Download pdf - Develop Michigan

A publicAtion of GreAt lAkes cApitAl fund Volume 21 | issue 2 | 2014

Anin-deptHlook At

micHiGAn’s neWest

economic deVelopment

proGrAm

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depArtments

feAtures

A NEW PARADIGM FORECONOMIC DEVELOPMENT ........................................6

WHAT DOES THE FUTURE HOLDFOR DEVELOP MICHIGAN? ..........................................8

WHAT IS A DEVELOPMENTFINANCE ORGANIZATION? ......................................10

WHY THE DEVELOP MICHIGAN TEAMIS BULLISH ON MICHIGAN ........................................13

WHY A DEVELOPMENT FINANCE ORGANIZATIONIN MICHIGAN AND WHY NOW? ..............................16

FILLING THE CREDIT VOID ..........................................18

CAPITAL PROGRAMS ARE AVAILABLEFOR YOUR PROJECT ..................................................20

DMI IN ACTION: THE CAPITOL PARK PROJECT ............21

COMMUNITY REVITALIZATION PROGRAM ..................23

A WORD FROM THE DMI BOARD ...............................24

THE MANAGERS OF DEVELOP MICHIGAN .................25

AN INTERVIEW WITH DEVELOPMICHIGAN’S PRESIDENT: RICK LABER .........................26

CEO’s MESSAGE .........................................................5

Serving Our Mission

EVENTS & HAPPENINGS ...........................................28

ADVERTISER INDEx ....................................................34

28

21

18

“Building a Brighter Future Today”

Ginosko Development Company (GDC) is a real estate development company specializing in quality affordable housing creation and preservation. GDC, through its subsidiaries and joint ventures, engages in the acquisition, development, redevelopment, ownership, and operational oversight of multifamily properties primarily in the United States. Its activities include the acquisition and development of residential properties and undeveloped land reserves for development or sale.

Ginosko is the Greek meaning for, “to understand completely” or “to know.” We at Ginosko Development Company, believe that a thorough understanding and comprehensive knowledge is the unbreakable foundation for any successful real estate venture.

GDC’s communities are known for their careful planning, attention to detail and respect for the environment. GDC strives to lead in the evolution of real estate use in order to meet the market needs of a global economy.

41800 West 11 Mile Road, Suite 209 | Novi MI 48375office 248.513.4900 | fax 248.513.4904

www.Ginosko.com

Ginosko Development Company

ceo’s messAGe

SERVING OUR MISSION

GOVERNING BOARDWendell Johns, ChairRetired

Michael J. Taylor, Secretary/TreasurerPNC Bank

Catherine A. CawthonFifth Third CDC

Derrick K. Collins Chicago State University

Christine Hobbs(retired)

William C. PerkinsWisconsin Partnership for HousingDevelopment, Inc.

James W. StretzGeorge K. Baum & Company

Donald F. TuckerDon Tucker Consulting

Paul J. Weaver

Retired

CORPORATE OFFICERSMark S. McDaniel, President & CEOChristopher C. Cox, CFOJames L. Logue III, COOJennifer A. Everhart, Executive Vice PresidentRick Laber, Executive Vice PresidentKevin Crawley, Executive Vice President

This magazine is published quarterly by the Great Lakes Capital Fund (GLCF) to provide readers with informa-tion on affordable housing and economic and commu-nity development resources. This publication is copy-righted. The reproduction of Avenues to Affordability is prohibited by law. For additional copies, comments, con-cerns or to be added to the mailing list, please contact the Great Lakes Capital Fund office at 517.482.8555 or visit www.capfund.net.

Editorial and AdvertisingMary McDaniel, CMP • Alternative Solutions, LLC 517.333.8217 • [email protected] DesignMelissa Travis • Ink Ideas Graphic Design, LLC989.272.3101 • www.inkideasgraphicdesign.com

Lansing Headquarters1118 S. Washington AvenueLansing, MI 48910 Phone 517.482.8555Detroit Office1906 25th StreetDetroit, MI 48216 Phone 313.841.3751Illinois Office225 West Washington, Suite 1350 CChicago, IL 60606 Phone 708.781.9603Indianapolis Office320 N. Meridian, Suite 1011Indianapolis, IN 46204 Phone 317.423.8880Wisconsin Office2 E. Mifflin Street, Suite 101Madison, WI 53703 Phone 608.234.5291Delaware Office100 W. 10th Street, Suite 302Wilmington, DE 19801

BY MARK MCDANIEL, CEO/PRESIDENTGREAT LAKES CAPITAL FUND

5

Our 20 year anniversary was a huge yearlong celebration in 2013. We spent some time looking back at all we have accomplished. But as our history has shown we have never been an organization to sit on our laurels and be satisfied with the status quo. In Capital Fund style we embarked on two historic efforts that will position us to serve our mission better and benefit more people in need. First, was the finalization of the joining together of the Delaware Community Investment Corporation and the Great Lakes Capital Fund. We have combined the strengths of these two 20 year old orga-nizations to serve our markets with more community development financial products and services that will create a greater impact on people in need of safe decent afford-able housing and economic development opportunities. The second historic opportunity for the Capital Fund is the culmination of 3 years of work on creating a Development Finance Organization to serve the void in Michi-gan for economic development financing. The Capital Fund has spent countless hours and financial resources with our partner the Development Finance Group to create what is now known as Develop Michigan Inc. Develop Michigan became operational in 2013. The Michigan Economic Development Corporation has been a wonderful champion of our efforts and was instrumental to Develop Michigan becoming a reality. It is quite a story. In 2007, the GLCF Board made a significant decision. Despite our great success in financing more than $2 billion of low-income housing projects comprising more than 500 projects, the Board believed we had the capacity and expertise to do more for the low-income residents of Michigan. While we are proud of having provided our tenants with safe, affordable, high-quality living environments, our state’s residents needed more: they needed quality paychecks in their hands to improve their standard of liv-ing. Thus, we expanded our mission to include economic development. Our first foray into economic development was New Markets Tax Credits. We re-ceived two NMTC awards totaling $74 million which we have invested in nine com-mercial projects. We have also managed the investments of the Michigan Magnet Fund NMTC allocations since 2006 ($145 million) and the $95 million allocation of a national New York bank, among others. In this Avenues edition, we are excited to describe our most ambitious economic development effort to date: the formation and launch of Develop Michigan. Develop Michigan represents a new paradigm for economic development finance in Michigan. We plan to grow Develop Michigan into a powerful vehicle that enhances access to capital to support economic development projects across the state. We welcome your questions and support as we embark on this new and exciting chapter in GLCF’s journey.

6 GreAt lAkes cApitAl fund

By DeBBie La Franchi, DeveLop Michigan ManageMent group & Strategic DeveLopMent SoLutionS

Develop Michigan is an ambitious ef-

fort. It expands on the traditional concept

of a Development Finance Organization

(DFO) – of which many highly success-

ful models exist around the country (see

page 10) – to a new level. While Develop

Michigan incorporates the best practices

of other models to finance economic de-

velopment, it adds a unique structural in-

novation that increases its ability to devel-

op new programs. DMI is a not-for-profit

that is neither managed by nor controlled

by a government organization. Unlike all

other DFOs in the United States, Develop

Michigan has been designed to combine

the speed, flexibility and innovation of

the private sector, while maintaining a

public-sector oriented focus on the com-

munity, economic, social and environ-

A NEwPARADIGM

FOR ECONOMIC DEVElOPMENT

feAture

AVenues to AffordAbilitY 7

mental impacts. Develop Michigan is a

new national paradigm designed to have

the best of both worlds. The Michigan

Economic Development Corporation

(MEDC) has been a critical strategic and

financial partner in the launch of this

initiative (see page 16), and, as such,

it is represented on the Board of Direc-

tors; however, MEDC does not control.

This balance of representation allows the

Board and DMI’s manager – a partnership

between Great Lakes Capital Fund and

Development Finance Group (see page

25) – to pursue the organization’s mis-

sion independently and proactively.

Develop Michigan promotes econom-

ic development in Michigan by investing

in impactful real estate projects – par-

ticularly those in low-income commu-

tal, while other worthy projects require

below-market or subsidized capital. De-

velop Michigan aims to become a “go-

to” source for developers with challeng-

ing yet high-impact projects, regardless

of the financing needs.

In only 24 months of operations

(since its first full Board meeting), De-

velop Michigan has begun working with

the state’s Community Revitalization Pro-

gram (CRP).

