their own entrances so they can be open later hours than the market hall. To be supportive of the rest of the Market, however, they should be required to be open for at least two meals daily. Restaurant tenants should preferably be independent operators and they should have purchasing practices that enhance the Market’s mission of supporting regional farmers. The growing population and the expansion of the customer base suggest that up to four restaurants can be accommodated in spaces in or around the market hall.

Farmers’ and crafts market shed and event space

To meet the goal of supporting Maryland farmers and crafters, and to differentiate the Market from food retailing competitors, the redevelopment should include an outdoor shed structure that can host a farmers’ market. The farmers’ market can become the downtown source for local fresh food sold directly by farmers and fishermen in a unique atmosphere. Initially, the farmers’ market should operate seasonally and a few days per week, but over time it can expand to go year-round (as do numerous outdoor farmers’ markets in climes further north than Baltimore). The shed can also accommodate an outdoor crafts market, which ties into the Bromo Arts District and provides space for craft entrepreneurs, as well as for outdoor events. The size of the shed will depend on the site qualities but a facility that can accommodate

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 23 50-60 stalls is reasonable.

Storage

Tenants and management both require storage space. Some vendors need continual access to cold storage, such as seafood and meat vendors; they would greatly benefit from having walk-in coolers within their stall on the Market floor. For other vendors, storage away from their stalls is sufficient, with the Market’s basement a likely location. Storage needs vary by vendor but 100-200 square feet per vendor provides a good baseline, with the option for cold and/or dry storage. Large, low cost storage spaces provide vendors with the opportunity to purchase more items in bulk and reduce their expenses. Storage locations could also be used for innovative programs such as a Community Supported Agriculture (CSA) initiative, where customers prepay for fresh products and pick up a weekly box. This might be an opportunity for partnerships with area hospitals who are increasingly getting involved with health initiatives focused on changing diets, as well as with local farmers or fishermen.

Education/events

In support of the Market’s mission of “contributing to community wellness through access to and education about healthy and affordable fresh and prepared foods,” and to provide additional sources of income, the Market’s redevelopment should include a variety of flexible special event and education spaces. These could host small meetings up to larger events such as weddings. Education and event spaces that have been successfully developed in other public markets include: 1. Demonstration kitchen: a “show kitchen” suitable for TV broadcast and classes. These typically seat 25-50 people, although can be larger as part of a special event room. 2. Hands-on teaching kitchen. The new Grand Rapids Downtown Market has the country’s first teaching lab designed for kids and adults, with adjustable height cooking surfaces that can be lowered with the push of a button to accommodate 6-7 year olds or raised to adult height. That facility includes six cooking stations plus an instructor’s station, with cook top, sink and prep area on each station, plus video screens at every station and a shared eating area. 3. Rooftop greenhouse. A greenhouse can be used to teach people about how food grows, how to become an urban gardener, and for events. A green roof on top of the farmers’ market shed might provide an opportunity for gardening education. 4. Meeting rooms, which can incorporate technologies such as projection screens and conference calling and can be rented for small meetings or classes. To maximize revenue from events and catering, the Market will need to secure a liquor license to support its event programs and potentially have its own catering staff.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 24 Customer seating

Since many people come to Lexington Market wanting to eat, there needs to be customer eating areas. At present, nearly all of the Market’s eating areas are clustered in the Arcade, with stand-up tables downstairs within the Arcade center court and tables and chairs on the upstairs mezzanine. The Market also provides some stand-up eating areas adjacent to Herling’s Grocery, while Faidley’s Seafood has stand-up tables within their leasehold. The size and configuration of eating areas have contributed to the high cost of housekeeping services within the Market, and create the perception that the Market is a food court. To lower operating costs and change the perception that Lexington Market is a food court, the consultant team recommends three steps: 1. Reduce the number of fast food vendors. 2. Shift a portion of customer seating from common areas to vendor leaseholds. 3. Reduce the space devoted to common area seating. Since the proposed square footage of vendors serving exclusively prepared foods is suggested to drop by half, the total seating can drop by about half, to approximately 300 seats. If half of these 300 seats is provided by tenants within their leaseholds, then the other half (150 seats) can be provided as common seating by the Market, allowing groups of customers to purchase from various vendors but still sit together. Within vendors’ stalls, responsibility for maintenance and customer behavior will shift from the Market staff to the vendors who directly benefit from fast food sales.

Shared commercial kitchen

Commercial food production facilities that can be rented by the shift or through monthly membership are becoming common in public markets. These can be used for a kitchen incubator program that provides support and training to targeted entrepreneurs. A shared commercial kitchen within Lexington Market can serve three distinct groups effectively: 1. The Market’s leaseholds merchants can use the shared kitchen to expand their food production capacity, which can be particularly important during seasons or holidays that drive substantial but short term demand. Merchants might also use the kitchen to experiment with new recipes or products, or to create value-added products that they can sell at their stalls or through mail order channels. 2. Area entrepreneurs can rent the facility to help launch or grow their food businesses. By virtue of its location within Lexington Market, the shared kitchen will provide users with unique advantages around ingredient sourcing, marketing, and education. Shared kitchen users can buy their inputs directly from Market vendors or gain information about good places to source. They have the potential to sell their products on a wholesale basis to Market merchants or directly to consumers from the farmers’ market shed or short term “day tables” within the market hall. Finally, shared kitchen users can find mentors among the experienced food producers and retailers within the Market. Some kitchen incubator programs offer participants free or reduced rate retailing space within the farmers’ market so they gain feedback and

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 25 exposure from customers. The shared commercial kitchen will benefit from partnerships with organizations that provide entrepreneurship training or business development, and can be a good location for student internships. 3. Market management can utilize the commercial kitchen to support the Market’s education or special event education programs, particularly for catering large parties or for teaching food handling classes or other certifications. Recent examples of shared commercial kitchens in public markets range from 3,000 to 5,000 square feet. They sometimes have several distinct production areas so multiple users can work simultaneously and the kitchen can produce a variety of products.

Office and employee lockers

A public market management office provides an essential customer service function for both vendors and the public, offering information, adding to security, and providing a place to direct complaints or concerns. At present, the Lexington Market management office is located on the East Market mezzanine, at the end of a corridor and behind solid walls. To improve the Market’s customer service orientation and increase security, the Market office should have glass walls and be visibly part of the Market experience. The Market office must be big enough to accommodate a growing professional staff in order to run special events and education programs.

Bathrooms

The facility analysis highlighted numerous physical problems with the bathrooms, suggesting that they need to be replaced. The bathrooms should be highly durable, easy to clean, reflect best practices in sustainability, and feel safe. Given the popularity of Lexington Market, adequate bathrooms are needed to handle large crowds. Ideally, the management office will have a clear view of the main bathroom entrances, increasing the perception of safety, or they should be located on the main floor. If the main public bathrooms are in a remote location, employee bathrooms should be located on the main floor.

Parking

To attract customers from the entire region, the Market will need to continue to provide convenient and inexpensive parking. The Lexington Market Garage, which is located adjacent to the West Market and managed by the Market, has been an important source of revenue to Lexington Market as well as a source of convenient customer parking. The garage’s net operating income of about $1.3 million has offset losses in the market halls, ensuring that Lexington Market operates in the black. If the market hall function is consolidated in the East Market (as discussed below), Lexington Market should take over management of the Market Center Garage, which is located adjacent to the East Market, in a swap with the Lexington Market Garage. This would free up the entire West Market block for redevelopment. At one time, there were direct entryways between the Market Center Garage and the East Market; these have been blocked for security reasons but perhaps can be redesigned so they feel safer. Re-creating direct links between the

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 26 garage and the Market hall would provide an important amenity to customers and should be explored. Alternatively, if the market hall moves to the West Market block (discussed in phasing options, below), then the Lexington Market Garage will be an integral part of the redevelopment in its current location.

Building services

Lexington Market requires building services such as waste/recycling facilities and adequate loading docks. Vendor delivery vehicles come in all sizes, from cars and vans to semis, although deliveries are typically done in medium size straight trucks. The facility needs both loading docks and easy access points that accommodate small vehicles. Public markets are increasingly looking at sustainable or green practices for their waste handling. A major recoverable waste stream is corrugated boxes. These are best handled in a separate trash compactor so the boxes do not need to be broken down before compaction. Vendors will need training to prevent wet or soiled boxes from being mingled with clean boxes since it affects the fees or credits offered by recycling companies. Some public markets separate food waste and have composting services or area farmers who will take organic waste streams. Some markets have experimented with bio-digesters, which promise to turn food waste into water. However, with so many vendors and customers, it has proven to be difficult and expensive to maintain the “clean” and consistent waste stream that is needed for bio-digesters. Other waste streams that can be diverted include glass and plastics. These require spaces to store recycled materials, separate trash cans, and strong training and communications programs to change users’ behavior.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 27 Schematic design

The consultant team explored options for incorporating the proposed development program, including the tenant mix plan and new programmatic facilities, into the Lexington Market properties.

Existing layout

The following drawing shows the current configuration of Lexington Market properties, with the yellow showing aisles/customer circulation paths and the pink showing leasable areas:

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The site plan drawing demonstrates the substantial separation between the West Market and the core market activity in the East Market. A close-up drawing of the East Market and Arcade (below) demonstrates the very tight aisles in the East Market and the low ratio of leasable space (pink) to common areas (yellow) in the Arcade:

The drawing below shows the mezzanine level in both the East Market and Arcade. The dark yellow shows the Market office and the green shows the public bathrooms. The large yellow areas in the Arcade are the public seating zone. The large rooms on the Eutaw Street side of the mezzanine were once used for bingo and other events but are currently used for storage:

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This section through the East Market (below) shows the steep rake of the floor plus the high ceiling heights throughout the space. The mezzanine currently exists on three sides of the East Market, stepping down as it approaches Eutaw Street:

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As enumerated in the SWOT analysis, the East Market building faces serious problems: 1. While the East Market is in acceptable structural condition, there are numerous deficiencies with all the building’s systems, including clogged plumbing, inadequate electrical, inefficient HVAC, and fire safety violations. Poor ventilation contributes to the strong odors and grease laden vapors that coat people’s clothes when they visit the Market. 2. The steep slope is not ADA compliant, making it very difficult for customers in wheelchairs to utilize the Market. 3. Since vendor spaces are flat and customer walkways are sloped, there is no flexibility to adjust the size of vendor spaces to meet tenants’ space needs. 4. The tight aisles do not accommodate the number of customers and create hidden and narrow spaces, making the Market feel unsafe. 5. Many of the vendors’ spaces are physically deteriorated, with old display cases and poor lighting. 6. The stall configuration provides many vendors with too much frontage on aisles and not enough back-of-the-house space. As a result, many vendors do not merchandise toward all of their aisles but rather use the space for storage or have created solid walls facing the aisles. 7. There are too many exterior doors, making security difficult. 8. There is almost no natural light. The Arcade also faces serious problems, including: 1. Significant problems with existing mechanical systems, making it very expensive to operate. 2. Low ratio of leasable space to common areas, making it economically inefficient. 3. Too large seating area on the mezzanine level. 4. Uninspiring design.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 31 Proposed development concept

Based on the proposed tenant mix program and the development principles, the consultant team recommends concentrating the market hall activity into a single, rebuilt market hall, either within the existing East Market building envelope or in a new structure that would replace the West Market. Either facility is large enough to accommodate the entire tenant mix plan and can be operated much more efficiently, lowering operating expenses. The consultant team presented several design approaches to the Steering Committee, focused on consolidating the market hall function in the existing East Market structure. The development approach is the same if the market hall is located on the West Market block. The Steering Committee accepted the team’s recommendation for a plan with the following key elements: 1. Maintaining the East Market building envelope but gutting the interior, creating a flat floor that stretches from Paca Street (at grade) to Eutaw Street (second story), and developing a partial lower level that has entrances at grade on Eutaw Street and staircases and perhaps escalators and elevators to bring customers to the main level. 2. Replacing all of the Market’s plumbing, electrical, and mechanical systems with new, efficient technologies. 3. Rebuilding all of the vendor stalls in the East Market on the flat floor with larger spaces, better sight lines, smaller display zones, improved mechanical systems appropriately sized for cooking capacity, high efficiency LED lighting, and more storage. 4. Maintaining the individuality of each vendor but introducing design standards that ensure sight lines, quality fixtures, and food safety improvements. 5. Creating fewer but wider aisles and fewer exterior doors. 6. Creating new event and education spaces within the East Market, including a demonstration kitchen, shared commercial kitchen, and hands-on cooking lab. 7. Replacing the Arcade building with a shed structure that will contain a farmers’ and crafts market, plus event space and seating on the roof. This facility and the adjacent parking lot can be used for specialized markets on holidays and ethnic festivals. 8. Rebuilding the West Market as part of a second phase (if there is demand for additional vendor space or for restaurants) or make it available for a mixed-use development that will benefit both the West Side and Lexington Market.

East Market, section view The drawing below shows a section view with the installation of the flat floor within the East Market. Key design components include: 1. Elimination of the mezzanine on the Eutaw Street side of the building so there is spacious ceiling height throughout the Market. 2. Installation of all new plumbing and electrical service from underneath the new floor, limiting the need to chop up the existing concrete floor.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 32 3. Retention of the existing basement, following a complete gutting, creation of six flat sections that step up from Eutaw to Paca Streets to replace the sloped floor, and installation of proper building systems. 4. Installation of sawtooth clerestory windows on the roof to introduce natural lighting into the Market. Since direct sunlight can damage food products and create too much heat gain, the windows should be oriented toward the north (they face east in the drawing to illustrate the concept). An initial review by the consultant team’s structural engineer suggests that the new flat floor can be supported by carrying the existing columns through the new floor to the existing beams in the basement ceiling. The roof area could potentially include solar panels or a green roof system to improve the Market’s sustainability.

East Market, plan view The proposed schematic layout for the East Market (below) includes 31,713 sf of leasable area on the main floor and 7,345 sf of leasable area on the lower level. The main floor plate is about 59,220 sf. The plan includes numerous changes to the existing layout to enhance the experience for both vendors and customers. Some key design elements include: 1. Fewer common doors so the Market is easier to police. Several vendors can have their own doors (as Faidley’s does currently) so these businesses can potentially be open expanded hours. 2. Increased use of glass on the building edges to improve transparency and safety. 3. Flat, wider aisles, which will reduce congestion and improve safety, and increase visibility of all vendors throughout the Market. 4. Fewer aisles, making it more likely that customers will wander throughout the entire

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 33 Market and impulse buy from more vendors. 5. Rebalancing the ratio of vendor display area (linear frontage along customer walkways) to back-of-house space, so vendors will not make part of their aisle frontage into storage areas or walls, as they do now. 6. Limited common area seating in several spaces around the East Market. The schematic plan shows 292 seating spaces on the ground level and 88 seats on the mezzanine. Vendor stalls are now adequately large for vendors to accommodate their own seating, if desired. These seating areas could also be used for day stall vendors or other flexible uses. 7. Creation of an infrastructure grid system within the vendor spaces so there will be flexibility of stall size and design over time. 8. Relocation of waste management services to the main floor, eliminating the need to haul garbage down and up from the basement. 9. Farmers’ market shed directly connected to the market hall to encourage customer circulation inside and outside the building. 10. Public bathrooms on the main floor.

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Greater detail can be seen in this close up view of the market hall:

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Lower level, East Market The lower level will be located at-grade on Eutaw Street. The gross area of the lower level is 14,990 sf and includes 7,345 sf of leasable area. The area is adjacent to the full Market basement, which is approximately 60,500 sf. To improve security, the Eutaw Street frontage has only two public doors, plus doors

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 36 entering directly into vendor spaces (potentially restaurants or a hybrid vendor restaurant such as a bakery/café). Large staircases and escalators bring customers from the lower to the upper level.

Mezzanine, East Market The schematic design shows a partial mezzanine level, with the Market management office, event/education spaces including the demonstration kitchen/event room, cooking lab/Kids’ Kitchen, the shared commercial kitchen, and common area seating that looks over the green roof on the farmers’ market shed. Public seating on the mezzanine drops from 500 seats in the Arcade’s upper level to 88 seats on the mezzanine in this initial plan (plus 292 spaces on the ground level and the potential for outdoor seating around the farmers’ market shed). The office should be redesigned with liberal use of glass walls to dissolve the barriers between the office and the life of the Market.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 37

Appendix B includes photographs of a successful two level public market, the St. Lawrence Market in Toronto, which also had to address a significant slope. The proposed design

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 38 solution for Lexington Market is similar to St. Lawrence Market, which has on-grade openings at both entrances and staircases and elevators within the Market. Appendix B also has photographs of outdoor farmers’ market sheds that could be models for Lexington Market.

Neighborhood improvements

As noted in the Phase 1 report, the appearance of many of the streets and buildings immediately around the Market is unkempt and uninviting. Surrounding the Market are a number of vacant or poorly maintained buildings, broken sidewalk sections, empty tree pits, messy tree pits with missing grates, and untended landscaping. The Market’s immediate surroundings need attention by property owners and the city. Public right-of-ways should be repaired and replanted as needed. Effective ongoing maintenance strategies should be developed. A “Main Street” initiative, including stepped-up code enforcement and resources for façade and sign improvements, might be an effective approach to address the problems presented by the private properties.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 39 Operations and management plan

Based on national models and experience, the consultant team makes the following recommendations for adjusting the operational schedule and other key site management issues, including staffing, waste management, marketing, and leasing.

Operating schedule

Lexington Market is currently open from 8:30 am to 6 pm, Monday through Saturday. Tenants with their own doors, such as Memsahib Restaurant and the barbershop, set their own hours. At present, Memsahib is only open for three hours on weekdays for lunch and for two hours for dinner Tuesday through Saturday. As noted in the Phase 1 report, customers expressed strong interest in Sunday hours and Sundays have become the busiest shopping day of the week in the supermarket industry. Many public markets are now open on Sundays, including Reading Terminal Market, and have found that Sundays are their second busiest day, after Saturdays. At Lexington Market, opening on Sundays will greatly enhance the Market’s ability to attract customers from throughout the region because many residents only have leisure time on the weekend to visit downtown Baltimore. There is considerably less traffic on Sundays than midweek and greater availability of parking. It is strongly recommended that Lexington Market add Sunday hours as part of the transformation process. The 6 pm closing time discourages sales among downtown residents who do not have time to visit the Market after work. At least one additional hour of operation (open until 7 pm) would likely increase sales and serve shoppers better.

