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2011 Annual Report As a leading source of private sector gap financing, Invest Detroit utilizes a variety of
managed for-profit and non-profit targeted funds to support economic development,
primarily in the City of Detroit. In 2011, these efforts continued to be focused on
support for commercial businesses and residential projects, emerging businesses and
neighborhood-based retail, and the creation and retention of jobs.
Since inception, Invest Detroit has played a lead role in collaborative initiatives to
support the revitalization of targeted areas of Detroit. In partnership with the business,
philanthropic and government sectors, we are building on previous successful
development strategies, and moving forward on initiatives for areas of critical
importance for the creation of a thriving and sustainable city.
Targeted investment is important. Strategic development projects under consideration
for funding by Invest Detroit managed funds will provide for optimal investment and
development results, and have been identified for their purpose, location, and initiative
support from our community partners. These Initiatives include: transit-oriented-
development which will service and redefine Downtown’s Woodward Avenue and Midtown
as an ever greater hub of activity for residents, workers and visitors; the Capitol Park
initiative which will provide for the redevelopment of a Downtown district, resulting in
increased population, retail density, and job creation; and the Retail Strategy, which
identifies and supports place-based urban retail. Plans to open a cluster of 15 to 20 new
retail stores in 2014 are well underway and on target.
To support these endeavors, we have expanded our outreach and fundraising efforts.
Since inception, Invest Detroit grant proposals have resulted in commitments totaling
$11.87 million. In the 2011 application round, Invest Detroit CDE was awarded a $30
million New Markets Tax Credit (NMTC) allocation from the U.S. Department of
Treasury’s Community Development Financial Institutions (CDFI) Fund, which will
complement the $40 million NMTC allocation award received in 2009. Additionally,
Invest Detroit Foundation received certification as a CDFI and applied for a $2 million
CDFI Fund Financial Assistance Grant which is pending. Successful grant proposals in
2011 have resulted in total commitments of $2.58 million.
Invest Detroit Mission & Market Focus
Invest Detroit is a leading source of private sector gap financing that utilizes a variety of
managed for-profit and non-profit targeted funds to support economic development
opportunities in underserved communities primarily in the City of Detroit. The efforts of
Invest Detroit are intended to promote job creation, expansion of the tax base and an
improved quality of life for residents of the communities it serves. Invest Detroit
supports businesses through financing for a variety of needs including:
Business expansion and purchase of equipment
Real estate development and redevelopment
Predevelopment costs
Neighborhood retail
Emerging businesses’ development costs
New Markets Tax Credit Equity
Loans for strategic projects are considered when potential exists for a long-term, clear
benefit which is critical to the economic development of the City of Detroit. This
emphasizes the Fund’s commitment to economic revitalization by financing projects that
would likely not be completed without the participation of Invest Detroit.
Managed Funds
Detroit Investment Fund The Detroit Investment Fund (DIF) is a source of private sector financing designed to be
a catalyst for investment in Detroit by financing qualified commercial and industrial
projects, and residential real estate development to stimulate economic development
and job creation. The DIF provides gap financing intended to leverage owner equity so
that the transaction merits traditional bank/senior lender financing.
During 2011, DIF experienced a slow return to a more normal operating environment.
Management continued its efforts to preserve existing real estate projects and to
protect partner capital while looking for opportunities to grow the loan portfolio. Loans
outstanding at December 31, 2011 totaled $41.9 million up from $39.8 million at the
previous year end. During the year $6.6 million in new loans were funded while $3.3
million in loan pay downs were received and $1.3 million in charge offs were incurred.
Highlighting the new loan volume, were a $3.0 million loan to Global Titanium, Inc.
(GTI) and $2.0 million in loans to The Auburn mixed-use development.
GTI processes titanium scrap and sells reprocessed titanium to the aerospace industry.
It also supplies titanium alloy to the steel and stainless steel industries for use in the
automotive and appliance industries. DIF’s loan to GTI refinanced the $2.0 million
balance of a previous loan and advanced an additional $1.0 million which was part of a
$3.5 million financing package for the company’s expansion into the titanium powder
market.
The total projected cost of the project is $11.2 million. The loan structure includes an
$8.4 million NMTC allocation from Invest Detroit CDE, and a $1.5 million bridge loan and
a $250K subordinated term loan from DIF.
In 2011, DIF management continued its efforts to reposition residential real estate
projects which have been adversely impacted by the continuing problems in the
residential real estate and mortgage markets. In doing so DIF has utilized $2.9 million in
capital to purchase the senior bank loans on 5 projects at significant discounts and is
working with the project developers to lease or sell the remaining lofts/condos. 55 W.