Debbie La Franchi is one oF the PrinciPaLs oF

DeveLoP Michigan ManageMent grouP, which

runs the Day-to-Day oPerations oF DeveLoP Michi-

gan (DMi). she is the FounDer anD ceo oF stra-

tegic DeveLoPMent soLutions, which DeveLoPs

innovative Market-Driven aPProaches to eco-

noMic DeveLoPMent (www.sDsgrouP.coM).

nities. Achieving this mission requires

organizational flexibility to invest in

various property types and a “tool box”

with a wide range of products. Flexibil-

ity is the key. Economic development is

spurred through the construction and

renovation of many property types, such

as office, retail, multifamily housing,

industrial, business parks and mixed-

use developments. Develop Michigan

has the flexibility to invest in each of

these property types. In addition, in-

dividual projects have very different

capital needs given their financial and

risk profiles. For this reason, DMI will

utilize a broad platform with a range of

investment “tools” to meet these needs

and conditions. Some projects need and

can support the cost of market-rate capi-

“the unDerLyingPhiLosoPhy oF the DeveLoP Michigan FounDers is to

create a DynaMic PLatForMthat is niMbLe, resPonsive

anD innovative, whiLeFocusing on FinanciaL

DisciPLine.”– Mark McDaniel, DMi chairMan

anD GlcF PresiDent & ceO

By JaMeS L. Logue, iiiDeveLop Michigan ceo anD great LaKeS capitaL FunD coo


economic outlook

The long-term vision for Develop Michigan is that it will be-

come a powerful economic development driver over the coming

decades. Mass Development, as noted in “What is a DFO” (page

10), has invested more than $35 billion in Massachusetts since

it was launched in 1974. The chart below shows how the DMI

initiative is envisioned to grow in the future.

Develop Michigan provides underwriting, transaction closing

and asset management services to support the state’s impactful

Community Revitalization Program (CRP). Develop Michigan

closed its first CRP project in March 2014, the Capitol Park devel-

opment profiled on page 21. In addition, DMI currently has its

own capital sources available for direct deployment into projects.

In the near future, Develop Michigan will also provide technical

assistance to developers. The management team’s extensive expe-

GAP FINANCING(CRP)

ExISTING REAL ESTATE CAPITAL

FUTURE DMIINVESTMENT PROGRAM

FUTURE DMIINVESTMENT PROGRAM

A 501(c)3 Parent Organization

wHAT DOES THE FUTURE HOlD FORDEVElOP MICHIGAN?

rience in market and below-market capital investing makes it a

valued partner to developers who not only need funding but also

require technical assistance and enhanced technical capacity.

JaMes Logue is the ceo oF DeveLoP Michigan anD is resPonsibLe For caPi-

taL DeveLoPMent anD growth at DMi. Logue has been the chieF oPerat-

ing oFFicer For gLcF since he JoineD the coMPany, with 38 years oF

creDentiaLs in aFForDabLe housing, senior Debt Finance anD the caPi-

taL Markets. Logue’s track recorD incLuDes Managing organizations

such as the Michigan state housing DeveLoPMent authority anD the

new Jersey housing anD Mortgage Finance agency; PresiDent at the

nationaL counciL oF state housing agencies (ncsha); anD, DePuty as-

sistant secretary For MuLtiFaMiLy housing PrograMs at the uniteD states

DePartMent oF housing anD urban DeveLoPMent. he is aLso a MeMber oF

the boarD oF the FeDeraL hoMe Loan bank oF inDianaPoLis.


Develop Michigan, Inc. (DMI) is the newest of a long line of statewide Development Finance Organizations (DFOs) that are powerful multi-purpose state development banks. These DFOs mobilize long-term capital for mid-size ($10 - $100 million) to large-scale ($100 million and above), high-impact development projects that require a longer risk-return horizon than either the private sector or the public sector can easily undertake by them-selves. Through their access to long-term debt, equity and other alternative financial resources, DFOs bring global capital to proj-ects that few others are equipped and prepared to address. Like their counterpart development banks around the world, they are aggressive, proactive builders that do not act simply as a pass-through for capital. Rather, if properly designed and operated, DFOs play an integral role in the long term redevelopment of the neighborhoods and regions in which they invest. These DFOs have helped to rebuild whole neighborhoods and towns, rede-velop closed military bases or abandoned industrial sites, create world class research centers for universities, and build new indus-trial and technology parks. They regularly undertake large-scale, long-term in-fill, affordable and mixed-income housing as well as mixed-use retail and commercial development, often in partner-ship with other public and private sources of capital. In the best

cases, they are the drivers of development and good reporters of their stewardship in terms of the financial, economic, social and environmental impacts of their investments to the citizens they serve.

THREE EFFECTIVE PUBLIC SECTOR DFOSOne of the two partners in Develop Michigan, the Development Finance Group (DFG), has built or rebuilt 20 DFOs around the country. These DFOs have invested more than $75 billion in their states, giving DFG many models to draw upon in building De-velop Michigan. The three DFO models below provide just a few examples of the capacity of DFOs to be change agents and the impact they can make within their state. As public sector DFOs, each of these three models has limits imposed by their opera-tion within state government that Develop Michigan is designed to correct. Develop Michigan is the first DFO in the country to have all the public power and accountability of these public sector development banks while at the same time having the lean agility and speed of the private sector.

MassDevelopment: One of the most impressive long-standing models is the 37-year- old $35 billion MassDevelopment that to-

What is a Development Finance organization?

By BeLDen huLL DanieLS, DeveLop Michigan ManageMent group & econoMic innovation internationaL anD Steve KLein, DeveLop Michigan ManageMent group & FirSt inFraStructure

GlobAl cApitAl

MassDevelopMent: transforMing fort Devens

Massachusetts faced a string of military base closures in the 70’s. The last of these closures was Fort Devens. Today, Devens is a 4,400-acre “new town”. For more than two decades, Mass Development has financed the transformation of this military site. Today it has a thriving commercial center and residential community which are magnets for 63 rapidly expanding technology and biotech companies near Boston.


day invests more than $1 billion a year in Massachusetts to rebuild inner city neigh-borhoods, transform abandoned indus-trial and military sites and jump start the creation of new towns. MassDevelopment is a full service development bank provid-ing taxable and tax-exempt bond financ-ing, real estate and equipment financing, subordinated and senior loans and loan guarantees to help for-profit and not-for-profit organizations grow their enterprises at any stage of their development – from predevelopment to permanent long term financing. During 2013 alone, MassDevel-opment financed or managed 350 projects generating investment of more than $2.4 billion in the Massachusetts economy. These projects are will create more than 7,000 new jobs and build or rehabilitate 800 residential units. These investments result in thriving multipurpose retail, commercial, industri-al, mixed income and mixed-use housing developments with an impressive record generating jobs, wealth for lower-income residents and increased tax revenue for cities and towns. In addition to convert-ing eight shut-down military bases such as Fort Devens, MassDevelopment also works closely with the great research uni-versities of Boston and Cambridge to help them build long term facilities that they cannot build themselves. One of the most dynamic is the $350 million Harvard-Mass General Hospital Research Center in the former Charlestown Naval Yard, itself a major multi-purpose community redevel-opment since the base was closed in 1974. This great research center was financed by MassDevelopment as a “turnkey” project for Harvard and Mass General, using an-nual National Institute of Health grants to finance a 30 year mortgage, terms no pri-vate commercial bank is in any position to provide.

The Arkansas Development Finance Authority (ADFA): ADFA was created as the keystone of a major economic devel-opment effort spearheaded by Economic

Innovation of DFG for then Governor Bill Clinton. At the time, Arkansas’s growth rate was far behind that of its neighbor-ing states. ADFA today is by far Arkansas’s largest source of low-cost, long-term capi-tal to build affordable housing, finance small enterprise and agriculture, health care and education facilities, and fund the direct needs of government from the efficient purchase of police cars to facili-ties construction and management. ADFA provides capital access for new, young and small enterprises at the very earliest stage of angel and seed capital, through venture capital, private equity, near equity and growth capital. ADFA also provides capital for first time home ownership and multi-unit housing, especially in low- and moderate-income neighborhoods, and it is the go-to source for all forms of in-termediate and long term debt at reason-


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nor achieved its full potential. It did, how-ever, pave the way for the first true DFO supported by government, but indepen-dent of state government – Develop Mich-igan – now the new national standard for DFOs and state development banks in the

United States.

beLDen huLL DanieLs is a PrinciPaL oF DeveLoP-

Ment Michigan ManageMent grouP. he is the

FounDer anD ceo oF econoMic innovation

internationaL, inc. (www.econoMic-inno-

vation.coM). steve kLein is aLso a PrinciPaL oF

DeveLoPMent Michigan ManageMent grouP.

he is the FounDer anD ceo oF First inFrastruc-

ture. both are Partners with Deborah La Fran-

chi oF sDs in the DeveLoPMent Finance grouP

(DFg) which has PLayeD a MaJor roLe in heLPing

to buiLD 20 state DFos investing More than

$75 biLLion oF caPitaL in their resPective states

over the Last 39 years

able costs for all development needs in the state. Like its counterparts across the country, ADFA sees a capital need and fills it in close working relationship with Ar-kansas’s banks and investors.

