Commercial Real Estate

Programs and resource links help with locating affordable and functional real estate to support manufacturing needs and connections to the local, regional, and international supply chain.  The section also includes information on financing through public, private, and foundation sectors, tax incentives, abandoned property rehabilitation, and much more.

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Develop Michigan

Develop Michigan is an innovative nonprofit development finance organization formed through a partnership between the State of Michigan, Great Lakes Capital Fund (GLCF) and the Development Finance Group (DFG). Develop Michigan plays a dynamic role in financing commercial real estate projects and is designed to supplement current efforts to transform and rehabilitate the Michigan economy. The State of Michigan provided $20 million to launch this effort and to help provide lower-cost financing to creditworthy projects in the State of Michigan.  Private-sector capital will leverage the State’s money to provide a substantial pool of capital to Developers and Sponsors.

Develop Michigan is managed by a partnership between GLCF, a Lansing-based, nonprofit Community Development Financial Institution with 20 years and $2.5 billion dollars of investment experience, and the DFG, a consulting partnership with a 42-year history of designing and successfully building fifteen development finance organizations across the nation.

Senior Debt Financing

For existing, stabilized assets or less risky tranches of investment capital that meet underwriting criteria, DMI will provide competitive, longer-term senior debt financing solutions.

  • Target Project Range: $5 - $35 million
  • Target Investment Range: $3 - $10 million, subject to program conditions
  • Target investment period: 5 – 7 years
  • Target Leverage: 75% LTV
  • Investment Capital: Fixed-rate interest during the loan term, subject yield maintenance requirements and industry carve-outs
  • Geography: Projects must be located within the State of Michigan
  • Project Impacts: Projects must show substantial “second bottom line” of community impacts, such as quantifiable job creation or community development

Mezzanine Capital

Mezzanine Capital is a critical financing source for Develop Michigan projects. DMI will underwrite and provide shorter-term mezzanine capital for higher-risk tranches of real estate transaction’s capital sources.

  • Target Project Range: $5 - $35 million
  • Target Investment Range: $3 - $10 million, subject to program conditions
  • Target investment period: 2 – 4 years
  • Target Leverage: 80% - 90% LTV
  • Investment Capital: Fixed-rate interest during the loan term, with negotiated equity participation at assest refinance or sale.
  • Geography: Projects must be located within the State of Michigan
  • Project Impacts: Projects must show substantial “second bottom line” of community impacts, such as quantifiable job creation or community development

Gap Financing

Projects of greater scale often involve a very complex ‘capital stack’. For example, the repositioning of an industrial site might require any of the following types of funding: federal brownfields funding, federal infrastructure monies, local participation through tax increment financing, enterprise zone incentives, equity (private or developer), debt (construction loan and long-term financing from commercial banks or the debt markets) and New Markets Tax Credits. GLCF and DFG both have extensive experience in working with and securing capital from federal agencies, which may be necessary to fund portions of projects meeting their respective criteria.

GLCF and DFG have very strong relationships with federal agencies such as Housing and Urban Development (HUD), the Department of Commerce, the U.S. Treasury Department (Community Development Fund Institute – CDFI), the Department of Energy, U.S. Department of Agriculture (USDA) and the U.S. Department of Transportation. These are all departments with funding programs related to the types of projects we anticipate financing. Develop Michigan provides substantial added value to the process given its team’s extensive internal capacity to identify, access and structure other external investment dollars. Securing other federal, state, local and foundation dollars for complex projects augments the ability of Develop Michigan to close challenging investments and enhances the overall effectiveness of Develop Michigan.

