When the editors of Fortune magazine decided to run an article honoring African American businesspeople making a difference in their community, they unwittingly played matchmaker to a new business concept.

Sitting together at a table surrounded by a gaggle of Armani and Hugo Boss-clad executives, Dr. Richmond McCoy and John O. Utendahl conceived the idea for a business that would be different. A business that would invest solely in low-income, inner-city commercial markets while providing strong returns for investors. So it came to pass a little more than a year after their initial meeting in September 1998, the McCoy-Utendahl notion became a reality, and it bore the name UrbanAmerica.

Utendahl was chairman and CEO of Utendahl Capital Partners. McCoy was heading up his own McCoy Realty Group and McCoy Development Corp. The two men were successful, sure, but they wanted to do more.

Utendahl maintains his position at Utendahl Capital Partners, which is one of many investors in UrbanAmerica. McCoy is now president and CEO of UrbanAmerica, which boasts a $400 million real estate portfolio. The firm currently has properties in New York, Philadelphia, Newark, N.J., Baltimore, Chicago, Atlanta, Birmingham, Ala., and parts of Florida. Although continued growth is at the forefront of McCoy's game plan, he says there are no immediate plans to enter new cities, except maybe for some areas of California.

In describing what makes an area attractive for UrbanAmerica, McCoy notes both market level and property level considerations.

“Our investors' desires often determine which specific geographic areas we pursue,” McCoy explains. “We look for demonstrated economic activity in cities, like a new baseball stadium, a performing arts center, etc. These types of activities tell us the river is already rising, so to speak, in a certain area. We then ensure there is easy transportation in and out of the area, and see if we can buy density within the city in a short period of time. Then, it gets down to us looking at the competition and what they are doing, as well as the actual supply and demand within the area.”

“People just haven't considered this before because of economic prejudice. It's not racial. People just don't understand the ethnic market. They are afraid of crime, afraid of vacancies. But we're turning those assumptions around.
Richard McCoy president and CEO UrbanAmerica

By competition, McCoy doesn't necessarily mean immediate rivalry. “On an institutional level, there really is no direct competition,” he says. “There is some on a city-by-city basis, but we have a more long-term approach.”

McCoy believes UrbanAmerica is, for the most part, on its own in the commercial urban development arena. “People haven't considered this before because of economical prejudice,” he says. “It's not racial. People just don't understand the ethnic market. They are afraid of crime, afraid of vacancies. But we're turning those assumptions around.”

Indeed they are. Not only has UrbanAmerica closed 16 properties valued in excess of $100 million in the past 12 months, it has managed to do so while bringing along a mixed group of national tenants, including CVS, Radio Shack, Payless Shoe Store, Burlington Coat Factory, McDonald's and Magic Johnson Theaters.

UrbanAmerica hosts community events at its centers (circuses and fairs) and distributes coupons to shoppers — all marketing maneuvers to drum up business. “We definitely take a proactive approach,” McCoy says. “In the long run, these things help increase traffic and, in turn, the value of the property.”

According to company statements, UrbanAmerica's formal strategy is to serve its investors with strong returns on quality investments and, at the same time, spur new jobs and fuel economic growth and redevelopment efforts in urban neighborhoods.

Fostering action that is in sync with it's promise, UrbanAmerica uses local contractors and vendors whenever possible. “Using local vendors is an important part of UrbanAmerica's mission,” McCoy says. “We use everything from landscapers and architects to security and construction companies — all local.” About 65% of UrbanAmerica properties, in fact, hire minority- or women-owned businesses. “It really gives the community an ownership mentality and, of course, circulates dollars back into the community.”

Currently, UrbanAmerica's operation is split roughly down the middle, with 50% of the company's business coming from the retail sector and the other 50% coming from the office sector. “As we go forward, I anticipate the retail market to be even greater because these markets are so under-served,” says McCoy. “I'd say it'll end up being about 65% retail and 35% office.”

Although UrbanAmerica's primary revenue source has come from acquisitions, the company isn't opposed to developing projects from the ground up. The company has a handful of development projects currently underway, including a 14-acre plot for retail development in Las Vegas and a $28-million project in Detroit which it finalized in December. “By the end of the first quarter of this year, I anticipate we'll have close to $250 million in development projects on the go, half of which will be retail,” McCoy says proudly.

Although development is something to consider, McCoy says it won't be the basis for UrbanAmerica's future. “Our goal is to have about 20% development business and 80% acquisition business. Development will be a significant, but small part of our overall business,” he says. Another goal, according to McCoy, is to have $50 million invested in each of its markets, adding that in Washington D.C. they have already surpassed that figure.

UrbanAmerica's biggest achievement, McCoy claims, is accomplishing what he and Utendahl set out to do: “build an organization, buy a portfolio of properties, and demonstrate that you can put dollars out there and make money.” As many companies do, however, he believes their biggest challenge will be raising additional equity in a timely fashion.

“We want to encourage other retailers to come into the market. We want to show them: the water is fine, come on in.”

Stephanie Flack is a Louisville, Colo.-based writer.