Canfield provides a good example of our efforts to preserve projects and protect partner
capital.
In 2004, loans totaling $900,000 from DIF and
the Predevelopment Fund were funded for
the $5.2 million redevelopment of the 55 W.
Canfield project in Midtown, which would
result in 34 market-rate, for-sale loft units,
4,161 sq. ft. of commercial/retail space and
51 adjacent parking spaces.
The Auburn, LLC was formed to redevelop the
property located in Midtown Detroit. The
project represents the new construction and
redevelopment of a blighted property into a
56,000 square foot, mixed-use facility including
58 market-rate and affordable rental housing
units and up to 11 street-level retail spaces. The Auburn
55 W. Canfield
DIF provided the financing for the purchase,
improvement and expansion of a facility on the
property just north of its existing plant. This is
another step in GTI’s growth strategy. GTI’s
annual volume of titanium processed and sold
increased from 14.0 million pounds in 2004 to 38
million pounds in 2011. During this period GTI
has invested over $18 million in new facilities
and equipment and has expanded its employee
base from 60 to 142.
Global Titanium, Inc
The collapse of the real estate market stalled the project and the developers defaulted
on their senior debt and Invest Detroit loans.
A subsequent forbearance agreement provided for the conversion of the project to
rental and the purchase of twelve units by the development team with additional unit
sales required. DIF purchased the senior lender’s interest for $850K which represented a
significant discount and assumed first position on the collateral. This allowed for
positive cash flow on a rental basis supporting the interest carry on Invest Detroit’s
loans.
Working with the developers, a seller-financed mortgage program is being developed
with 100 percent of net down payments and the principal portion of the mortgage
payments made to DIF to reduce principal. A private mortgage company will market,
package and sell the mortgages when eligible. The loans will continue to be guaranteed
by the principals with a pledge of the remaining mortgages as collateral.
While the markets DIF focuses on have shown improvement over the last year,
management continues to focus on managing the portfolio as well as DIF’s mission of
providing gap financing to support economic development. To date DIF loans and
investments totaling $93.9 million have leveraged $558.9 in total investment.
38 Loans and Investments
$35.9 Million Outstanding
Total Available: $3,670,269
Projected Funding Needed: $10–15 Million
New Center Stamping Kales Building Kennedy Square
Broderick Tower
Investments in Portfolio Companies Have: Developed 1.43 million
commercial Sq. Ft.
Developed 2.15 million residential Sq. Ft.
Developed 335K Retail Sq. Ft.
Created or renovated over 1,300 housing units
Leveraged $559 million in additional investment
Created or retained 1,809 jobs Global Titanium, Inc.
Grand Papa’s Manufacturing & Distribution
DETROIT INVESTMENT FUND
Newberry Hall Restoration
Invest Detroit Foundation
Invest Detroit Foundation (IDF) is a 501(c)(3) organization and certified Community
Development Financial Institution formed in 2010. IDF promotes a higher quality of life
for residents of distressed communities, primarily in the City of Detroit through
attracting new industry, encouraging the development of business, housing,
transportation and other community resources. IDF provides loans and financial
assistance to promote community development and combat community deterioration
and economic blight.
The IDF loan programs provide funding, generally in the form of loans, to qualified
applicants to encourage revitalization and development. In concert with operating the
loan programs, IDF also conducts programmatic activities that include planning and
participating in developing strategies for urban revitalization.
The impact of the IDF loan programs includes the creation of jobs and training for the
unemployed and persons of low income, and providing quality housing for the low-
income community.
IDF funds provide loans which encourage projects where the necessary financing is not
available from traditional sources, or may be available, but at high rates and restrictive
terms. Financing may also be unavailable because of the credit risks of financing a
project in the designated area. Projects will also be evaluated based on whether they
have received support from local community groups, institutions and public agencies.
Loans and the repayment of funds are offered upon terms and conditions that are not
available from traditional private and public financing sources.
IDF Loan Programs include:
Lower Woodward Housing Fund
Predevelopment Funds
Urban Retail Loan Fund
New Markets Tax Credits
First Step Fund
Capitol Park
Lower Woodward Housing Fund
The Lower Woodward Housing Fund (LWHF) is a $15.37 million fund intended to promote
the development of a downtown neighborhood through loans to qualified residential and
mixed-use projects that will significantly increase the residential population of Detroit’s
downtown core. The Fund’s objective is to increase market demand and elevate
property values through concentrated residential real estate development in a targeted
area that attracts residents into the downtown, making the streets livelier, and
providing support for commercial and retail businesses.
