Act like a non-profit think like an investor: The Art and Science of Communicating with your Partners

F.A. Johnson Development Group, LLC.
Commercial • Residential • Institutional • Mixed-Use • Multifamily
1520 Senate Street • Suite 177 • Columbia, SC • 29201 • Phone (803) 799-2057 • Fax (803) 799-6888
www.FAJohnsonDevelopmentGroup.com
ACT LIKE A NON-PROFIT THINK LIKE AN INVESTOR:
THE ART & SCIENCE OF COMMUNICATING WITH YOUR PARTNERS

ACT LIKE A NON-PROFIT: THINK LIKE AN INVESTOR
THE ART & SCIENCE OF COMMUNICATING WITH YOUR LENDER
Page # 2
I. Vision: The Starting Point1
The Vision (Goals and Objectives): It takes vision and initiative to enter the Community
Development and Economic Development area. The starting point is to seek to create a
development plan for the proposed project(s) and determine the first phase of
development for community services, multi-family, commercial, or retail development.
When it comes to creating the Vision, begin with end user or use. This may include, but
are not limited to:
1. Obtaining and maintaining ownership and control of available properties in the
community;
2. Identifying opportunities for independent revenue streams (through additional
income producing activities for long term sustainability);
3. Attracting/Maximizing Equity and/or Grant Opportunities
to leverage activities;
4. Leverage Any Existing Assets (Land);
A. Setting The Stage For Development: Key Ingredients to a
Successful Project
1. Leadership: Capturing and Setting the Vision
2. Partnership: Forge A Healthy Public/Private Partnership
3. Empowerment
B. Selling Your Project
1. Understand your potential Partner’s and/or Lender’s Perception (i.e.
perspective). No lender wants to underwrite a project that is not properly structured
or likely to fail. While it is up to the lender to understand the project and assess its
viability, fear associated with the fact that your project looks different, may impact
his/her perception.
The perception of High Risk and Low Return can be addressed by understanding non-
traditional equity, proper gap analysis, and a host of things you can do. Realize that it
can be properly structured and the local municipality may participate in creating the
structure.
2. Know: What is your Lender’s appetite?
3. Do you have a Plan? (Refer to pages 104 and 20 of the Not-for-Profit Developer’s
Training Manual)
C. Issues To Consider When Undertaking Commercial or Development Projects
i. Understand Local Market Forces
ii. Develop An Implementation Plan (Strategic Plan)
iii. The Value of A Public Private Partnership
iv. Understanding The Development Process
1
For a more detailed discussion of the topics summarized, referenced page numbers correspond to the Book From Vision To
Fulfillment: The Non-Profit Developer’s Training Manual (ISBN#: 978-1-4343-5656-7)

Page # 3
v. The Financing Package (Business Plan)
vi. Lessons Learned with Universal Application (see Dead on Arrival: Mistakes That
Can Kill Your First Project
II. Discussion Outline of the Pre-Development Process
The process of Pre-Development is a very involved process. At the risk of over simplifying, the
following outline provides a glimpse into the process. The proper phasing and sequencing of
these steps are very important to minimize errors. In order to obtain financing for a proposed
development, the following steps are typically undertaken:
• Site selection
• Obtain plat/survey
• Engineering study to determine physical limitations of
development, such as availability and location of utilities,
topography and drainage issues, and access points
• Market study and feasibility analysis for proposed development
• Architectural plans and specifications
• Construction cost estimates
• Permitting
• Pre-marketing package/strategy
• Appraisal
• Construction loan financing
• Permanent loan
Once a site is selected, a typical development schedule would require:
• 60 – 90 days for platting, engineering and market analysis
• 60 – 90 days for architectural drawings and construction cost
estimates
• 60 days for permitting
• 60 – 90 days to development a pre-marketing strategy, initiate a
loan package, obtain an appraisal and acquire development
financing.
Proposed development of community and economic development projects
can require up to one year from site acquisition to receipt of funding for
construction.
III. Issues/Questions For Working Lenders
Development projects often involve lending situations to which banks are normally adverse. The
need for focused commercial economic development activity is usually a direct reflection of
weak economic conditions in communities or targeted neighborhoods. Such areas often are
characterized by potential borrowers with limited personal incomes, low or declining property
values, or business profits and prospects that are substantially below those found in economically
healthy areas. As a result, for banks, perceived lending risks in economic development deals
often are high.