Staffing

As noted in the Phase 1 report, Lexington Market has an extraordinarily large security staff (21 employees) compared to other large downtown public markets. Drug sales and other factors, such as the presence of substance abusers and people suffering from mental health ailments, make the blocks around Lexington Market uncomfortable for visitors. For Lexington Market to be successful, it must become a welcoming place where everyone feels safe and where miscreant behavior is not tolerated. The Phase 1 report identified a multipronged strategy to address these problems, including: • Substantial disruption of the current physical spaces during construction to displace the drug sales. • New upgraded facilities that employ environmental design components such as glass storefronts which provide more “eyes on the street,” fewer entrance doors, and elimination of dark corners and narrow aisles within the Market. • New merchants and product offerings that attract a wide spectrum of shoppers from throughout the region. • Training to improve the ability of merchants and their employees to take an active

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 40 role in security. • Ongoing concentrated efforts of police and Market security, working in partnership with social service agencies and other interested parties. Taken together, these initiatives, along with a concentration of market hall activity into a single location, should lower the need for such as extensive security infrastructure, although the Market should maintain a robust security staff until improvement is evident. The Market also has a very large housekeeping staff (23 employees). The reduction in common seating areas and new facilities that are designed to be more cleanable will lower the need for such a large staff. While they are organized as two separate corporations, Lexington Market and the Baltimore Public Markets share some management staff, with the Executive Director overseeing all of the city’s public markets. The Executive Director’s office is located at Lexington Market. The recommended site management staff for Lexington Market includes: • Executive Director (two-thirds of compensation assigned to Lexington Market and one-third assigned to Baltimore Public Markets) • Leasing and Tenant Coordinator • Marketing and Education Director

o Special Events Coordinator o Education/Partnership Coordinator o Event staff/bartender • Operations Director

o Security lead and security staff (7 FTE) o Maintenance Leader and Maintenance Assistant (2 FTE) o Housekeeping Leader and housekeepers (8 FTE) • Controller/Office Manager

o Receptionist/Administrative Assistant

The Market management staff is well positioned to utilize student interns, perhaps as part of a partnership with UMB or other area schools. Interns can help strengthen the Market’s administrative, marketing, event, and education functions. Numerous Market tenants, particularly a number of Korean business owners, do not speak English well. Since no one on staff speaks Korean, Market management utilizes other vendors when translation is needed. Lexington Market needs access to language translators for both oral and written communication, and would benefit from a management employee who is fluent in Korean.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 41 Waste management

As described above in the design section, the rebuild offers the opportunity to enhance the Market’s waste management practices, increasing efficiency and implementing sustainable practices. This program will require participation by Market management, vendor employees, and the public, with training and communication needed for each group. A major recoverable waste stream is corrugated boxes, which could be bundled or go into a separate trash compactor so the boxes do not need to be broken down before processing. The Market will need to implement a vendor training program to educate employees about new waste handling procedures. The Market should also implement a program to divert glass and plastics from the general waste stream.

Marketing

Lexington Market currently provides a variety of marketing services, including a regular program of live music in the Arcade, staging of festivals, a web site and Facebook page, and about four major events per year. Educational programming is offered in concert with partnering organizations, including health fairs, literacy programming for youth, and art activities. The Market presently operates without an annual marketing plan that is tied to specific goals and objectives, or that is informed by market research or evaluation. The Marketing Director does not work from a set annual budget but rather seeks approval for individual initiatives as they arise. The marketing function at a public market typically seeks to achieve a variety of objectives: • support the Market’s mission

• build awareness and positive impressions about the Market among consumers, particularly those likely to be frequent shoppers or high spenders

• inform the public about the Market’s events, cooking classes, other programs, and space rentals

• position the Market to attract high quality merchants to fill vacancies

• build community support and goodwill Public market management typically employs a range of marketing methods to achieve these objectives, including advertising, signage and “four walls” marketing (marketing efforts within the facility), social media, festivals and events, promotions, signage, charitable events, and partnerships. These marketing activities are in addition to (and should be coordinated with) the marketing activities of individual merchants. It is important to understand that Market management’s marketing efforts do not directly create sales for Market vendors or fulfill the marketing needs of each vendor. Each business must take responsibility for converting potential buyers into regular customers. Each individual Market business needs its own marketing plan and marketing resources. Furthermore, marketing

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 42 cannot overcome deficiencies such as vendors not being open for business during posted hours, weak customer service, or low quality merchandise. Going forward, Lexington Market would benefit from an annual, written marketing plan and sufficient resources to implement the plan. The plan should be based on market research and follow best practices from other public markets nationally and similar venues locally. The market research conducted as part of the master planning process provides good baseline data about current and targeted customers. The marketing plan and budget should include regular market research activities, such as customer intercept surveys and focus groups, to track the Market’s evolution and provide guidance for future marketing initiatives. The marketing plan requires three separate strategies for the construction period, the grand reopening, and ongoing operations. Market vendors should be encouraged to develop and implement their own marketing programs, coordinated with the Market’s efforts. Some key issues for each period include: 1. Construction period: Leading up to and during the construction period, the Market’s existing, loyal customers must be encouraged to keep visiting the Market in order to sustain the vendors while improvements are coming. Customers must be made aware that the Market will continue to operate during the construction period, and that Market vendors need them to keep shopping, otherwise many will assume that the Market is closed for construction. Consistent communication with current customers is important. 2. Reopening: Lexington Market is well known throughout the region and many residents have positive memories of the Market from the past. This emotional affinity will need to be carefully wed with a reintroduction of the Market once the construction is complete, inviting customers back to see the major changes that have taken place in order to make the Market more like it used to be, recreating the qualities that they loved about Lexington Market but made up-to-date, welcoming, and attractive. 3. Ongoing operations. The Market requires a strong, consistent marketing program that is tied to clear objectives and metrics. There should be an annual budget devoted to marketing, partnerships developed with organizations that overlap the Market’s mission, and an ongoing research program to evaluate the program’s success and inform future marketing efforts. The University of Maryland Baltimore, the University of Maryland Medical Center, and the Baltimore Veterans Administration Medical Center are Lexington Market’s largest close potential sources of customers, with a weekday population of over 30,000 people, including faculty, staff, students, and visitors. Some are as close as one-half block away. This population includes well-paid physicians, researchers and administrators, as well as many medical technical and support staff. While many purchase lunch on or near campus, few now go to Lexington Market regularly. The rebuild offers the opportunity to re-introduce UMB affiliates to Lexington Market for a variety of food purchasing opportunities, such as lunch-time purchases; catering for seminars, work sessions and meetings; and personal and corporate gift giving. The event and education spaces could also be marketed to UMB as nearby, off-campus locations for meetings or seminars.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 43 Since 2000, Downtown Westside has added more than 1,800 residential units in converted commercial or new buildings. The population within one-half mile of the Market is currently just under 10,000 people. The close proximity of these residents gives Lexington Market a clear advantage to become their primary destination for food shopping. As mentioned above, adding Sunday hours and keeping the Market open at least one hour later will better serve these residents; a broader variety of merchandise and better merchandising will also meet their interests. Marketing efforts can be directed at informing these residents of the Market’s new and improved offerings. The newly branded Bromo Arts District is also an opportunity for Lexington Market. The District’s purpose is to realize the area’s potential as a thriving arts neighborhood in downtown Baltimore. The district seeks to attract city and regional visitors to its attractions including the France-Merrick Performing Arts Center, Everyman Theater, and the galleries and studios of artist residents. Lexington Market is seen as a key asset within the district and the Market should work closely with the Bromo District’s organizers to offer itself as a venue for arts promotion and programming, and as a supplier of food for events throughout the district. The introduction of the crafts market component of the outdoor shed market provides a signature opportunity to anchor Lexington Market within the Bromo Arts District.

Leasing

To achieve the tenant mix goals described above, a substantial leasing effort will need to coincide with the Market’s physical improvements. Since the plan calls for the absolute number of tenants to shrink and for the mix of product offerings to change, there needs to be a clear process for decision-making in terms of selecting tenants. In total, the plan calls for 71 vendors, down from 97 vendors. • The number of staple food vendors stays nearly constant at 17 from 18 although square footage for staple foods is recommended to grow substantially from 6,804 to 11,696 sf. • The number of specialty food businesses is recommended to grow from 12 to 24. • The number of prepared food businesses shrinks from 53 to 20. • The number of service/nonfood businesses is recommended to shrink from 14 to 8, and the square footage devoted to service/nonfood businesses is recommended to shrink from 6,050 sf to 2,850 sf. As noted in the Phase 1 research, current vendors are optimistic about the future if physical and operational improvements can be made to the Market. While they are concerned about disruption to their businesses, many expressed a desire to see the Market closed, rebuilt, and then reopened. They want the proposed improvements to happen quickly. Research into new vendors found strong interest among high quality specialty food businesses in the Baltimore-Washington area. They want to see the Market made safer, cleaner, and have a better merchandise mix, but they do not want to see it made upscale or deviate far from its historic past.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 44 Tenant selection process To ensure a consistent and fair process for all Market vendors, the consultant team recommends that Lexington Market adopt tenant selection criteria. Every tenant should be evaluated against these criteria, whether they currently have a lease at Lexington Market or whether they are new or returning vendors. The criteria should take into account if a vendor is already a tenant of Lexington Market and favor those vendors who have contributed to the Market. The proposed tenant selection criteria include: 1. The applicant is a Lexington Market vendor in good standing (up to date on rent, no current violations, has demonstrated good customer service, etc.). Assuming the vendor is in good standing, he or she should receive preference over outside vendors. 2. The product offering meets the tenant mix plan (rebalancing of staple foods, specialty foods, prepared foods and services, with an increased focus on fresh and specialty food products, less redundancy of prepared food concepts, no tobacco). 3. The vendor sells high quality and affordable products and services, including unique, locally sourced or produced items. 4. The owner will be involved in daily operations. 5. The business is an authentic reflection of Baltimore’s ethnic and cultural mix and will appeal to a wide range of consumers, including regional residents, downtown workers, inner city residents, and tourists. 6. The vendor has the financial capacity and willingness to invest in displays, merchandising and marketing. Based on these criteria and the Market’s proposed mission, the consultant team recommends that certain products not be included in the new Lexington Market. These include tobacco, hard alcohol, and telephone services. The Market’s other current service and nonfood items could be included in the redevelopment of the West Market block but do not fit within the proposed East Market configuration. To ensure a consistent process, the consultant team recommends that every business interested in being part of the rebuilt Market submit a written proposal. The Market should provide the application form, with questions that incorporate the selection criteria. The application form should be available in multiple languages, including Korean, and assistance should be provided to help applicants prepare their proposals. During the re-leasing period, the Market’s professional staff will likely require additional leasing support to seek out new tenants and manage the application process. The cost of this support should be built into the development budget. Ideally, tenant leases will be finalized one year before the construction is completed so the vendor stalls can be designed for individual needs. Therefore outreach to tenants should begin about nine months before that. Applications should be reviewed and analyzed by the Market’s professional staff, in consultation with a Leasing Committee made up of members of the Market’s board of directors.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 45 Once the preferred applications are identified, the professional staff should be authorized to initiate negotiations about product mix restrictions, stall location, rents, build-out, lease terms, and tenant allowance. Final decisions on leasing should be made by the full board of directors, based on the recommendations of the Leasing Committee. New leases should require vendors to report their gross sales to Market management each month. Reading Terminal Market requires sales reporting and it has proven to be an effective tool for management, providing an “early warning system” if a tenant’s sales decrease and allowing the Market to track sales trends. When aggregated, the sales data should be shared with the entire community of merchants so vendors can track their own sales against the Market’s trends. These data are also very useful for testing the efficacy of marketing programs and changes to operations, as well as assessing the Market’s economic impact. Leases should also require vendors to accept credit cards and, if they are eligible, SNAP and other food assistance programs. The Phase 1 research determined that only about 60% of vendors currently accept credit cards. In a business climate where carrying cash is becoming increasingly uncommon, credit card acceptance is now the norm. Failing to employ a credit card system makes tenants less competitive and diminishes sales potential. Universal credit card acceptance is also essential for implementing a Market-wide gift card system. Gift cards provide opportunities to increase Market sales and develop relationships with partnering businesses or institutions which might provide Market cards to their clients or employees.

Customer counts and consumer research

Lexington Market should install electronic door counters at each entrance so it can track foot traffic. These counters provide valuable data that can reveal trends over time and be used to guide management decisions such as hours of operation. When combined with purchasing data from customer intercept surveys, customer counts can be used to estimate Market sales. Lexington Market should adopt a program of regular research and analysis of its customers in order to monitor the impact of the transformation process. The customer intercept survey and online customer survey used as part of the Phase 1 research provide a format, methodology and baseline data for future research. Key metrics, such as average expenditures per customer and customer demographic information, should be tracked over time.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 46 Construction costs and phasing

The consultant team prepared a construction cost estimate for the proposed master plan schematic design reflecting typical square footage construction costs for the Baltimore area. The cost estimate includes demolition of the Arcade and reconstruction of the East Market, but not costs associated with rebuilding the West Market, the parking garage or the Pfeiffer Building. The construction estimate assumes that vendors will be responsible for their own stall build-out and equipment, while the development budget includes tenant allowances, which are funds that can be used to offset vendors’ capital or fit-out expenses. Based on their experience with construction costs in Baltimore, Qodesh Engineering prepared a construction cost estimate on a per unit basis for each element of the schematic plan. They estimated construction costs between $9.8 and $12.2 million. Their detailed estimate is attached in Appendix C. Since construction only accounts for part of the redevelopment cost, the consultant team prepared an estimate that includes other typical development costs, including a construction contingency, design services for each vendor, costs associated with temporary vendor relocations during construction (phasing), furniture/fit-out/equipment (FFE), tenant allowances, and a variety of other items. Since the master plan scope of work only called on the consultant team to estimate construction costs, these non-construction figures are general in nature and meant to provide a sense of what the entire redevelopment budget might be. The two largest supplemental items are costs associated with relocating vendors in temporary facilities during construction (estimated at $4.0 million) and tenant allowances (estimated at $2.84 million). The phasing costs will vary depending on the redevelopment strategy (discussed below) and factors such as the quantity of cooking capacity provided in the temporary facilities. Tenant allowances are budgeted as $40,000 per vendor for 71 vendors, or $2.84 million. This will help offset the cost of installing quality cooking and display fixtures and other tenant- related work, allowing the Market to recruit or retain under-capitalized but otherwise desirable vendors. While a constant number per vendor is utilized for budgeting purposes, in reality some vendors will require very little tenant allowance while others might need significant landlord assistance. Some of these investments might be captured back over time with higher rents for those vendors receiving high levels of assistance. The rebuild offers the opportunity to incorporate energy-saving or -producing components as well as other “green” design features. These might increase upfront costs but could have a reasonable payback period for operating savings. Some markets have found public and philanthropic funding sources to pay for these green elements. The schematic design identifies a green roof for the farmers’ market shed and natural lighting through rooftop clerestory windows. Utilizing LED lighting throughout the Market will result in considerable cost savings and lower heat gain. The East Market’s large roof might be appropriate for solar panels. Some new public markets have installed heat loop systems that provide the cooling capacity for all of the vendors’ refrigerated display cases and walk-in coolers. These systems take the place of individual compressors, which generate significant heat inside the Market and are less efficient to operate.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 47 The following budget includes the items from the Qodesh construction budget in black and supplemental costs in red. The total development budget in this scenario is $26.7 million:

Development Budget: Transform Lexington Market Total Construction Demo and removal $ 345,185 Structural $ 1,611,720 Plumbing & electrical $ 1,605,365 Mechanical HVAC $ 2,900,508 Interior improvements $ 939,276 Roof modifications $ 674,409 Parking and utilities $ 312,413 Exterior envelope - walls $ 297,770 General Conditions $ 1,054,377 Construction project management $ 382,449 Construction contingency (not on phasing, FFE, TI) $ 5,061,736 50% Phasing (West Market upgrade, temp structure) $ 4,000,000 FFE $ 1,325,000 Tenant improvements $ 2,840,000 Subtotal $ 23,350,208

Soft costs Design services - base building $ 458,938 Design services - tenant design $ 355,000 Legal & Admin $ 152,980 Permits $ 114,735 Project Representative/Prof. fees $ 300,000 Graphic design/branding $ 100,000 Leasing $ 300,000 Preopening promotion $ 125,000 Financing $ 750,000 Soft cost contingency $ 664,163 25% Subtotal $ 3,320,816

Total $ 26,671,024

If Lexington Market moves forward with implementing the master plan, the next phase of work should include selection of the preferred phasing approach, refined schematic design, and additional cost estimating by an experienced local construction firm. Depending on the project start date, construction costs might need to increase because of inflation.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 48 Phasing

Construction phasing needs to reconcile several competing objectives. To minimize construction costs, the construction period should be as short as possible, vendor relocations should be kept to a minimum (ideally only one move), and there should be ample room for construction staging. To meet the development principles discussed above, Lexington Market needs to stay open during construction, continuing to serve consumers who rely on the Market for their fresh food shopping and maintaining the livelihood of vendors who do not have the resources to close for the construction period (perhaps two years) and then simply return. At the same time, the construction provides an opportunity to disrupt the negative behavior in and around the Market that has tainted its operation and reputation, such as by closing the Eutaw Street sidewalk during the construction period. Finally, the safety of both people who work in the Market and customers must be ensured. The consultant team identified three options for construction phasing. Each option has ramifications for development timeline, cost, and disruption of the Market’s operation.