Bridge Lending

Bridge Lending is another critical financing source for Develop Michigan projects. DMI will underwrite and provide shorter-term bridge capital during construction periods for capital that cannot be made available until a project is complete, such as tax credits and grants

  • Target Project Range: $5 - $35 million
  • Target Investment Range: $1 - $8 million, subject to program conditions
  • Target investment period: 1 – 2 years
  • Target Leverage: 80% - 100% of direct collateral (tax credits/grants)
  • Investment Capital: Fixed-rate interest during the loan term
  • Geography: Projects must be located within the State of Michigan
  • Project Impacts: Projects must show substantial “second bottom line” of community impacts, such as quantifiable job creation or community development

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Invest Detroit

Invest Detroit is a leading source of private sector gap financing that utilizes a variety of funding tools through managed for-profit and non-profit targeted funds to support economic and community development in underserved communities primarily in the City of Detroit.  Invest Detroit and its related entities were formed to facilitate funding from the public, private and foundation sectors and to address targeted needs of the communities it serves. Representing $110 million in funds and tax credits, Invest Detroit serves as a platform to meet a broad range of financing needs to support business expansion and real estate development, the creation and retention of jobs, and the revitalization of distressed areas.

Invest Detroit represents the vision of the Board of Directors and management of the Detroit Investment Fund (DIF), which was created and funded in 1995 by members of Detroit Renaissance, now known as Business Leaders for Michigan.  In 2010, the DIF Board and management team enhanced and transitioned the capabilities of DIF to create Invest Detroit, which serves as an umbrella entity for DIF and other for-profit and non-profit managed funds.  The efforts of Invest Detroit are intended to promote job creation, expansion of the tax base and an improved quality of life for the communities it serves.  Invest Detroit’s financing tools support a variety of needs including business expansion and purchase of equipment, real estate development and redevelopment, predevelopment costs, neighborhood retail, emerging business’ development costs, and New Markets Tax Credits. Loans for strategic projects are considered when the potential exists for a long-term, clear benefit, which is critical to the economic development of the City of Detroit.  This emphasizes the Fund’s commitment to economic revitalization by financing projects that would likely not be completed without the participation of Invest Detroit.

Invest Detroit invests in eligible projects or companies from several different funding sources which include Detroit Investment Fund (DIF) , New Markets Tax Credits (NMTC), Lower Woodward Housing Fund (LWHF), Predevelopment Loan Funds, Urban Retail Loan Fund (URLF), and First Step Fund.  The economic development efforts of Invest Detroit have resulted in 2,000 jobs created or retained, 1,490 housing units created or renovated, 2,230,657 residential square feet developed, 1,626,010 commercial square feet developed, and 40,000 retail square feet developed.  For more information, call the Invest Detroit office at 313.259.6368 or visit http://www.investdetroit.com.

Business & Equipment Loans

Financing from business & equipment loans may be utilized for the growth of commercial and industrial businesses in the City of Detroit.  Industries serviced include manufacturing companies, distribution and logistics companies, service companies, and others.  The transaction range is $50,000 to $2.5 million for business expansion, capital improvements, purchase of equipment, purchase of real property, working capital, and restructuring of existing debt.  Loans of this type will typically be subordinated and are intended to assist the owner in meeting the financing requirements of a traditional lender.  Financial types considered are:  term loans, mezzanine financing, bridge loans, construction loans, and commercial mortgage real estate loans.  General loan criteria includes: a business plan which demonstrates that the future financial results of the company will service the senior and capital debt and the business must have experienced and successful management with 3 years of successful operating experience.  For more information on Invest Detroit Business & Equipment Loans, visit http://www.investdetroit.com or call 313.259.6368.

Detroit Investment Fund (DIF)

The Detroit Investment Fund (DIF) is a source of private sector financing designed to be a catalyst for investment in Detroit by financing qualified commercial projects and entities to stimulate economic development and job creation. The DIF provides gap-financing intended to leverage owner equity so that the transaction merits traditional bank/senior lender financing. Investments in strategic projects are considered when potential exists for a significant long-term, clear benefit to the economic development of Detroit that would likely not be completed without the DIF.

Eligible projects include business expansion, capital improvements, purchase of equipment, working capital, purchase of real property, commercial real estate development, and strategic investments that create a long-term benefit for the community. DIF provides loans that leverage owner equity to merit traditional financing, offers flexibility in structuring financing, and provides access to senior level expertise in a variety of industries.

