Partners for Progress: Teamwork guides multi-million-dollar neighborhood fund

Freshly written corporate checks are only part of what’s needed to answer the call from Detroit neighborhoods that are among the last to experience new investment.

Strategies including sustainability, market research and community support are the formula for effectively matching finances with housing and business initiatives that reflect resident interests, experts say. Among the challenges for more conscientious developers and investors is striking a balance between their visions and the collective needs of neighbors who don’t want to feel like visitors to their own homes.

A collaborative of such experts, including local developers and funding partners, has begun sharing their visions for promoting sustainable neighborhoods that lack significant resources.

The combined efforts of the Detroit Strategic Neighborhood Initiative (DSNI), which includes Invest Detroit, Detroit Development Fund and Opportunity Resource Fund, are expected to make a positive impact in District 2 and throughout the city well into the future. Representatives of the three investment agencies shared with TheHUB some of their current plans for the community, including a $10-million investment in each of three targeted areas across the city.

Collaborative approach

Invest Detroit’s Director of Neighborhood Strategies Mike Smith says his organization’s 20-year lending history is helping to fuel sustainable investments in downtown and Midtown. The impact of Smith’s collaborative efforts cannot be underestimated, according to his co-collaborators.

“We have 20 years of lending experience in Detroit,” says Mike Smith, director of neighborhood strategies for Invest Detroit. “And our investment in downtown and Midtown is starting to work.”

As part of the vision, Invest Detroit has already started pre-development activities in the neighborhoods surrounding Livernois Avenue and McNichols (Six Mile) Road.

“The Fund follows a model that has two key pillars – leverage and leadership,” says Smith. “Leverage comes from working with collaborative partners. Going it alone is too risky. So we and our partners go in together, along with the city, such as in the Fitzgerald neighborhood (of Live6).”

DSNI’s initiative identifies three to four real estate projects within 15 to 18 blocks, or “micro-districts,” throughout the city. Along with Live6, the neighborhoods on DSNI’s radar include two outside District 2, one in Southwest Detroit and one in West Village. Primary goals include avoiding displacement of current residents in the targeted areas, creating mixed-income housing with 20 percent of the units designated as affordable, and generating both renovated and new construction.

A benefit of the collaboration is each partner brings a complementary background and area of expertise in funding.

Invest Detroit specializes in commercial real estate projects of various sizes.

Detroit Development Fund makes small business loans, facilitates investment partnerships, and makes “co-loans” with partners, including mixed-use residential projects.

Opportunity Resource Fund makes loans for residential mortgages and develops affordable housing.

The Fund has begun construction of The Coe at West Village town homes on Van Dyke, just around the corner from a popular restaurant and retail strip on Agnes Street. The development will bring another 1,100 square feet of retail space to the area. DSNI hopes to help build similar blocks of accessibility and new amenities in the other strategic neighborhoods.

Detroit Development Fund President Ray Waters is accelerating retail growth where it is most needed, in Detroit’s neighborhoods. Frequently applauded for his leadership in helping shepherd minority-owned business growth, Waters is a considered a key agent in Detroit’s resurgence.

“We look for opportunities to build in small retail,” says Ray Waters, president of the Detroit Development Fund.

Of the Coe, he says, “We asked residents what they wanted to see in the neighborhood where they lived and worked.”

Investing, despite risks

As part of its focus, the Development Fund helps prepare clients for mainstream financing to access real estate.

The effort requires specific tools and patience, particularly in neighborhoods with a high concentration of low-income renters, who typically don’t meet traditional lending requirements.

“We’re alternate lenders who work with non-bankable customers and help them become bankable,” says Waters.

Christine Coady Narayanan, CEO of Opportunity Resource Fund, wants to see DSNI improve on the Midtown model in outlying neighborhoods targeted through the partnership. She describes Opportunity Resource Fund as a “character lender,” not one bound by credit profiles.

The Opportunity Resource Fund came into Detroit in 2011. Since then it has loaned about $1.2 million in mortgages with no defaults.

“Midtown invested alternative capital where it was needed,” Narayanan says, “not necessarily where there was return on investment.”

The Opportunity Resource Fund’s CEO Christine Coady Narayanan understands the importance of being a “character lender,” unbound by credit profiles. Narayanan is delivering impressive results in converting hard-to-finance renters into homeowners. The proof: her organization does not have a single loan default.

Through its team approach DSNI anticipates a return while adding to the city’s overall prosperity. Including District 2, the group chose areas for investment based on neighborhood studies, area median incomes, and state housing support funding, along with 18 other demographic indicators.

“We also look at basic issues like safety and lighting… and through our public infrastructure component we are able to make more improvements,” Smith says.

Investors will take on development in additional neighborhoods, particularly when they see residents who are organized and aligned. For example, the Live6 Alliance’s presence as a convener on behalf of district residents helped create DSNI’s inroads to the area, he adds. Meanwhile, Southwest Detroit’s residents coordinated their agenda so well they requested “participatory budgeting,” which would give them input on prioritizing how public infrastructure dollars are invested. An added component of DSNI’s work is inclusion of Detroit-based, women-owned businesses and contractors of color through job-specific lines of credit. The Develop Detroit Talent program identifies minority developers, like Cliff Brown of Woodborn Partners, who is a principal in The Coe in West Village, for half the neighborhood projects.

With more than $10 million in grant funding from J.P. Morgan Chase’s Pro Neighborhoods, as well as the Hudson Webber, Knight, the Kresge and Ford Foundations, along with Reimagining the Civic Commons, teamwork is a multi-layered approach of DSNI’s efforts.

Partnership with other investors has been beneficial to Detroit Development Fund’s goals.

“Compared to where we were in 2003, we were the only ones in the sandbox,” says the Detroit Development Fund’s Waters. “Now more people have joined us and we can build sand castles.”

DSNI Resources

Opportunity Resource Fund is a non-profit community development financial institution whose core purpose is to provide loans to benefit Michigan communities while fostering economic and social justice. OppFund functions as a revolving loan fund by accepting socially motivated investments, then pooling and recycling these dollars to provide loans for the creation of affordable housing, job creation, commercial space renovation, and community development activities. We offer the following types of loans:

• Real Estate Development Loans
• Small Business Loans
• Homeownership Loans

7700 Second Avenue, Suite 608 | Detroit MI 48202
313.964.7300 | info@oppfund.org | www.oppfund.org

Invest Detroit Foundation is a financial catalyst serving the Detroit community with over $230M in capital and tax credit allocation under management. With funds spanning real estate development, commercial lending and venture capital, Invest Detroit is a 501(c)(3) Community Development Financial Institution developing innovative solutions to economic development challenges in this region. Working in collaboration with private, public and philanthropic partners, Invest Detroit promotes the creation of jobs, density and better quality of life for underserved communities. Types of financing tools provided by Invest Detroit to promote the Detroit Strategic Neighborhoods Initiative include the following:
• Predevelopment Loans
• Real Estate Development Loans
• Small Business Loans

600 Renaissance Center, Suite 1710 | Detroit, MI 48226
313-259-6368 | info@investdetroit.com | www.investdetroit.com

Detroit Development Fund provides loans and technical assistance to small business owners, developers, building owners, contractors, and subcontractors who cannot get all of the capital they need from traditional financing sources.
• Small Business Loans
• Contractor Lines of Credit
• Real Estate Development Loans