Page # 4
Can the perceived risk be explained such that the lender understands what the real risk are?
The challenge is to take an apparently “marginal” or “undoable” deal and make it a
“doable” deal. Most lenders believe this requires an understanding of the difference
between Conventional Lending and the various Economic Development projects. Thus
lenders struggle in figuring out how to understand your project.
These deals need the use of creative measures for the banks’ willingness to go beyond
traditional loan or project assessments; rather than reject a financing proposal because the
borrower or project cannot meet conventional credit or underwriting standards, the bank
needs to take further steps, usually in conjunction with other parties, to help the borrower
or project qualify or to reduce risks to the bank to manageable levels.
In short, the project may need some enhancement (help to make it look more
conventional). Typical methods for loan enhancement include:
1. Strengthen Collateral (Guarantees and Loan Subordinations)
2. Reduce Expenses (Grants for Equity, Interest Rate Subsidies)
3. Provide Management Assistance (Technical Assistance)
4. Shift Transaction Costs/Risks (Partnering to have a Track Record)
5. Increase Project Revenue (add other components to the project)
As a result, some development project often must turn to non-traditional or unusual
sources of equity. The extent to which banks are willing to accept unconventional sources
of equity to support deals has grown in recent years. In part, this increased acceptance
stems from bank experience with a variety of development and business finance
proposals, which may include a complex array of equity partnerships and sources of
capital.
IV. Loan Packaging: The Art & Science of Communicating with Potential
Partners (Local/State/Federal Agencies, Banks or Partners)
A. A Business Plan (i.e. “capital financing package”) must be prepared and submitted to
your prospective financial institution(s).
B. Preparing this Business Plan is known in the industry as pre-development and/or
pre-construction activity.
C. The business plan will tell you how its bricks and mortar, hopefully, can be funded
and/or financed.
D. At the beginning of the pre-planning stage, it is important for you to have an estimate
of pre-development activity funds that will be needed (Pre-Development Budget).
(refer to The Evolution of a Budget pages 147-155 of the Non-Profit Developer’s
Training Manual)
E. Typical Components of the pre-development process (Your Due Diligence Process)
include:
i. Environmental Phase I (possibly Phase II);

Page # 5
ii. Topography/Utility/Boundary Survey(s);
iii. Soil Borings;
iv. Appraisal
v. Conceptual Design
F. Market Absorption Rates and/or Prevailing Rent Ranges will tell you how much
subsidy is needed before requesting a loan
G. Loan Submission Package Checklist
1. Site Plan (with pertinent site information)
2. Floor plan
3. Visual illustration of completed project (Rendering)
4. Development Cost Budget (Land, Site, Construction, & Soft costs)
5. Operating pro forma: Project revenues, expenses, and net operating
income (NOI) through stabilization and beyond
6. Contractor information:
a. Resume(s);
b. Bonding company and contact;
c. Financial statements for past three fiscal years (balance sheets,
cash flow statements, and income statements)
7. Development team resumes
8. Guarantor financial statements for past three fiscal years (balance sheets,
cash flow statements, tax returns, and contingent liabilities)
9. Market information (if available)
10. Rent roll (if project is pre-leased)
11. Financial information on tenant (s) (if project is pre-leased)
V. The Construction Loan
1. Risk is inherit in every transaction. Three common types of risk in a construction
project include:
a. Construction risk: What physical factors may affect completion of construction?
Examine site conditions, environmental conditions, adequacy of labor & materials,
contractor experience.
b. Market Risk: Supply vs. demand may change rents, vacancies, tenant amenities, free
rent, or other lease terms
c. Economic Risk: An underwriting issue, through lender has no control over macro-
economy.
2. Evaluating the project: Typical Financial Evaluation Tools used by lenders:
1) Loan to Value;
2) Loan to Cost;
3) Debt Service Coverage;
4) Lender Exit strategy;
5) Market feasibility;
6) Developer track record;
3. Mitigation of Risk: What are ways to mitigate risk?
1) Pre-leasing (income producing) or pre-sales;