Option 1: temporary structure This option requires upgrades to the West Market and construction of a temporary building (perhaps a structure with a fabric skin) on the Market’s parking lot or within the Lexington Market Garage. Once these temporary facilities are available, vendors can relocate out of the East Market and continue to operate in the temporary facilities. Construction can then begin on the East Market. The sequencing would include: 1. Relocate vendors from West Market to vacant spaces in East Market (if they will be part of the new market) or terminate West Market vendor leases. 2. Clean and upgrade the West Market for the construction period (Leasable area: ~15,000 sf) and erect a temporary structure on Market parking lot (leasable ~20,000 sf) or in the parking garage. 3. Terminate Arcade and East Market vendor leases for those who will not be part of the new facility. Relocate Arcade and East Market vendors who need to cook to the West Market and relocate non-cooking vendors to the temporary structure. 4. Demolish the Arcade, renovate the East Market, and construct the farmers’ market shed. A portion of the Lexington Market Garage might be needed for construction staging. 5. Relocate vendors from the temporary structure and the West Market to the renovated East Market. 6. Make the West Market, Pfeiffer Building, and Lexington Market Garage available for redevelopment with the stipulation of having complementary ground floor uses, such as restaurants and retail. The principal benefit of this option is reconstruction of the East Market can happen at once, unencumbered by having operating uses in the building. While it will take time and add costs to fix up the West Market and create the temporary building, the demolition of the Arcade

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 49 and construction of the East Market should happen most quickly because the construction company will have full access to the site. When Eastern Market in Washington, DC was forced to close because of a catastrophic fire, the vendors were relocated to a temporary building in a nearby parking lot while the Market was reconstructed. The temporary structure was not ideal but the vendors survived the construction period and have greatly benefited from the totally rebuilt market hall. Similarly, St. Jacobs Market in Ontario, Canada closed because of a fire and reopened within a few months in a temporary building that housed 49 of the Market’s 59 vendors. See photos, right. The principle drawbacks of this option include: • All existing vendors cannot be accommodated in the West Market and the temporary building during construction unless stall sizes are less than their current stands and storage areas. The Market will need to substantially reduce the number of vendors or find alternative locations to house them during construction.

• Temporary spaces are expensive to build, particularly for cooking, and these costs cannot be recaptured. The health and fire departments might not permit cooking at all in the temporary building.

• Since there is a significant slope in the parking lot, a temporary structure located there will present accessibility issues.

• When vendors make their initial relocation to temporary facilities, they will either need to use their existing (often substandard) equipment or will need new equipment. If they use equipment that will be used in the rebuilt Market, there will be down time when the equipment is moved and installed.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 50 • Vendor rents in the temporary facilities might need to be abated or reduced since vendors’ sales will likely be lower.

• The overall development timeline will be lengthened by the multiple moves.

Option 2: East Market phases The second option would be to rebuild the East Market in sections, keeping one-half to two-thirds of the Market open (behind temporary construction walls) while construction takes place on the other one-half or one-third. The Arcade would remain in place during construction and be demolished once the East Market is complete. When Reading Terminal Market was renovated in the 1990s, the construction was done in six phases, with vendors relocating to temporary spaces and then returning to their permanent space.1 While substantial, that project did not include creation of a new floor. The sequencing of this option would include: 1. Relocate one-third to one-half of East Market vendors to Arcade or West Market (depends on how many leases are terminated at the beginning of construction) 2. Rebuild one section of East Market, creating the flat floor and replacing mechanical systems, etc. 3. Move vendors back into the completed section and then relocate the next third or half to temporary facilities. Construct the next section of the East Market. 4. Once East Market is complete, demolish the Arcade and then build the farmers’ market shed. This option would likely require use of the Lexington Market Garage and/or the parking lot for staging. The principle benefits of this option are it keeps the market hall in the East Market and potentially maintains more vendors in operation during construction. The principle drawbacks of this option are that vendors and customers will be within a construction site, with potential loud noise and dust, and all of the existing building systems (mechanical, electrical, plumbing, life safety, etc.) will need to remain operational while new systems are installed. Entrances will change for customers and the operation will be non- continuous at times – customers will need to walk around the building to access all the vendors. Since they will need to maintain a sanitary and safe environment for the public, the cost of construction will likely be higher and the timeline extended.

1 While the Reading Terminal Market experience provides a valuable model, that renovation did not include creating a new flat floor on top of a sloped floor while it did include historic preservation issues and the complexity of creating the new convention center on top of the Market.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 51 Option 3: relocation to West Market site The final option entails relocating the entire market hall operation from the East Market block to new facilities located on the West Market block. The West Market block is only slightly smaller than the East Market block so the proposed development program can be readily accommodated there, including the outdoor farmers’ market shed. This approach provides the opportunity to redevelop Lexington Market within a mixed- use facility, with elements such as upper level housing or commercial space at the northern side of the block (along Saratoga Street) which can help subsidize either development costs or ongoing operations. A new basement will likely be required under the West Market site where none currently exists. The Lexington Market Garage will need to be redesigned since the market hall will likely extend past the garage’s interior circulation ramps. If this approach is pursued, it is critical that the market hall have its own architectural identity and access to its own roof for mechanical systems. The southern portion of the West Market block is the preferred location for the market hall and the farmers’ market shed. The north side of the block can continue to include a parking garage but have other upper level uses, such as office or residential. Other functions, such as storage, education, shared commercial kitchen, and event facilities can be located in various places within the block. This schematic design shows how the proposed program for the East Market can fit on the West Market block:

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 52

Construction sequencing would include relocating existing businesses from the West Market, razing all or most of the West Market block, and building a new Market facility on the Lexington Street side of the block. Once the East Market and Arcade vendors are relocated to the new facility, the Arcade should be torn down in order to create a strong pedestrian linkage between Paca and Eutaw Streets, making access to public transportation easy for Market patrons. The East Market block can then be redeveloped, ideally with uses that complement Lexington Market, such as restaurants and other retail. This relocation approach is being used at Essex Street Market in New York City, where that historic market is being moved to the ground floor of a mixed-use facility across the street. Like at Lexington Market, the new site once housed part of Essex Street Market so the historical connection to public market activity on the site remains unbroken. In this case, the full cost of rebuilding and expanding Essex Street Market is being paid by private developers in return for

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 53 the opportunity to create housing, commercial and other functions over a nine-block redevelopment area. The principle benefits of relocating Lexington Market to the West Market block are: • The East Market and Arcade can stay in operation during construction, serving the needs of current customers and vendors. • Vendors will only need to move once, eliminating the costs and disruption of multiple moves, and they can continue to use their existing equipment while new equipment is installed in the new facility. • Vendor rents will not require reduction or abatement during construction. • This approach moves Lexington Market away from the drug trafficking on Eutaw Street and closer to customers coming from the University of Maryland. • The Market will benefit from adjacency to parking in a rebuilt Lexington Market Garage. • A new facility provides the opportunity for a design solution that is both more dramatic and functional than the current East Market, not limited by the existing structure (and unchangeable elements such as the column spacing). • The redevelopment could be structured as a public-private, mixed-used development, potentially providing some capital towards the Market’s reconstruction. The principle drawbacks to this approach include: • If a private developer is involved, the development process will be more complicated and might lead to design or operational compromises for the Market. • New construction might cost more than reusing the existing East Market structure, particularly if the new facility includes a basement since the West Market does not currently have a basement. However, since vendors can stay in operation during construction, the Market will not bear the cost of temporary facilities (budgeted at $4 million) and rent income during the construction period will stay higher. • This site is a block farther from the Light Rail on Howard Street and the Metro station on Eutaw Street, although still within close walking distance. • The negative effects of the dilapidated structures and retail stores on the south side of Lexington Street will be more pronounced if they are not upgraded before the Market reopens.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 54 Operations pro forma

Using the current operating budget as a baseline, the consultant team developed an operation pro forma for Lexington Market based on the redevelopment scenario. Rental income from each source was estimated, along with operating expenses such as personnel, marketing, waste hauling, utilities, insurance, etc.

Income

Current vendor rents According to financial Rent/sf by Location statements provided by Market Lexington Market FY14 Estimate management, Lexington Market’s $80.00 FY14 revenues were nearly $4 $69.82 million, with the bulk of revenue $70.00 coming from market stall rents $60.00 ($3.46 million, or 87%). The $48.54 outdoor vending next to the West $50.00 $38.69 Market brings in revenue of about $40.00 $23,000. $30.00 Disaggregated rent data $20.00 provided by management for all of $12.22 the current 110 tenants showed rent $10.00 income of only $2.5 million. As the chart labeled “Rent/sf by Location” $- demonstrates, East Market rents were Arcade East Mkt Paca stores West Mkt the highest at $69.82 per square foot while the Paca Street retail stores had average rents of only $12.22 per Rent/sf by Product square foot. Lexington Market FY14 Estimate To analyze rents per square foot by product category, information $80.00 $68.22 from Herling’s Grocery was $70.00 $63.89 excluded because the space is so $60.00 much larger than all other vendors $50.00 $44.86 and the rent per square foot is so low. $41.68 See the chart labeled “Rent/sf by $40.00 Product”. Specialty food tenants $30.00 paid, on average, the highest rents of $68.22/sf, more than prepared food $20.00 vendors. Excluding the Paca Street $10.00 stores, nonfood vendors paid slighly $- more per square foot ($44.86) than Staple Specialty Prepared Nonfood staple food, who paid $41.68/sf. Food

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 55 Current other sources of income Lexington Market has few sources of income other than market stall rent. In FY14, fundraising provided $113,000 of income while interest and other sources provided $215,000. Subsidy from the City of Baltimore was about $170,000, or 4% of income. This subsidy has been tied to lease payments for the Arcade (in December 2014, the City of Baltimore decided to purchase the Arcade as part of a lease-buyback provision with a private developer).

Parking income Lexington Market realizes significant income from the Lexington Market Garage and the Market’s surface parking lot. In FY14, these properties contributed over $1.7 million of income. Parking expenses totaled about $430,000, resulting in net operating income of over $1.3 million.

Potential market hall vendor rents To meet the Market’s mission, the rents need to be reasonable to support small, independent businesses and to reflect the desire of having healthy, fresh foods. The creation of new facilities and the implementation of strategies to expand the customer base should increase sales for Lexington Market vendors, suggesting that rents can potentially be higher. At the same time, the elimination of certain types of businesses, such as tobacco and liquor sales and telephone services, will have a downward effect on rental income because these businesses currently pay high square foot rents. The following chart summarizes a recommended approach to rents, which pegs rents to the sales potential and profitability of different types of businesses. The proposed number of vendors in each category and their leased square footage (the columns labeled “Vendors” and “SF”) are taken from the tenant mix plan, above. The consultant team used its experience at other public markets to identify reasonable sales per square foot that each type of vendor should be available to achieve at the rebuilt Lexington Market (the column labeled “Reasonable sales/sf”).2 The next column, labeled “Rent as % sales,” presents a reasonable percentage of sales that can be devoted to rent for each category of tenant. Staple foods, which are the most important to have in the Market to meet the mission of selling fresh, healthy foods, also have the slimmest profit margins, so rent as percentage of sales should be held to 5.0%. Prepared foods, which are overabundant and which have the highest profit margins, have both high sales potential on a per square foot basis (in part because they need smaller spaces) and the highest rent as a percentage of sales. The next column, labeled “Rent/SF”, is the product of “Reasonable sales per sf” times “Rent as a percentage of sales.” Finally, the column labeled “Annual rent” is the product of “SF” times “Rent/SF.” This approach results in total market hall rents, when fully leased, of about $2.6 million per year:

2 Actual sales will vary and are highly dependent on the skills and passion of each vendor. Even the most successful public markets have both high and low grossing vendors. Furthermore, sales will depend on many factors both internal and external to the Market, including the quality and extent of the redevelopment and evolution of downtown Baltimore.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 56 Reasonable Rent as % Category Vendors SF Rent/SF Annual rent sales/sf sales Staple 17 11,717 $ 700 5% $ 35.00 $ 410,109 Specialty 24 15,623 $ 800 8% $ 64.00 $ 999,885 Prepared Food 21 7,812 $ 1,000 12% $ 120.00 $ 937,392 Nonfood 9 3,906 $ 750 8% $ 60.00 $ 234,348 Total 71 39,058 $ 66.10 $ 2,581,734

The pro forma includes substantial vacancy rates in the initial years since it might take time to fully lease the Market once construction is complete.

Potential shed rents The outdoor farmers’ market shed provides a new source of revenue. As drawn, the shed has space for 48 stalls. In the first year, it is assumed that the shed will operate one day per week each as a farmers’ market and as a crafts market, all from April through December. Each year for the first five years, the operating schedule expands. By the fifth year, the combined operating schedule is projected to be one day per week in the winter, three days per week in the spring, five days per week in the summer, and four days per week in the fall. To assess income, assumptions were made about rental rates per day and average vacancy rates each season. Vacancy rates decrease each year if there is the same number of days of operation but increase when more days are added. These calculations are summarized in the following charts:

Farmers Year 1 Year 2 Year 3 Year 4 Year 5 Stalls 48 48 48 48 48 Daily base rate/stall $25.00 $25.00 $28.00 $28.00 $30.00 Days/week (Jan-Mar) 0 0 0 1 1 Days/week (Apr-June) 1 2 2 2 2 Days/week (Jul-Sep) 1 2 2 3 3 Days/week (Oct-Dec) 1 2 2 2 2 Average sales $600 $650 $700 $750 $750 Rent as % sales 4.17% 3.85% 4.00% 3.73% 4.00%

Seasonal rates/day Rate/day Jan-Mar $ 15 $ 15 $ 18 $ 18 $ 20 Apr-Jun $ 20 $ 20 $ 23 $ 23 $ 25 Jul-Sep $ 25 $ 25 $ 28 $ 28 $ 30 Oct-Dec $ 20 $ 20 $ 23 $ 23 $ 25

Vacancy Jan-Mar 70% 65% 60% 75% 70% Apr-Jun 50% 65% 60% 55% 50% Jul-Sep 20% 35% 30% 45% 40%

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 57 Farmers Year 1 Year 2 Year 3 Year 4 Year 5 Oct-Dec 35% 50% 45% 40% 35%

Rent Jan-Mar $ - $ - $ - $ 2,808 $ 3,744 Apr-Jun $ 6,240 $ 8,736 $ 11,482 $ 12,917 $ 15,600 Jul-Sep $ 12,480 $ 20,280 $ 24,461 $ 28,829 $ 33,696 Oct-Dec $ 8,112 $ 12,480 $ 15,787 $ 17,222 $ 20,280 Total $ 26,832 $ 41,496 $ 51,730 $ 61,776 $ 73,320

Crafts Year 1 Year 2 Year 3 Year 4 Year 5 Stalls 40 40 40 40 40 Base rate/stall $25.00 $25.00 $28.00 $28.00 $30.00 Days/week (Jan-Mar) 0 0 0 0 0 Days/week (Apr-June) 1 1 1 1 1 Days/week (Jul-Sep) 1 2 2 2 2 Days/week (Oct-Dec) 1 1 2 2 2

Average sales $400 $450 $500 $500 $550 Rent as % sales 6.25% 5.56% 5.60% 5.60% 5.45%

Seasonal rates/day Rate/day Jan-Mar $ 15 $ 15 $ 18 $ 18 $ 20 Apr-Jun $ 20 $ 20 $ 23 $ 23 $ 25 Jul-Sep $ 25 $ 25 $ 28 $ 28 $ 30 Oct-Dec $ 20 $ 20 $ 23 $ 23 $ 25

Vacancy Jan-Mar 100% 100% 100% 100% 100% Apr-Jun 50% 45% 40% 35% 30% Jul-Sep 30% 45% 40% 35% 30% Oct-Dec 15% 10% 25% 20% 15%

Rent Jan-Mar $ - $ - $ - $ - $ - Apr-Jun $ 5,200 $ 5,720 $ 7,176 $ 7,774 $ 9,100 Jul-Sep $ 9,100 $ 14,300 $ 17,472 $ 18,928 $ 21,840 Oct-Dec $ 8,840 $ 9,360 $ 17,940 $ 19,136 $ 22,100 Total $ 23,140 $ 29,380 $ 42,588 $ 45,838 $ 53,040

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 58 Potential events/catering income Events can provide significant income to a public market. The redevelopment program includes several new event spaces, including a demonstration kitchen/large event and catering room and a hands-on teaching kitchen that can serve children and adults. In the schematic design, both of these spaces are located on the mezzanine. The market hall itself can be utilized for large scale events, as is done frequently at Reading Terminal Market by its in-house catering company (owned by the Reading Terminal Market Merchants Association). The following chart provides estimated rental income to the Market from each of these event spaces:

Average Annual Rental rate/ Space Events/year participation Participants participant Income Demo Kitchen 60 60 3,600 $20 $96,000 Teaching Kitchen 100 20 2,000 $25 $50,000 Market Hall 12 500 6,000 $15 $90,000 Total 192 $236,000

Potential fundraising and other income In the past two fiscal years, Lexington Market has averaged $125,000 per year in fundraising income. The new facilities, expanded programming staff, and clear mission to support community wellness provide the opportunity to grow fundraising income. The proposed budget includes a modest increase to $175,000 per year in fundraising. For purposes of pro forma analysis, the city subsidy is assumed to continue at the same level, or $170,000 per year. Interest/gains are pegged to the amount recorded in FY14, or $60,000 per year. “Other income” has averaged about $150,000 in the past three fiscal years. For the pro forma, the number is set at one-half this amount, or $75,000 per year. The following chart shows all sources of income for the past two fiscal years and estimated income in the three years following implementation of the master plan, as well as deductions for vacancies and bad debt:

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 59 FY13 FY14 Year 1 Year 2 Year 3

Lexington Market Operating Income

Rent

Market stall rent $3,447,206 $3,459,115 $2,581,734 $2,581,734 $2,659,186 Exterior vending/Sheds $24,355 $23,200 $82,212 $113,906 $143,458 City subsidy $168,910 $172,204 $170,000 $170,000 $170,000 Events/catering $0 $0 $188,800 $207,680 $228,448 Fundraising $138,031 $113,277 $175,000 $192,500 $211,750 Interest/Gains $104,077 $57,368 $60,000 $60,000 $60,000 Other $193,434 $157,784 $75,000 $75,000 $77,250 Gross Operating Income $4,076,013 $3,982,948 $3,332,746 $3,400,820 $3,550,091 Vacancy $0 $0 $399,592 $269,564 $224,211 Bad debt $1,347 $0 $26,639 $26,956 $28,026 Adjusted Gross Income $4,074,666 $3,982,948 $2,906,514 $3,104,299 $3,297,854

Overall, Adjusted Gross Income is projected to contract 27% between FY14 and the first year of operation in the rebuilt facility, from about $4.0 million to $3.0 million. Market hall vendor rent income is projected to drop about 35% as the number of vendors and leasable square footage are reduced and vacancy is factored in. The Market will become less dependent on vendor rents, with the share of income attributable to market hall rents dropping from 87% to 73% by year 5. Other sources of income, including events and fundraising, will become more important.