The Alaska Industrial Development and Export Authority (AIDEA): At the other end of the continent is the Alaska Industrial Development and Export Au-thority. AIDEA uses its broad powers in a variety of ways: to diversify the Alaska economy away from oil dependence, to utilize the state’s emerging natural gas re-source as a vehicle for substantially cut-ting home heating costs, and to expand its fishing, agriculture, tourism and min-ing industries in environmentally sound ways. For example, AIDEA is now design-ing a new $250-$300 million natural gas facility to liquefy natural gas on the Arctic

North Slope, truck it 350 miles to Fair-banks on Alaska’s famous Haul Road, and then re-gasify it for piping to Fairbanks home owners and businesses at 50% of current fuel costs. Just as this reduces en-ergy costs at home, a related development now under consideration would extract and export Alaska natural gas to help meet the energy needs of post-Fukushima Ja-pan while importing capital, jobs, income and wealth to Alaska. Finally, when 20 years ago Economic Innovation helped Florida move its Com-merce Department out of state govern-ment into a public-private partnership, Enterprise Florida, it also sought to create the first DFO that was supported by gov-ernment but not within or controlled by government, the Florida Development Fi-nance Corporation. This new model never used all the powers it was originally given

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GlobAl cApitAl

By greg nichoLaSDeveLop Michigan ManageMent group anDgreat LaKeS capitaL FunD


wHy THE DEVElOP MICHIGAN TEAM ISBUllISH ON MICHIGAN

While a Development Finance Organization can be a very pow-erful tool for development, by itself it would not be substantial enough to jumpstart nor transform Michigan’s economy which has been challenged for more than a decade. A Development Finance Organization (DFO) such as Develop Michigan is most effective when a state has already put in place financial and structural reforms that begin to move the economy in the right direction. Fortunately, Michigan is at this juncture – with numerous reforms in place and a very proactive government response to making the state more business friendly. The reforms and data noted below create exactly the type of atmosphere where DMI can play a niche role in adding to the improving investment and business activity within the state. Develop Michigan believes that the state is already emerging from the worst of its economic troubles, and Develop Michigan will play a role in accelerating this resurgence. While Michigan certainly continues to confront significant challenges, DMI believes that the following trends provide a the right economic atmosphere for DMI to enhance the state’s economy: • New investment capital is beginning to flow to companies and

real estate across the state; • A number of Michigan’s regional economies are showing signs

of expansion; • A multitude of efforts are bringing the state government’s

finances in line, as well as making Michigan more business friendly; and

• Efforts aimed at diversifying Michigan’s economy are taking root.

DMI intends to further enhance Michigan’s economic recov-ery, particularly spurring economic development in areas with the greatest needs. According to Moving Michigan Forward — Con-tinuing Our Comeback, Executive Budget Recommendation for Fiscal Years 2014 and 2015, there are a wide variety of indicators showing the improvement in the state’s economic growth and fis-cal health: • Michigan’s economy is at a 10-year high. Michigan’s income

growth is the ninth best in the nation (including significant gains in per capita personal income in the state’s metropoli-tan areas); the state’s GDP growth is sixth best in the United States; Michigan motor vehicle production is improving (with 2012 production up above two million for the first time since 2007); and home sales have increased a full 10%.

• Michigan Governor Rick Snyder’s business-minded approach to tackling the state’s financial problems has improved the state’s economic outlook. As recognized by Bloomberg in its State of the States report, Michigan is ranked second in the na-tion in economic health, making Michigan a model for imple-menting financial stability reforms.

• From February 2010 through February 2014, Michigan’s overall unemployment rate dropped from 13.6% to 7.7%, a 43.4% decrease. For the same time period, the U.S. overall unemployment rate dropped from 9.9% to 6.7% only a 31.6% decrease.1

• According to Jones Lang LaSalle, the vacancy rate for Detroit’s prime office space (buildings over 100,000 square feet or renovated since 1985) fell from 19.2 percent in 2012 to 11.5 percent last year.2

• From February 2010 through February 2014, private sector employment grew in Michigan by 10.7%, compared to 8.1% for the US as a whole.3

• Michigan ranks 14th nationally in the 2014 State Business Tax Climate Index published by the Tax Foundation. The same report ranks Michigan’s Corporate Tax 9th nationally.

• Area Development Magazine’s Top States for Doing Business 2013: Site Consultant Survey Results ranks Michigan 3rd (tied with California) nationally in the availability of skilled labor. The same survey shows that Michigan ranks 4th (tied with South Carolina) for renewed consideration – post recession.4

• Site Selection Magazine ranks Michigan 5th nationally in their recent Governor’s Cup rankings. The Governor’s Cup ranks states based on the number of qualifying projects that have

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a minimum capital commercial invest-ment of $1 million, 20,000 square feet or more of new construction or result in the creation of 50 or more new jobs. According to Site Selection Magazine, Michigan had 312 projects meeting at least one of the qualifying criteria.5

• In addition to the state rankings, Site Selection Magazine rated the top na-tional metropolitan areas with popu-lations over 1,000,000. The Detroit-Warren-Dearborn metropolitan area ranks 5th nationally with 129 qualify-ing projects.

• On a year-over-year basis, Michigan’s annual Per Capita Personal Income growth rate since 2008 has surpassed or equaled the U.S. level. Michigan’s overall Per Capita Personal Income growth from 2008 – 2013 is 10.2% vs. 8.8% for the U.S.

• Michigan is in the top 10 states for high-tech employment growth, ac-cording to the Bay Area Economic In-stitute6

• Lansing-East Lansing and Warren-Troy-Farmington Hills rank in the top 25 metros for high-tech employment growth7

For all these reasons, DMMG believes the time is the right time for a Develop-ment Finance Organization such as De-velop Michigan to help elevate Michigan’s

economic renewal to the next level.

1 Bureau of Labor Statistics2 Crain’s Detroit Business, March 24, 20143 Bureau of Labor Statistics.4 Area Development Magazine’s Top States for Do-

ing Business 2013: Site Consultant Survey Re-sults (Special Presentation (Q3/2013)

5 Site Selection Magazine – March 20146 Technology Works: High-Tech Employment and

Wages in the United States, Bay Area Economic Institute

7 ibid

to Learn More about DMi or to Discuss a sPe-

ciFic ProJect, PLease contact greg nichoLas at

(517) 489-4455.


t he impetus for creating Develop Michi-gan (“DMI”) came from several sources and one of those was State Government. Between 2008 and 2011, Michigan was

in the early stages of recovery from both a 10 year state-specific depression and a deep national reces-sion. It saw two major employers and corporate

citizens endure massive but much needed financial restructuring. Prior to 2008, state government had largely sat out when it came to commercial banking in general and with respect to “access to capital” is-sues more specifically. The state had been previously engaged on a massive $500 million dollar “market making” ex-ercise in the Venture Capital community and en-trepreneurial ecosystem. Those efforts have been very successful and have pushed Michigan from the bottom of the state rankings to 15th a few years ago. This experience taught the state that there was room in the capital markets between federal tools such as the SBA and the private sector – gaps that were still very significant. It also learned that when it comes to public dollars participating in more tra-ditional commercial capital markets, a little money

“THIS IS A GREAT ExAMPLE OF THE WAY GOVERNMENT CAN FACILITATE COOPERATION BETWEEN ITSELF, THE PRIVATE SECTOR AND THE NON-PROFIT SECTOR TO ACCOMPLISH PROJECTS WHERE INTERESTS ARE ALIGNED. THE WORK THIS ORGANIZATION WILL DO WILL MAKE A SIGNIFICANT CONTRIBUTION TO IMPROVE THE ATTRACTIVENESS AND VITALITY OF MANY COMMUNITIES IN MICHIGAN FOR YEARS TO COME.” — GOVERNOR RICK SNYDER

roAd to recoVerY

structured well can create the right conditions to generate/motivate significant private investment. Interestingly, this is often seen as the theoretical un-derpinning of the entire economic and community development public policy mandate: trading a little bit of public money for a lot of something else. In response to stresses in the commercial credit

markets and the necessary but painful financial diet that came with the state tax restructuring, the State pursued three major interventions in more tra-ditional commercial markets. The first was direct credit enhancement (collateral support and loan participation) for which Michigan is known as a national leader and whose program, the Michigan Supplier Diversification Fund, was the national model for a $1.5B federal program called the State Small Business Credit Initiative. Michigan’s invest-ment in these programs now stands north of $100 million dollars. The second intervention was a Small Business Mezzanine Fund designed by looking at national best practice type organizations such as Massachu-setts Capital Resource Company. The fund, the first of many tools, involves a subordinated state invest-

WHY A deVelopment finAnce orGAniZAtion in micHiGAn And

wHy NOw?