Sponsors must have a proven track record and personal investment in the project, clear exit strategy for the Fund with expected repayment within 5-7 years, and significant economic impact in the City of Detroit. Loan size is from $500,000 to $2.5 million. For more specific loan criteria for Business and Equipment Loans or Real Estate Loans or general information on Invest Detroit Detroit Investment Fund (DIF), visit http://www.investdetroit.com or call 313.259.6368.

Invest Detroit Foundation (IDF)

Invest Detroit Foundation is a 501(c) (3) organization and certified Community Development Financial Institution formed exclusively for the purpose of receiving and administering funds for charitable, educational and scientific purposes. IDF promotes a higher quality of life for distressed communities, primarily in the City of Detroit through attracting new industry, encouraging the development of business, housing, transportation and other community resources. IDF provides loans and financial assistance to promote community development and combat community deterioration and economic blight. The IDF loan programs provide funding, generally in the form of loans, to qualified applicants to encourage revitalization and development. In concert with operating the loan programs, IDF also conducts programmatic activities that include planning, spearheading and developing strategies for urban revitalization. The impact of the IDF loan programs includes the creation of jobs and training to the unemployed and persons of low income, and providing quality housing for the low-income community.

IDF Funds are financing resources aimed at encouraging projects where the necessary financing is not available from traditional sources, or may be available, but at high rates and restrictive terms. Financing may also be unavailable because of the poor credit risks of financing a project in the designated area. Projects will also be evaluated based on whether they have received support from local community groups, institutions and public agencies. Loans and the repayment of funds are offered upon terms and conditions that are not available from traditional private and public financing sources. IDF Loan Programs include: Lower Woodward Housing Fund, Predevelopment Funds, and Urban Retail Loan Fund. For more information on the Invest Detroit Foundation, call 313.259.6368 at Invest Detroit or visit http://www.investdetroit.com.

Pre-Development Loan Fund

Pre-development funds are intended to act as a catalyst for commercial, residential and mixed-use development projects in targeted areas in the City of Detroit. Predevelopment financing assists both individual developers and community organizations by providing funding for costs incurred in the early stages of a project, such as environmental studies or appraisals that facilitate the project’s pursuit of traditional financing. To be considered for a loan under this program, applicants must be able to contribute meaningful owners’ equity in their projects, present a viable business or project plan, and demonstrate a successful track record.  Loan sizes range from $50,000 to $250,000 for projects within a targeted area of Detroit or for nonprofit and community development projects, the entire City of Detroit. For more information contact Mary Seaberg King at 313.259.6368 or visit http://www.investdetroit.com.

New Markets Tax Credit Fund (MNTC) 

The New Markets Tax Credit Fund (NMTC) Program attracts private businesses and development by offering tax credits worth 39% of the value of the investment in low-income communities, claimable over seven years. Invest Detroit CDE has received a $40 million NMTC allocation for 2009 from the U.S. Treasury’s CDFI Fund. The purpose of the New Markets Tax Credit is to support the development of commercial and mixed-use real estate projects in Detroit by expanding the availability, affordability, and access to commercial capital. Capital will be made available for real estate development, building improvements and new commercial activity.

The purpose of the New Markets Tax Credit is to support the development of commercial and mixed-use real estate projects in Detroit by expanding the availability, affordability, and access to commercial capital. Capital will be made available for real estate development, building improvements and new commercial activity. To be considered for an allocation, projects must be located in an eligible area and applicants must have relevant project experience and be able to contribute meaningful owners’ equity in their projects.

The project budget is a minimum of $5 million and the investment must stay in the project for seven years. Fees will include upfront fee received at closing, an annual administrative fee and a backend fee at maturity. Other third party closing costs, including legal fees, title work, and other professional fees, are to be paid by borrower. Interest rates will be determined based on the source of leveraged funds. Security interest in the real estate and guarantees of the key owners is required. To learn about the application process and for more information, call 313.259.6368 or visit http://www.investdetroit.com.