The LWHF is designed to work concurrently with other Lower Woodward initiatives that
include the following: Remediation/Raze/Renovate, Streetscape Improvements, and
50/50 Owner Match (i.e. façade improvements, building clean up and parking lot edges).
Collectively these initiatives represent a collaboration of downtown property owners and
stakeholders, the City of Detroit, Wayne County, State of Michigan and Federal
Government, and private Foundations and Corporations.
In 2011, the capacity of the LWHF was fully utilized due to the funding of the two loans described below and the Funder’s decision to repurpose $6 million.
The Fort Shelby Tower Apartments and Hilton Doubletree
Suites project represents 56 market-rate residential units atop
the 203 all-suite hotel which reopened in 2008. The LWHF
provided $1.7 million in financing for the residential portion of
the historic Fort Shelby Hotel redevelopment. Financing
terms provided the developer the flexibility that was needed
as the project was slow to achieve stabilization and operating
cash flow was tight.
The landmark David Whitney Building, located at the
northern entry point of Detroit’s Central Business
District, will be redeveloped into a 125-room boutique
hotel and 108 moderately priced 1- and 2-bedroom rental
apartments. The LWHF provided acquisition financing of
$1.75 million. This long-vacant structure will undergo a
complete rehabilitation and complement the on-going
effort to create population and retail density as part of
the West District / Transit Oriented Development
Strategy.
Fort Shelby Tower
The David Whitney Building
Lower Woodward Housing Fund . . .
Funding for the LWHF was provided by Business Leaders for Michigan (formerly Detroit Renaissance) in concert with The Kresge Foundation, Hudson-Webber Foundation and the Downtown Development Authority (DDA).
Total Available: $155,240
Projected Funding Needed: $6 – 8 million
Westin Book Cadillac Residences The Broderick Tower Kales Building
Urban Retail Loan Fund
The Urban Retail Loan Fund (URLF) is a revolving loan program intended to stimulate
economic growth and support for residential and neighborhood development in Detroit’s
Greater Downtown area by providing loans to neighborhood retail, service, and
storefront businesses. These businesses, in turn, will provide necessary goods and
services to the neighborhood, create and retain jobs, and promote a higher quality of
life.
The DIF created the Detroit Urban Retail Loan Fund in partnership with the Michigan
Economic Development Corporation to assist neighborhood businesses and drive
additional economic activity in the community.
Descriptions of representative URLF portfolio projects follow.
Yoga Shelter
Fountain Bistro is a restaurant located in Campus
Martius Park, which is in the epicenter of Detroit’s
Central Business District. The restaurant opened in
2010 and closed for remodeling in March 2011. A
$100K URLF loan funded the purchase of furniture,
equipment, a new ventilation system and various
other tenant improvements. The restaurant re-
opened in June 2011 and has benefited from the
influx of downtown employees and the robust
programming of the Campus Martius Park which has
an ice skating rink in the winter and lunchtime
concerts in the summer months.
Yoga Shelter Detroit will open a new yoga studio in
a Wayne State University Building in Midtown
Detroit, adjacent to Woodward Ave. One of the
owners has more than 10 years combined
experience as a yoga practitioner, business woman
and community leader. This represents a second
location of an existing local business. The $300K
URLF loan is bridging a $175K Wayne State
University grant as well as assisting with preopening
expenses such as furniture, advertising, inventory,
and carrying costs.
Yoga Shelter Detroit
Fountain Bistro
Urban Retail Loan Fund . . .
Canine to Five
Canine to Five provides dog daycare, training, boarding and grooming services. This Midtown business, located in the Cass Corridor, opened in 2005 and utilized a $50K loan from URLF in 2010 to fund capacity expansion and façade improvements. The demand for these services continues to increase and the owner is seeking additional funding to do another expansion. The staff is comprised primarily of Detroit residents, many of them students from Wayne State University.
Target Area
Greater Downtown including:
Corktown Downtown Eastern Market Midtown New Center Riverfront
Total Available: $658,752
Projected Funding Needed: $6 Million
Metro Foods
Yoga Shelter Canine to Five – Doggie Daycare
Fountain Bistro Campus Martius Park
Slows To Go
Investments in Nine Portfolio Companies Have: Developed 41,850 Sq. Ft.
Leveraged $3.34 million in additional investment
Created 134+ jobs
URBAN RETAIL
LOAN FUND
Predevelopment Loan Funds
Predevelopment Funds are intended to act as a catalyst for commercial, residential and
mixed-use development projects in targeted areas in the City of Detroit.