BY ERIC HANNA, MICHIGAN ECONOMIC DEvELOPMENT CORPORATION

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Brownfield consulting services to our clients for over 20 years.

2014_Avenues to Affordability_5x5.indd 1 1/21/2014 9:06:34 AM

ment and the market rate investment of more than 14 banks into a fund to deliver highly cost effective growth capital, subor-dinated to the senior lender, in amounts between $500k and $3.0M per company, which is well below the loan size of any privately managed mezzanine fund. By solving for the origination and diligence costs, largely shouldered by the state’s returns, the fund uses a highly aligned group of interests between its investors and their customers to close small loans that help companies with 50 people be-come companies with 100 or 150 people. The third intervention the State made was funding to launch DMI. With the re-write of the State tax code and the aboli-tion of the State Historic Tax Credit and the Brownfield Tax Credit, it was clear that the old way of doing adaptive reuse/rede-velopment projects would not work. A re-view of a number of the deals in the State’s portfolio revealed and validated some-thing officials had known for some time – many of the deals had multiple publicly funded tools, mostly tax credits, which al-lowed them to cash flow extremely well. In a sense, the ability of a developer to use state and federal tax credits together as they existed under the old state tax code allowed a deal to be funded virtually 100% by subsidy. It was also clear that the quality of trans-actions in larger Michigan markets was improving quickly. In Detroit, major busi-nesses such as Quicken Loans, Blue Cross Blue Shield and others had made very sig-nificant investments. Rents had increased from $1.20 per square foot to $1.50 in just a year between 2011 and 2012. Now rents in these markets can be reasonably under-written at $1.65 and higher. With rents like these and strong demand returning to the market on the back of the automotive recovery, development deals could now support some senior debt comfortably – so where were the lenders? The national recession was a bank-ing driven recession, a classic housing bubble. The one asset class that Michigan

Much will be expected of DMI going forward. As the market changes and the economics of potential DMI deals change, the organization will need to change. It is well positioned to do so, with the financial and development knowledge of the De-velopment Michigan Management Group, which has been investing in Michigan for decades. Most importantly, it is free to op-erate by lending and investing in what will undoubtedly be the most crucial transac-tions in Michigan, advancing the Vital Communities strategic objective of the

state and the MEDC.

eric hanna is Director oF caPitaL Debt Pro-

graMs at the Michigan econoMic DeveLoP-

Ment corPoration, a state agency.


needed then and needs desperately now is commercial investment real estate. Un-fortunately, most banks’ regulators and investors have no tolerance for additional lending in that asset class. In fact, even to-day, many banks are downsizing that asset class, without regard to the quality of the deal. Where would Michigan get its much needed senior debt? – Develop Michigan. The state has supported DMI as we believe it will make a difference. For the State, DMI serves as a force multiplier, lending where the State would otherwise need to lend in order to accomplish its goals of improving density and stabilizing neighborhoods in underserved but emerg-ing communities. This allows state offi-cials to stretch scarce resources and stay focused on the cost gaps and depressed rents which only government and philan-thropy can address.


lendinG

The Commercial Real Estate Finance (“CREF”) industry nationwide has made a slow but steady resurgence in returning liquidity to the market over the past two years. The industry has year-over-year since 2012 increased the total dollar amount of commercial real estate loans made, and 2014 is expected to continue this trend. Life companies, conduit lend-ers, portfolio lenders, and the shadow banking sector con-tinue to be bullish on com-mercial real estate. Indeed, in a sure sign of the steadily increasing appetite for com-mercial real estate lending opportunities, there nearly 30 conduit lenders active in origi-nating CMBS loans at the end of 20131, and that number appears to continue to increase. As this market appetite continues to increase, the i n -dustry has seen a steady de t e -rioration of credit quality.2 I n t e r e s t -only deals and pro forma underwriting, all too common pre-2008, were shunned as the in-dustry started to emerge from the financial crisis in 2010, but are now creeping back into the landscape. Overall, lenders’ tolerance for leverage and structure are steadily increasing as they jockey for deals. However, this rebound has not been geo-

graphically uniform. Top markets like New York City, Boston, Chicago, Los Angeles and San Francisco continue as

principal drivers of deal flow for lenders, particu-larly for large loans. Outside of these gateway

markets, Texas (Houston, Dallas/Fort Worth, Austin), Seattle, Nashville

and Charlotte, driven by energy, tech and healthcare, continue to increase in popularity. Michigan, however, has not been as fortunate as the broad-

er CREF industry continues to rebound. In a list of major metro markets from the Urban Land Institute,

Detroit was ranked at the bottom of the list.3 Despite

all of the positive economic trends and investment opportu-

nities in Michigan (See pg. x for a list of such trends), Michigan con-

tinues to be held back by the too-long lingering rearview memory of

the auto industry crisis of 2008, and even more so by the current spec-

ter of the City of Detroit’s bank-ruptcy. This is exacerbated by

the fact that many of the major players in the CREF industry do not have a local presence,

and therefore derive much of the mar-ket knowledge from what’s trending in the news. All of this has created

By eric BartLeyMiLLer canFieLD

f i l l inG tHe

CREDIT VOID


a frustrating credit void for much needed development across Michigan that is nec-essary to keep the positive economic prog-ress on an upward trajectory. Develop Michigan is vital to filling this credit void. Its programs are focused exclusively on projects in Michigan, and specifically on projects that have strong economic and community impacts. With this as a primary objective, Develop Mich-igan continues to maintain exacting credit standards to ensure viability of its finan-cial platform . We have had the good fortune to work with the Develop Michigan team. The Develop Michigan team has established an application, underwriting and clos-ing process that is focused on ensuring a consistent flow of worthy opportunities, sound and prompt credit judgments and a smooth closing process. Indeed, this pro-cess is modeled on national CREF market standards implemented by a closing team, including ours, with a long and deep ex-perience in the external credit markets, where fundamental real estate and under-writing skills, clearly defined and commu-nicated parameters and certainty of execu-tion are simply vital. In a short time frame, Develop Michi-gan has already started making an impact on the Michigan CREF landscape, and we believe they will continue to do so in the

future.

1 See, Commercial Mortgage Alert, Top Loan Contributors to US CMBS Deals, December 31, 2013, available at www.cmalert.com/ranking.php?rid=438.

2 See, Edward L. Shugrue III, CMBS – Party Like its 2007, CRE FINANCE WORLD, Winter 2013; Standard & Poors, Industry Economic and Rat-ings Outlook: With Issuance Up and Deliquen-cies Down, CMBS Has Positive Momentum Go-ing into 2014, Dec. 9, 2013, available at www.standardandpoors.com/ratings/articles/en/us/?articleType=HTML&assetID=1245361331927; Standard & Poors, U.S. Conduit CMBS Update: Robust Issuance and More Competition Could Mean Higher New Issue Credit Risk, January 10, 2014, available at www.standardandpoors.com/ratings/articles/en/us/?articleType=HTML&assetID=1245362798693.

3 See, PwC and the Urban Land Institute. Emerg-ing Trends in Real Estate® 2014. Washington, D.C.: PwC and the Urban Land Institute, 2013.

eric bartLey is a PrinciPaL at MiLLer canFieLD, a

LeaDing Law FirM heaDquartereD in Detroit

with a gLobaL Presence.

Strength in numbers.

www.doz.net 866.848.5700

3,000 clients | 45 states | 140 employees

thanks to our clients,

doz is celebrating 25 years of service.


inVestments

DMI currently has capital to invest in a range of real estate property types with wide ranging risk profiles and capital needs. DMI seeks to make investments of between $3M and $8M in a variety of de-velopment and/or redevelopment projects in a wide range of property types includ-ing:

OFFICE SPACE OPPORTUNITIES • In-fill Central Business District

(“CBD”) Class A and B office build-ings in areas with moderate near term leasing risk.

