I saw some mention of HUB zones. Were these used in relation to community development loans/investments only? Can you give me an example of a writeup? Let's say the bank made a loan to a regional school smack dab in the middle of the zone.

Thanks!

This is a write up (approved in 2004 exam) for a CD loan within a Rennisance Zone. A write up for a HUB zone would be the same, with particular emphasis on the HUB Zone's goals and how the loan purpose (property in this case) fits within those goals. Names have been changed to protect the innocent

Name of Organization
The Mall Stores LLC
Amount of Commitment$15,000,000
Date Originated 06/15/05

Name of Project/Program:
The Mall Stores LLC

Third Party Activity: (Yes/No - if Yes, who and how)
Good Guys LLC, A Darned Big University, Jeckle and Hie

This loan is the final piece of the Big Mall renovation that began in 2001. As each piece of the center has been completed, Jeckle and Hie sell off to new investors. The Darned Big University was the first large investor, with Mall Stores LLC following.

Assessment Area Status: (the assessment area benefiting from the activity, the location of the organization if not located in the assessment area, and whether the activity benefits more than one assessment area)
The property is located in the City MSA at 101 W Ice Highway, in census tract 15.00, a moderate-income census tract located within the City Renaissance Zone boundaries.

Purpose: (Community Development/Services to Low-to Mod Persons/Community Stability-revitalization/Affordable Housing Services/Medical Services to Native Children, etc. and a brief statement how the funds will be used)

Community Stability-Revitalization/Job Creation
The project was a perfect example of what the Renaissance Zone planners had in mind for areas of the City that had experienced economic downturn. The location of the stores in this large abandoned mall will provide visual and economic benefits to the community in terms of jobs (estimated creation is 40 new jobs which will be filled 100% by Alaskans) as well as additional focus on commercial development. A new grocery has located in the building as well as the Big Darned University. Across the street from the complex, a popular grocer renovated his location with the new occupants in mind. Employees who work in the mall now have ample opportunity to spend funds within the moderate-income tract. A large mall that was becoming an eyesore is now a well-developed University campus and shopping site.

This final loan is the long term take out financing with AIDEA.

Housing Detail if applicable: (total number of housing units and the percentage of the total that is dedicated to low-and moderate-income residents)
None

Innovative or Complex Features:
This loan was to finance the long term take out of the purchase and renovation of a large mall in mid-town City. The mall, like many of its type had been abandoned and was falling into disrepair. No anchor tenants could be found and a series of small retailers have moved in and out of the property. The associated downturn in the value of the building could have led to the building being abandoned as several other large complexes similar to this have been in City. Jeckle and Hie worked with the Big Darned University, who were the first to move in to develop a plan to remodel a portion of the building as university offices and an off campus class area. Upon completion of negotiations, a retail grocer located in the unoccupied portion of the building, which will provide the university with additional cash flow on the property. The Mall Stores LLC followed, relocating two large stores to the site. Renovations have taken place over time and spurred other developers to see the potential of occupying similar sites.

Comments:
Key goals in the Renaissance Zone plan and the City 2020 plan include infill and redevelopment to gradually revitalize older areas of the Downtown and Midtown tracts in the zone. Focus on site design standards in the plan were considered in the design of the renovated property, including use of higher quality exterior features like slate and landscape design. The desire to bring a cohesive look to the developments in midtown drove the developer to use materials consistent to other buildings they had developed in the area, including the Goodguys properties, located four blocks away. Redevelopment of underused parcels was also a focus of the city planning. As mentioned, this property had sat vacant for some time before the The Goodguys Company and the Big Darned University was convinced that it would work for them. The design features and the location became a deciding factor for The Mall Stores LLC. Overall the renovation of the property fit within many of the goals of the 2020 plan as well as the specific goals of the Renaissance Zone, with the revitalization of this structure being a key issue

Thank you!! How would we find out a HUB zone's goals? Community groups? Or would SBA have that information?

Are you referring to the SBA's HUB Zone program? The purpose (goal) of a HUB Zone is as follows?

The HUB Zone HUB Zone Empowerment Contracting Program
(HUB Zone program) is a procurement preference program intended to assist specifically designated small businesses through access to Federal procurement.

It is a place-based economic development program that provides benefits based on the location of the business and residency of the business’ employees. It seeks to use the Federal marketplace to encourage jobs and development in economically stagnant areas by allowing the government to function as a short-term customer while the business builds its client base.

To be eligible for the program, a business must meet all of the following criteria:

it must be a small business by SBA standards

it must be located in a "historically underutilized business zone(HUBZone),

it must be wholly owned and controlled by person(s) who are U.S. Citizens,

at least 35% of its employees must reside in a HUBZone.
A "HUBZone" is an area that is located in one or more of the following:

a qualified census tract (as defined in section 42(d)(5)(C)(ii)(I) of the Internal Revenue Code);

a qualified "non-metropolitan county" (as defined in section 143(k)(2)(B) of the Internal Revenue Code) with a median household income of less than 80 percent of the State median household income or with an unemployment rate of not less than 140 percent of the statewide average, based on US Department of Labor recent data; or
lands within the boundaries of federally recognized Indian reservations.

In short a HUB Zone "goal" is to to allow qualified businesses within a zone to obtain preference in obtaining government contracts.

The fact that your borrower is located in a HUB Zone would indicate its in an economically deprived area, which may have some CD implications, but your borrower may not be qualified as a HUB Zone business. IMO your write up would be no different than any other CD activity. Providing your loan meets CD eligibility requirements