Strategic clarification · Now City West Salem

What is the business of the partnership?

Three layers of business activity, with a clear division of labor.

The JV is a real estate development venture with an operating-business component and an optional district-scale upside layer. The landowner partner contributes the 5.29-acre West Salem site and patient capital. Now City Inc. contributes development capability, capital relationships, design, and operating leadership. The partnership produces value the land alone cannot realize, and produces it through three discrete business activities operating on different time horizons.

In one paragraph

The plain-English business model.

The 5.29-acre site at 740 Basset St NW, with the original cannery structures already demolished and the parcel cleared, is the land asset. The partnership entitles, develops, and operates a phased mixed-use project on that land, then captures value across three streams: the development margin (between cost basis and stabilized asset value), the operating cash flow (from residential rents, ground-floor retail, and the daily marketplace), and optional participation in a district-scale acquisition vehicle if the first phase establishes the comp set.

The base case (Phase 1A and Phase 1B) does not require the district to happen. It does not require culture change in Salem. It requires a delivered, well-leased 200-unit residential project with a working ground-floor activation, in a market with 1.92 months of housing inventory and documented unmet demand. The district is the upside, not the floor.

What each partner brings

Two complementary contributions.

The structure works because each partner brings what the other cannot. Land does not develop itself, and capable development without land does not produce a project.

Landowner partner

Land, local relationships, patient capital.

The 5.29-acre West Salem site at 740 Basset St NW, cleared of the original cannery structures and ready for entitlement and development, contributed at entitled-and-positioned value rather than raw land value
Local relationships and reputation in Salem and the broader Willamette Valley, including capital introductions, civic relationships, and contractor or vendor connections
Patient capital able to ride out a five-year development cycle without forcing early liquidity
Board-level decision authority on major capital events (raises, refinancings, exits)
Optional active participation in development activities by election (see fee allocation section), including city relationships, contractor introductions, retail leasing, and capital introductions

Developer · Now City Inc.

Capability, capital strategy, design, operations.

Development management across entitlement, design, construction, and stabilization
Capital strategy and LP relationships (Opportunity Zone, mission-aligned, sustainability-linked)
Architectural and urban design through Ritchie's leadership
Operating partner network for the daily marketplace and the residential operations
Brand and platform identity across the Now City ecosystem
The methodology (the Stack, the outcomes framework) that produces above-market performance

What the JV actually does

Three layers of business activity, each with its own time horizon.

Each layer is a distinct revenue model. The partnership commits to Layer I with the initial closing. Layers II and III are options, exercised if the data supports them.

Phase 1A and Phase 1B development and operation

Years 1 to 5 · The committed core

Entitle the 5.29-acre site. Build and operate the 200-unit Scandi Block (Phase 1A) for residential rents and ground-floor retail. Activate Wallace Road frontage with the Now City Market (Phase 1B) for daily-routine retail and demonstrated demand data. Stabilize at year 4 to 5. Refinance to return construction equity. Hold for cash flow or exit at year 5.

This is the layer that has to work. The OM models a $95M Phase 1A project with 24% Levered IRR and 6.2% untrended yield on cost. Phase 1B at base case produces approximately $725K of NOI in its own right plus a documented $4.2M lift in real estate value from the rent premium it produces in the Phase 1A retail.

Residential rents Ground-floor retail Activation NOI Refi proceeds Exit value

Phase 2 of the 5.29 acres, contingent on Phase 1 data

Years 4 to 7 · Conditional expansion

The remaining 5.29-acre program (the additional 180 units to reach the 380-unit Phase 1 plan, plus the additional retail and flex office) is built if Phase 1A delivers and the Phase 1B activation produces the demand data that supports the underwriting.

Phase 2 is structurally a separate capital event with its own equity raise, its own debt placement, and its own go or no-go decision based on documented Phase 1 performance. The OM models the full Phase 1 (5.29 acres) at a $194M project cost and a 20.5% Levered IRR with 2.5x equity multiple. The partnership captures Phase 2 value if conditions warrant. The partnership does not commit to Phase 2 at the initial JV closing.