• For repositioning, rehabilitation and/or value-add opportunities including well located buildings with high va-cancies.

Specializing in the Management of Affordable Housing

Since1970

33067 Schoolcraft Road, Livonia, Michigan 48150P 734.402.6402 F 734.402.6408

We make a difference.TAMC has been developing affordable apartment communities for more than 40 years. We bring the management skills used to manage our own investments to others, offering quality management services in fee management. We have the proven experience and ability to improve property performance while enhancing the quality of life for your residents.

Let us make a difference for you, contact us today.www.associated-management.com

• Recapitalizations of existing own-ers to reposition or back fill existing buildings.

• Buildings located in areas experienc-ing revitalization and targeted pub-lic-sector investing efforts

MULTI-FAMILY HOUSINGOPPORTUNITIES

• Repositioning of older properties. • Multifamily in urban core areas expe-

riencing targeted investment focus by public sector and private investors

INDUSTRIAL SPACE OPPORTUNITIES • In-fill light industrial and warehouse

properties with current or near term vacancy.

• In-fill light industrial or flex-use or research and development.

• Light industrial business parks. • Repositioning of older industrial sites

for modern uses.

MIxED-USE OPPORTUNITY• Repositioning of existing CBD prop-

erties into mixed-use office/retail or retail/residential properties.

• In-fill mixed-use or hybrid multi-family residential/office or multi-family residential/retail properties.

RETAIL SPACE OPPORTUNITIES• Redevelopment of underperforming

retail centers.

• In-fill CBD retail properties.

Dave Levinson is the chieF unDerwriter oF De-

veLoP Michigan. to inquire about how DMi

can heLP your ProJect PLease contact wanye

bota, LeaD Loan originator at 313.544.4001

(oFFice) or 248.821.0564 (ceLL).

By Dave LevinSonDeveLop Michigan ManageMent group & great LaKeS capitaL FunD

CAPITAl PROGRAMS AREAVAIlABlE FOR yOUR PROJECT


Downtown Detroit’s rebound has been marked with succes-sive large-scale project announcements in recent years despite a national perception from the banking and investment commu-nity of extremely high risk. Amid the country’s largest municipal bankruptcy filing, we continue to see projects such as the $50M Broderick Tower redevelopment (mixed use with both market-rate housing and retail), the $82M David Whitney redevelopment (mixed use including a boutique hotel, market-rate housing and retail), Olympia Development’s $650M hockey arena district, and Bedrock’s (Dan Gilbert) over $1.2B investment in over 40 buildings in the downtown. Despite this activity, conventional construction lending has been quite challenging for a project that relies on standard underwriting guidelines. After careful study of the financial environment, Capitol Park Partnership, in conjunction with the Michigan Economic Devel-opment Corporation (MEDC), identified the greatest obstacle in securing construction and bridge financing as being a forward commitment for permanent debt. Adapting MEDC’s Community Revitalization Program (CRP) to provide such a commitment in-volved the creative thinking of Develop Michigan to structure a participation with MEDC to act as the permanent lender utilizing DMI’s underwriting team. A highly competitive RFP process resulted in the award of three historic structures surrounding downtown De-troit’s Capitol Park to the Capitol Park Partnership (CPP) which comprises partners Richard Karp, Kevin Prater, and Richard Hosey, along with a host of the nation’s best Historic and New Mar-kets tax credit professionals. The De-troit Savings Bank redevelopment was the first of the three to close financing

dmi in Action

tHe cApitol pArk proJect By richarD Karp, Karp + aSSociateS

deVelopment


deVelopment

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102 South Main Street

Mt. Pleasant, Michigan 48858

Phone: (989) 772-3261

www.kmgprestige.com

For more details on how KMG Prestige can benefit your community contact

Karen Mead

Vice President of Business & Development (989) 400‐4828

[email protected]

in March of this year. Prominently situated on the northeast corner of Griswold and State streets, it was built in 1895 as Detroit’s then tallest sky-scraper by the Detroit Chamber of Com-merce. Fortunately, the structure remained continuously occupied and well main-tained until purchased in 2009 from the United Way by Detroit’s Downtown Devel-opment Authority in conjunction with In-vest Detroit and Wayne County’s Economic Development Growth Engine. CPP’s win-ning proposal included 56 market-rate loft apartments on the upper floors and over 45,000 square feet of office space on the lower of the building’s thirteen floors, pre-leased as the administrative headquarters of the Archdiocese of Detroit.

The capital stack included legacy State of Michigan Historic and Brownfield Tax Credits, Federal Historic Tax Credits, New Markets Tax Credits, and owner equity. Af-ter a $6M Community Revitalization Pro-gram award from the Michigan Strategic Fund/Michigan Economic Development Corporation, DMI commenced with its un-derwriting along with structuring its first participation with MSF as a permanent lender. As the needed permanent loan was $9M, Urban Partnership Bank stepped in with the remaining $3M, adding even more complexity to the participation agreement. As one would expect, a finance trans-action with this level of intricacy was not without its obstacles and delays. The closing would not have happened but for

the confidence in both the project and the marketplace from all parties, and the willingness to continually work through challenges as they arose. Showing great market and project confidence, the devel-oper/sponsor commenced with construc-tion activity a full three months prior to financing close, highlighting residential occupancies exceeding 99% in Detroit’s downtown and the need to continue mar-ket and political momentum.

DMI’S INVOLVEMENTDMI closed its first investment of CRP capital for the Community Revitalization Program on March 13, 2014. This invest-ment represented a forward commitment for long-term permanent debt on the renovation of a historic high-rise build-ing in the CBD of Detroit into a mixed use commercial/residential property contain-ing approximately 50,000 square feet of general office space and 56 market rate apartment units. The terms of the loans can be seen below:First Mortgage Amount ......... $9,000,000CRP/MEDC ........................... $6,000,000Urban Partnership Bank ........ $3,000,000Loan Term ...............................84 monthsAmortization ...............................25 yearsInterest Rate ............................................

CRP/DMI ................ 7.50% per annumUrban Partnership Bank ....... Five Year ........................ LIBOR SWAP + 4.00%

Combined DSC at Stabilization ..... 1.50:1Combined Loan to Value ............. 64.25% DMI ultimately sold 100% of the loan, at par, to two other parties: (i) the MEDC under its Community Revitalization Program; and,

(ii) Urban Partnership Bank of Chicago.

richarD karP has been reDeveLoPing historic

coMMerciaL ProPerties in Michigan anD ohio

since 1991 as a DeveLoPer, DeveLoPMent con-

suLtant, anD generaL contractor.

as a DeveLoPer unDertaking chaLLenging ProJects, i cansee how DeveLoP Michigan is going to be a great FinanciaL

anD technicaL asset to DeveLoPers across the state.

COMMUNITy REVITAlIZATION PROGRAM


.{Questions answered.}

You will benefit from the skills we have refined

helping clients like you with the countless business

and financial choices faced in putting together

a deal. Our experienced consultants bring an

in-depth understanding of community development

and housing projects and are qualified to deliver

knowledge, value, and guidance to help you

see your project to completion, resulting in

a higher return on experience.

Contact: Robert Edwards [email protected]

hcd.plantemoran.com

The Michigan Community Revitaliza-

tion Program (CRP) is an incentive pro-

gram available from the Michigan Strate-

gic Fund (MSF), in cooperation with the

Michigan Economic Development Cor-

poration (MEDC). The CRP has been de-

signed to promote community revitaliza-

tion and job creation activities throughout

Michigan. The program is designed to

provide grants, loans or other economic

assistance for eligible investment projects

in Michigan. Develop Michigan works

closely with the state in certain selected

CRP transactions to handle the underwrit-

ing, due diligence, closing asset manage-

ment and loan servicing.

Eligible investment activities include:

• Any alteration, construction, im-

provement, demolition or rehabili-

tation of buildings;

• Site improvements;

• The addition of machinery, equip-

ment or fixtures; and

• Architectural, engineering, survey-

ing and similar professional fees for

a project, but not certain soft costs

of the eligible investment.

INVESTMENT GUIDELINESThe MSF’s support will not exceed 25%

of the total eligible investment for a single

project, and in no event exceed a total of

$10,000,000 for loan projects, $1,000,000

for grant projects or $10,000,000 for a

combination of support. Any grant or

loan under the program will be perfor-

mance based. Grants and loans will in-

clude flexible terms and conditions and

may be assignable upon approval of the

MSF. Loan terms and conditions may be

flexible and patient in order to accommo-

communitY

date the financial conditions of the emerg-

ing markets in which projects of interest

are located. This year, the MSF anticipates

it will commit approximately $50 mil-

lion to transactions in the CRP program.