Expenses

Current expenses Operating expenses for Lexington Market in FY14 totaled $5.02 million. As discussed in the Phase 1 report, Lexington Market’s $2.1 million personnel expense is high compared to other public markets, driven by the substantial staffing for security and housekeeping. Utility expenditures are also very high at $1.55 million because of inefficient and outdated lighting, HVAC, and other building systems. Marketing expenses in FY14 were only $155,000. FY14 Market operations resulted in a $1.2 million operating loss, which was made up by the $1.3 million net income from parking operations.

Projected expenses As currently, the largest expected expense will be staffing. The design improvements, new smaller facilities, and reduced public seating should mean a reduction in staffing for security and housekeeping. New staff positions will be needed for operating the outdoor farmers’ and crafts market, for events, and for education. The security detail includes a Security Lead and eight full-time equivalent (FTE) staff. This is the same number of security as Reading Terminal Market, which provides an overnight

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 60 security presence in addition to day-time staff. To determine appropriate wages, data for annual mean wages of positions that correspond to the Market management jobs were collected from the federal Bureau of Labor Statistics for the Baltimore-Towson metropolitan area. The salary of the Executive Director position is assumed to be charged two-thirds to Lexington Market and one-third to Baltimore Public Markets.

Lexington Market Master Plan Personnel – proposed Year 1 Executive Director (2/3 time) $91,938 Leasing Director $70,285 Farmers' Market Coordinator $44,877 Operations Director $96,712 Maintenance Leader $48,419 Maintenance Assist $42,171 Housekeeping Leader $48,419 Housekeeping staff (8 FTE) $210,567 Security Lead $46,223 Security staff (8 FTE) $257,502 Marketing/Promotions Director $70,285 Special Events Coordinator $59,163 Education/Partnership Coord $59,163 Event staff/Bartender (2 FTE) $41,530 Shared kitchen coordinator $59,163 Controller/Office Manager $50,923 Receptionist/AA $40,017 Fringe benefits $401,207 Payroll tax $133,736 Subtotal $1,872,300

The following chart includes the principle operating expenses for Lexington Market, showing FY14 actual expenses and projections for the rebuilt facility. The biggest changes are Repair (which drop from $328,802 to $75,000 because all of the Market’s infrastructure will be new and under warranty) and Utilities (which drop because new mechanical and plumbing systems will be much more efficient, the square footage reduced to just the East Market, and the cost of vendors’ electricity usage should be directly metered to them). Utilities are estimated at $3.00 per square foot of gross area, which is about the same as Reading Terminal Market.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 61 Market operations FY14 Year 1 Legal & Professional $44,052 $50,000 Other $89,415 $75,000 Interest $98,024 $98,024 Repair $328,802 $75,000 Supplies $150,039 $120,000 Utilities $1,548,744 $360,000 Waste removal $72,000 $65,000 Subtotal $2,331,076 $843,024

Total Operating Expenses are estimated at $3.74 million in the first year of operation after construction, a significant drop from FY14 expenditures of $5.20 million. Depreciation is kept at the FY14 level, insurance is increased from $3,000 per year to $23,000, and the Marketing/Education budget grows from $155,000 to $250,000 (these marketing costs are just for direct expenditures; the salaries of marketing and event staff members are included in the Personnel line.)

Operating Expenses FY14 Year 1

Market operations $2,331,076 $885,702 Personnel $2,102,686 $1,967,086 Insurance $2,844 $22,982 Property tax $0 $0 Depreciation $610,038 $610,038 Marketing/Education $154,896 $250,000 Subtotal $5,201,540 $3,735,808

The full profit and loss statement for Lexington Market is provided below, including FY14 and the five years of operations following reopening. While the Market’s operating income is lower, operating expenses are much lower, resulting in losses shrinking from $1.2 million in FY14 to $452,000 in Year 5. Assuming parking revenues and expenses stay consistent, the Market should generate about $900,000 per year in net revenue, providing the opportunity to assume some debt to pay for capital improvements.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 62 FY14 Year 1 Year 2 Year 3 Year 4 Year 5

Lexington Market Operating Income

Rent

Market stall rent $3,459,115 $2,581,734 $2,581,734 $2,659,186 $2,738,961 $2,821,130 Exterior vending/Sheds $23,200 $82,212 $113,906 $143,458 $160,817 $189,573 City subsidy $172,204 $170,000 $170,000 $170,000 $170,000 $170,000 Events/catering $0 $188,800 $207,680 $228,448 $239,870 $251,864 Fundraising $113,277 $175,000 $192,500 $211,750 $222,338 $233,454 Interest/Gains $57,368 $60,000 $60,000 $60,000 $60,000 $60,000 Other $157,784 $75,000 $75,000 $77,250 $79,568 $81,955 Gross Operating Income $3,982,948 $3,332,746 $3,400,820 $3,550,091 $3,671,553 $3,807,976 Vacancy $0 $399,592 $269,564 $224,211 $144,989 $90,321 Bad debt $0 $26,639 $26,956 $28,026 $28,998 $30,107 Adjusted Gross Income $3,982,948 $2,906,514 $3,104,299 $3,297,854 $3,497,567 $3,687,547 Operating Expenses

Market operations $2,331,076 $885,702 $912,273 $939,641 $967,831 $996,866 Personnel $2,102,686 $1,967,086 $2,026,098 $2,086,881 $2,149,487 $2,213,972 Insurance $2,844 $22,982 $23,672 $24,382 $25,114 $25,867 Property tax $0 $0 $0 $0 $0 $0 Depreciation $610,038 $610,038 $610,038 $610,038 $610,038 $610,038 Marketing/Education $154,896 $250,000 $260,000 $270,400 $281,216 $292,465 Subtotal $5,201,540 $3,735,808 $3,832,081 $3,931,342 $4,033,686 $4,139,207

Net Operating Income ($1,218,592) ($829,294) ($727,782) ($633,489) ($536,119) ($451,660)

Parking Income Garage $1,315,084 $1,320,000 $1,320,000 $1,320,000 $1,320,000 $1,320,000 Surface lot $437,171 $440,000 $440,000 $440,000 $440,000 $440,000 Gross parking income $1,752,255 $1,760,000 $1,760,000 $1,760,000 $1,760,000 $1,760,000 Expenses Parking - Garage $314,433 $310,000 $310,000 $310,000 $310,000 $310,000 Parking - Surface $118,481 $120,000 $120,000 $120,000 $120,000 $120,000 Parking expenses $432,914 $430,000 $430,000 $430,000 $430,000 $430,000

Net Operating Income $1,319,341 $1,330,000 $1,330,000 $1,330,000 $1,330,000 $1,330,000

Consolidated Operating Inc. $100,749 $500,706 $602,218 $696,511 $793,881 $878,340

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 63 Construction period

Depending on which phasing approach is used during the construction period, revenues might decrease significantly while most expenses might stay constant. Lexington Market will likely experience operating losses during construction, so these costs will need to be included in the development budget. If rental income drops by half but expenses stay constant, the Market’s annual operating loss will reach $3.2 million. If parking revenue also drops by a third because the garage and surface lot are used for construction staging, then total annual loses will be approximately $2.5 million.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 64 Economic impact analysis

MVI estimated the economic impact of a rebuilt Lexington Market on its region. Economic impacts typically consist of direct benefits of increased sales, indirect benefits that flow from increased purchases of other materials and services, and induced benefits to household incomes and consumption. This analysis focused on the direct benefits.

Methodology

The methodology for measuring economic benefits of specific projects or programs on affected regions is well established in the field of urban economics. Systematic analysis takes into account inter-industry relationships within regions, because these relationships largely determine how regional economies respond to project or program changes. The tool of regional input-output (I-O) multipliers, developed by the U.S. Bureau of Economic Analysis (BEA) and customized for specific regions as RIMS II Multipliers, accounts for highly disaggregated inter- industry relationships within regions. It is based upon BEA’s 2002 national benchmark I-O table, which accounts for the input and output structure of more than 500 U.S. industries, and BEA’s 2010 regional economic accounts, which show each region’s industrial structure and trading patterns. RIMs II Multipliers can be estimated by BEA for any region composed of one or more counties and for any industry in the national I-O table. For purposes of measuring the economic benefits of Lexington Market, RIMS II Multipliers were customized for Baltimore’s seven- county Metropolitan Statistical Area, which includes Baltimore City and Anne Arundel, Baltimore, Carroll, Harford, Howard, and Queen Anne’s Counties. The table below shows the Final Demand Multipliers for various industry sectors. The Final Demand Multipliers account for all regional economic repercussions of generating an additional dollar of sales or construction output.

RIMS II Multipliers for Baltimore-Towson, MD Metropolitan Statistical Area Lexington Market Master Plan: Economic Impact Multipliers Final Demand Multiplier Output Earnings Employment Food services 1.9586 0.5645 22.2273 Retail trade 1.8767 0.5700 16.2352 Real estate 1.4875 0.1958 7.5006 Construction 2.0333 0.6465 14.1407 Source: U.S. Bureau of Economic Analysis

The multipliers listed under Final Demand include Output, Earnings, and Employment. The Output column represents the total dollar change in output that occurs in all industries in the regional economy for each additional dollar of output delivered to final demand by the industry

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 65 sector corresponding to the row entry (e.g., Food services). In this case, $10 of new sales in Food Services creates $19.59 in new economic output. Entries in the Earnings column represent the total dollar change in earnings of households employed by all industries in the regional economy for each additional dollar of output delivered to final demand by the industry sector corresponding to the row entry. Entries in the Employment column represent the total change in number of jobs that occurs in all industries in the regional economy for each additional one million dollars of output delivered to final demand by the industry in the row entry.

Economic impact of sales at Lexington Market

Market hall tenants Lexington Market does not collect sales information from its vendors. In interviews during the Phase 1 research, many of the vendors stated that their sales have decreased over the past several years with some stating that their sales dropped in half following recent efforts to eliminate drug dealing on Eutaw Street. In the absence of data, the consultant team must rely on its experience with other public markets that have gone through substantial transformation processes. In the case of Lexington Market, the consultant team believes that, on average, sales per square foot can double when the master plan is implemented. In the pro forma rent analysis above, the consultant team estimated reasonable sales per square foot for each vendor category. These ranged from$700 per sf for staple foods to $1,000 per sf for prepared foods. For this economic impact analysis, it is assumed that current sales per square foot are one half of this amount. The following chart provides an overall sales estimate using these estimated sales per square foot for both existing vendors and following implementation of the proposed tenant mix:

Sale Estimate Existing Merchants Proposed Lexington Market Category # SF Sales/sf Sales # SF Sales/sf Sales Staple food 18 6,804 $350 $2,381,400 17 11,696 $700 $8,187,200 Specialty food 12 11,800 $400 $4,720,000 24 14,800 $800 $11,840,000 Prepared food 53 16,517 $500 $8,258,500 21 8,750 $1,000 $8,750,000 Nonfood 14 6,050 $375 $2,268,750 9 3,800 $750 $2,850,000 Total 97 41,171 $17,628,650 71 39,046 $31,627,200

Based on these assumptions, sales for existing vendors are currently about $17.6 million and future sales will be $31.6 million. By way of comparison, Reading Terminal Market vendors reported sales of $49.1 million in 2013. This was a 14% increase over sales in 2011, before the recent improvements to that Market were made. As discussed in the Phase 1 report,

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 66 demand for products sold at Lexington Market can reasonably be estimated at $38.2 million, so sales of $31.6 million are well within potential demand and suggest a strong upside potential. For the impact analysis, sales are divided between food service and retail. Assuming “prepared food” vendors are all food service sales while the “staple food,” “specialty food” and “nonfood” vendors are all retail sales, then current sales are divided as follows:

Lexington Market Master Plan: Vendor Sales Estimate

Sales channel Current sales Future sales Change

Food service $8,258,500 $8,750,000 $491,500

Retail $9,370,150 $22,877,200 $13,507,050

Total $17,628,650 $31,627,200 $13,998,550

These estimates can all be viewed as reasonable increases from current Lexington Market sales. The ability to achieve these sales depends not only on the implementation of the master plan, but will also be affected by the skills of the business owners and their employees, changes to the economic climate, new competition, etc. Therefore, while the economic impact analysis employs the standard approaches described above, the results must be read with an understanding of the limitations of the sales projections: sales could be considerably higher or lower than these projections. This analysis shows that total sales for Lexington Market vendors are projected to reach $31.6 million, a $14 million increase.

Farmers’ and crafts market Sales for the outdoor farmers’ and crafts market was estimated using the charts shown in the pro forma analysis that include the number of participants, vacancy rates, and dates of operation. Average sales per day are based on the experiences of vendors in similar markets in other cities. As with any average, there is likely to be widely varying experiences between farmers. Based on this methodology, annual sales at the outdoor market are estimated at $2.06 million for farmers and $1.09 million for craft vendors:

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 67 Farmers Year 1 Year 2 Year 3 Year 4 Year 5 Vacancy Jan-Mar 70% 65% 60% 75% 70% Apr-Jun 50% 65% 60% 55% 50% Jul-Sep 20% 35% 30% 45% 40% Oct-Dec 35% 50% 45% 40% 35%

Sales Jan-Mar $ - $ - $ - $117,000 $140,400 Apr-Jun $187,200 $283,920 $349,440 $421,200 $468,000 Jul-Sep $299,520 $527,280 $611,520 $772,200 $842,400 Oct-Dec $243,360 $405,600 $480,480 $561,600 $608,400 Total $730,080 $1,216,800 $1,441,440 $1,872,000 $2,059,200

Average sales $400 $450 $500 $500 $550 Rent as % sales 6.25% 5.56% 5.60% 5.60% 5.45%

Vacancy Jan-Mar 100% 100% 100% 100% 100% Apr-Jun 50% 45% 40% 35% 30% Jul-Sep 30% 45% 40% 35% 30% Oct-Dec 15% 10% 25% 20% 15%

Sales Jan-Mar $ - $ - $ - $ - $ - Apr-Jun $104,000 $128,700 $156,000 $169,000 $200,200 Jul-Sep $145,600 $257,400 $312,000 $338,000 $400,400 Oct-Dec $176,800 $210,600 $390,000 $416,000 $486,200 Total $426,400 $596,700 $858,000 $923,000 $1,086,800

Employing the RIMS II multipliers based on the sales increase for each industry sector results in the following economic impact:

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 68 Lexington Market Master Plan: Economic Impact

Final Demand

Change in Sales Output Earnings Employment Food service $ 491,500 1.9586 $962,652 0.5645 $277,452 22.2273 10.9 Retail $ 15,806,490 1.8767 $29,664,040 0.5700 $9,009,699 16.2352 256.6 Total $16,297,990 $30,626,692 $9,287,151 267.5

In total, the $16.3 million in new sales generates over $30 million in annual output within the region and increases earnings by over $9 million. Lexington Market generates 268 new jobs in the region. Over a ten year period, assuming output increases 3% each year, the future value of the aggregate impact of Lexington Market on the region would be $351 million.

Direct impact of construction and operations

The development program for Lexington Market includes a construction budget estimated at $13 million. The annual operating costs of the Lexington Market are projected to decrease from $5.2 million to $3.5 million, a drop of $1.7 million. The following chart shows the relevant RIMS II multipliers for construction and operations:

Lexington Market Master Plan: Economic Impact of Construction and Management

Final Demand Value Output Earnings Employment Construction $26,671,024 2.0333 $54,230,194 0.6465 $17,242,817 14.1407 377.1 Operations ($1,465,732) 1.4875 ($2,180,276) 0.1958 ($286,990) 7.5006 -11.0 Total $52,049,917 $16,955,827 366.2

The total economic effects of constructing Lexington Market would represent a one-time increase of $54.2 million by all industries affected by the construction activity. Earnings in the region would increase $17.2 million and employment would increase by 377 jobs. Upon completion of the facility, the economic effects of construction on the output of the region would come to an end. The reduction in annual operations of Lexington Market will decrease the region’s output by $2.2 million annually, decrease earnings by $287,000 and result in 11.0 fewer jobs in the regional economy.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 69 Financing

The consultant team identified potential sources of funds to pay for the master plan implementation. The analysis included research into potential public funds from local, state, and federal sources, private philanthropic grants, and private debt options. Appendix D includes an in-depth report by Economic Development Assistance Consortium (EDAC) that includes program-by-program reviews of funding sources along with typical sizes of grant or loan awards, anticipated due dates, funding source contact persons and potential requirements pertaining to collaborating entities. Based on the experience of other public markets, implementation of the Transform Lexington Market initiative will require funding from multiple sources. As the EDAC report notes, the revitalization of Lexington Market, new programmatic features that will support education and food access, and new and expanded partnerships with health care and veterans organizations (among others) should position the Market well to attract substantial support.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 70 Conclusion

Benefits

Implementation of the master plan will lead to a wide array of benefits, including reversal of negative sales trends for Market vendors, expansion of the customer base, strengthening of the Market’s unique and historic attributes, sales of fresh, healthy foods, improvements to community wellness, and positive impact on the Downtown Westside neighborhood. As presented at the beginning of this Phase 2 report, the master plan followed six development principles. As enumerated below, the master plan achieves these six principles in a variety of ways: 1. Create modern, code compliant, energy efficient public market facilities that meet the needs of Market vendors and customers while maintaining the Market’s historical character. The plan calls for maintaining the East Market building shell but replacing all interior systems and installing a flat floor. The result will be a highly functional building that meets the needs of customers and vendors today and has the flexibility to change over time, if needed. The Market’s historical character, expressed principally as independent, food vendors selling from individual stalls, will be maintained. Alternatively, a new market hall could be constructed on the West Market block facing Lexington Street, creating a new purpose-built facility not constrained by the limitations of the East Market structure. This would allow the Market to keep operating during construction, minimize phasing costs, and require a single move for East Market or Arcade vendors.