Predevelopment Financing

Predevelopment financing assists both individual developers and community organizations by providing funding for costs incurred in the early stages of a project, such as environmental studies or appraisals that facilitate the project’s pursuit of traditional financing. Predevelopment loans may be utilized for commercial, residential and mixed-use development projects in targeted areas of Detroit. Loan sizes range from $50,000 to $250,000 for housing development projects including single, multi-family and mixed-use developments, and commercial projects that have potential for significant positive impact on the community. Loan uses include; land acquisition (intended for immediate release), environmental studies, legal work, tax credit consultants and fees, site planning and design, appraisals, survey work, and construction required to preserve the structural integrity of a building. For more information on the targeted area and loan criteria, call 313.259.6368 or visit http://investdetroit.com.

Real Estate Financing

Real estate financing may be utilized to support the development of commercial residential and mixed-use projects. Loans to experienced developers of residential real estate and neighborhood retail centers will be considered.  Financing is intended for construction of apartments, lofts/condos and single family home developments, financing for commercial residential rental properties and retail centers, bridging tax credit equity, and purchase of real property intended for immediate development.  Loans are to help the developer in meeting the requirements of traditional lenders and are typically subordinate to the senior lender, but will not exceed 50% of the equity required for the project.  Available financing types include bridge loans to facilitate the timing gap of monetizing tax credits, construction loans, term loans (up to 7 years), and mortgage loans (up to 7 years).  Transactions range from $500,000 to $2.5 million.

General Loan Criteria includes: the borrower (developer) must provide financial projections for the project which demonstrate its viability along with detailed budgets and demonstrated repayment capacity, the developer(s) must provide 3 years of financial statements and sufficient information to evaluate the developer’s cash flow and debt service capacity, and real estate loans require an equity contribution by the borrower/developer. For more information, call 313.259.6368 or visit http://www.investdetroit.com.

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InsYght

InsYght is a free service that helps businesses to identify exactly what is available to support their needs. No matter what stage an idea or business is in, InsYght gives access to critical resources that fit the businesses unique profile. InsYght has collected detailed information about thousands of free or heavily discounted business resources available to Michigan entrepreneurs and innovators. The service uses unique differential diagnosis technology to help you identify exactly what your business needs and where to find it.  Simply tell us what you need and InsYght will connect you to the right resources. To get started, visit http://insyght.co/ or call 313.963.4440.

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Opportunity Resource Fund 

Formerly known as the Michigan Interfaith Trust Fund, the Opportunity Resource Fund is a nonprofit 501 (c) (3) celebrating 25 years of working for social and economic justice. Supporting Michigan’s communities via the creation of decent and affordable housing, jobs and great commercial spaces, we are a catalyst for positive change. The new name and logo reflect our reenergized commitment to the mission and values we have lived since our inception in 1985. The Opportunity Resource Fund seeks to reach even more communities. The purpose, while updated to incorporate a larger audience, continues to accept loans and investments from individuals and organizations to provide these funds to those denied traditional access to capital. For more information, call 313.964.7300 or visit http://www.oppfund.org.

Mixed Use Loans

The Opportunity Resource Fund offers one-stop financing to developers of mixed use projects that involve both commercial and residential space. Potential borrowers need only submit one application and will have only one contact person with the Opportunity Resource Fund.  Eligible projects are those that combine affordable housing with qualifying commercial real estate development.  Generally, the Opportunity Resource Fund makes short-term loans of six years or less, although longer terms would be considered for low income housing tax credit projects. Interest rates vary from six to nine percent (6% – 9%). Eligible purposes include: Real estate option/acquisition; Pre-development costs (e.g. legal fees, design costs, appraisals, etc.); Construction financing and rehabilitation financing; Bridge loan; and Permanent financing. For more information the Opportunity Resource Fund Mixed Use Loans and how to apply for a loan, visit http://oppfund.org/lending/mixed-use-loans/ or call 313.964.7300.