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2) Equity;
3) Guaranty;
4) Financial Evaluation Tools: Loan to Value, Loan to Cost, Debt Service
Coverage;
5) Exit strategy;
6) Phasing;
7) Borrower’s past experience in development;
8) Experienced (bondable) contractor;
VI. Obtaining Site Control and Ownership
A. What are some of the “key” questions you need to ask yourself in order to obtain and
maintaining ownership and control of available properties in the community? (refer
to pages 115 to 128 of the Non-Profit Developer’s Training Manual)
B. Review the Land Purchase Checklist
Disclaimer: The F.A. Johnson Development Group has prepared this educational material as a supplement to the Non-Profit
Developers Training Manual as a service to the nonprofit community and the many individuals who serve as directors of
nonprofit corporations. It summarizes and provides general background information regarding the nonprofit development
process, selected available federal tax exemptions and laws regulating charitable solicitations and provides practical advice
for minimizing liability arising out of service as a director of a nonprofit corporation. It is not intended to serve as legal
advice on any particular matter. Directors should consult counsel knowledgeable about nonprofit corporations for legal
advice. It is not intended to provide definitive legal interpretations of local, state, or Federal regulations. Information should
be independently researched in dealing with a specific problem or issue.

Page # 7
LAND PURCHASE CHECKLIST
þ Is the property zoned for the intended use? What are the steps and costs of rezoning?
þ Does a development agreement exist? What are the rights and obligation of the property owner,
city and other parties? If needed, how easily can the agreement be renegotiated?
þ What are the positions of local government, community activists and neighbors?
þ What are the required and negotiated fees, exactions and mitigation measures?
þ Has an environmental impact report, traffic study or mitigation report been performed? Are there
any animals on the sight? Any endangered species?
þ Has an environmental assessment or relevant toxic study been completed? Can any soil or
ground water contamination be mitigated?
þ Has a soils study been done? Any unusual stability, drainage or compaction issues?
þ What are the seismic conditions and their impact on cost, schedule, marketing, etc.?
þ What are the requirements, timing, and cost of obtaining building permits? Can permitting be
accomplished in stages? Are there any unusual code requirements?
þ Can the parcel accommodate the planned building, parking, landscape setbacks, etc.? Is there
room for expansion or the possibility of subdividing parcels to resell?
þ Do Conditions, Covenants and Restrictions (CC&R’s) exist? Are they planned? How will they
affect the buyer and/or tenants?
þ Have topographical and boundary surveys been provided? Are there any easements that could
affect construction, leasing or sales?
þ Get an American Land Title Association (ALTA) extended owner’s title insurance policy. Check
for existing and potential liens. Obtain a title that will ensure the ability to easily resell the land
and/or buildings.
þ What are the off-site conditions? Are all necessary utilities available or near the site? Is there
sufficient capacity for current and future buildings?
þ Are financing documents completed? What is the amount and method of payment?

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New Markets Tax Credit
Financing Program Project Information Sheet
You need to:
1. Determine that the Business or Project is located in a qualified Low-Income Community (see below).
2. Determine that the Business or Project is an eligible project. Eligible projects must be either commercial or
mixed-use projects, which include, but are not limited to the following types of businesses/projects in
qualified low-income communities:
Manufacturing Facilities. New or existing facility construction; expansion or improvements; equipment;
and furniture and working capital.
Distribution Facilities. New or existing construction, expansion or improvements; equipment; furniture;
and working capital.
Community Facilities. New or existing facilities (daycare, schools, training facilities, assisted living (pay
per day/no leases), nursing homes, hospital, jails, sewer plants, water treatment, telephone, cable,
electricity, internet, etc. construction, expansion or improvements (including interior build-out);
equipment; furniture; and working capital.
Office. New or existing construction, expansion or improvements (including interior build-out), furniture;
equipment; and working capital.
Retail. New or existing construction, expansion or improvements (including interior build-out); fixtures;
equipment; and working capital.
Mixed-Use. (more than 30% of revenue attributable to retail and/or office; and less than 70% of
revenue attributable to apartments for lease): new or existing construction, expansion or improvements
(including interior build-out and appliances); furniture; equipment; and working capital.
Other Industrial Facilities. New or existing facilities; construction, expansion or improvements (including
build-out); equipment; furniture; and working capital.
Real Estate Development. Industrial or commercial, including land acquisition, infrastructure, and
working capital.
3. Determine that the Equity/Loan amount to Business or Project will exceed $2.5 Million (“Minimum Deal
Size”)
4. Complete Preliminary Project Information and send to F.A. Johnson, II, Esq. at
fajohnson@fajohnsondevelopmentgroup.com.