Optional second close Phase 1 data dependency Distinct equity raise

III

District participation through the Willamette Wellness QOF

Years 5 to 15 · Optional asymmetric upside

If Phase 1 establishes the placemaking comp set and the Salem market window holds, Now City Inc. plans to form a $100M Willamette Wellness Opportunity Zone Fund (QOF) for adjacent acquisitions of up to 40 acres in the surrounding district. The landowner partner can participate in the QOF as an LP, contribute additional adjacent parcels at appreciated value, or stay concentrated in Phase 1 economics. Participation is by election, not by obligation.

The District layer is where 10-year Opportunity Zone optimization, district energy infrastructure, and the broader catalytic placemaking thesis live. It is the upside, not the base case. It is also the layer that converts Phase 1 success into platform-scale returns.

Opt-in by partner QOF anchor 10-year hold Asymmetric upside

When the landowner partner gets paid

Five distinct return events across the hold.

The land contribution is not a one-time monetization. It produces a sequence of return events, with the first one happening at JV closing and the last one happening at exit or hold extension.

At JV closing · Year 0

Land capitalized at entitled-position value

The land contribution is valued at its entitled, positioned, mixed-use development value, which is materially above raw light-industrial land value. The exact basis is a JV term sheet item, but the structural lift is the first return the land contribution captures.

During development · Years 1 to 3

Pro rata share of developer fees plus elective activity-based fees

The JV captures development management fees, construction management fees, and any capital-event participation (rebates, grants, OZ structuring). The landowner partner captures a pro rata share of project-level returns plus a direct share of activity-based fees for any development roles taken on by election (see fee allocation section).

At stabilization · Years 4 to 5

Quarterly cash flow distributions begin

Once Phase 1A reaches stabilized NOI, the JV distributes operating cash flow to partners on a quarterly schedule per the JV waterfall. This is the first ongoing income stream for the landowner partner.

At refinance · Year 5

Refi proceeds return construction equity

Stabilized refi releases capital that returned construction equity to LPs. The landowner partner participates in refi proceeds per the JV waterfall, providing a second meaningful liquidity event during the hold.

At exit · Year 5+ (optional)

Pro rata share of sale or hold value

The JV either exits via sale at year 5 to 7 or holds the asset for continued cash flow with a refinance recap. The landowner partner captures a pro rata share of the exit or recap value per the JV waterfall.

If District happens · Years 5 to 15

Optional QOF participation

If the partner elects into the Willamette Wellness QOF, the landowner participates in the District-scale value creation. Tax-advantaged structure (OZ optimization at year 10) provides additional return on adjacent acquisitions.

Operational division of labor

Three roles, with elective scope for the landowner partner.

Day-to-day execution does not require landowner participation. The landowner partner has full authority on major decisions, transparency on all decisions, and the option to take on specific development activities by election. The structure flexes to the level of involvement the landowner partner wants.

Landowner partner

Required minimum, with elective active scope.

Required involvement

Land contribution at JV closing
Approve major capital events (raises, refinances, exits) at board level
Quarterly board meetings (one to two hours each)
Annual budget approval
Approve any change of strategic direction (Phase 2 go-decision, District participation)

Optional active roles, by election

City and civic relationships, including agency engagement and entitlement support
Contractor and subcontractor introductions, regional vendor relationships
Retail leasing for ground-floor tenants where local connections apply
Capital introductions to PNW family offices, foundations, and local LPs
Community engagement and coalition relationships
Design and program input where landowner expertise applies

Default to developer (unless elected)

Day-to-day operations
Construction management
Capital raising structure and LP relations
Tenant relations and vendor management

Developer · Now City Inc.

Operational and strategic, with elective sharing.

Owns and runs by default

Capital strategy, LP relations, and capital raising
Design, entitlement, and city negotiations
Construction management and contractor selection
Operating partner selection and oversight
Phase 1A leasing and stabilization
Phase 1B activation through specialist operating partner
Quarterly reporting to JV partners
Day-to-day decisions within budget and strategic envelope

Sharable by mutual election

City and entitlement work where landowner relationships add velocity
Local contractor coordination
Retail leasing where landowner has tenant relationships
Capital introductions where landowner has LP access

Activity-based fee allocation

Development fees flow to whoever delivers the role.

Standard JV development and management fees are allocated to the partner who delivers the underlying activity. Each fee category has a default holder, an explicit pathway for the landowner partner to participate, and a documented split where contributions are shared. Quarterly true-up reconciles actual contribution against the elected split.

Acquisition fee 1 to 2% of land basis at closing

Compensates deal sourcing, site assembly, and JV formation work.

