City Fresh CEO Sheldon Lloyd, South Shore Bank Chief Commercial Banking Officer Stephen DiPrete, The Community Builders President and CEO Bart Mitchell, Boston Chief of Economic Opportunity Segun Idowu, and other dignitaries take part in a ceremonial groundbreaking for City Fresh’s new facility in Roxbury on June 21. Photo courtesy of The Community Builders
When Weymouth-based South Shore Bank had the opportunity to bring on City Fresh Foods as a new client, the bank found itself just one piece in a multi-partner effort to help the Roxbury-based food services provider open a new facility.
Part of the financing package involved using the New Markets Tax Credit, the first time South Shore Bank had worked with the two-decade-old federal program.
With high costs for real estate, rising construction costs and a rapidly changing economy, the funding would have been difficult to finalize without the public-private element of the package and multiple sources providing funding, said Stephen DiPrete, chief commercial banking officer at South Shore Bank.
“It would just be very difficult to see this deal happening if it was just all bank debt,” DiPrete said. “I wouldn’t put it past City Fresh to find a way, but this structure worked because the partnerships overcame those challenges.”
Tax Credit Program Vital
A Black-owned, employee-owned business founded in 1994, City Fresh wanted to expand its operations by purchasing an 18,000-square-foot facility at 94 Shirley St. in Roxbury, across the street from its existing location.
The company delivers culturally diverse prepared meals to organizations throughout Greater Boston and was awarded a $17 million contract in May to provide meals for Boston Public Schools, the largest non-construction contract the city has ever awarded to a Black-owned business.
In addition to increasing production, CEO Sheldon Lloyd said the company, which currently has 141 employees, plans to add 85 full-time jobs in the new facility. The company held a groundbreaking ceremony at the new facility on June 21.
“This is an important milestone for City Fresh Foods, and I’m thrilled to celebrate this groundbreaking with the City Fresh team and our partners who have helped us grow and create more quality jobs with living wages, career path opportunities and employee ownership in our community,” Lloyd said in a statement announcing the groundbreaking.
Keeping the facility in Boston was important for City Fresh Foods and its employees, DiPrete said, but the company faced challenges with the city’s high cost of real estate, including for industrial buildings.
South Shore Bank knew City Fresh was looking for a bank to provide financing for the new facility and began building a package that would use the New Markets Tax Credit.
NMTC was established in 2000 to provide an incentive for investing in projects in low-income communities, giving investors a federal tax credit.
While DiPrete was familiar with the program, he had never built a loan package using the program. The Massachusetts Housing Investment Corp. worked with the bank and City Fresh on the NMTC, and legal advisers met the bank and members of the board’s loan committee to explain the program. South Shore Bank had to update bank policies to ensure it could accommodate the program.
As the loan package was being worked on, the turbulent economic environment added to the challenges. Construction quotes, shifting materials costs, rising property prices and interest rate jumps all piled on difficulties.
South Shore Bank had locked in an interest rate for City Fresh for a certain time frame, a feature DiPrete said was critical to getting the deal done, since the rate cap expired shortly after the expected closing date.
“That was a great target,” DiPrete said. “It kept us with a really great sense of urgency, and it provided City Fresh an opportunity to really focus on the project with having the security of a fixed rate.”
Diane McLaughlin
Bridge Loan Adds Time to Clock
City Fresh continues to look for additional partners for this project, DiPrete said, and the financing package included a bridge loan that the company could repay – with no prepayment fees – if additional funds become available.
The project already had received grants as well as subordinated debt from MassDevelopment. Without the NMTC and MassDevelopment’s participation, DiPrete said, South Shore Bank would not have been able to provide the financing, adding that the bank plans to get involved in more of these types of projects.
“They do need some public-private partnership,” DiPrete said. “Working with these tax credit programs, I realized that incentive is necessary.”
DiPrete gave City Fresh credit for bringing the disparate partners together to help finance the project.
“What’s exciting for us is this is a long-term banking relationship that we’ll have,” DiPrete said. “We’ll be in a front row seat to see them grow … so this is a true relationship beyond just the building financing.”