Predevelopment financing assists both individual developers and community
organizations by providing funding for costs incurred in the early stages of a project,
such as environmental studies or appraisals that facilitate the project’s pursuit of
traditional financing. To be considered for a loan under this program, applicants must
be able to contribute meaningful owners’ equity in their projects, present a viable
business or project plan, and demonstrate a successful track record.
In 2011, the Predevelopment Fund closed the following two loans.
The Detroit Catholic Pastoral Alliance (DCPA) is a non-profit corporation providing
community resources in neighborhoods hit hard by the closing of local parishes. DCPA is
developing a new mixed-use property on the eastside of Detroit in the Gratiot Woods
Neighborhood. Eleven affordable residential apartments on the second floor will
complement first-floor commercial space. The Predevelopment Fund provided a
$200,000 revolving credit facility needed to meet a variety of predevelopment expenses.
In addition to creating new permanent jobs, the completed project will be critical for
expanding outreach activities in DCPA’s targeted neighborhoods.
The Warren/Conner Development Coalition is a non-profit organization working to
improve quality of life issues for Detroit’s eastside communities. Several of its
subsidiaries own properties in various stages of development, all of which are designed to
remove blight, create jobs and assist local businesses. The organization is completely
renovating an historic building for residential and commercial use.
Warren/Conner Development
Predevelopment Loan Funds …
A new parking lot and small park will complement the redevelopment. The
Predevelopment Fund provided a $130,000 loan to bridge the DEGC’s Retail Readiness
Façade Grant Program financing. This loan provided support for an established
community organization expanding its outreach and revitalization activities on the east
side.
Target Area
Predevelopment Funds
target Detroit’s
Woodward corridor and
mirror the Live Midtown
and Live Downtown
boundaries. For
nonprofit and community
development projects,
the entire City of Detroit
is eligible.
Total Available: $807,062
Projected Funding Needed: $1 Million
New Markets Tax Credits
The New Markets Tax Credit (NMTC) Program attracts private businesses and
development by offering tax credits worth 39% of the value of the investment in low-
income communities, claimable over seven years. Invest Detroit CDE received a $40
million NMTC allocation in 2009 and a $30 million NMTC allocation in the 2011 round
from the U.S. Treasury’s CDFI Fund.
The purpose of the Invest Detroit NMTC allocation is to support the development of
commercial and mixed-use real estate projects in Detroit by expanding the availability,
affordability, and access to commercial capital. Capital will be made available for real
estate development, building improvements and new commercial activity. To be
considered for an allocation, projects must be located in an eligible area and applicants
must have relevant project experience and be able to contribute meaningful owners’
equity in their projects. Descriptions of representative NMTC projects follow.
Motown Construction Partners LLC is
renovating the historic, 34-story Broderick
Tower Building located at the entrance of
the Central Business District (CBD) on
Woodward Avenue. When complete, the
Tower will include 127 market-rate rental
units and 23,485 sq. ft. of commercial
space. This project will bring market-rate,
rental units to Detroit's CBD, provide up to
150 construction jobs and, upon completion
and lease-up, provide 75 retail and office
jobs. The Broderick Tower project utilized
a $7 million NMTC allocation from Invest
Detroit CDE as well as loans totaling $2.55
and $2.5 million from the DIF and LWHF,
respectively. Completion of the $57 million
redevelopment project is scheduled for fall
of 2012.
The Broderick Tower
Entrance to the CBD
New Markets Tax Credits . . . Community Health and Social Services (CHASS) is a community-based, not-for-profit
organization formed to provide comprehensive, accessible and affordable health care
and support services, with emphasis on the underserved African American and Latino
populations in Detroit. Construction of a new $17 million health and administrative
center will give CHASS more than three times the amount of space it currently has,
enabling it to double the 15,100 patients it sees annually and creating 52 positions, from
health care and dental provider to clerical staff. The CHASS Center project utilized a
$7 million NMTC allocation from Invest Detroit CDE. This development will bring quality
health care to the underinsured and uninsured populations of Detroit. Funding of the
$17 million project was finalized February 2011 and construction is scheduled to be
complete mid-year 2012.
Community Health and Social Services
First Step Fund The First Step Fund (FSF) represents a partnership of the Invest Detroit Foundation,
TechTown, Ann Arbor SPARK and Automation Alley intended to support a revolving loan
pool to provide financing to emerging and newly-formed small businesses in southeast
Michigan that have successfully completed a training program through a qualified
regional business incubator/accelerator.
