spot_img

Black Owned Businesses Evicted from EastPoint

Date:

spot_img

Entrepreneurs Worry Broken Leases Will Leave Them with Insurmountable Debt

OKLAHOMA CITY — The EastPoint Project, located at 1720 NE 23rd Street, was heralded in its development phase as haven for Black entrepreneurs who wanted to grow their businesses in Northeast Oklahoma City’s historically Black community.  But today, several of the Black owned businesses that opened in the development have closed, evicted for failure to pay rent. 

“Businesses that are truly Black owned” are closing, said Brittani Hunter, who’s coffee shop, Spiked: A Coffee Concept, closed its doors a few weeks ago. 

However, the founders of Pivot Project, the development team that brought the EastPoint Project to life while attempting to “reframe the conversation with white developers going into Black communities,” remain hopeful the project will ultimately succeed. 

Some of the former tenants are now taking a second look at the leases they signed — for which they were required to provide a personal guarantee putting their personal assets at risk if they didn’t stay current with rent payments for the entire 10-year lease period — as they face pending legal action.  Only now are some understanding that the 15% equity ownership stake in the EastPoint Project they received upon signing their lease becomes forfeit if they default on the lease before they’ve paid rent for 10 years — leaving them without the ownership interest in the property thought they were investing in when they chose to open their businesses at EastPoint.

Former banker Jonathan Dodson and partners Ben Sellers and David Wanzer founded Pivot Project in 2014 and quickly established a strong reputation for creative redevelopment, successfully revitalizing long-dormant structures and neglected areas around Oklahoma City. The Alliance for Economic Development of Oklahoma City reached out to Pivot when a Tax Increment Financing (TIF) district, allowing tax dollars to be reallocated toward private development for areas in need of additional investment, was created for the NE 23rd Street corridor.  The Alliance asked Pivot about using TIF funds to redevelop the EastPoint site, which then was nearly vacant and partially under the Urban Renewal Authority’s ownership.

“Pivot agreed to take a look, but wanted to have the plan defined by locals rather than by outsiders,” according to a profile written about the project by the Urban Land Institute. 

“We first wanted to reframe the conversation with white developers going into black communities,” Dodson told writer Martita Mestey for an article that appeared in Authority Magazine in 2021.  “Those values we prize the most — community, joy and perseverance — exist in abundance on the east side of town.  Therefore, we were and are happy to prostitute our access to wealth and power so that we could enter into the community.”

Dodson told Authority Magazine he had experienced a turning point moment in his life some years ago when, attending a community reconciliation event held after a racially-charged incident, “an African American pastor stood up and said, ‘If you want to know what it is like to walk in my shoes, when was the last time you had someone like me over for dinner?’ That struck a personal chord in me as at that time I was not in any kind of relationship with the black community.  Over the next two years, that moment created a sense of intentionality and purpose.”

When the time came to develop the EastPoint property, “Dodson’s first call was to Sandino Thompson, a community development leader he knew who lived nearby,” reads the ULI profile.  “Thompson agreed to help with project strategy in return for an equity stake and fee income.” 

Dodson also reached out to Jabee Williams, whom Dodson described as a “rapper” and “friend” in the Authority Magazine article.  “His reputation and care for the community has been instrumental in bring[ing] tenants to the development,” Dodson said of Williams.

The article states that when EastPoint was in its initial phases, Dodson said Williams took him to barbershop within walking distance of EastPoint to meet someone named “Mailman.”

“After giving Jabee a hug he started firing off questions related to the project,” said Dodson, as quoted in the Authority Magazine article.  “At the end, he said we were good and he was excited about it.  As Jabee and I walked out, I asked him, totally confused, ‘what was that about?’ He said something like, ‘Mailman is an OG and he needed to bless the project.’  After a quick tutorial on what I [sic] meant to be an OG, Made, and other things, I was shocked.  My friend had just risked his reputation to allow our project to be protected.  This only happened because he knew I loved him and he was not just some ‘black face’ for the project.”

But the project did need a Black face, according to Erica Emery and Monique Short, sisters and owners of Monarch Property Group, which has its office in the EastPoint Project, as they were quoted in a 2020 interview with Elizabeth Macbride, writing for New Builders Dispatch.  After years of failed ventures, East Side neighbors were downright hostile to outsiders, the article states. 

“If developers show up in all their whiteness, there would be riots,” said Emery, as quoted in the New Builders Dispatch story.

