Develop Michigan

A publication of Great Lakes Capital Fund

Volume 21 | Issue 2 | 2014

AN IN-DEPTH LOOK AT MICHIGAN’S NEWEST ECONOMIC DEVELOPMENT PROGRAM

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FEATURES A NEW PARADIGM FOR ECONOMIC DEVELOPMENT......................................... 6 WHAT DOES THE FUTURE HOLD FOR DEVELOP MICHIGAN?........................................... 8 WHAT IS A DEVELOPMENT FINANCE ORGANIZATION?....................................... 10 WHY THE DEVELOP MICHIGAN TEAM IS BULLISH ON MICHIGAN......................................... 13 WHY A DEVELOPMENT FINANCE ORGANIZATION IN MICHIGAN AND WHY NOW?............................... 16 FILLING THE CREDIT VOID........................................... 18

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CAPITAL PROGRAMS ARE AVAILABLE FOR YOUR PROJECT................................................... 20 DMI IN ACTION: THE CAPITOL PARK PROJECT............. 21 COMMUNITY REVITALIZATION PROGRAM................... 23

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A WORD FROM THE DMI BOARD................................ 24 THE MANAGERS OF DEVELOP MICHIGAN.................. 25 AN INTERVIEW WITH DEVELOP MICHIGAN’S PRESIDENT: RICK LABER.......................... 26

DEPARTMENTS CEO’s Message.......................................................... 5 Serving Our Mission EVENTS & HAPPENINGS............................................ 28 advertiser index..................................................... 34

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Ginosko Development Company “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.

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CEO’s MESSAGE GOVERNING BOARD Wendell Johns, Chair Retired Michael J. Taylor, Secretary/Treasurer PNC Bank Catherine A. Cawthon Fifth Third CDC Derrick K. Collins Chicago State University Christine Hobbs (retired) William C. Perkins Wisconsin Partnership for Housing Development, Inc. James W. Stretz George K. Baum & Company Donald F. Tucker Don Tucker Consulting Paul J. Weaver Retired

CORPORATE OFFICERS Mark S. McDaniel, President & CEO Christopher C. Cox, CFO James L. Logue III, COO Jennifer A. Everhart, Executive Vice President Rick Laber, Executive Vice President Kevin Crawley, Executive Vice President This magazine is published quarterly by the Great Lakes Capital Fund (GLCF) to provide readers with information on affordable housing and economic and community development resources. This publication is copyrighted. The reproduction of Avenues to Affordability is prohibited by law. For additional copies, comments, concerns 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 Advertising Mary McDaniel, CMP • Alternative Solutions, LLC 517.333.8217 • mcdaniel64@comcast.net Graphic Design Melissa Travis • Ink Ideas Graphic Design, LLC 989.272.3101 • www.inkideasgraphicdesign.com Lansing Headquarters 1118 S. Washington Avenue Lansing, MI 48910 Phone 517.482.8555 Detroit Office 1906 25th Street Detroit, MI 48216 Phone 313.841.3751 Illinois Office 225 West Washington, Suite 1350 C Chicago, IL 60606 Phone 708.781.9603 Indianapolis Office 320 N. Meridian, Suite 1011 Indianapolis, IN 46204 Phone 317.423.8880 Wisconsin Office 2 E. Mifflin Street, Suite 101 Madison, WI 53703 Phone 608.234.5291 Delaware Office 100 W. 10th Street, Suite 302 Wilmington, DE 19801

SERVING OUR MISSION

BY MARK MCDANIEL, CEO/PRESIDENT GREAT LAKES CAPITAL FUND

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 organizations 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 affordable 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 Michigan 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 living. Thus, we expanded our mission to include economic development.

Our first foray into economic development was New Markets Tax Credits. We received two NMTC awards totaling $74 million which we have invested in nine commercial 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.

5

FEATURE

A New

paradigm for economic development

By Debbie La Franchi, Develop Michigan Management Group & Strategic Development Solutions 6

Develop Michigan is an ambitious effort. It expands on the traditional concept of a Development Finance Organization (DFO) – of which many highly successful 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 development, it adds a unique structural innovation that increases its ability to develop 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 community, economic, social and environGREAT LAKES CAPITAL FUND

“The underlying philosophy of the Develop Michigan founders is to create a dynamic platform that is nimble, responsive and innovative, while focusing on financial discipline.”