2. Keep a portion of the Market in operation during construction but significantly disrupt and displace the negative behavior. The phasing options provide several strategies for keeping the Market open during the construction period so local residents can continue to access the Market for their food consumption needs and vendors can stay in business. The rebuild concept is bold enough to significantly change perceptions of the Market, while the construction period provides the opportunity to take steps to displace drug dealing and other destructive behaviors from the Market’s periphery, particularly on Eutaw Street.

3. Utilize environmental design strategies inside and outside the Market to address security concerns while creating a place that welcomes the whole community. As noted in the Phase 1 report, the three main reasons residents do not visit Lexington Market are they do not feel safe, the Market is not clean, and there are panhandlers. To address security concerns, the design includes more exterior glass, fewer entry doors, wider aisles, better sight lines, increased natural lighting and upgraded lighting systems, and an improved merchandise mix. Concentrating all the vendors into a single market hall will make the Market feel safer and reduce the need for such large and expensive security and housekeeping staffs.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 71

4. Continue to serve current customers while appealing to a wide array of Baltimore area residents, downtown workers, and visitors by offering a diverse range of quality products at affordable prices, particularly local, authentic and unique fresh and prepared foods. The merchandise mix plan maintains the Market’s staple food products and expands the number of vendors selling specialty foods, while reducing the number of duplicative fast food stalls. Stalls will be large enough for food production, encouraging innovation and the creation of authentic and interesting food products. These changes will continue to serve the Market’s current customers but widen the appeal to a much greater range of other visitors. Initial conversations with high quality, independent food retailers in the region revealed strong interest in potentially becoming merchants at Lexington Market once the physical issues are addressed.

5. Create special event and education spaces that support the Market’s wellness mission and provide new sources of revenue. The proposed education and event spaces in Lexington Market will allow the Market to create exciting and impactful programs that address community wellness. These spaces can also become important new sources of income, reducing the Market’s reliance on rent to fund its operations.

6. Develop the Market in a financially prudent manner so that income exceeds operating expenses, in part by designing the facilities to lower the costs of operations. In keeping with public market best practices, the proposed rent approach will lower rental costs for staple food vendors, keep rents about the same for specialty food vendors, and increase rates for prepared food vendors. Income will be broadened so the Market is less reliant on vendor rents to cover the costs of operations. Improved building systems will lower the costs of energy, repair and maintenance. Reducing public seating and shifting responsibility to vendors for some of their own customer seating will reduce the housekeeping costs. Net income from operation of the Market and the Lexington Market Garage are estimated to increase from $100,000 in FY14 to nearly $900,000 by the fifth year of operation. An initial assessment of financing opportunities suggests that numerous public and philanthropic sources are available to share in the development cost, along with debt paid by the Market’s positive cash flow.

The economic impact of implementing the master plan will be substantial. Construction will create 377 jobs in the region and lead to $54.2 million of economic impact. Increased Market sales will create 268 permanent jobs in the region and provide a 10 year economic impact of $351 million.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 72 Challenges

Implementing the Lexington Market master plan will require overcoming various challenges, including: • Continuous operations: In order to keep the Market in continuous operation during construction, vendors and customers will need to adapt to a construction site for an extended period, perhaps several years. • Cost of construction: With an estimated development cost of $26+ million, rebuilding Lexington Market requires substantial investment. • Rebalancing of tenant mix with fewer vendors: Over the years, the mix of vendors at Lexington Market has become increasingly focused on fast foods with limited number of specialty food vendors. Advantageously, the Market has retained its staple food vendors, who provide the core of the public market experience. Rebalancing the Market to a better mix of staple, specialty, prepared food, and nonfood vendors in a single building will require decisions about which tenants will participate in the rebuilt Market. • Displacement of drug dealing and other negative behavior away from the Market: The construction period offers an opportunity to displace drug dealing and other negative behaviors away from the Market and Eutaw Street, but will require active participation by the Baltimore police and others. • Neighborhood improvements: The west side of downtown Baltimore has seen significant investment over the past decade, with building rehabilitation now reaching close to Lexington Market. Additional improvements are needed in the blocks around the Market, particularly on the south side of Lexington Street between Paca and Greene Streets.

Next steps

If the Lexington Market and the City of Baltimore decide to move forward with master plan implementation, some next steps include: 1. Selection of the preferred phasing option. 2. Continued outreach to Market tenants, farmers, the local community, partners, and new tenants to gain their feedback and suggestions for strengthening the master plan, as well as build support for the project. 3. Raise funds from multiple sources to cover the development budget. This will likely require assistance from the City of Baltimore, the Baltimore Development Corporation, and outside experts, as well as enhanced capability on the Lexington Market staff. 4. Retain an Owner’s Representative to help manage the redevelopment process. 5. Retain an experienced architecture and engineering team to refine the schematic design, conduct design development, prepare construction drawings, oversee

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 73 construction, and provide stall design services to individual vendors. 6. Retain a construction management firm to conduct additional cost estimating based on refined schematics and to manage the construction process. 7. Refine the leasing, business, and operating plan, working closely with the design team. Given its size, history, and prime location, Lexington Market has the potential to be transformed into one of the finest public markets in the country, recapturing its former standing as a key economic and cultural institution in Baltimore. This master plan provides a path forward to realize that vision.

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 74 Appendix A: SWOT Analysis

The SWOT analysis (Strengths – Weaknesses – Opportunities – Threats) seeks to concisely state Lexington Market’s existing strengths and weaknesses, and to reveal the opportunities for redevelopment and any potential threats to its future. This analysis concluded the Phase 1 research tasks and set the stage for the development principals, program, and design options that were explored in Phase 2.

1. Strengths a. Well known institution b. Long, storied history c. A few well known, branded merchants d. Loyal, longstanding customers – most come weekly, 75% first came more than 10 years ago e. Has a number of “pure” fresh food vendors selling only produce, meat, poultry, and seafood but not fast foods f. Serves fresh food needs of many city residents g. Financially secure with substantial operating reserve h. Achieving high rents per square foot i. Accessible, visible, at a public transportation hub j. Sufficient parking k. Recognized as an important city asset l. Healthy foods social marketing and menu changes 2. Weaknesses a. Pfeiffer Building i. Serious structural and building system conditions b. East Market i. Sloped floor; raised vendor stalls (not ADA compliant) ii. Narrow aisles iii. Lack of natural light iv. Too many doors v. Inadequate HVAC, fire protection, electrical, plumbing systems vi. Deteriorated stalls, bathrooms vii. Freight elevators break down viii. Garbage located in basement ix. Smells c. West Market i. Noncontiguous with core operation in East Market and Arcade d. Paca Street storefronts i. Not connected to market activity

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 75 ii. Weak retailers iii. Vacancies and low rents e. Merchants i. Product overlap, lack of variety, merchandise mix has limited appeal ii. Decreasing sales iii. Most tenants without own brand identity iv. Lack of authenticity – ethnic foods being sold by people of unrelated ethnicities v. Poor customer service skills; limited English, poor sanitation vi. Old equipment, weak merchandising vii. Numerous unhealthy food options f. Operations i. Enormous expense of security ii. Not open Sunday – busiest fresh food buying day iii. Closes 6 pm – too early g. Customers i. Narrow demographic – Market not attracting wide range of customers 1. Racially imbalanced 2. Income imbalanced ii. Geographically clustered – not attracting people from entire region iii. Very few new or recent customers – nearly all first came more than 10 years ago h. Negative behavior i. Crime ii. Panhandling iii. Loitering iv. Rude and antisocial behavior i. Neighborhood i. Drug sales in and around Market ii. Deteriorated storefronts facing the West Market iii. Sidewalks and other streetscape elements need improvements 3. Opportunities a. Consumer affection for and memories of Lexington Market b. Growing interest in markets and quality, local food c. Interest among high quality area food businesses in being part of transformed Lexington Market d. Recruitment of Lancaster County Amish vendors e. Successful national examples of public market renovation and remerchandising f. Growth of UMB g. Growing residential neighborhood around Market

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 76 h. Sunday hours – biggest grocery day i. Capital reserves and public interest in investment j. Affordable Care Act community initiative requirements that could lead to partnerships with local hospitals to promote fresh food consumption k. Size of Market and multiple properties provides opportunities to phase construction while still doing substantial transformation 4. Threats a. Persistent challenges to create a comfortable and safe environment around the Market b. Ongoing deterioration of facilities c. New fresh food competition downtown d. Lack of redevelopment immediately to east and north e. AmazonFresh delivery business

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 77 Appendix B: Multi-level public market and market sheds

St. Lawrence Market exterior:

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 78

St. Lawrence Market, upper level:

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 79

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 80 St. Lawrence Market, lower level:

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 81 Market shed, Grand Rapids Downtown Market:

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 82 Market shed, Findlay Market, Cincinnati:

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 83 Appendix C: Construction cost estimate

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 84 Lexington Market Renovation Schematic Cost Estimate Nov. 7, 2014 Prepared by Qodesh CM

General Conditions + Soft Cost Description Quantity Unit Cost Unit Subtotal Subtotal + 5% Project Management 53961 $ 6.75 sf $ 364,237 $ 382,449 Design Services 53961 $ 8.10 sf $ 437,084 $ 458,938 Legal & Administrative Expenses 53961 $ 2.70 sf $ 145,695 $ 152,980 Permits and Inspections 53961 $ 2.03 sf $ 109,271 $ 114,735 Demolition Subtotal $ 345,185 12.00% Percent $ 41,422 $ 43,493 Structural Subtotal $ 1,611,720 12.00% Percent $ 193,406 $ 203,076 Plumbing & Electrical Subtotal $ 1,605,365 12.00% Percent $ 192,644 $ 202,276 Mechanical HVAC Subtotal $ 2,900,508 12.00% Percent $ 348,061 $ 365,464 Interior Improvements Subtotal $ 939,276 10.00% Percent $ 93,928 $ 98,624 Roof Modifications Subtotal $ 674,409 10.00% Percent $ 67,441 $ 70,813 Landscape & Site Subtotal $ 312,413 12.00% Percent $ 37,490 $ 39,365 Exterior Envelope Subtotal $ 297,770 10.00% Percent $ 29,777 $ 31,266

General Conditions Subtotal $ 2,163,479

Demolition Description Quantity Unit Cost Unit Subtotal Markup Estimate

Arcade Mezzanine 27720 $ 2.60 sf $ 72,072 130% $ 93,694 Arcade Main Floor 33775 $ 2.05 sf $ 69,239 130% $ 90,011 Arcade MEP 33775 $ 1.10 sf $ 37,153 125% $ 46,441

East Market - Mezzanine 12544 $ 2.00 sf $ 25,088 120% $ 30,106 East Market Basement 53961 $ 0.50 sf $ 26,981 120% $ 32,377 East Market - Ground 53961 $ 0.75 sf $ 40,471 110% $ 44,518 Main Exterior Facade 13980 $ 0.50 sf $ 6,990 115% $ 8,039

Demolition Subtotal $ 345,185

Considerations: Phased demo for partial occupancy, Selective demolition at the East Market, Minor work in basement, salvage / resale of removed steel, minor facade demo - exterior steel frame removed, Lexington Market Renovation Schematic Cost Estimate Nov. 7, 2014 Prepared by Qodesh CM

Structural Description Quantity Unit Cost Unit Subtotal Markup Estimate

Terrace Elevated Level 13550 $ 12.25 sf $ 165,988 110% $ 182,587 Terrace Slab on Grade 13550 $ 4.83 sf $ 65,447 110% $ 71,992 Framing for new Ground Floor - 43169 $ 18.00 sf $ 777,038 120% $ 932,446 Conc in Metal Deck Column Modifications 45 $ 400.00 Ea $ 18,000 110% $ 19,800 Girder Trusses for Ground Floor 1620 $ 150.00 lf $ 243,000 125% $ 303,750 Roof Modifications 53961 $ 1.25 sf $ 67,451 110% $ 74,196 Columns Foundations in Basement 49 $ 500.00 Ea $ 24,500 110% $ 26,950 Transfer Beams in Basement 0 Ea $ 0 110% $ 0

Structural Subtotal $ 1,611,720 Considerations: Minor structural mod in basement, new steel framed ground floor supported on existing column system, steel frame terrace, minor roof structural modification

Plumbing & Electrical Description Quantity Unit Cost Unit Subtotal Markup Estimate

Bathrooms - Public (M/F) 800 $ 150.00 sf $ 120,000 115% $ 138,000 Bathrooms - Staff 200 $ 110.00 sf $ 22,000 15% $ 3,300 Bathrooms - Vendors 200 $ 110.00 sf $ 22,000 115% $ 25,300 Sanitary Allowance per Stall 20 $ 850.00 ea $ 17,000 110% $ 18,700 Water Allowance per Stall 20 $ 500.00 ea $ 10,000 110% $ 11,000 Electrical System Upgrade 53961 $ 5.60 sf $ 302,182 115% $ 347,509 Sprinkler System 53961 $ 2.50 sf $ 134,903 120% $ 161,884 Sanitary Collectors Out 2 $ 20,000.00 ea $ 40,000 125% $ 50,000 Water Service Upgrade 1 $ 14,000.00 ea $ 14,000 110% $ 15,400 Electrical System / Lighting 53961 $ 8.60 sf $ 464,065 120% $ 556,878 Grease Management 2 $ 12,500.00 ea $ 25,000 110% $ 27,500 Fire and emergency 53961 $ 2.55 sf $ 137,601 110% $ 151,361 Data and Communications 53961 $ 1.66 sf $ 89,575 110% $ 98,533

Plumbing & Electrical Subtotal $ 1,605,365 Considerations: Sprinkler, Fire and Data, Lighting, Plumbing, Sanitary Lexington Market Renovation Schematic Cost Estimate Nov. 7, 2014 Prepared by Qodesh CM

Mechanical HVAC Description Quantity Unit Cost Unit Subtotal Markup Estimate

Roof Top Units Upgrade 0 $ 0.00 ea $ 0 0% $ 0 Roof Top Units New 53961 $ 7.12 sf $ 384,202 110% $ 422,622 Ducting and Air Distribution 53961 $ 2.00 sf $ 107,922 115% $ 124,110 AHU and Exhaust per Vendor 71 $ 2,300.00 ea $ 163,300 125% $ 204,125 Water Heater Units 10 $ 1,250.00 ea $ 12,500 110% $ 13,750 Escalator 2 $ 115,000.00 ea $ 230,000 135% $ 310,500 Commercial Kitchen 5000 $ 155.00 sf $ 775,000 120% $ 930,000 Kitchen Equipment per Vendor 50 $ 14,000.00 ea $ 700,000 110% $ 770,000 Elevators 2 $ 40,000.00 ea $ 80,000 110% $ 88,000 Ex. Service Elevators 4 $ 8,500.00 ea $ 34,000 110% $ 37,400

Mechanical HVAC Subtotal $ 2,900,508 Replace roof top units, air handling units, Escalator at Entrance

Interior Improvements Description Quantity Unit Cost Unit Subtotal Markup Estimate

Mezzanine Fit Out 12544 $ 18.00 sf $ 225,792 110% $ 248,371 Main Floor Partitions 4000 $ 1.86 sf $ 7,440 110% $ 8,184 Basement Retrofit 53961 $ 4.80 sf $ 259,013 115% $ 297,865 Ceilings for Bathrooms 800 $ 8.51 sf $ 6,810 110% $ 7,491 Exterior Doors 10 $ 4,500.00 ea $ 45,000 120% $ 54,000 Interior Doors 50 $ 600.00 ea $ 30,000 110% $ 33,000 Floor Surfaces - Aisles 6475 $ 6.50 sf $ 42,090 120% $ 50,508 Floor Surfaces - Stalls 47486 $ 3.75 sf $ 178,071 115% $ 204,782 Other Interior Finishes 53961 $ 0.50 sf $ 26,981 130% $ 35,075

Interior Improvements Subtotal $ 939,276 Bathroom and Office ceilings,doors, other finishes Lexington Market Renovation Schematic Cost Estimate Nov. 7, 2014 Prepared by Qodesh CM

Roof Modifications Description Quantity Unit Cost Unit Subtotal Markup Estimate

Main Roof Resurface 53961 $ 5.25 sf $ 283,295 110% $ 311,625 Skylights 6480 $ 28.00 sf $ 181,440 110% $ 199,584 Clerestory Windows 4000 $ 34.00 sf $ 136,000 120% $ 163,200

Roof Modifications Subtotal $ 674,409 Considerations: Minor roof resurface, skylights, clerestory windows

Landscaping and Utility Description Quantity Unit Cost Unit Subtotal Markup Estimate

Parking Lot 37500 $ 3.55 sf $ 133,125 110% $ 146,438 Stormwater Handling and ESD 1 $ 35,000.00 ls $ 35,000 125% $ 43,750 Utilities ROW 1 $ 55,000.00 ls $ 55,000 125% $ 68,750 Pavement - Pedestrian 5000 $ 4.50 sf $ 22,500 115% $ 25,875 Landscaping 2000 $ 12.00 sf $ 24,000 115% $ 27,600

Landscape & Site Subtotal $ 312,413 Considerations: Minor Site Improvements, ESD practices, parking resurface; utilities connection in the City ROW.

Exterior Envelope - Walls Description Quantity Unit Cost Unit Subtotal Markup Estimate Exterior Walls - CMU Base 9450 $ 0.80 sf $ 7,560 120% $ 9,072 Exterior Walls - Structural $ 1.73 sf $ 46,575 115% $ 53,561 Elements 27000 Exterior Walls - Glazing 17550 $ 11.16 sf $ 195,858 115% $ 225,237 Canopies 1800 $ 5.00 sf $ 9,000 110% $ 9,900

Exterior Envelope Subtotal $ 297,770 Considerations: Minor cleaning and prep. Painting. Lexington Market Renovation Schematic Cost Estimate Nov. 7, 2014 Prepared by Qodesh CM

GRAND TOTALS Lexington Market East Renovation Description Quantity Unit Cost General Conditions + Soft Cost $ 2,163,479 19.94% Demolition $ 345,185 3.18% Structural $ 1,611,720 14.85% Plumbing & Electrical $ 1,605,365 14.80% Mechanical HVAC $ 2,900,508 26.73% Interior Improvements $ 939,276 8.66% Roof Modifications $ 674,409 6.22% Landscaping and Utility $ 312,413 2.88% Exterior Envelope - Walls $ 297,770 2.74%

GRAND TOTAL $ 10,850,125

COST RANGE $ 9,765,113 To $ 12,152,140 based on area of East $ 201.07 Cost Per SF Market Appendix D: Finance opportunities

Master Plan: Phase 2 Market Ventures, Inc. Lexington Market Page 85 ECONOMIC DEVELOPMENT ASSISTANCE CONSORTIUM 21 MERCHANTS ROW BOSTON, MASSACHUSETTS 02109

PHONE: (617) 742-4481 FACSIMILE: (617) 367-0908 E-MAIL: [email protected] WEB: www.EDACweb.com

Lexington Market Redevelopment: Funding Considerations for Construction Costs and Programmatic Initiatives

Marcus Weiss President, EDAC

Principal Investigator As a subcontractor to Market Ventures, Inc.