“Once or twice a month, I get a call from a someone working on a project. They want a black face involved,” said Short, as quoted in the story.

According to the ULI article, TIF funds provided about 27% of the $8.7 million project budget, with the $1.3 million TIF allocation for the first phase split between a $600,000 “soft loan,” gradually forgiven over time, and a $700,000 predevelopment grant.  Use of the TIF funds meant that the developers were unable to sell the newly renovated property for a period of ten years.  The TIF allocation included a “clawback” provision, requiring the developers to pay back the TIF money if they sold the development to a new owner within 10 years.  That provision helped shape how the tenants’ leases were structured, also locking them into a 10-year agreement but providing tenants with equity which “included a share of the project’s cash flow over the city’s 10-year lockup period.”

Dodson told ULI that Pivot invested in the tenants, coaching them through paperwork and filing for permits, and that several spaces had to be re-leased multiple times as various ideas fell through.  

“We have to purposely reinvest in those communities, not because it makes economic sense but because it is morally imperative,” Dodson told Authority Magazine.  “What I do hope is that the white community as a whole starts to realize the beauty, wonder and culture in the Black and African American community.  It is not about appropriating or paternalism, but rather about entering into a world that can teach us so many things, including joy. This includes all at-risk communities.  So much joy is not being accessed because our comfort had deluded us.”

Noting that the African American community’s ability to attract investment to the historically Black area of town has been negatively impacted by white flight, redlining, eminent domain and other issues, Dodson said Pivot provided tenants with additional buildout assistance, reduced rent, and set aside an equity stake in the real estate.  The moment the tenants signed a lease, they became a 15% pro-rata owner in the project, Dodson said.

“I couldn’t imagine developing this, and not having tenants share in the upside,” Dodson told ULI.  Providing tenants with 15% ownership means “’we’re giving up the majority of the value, but that was created by the people who took the risk’ of opening businesses and creating the site’s value,” Dodson said. “The offer of an equity stake did attract some businesses, who might have found cheaper options elsewhere,” reads the article. 

The offer of an equity stake was a powerful attraction for Emmanuel Sosanya, owner of Intentional Fitness, Sosanya said.  Sosanya was required to provide a 10-year personal guarantee when he signed his lease, putting his personal assets on the line if his business became unable to pay the rent over the next decade. 

According to U.S. Census statistics, roughly a third of new small businesses close within their first two years, and half shut down within their first five years.

“In so many words, I got screwed,” Sosanya told The Black Chronicle.  Intentional Fitness — which opened just two months before COVID 19 struck in 2020 — found creative ways to stay in business despite the pandemic lockdown on gyms and the challenges of opening the area’s first ever private fitness center.  But as the business continued to face mounting financial challenges, Sosanya shut down the gym for good and obtained a temporary, one-year sublease tenant for the space to keep him from going into default on the lease.  When the yearlong sublease is up, Sosanya is hoping he can renegotiate the lease agreement or find some other way to stay current with rent and avoid losing his 15% stake in the development.

“You are treated as a 15% owner from day one; the only way you lose that ownership is if you default on your rent,” Dodson told The Black Chronicle.  “Some chose not to sublease the space and just close the doors, so in those scenarios they lose their ownership.”

What happens to the equity lost by those tenants who defaulted on their lease will be decided by the other tenants who are still current with their lease agreements. 

“We’re going to defer to what the tenants want to do that have stayed in business,” Dodson said.  They might choose to redistribute the ownership percentages, or present some offer to the new tenants coming in, or find some other novel solution.  “We’ll honor their request, however that winds up looking.  We’re not going to make that decision as a developer,” Dodson said.

Pivot made every effort to help the Black owned businesses formerly housed at EastPoint before getting to the point of eviction, Dodson said.  Pivot offered to terminate leases early to prevent debt from accruing and allowed tenants to sublet.  

“We’ve had a lot of tenants who fell behind on rent and we worked with them,” Dodson said.  “It’s really come down to what point, at some point, we have to figure it out if people aren’t paying rent. It’s not fair to the people who are paying rent.” 

Restaurant owners all over the city have experienced a difficult financial cycle, and an unprecedented number of metro area restaurants have closed over the last year, but Scrambl’d owner Cordell Love and Eastside Pizza owner Williams are still in business at EastPoint. 