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State of Michigan

Commercial Rehabilitation Act Exemption

The Commercial Rehabilitation Act Exemption affords a tax incentive for the rehabilitation of commercial property for the primary purpose and use of a commercial business or multi-family residential facility. The property must be located within an established Commercial Rehabilitation District. Exemptions are approved for a term of 1-10 years, as determined by the local unit of government. The property taxes are based upon the previous year's (prior to rehabilitation) taxable value. The taxable value is frozen for the duration of the certificate. Applications are filed, reviewed and approved by the local unit of government, but are also subject to review at the State level by the Property Services Division. The State Tax Commission (STC) is responsible for final approval and issuance of certificates. Exemptions are not effective until approved by the STC. For more information, visit http://www.michigan.gov/taxes/0,4676,7-238-43535_53197-213167--,00.html

Obsolete Property Rehabilitation Act Exemption (OPRA)

Detroit may establish obsolete property rehabilitation districts. The Obsolete Property Rehabilitation Act (OPRA) provides property tax exemptions for commercial and commercial housing properties that are being rehabilitated and meet the requirements of the Act. Properties must meet eligibility requirements including a statement of obsolescence by the local assessor. The property must be located in an established Obsolete Property Rehabilitation District and qualify as a commercial property or commercial housing property that is a “facility” (contaminated), “blighted”, or “functionally obsolete.” Personal property is not eligible.

Buildings and improvements within these districts are eligible for exemption from ad valorem property taxes for a term of 1 to12 years as determined by the local unit of government. The property taxes for the rehabilitated property are based on the previous year's (prior to rehabilitation) taxable value. The taxable value is frozen for the duration of the exemption. Additionally, the State Treasurer may approve reductions of half of the school operating and state education taxes for a period not to exceed 6 years for 25 applications annually. A new exemption will not be granted after December 2016, but an exemption that is in effect will continue until the certificate expires.

Applications are filed, reviewed and approved by the local unit of government before rehabilitation work begins, and are also subject to review at the State level by the Property Services Division. The State Tax Commission (STC) is responsible for final approval and issuance of OPRA certificates. Exemptions are not effective until approved by the STC.  If you have questions about this incentive or how to take advantage of it, please call DEGC Business Development Intake at 313.237.4630 or visit http://www.degc.org.  You may also visit http://www.michigan.gov/taxes/0,1607,7-238-43535_53197-213177--,00.html.

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Tax Abatement Program

The City of Detroit- Planning and Development Department administers the following tax incentive programs: Public Act 146 of 2000 the Obsolete Rehabilitation Act, which provides for reduced property taxes for up to 12 years on improvements to existing rental residential units and/or commercial structures or structures being converted to rental residential and/or commercial space.  For more information, about the abatement program or upcoming projects, contact the Planning and Development Department at 313.224.1339.

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Wayne County Land Bank Program

The Wayne County Land Bank is a governmental authority whose purpose is to manage abandoned, underutilized, or blighted property and turn it into a productive use. The Land Bank encourages investment, revitalization, and rehabilitation in Wayne County through a number of programs that provide economic incentives to owners to rehabilitate their property, sell abandoned property at affordable rates, work with non-profit organizations and developers to provide economic support for new developments, and demolish and maintain blighted property to create cleaner, safer neighborhoods.

Abandoned and dilapidated properties in the neighborhoods are often in that condition because it cannot be sold due to large tax bills, water liens, title problems, etc. The Land Bank has a number of tools to quickly and efficiently solve those problems by cleansing title, holding property tax free and eliminating tax liens. The Land Bank can then put the property into the hands of those who will use it productively.

The County also uses the power of the Land Bank to operate its TURBO program. The Land Bank TURBO program offers additional tax breaks for businesses that make significant investments in Wayne County. TURBO reimburses investors by giving cash back to property owners who make significant real estate investments in Wayne County. Wayne County Land Bank only works with land that is tax-reverted or is voluntarily contributed. The Land Bank can never condemn property or forcibly take someone’s property under eminent domain.  For additional information on the Wayne County Land Bank Program, please call 313.224.5950 or visit http://www.michigan.gov/landbank/