– Mark McDaniel, DMI Chairman and GLCF President & CEO

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 Directors; 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 mission independently and proactively.

Develop Michigan promotes economic development in Michigan by investing in impactful real estate projects – particularly those in low-income commuAVENUES TO AFFORDABILITY

nities. Achieving this mission requires organizational flexibility to invest in various property types and a “tool box” with a wide range of products. Flexibility 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 mixeduse developments. Develop Michigan has the flexibility to invest in each of these property types. In addition, individual 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-

tal, while other worthy projects require below-market or subsidized capital. Develop Michigan aims to become a “goto” source for developers with challenging yet high-impact projects, regardless of the financing needs.

In only 24 months of operations (since its first full Board meeting), Develop Michigan has begun working with the state’s Community Revitalization Program (CRP).

Debbie La Franchi is one of the Principals of Develop Michigan Management Group, which runs the day-to-day operations of Develop Michigan (DMI). She is the founder and CEO of Strategic Development Solutions, which develops innovative market-driven approaches to economic development (www.sdsgroup.com).

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ECONOMIC OUTLOOK

WHAT DOES THE FUTURE HOLD FOR

DEVELOP MICHIGAN?

BY JAMES L. LOGUE, III DEVELOP MICHIGAN CEO AND GREAT LAKES CAPITAL FUND COO

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

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 capital development and growth at DMI. Logue has been the Chief Operating Officer for GLCF since he joined the company, with 38 years of credentials in affordable housing, senior debt finance and the capital 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 Assistant 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.

A 501(c)3 Parent Organization

Gap Financing (CRP)

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EXISTING REAL ESTATE CAPITAL

FUTURE DMI INVESTMENT PROGRAM

FUTURE DMI INVESTMENT PROGRAM

GREAT LAKES CAPITAL FUND

GLOBAL CAPITAL

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

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 themselves. Through their access to long-term debt, equity and other alternative financial resources, DFOs bring global capital to projects 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 passthrough 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, redevelop closed military bases or abandoned industrial sites, create world class research centers for universities, and build new industrial 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 partnership with other public and private sources of capital. In the best 10

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 DFOs One 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 Develop 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 operation 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 toGREAT LAKES CAPITAL FUND

day invests more than $1 billion a year in Massachusetts to rebuild inner city neighborhoods, transform abandoned industrial and military sites and jump start the creation of new towns. MassDevelopment is a full service development bank providing taxable and tax-exempt bond financing, real estate and equipment financing, subordinated and senior loans and loan guarantees to help for-profit and not-forprofit organizations grow their enterprises at any stage of their development – from predevelopment to permanent long term financing. During 2013 alone, MassDevelopment 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, industrial, 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 converting eight shut-down military bases such as Fort Devens, MassDevelopment also works closely with the great research universities 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 redevelopment 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 annual National Institute of Health grants to finance a 30 year mortgage, terms no private commercial bank is in any position to provide.

Innovation of DFG for then Governor Bill Clinton. At the time, Arkansas’s growth rate was far behind that of its neighboring states. ADFA today is by far Arkansas’s largest source of low-cost, long-term capital 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 facilities 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 intermediate and long term debt at reason-

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.

The Arkansas Development Finance Authority (ADFA): ADFA was created as the keystone of a major economic development effort spearheaded by Economic AVENUES TO AFFORDABILITY

11

GLOBAL CAPITAL

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 Arkansas’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 Authority. 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 resource as a vehicle for substantially cutting home heating costs, and to expand its fishing, agriculture, tourism and mining industries in environmentally sound ways. For example, AIDEA is now designing a new $250-$300 million natural gas facility to liquefy natural gas on the Arctic

North Slope, truck it 350 miles to Fairbanks 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 energy 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 Japan while importing capital, jobs, income and wealth to Alaska.

Finally, when 20 years ago Economic Innovation helped Florida move its Commerce Department out of state government into a public-private partnership, Enterprise Florida, it also sought to create the first DFO that was supported by government but not within or controlled by government, the Florida Development Finance Corporation. This new model never used all the powers it was originally given

nor achieved its full potential. It did, however, pave the way for the first true DFO supported by government, but independent of state government – Develop Michigan – now the new national standard for DFOs and state development banks in the United States.

Belden Hull Daniels is a principal of Development Michigan Management Group. He is the founder and CEO of Economic Innovation International, Inc. (www.economic-innovation.com). Steve Klein is also a principal of Development Michigan Management Group.