Default: Now City Inc. (sourcing and structuring).
Landowner participation: Limited. The landowner is contributing the asset rather than sourcing the deal.
Default split: 100% NCI.

Development fee 3 to 5% of TPC, paid in tranches across the development period

Covers entitlement leadership, design coordination, capital strategy, contractor selection, and overall construction oversight.

Default: Now City Inc.
Landowner participation: Sub-roles available by election (city relationships, contractor introductions, community engagement). Each sub-role carries a documented share of the development fee.
Typical split if shared: 70 to 80% NCI, 20 to 30% landowner depending on scope of elected sub-roles.

Construction management fee 3 to 5% of hard costs, paid monthly during construction

Day-to-day construction oversight, RFI management, change order management, schedule and budget tracking.

Default: Specialist construction manager or NCI.
Landowner participation: Low (specialized skill set; landowner relationships with regional contractors covered under development fee).
Default split: 100% to construction manager.

Asset management fee 1 to 2% of equity, paid quarterly post-stabilization

Ongoing asset oversight, capital event timing, refi management, performance reporting to LPs.

Default: Now City Inc. as managing partner.
Landowner participation: Optional co-asset-manager role with defined responsibilities.
Typical split if shared: 70/30 NCI/landowner.

Property management fee 3 to 4% of effective gross revenue

Day-to-day property operations, tenant relations, maintenance, billing.

Default: Third-party property manager.
Landowner participation: Not typical at this scale (specialized).
Default split: 100% to property manager.

Leasing commissions 4 to 6% of first-year rents (residential), higher for retail

Securing residential and retail tenants, lease negotiation, build-out coordination.

Default: In-house leasing or third-party broker.
Landowner participation: Retail leasing role available by election where local tenant relationships apply. Residential leasing typically remains with the in-house team.
Typical split if shared: 100% landowner on retail tenants where landowner sources, residential split per JV terms.

Disposition fee 1 to 2% of sale price at exit

Exit structuring, broker selection, buyer engagement, transaction execution.

Default: Now City Inc. plus specialist broker.
Landowner participation: Optional, where local market knowledge or specific buyer relationships apply.
Typical split if shared: Documented at decision point.

Promote / carried interest Back-end split above the IRR hurdle (e.g., 70/30 above 8% IRR with two tiers)

Incentive compensation for delivering above the underwritten return. This is a return-on-equity allocation, not a fee for service.

Default: Per JV waterfall.
Landowner participation: Allocated based on equity contribution and JV terms, not on activity contribution.
Documented at: JV closing.

Allocation mechanism

How elections, tracking, and true-up actually work.

At JV closing. Each partner elects which roles they will own and at what percentage. The elections are documented in the JV agreement.
During the period. Each partner tracks actual contribution against the elected role share. Major activities are noted in the quarterly board materials.
Quarterly board review. The board reviews actual contribution versus elected split. If the contribution diverges materially from the election, the board approves a true-up adjustment to the fee allocation.
At major milestones. Roles can be re-elected at Phase 2 close, refinance, exit, or any major capital event. The new election supersedes the prior one prospectively.
Disputes. Disagreements about contribution or allocation go to the board for resolution. If unresolved, JV agreement default mediation applies.

The mechanism is intentionally lightweight. Neither partner runs a time-tracking operation. The quarterly board materials note major activities; the true-up handles material divergence. The default elections are intended to be the right answer most of the time, with the mechanism existing for when they are not.

Specific concerns, addressed

The four reasons to be skeptical, answered.

Each concern below is legitimate. The point of this section is not to dismiss the concerns, but to show how the partnership structure and the project plan respond to each. If any of these answers is unsatisfying, that is the conversation to have.

Concern 1

Is Salem ready for this?

Two questions, not one

For housing, yes. Salem holds 1.92 months of inventory. Multifamily vacancy is below 6%. Median income is rising. The 200-unit Phase 1A leases on housing scarcity alone, without requiring placemaking outperformance.

For placemaking, the Phase 1B activation is the test. We are not assuming Salem is ready. We are running a 24-month measurement of whether daily-routine, walkable, design-forward retail can work in this market. The activation budget is bounded at $1.3 to 1.4M with explicit performance gates and a documented fallback if the data does not support continuation.

Concern 2

Will culture change be too slow?

