A public-private partnership that was supposed to lift a neighborhood on Chicago’s South Side nearly 10 years ago didn’t play out as planned. The private side delivered retail and jobs while, the investor said, the public side didn’t come through with housing that would have boosted quality of life and created demand for the retail. Still, the neighborhood is better than before, he asserts, and there are lessons to be learned for investors looking to revitalize neighborhoods.

In 2014, Chicago-based DL3 Realty and the city of Chicago divided a 13-acre South Side parcel between themselves, aiming to revitalize one of the city’s most distressed neighborhoods and a longtime food desert. For its end of the bargain, DL3 built the 49,300-square-foot Englewood Square marketplace, anchored by a 20,000-square-foot Whole Foods that opened in 2017. Crime fell 50% over the following 12 months and the project created 250 jobs, according to DL3 managing partner Leon Walker. He stated that the city, however, failed to follow through with housing on its piece of the property in a timely manner. Now, DL3 has taken over the entirety of the project and hopes to develop 108 mixed-income apartment units in the next two years.

Still, the lack of new housing already has taken its toll. In April, Whole Foods parent Amazon announced it would close the location, along with five other Whole Foods around the country, as Amazon tinkers with its brick-and-mortar strategy. But that’s not the only reason the store isn’t ideal for Whole Foods. It had committed to the project, before Amazon acquired the grocer, in anticipation of additional residential density, Walker said. “The housing was supposed to happen sooner, and unfortunately, it didn’t. Now we’re playing catch-up,” said Walker, who also is a founder of the Chicago Emerging Minority Developer Initiative, an effort to expand the roster of local Black and brown developers.

Commerce + Communities Today contributing editor Joe Gose talked with Walker about how Englewood Square nonetheless has improved the neighborhood, the lessons he has learned and venture development’s power to encourage investment in neighborhood revitalization.

While Whole Foods is leaving Englewood Square, what are some of the most notable changes that have occurred over the past five years?

With Whole Foods’ investment in the neighborhood, we were able to attract great national retailing brands like Starbucks, Chipotle and PNC. In addition to the jobs we’ve created and the drop in crime, 40 local vendors that found their way onto the shelves at [this] Whole Foods have expanded into other locations, and a handful are building national businesses. We’re seeing appreciation in local home values. When we started, you could buy a house for $50,000 a block away, but now you have to spend $150,000 to $250,000, depending on whether it’s fixed up.

What has been one of your takeaways from the project?

It’s always a chicken-and-egg question with this type of placemaking. If you lead with the residential, no one will want to move in if they don’t have a place to shop and eat, and if you lead with the places to shop and eat and the residential doesn’t come, then you’re stuck there, on an island. So the biggest lesson we’ve learned is that these projects are best developed in a coordinated fashion, and if you’re going to lead with the commercial, you need to have a firm, ironclad commitment that the residential is going to come soon thereafter. That’s really what sparked us to do the housing ourselves.

How are you approaching this impending vacancy from Whole Foods? There are reports you’re looking at Trader Joe’s and Jewel-Osco as replacements.

This as a great opportunity for the next operator because you have a relatively brand-new, fully fixtured store already there. But the way we see it, grocery exists on a continuum. On the right side of that continuum, you have the premium grocers like Whole Foods and Fresh Market. On the left side, you have the deep discounters. We don’t believe either extreme is right for this location, which is in an emerging community. What we need is someone right down the middle who provides value and also a nice customer experience, a good selection and healthy food. So those names you mentioned are on our list, as are others. But besides finding that middle, we’ve also got to find a grocer that can operate in a 20,000-square-foot box. That’s the trick.

Among other projects in Chicago, you’ve developed a Jewel-Osco in Woodlawn, the first full-service grocer in the neighborhood in more than 40 years, since Hillmans. What was the appeal of that site and the Englewood Square site?

You always need some initial investment to get the train running. In Englewood, the catalytic event was a $250 million investment in the Kennedy-King College across the street from our project. In Woodlawn, The Obama Presidential Center, [which broke ground in 2021], was the catalytic investment. The way we look at it is: The Obama Presidential Center is obviously the headliner, but when choosing to live in that neighborhood, people are looking at the big three: Where am I going to shop and eat, where are my kids going to go to school and how safe are my streets? Crime is addressed by providing jobs. [DL3] has created 3,000 jobs in the last five years through our developments and [has] a goal of creating 10,000 jobs in Chicago by the end of the decade.

You’ve introduced the concept of venture development, which marries the entrepreneurial spirit of venture capitalists with the social drive of mission investors to create a blend of financial and social returns, or “holistic returns.” How did you come up with the idea?

I am the son of two schoolteachers who did great work educating families on the South Side. In 1979, I watched them borrow $1 million at an interest rate of 18% to build a school, and I got my first hard hat on that job. I knew I wanted to be in this business, but I wanted to be in it in a way that made a difference, as well as made money. I went to Citigroup and then became a junior partner at JLL. When my dad passed, I came back to Chicago to take over the family business. The idea of doing well by doing good evolved, and venture development was the outgrowth of that mixture: being locally focused with institutional-quality practices and an entrepreneurial spirit.

Are you concerned that gentrification is a necessary part of growth?

Being a venture developer means being about community revitalization, not gentrification. The difference is: We’re intentional about involving local residents and businesses in the investment and revitalization efforts so that they grow along with us. That means home appreciation, jobs and directing contracts to local businesses. With that comes the business case, which is a return on capital and a return of capital to our investors.

What advice would you give developers seeking to invest in distressed neighborhoods?

Developers need to engage who really has the pulse of the community, and it takes time to identify that person. It’s not always an elected official or pastor or the loudest person at a meeting. It’s also important to uncover [the neighborhood’s] brand-changing activities that are bubbling up and haven’t attracted the media’s attention. They could be art, food co-ops or preservation efforts. Whatever they are, they are an important signal that the community is ready for revitalization.