He is the founder and CEO of First Infrastructure. Both are partners with Deborah La Franchi 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

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GREAT LAKES CAPITAL FUND

STATE OF THE STATE

Why the Develop Michigan Team is

Bullish on Michigan

BY GREG NICHOLAS DEVELOP MICHIGAN MANAGEMENT GROUP AND GREAT LAKES CAPITAL FUND

While a Development Finance Organization can be a very powerful 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 recovery, particularly spurring economic development in areas with the greatest needs. According to Moving Michigan Forward — Continuing 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 fiscal health: • Michigan’s economy is at a 10-year high. Michigan’s income AVENUES TO AFFORDABILITY

growth is the ninth best in the nation (including significant gains in per capita personal income in the state’s metropolitan 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 nation in economic health, making Michigan a model for implementing 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 13

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a minimum capital commercial investment 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 national metropolitan areas with populations over 1,000,000. The DetroitWarren-Dearborn metropolitan area ranks 5th nationally with 129 qualifying 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, according to the Bay Area Economic Institute6 • Lansing-East Lansing and WarrenTroy-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 Development Finance Organization such as Develop Michigan to help elevate Michigan’s economic renewal to the next level.

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Bureau of Labor Statistics Crain’s Detroit Business, March 24, 2014 Bureau of Labor Statistics.

Area Development Magazine’s Top States for Doing Business 2013: Site Consultant Survey Results (Special Presentation (Q3/2013) 5 Site Selection Magazine – March 2014 6 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 specific project, please contact Greg Nicholas at (517) 489-4455.

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14

GREAT LAKES CAPITAL FUND

ROAD TO RECOVERY

WHY NOW? WHY A DEVELOPMENT FINANCE ORGANIZATION IN MICHIGAN AND

By Eric Hanna, Michigan Economic Development Corporation

T

he impetus for creating Develop Michigan (“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 recession. It saw two major employers and corporate

structured well can create the right conditions to generate/motivate significant private investment.

Interestingly, this is often seen as the theoretical underpinning 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

“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 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” issues more specifically.

The state had been previously engaged on a massive $500 million dollar “market making” exercise in the Venture Capital community and entrepreneurial 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 traditional commercial capital markets, a little money 16

markets and the necessary but painful financial diet that came with the state tax restructuring, the State pursued three major interventions in more traditional 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 investment 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 Massachusetts Capital Resource Company. The fund, the first of many tools, involves a subordinated state investGREAT LAKES CAPITAL FUND

ment and the market rate investment of more than 14 banks into a fund to deliver highly cost effective growth capital, subordinated 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 become companies with 100 or 150 people.

The third intervention the State made was funding to launch DMI. With the rewrite of the State tax code and the abolition of the State Historic Tax Credit and the Brownfield Tax Credit, it was clear that the old way of doing adaptive reuse/redevelopment projects would not work. A review of a number of the deals in the State’s portfolio revealed and validated something officials had known for some time – many of the deals had multiple publicly funded tools, mostly tax credits, which allowed 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 transactions in larger Michigan markets was improving quickly. In Detroit, major businesses such as Quicken Loans, Blue Cross Blue Shield and others had made very significant 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 underwritten 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 banking driven recession, a classic housing bubble. The one asset class that Michigan AVENUES TO AFFORDABILITY

needed then and needs desperately now is commercial investment real estate. Unfortunately, most banks’ regulators and investors have no tolerance for additional lending in that asset class. In fact, even today, 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 emerging communities. This allows state officials to stretch scarce resources and stay focused on the cost gaps and depressed rents which only government and philanthropy can address.

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 Development Michigan Management Group, which has been investing in Michigan for decades. Most importantly, it is free to operate by lending and investing in what will undoubtedly be the most crucial transactions in Michigan, advancing the Vital Communities strategic objective of the state and the MEDC. Eric Hanna is Director of Capital Debt Programs at the Michigan Economic Development Corporation, a state agency.

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2014_Avenues to Affordability_5x5.indd 1

1/21/2014 9:06:34 AM

17

LENDING

FILLING TH E

CREDIT VOID

BY ERIC BARTLEY MILLER CANFIELD

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-overyear since 2012 increased the total dollar amount of commercial real estate loans made, and 2014 is expected to continue this trend.