Culture change is not on the critical path

The base case underwriting (24% Levered IRR at Phase 1A) does not depend on Salem becoming a different city. It depends on a 200-unit residential project leasing at market or near-market rents in a supply-constrained market.

Culture change is the upside layer, not the floor. If walkable, design-forward living becomes a defining Salem trend over the next decade, the project captures that. If it does not, the project still delivers because the housing scarcity and the OZ + URA + 10-year tax abatement structure carry the underwriting.

Concern 3

Other isolated placemaking attempts have failed.

Yes, and the structural conditions matter

Standalone placemaking attempts often fail for predictable reasons: no residential mass behind the activation (no daily demand baseline), weekend-destination programming that cannot sustain weekday traffic, brand-led without demand-data discipline, dependence on programming budgets that get cut when the operator changes.

The structural conditions here are different. 200 to 380 units of residential demand pull daily activity. The Now City Market is built for daily routine, not weekend events. The activation includes explicit measurement gates and revision protocols. The OZ + URA + 10-year tax abatement structure produces a financial buffer that placemaking attempts dependent on programming alone do not have. None of this guarantees success. It does mean the failure modes that have killed similar attempts are addressed in the design.

Concern 4

Minimal stress, drama, and effort on the landowner side.

Floor of involvement is low; ceiling is elective

The required floor of involvement is roughly four to eight hours per quarter at full ramp, plus episodic attention at major capital events (closings, refinancings, exit). The landowner partner contributes land and patient capital, attends quarterly board meetings, approves major capital events, and otherwise stays out of operations if that is the preference.

The ceiling is elective. If the landowner partner wants to take on specific development activities (city relationships, contractor introductions, retail leasing, capital introductions), the activity-based fee allocation framework above provides a documented pathway to do so and capture the corresponding fee share. The partnership flexes to whatever level of involvement the landowner partner chooses, from pure passive (floor) to actively involved (ceiling).

The alternative

Land sale at $22 per square foot vs partnership.

Both options are valid. The partnership produces materially more total value, takes longer to realize, and carries development risk that the sale option does not. The honest comparison is below.

Option A · Direct sale

Sell the 5.29 acres at the target $22 per SF.

Sell the 5.29-acre cleared site to a third-party developer or pad-and-anchor user. The cannery structures are already demolished, so the site is positioned for a relatively clean transaction. Capture roughly $5M gross at the target price. Liquid, simple, near-term.

Gross sale value~$5M

Time to realization12 to 24 months

Development riskNone to landowner

Effort beyond demoMinimal

District upsideNone

Captures land value once. Liquidity sooner. No participation in the project that gets built on the land.

Option B · Partnership

Contribute land to the JV and capture project-level value.

Land capitalized at entitled-position value at JV closing. Participate in development margin, operating cash flow, refi proceeds, and exit value across the five-year hold. Optional participation in District-scale value creation through the Willamette Wellness QOF.

Land contribution basis~$5M (negotiated)

Phase 1A project value$95M total

Levered IRR (Phase 1A)24%

Equity multiple2.0x

Hold horizon5 years

District optionalityYes, by election

Materially larger value across the hold. Longer to realize. Development risk borne by the JV, with major decisions retained at board level by the landowner partner.

Bottom line

What the partnership offers.

The business of the partnership is, in plain language, to develop and operate a phased mixed-use project on the 5.29-acre West Salem site, capture value across three layers (development, operations, and optional District-scale upside), and produce a multiple of what the land alone could produce in a direct sale.

The partnership is structured so that the operational load falls on Now City Inc. and a specialist operating partner. The landowner partner contributes land and patient capital, holds board-level authority on major capital events, and otherwise stays out of the operating weeds. Episodic attention rather than ongoing stewardship.

The base case (Phase 1A and Phase 1B) does not depend on Salem becoming a different city. It depends on housing demand that is already documented in the market, a stack of tax incentives that are already in place, and a 24-month activation prototype that has explicit performance gates and a documented fallback. Phase 2 and the District are upside layers that are exercised by election if the data supports them, not committed at the initial closing.

A direct sale at the $22 per SF target captures roughly $5M of land value quickly. A successful partnership captures multiples of that across a longer horizon, with development risk shared and operational stress kept on the developer side. The partnership is the harder path. The math supports it being the more valuable path. The decision is whether the partnership shape and risk profile fit how the landowner partner wants this asset to work.

Now City Inc. · West Salem JV