January 21, 2015

Lexington Market Redevelopment: Funding Considerations for Construction Costs and Programmatic Initiatives

Table of Contents

INTRODUCTION ...... 2 OVERVIEW ...... 2 I. CONSTRUCTION COSTS/FACILITY ...... 6 II. EQUIPMENT FINANCING ...... 18 III. SUPPORTING ENTREPRENEURSHIP BY IMMIGRANTS, VETERANS AND LOCAL RESIDENTS ...... 20 IV. YOUTH AND FAMILY UNDERTAKINGS ...... 23 V. RESOURCE PROVISION FOR PRODUCERS ...... 25 VI. MARKETING AND COMMUNITY OUTREACH ...... 27 CONCLUSION ...... 29 GLOSSARY ...... 30

Lexington Market Economic Development p. 1 Funding Considerations Assistance Consortium

Introduction

During the past two years, our team of public market specialists led by Market Ventures, Inc., had the privilege of working with multiple stakeholders dedicated to the revitalization and redevelopment of the historic Lexington Market. During meetings with the steering group and the finance committee, considerations were reviewed with respect to developmental and programmatic elements which might attract a diversity of funding sources from governmental, philanthropic and private sector sources. This report is intended to reflect patterns among these sectors and funding for the types of undertakings that are being considered for Lexington Market. While architectural design and engineering estimates suggest that a preliminary budget ultimately approaching $30 million might be anticipated, considerations of pursuing joint development projects on abutting or shared parcels may lead to additional cost scenarios.

Many of the programs discussed in this report have been used for various aspects of food supply chain projects. At one time more than a decade ago, a federal agency received a matching philanthropic commitment for funding of public markets in areas confronting high unemployment. Congress was eventually inspired to preclude such matching “set-asides” but the current administration’s Healthy Food Financing Initiative and recent Farm Bill innovations have generated continuing momentum for connecting urban populations with access to fresh fruits and vegetables as well as locally produced items for consumption. Where feasible, examples of projects funded are depicted. In other cases, details about typical sizes of grants are described. This review is not intended to be exhaustive of all potential funding sources. It is hoped that it might serve to depict a palette of resources which may allow stakeholders to decide which programmatic initiatives may be timely over the next few years.

Overview

The Lexington Market redevelopment consulting team led by Market Ventures, Inc. received guidance from stakeholders and finance committees which confirmed a strategy that anticipates significant redevelopment of market space, accompanied by a range of programmatic innovations. This analysis focuses attention on both aspects. With a projected development budget to transform Lexington Market reaching and perhaps exceeding $25,839,220, a mixture of grants, equity and debt will be essential to the viability of the public market.

Numerous public markets have found that a disproportionate burden of debt service in pivotal early years can strain cash flow to the point where needed expenditures have to be deferred for extended periods of time. Thus, finding debt, equity and grant resources that will defer principal payments or that may be converted from debt to equity (or vice versa) in subsequent years when positive cash flow flourishes, is important.

Lexington Market Economic Development p. 2 Funding Considerations Assistance Consortium At one point in time, some agencies and foundations had targeted funding exclusively available to public markets and their proponents. In more recent years, broader categories were established for healthy food initiatives, ranging from value-added processing and aggregation at food hubs to retail sales via farmers’ markets, core urban neighborhood groceries and public markets. A number of such grantees and borrowers went beyond the traditional sales or distribution roles to establish kitchen incubators, health and nutrition programming and creative initiatives to link farmers and other producers with institutional or national chain store purchasers.

The following matrices and elaborative comments reflect listings of some of the more prominent potential funders of anticipated Lexington Market activities from the governmental, philanthropic and private sectors. Subsequent to reviewing intended categories with finance committee members, analysis of six categories were deemed to be priorities. Funders to consider for facility construction, equipment financing, entrepreneurship support, youth/family undertakings, producer efforts and marketing/community outreach may often have resources which they’ve awarded within another of the six categories, despite being listed more prominently under one of the particular headers. Information provided concerning potential contacts or email addresses may certainly be pursued for various categories, notwithstanding the fact that they were listed under another priority.

Attracting Increased Funder Interest

While facility construction costs are, of course, the most important priority for Lexington Market supporters to initially consider, other programmatic activities may represent a “door opener” to funding sources which, initially, might be more difficult to approach for a significant grant or loan for traditional building or operational costs. For example, a number of stakeholders and advisors expressed enthusiasm and a positive Baltimore history with respect to assisting veterans who may, in this instance, have a strong interest in playing a role in the food supply chain. Both the Farm Bill and the recent budget agreement of the U.S. Congress make special references about working with veterans who seek to become self-sufficient, overcome a range of challenges and secure a positive future through business development and/or linkages with the food sector. The proximity of the VA Hospital and Baltimore’s history of caring for its veterans suggest a unique opportunity to attract attention in the foundation and private sectors, should several veterans’ initiatives be found worthy of support at the market.

Other funding sources might particularly be attracted by creative undertakings imparting best practices in food preparation and nutrition to children and their families. The use of the proposed new kitchen facilities to offer celebrity cooking classes, while simultaneously facilitating access to healthcare and nutritional resources at the market site, might create a nexus to foundation program personnel, government grant officers or corporate leaders active in the support of the first lady’s healthy food initiative. Once positive relationships are established with a particular funder, opportunities may rapidly increase to approach a financing

Lexington Market Economic Development p. 3 Funding Considerations Assistance Consortium source for some of the larger requests inevitably required by the Lexington Market redevelopment plan.

Private Sector Largesse

Where feasible, future grant applications may apply for financial support for required additional staff, rather than necessitate an increase in the market’s operational budget. Indeed, the availability of such personnel funded by a subsequent financial award might allow for supplementation and cost saving for the anticipated conventional market employees historically included in prior budgets. Nevertheless, the pursuit of supplemental funding and other programmatic resources represents a preliminary cost for consultants, grant writers and financial specialists/brokers that may be deemed by market stakeholders to be prohibitive in a number of instances.

Ultimately, private sector funding will be a key component for the financing of construction and other activities over the next five years. Even where conventional debt at market or slightly below market interest rates are relied on, past market experiences have also shown that conversion of debt to equity, subsequent write-downs of debt and the forgiveness of exit fees which accompany the wind up of tax credit programs, may potentially be renegotiated after a number of operational years.

Other incentives to inspire the generosity of traditional banks and hospitals continue to emanate from congress, federal agencies, regulatory bodies as well as state and local initiatives. Congress just appropriated $18 million for the Bank Enterprise Act (BEA), which facilitates Treasury grant funding to financial institutions providing resources for special community undertakings. In a number of instances, banks have donated their BEA awards to the partnering local not-for-profit, tax exempt entity.

In a more recent development, the Internal Revenue Service (IRS) issued final regulations for new requirements imposed on tax-exempt hospitals. Such institutions historically have approached their charitable obligations by demonstrating to the IRS that they were forgiving amounts previously charged for emergency or other medically necessary care provided to low- income individuals. The final regulations issued for tax-exempt hospitals on December 31, 2014 establish limits with respect to such charges for emergency and related care. The regulations reiterate the requirement for hospitals to conduct Community Health Needs Assessments (CHNA) and adopt implementation strategies not less than once every three years.

As a result, healthcare providers, like Kaiser Permanente and numerous individual hospitals and their foundations, have funded healthy food initiatives with multi-million dollar grants in recent years. While the market has historically availed itself of local hospitals’ willingness to come and do special screenings and advice, local institutions might be challenged to replicate the “best practices” and generosity of healthcare institutions in other geographic locations. Whether it’s providing a healthcare specialist on a mobile vehicle going to transportation-challenged housing sites with Lexington Market fresh produce and prepared foods or facilitating loan resources

Lexington Market Economic Development p. 4 Funding Considerations Assistance Consortium with an interest rate below 1%, examples may be offered to illustrate a range of new commitments which may be negotiated as market proponents pursue maximized collaboration with hospitals and other healthcare providers.

Analyses in the Phase II report tendered by Market Ventures, Inc. and its subcontractors address the need to inspire major institutions proximate to the market to increase patronage of their employees and visitors for the improved offerings which will emanate from the redevelopment. In some cities, hospitals and related insurance companies initially organized group employee lunch delegations to visit markets that previously had been challenged by stereotypical perceptions about safety. In one case, a public market’s role in revitalizing a distressed Empowerment Zone soon led to many employees’ leaving their secure, institutional office settings to ultimately stroll a number of blocks past the market to nearby mercados and ethnic restaurants whose diverse food purveyors had grown beyond small walk-up booths and stalls. Thus, entrepreneurs who emerged from maintaining a five-foot counter within the market were capable of transitioning to operators of multiple sit-down restaurants. Frequently, these same vendors were gradually observed to purchase commercial and residential properties near their venues while becoming active leaders in community planning and role model capacities.

Each of the following matrices attempts to furnish examples of funded projects or resource usage that may have relevance to the redevelopment approach. Where feasible, data is provided about budget availability, typical size of awards, contact information and application timing considerations. While many hundreds of programs exist, the ones highlighted are recommended as a result of their prior activity in support of initiatives which may eventually be deemed productive for Lexington Market. In many cases, proponents may choose to initially target six to twelve funding sources to explore. Subsequently, additional narrowing of those most pertinent for near-term applications will likely become an annual exercise.

Lexington Market Economic Development p. 5 Funding Considerations Assistance Consortium I. Construction Costs/Facility

Reducing or deferring principal payments on loans will necessitate a creative mix of grants, equity infusions and patient debt for the early years the redevelopment effort. Grant funding, of course, has historically been available to public markets in amounts of $800,000 to several million, depending on the source. At one time, HHS’s Office of Community Services (OCS) had a dedicated allocation of awards to public market projects which was matched (and inspired) by the Ford Foundation, a leader for several decades in nurturing collaborations with other funders. Push back from the congress subsequently discouraged using appropriated funds for “set asides.” That same agency, however, is now the principal grant giver for the Obama Administration’s Healthy Food Financing Initiative (HFFI).

Within the Department of Commerce, the Economic Development Administration (EDA) provided $1.4 million for the food hub at Baltimore’s former Eastern Avenue Pumping Station. The agency has also provided $1 million plus awards for infrastructure upgrades and other regionally-oriented initiatives for agribusiness parks and regional agribusiness studies funded through the Philadelphia regional EDA office. Tax credit programs (e.g. New Markets or Historic Tax Credits and state credits), philanthropic support and private-sector investments also represent the potential for deferred cash outlays for financial infusions. In some cases, waivers of project closeout fees or conversions from debt to equity have also enhanced the cash flow concerns of various public markets.

Lexington Market stakeholders and their advisors will need to consider which collaborations might maximize access to the various sources partially depicted below. The potential for evolving partnerships with the new food hub or with institutions on the Eastern Shore might be timely to ensure that competition for funding resources is less of a concern while joint proposals or subcontracts build bridges to an increased number of funders. Legal counsel and other advisors might, similarly, be helpful in guiding stakeholders to the establishment of subsidiary for-profit entities, which might be more appropriate for equity infusions. Contemplating the potential for a future holding company to manage non-profit and for-profit activities might also be in order.

Approaching foundations may be a more subtle process. While some have directly funded public markets aided by the team’s project advisors, others might be courted more successfully by undertaking a pertinent programmatic endeavor at the market. This may inspire program officers to invite a submission that generally falls within the particular interest area prioritized by that funder. In some instances, certain foundations have been proactive in soliciting participation by other philanthropies with which it had collaborated on comparable initiatives. In other instances, identifying foundation leaders who have demonstrated repeated interest in supporting public markets might evoke interest by a mix of funders. For example, former McKnight Foundation President, Rip Rapson, was a key funder and supporter of the Midtown Global Market in Minneapolis ($600,000). Subsequently, in his role as the head of the Kresge Foundation, he facilitated a $400,000 award from Kresge for capital improvements and other

Lexington Market Economic Development p. 6 Funding Considerations Assistance Consortium expenditures significantly after the development phase following several years of market operations. Mr. Rapson is also a key actor in Living Cities, where he and a number of leaders of prominent foundations (including Casey and Ford) guide a public/private partnership of banks, corporations and foundations in the provision of grants and loans and technical assistance to a number of metropolitan areas pursuing revitalization.

A number of local philanthropies have also demonstrated national leadership with respect to healthy food innovations. In some cases, linkages with the Affordable Care Act and providing programs for youth and families to improve their health prospects might represent an access point to pursue. Thus, suggestions from stakeholders and Market Ventures, Inc. advisors regarding kitchen access and programming targeting youth and their families might kindle interest with one foundation, whereas an initial approach about construction funding might generate less interest. Still, other foundations might be willing to consider program related investments (PRIs) spread out over a number of years with extremely low interest and deferred principal payments.

The analysis includes a matrix and selected program reviews of funding sources along with typical sizes of grant or loan awards, potential requirements pertaining to collaborating entities and funding source contact persons.

Selected Federal Programs

I. Construction Description Funding Eligibility Contact HHS–OCS Key healthy food $9.5-10MM set Community Development Karen Harris, Community grants program. aside for approx. 13 Corporations (although CED-HFFI Program Economic awards, max $800k Eastern Market, in Specialist Development – (job creation Detroit, was recently [email protected]. Healthy Food essential) awarded $600,000) gov Financing Typically due in the 202.205.2674 Initiative Spring, but this (CFDA 93.570) year's NOFA may be imminent.

Comment: One of three key components of the Healthy Food Financing Initiative, along with USDA and Treasury. Winning one of them provides special consideration when applying for the others. Administration sought to relocate to USDA, but Congress kept it at HHS for the coming budget year. See also HHS Office of Refugee Resettlement (ORR) for resources to the extent that immigrant producers/purveyors will be targeted.

Lexington Market Economic Development p. 7 Funding Considerations Assistance Consortium I. Construction Description Funding Eligibility Contact HUD Debt (attractive Typically ranges Up to 5x city's annual Paul Webster Section terms) through from $4-15MM CDBG allocation, although [email protected] 108/CDBG municipality, based on recent subject to currently ov 202.708.1871 guaranteed by comparable outstanding amts future CDBG projects in other ($18.8MM currently being Preliminary review revenues and cities (e.g. paid off) with Stephen Janes of financed through Birmingham, Baltimore DHCD the financial Chicago). Given steve.janes@baltimor markets. Baltimore's current ecity.gov servicing of its 410.396.4051 outstanding 108 indebtedness, $5- 7MM may be a more realistic ask (although more might be available w/ respect to eligibility).

Comment: Preliminary reaction from HUD appears positive for a submission. Recent congressional budget agreement indicated 108 aggregate limitation of $500MM. No deadline, per se, but timing may be a consideration given the aggregate limitation. Baltimore has extensive experience with significant funding for the Montgomery Park undertaking.

I. Construction Description Funding Eligibility Contact HUD National $80MM allocated Depends on target area Caroline Clayton Choice competition with in recent budget prioritized by the city. choiceneigborhoods@ Neighborhoods roughly $20MM agreement. May ultimately prove hud.gov awards to FY14 more pertinent to a 202.402.5461 municipalities. Implementation market district expansion Grant NOFA issued to nearby blocks/parcels. early November, Applicants may include with another round public housing of applications due authorities, local February 9, 2015. governments, nonprofits, tribal entities and for- profit developers. Comment: Boston recently allocated $500k of $20.5MM award for a redevelopment of the Pearl Meat Building into a food hub/kitchen facility (additionally that project received an HHS/OCS award, 108 financing of $3.2MM, $10MM in Treasury HFFI funding via NMTCs, CDFIs and related financing for construction and equipment). Jubilee Baltimore received a planning grant in 2009. In budget agreement, Congress directed the agency to take regional diversity into account for this year's awards.

Lexington Market Economic Development p. 8 Funding Considerations Assistance Consortium I. Construction Description Funding Eligibility Contact U.S. Dept. of Grants for economic 6 - 7 figure grants. Business incubator and Alma R. Plummer, Commerce – development $213MM in new food facilities have EDA Philadelphia Economic facilities and budget designated historically received Regional Office Development infrastructure. Has for economic grants from this program [email protected] Administration funded public development (e.g. $2.669 million in 215.597.7538 (EDA) markets and other assistance public works funds for healthy food programs, with construction/renovation National contact: initiatives. EDA $99MM targeted of Michigan State Philip Saputo Public Works money for public works University’s Food Product [email protected] has been a resource awards. $10MM and Innovation Center 202.482.6331 for food initiatives allocated in budget which will include a oriented to the for Minority kitchen incubator and regional economy. Business commercial kitchen Baltimore's new Development space). food hub is Agency (MBDA). receiving $1.4MM Four funding cycles, from EDA. year-round.

Comment: Puerto Rico, which is covered by the same desk officer in the regional office, received a $500,000 grant to analyze the regional agribusiness economy which preceded its federal funding for its food processing center, farmers' market and mobile market. EDA funds have also provided for predevelopment stage work for an ill-fated public market concept in western MA on which several of the Lexington Market consultant team members assisted, but ultimately underwent private, non-market development.

Lexington Market Economic Development p. 9 Funding Considerations Assistance Consortium I. Construction Description Funding Eligibility Contact U.S. Citizenship The EB-5 Visa TEAs require Investment coordination EB-5 Program Chief, and Immigration program raised $5.5 unemployment at typically must flow Nicholas Colucci Services (USCIS) billion in 2014. With 150% of the through "regional USCIS.ImmigrantInves EB-5 Visa applicants obtaining national rate, or centers" (some, however, [email protected] Program visas for the investment may be found to be more .gov investments of requirement is reliable than others). $500k in doubled to $1MM Baltimore's first EB-5 business/commerci per applicant. project, the Mount al real estate Vernon Hotel Indigo has undertakings in attracted $6MM of Targeted foreign investment Employment Areas through this visa (TEAs). program.