Life companies, conduit lenders, portfolio lenders, and the shadow banking sector continue to be bullish on commercial real estate. Indeed, in a sure sign of the steadily increasing appetite for commercial real estate lending opportunities, there nearly 30 conduit lenders active in originating CMBS loans at the end of 20131, and that number appears to continue to increase.

As this market appetite continues to increase, the industry has seen a steady dete2 rioration of credit quality.

Interestonly deals and pro forma underwriting, all too common pre-2008, were shunned as the industry 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 geo18

graphically uniform. Top markets like New York City, Boston, Chicago, Los Angeles and San Francisco continue as principal drivers of deal flow for lenders, particularly 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 broader 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 opportunities in Michigan (See pg. x for a list of such trends), Michigan continues to be held back by the toolong lingering rearview memory of the auto industry crisis of 2008, and even more so by the current specter of the City of Detroit’s bankruptcy. 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 market knowledge from what’s trending in the news. All of this has created GREAT LAKES CAPITAL FUND

a frustrating credit void for much needed development across Michigan that is necessary to keep the positive economic progress 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 Michigan continues to maintain exacting credit standards to ensure viability of its financial platform .

We have had the good fortune to work with the Develop Michigan team. The Develop Michigan team has established an application, underwriting and closing process that is focused on ensuring a consistent flow of worthy opportunities, sound and prompt credit judgments and a smooth closing process. Indeed, this process is modeled on national CREF market standards implemented by a closing team, including ours, with a long and deep experience in the external credit markets, where fundamental real estate and underwriting skills, clearly defined and communicated parameters and certainty of execution are simply vital.

In a short time frame, Develop Michigan 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 Ratings Outlook: With Issuance Up and Deliquencies Down, CMBS Has Positive Momentum Going 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&asset ID=1245362798693.

AVENUES TO AFFORDABILITY

3 See, PwC and the Urban Land Institute. Emerging Trends in Real EstateÂŽ 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.

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INVESTMENTS

CAPITAL PROGRAMS ARE AVAILABLE FOR YOUR PROJECT

BY DAVE LEVINSON DEVELOP MICHIGAN MANAGEMENT GROUP & GREAT LAKES CAPITAL FUND

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 development and/or redevelopment projects in a wide range of property types including: Office Space Opportunities • In-fill Central Business District (“CBD”) Class A and B office buildings in areas with moderate near term leasing risk.

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

• Recapitalizations of existing owners to reposition or back fill existing buildings.

• Buildings located in areas experiencing revitalization and targeted public-sector investing efforts

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

• Light industrial business parks.

• Repositioning of older industrial sites for modern uses.

Multi-Family Housing Opportunities • Repositioning of older properties.

• Multifamily in urban core areas experiencing targeted investment focus by public sector and private investors

Mixed-Use Opportunity • Repositioning of existing CBD properties into mixed-use office/retail or retail/residential properties.

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

Industrial Space Opportunities • In-fill light industrial and warehouse properties with current or near term vacancy.

Retail Space Opportunities • Redevelopment of underperforming retail centers.

• In-fill CBD retail properties.

Dave Levinson is the Chief Underwriter of Develop Michigan. To inquire about how DMI

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20

GREAT LAKES CAPITAL FUND

DEVELOPMENT

DMI In Action

THE CAPITOL PARK PROJECT

By Richard Karp, Karp + Associates

Downtown Detroit’s rebound has been marked with successive large-scale project announcements in recent years despite a national perception from the banking and investment community 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 marketrate 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 Development 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 involved 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 Detroit’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 Markets tax credit professionals. The Detroit Savings Bank redevelopment was the first of the three to close financing AVENUES TO AFFORDABILITY

21

DEVELOPMENT

As a developer undertaking challenging projects, I can see how Develop Michigan is going to be a great financial and technical asset to developers across the state. 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 skyscraper by the Detroit Chamber of Commerce. Fortunately, the structure remained continuously occupied and well maintained until purchased in 2009 from the United Way by Detroit’s Downtown Development Authority in conjunction with Invest Detroit and Wayne County’s Economic Development Growth Engine. CPP’s winning 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, preleased 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. After a $6M Community Revitalization Program award from the Michigan Strategic Fund/Michigan Economic Development Corporation, DMI commenced with its underwriting 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 transaction with this level of intricacy was not without its obstacles and delays. The closing would not have happened but for

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

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 developer/sponsor commenced with construction activity a full three months prior to financing close, highlighting residential occupancies exceeding 99% in Detroit’s downtown and the need to continue market and political momentum.