The FSF provides emerging companies with access to capital, focused mentoring in areas
consistent with growing the business, and a network that will work to foster demand and
create opportunities. FSF support is meant to address the deficit of financing in the
marketplace and to promote economic development by identifying, nurturing and
fostering demand for early stage, commercially viable businesses resulting in job
creation and increased tax revenue for the region.
The FSF has completed the following since its launch in March 2010
Reviewed 220+ business opportunities Completed 34 investments in 33 companies
27 companies have raised additional capital from other investors Coliant Corporation received a FSF follow-on investment of $50,000 in
December 2011 (hence 34 investments have been made in 33 companies). 45% of FSF investments are located in greater Ann Arbor, 40% are in Detroit
and 15% are in Oakland county 23.6% of FSF investments are in women-owned / women-managed companies.
20.2% of FSF investments are in minority-owned / minority-managed companies.
FSF has invested in four university spin-offs and an additional two start-ups formed by university graduates.
FSF completed 12 new investments in 2011 - FSF Highlights of 2011
Completed first follow-on investment in Coliant Corporation by increasing its investment to $100,000. FSF’s second tranche investment of $50,000 leveraged $450,000 of additional investment in this company with 15 employees.
FSF Portfolio companies: De Novo Sciences, Fusion Coolant and Are You A Human
Represented the three leading winners of the Accelerate Michigan Business Plan Competition
First Step Fund . . .
FSF has deployed approximately $1.55 million to date.
The Fund has realized losses of approximately $50,000 as two portfolio start-ups have
folded. The loss ratio of the Fund is approximately 3.23% which is well below the
established 20% threshold.
Portfolio Metrics:
Generated revenues:
Companies have generated over $9.6 million in trailing twelve-month revenues
Jobs:
Companies have created or retained 202 jobs
Leverage of additional capital:
Companies have attracted $30.3 million from other sources yielding a leverage
ratio of 20X
Patents:
Companies have licensed or filed for 101 patents
Algal Waste Water Treatment Systems
Shepherd Intelligent Systems Fleet management systems
Delphinus Cancer Detection Systems
Ix Innovations Pico Ammeters / Next generation measuring instruments
Accio Wind Energy Systems
Investments in 34 Portfolio Companies have: Generated $9.6 million in
revenues
Leveraged $31.6 million in additional capital
Created 225+ jobs
Produced 101+ patents
Ongoing Revitalization Efforts
Greater Downtown Detroit has benefited from major renewal projects that include the
relocation and new construction of the main bus terminal, structural improvements to
Washington Boulevard, the resurfacing of Capitol Park and new investment on Michigan
Avenue with ongoing improvements to the connector streets. Landmark buildings have
been redeveloped and financing for additional historic redevelopment projects has
recently been completed. Rock Financial has been added to the list of corporate
stakeholders investing and residing in the Greater Downtown and employers are adding
staff. Major initiatives supported by the business and philanthropic community are
planned and underway. Significant investment has been made, however the need is
great to provide funding and support for strategic priority projects to continue the
momentum for revitalization.
Corporate collaboration with the foundation community has helped to drive economic
development efforts that include the successful Live Midtown and Live Downtown
initiatives. The Henry Ford Health System, Detroit Medical Center and Wayne State
University, collectively representing over 30,000 employees, donated $200,000 each to
the “Live Midtown” initiative which is also supported by an additional $600,000 in
matching money from foundations and MSHDA. Live Midtown incentives of over $1.2
million have been made available to residents or potential residents that include up to
$25,000 over five years toward buying a house or other cash amounts for existing and
new renters. Live Midtown is a part of the Anchor Strategy and works along with the "15
X 15" initiative and seeks to attract 15,000 young people with a four-year degree or more
to repopulate Detroit by 2015. The well received Live Downtown program emulates the
Live Midtown initiative and seeks to create population density in the downtown core.
Live Downtown is a five-year, more than $4 million initiative that will provide cash
incentives to employees who choose to move to Downtown Detroit and live where they
work and play. The companies currently participating in the program are Blue Cross
Blue Shield of Michigan, Compuware, DTE Energy, Quicken Loans and Strategic Staffing
Solutions. These recent efforts and emphasis on renewal have attracted residents to the
Downtown.
The need is great to stabilize and assist current and future efforts by developers and
businesses. The 2010 Residential Market Potential for Greater Downtown Detroit Study
identified over 14,500 households as the potential market for new housing units within
Greater Downtown Detroit. Retail and project specific plans will serve to retain and
attract area residents and visitors, and support entertainment, retail and restaurant
venues culminating in a vibrant, active, walkable environment.