“They’ve been able to continue to pull people to their concepts and they’ve been able to pay rent,” Dodson said.  “What Cordell has done is pretty amazing, what Jabee has done has been pretty amazing, but it’s been hard.”

Kindred Spirits, the nightspot that had been co-founded by Thompson and Chaya Pennington-Fletcher, was doing well before there was a shooting at the establishment last September, leading to its closing.  The business may soon reopen with new management.

Thompson’s involvement with the EastPoint Project was cited in an April 18 press release issued by investment firm Echo, announcing Thompson was tapped to manage $1.5 million to support minority owned businesses in Oklahoma City.  The investment, which is projected to grow to $15 million, is provided through investment firm Echo, founded by Christian Kanady, a businessman who oversees more than $1.5 billion in assets under management across the country. 

“[This fund is] focused on building businesses in Oklahoma,” Thompson said in the release.  “It will be focused on minority, Black and brown, women-owned businesses and industry.”

Two Black women business owners who were some of the first tenants at EastPoint just shut down their businesses after falling behind on rent. 

Courtney Strickland opened Belle Books Boutique and More in Sept. 2020 on her own dime, creating a brick-and-mortar storefront for her book publishing business and turning it into a retail boutique, filled with books and locally created merchandise.  The store also served as a community center, providing story time events for children and a host of charitable events.

“To say I was crazy for opening during a pandemic is an understatement and it hasn’t been easy,” Strickland wrote when starting a GoFundMe a few months ago.  “I’ve poured everything I have into this business, financially and mentally.  But I do not believe it was in vain.  Partnering with Youth First we’ve given away close to 600 books.  November of 2020 in collaboration with family we fed 75 families for Thanksgiving and I want more than anything to continue to be more than a business owner in this community.  My desire to serve outweighs the monetary gain but trying to do it alone is no longer an option.”  

Strickland weathered the pandemic and the economy for nearly three years before finally falling behind on the rent last summer, she said.  Belle Books opened before many of the other businesses in the EastPoint development, and she claimed not every tenant was treated the same. 

“We had to get a sign approved and put up before we could open our doors,” Strickland said, a $2,000 expenditure, “but that wasn’t required for anyone else, if you’re friends with the group.”  Other tenants were already open and operating without signage when the development obtained funding to provide signage for them, she said.  While some of the other businesses did bring in more foot traffic to the development, Strickland said, often their patrons would take up the parking in front of her boutique. 

Clearing out her former business in early May, Strickland said the experience was “bittersweet,” but she remains faithful and hopeful as she determines her future plans — after taking a break to enjoy time with her new grandchild. 

“I’m ready to release all of this,” Strickland said. 

In the final hours before she was required to turn over the keys to her former space, Hunter allowed members of the community to carry off whatever fixtures and furniture they wanted.  The notice to vacate directed her to leave the space in the condition in which was when she took possession, she said to a former patron carrying away bar stools in late April.

“Clearly, they are not aware of what condition this space was in when I took possession,” said Hunter, claiming that she paid for installation of the electrical system, heating and air, as well as painting and installing the decorative bar, in a space she described as an “empty box” when she took possession.

Hunter said Pivot had been supportive in the beginning, when the project was under consideration for a ULI award and her story was highlighted as Black woman business owner who is a direct descendant of a successful entrepreneur in Tulsa’s historic Greenwood District.  In early May, Hunter said prospective tenants had already been coming by to look over the space, even as she worked to take down her decorations and disassemble her dream.

“We still very much care for the tenants who have left, but we’ve handed all these issues over to our attorneys,” Dodson said.  

In the end, a judge may decide how much the tenants who defaulted will have to pay on the roughly seven years remaining of their lease agreements. 

“What we’ve seen is there is significant demand to fill those spaces back up, so we’ve already got quite a bit of interest to be a part of that project,” Dodson said.  While he could not say what new tenants may be coming in to fill the space, Dodson said it has “always been the focus” to rent space in the EastPoint Project to African American entrepreneurs.

Read the Black Chronicle Black History Edition for Free! Click Below

Read the Black Chronicle Black History Edition for Free! Click Below

spot_img
spot_img

Subscribe

Share post:

Popular

More like this
Related

Everyday Economics: The countdown to rate cuts has begun, for real this time

After a blockbuster jobs report cast doubt over Federal...

Trump, Biden faceoff heats up

This 2024 election cycle has seen several major developments...