DMI’s Involvement DMI closed its first investment of CRP capital for the Community Revitalization Program on March 13, 2014. This investment represented a forward commitment for long-term permanent debt on the renovation of a historic high-rise building in the CBD of Detroit into a mixed use commercial/residential property containing 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.......... $9,000,000 CRP/MEDC............................ $6,000,000 Urban Partnership Bank......... $3,000,000 Loan Term................................84 months Amortization................................25 years Interest Rate.............................................

CRP/DMI................. 7.50% per annum Urban Partnership Bank........ Five Year ........................ LIBOR SWAP + 4.00% Combined DSC at Stabilization...... 1.50:1 Combined 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.

Karen Mead Vice President of Business & Development (989) 400‐4828 kmead@kmgprestige.com

Richard Karp has been redeveloping historic commercial properties in Michigan and Ohio since 1991 as a developer, development consultant, and general contractor.

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GREAT LAKES CAPITAL FUND

COMMUNITY

COMMUNITY REVITALIZATION PROGRAM The Michigan Community Revitalization Program (CRP) is an incentive program available from the Michigan Strategic Fund (MSF), in cooperation with the Michigan Economic Development Corporation (MEDC). The CRP has been designed to promote community revitalization 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 underwriting, due diligence, closing asset management and loan servicing.

Eligible investment activities include: • Any alteration, construction, improvement, demolition or rehabilitation of buildings; • Site improvements; • The addition of machinery, equipment or fixtures; and • Architectural, engineering, surveying and similar professional fees for a project, but not certain soft costs of the eligible investment.

The program is designed to provide grants, loans or other economic assistance for eligible investment projects in Michigan. date the financial conditions of the emerging markets in which projects of interest are located. This year, the MSF anticipates it will commit approximately $50 million to transactions in the CRP program.

Commitments are balanced by the MSF between business and community development according to which transactions

.

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 information, please contact the Community Assistance Team at (517) 373-9808.

{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

Investment Guidelines The 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 performance based. Grants and loans will include 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 accommoAVENUES TO AFFORDABILITY

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 517.336.7460 robert.edwards@plantemoran.com hcd.plantemoran.com

23

LEADERSHIP

A WORD FROM THE DMI BOARD 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 involved with Develop Michigan: “Fifth Third has a rich 156-year legacy of economic development in the communities 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 economy 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 experience and has lived in Michigan his entire

life. In addition to his banking responsibilities, Dennis has served in leadership positions on many different non-profit Boards including the Economic Development Foundation and The Ronald McDonald 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 housing projects, providing 25,000 plus hours for volunteering at 500 non-profits, facilitating 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 important to play a role within the communities it serves.

“PNC’s involvement in Develop Michigan 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 mission to create positive economic impacts.”

– Richard Landgraff Mr. Landgraff is Senior Vice President 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, bilingual 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 education 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.

DMI Board of Directors The DMI Board of Directors consists of a dedicated group of eight individuals, with extensive real estate investment experience, knowledge of the Michigan real estate market and commitment to the ideals of Develop Michigan:

Richard Landgraff, PNC Real Estate Dennis Roudi, Fifth Third Bank Mark McDaniel, Great Lakes Capital Fund Tom Edmiston, Great Lakes Capital Fund Ted Rozeboom, Loomis, Ewert, Parsley, Davis & Gotting Law Firm Jennifer Nelson, Michigan Economic Development Corporation Eric Larson, Larson Realty Group Robert Joseph, Talmer Bank and Trust 24

GREAT LAKES CAPITAL FUND

MANAGEMENT

THE MANAGERS OF DEVELOP MICHIGAN

BY DEBBIE LA FRANCHI DEVELOP 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 established 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 development activities through various lending and tax credit programs. 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 structuring and providing innovative economic development solutions to low-income communities around the country. Deborah La Franchi 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 Develop 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) program which is overseen by the U.S. Department of Treasury. SDS and Economic Innovation jointly manage National New Markets AVENUES TO AFFORDABILITY

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 retail center in Detroit anchored by Meijer grocery store; Michigan Renewable Carbon, located in the Upper Peninsula, which converts 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 Innovation 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, Economic 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 Innovation has built these capital programs in every asset category, including technology commercialization funds; seed capital funds; early and later-stage venture capital funds; mezzanine capital funds; private equity real estate funds; development banks, development finance authorities and DFOs; as well as public pension 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 private-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 national 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 notfor-profit development, with a particular emphasis on energy finance 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.