Comment: In prior years, program had been underutilized but is now reaching significant levels of investment, since numerous U.S. developers are finding it to be a valuable resource for project capitalization. Brokers often depict having dozens of overseas investors anxious to participate in projects in order to secure an EB-5 visa for themselves and/or family members. Extensive and thorough due diligence urged before advisor/consultants and "experienced" attorneys are retained.

I. Construction Description Funding Eligibility Contact USDA – NIFA One-time funding Award size of $10 - Non-profit entities and Jane Clary, NIFA Community Food for projects lasting 300k depending on local food program National Program Projects one to three years project length (1 -3 providers with relevant Leader (CFDA 10.225) targeting food years). Allocation of experience. Must have [email protected] insecurity in low- $9MM for FY15 and 1:1 matching funds. 202.720.3891 income each FY thereafter Applications typically due communities. Uses in Farm Bill. in late Fall. include research, feasibility studies, construction, working capital and market promo.

Comment: Several public markets and food hubs (such as Findlay Market in Cincinnati) have received funding through this program. One New York group used their three-year funding to expand relationships among youth, small farms and a public market in a low- income neighborhood, targeting job creation and the production/branding of value-added products.

Lexington Market Economic Development p. 10 Funding Considerations Assistance Consortium Local/State Finance

I. Construction Description Funding Eligibility Contact Tax credits issued One Maryland Qualifying as costs Mark A Vulcan, Director, through the Maryland Project Tax Credit under this program Tax Incentives Department of Business max $5MM, One are project MVulcan@choosemaryl and Economic Maryland Start-Up construction, and.org Development (DBED). Tax Credit max rehabilitation, 410.767.6438 or Credits can be carried $500k. installation and 877.821.0099 OneMaryland Tax forward 14 years and acquisition Credit may be refundable. expenditures. (See also re. II and III)

Comment: See also Maryland Department of Business and Economic Development (DBED) resources for disadvantaged, minority, women and small business loans, as well as the Invest Maryland Venture Fund and the Maryland Economic Development Assistance Authority and Fund.

Lexington Market Economic Development p. 11 Funding Considerations Assistance Consortium Philanthropic Resources

Foundation Grant Funding

Description: Six to seven-figure grants have been received by public markets from larger foundations, with five-figure awards more common from local family foundations etc. Enterprise Foundation provides an example of a comparably-sized reuse of commercial/industrial buildings which featured a 6,2000 square foot (sf) commercial kitchen along with 6,400 sf of retail and 40,700 sf of warehousing in a project in New Orleans (1770 Tchoupitoulas Street). A mix of New Markets Tax Credits ($10MM), U.S. Bank equity, state historic tax credits and other debt may be illustrative of an endeavor similar in scale to Lexington Market.

Funding and Eligibility: In the Midtown Global Market in Minneapolis McKnight, Ford, and Casey provided $575k, $400k and $115k, respectively, for the initial construction undertaking for the conversion of the 75,000 square foot Sears building ground floor and basement space. During the operational phase, the Kresge Foundation (then led by President Rip Rapson, who formerly ran McKnight) provided $400k plus for capital improvements and other needs. While some accept direct applications, many provide funding by invitation only. Foundation Grant Comment: Many national foundations prefer to use intermediaries (e.g. Wholesome Wave, Funding discussed below) for direct lending and grant activities with respect to healthy food funding. (See also: special food and municipal initiatives sponsored by Living Cities which is comprised of a number of foundation, bank and corporate funders.)

Selected Contacts: Enterprise Foundation Kresge Foundation Sarah Torsell Laura Trudeau East Region Grants Manager Managing Director Community Development [email protected] [email protected] 614.484.5161 248.643.9630

Stacy Barbas Senior Program Officer, Health [email protected]

Lexington Market Economic Development p. 12 Funding Considerations Assistance Consortium Foundation Program Related Investments (PRIs)

Description: Larger, more patient and significantly reduced-rate financing may be available from numerous foundations providing PRI funding. The PRI directory maintained by the Foundation Center identified MacArthur, Ford, Heinz and Casey among those foundations with significant allocations for economic/community development. More recently, Surdna Foundation launched an $18MM PRI fund, with initial targeting of several regional food hubs to foster “sustainable communities.” Surdna acknowledged that it was targeting food systems and the Business Outreach Center of New York, which facilitates financing for minority and immigrant neighborhood vendors and retailers.

Funding and Eligibility: Loans, guarantees, bonds, patient capital. Some PRIs are specific about looking for projects that demonstrate the “viability of new innovations” versus expanding endeavors or programs already underway. Rebuilding local food systems appears Foundation to be a sustained interest of the Surdna Foundation. Some markets have received direct PRI Program Related Investment funding, while others required partnerships with local community development corporations or some other form of intermediary. (PRI)

Comment: In addition to working with intermediaries, a number of funders are also partnering with Goldman Sachs’ 10,000 Small Businesses initiative. Ford Foundation spearheaded the use of PRIs in the late 60s. While the foundation is engaged in a strategic reassessment mode, its relationship with Eastern Market in Detroit and that city’s revitalization bares close watching. Its senior leadership includes individuals who have dedicated much of their careers to fostering neighborhood revitalization. Thus, its history in building philanthropic collaboratives to support public markets merits continuing attention.

Selected Contact(s): Helen Chin, Director, Sustainable Environments (Surdna Foundation), [email protected], 212.557.0010

Lexington Market Economic Development p. 13 Funding Considerations Assistance Consortium Private Sector Financial Institutions

Description: U.S. Bank and JPMorgan Chase have been particularly active in coordinating investments for public markets, food hubs and other comparable initiatives. U.S. Bank may be investing in more related NMTCs than any other institution. Chase collaborated with Kroger Co. to rehabilitate four “food desert” grocery stores, subsidizing funding for the deal via a $7.8MM NMTC, thereby catalyzing a $20.3MM loan from Kroger. The bank also participates through construction loans and diverse financing, frequently complemented with JPMorgan Chase Foundation grants. Wells Fargo, similarly, has been active in joining other banks to support public markets and other food undertakings and is a valued ally of initiatives at the Midtown Global Market.

Funding and Eligibility: In 2013, Chase notably provided $210MM to non-profits, $25MM for Detroit initiatives and $30MM to the California FreshWorks Fund, mixing seven-figure grants with eight-figure, low-interest loans to a key intermediary underwriting deals through the FreshWorks Fund, Capital Impact. While not available for brick and mortar or operational endeavors, Wells Fargo’s Neighborhood Implementation program provides six-figure grants, up to $750k, which may be exceeded by two multi-year renewal grants of $150k each (inquiries to this program may be explored in re. the expansion of this initiative in Maryland).

Comment: Also worthy of note is City First Bank, which joined with Chase and The Reinvestment Fund (TRF) for the financing of the recent opening of the ShopRite Supermarket in Howard Park. City First was one of three awardees through a demonstration project created by HUD during Andrew Cuomo’s tenure as Secretary during the Clinton Administration. With a one-time grant in excess of $10MM, Baltimore was one of three that was awarded this unique form of community development finance. Private Sector Pittsburgh National and Citi have also pioneered regional and metropolitan innovations, including Financial food endeavors since the 1980s. These occurred years before the Community Reinvestment Act Institutions (CRA) revised regulatory enforcement tests and stimulated a dramatic increase of sustained bank community development investments through the 1990s and more recent decades. A number of other banks are well known to stakeholders as a result of their activity on various innovative, Maryland-based projects. [See also insurance company funding for permanent loans and other debt. For instance, Prudential Financial, Inc. and MetLife, Inc., are active in Living Cities and have developed innovative financing initiatives in targeted communities.]

The Federal Home Loan Bank of Atlanta supports the Live Baltimore program as well as other Baltimore deferred loan and historic restoration undertakings. The Home Loan Bank in Atlanta has pioneered a number of community development initiatives with its member banks. Contact(s): City First Bank of D.C. JPMorgan Chase Brian E. Argrett Helen Stewart President & CEO Community Relations Reg. Manage, Mid- 202.243.7100 Atlantic [email protected] 302.634.1099 Wells Fargo FHLB – Atlanta Anna Bard Cassandra Madden, Senior Lending and Community Affairs Manager Disbursement Specialist, Maryland Office, [email protected] [email protected] 1.800.536.9650, x 5321

Lexington Market Economic Development p. 14 Funding Considerations Assistance Consortium Selected Intermediaries

Description: Wholesome Wave has become an important repository of funding from a number of foundations that are interested in healthy food initiatives. It has undertaken Baltimore projects in collaboration with The Reinvestment Fund and has familiarity with emerging projects, including the redevelopment of Lexington Market.

Funding and Eligibility: Initially funded with extensive support from the Newman’s Own Foundation, Wholesome Wave added to its resource provision with its Healthy Food Commerce Investments and attracts (as well as assembles) financing from diverse sources. Wholesome Wave Comment: Wholesome Wave’s co-founder is former USDA Under Secretary, Gus Schumacher, who has served as an advisor to a number of cities and their special task force operating under the auspices of the U.S. Conference of Mayors. The organization has had extensive success in combining a number of additional financing sources on a project-by-project basis. Wholesome Wave has been particularly active in significantly sized projects that linked product from farmers and other producers through aggregation, processing and market sites.

Contact: Malini Ram Moraghan, Managing Director, Healthy Food Commerce Investments, [email protected], 203.226.1112

Description: Originally a subsidiary of the National Coop Bank, Capital Impact has become an active lender of philanthropic and Treasury resources, such as targeted funding from the CDFI program and the New Markets Tax Credit program. A significant operator of the California FreshWorks Fund, to which it also funnels foundation resources, Capital Impact has been active throughout the nation in fostering neighborhood revitalization undertakings.

Funding and Eligibility: Capital Impact has deployed an estimated $112MM in grants and loans in Capital its healthy foods program, financing over 70 food retailers. They provide seven-figure loans, often Impact with below-market terms. From time to time, they also have grant funding from foundations to complement lending activity. Capital Impact’s investments in low-income neighborhoods flow through both for-profit and non-profit businesses.

Comment: See also NeighborWorks Capital and LISC National Equity Fund which may offer comparable approaches to utilizing funding received from Treasury Healthy Food Financing programs and resources from foundations.

Contact: Terry Simonette, President, [email protected], 703.647.2300

Lexington Market Economic Development p. 15 Funding Considerations Assistance Consortium Description: Living Cities, with 22 member organizations comprised of some of the nation's largest foundations and financial institutions, operates with the mission of “improve[ing] the lives of low- income people and the cities where they live.” Annie E. Casey Foundation is among the entities active in nurturing Living Cities strategies and programs. Living Cities also provided $700k to Neighborhood Development Center of Minneapolis and St. Paul which established and operates the Midtown Global Market in the heart of Minneapolis' EZ.

Funding and Eligibility: Living Cities’ Integration Initiative and Catalyst Fund provide six- and seven- figure infusions through direct grants, program-related investments and commercial debt Living Cities financing. The Reinvestment Fund (TRF), the lending intermediary for Baltimore’s Integration Partnership, received a $3MM “general recourse loan” with a term of 9.6 years for the project, leveraging $39MM from other sources.

Comment: Living Cities’ support of TRF’s Fresh Food Financing demonstrates its commitment to maximizing impact on access to healthy foods in low-income areas. Baltimore Integration Partnership (BIP) is a Living Cities Integration Initiative site led by the Association of Baltimore Area Grantmakers (ABAG contact: Elisabeth Hyleck, [email protected], 410.727.1205, x1211).

Contact: Ben Hecht, Esq., President & CEO, [email protected]

Description: OFN is the national network organization for community development financial institutions. Subsequent to the defunding and demise of the National Congress for Community Economic Development, OFN has become one of the most prominent trade associations in the community development field, while attracting governmental, private sector and foundation funding. OFN also operates its own financing initiatives which partner with member CDFIs and provide T.A. with Treasury support for healthy food projects. Opportunity Funding and Eligibility: OFN has active resources for supporting HFFI interactions. OFN leadership Finance might best be pursued with a collaborating CDFI such as The Reinvestment Fund. TRF personnel Network (local contact: Dana Johnson, [email protected], 410.783.1110) have a working familiarity (OFN) with various PRIs and MRIs (mission related investments) as well as other resources funded by OFN. Comment: OFN has evolved national programs with global corporations (e.g. Starbucks) and may be helpful (despite criticism from some analysts) in providing linkages beyond traditional financing resources.

Contact: Mark Pinsky, President & CEO, 215.923.4754

Lexington Market Economic Development p. 16 Funding Considerations Assistance Consortium Local Foundations

Description: A number of funders choose to work through the Association of Baltimore Area Grantmakers and follow-up meetings may be timely. Special attention is suggested with respect to the Harry and Jeanette Weinberg Foundation, the Abell Foundation and the Blaustein Foundation regarding interests that may be related to programmatic strategies being contemplated for Lexington Market. For instance, the Blaustein Foundation has exhibited an interest in healthy eating and advocacy for children/youth regarding implications of the Affordable Care Act.

Funding and Eligibility: The Abell Foundation and the Weinberg Foundation, in collaboration with Wholesome Wave, helped launch the Maryland Hunger Solutions pilot project for Supplemental Nutrition Assistance Program recipients to receive bonus “Baltimore Bucks” for the purchase of healthy fruits and vegetables. Abell Foundation has utilized its PRIs to help non-profits expand facilities and provided $300,000 for Civic Works Real Food Farm.

Local Comment: (See also the Greater Washington Regional Food Funders, Lindsay Smith, Coordinator, Foundations 202.550.2357. A collection of 100 plus regional funders interested in food projects. Also note that the Gannett Foundation’s Pat Lyle sponsored the Greater Washington Food Funders’ recent meeting [email protected]). Selected Contacts:

Abell Foundation Robert C. Embry, Jr, President Blaustein Foundation [email protected] Lara A. Hall, Senior Program Officer: Educational Opportunity, Health and Mental Health Elizabeth Harber, Senior Program Officer, Tel: 410-347-7204 Community Development [email protected] [email protected] 410.547.1300

Weinberg Foundation Sheryl Goldstein, Program Director, Education [email protected] 410.654.8500, x217

Amy Kleine, Program Director, Basic Human Needs [email protected] 410-654-8500, x268

Selected Project Example

The Kresge Foundation Grant of $250,000 to the Grand Action Foundation (Grand Rapids, MI) Construction of public market with combined facilities for food production and sales, health educ. and cooking lab for kids.

Lexington Market Economic Development p. 17 Funding Considerations Assistance Consortium II. Equipment Financing

Many of the funders depicted in I. Construction Costs/Facility have also been resources for the financing of equipment purchased by a market itself, by vendors/tenants and by unique programs operated at a site. (E.g. a youth entrepreneurial initiative engaged in key making or repairing electronic devices). For many of the governmental programs described above, job creation for economically disadvantaged individuals is a key consideration. With other funders, impact on communities and families may be more pertinent. Several city programs, described in the matrix below, offer funding that may be accessible by emerging entrepreneurs from the community or elsewhere in the food supply chain. In other instances, some Community Development Financial Institutions (CDFIs) will have loan funds for immigrants, women and local entrepreneurs of color to foster access to working capital as well as essential equipment needed to operate their emerging business at the market and/or surrounding neighborhoods. In some cases, market management may want to acquire used or new equipment at a dramatically reduced price that may have become available on short notice as the result of a bankruptcy process or loan foreclosure. Acquiring and storing such equipment may be perceived as burdensome or, in the alternative, may represent an opportunity to assist aspiring local entrepreneurs in “graduating” from offering products at a day stall to being full-time operators in the heart of the market.

Funding Source

A number of aforementioned federal resources mentioned in I. Construction Costs/Facility may also be used in equipment budgets, such as the HHS/OCS $800,000 grants. Indeed, using such funds for moveable equipment may avoid or eventually eliminate the imposition of federal reversionary interest, whereas construction expenditures frequently retain such federal interest in perpetuity.

II. Equipment Description Funding Eligibility Contact BaltimoreMICRO loans may The program depicts Qualified small Jeff Pillas, represent an important a maximum of $30k businesses in the CFO, Baltimore source of working capital and with loan terms no City of Baltimore. Development equipment/machinery or longer than 7 years. Priority given to Corporation (BDC) fixtures/furniture for tenant projects that jpillas@baltimoredeve Baltimore businesses. While not-for- enhance larger lopment.com MICRO profit businesses and/or neighborhood 410.837.9305 Revolving Loan developers are not eligible, community Fund for-profit corporations, revitalization partnerships or efforts. proprietorships are. Comment: BaltimoreMICRO may be critical when tenant access to credit is constrained and may be a catalyst to supplemental private sector financing. BDC also serves as manager of a loan fund targeted to Maryland’s small, minority and women-owned businesses (see III. Entrepreneurship).

Lexington Market Economic Development p. 18 Funding Considerations Assistance Consortium Selected Project Example

HHS/OCS CED Fayette County Community Action Agency (Republic, PA) $759,374. Equipment for kitchen facilities at Republic Food Enterprise Center food hub and market.

Lexington Market Economic Development p. 19 Funding Considerations Assistance Consortium III. Supporting Entrepreneurship by Immigrants, Veterans and Local Residents

The market as a venue for aspiring entrepreneurs has been extensively discussed among stakeholders and advisors. Numerous funding sources will be especially motivated to be supportive if the market has dedicated programs to nurture entrepreneurship among area residents who have been outside of the economic mainstream. Where the Secretary of Commerce has toured business incubators in recent months, she has urged localities to work closely with Minority Business Development Agency representatives.

Working with immigrants, veterans and local residents who may have won acclaim for their baked goods at charitable events will also motivate supportive consumers to patronize the market more frequently. Special events may garner extensive media attention. For instance, this may occur when a pie bakeoff contest judged by local celebrities earns a church or neighborhood sports team baking champion an opportunity to have access to a highly visible day stall as a prize. Thus, he or she may explore converting an avocation/passion into a specialty business.