Commitments are balanced by the MSF

between business and community devel-

opment according to which transactions

THE PROGRAM IS DESIGNED TO PROVIDE GRANTS, LOANS OR OTHER ECONOMIC

ASSISTANCE FOR ELIGIBLE INVESTMENT PROJECTS IN MICHIGAN.

provide the best policy outcomes for the

citizens of the State of Michigan.

the crP PrograM is aDMinistereD by the MeDc’s

coMMunity assistance teaM. For More inFor-

Mation, PLease contact the coMMunity assis-

tance teaM at (517) 373-9808.


leAdersHip

The eight seats on the not-for-profit DMI Board include two banks that have been active in Michigan for decades. We asked them why they have become in-volved with Develop Michigan: “Fifth Third has a rich 156-year legacy of economic development in the com-munities it serves. Being involved in Develop Michigan is a chance for us to help bring our finance expertise to a very innovative endeavor that hopefully plays a role in transitioning Michigan’s econo-my for the future. Fifth Third has been involved with GLCF since its inception twenty years ago, and participation on the DMI Board of Directors was a natural extension of that involvement. ” – Dennis Roudi, Fifth Third Mr. Roudi is Senior Vice President and Commercial Real Estate Sales Manager for the State of Michigan at Fifth Third Bank. He has 30 years of banking experi-ence and has lived in Michigan his entire

A wORD FROM THE DMI BOARDlife. In addition to his banking responsi-bilities, Dennis has served in leadership positions on many different non-profit Boards including the Economic Develop-ment Foundation and The Ronald Mc-Donald House of Western Michigan. Fifth Third is very active in Michigan. Over the last year alone the bank has invested nearly $39.5 million in affordable hous-ing projects, providing 25,000 plus hours for volunteering at 500 non-profits, fa-cilitating financial education seminars to nearly 8,800 K – 12 graders in nearly 100 schools and educated over 14,500 adults; Fifth Third Bank truly believes it is impor-tant to play a role within the communities it serves. “PNC’s involvement in Develop Michi-gan is a result of being so vested in the economic development of the state. The state has been hit hard by the travails of the auto industry and the downturn in the economy resulting from the crisis.

But at its core, we are very aware of the high degree of skill of the workforce, the very strong work ethic within the state, and the significant opportunities for the future. We are true believers in Develop Michigan, and PNC is proud to be part of something that is so proactive in its mis-sion to create positive economic impacts.” – Richard Landgraff Mr. Landgraff is Senior Vice Presi-dent at PNC Real Estate. He has 26 years of banking experience and has lived in Michigan his entire life. PNC Grow Up Great, a $350 million, multi-year, bilin-gual initiative designed to help prepare children from birth to age 5 for success in school and life, is one of the nation’s leading corporate early childhood educa-tion programs. To date, the program has served more than two million children. In Southeast Michigan alone, PNC Grow Up Great grants have totaled more than $3.2

million since 2010.

the DMi board of Directors consists of a dedicated group of eight individuals, with extensive real estate investmentexperience, knowledge of the Michigan real estate market and commitment to the ideals of Develop Michigan:

richard Landgraff, Pnc real estateDennis roudi, Fifth third bank

Mark McDaniel, great Lakes capital Fundtom edmiston, great Lakes capital Fund

ted rozeboom, Loomis, ewert, Parsley, Davis & gotting Law FirmJennifer nelson, Michigan economic Development corporation

eric Larson, Larson realty grouprobert Joseph, talmer bank and trust

DMI BOARD OF DIRECTORS

By DeBBie La FranchiDeveLop Michigan ManageMent group & Strategic DeveLopMent SoLutionS


To manage the not-for-profit Develop Michigan initiative, the Develop Michigan Board of Directors hired the Develop Michigan Management Group (“DMMG”), LLC. The Great Lakes Capital Fund (“GLCF”), located in Michigan, is the lead partner, along with the Development Finance Group, LLC (“DFG”), running the organization. The principals collectively have more than 120 years of direct economic development experience.

GREAT LAKES CAPITAL FUND (GLCF)GLCF serves as the core of DMMG’s operations. GLCF was estab-lished in 1993 in cooperation with the State of Michigan to be an independent investment manager focused on attracting external capital to the state that would support affordable housing. During the past 20 years, GLCF has expanded to an eight-state footprint (Michigan, Indiana, Illinois, Wisconsin, Minnesota, Upstate New York, Mississippi and Delaware), expanding its economic devel-opment activities through various lending and tax credit pro-grams. GLCF, along with its subsidiaries, is well regarded for its broad investment expertise in low-income communities. GLCF manages almost $3 billion of assets and has a 45-member team in Michigan that provides an extensive network of relationships to support the Fund’s investment program.

THE DEVELOPMENT FINANCE GROUP Great Lakes Capital Fund’s partner, DFG, consists of the three firms below: Strategic Development Solutions — SDS specializes structur-ing and providing innovative economic development solutions to low-income communities around the country. Deborah La Fran-chi founded SDS in 2001. Since that time SDS has been involved with structuring and capitalizing, in combination with Economic Innovation, $2 billion of various capital programs such as the De-velop Michigan initiative. SDS’ activities extend across the US and internationally, and include the use of public and private-sector sources. SDS’ core activity with public-sector funding involves its involvement with the New Markets Tax Credit (NMTC) pro-gram which is overseen by the U.S. Department of Treasury. SDS and Economic Innovation jointly manage National New Markets

Fund, LLC (“NNMF”); SDS is the day-to-day operator of this $312 million tax credit fund which invests in low-income communities. NNMF has made three investments in Michigan: the Gateway re-tail center in Detroit anchored by Meijer grocery store; Michigan Renewable Carbon, located in the Upper Peninsula, which con-verts wood bio-waste into a very low-emission activated carbon product that replaces coal as an energy source; and the Taubman Center in Detroit, a mixed-use educational facility. Economic Innovation International — Economic Innova-tion is an international development finance company that has helped build more than $157.2 billion of capital programs similar in nature to the Develop Michigan initiative. Belden H. Daniels founded Economic Innovation in 1970; since its founding, Eco-nomic Innovation has created these impactful capital programs in 43 states and 21 countries across Asia, Europe and Latin America since its founding in 1970 by Belden Daniels. Economic Innova-tion has built these capital programs in every asset category, in-cluding technology commercialization funds; seed capital funds; early and later-stage venture capital funds; mezzanine capital funds; private equity real estate funds; development banks, de-velopment finance authorities and DFOs; as well as public pen-sion funds and sovereign wealth trust funds. Together with its DFG partners, Economic Innovation has helped build 20 DFOs upon which Develop Michigan is modeled. The DFO activities have ranged from those which were entirely within government control, to those that had a quasi-governmental structure, to that of the Develop Michigan initiative which is embedded in the pri-vate-sector and independent of government control. Most of these earlier DFO’s are still highly active or have grown their activities substantially from their initial launch. Economic Innovation is na-tional leader in this area of DFO development. First Infrastructure — First Infrastructure, Inc., led by Steven Klein, is a consulting and advisory firm focused on public and not-for-profit development, with a particular emphasis on energy fi-nance and public and project finance credit evaluation. In addition to DMI and the Fund, First Infrastructure’s current efforts include the development of a state-funded guarantee program for energy development projects in Alaska and financial advice to a state issuer of energy efficiency loans for residential properties in New York. Previously First Infrastructure has provided consulting services to the US Department of Energy, Case Western Reserve University and

a renewable energy development venture in west Texas.

THE MANAGERS OF DEVElOP MICHIGAN

mAnAGement


director

HOW RELEVANT IS DEVELOP MICHIGAN COM-PARED TO THE OTHER, MANY INITIATIVES THE STATE HAS UNDERTAKEN TO IMPROVE THE ECONOMY AND BUSINESS CLIMATE?We view Develop Michigan as a tool in a much larger tool box – both the state and the private sector have been expanding this tool box significantly over the past few years. Develop Michigan, in a vacuum, with-out the substantial efforts currently underway to make the state a more attractive place to do business, would not be as successful. We feel the foundation has been put in place over the past few years so that Develop Michigan can be much more successful, as a capital provider, to increase the eco-nomic development activi-ties throughout the state.