25

DIRECTOR

Rick Laber is the President of Develop Michigan. He focuses on the strategic priorities of DMI, overseeing the origination, underwriting and asset management platform and is a member of the Investment Committee. Laber has been with Great Lakes Capital 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.

How relevant is Develop Michigan compared 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, without 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 economic development activities throughout the state.

How is Develop Michigan different from GLCF’s other investment activities?

They are very different in some respects and very similar in others. The core difference is that GLCF, which was formed over 20 years ago, initially focused on affordable housing equity under the Low Income Housing Tax Credit Program. In subsequent years, GLCF has developed 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 26

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 example, 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 converting 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 Michigan and GLCF similar?

The main similarity is that they both focus on economic development and real estate finance. Additionally, 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 underwriting, transaction structuring and asset management. 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.

GREAT LAKES CAPITAL FUND

OVER 20 YEARS EXPERIENCE IN ALL PHASES OF AFFORDABLE HOUSING How important was the state of Michigan’s support of Develop 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 Michigan 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 commercial 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.

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AVENUES TO AFFORDABILITY

27

EVENTS & HAPPENINGS

CASS PLAZA GROUNDBREAKING Great Lakes Capital Fund, Cass Corridor Neighborhood Development Corporation, Ginosko Development Co., and other development 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 beautiful, affordable apartments for 47 Detroit families and will further strengthen the economic comeback that Midtown Detroit is leading within the City. The restoration represents almost $17 million of investment to the Midtown/Cass Corridor neighborhood.

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GREAT LAKES CAPITAL FUND

Redford Cottages: Groundbreaking and Grand Opening There 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 Redford, 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 Housing 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: Piedmont Chicago-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 Hill CFS 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 award Great Lakes Capital Fund has been named one of the country’s top nonprofit organizations to work for.

Often, nonprofit organizations 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 organization 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 executive 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!

AVENUES TO AFFORDABILITY

EDSON Award bestowed on hamilton crossing phase 1 in ypsilanti, michigan GLCF is pleased to announce the Affordable Housing Tax Credit Coalition (AHTCC) has awarded Hamilton Crossing Phase 1 development as a winner of the 2014 Charles L. Edson Tax Credit award. Presented to the most outstanding Low Income Housing Tax Credit (Housing Credit) properties in seven categories, this national awards program celebrates the best in affordable housing rental housing development.

Hamilton Crossing was selected as the winner in the HUD Preservation Properties category. GLCF recently invested in Hamilton Crossing Phase I with development partners Ypsilanti Housing Commission, Chesapeake Community Advisors and Fusco, Shaffer and Pappas.

O’Brien Earns Safety and Energy Awards GLCF partner, O’Brien Construction, was recently recognized by the Associated General Contractors of America (AGC) with a recent National Safety Award (NASA) for Building Division 50,000 + Work Hours Zero Incident Rate. O’Brien Construction also received 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!

29

EVENTS & HAPPENINGS

Great Lakes Capital Fund Provides $10,000 in College Scholarships Each year, Lansing hosts one of the largest MLK Celebrations in the country. As part of this tribute to equality, leadership, and activism, GLCF awarded three graduating seniors with $10,000, total, for their winning essays on 2014’s Celebration Theme: Our Lives Begin to End the Day We Become Silent About Things That Matter.

Haciendas Apartment Homes

Karl Gotting, Loomis Law Firm Partner & Affordable Housing Advocate, Announces Retirement Longtime friend of the Affordable Housing industry, Karl Gotting, of Loomis, Ewert, Parsley, Davis & Gotting P.C., has announced his retirement after nearly five decades of service. 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/Regulatory Law Lawyer of the Year.

have been permanently displaced.

Haciendas Apartments is being co-developed by Urban Offerings, 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.

Governor Snyder Highlights Silver Star in State of the State Speech Governor Rick Snyder recognized Silver Star Phase I & II and its staff from Medallion Management, David 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.

30

Great Lakes Capital Fund (GLCF) recently invested $4.4 million to rehabilitate fifteen apartment buildings, providing 200 affordable, quality apartment homes for Indianapolis families. Since the buildings were damaged by a tornado in 2008 they have been inhabitable and former residents of the apartment buildings

Great Lakes Capital Fund proudly supports the Children’s Trust Fund The Michigan Children’s Trust Fund is the only nonprofit in the State to protect children from abuse and neglect. At $50,000, GLCF proudly remains the Pam Posthumus Signature Auction Event’s top sponsor 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 Celebration In 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 families. Oconomowoc School Apartments is managed by ACC Management, Northcentral Construction serves as the general contractor, and Excel Architects led the Historical Rehab.