By establishing a business support initiative (perhaps in collaboration with area faith-based groups), the market’s role in fostering job creation for neighborhood residents may draw attention from regional governmental offices or among business leaders mentoring youth entrepreneurs. Offering access to advisors that can connect smaller scale food producers to procurement specialists from area hospitals, schools, military facilities and other institutions (e.g. the Ethiopian Community Development Council, which has a circuit riding loan officer for Baltimore minority or immigrant borrowers) would also find favor with a range of sources of support for the market and its initiatives. Maximizing the networking with organizations throughout the city and even institutions and/or producers on the Eastern Shore would serve to highlight the impact Lexington Market might have on the broader regional food supply system.

See also USDA funding for Food Safety Training Program. Also note SBA’s 7(a) guarantee program, which is under particular scrutiny, directed by Congress, with respect to reporting immediate emphases assisting veterans’ outreach for entrepreneurial financing.

Lexington Market Economic Development p. 20 Funding Considerations Assistance Consortium Funding Sources

Federal

III. Entpr. Description Funding Eligibility Contact USDA – NIFA Awards targeted to new Maximum of Collaborative network Jill Auburn, Beginning and established regional $250,000 per year among state, tribal, local, National Farmer and training, education and over a 3 yr. grant or regionally based Program Head Rancher technical assistance period. groups. Partnering [email protected] Development initiatives for beginning $20MM for each of entities might include sda.gov Program farmers and ranchers. fiscal years 2014 - community-based 202.720.2635 (CFDA 10.311) 2018, to remain organizations, available until educational institutions expended. and relevant USDA state agencies.

Comment: The Farm Bill introduced a new clause wherein a minimum 5% of funds go to military veteran farmers and ranchers. Projects, such as "Training Beginning Farmers for Chicago's Urban Agriculture Community" (which received $750k over 3 yr project period) have formed partnerships (e.g. with the county sheriff's office) that enhanced their program's ability to target populations, such as non-violent youth offenders, while providing employment opportunities and addressing neighborhood food security.

III. Entpr. Description Funding Eligibility Contact USDA – RD Planning and working Max. $75k for Eligible applicants MD State USDA – Value-Added capital grants for Planning Grants, (qualifying mid-tier RD Director, Bill Producer individuals, groups $200k for Working entities further McGowan Grant (VAPG) and/or organizations Capital restricted) plan, create 302. 857.3580 (CFDA 10.352) representing groups of 2014 Farm Bill gives markets, or use www.rurdev.usda. producers, farmers or a lump sum of working capital for gov/md/ ranchers to create or $63MM for VAPG value-added products develop value-added over the life of the and sales of same. producer-owned Farm Bill (2014- 1:1 matching funds businesses. 2018), but with no required. Deadline stipulations in re. FY14 extended from year-to-year Feb. to Apr. availability. Comment: VAPG awards totaled just under $25MM in FY14 in a round of funding with a "special emphasis" on food hubs, bio-based products and tribal projects. Uses of funds varied widely, from consumer and public relations to offsetting the costs of processing, operations, personnel and even the expenses associated with international market introduction.

Lexington Market Economic Development p. 21 Funding Considerations Assistance Consortium State/Local Finance

III. Entpr. Description Funding Eligibility Contact Capital emanates from a BDC manages Improvements to Jeff Pillas, CFO, BDC percentage of Video $1MM of VLT loan property and buildings jpillas@baltimorede Lottery Terminal (VLT) funds and typically is an appropriate use. velopment.com revenue received from provides loans So, vendors assuming 410.837.9305 Maryland casinos. from $30k – $300k, responsibility for their typically at below- own build out may be VLT Revolving market interest attractive borrowers. Loan Fund rates. Comment: Also see City General Obligation Bonds (particularly re. “brick and mortar” improvements), Tax Increment Financing (TIFs), Payment In Lieu of Taxes (Pilots) and Façade Improvement funding. Empowerment Zone tax credits/finance and brownfield programs may be relevant, where applicable, particularly as Lexington Market eventually catalyzes the creation of a food district.

Selected Project Examples

USDA– Risk Management Education and Outreach Partnership Cooperative Agreement Program Women Veterans in Agriculture to establish training programs in risk management and technical skill development. Also of interest: Veterans Administration support for Albuquerque project featuring a veterans’ urban farm as a remedy for PTSD ($70,000 initially pledged, but on hold). [Related project in Albuquerque recent recipient of $800,000 HHS HFFI grant.]

HHS/OCS – CED-HFFI Brightwood Development Corporation (Mayagüez, PR) $600,000 grant. Established “Healthy Foods Distribution and Logistics” business unit and provided related HHS seed capital funding/TA for emerging entrepreneurs of color.

Lexington Market Economic Development p. 22 Funding Considerations Assistance Consortium IV. Youth and Family Undertakings

Market Ventures, Inc. has highlighted the possibility of special programs where youth might have access to training in food preparation and/or product development. A number of farmers’/public markets and value-added processing centers have built relationships with sophisticated food testing and packaging laboratory facilities. In some cases, such collaborations with university or private sector, state-of-the-art facilities may prove to be advantageous. Introducing youth to the nutritional value of preparing healthy food will certainly be a priority. In any case, exposing various age groups to a mix of career roles in the food sector might provide outcomes of interest to various funders.

The 2015 omnibus appropriations bill approved by Congress in mid-December1 and the recent Farm Bill2 include multiple references to working with veterans and their families who are confronting challenges because of PTSD, homelessness, substance abuse or an inability to secure long-term employment in the private sector. The First Lady has been a particularly passionate advocate for focusing on such military families, simultaneous to her pursuit of healthy food innovations. Baltimore represents an attractive location for the installation of undertakings in this context. Many federal agency program officers have travel budget constraints. Few, however, are encumbered from making a day trip to Baltimore to assess progress with grants funded by various federal agencies described earlier.

Mentoring youth and/or veterans has become a particular interest of a number of corporate CEOs and companies who have responded to entreaties from the White House. As mentors are lured from the private sector to work with youth programs at the market, additional access to their favorite charitable organizations may also be fostered.

Selected Project Examples

USDA – Specialty Crop Block Grant Gary Corner Youth Center (Illinois) FY13 SCBG award to provide urban youth with education on the nutritional value of specialty crops and the opportunity to participate in urban agriculture via youth-managed roof top farm.

USDA – Community Food Projects The Lower Eastside Girls Club of New York $272,233 “Farm Girls Brand: a Growing Enterprise” to expand the relationship among youth development organization, small farms and public market in a low- income neighborhood to create jobs and support the local food system by working with farmers and community residents to develop value-added products.

1 “Consolidated and Further Continuing Appropriations Act, 2015.” Motion agreed to Dec 13, 2014 (113th Congress). 2 “Agricultural Act of 2014.” Pub. Law 113–79—Feb. 7, 2014 (113th Congress).

Lexington Market Economic Development p. 23 Funding Considerations Assistance Consortium W.K. Kellogg Foundation Ongoing “Healthy Kids” program has provided grants to organizations such as Philadelphia’s Common Market ($250,000) to support local food distribution facilities and programs serving vulnerable communities, with a particular emphasis on targeting youth.

USDA – Community Food Project Corporation at Findlay Market (Cincinnati, OH) $218,890 “Cultivating Healthy Entrepreneurs and Farmers” resources and training for urban farming sites, featuring youth. (In other cases urban farming projects have been funded which feature veterans, homeless and/or ex-offenders).

Lexington Market Economic Development p. 24 Funding Considerations Assistance Consortium V. Resource Provision for Producers

The market’s emphasis on becoming a sought-out venue for premium fresh fruits and vegetables and other value-added products suggests attracting relationships with producers throughout the state. Most farmers and other producers will travel to well-patronized markets, should sales justify investing the time. In some public markets, access to value-added production facilities during non-growing seasons gave producers a reason to establish weekly interactions.

In other instances, learning about resources to address daunting new federal requirements has become a priority. Special programs assisting producers with cooperative purchasing, accessing new markets, updating pricing trends for seed, fertilizer or institutional expenditures might generate sustained relationships. For instance, a tilapia producer on the Eastern Shore travels regularly to Baltimore to sell his fish to local restaurateurs. Specialists available from Lexington Market programs and/or the food hub could assist this tilapia producer to expand his production capacity and workforce size, should he be aided in securing school, hospital or other institutional contracts. Working to avoid redundancy with the food hub’s planned programs will be necessary in the immediate future.

Personnel at the kitchen facility may also be capable of assisting local caterers, food truck operators and other producers with access to networks or technical assistance specialists as they grow their businesses. Meeting packaging and labeling requirements of larger scale retailers could also represent a service available to producers and growers that might be coordinated at the market on days when individuals are operating day stalls or delivering products from more distant locations. Offering seminars or one-on-one advice at convenient times might draw larger constituencies than would asking producers to travel on days when they confronted conflicting demands at their production or growing sites.

Lexington Market Economic Development p. 25 Funding Considerations Assistance Consortium Funding Source

V. Resources Description Funding Eligibility Contact USDA – AMS FMLPP (an expansion Max. award of $100K FMPP direct-to- Nicole Nelson Miller, Farmers' of FMPP in the FY14 Authorized consumer market LFPP Program Market & Local Farm Bill) aims to appropriations of eligibility, LFPP includes Manager Food support local and $30MM for each year regional food enterprises USDALFPPQuestions Promotion regional food systems FY14 -18, to be split that process, distribute, @ams.usda.gov Program through activities evenly ($15MM ea.) aggregate, or store 202.720.2731 (FMLPP) including the between LFPP and locally-produced foods. (CFDA 10.168) development and FMPP. Has both LFPP requires 25% cash Carmen Humphrey, marketing of regional planning and or in-kind match. [See FMPP Branch Chief food products, as well implementation grants. also VI. Outreach] USDAFMPPQuestions as outreach, training FY14 applications were @ams.usda.gov and technical due June 20. 202.720.0933 assistance for producers. Comment: LFPP component was introduced in 2014, expanding the scope of eligible activities and entities included in the pre-existing (and continuing) FMPP. Recent ~$100k grantees have included projects producing and distributing regional food guides, establishing and marketing a regional "brand" for local producers and establishing kitchen/local food incubation programs.

Selected Project Examples

USDA – Value-Added Producer Grant Blue Diamond (California) $200,000 offset the high costs of new market introduction and funds freight, processing and personnel costs.

USDA – Rural Cooperative Development Grant La Montanita (via Farm to Table, Albuquerque, NM) $142,382 regional food hub and retail cooperative in New Mexico, received through RCDG to expand its work of aggregating, transporting and refrigerating products from over 900 producers.

Lexington Market Economic Development p. 26 Funding Considerations Assistance Consortium VI. Marketing and Community Outreach

Some forms of community outreach are discussed above, with respect to linkages to faith- based or other non-profit entities which might sponsor aspiring entrepreneurs for special events or competitions at the market. In other instances, mobile market undertakings might bring fresh produce and medical professionals to Baltimore neighborhoods with limited access to transportation or other constraints on travelling to Lexington Market. Special efforts to get prepared meals or fresh vegetables and fruits to homebound individuals with financing provided by institutions or agencies might expand the identification with Lexington Market as a unique resource for the greater Baltimore community. Increasing the visibility of the new vendors at the market might be done through the dissemination of local food guides featuring recipes or information about unique products. Offering “bonus bucks” or other subsidies for acquiring healthy food products already has precedence in the city and, presumably, would increase patronage as more producers of fresh fruits and vegetables become a priority among permanent vendors and day stall operators. While making the market an important tourist destination has been a strategy that has revitalized Empowerment Zone markets in other cities, SNAP and WIC programmatic access will ensure that the customer base remains diverse and sensitive to the needs and pricing points of residents from all of Baltimore’s neighborhoods. Addressing the reduction of health disparities will maximize the support from healthcare institutions as well as funders that are continually expanding their focus on underserved residents.

The role of healthier lifestyles in reducing the need for subsequent medical interventions suggests that Lexington Market’s range of initiatives, fostered in partnership with nearby medical institutions, may subsequently be perceived as cutting edge. Such efforts might align with the gaps identified by hospitals in their required community health needs assessments and, thus, be crucial to their institutions’ success in adequately responding to recent ACA/IRS community benefit regulations. While fliers at the market may currently be regularly observed advertising various health information symposia on site from time to time, inspiring area residents to bring their families for frequent access to such resources might be part of a sustained and funded outreach approach.

Lexington Market Economic Development p. 27 Funding Considerations Assistance Consortium Funding Sources

VI. Outreach Description Funding Eligibility Contact USDA – OAO Competitive grant Max. $400k Three categories of Kenya Nichols, Outreach & program to provide $9.1MM made eligible entities: Acting Program Assistance for training, education, available in FY14 to community-based orgs Director Socially outreach and assistance approx. 35 awardees. experienced in agr Kenya.Nichols@osec Disadvantaged to socially-disadvantaged FY14 application education and outreach, .usda.gov Farmers & farmers. deadline was at the land grant and Hispanic- 202.720.6350 Ranchers and end of August. serving institutions, and Veteran other institutions of Farmers & higher-ed with requisite Ranchers relevant experience. (CFDA 10.443) Collaboration with Maryland land grant colleges may be valuable.

Comment: The Federation of Southern Cooperatives received approximately $300k through this program to assist minority farmers with farm management and marketing skills.

VI. Outreach Description Funding Eligibility Contact Projects funded to $31.5MM allocated for Government agencies Jane Clary Loveless, provide incentives to its inaugural FY14 and non-profit NIFA Nat'l Program USDA – NIFA low-income consumers round. organizations with Leader Food Insecurity using the Supplemental mandatory support of [email protected] Nutrition Nutrition Assistance the state SNAP agency. 202.720.3891 Incentives Program (SNAP) to Preferably experienced (FINI) purchase fruits and with community food (CFDA 10.331) vegetables at the point work, job training and of sale business development for food-related activities in low-income communities. Comment: A key new program promoted by healthy food advocates added to the Farm Bill which will provide substantial resources for generating incentives to give local residents increased access to healthy fruits and vegetables (see related "Baltimore Bucks" initiative).

Selected Project Examples

USDA – Local Food Promotion Program Taste Buds (Chattanooga, TN) $100,000 distribute a 48-page color guide to community food businesses and rural producers, featuring local articles, recipes etc.

Rio Grande CDC (Albuquerque, NM) $100,000 “Delicious New Mexico” brand outreach, marketing, training and TA for local food businesses.

Lexington Market Economic Development p. 28 Funding Considerations Assistance Consortium Conclusion

Comparable food initiatives have been successful in obtaining a mix of grant, equity and debt financing in examples depicted above. A key to attracting incentivized funders may be enhanced by Lexington Market’s location in proximity to (and relationships with) institutions furnishing health care, education as well as services to veterans and community residents. Baltimore has an opportunity to evolve a national model in developing programs to connect multiple elements of the regional food supply system while benefiting consumers and producers. The implications for health, job creation and entrepreneurial outcomes should attract the attention and support of essential resource providers.

Additional Funding Information Resources

This analysis was not intended to be an exhaustive review of all potentially pertinent programs included in various federal funding catalogues. Lexington Market staff will, certainly, want to receive daily updates of notices and review monthly summaries, etc., provided by Grants.gov. Additional detail may also be found in the Catalogue of Federal Domestic Assistance3 (CFDA). Also indispensable is a review of the 128-page Financial Resources Catalogue available from the CDFI Fund’s Capacity Building Initiative for Financing Healthy Food Options.4

3 https://www.cfda.gov/ 4 http://www.cdfifund.gov/what_we_do/resources/Financial%20Resources%20Catalogue%20PDF.pdf

Lexington Market Economic Development p. 29 Funding Considerations Assistance Consortium Glossary

BDC – Baltimore Development Corporation NMTC – New Markets Tax Credit BEA – Bank Enterprise Act NOFA – Notice of Federal Assistance BIP – Baltimore Integration Partnership OCS – Office of Community Services, CDBG – Community Development Block U.S. Department of Health and Human Grant Services CDC – Community Development ORR – Office of Refugee Resettlement, Corporation U.S. Department of Health and Human CDFIs – Community Development Financial Services Institutions, U.S. Department of Treasury PRIs – Program Related Investments CFDA – Catalogue of Federal Domestic PTSD – Post-Traumatic Stress Disorder Assistance RLF – Revolving Loan Fund CHNAs – Community Health Needs REDF – (formerly known as Roberts Assessments Enterprise Development Fund) CRA – Community Reinvestment Act RME – Risk Management Education, DOT – U.S. Department of the Treasury U.S. Department of Agriculture EB-5 – also known as: Immigrant Investor SBA – Small Business Administration, Program, U.S. Citizenship and Immigration U.S. Department of Commerce Services SIF – Social Innovation Fund, Corporation EDA – Economic Development for National and Community Service Administration, U.S. Department of TA – Technical Assistance Commerce TEAs – Targeted Employment Areas, FA – Financial Assistance U.S. Citizenship and Immigration Services FCIC – Federal Crop Insurance Corporation TRF – The Reinvestment Fund FHLB – Federal Home Loan Bank USCIS – U.S. Citizenship and Immigration FMLPP – Farmers' Market and Local Food Services, Department of Homeland Security Promotion Program, USDA – U. S. Department of Agriculture U.S. Department of Agriculture USDA AMS – U.S. Department of Agriculture’s HFFI – Healthy Food Financing Initiative Agricultural Marketing Service HHS – U.S. Department of Health and USDA FDA – U.S. Department of Agriculture’s Human Services Food and Drug Administration HUD – U.S. Department of Housing and USDA NIFA – U.S. Department of Agriculture’s Urban Development National Institute of Food and Agriculture HUFED – Healthy Urban Food Enterprise USDA OAO – U.S. Department of Agriculture’s Development Office of Advocacy and Outreach IRS – Internal Revenue Service USDA RD – U.S. Department of Agriculture’s LISC – Local Initiatives Support Corporation Rural Development MWBE – Minority and Women-Owned USDA RMA – U.S. Department of Agriculture’s Business Enterprise Risk Management Agency MRIs – Mission Related Investments USDA VAPG – U.S. Department of NCCS – National Center for Children and Agriculture’s Value-Added Producer Grant Families

Lexington Market Economic Development p. 30 Funding Considerations Assistance Consortium