HOW IS DEVELOP MICHIGAN DIFFER-ENT FROM GLCF’S OTHER INVESTMENT ACTIVITIES?They are very differ-ent in some respects and very similar in others. The core difference is that GLCF, which was formed over 20 years ago, initially focused on af-fordable housing equity under the Low Income Housing Tax Credit Pro-gram. In subsequent years, GLCF has de-veloped a broader array of financing through its various lending programs and participation in the New Markets Tax Credit program. Since its formation, GLCF has invested more than $2 billion in low-income housing through the tax credit program (now in an eight state footprint) and almost $3 billion in total through all of its economic development and

financing programs, including commercial real estate. Develop Michigan on the other hand, is focused on providing capital targeting more broad-based economic development in commercial real estate financing, including market rate housing. For ex-ample, we might provide capital for converting

a shut-down factory to a business park. We also have many adaptive reuse projects we are looking

at, taking older buildings, some that have been abandoned for years, and con-

verting them to office, retail and apartments. Our investment

focus at Develop Michigan is broader from a commercial

real estate perspective and is focused solely on Michigan.

HOW ARE DEVELOP MICHI-GAN AND GLCF SIMILAR?The main similar-ity is that they both

focus on economic development and real

estate finance. Addi-tionally, they were both

formed in cooperation with the State of Michigan in

response to a statewide lack of access to capital. They both utilize

the same exacting rigor in underwrit-ing, transaction structuring and asset man-

agement. This core strength of GLCF has been the basis underpinning everything that Develop Michigan is now doing and will do in the future. DMI is built upon this platform – so it is by no means a new start-up venture. Develop Michigan benefits from being built upon a very solid, tested and proven foundation.

Rick Laber is the President of Develop Michigan. He focuses on the strategic priori-ties of DMI, overseeing the origination, underwriting and asset management platform and is a member of the Investment Committee. Laber has been with Great Lakes Cap-ital Fund since 2006 and has over 30 years’ experience in real estate and finance. Prior to GLCF, his roles included serving as Director of Finance, Chief Underwriter and Executive Director with the Michigan State Housing Development Authority and a CFO in the banking industry. Laber was also a CPA with Ernst & Young.


Mt. Pleasant & MidlandMichigan

Phone 989.772.4673 | Fax 989.772.6371 | Email [email protected]

OVER 20 YEARS EXPERIENCEIN ALL PHASES OFAFFORDABLE HOUSING

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We are a family of companies serving the needs of families.

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TTY: 1-800-649-3777

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Medallion Management

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Construction & Renovation for Residential, Commercial, Industrial & Multifamily

HOW IMPORTANT WAS THE STATE OF MICHIGAN’S SUPPORT OF DE-VELOP MICHIGAN IN LAUNCHING THE INITIATIVE?The state has been instrumental in the launch of Develop Michigan. The team we have been working with at the Michi-gan Economic Development Corporation understood immediately, in looking at similar efforts around the country, that the Develop Michigan model could be a key catalyst to bringing capital to Michigan to facilitate the financing of good com-mercial real estate projects. The state was instrumental in helping with the design of Develop Michigan as a public private partnership, leading to an organizational model that is unique in its design. DMI is not part of a state agency – it is run by the private sector – but MEDC has played a key role in the development and launch of

Develop Michigan.


eVents & HAppeninGs

Great Lakes Capital Fund, Cass Corridor Neighborhood Devel-opment Corporation, Ginosko Development Co., and other de-velopment partners recently broke ground on Cass Plaza and the Davenport Building’s along Detroit’s Historic Cass Corridor. The redevelopment of the historic buildings to provide beauti-ful, affordable apartments for 47 Detroit families and will further strengthen the economic comeback that Midtown Detroit is lead-ing within the City. The restoration represents almost $17 million of investment to the Midtown/Cass Corridor neighborhood.

CASS PlAZA GROUNDBREAKING


REDFORD COTTAGES: GROUNDBREAKINGAND GRAND OPENINGThere have recently been some exciting changes taking place at the Redford Cottages in Redford, Michigan. On April 30, 2014 we celebrated the Grand Opening of Phase I of The Cottages at Red-ford, along with the Groundbreaking for Phase II. The Cottages at Redford are located on the campus of The Village of Redford, a continuing care retirement community. Redford Cottages now offers affordable cottage homes for seniors 55+ through Hous-ing Tax Credits which were financed by GLCF and allocated by the Michigan State Housing Development Authority (MSHDA). This campus also offers The Villa apartment options along with assisted living, memory care, long term skilled nursing and rehab services in our Transitional Care Unit.

LENDING NEWS FROM CAPITAL FUND SERVICES:PIEDMONTChicago-based Capital Fund Services (CFS), a related company of Great Lakes Capital Fund, closed on an acquisition loan for the purchase of a 36-unit multi-family housing development in Portland, Indiana for PK Housing, a long-standing client of Great Lakes Capital Fund.

CULVER HILLCFS also closed on an acquisition loan that will be used to finance the purchase of a 44-unit multi-family housing development in North Webster, Indiana. Justus Property Management secured the bridge loan from CFS. The development will be named Culver Hill and is a senior, multi-family affordable housing community.

GLCF WINS BEST NON-PROFIT AWARDGreat Lakes Capital Fund has been named one of the country’s top nonprofit organizations to work for. Often, nonprofit organiza-tions must offer something more than a great mission to attract talented and hard-working employees.

GLCF’s mission is certainly desirable. Not only does the organiza-tion improve the lives of others through community development initiatives, they also strive to provide their employees with a solid foundation through generous benefits and pay, ongoing execu-tive leadership training throughout employment and a culture of giving, support, and engagement. We are honored to be ranked on NonProfit Times Best Nonprofits to Work For List. We look forward to rising in the ranks in the coming years!

EDSON AWARD BESTOWED ON HAMILTON CROSSING PHASE 1 IN YPSILANTI, MICHIGANGLCF is pleased to announce the Af-fordable Housing Tax Credit Coali-tion (AHTCC) has awarded Hamilton Crossing Phase 1 development as a winner of the 2014 Charles L. Edson Tax Credit award. Presented to the most out-standing Low In-come Housing Tax Credit (Housing Credit) properties in seven catego-ries, this national awards program celebrates the best in affordable hous-ing rental hous-ing development. Hamilton Cross-ing was selected as the winner in the HUD Preservation Properties catego-ry. GLCF recently invested in Ham-ilton Crossing Phase I with de-velopment partners Ypsilanti Housing Commission, Chesapeake Community Advisors and Fusco, Shaffer and Pappas.

O’BRIEN EARNS SAFETY AND ENERGY AWARDSGLCF partner, O’Brien Construction, was recently recognized by the Associated General Contractors of America (AGC) with a re-cent National Safety Award (NASA) for Building Division 50,000 + Work Hours Zero Incident Rate. O’Brien Construction also re-ceived a Michigan Outstanding Safety Performance Division 1 Gold Award from AGC Michigan. And, O’Brien earned credentials as an Official Energy Star Partner Builder. GLCF is proud to do business with companies like O’Brien and congratulate them on their recognitions as affordable housing and building industry leaders!


eVents & HAppeninGs

GREAT LAKES CAPITAL FUND PROVIDES $10,000IN COLLEGE SCHOLARSHIPS

Each year, Lansing hosts one of the largest MLK Cel-ebrations in the country. As part of this tribute to equal-ity, leadership, and activism, GLCF awarded three gradu-ating seniors with $10,000, total, for their winning es-says on 2014’s Celebration Theme: Our Lives Begin to

End the Day We Become Silent About Things That Matter.

KARL GOTTING, LOOMIS LAW FIRM PARTNER & AFFORD-ABLE HOUSING ADVOCATE, ANNOUNCES RETIREMENT

Longtime friend of the Afford-able Housing industry, Karl Gotting, of Loomis, Ewert, Parsley, Davis & Gotting P.C., has announced his retirement after nearly five decades of ser-vice. Among his

many distinguished awards is the Terrence R. Duvernay award, which he received in 2011, and is recognized as a pinnacle for any career in the Affordable Housing industry. Mr. Gotting was also named Best Lawyers‘ 2014 Lansing Administrative/Regula-tory Law Lawyer of the Year.

GOVERNOR SNYDER HIGHLIGHTS SILVER STARIN STATE OF THE STATE SPEECH

Governor Rick Snyder recognized Silver Star Phase I & II and its staff from Medallion Management, Da-vid Phillips and Michael Carter, in

his State of the State address earlier this year. The tribute to Silver Star, a development located on the VA Medical Campus in Battle Creek serving 175 formerly homeless Veterans, can be viewed on Great Lakes Capital Fund’s YouTube Channel: GLCapFund.