GREAT LAKES CAPITAL FUND

GLCF Purchases Two Cars for VeteranS in Need

Great Lakes Capital Fund: New Hires and Promotions Kellie Green, Capital Management Coordinator Kellie Green joined Great Lakes Capital Fund in January of 2014. Kellie serves as the Capital 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

Through a partnership with one local Veteran, the Buddy to Buddy 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 families, especially the recently returning Veterans of the Iraq and Afghanistan 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.

AVENUES TO AFFORDABILITY

Ashlee Barker, Community Impact Analyst Ashlee 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 developments are creating within communities.

Her former position is now held by Ms. Kellie Green.

31

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 Communications Assistant. 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 neighborhood space for arts education and civic engagement in REO Town, Lansing.

Chris Guy, Asset Manager Chris Guy, CPA, joined Great Lakes Capital Fund at the beginning of 2014 as an Asset Manager.

Chris began his professional 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 mutual 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 leader in a youth program for pre-school age children.

Kelly Martin, Human Capital Administrator Kelly Martin recently joined Great Lakes Capital Fund as Human Capital Administrator. Kelly brings over 20 years of management experience with her and has been self-employed as a consultant for the past five years. She began her career 32

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 relation between good people and organizational 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 Develop 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 networks and forums, the real estate banking community, real estate broker networks and economic development entities (nonprofit and public sector) to originate investment opportunities.

Michael Koester, Financial Analyst, Asset Management Michael Koester serves as a Financial Analyst in the Asset Management department at Great Lakes Capital Fund. Michael started at GLCF in 2013, after previous work experience in the Finance Department of The Detroit Symphony Orchestra and various other financial institutions.

Megan Fuller, Administrative Coordinator Ms. Megan Fuller joined GLCF’s Detroit Office full-time after serving assisting GLCF part-time while also serving as Operations 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 Management department.

Don is a recent college graduate with a dual Bachelor of Arts degree in Hospitality Management and Business Management from Northwood University. He has previous experience in the Hospitality Management Industry holding a variety positions, preparing him for his role here at GLCF. Anthony Winston, Executive Assistant Anthony Winston joined Great Lakes Capital Fund in April of 2014 as an Executive 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 Luther King, Jr. Holiday Commission and has been instrumental in presenting new ideas, formulation partnerships, and managing sponsor relations for the Commission.

Kelly Keenan, Business Development Manager Mr. Kelly Keenan joined Great Lakes Capital 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.

GREAT LAKES CAPITAL FUND

Promises Made, Promises Kept.

Syndicators and lenders will attest to our rock solid reputation.

For more information, contact our administrator at 248.833.0550

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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SaVE tHE DatE! PMAM GLAStar Education Conference & Awards October 16 –17, 2014

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JOin tODay! Call 616.531.5243 or visit pmamhq.com.

GREAT LAKES CAPITAL FUND

WHY YES, the grass is GREENER over here.

Sometimes brilliant advising and accounting isn’t enough. Allow us to give you an extra nudge over the fence.

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Audit and tax services

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Securing tax credit equity – Low-income housing – Historic – Energy

Exceptional client service is what separates Baker Tilly from the rest. Our tailored affordable housing services address your needs and deliver the individual attention you deserve. It’s our pledge to you, because in the end, your definition of satisfaction is the only definition that matters.

© 2013 Baker Tilly Virchow Krause, LLP. Baker Tilly refers to Baker Tilly Virchow Krause, LLP, an independently owned and managed member of Baker Tilly International.

Come see what’s happening on our side.

Connect with us: bakertilly.com Don Bernards, CPA, Partner 608 240 2643 | donald.bernards@bakertilly.com

Great Lakes Capital Fund 1118 S. Washington Avenue Lansing, MI 48910 www.capfund.net

We assist in home ownership, affordable housing, urban renewal, and the fight against homelessness to create vibrant neighborhoods in a thriving state.

AffordAble rentAl Housing

HomeoWnersHip And Home improvement

Homelessness And supportive Housing

Communities, neigHborHoods And doWntoWn revitAlizAtion

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