Courtesy of Quinetha Frasier 2013 Copyrighted and Confidential 1
Show Me the Money: Grants, Fundraising and Earned Income
I. INFORMATION REQUIRED FOR MOST Grant REQUESTS:
 Name, address and telephone number of the organization.
 Complete list of the organization's officers and board of directors.
 Description and history of the organization.
 A mission statement, goals and objectives.
 Purpose of funding request.
 Project description and location.
 Dates of proposed project.
 Expected benefits and measurable results.
 Amount of funding requested.
 The organization's actual income and expense statement for the past fiscal year, identifying the
organization's principal sources of support (optional).
 The organization's projected income and expense budget for the current fiscal year, identifying the
projected revenue sources.
 Projected budget for the specific program for which the request is submitted.
Ia. Attachments that may be requested:
 Biographies of Organization's Executive Leadership
 3-year Statistical Summary of Services Provided by the Organization
 Current Year Operating Budget
 Most Recent Financial Audit
 Current Strategic Plan
 Project Budget for which funding is requested
 Funding Status Report & list of Current Donors
 Copy of the organization's most recent Form 990
II. KEYS TO MANAGING A SUCCESSFUL FUNDRAISING CAMPAIGN.
The Partnership Campaign is paramount.
1. BUILD YOUR COMMUNITY PARTNERSHIP POOL
• Introduce the key components of your programs
• Establish Creditability
• Gain support for your partners
• Identify synergy between organizations and opportunities to share service
2. IDENTIFY YOUR ORGANIZATION'S 6 DEGREES OF CONNECTIONS IN COMMUNITY
• Have key stakeholders associated with your organization to identify key persons that they
know or are affiliated with in the community.
• Introduce the program to the affiliated person on introduction by the person who is closet
to them.
• Send an ask letter to them as a part of 'nickel and dime' campaign, asking for monthly
donors ($20-$100)

Courtesy of Quinetha Frasier 2013 Copyrighted and Confidential 2
3. Invite and manage SUPPORTERS-There will be two types:
a. Base-
- Key community partners to exchange services and clients
-They will serve as your ambassadors to bring relevance and namesake in the local
business community.
b. Financial - Nickel and Dime supporters -Local and state corporations
3. DEFINITION OF PARTNERSHIP CAMPAIGN STAKEHOLDERS (Intro to Crowdfunding)
• Each contact has two potential functions: partner or supporter
The Supporter may be in word (network marketing) or deed (financial)
The Partner may be formal or informal.
(Solidified by a Memo of Understanding that identifies the contributions of each organization; or a
letter of support that solidifies a cross-community working relationship.)
Ideal: Local congressman, local education personalities, educators, community based
organizations who serve youth; Local businesses and individuals who are active in the local
business community.
III. EARNED INCOME
Can Fee-for-Service Work for Your Organization? A solid analysis and good business planning is
central to identifying which of your organization’s services and products can be used to generate fees. The
following questions are designed to assist you in the evaluation process.
A. Core Services and Products- Identify your organization's distinctive areas of expertise.
Identify unique products and services that "stand out" and meet an important need.
B. Clients- Identify who currently benefits from your organization's expertise, products, and/or services.
Identify what specific need(s) is/are met by offering a particular product to each type of client.
C. Client Response to Fees- Describe each client identified. Consider how fees (mandatory or voluntary)
might affect them (both positively and negatively).
Then answer the question, "Are fees for these products/services a viable alternative for the current
population that receives them?”
D. Potential Market Research- Explore who else might benefit from this expertise, product, or service. How
do you know?
Who else is offering similar products? What is your competitive advantage?

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Act like a non-profit think like an investor: The Art and Science of Communicating with your Partners