HACIENDAS APARTMENT HOMESGreat Lakes Capital Fund (GLCF) recently invested $4.4 million to reha-bilitate fifteen apartment buildings, providing 200 affordable, quality apart-ment homes for India-napolis families. Since the buildings were damaged by a tornado in 2008 they have been inhabitable and former residents of the apartment buildings

have been permanently displaced. Haciendas Apartments is being co-developed by Urban Offer-ings, Inc. and Meridian Group Ltd. Meridian Group will manage the property once complete. S & B Construction Group, LLC is the general contractor; R & B Architects is the project architect; and Terry Keusch, Pioneer Development Services, Inc. serves as project consultant.

GREAT LAKES CAPITAL FUND PROUDLY SUPPORTS THE CHILDREN’S TRUST FUND

The Michigan Children’s Trust Fund is the only non-profit in the State to pro-tect children from abuse and neglect. At $50,000, GLCF proudly remains the Pam Posthumus Signature Auction Event’s top spon-sor in 2014 for the eighth

year in a row. To learn more about the annual event please visit: www.michigan.gov/ctf or contact GLCF. In related news, Mark McDaniel, GLCF President & CEO, was reappointed to the Child Abuse and Neglect Prevention Board for the State of Michigan by Governor Snyder. He has served on the board since 2011.

OCONOMOWOC SCHOOL APARTMENT HOMES, $11.1 MILLION HISTORICAL REHABILITATION, HOLDS GRAND OPENING CELEBRATIONIn Oconomowoc, Wisconsin, Keystone Development received $7.8 million of Housing and Historic Tax Credit equity from GLCF to provide 55 apartment quality, affordable homes to fami-lies. Oconomowoc School Apartments is managed by ACC Man-agement, Northcentral Construction serves as the general con-tractor, and Excel Architects led the Historical Rehab.


GLCF PURCHASES TWO CARS FOR VETERANS IN NEED

Through a partnership with one local Veteran, the Buddy to Bud-dy Veteran Peer Mentoring Program, the American Legion and Sawyers Chevrolet Lansing GLCF purchased two vehicles as a start. GLCF hopes to leverage further donations from business and community leaders to help support Veterans and their fami-lies, especially the recently returning Veterans of the Iraq and Af-ghanistan wars. If you are interested in donating to this effort, please contribute to the Fallen and Wounded Soldiers Fund at FWSF.org or send checks to: FWSF (reference GLCF); P.O. Box 33099; Bloomfield Hills, MI 48303. For more information on the Buddy to Buddy Program, contact 1-888-822-8339.

great lakes Capital funD:new Hires anD proMotions

KELLIE GREEN, CAPITAL MANAGEMENT COORDINATORKellie Green joined Great Lakes Capital Fund in January of 2014. Kellie serves as the Capi-tal Management Coordinator, focusing on investor tax credit information, marketing materials and annual reports. She comes to GLCF with over four years of experience in the real estate sector

ASHLEE BARKER, COMMUNITY IMPACT ANALYSTAshlee Barker has accepted a new position in the company as Community Impact Analyst. In her new role, Ashlee helps GLCF quantify and capitalize on the impacts our housing de-velopments are creating within communities. Her former position is now held by Ms. Kellie Green.


eVents & HAppeninGs

MARY MOLNAR, MARKETING AND COMMUNICATIONS ASSISTANT

Mary Molnar started at Great Lakes Capital Fund as an intern in January of 2013, and recently joined the staff permanently as Marketing and Com-munications Assis-

tant. She graduated with her Bachelor of Arts in Studio Art from Adrian College in 2011, where she also studied psychology. Mary is active in her local community and currently volunteers with teens at REACH Studio Art Center, a nonprofit neighbor-hood space for arts education and civic engagement in REO Town, Lansing.

CHRIS GUY, ASSET MANAGERChris Guy, CPA, joined Great Lakes Capital Fund at the beginning of 2014 as an Asset Manager. Chris began his pro-fessional career as an auditor for Deloitte &

Touche, LLC in Dayton. Prior to joining Great Lakes, Chris worked for four years as the Controller of a Lansing based mu-tual insurance company. In addition to his professional experience, Chris currently serves on the board of a local non-profit organization in Lansing and is also a lead-er in a youth program for pre-school age children.

KELLY MARTIN, HUMAN CAPITAL ADMINISTRATOR

Kelly Martin recently joined Great Lakes Capital Fund as Hu-man Capital Admin-istrator. Kelly brings over 20 years of management experi-ence with her and

has been self-employed as a consultant for the past five years. She began her career

in the legal profession and then moved on to manage distribution for a Michigan oil company. Kelly is honored to be part of a team which not only understands the rela-tion between good people and organiza-tional success but values their employee’s contributions and is fully invested in their individual success as well.

WAYNE BOTA, LOAN ORIGINATOR, DEVELOP MICHIGAN

Mr. Bota, as a Loan Originator for Devel-op Michigan (DMI), is responsible for outreach across the State of Michigan to find high-impact, economically feasible

projects that would benefit from senior debt and/or mezzanine capital and that have the potential to generate the targeted returns for DMI. His activities focus on reaching out to real estate developer net-works and forums, the real estate banking community, real estate broker networks and economic development entities (non-profit and public sector) to originate in-vestment opportunities.

MICHAEL KOESTER, FINANCIAL ANALYST, ASSET MANAGEMENT

Michael Koester serves as a Financial Analyst in the Asset Management depart-ment at Great Lakes Capital Fund. Michael started at GLCF in 2013, after previous

work experience in the Finance Depart-ment of The Detroit Symphony Orchestra and various other financial institutions.

MEGAN FULLER, ADMINISTRATIVE COORDINATORMs. Megan Fuller joined GLCF’s Detroit Office full-time after serving assisting GLCF part-time while also serving as Op-erations Manager for Art of Leadership Foundation for over three years.

DON SCHAPPACHER, FINANCIAL ANALYST, ASSET MANAGEMENT

Don Schappacher Jr., has joined Great Lakes Capital Fund as a Financial Analyst for the Asset Manage-ment department. Don is a recent col-lege graduate with a

dual Bachelor of Arts degree in Hospitality Management and Business Management from Northwood University. He has previ-ous experience in the Hospitality Manage-ment Industry holding a variety positions, preparing him for his role here at GLCF.

ANTHONY WINSTON, ExECUTIVE ASSISTANTAnthony Winston joined Great Lakes Capital Fund in April of 2014 as an Exec-utive Assistant. Prior to coming to GLCF, Anthony was employed with the Michigan Department of Transportation (MDOT) for nearly eight years where he served as the Executive Resource Technician to the Chief Operations Officer (COO). He is also a member of the Lansing Martin Lu-ther King, Jr. Holiday Commission and has been instrumental in presenting new ideas, formulation partnerships, and man-aging sponsor relations for the Commis-sion.

KELLY KEENAN, BUSINESS DEVELOP-MENT MANAGERMr. Kelly Keenan joined Great Lakes Capi-tal Fund affiliate, Develop Michigan, Inc. (DMI) as Business Development Manager to help expand access to the equity and loan funding available through DMI. Mr. Keenan’s past work experiences include serving in the Department of Attorney General as an Assistant Attorney General in litigation and finance and development divisions. He was also appointed Deputy Attorney General to advise and represent the Attorney General.

Promises Made, Promises Kept.Syndicators and lenders will attest to our

rock solid reputation.

For more information, contact our administrator at248.833.0550

Associated Management Company ..........................................20

Baker Tilly Virchow Krause, LLP .............................................35

Blystone & Bailey ....................................................................27

Chesapeake Community Advisors, Inc. ...................................19

Clark Hill ................................................................................14

Community Economic Development Association of Michigan .....22

Dauby O’Conner & Zaleski .....................................................19

Fourmidable ..............................................................................2

G. Fisher Construction ............................................................27

Ginosko Development Company ...............................................4

KMG Prestige ..........................................................................22

Loomis, Ewert, Parsley, Davis & Gotting, P.C ...........................31

Love Funding ..........................................................................11

McCartney & Company, P.C ....................................................12

Medallion Management, Inc. ...................................................27

MHT Housing, Inc. .................................................................33

Michigan State Housing Development Authority .....................36

O’Brien Construction Company, Inc. .......................................15

Occupancy Solutions ...............................................................12

Plante Moran ...........................................................................23

PM Environmental...................................................................17

Property Management Association of Michigan .......................34

Rohde Construction ..................................................................9

Vogt Santer Insights .................................................................27

Wolverine Building Group .......................................................14


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