The redevelopment boom taking place in Detroit’s Midtown district has been spreading slowly from Woodward and Cass avenues farther to the edges of the community.
A four-story apartment building at 711 Alexandrine near Third is now undergoing a $6-million renovation, to reopen in mid-2015 as the Rainier, a 36-unit market-rate building catering to students and young professionals.
The project would not be possible but for the $100-million commitment to Detroit by JPMorgan Chase announced earlier this year. The Chase commitment included $40 million to two community development financial institutions, or CDFIs, which are entities that act like banks but lend at much better terms to assist projects in Detroit and other distressed cities.
The Rainier project is the first in Detroit to utilize Chase money provided to the CDFIs — Invest Detroit and Capital Impact Partners.
“This was not something that was going to be a candidate for traditional financing,” Aaron Seybert, a community development banker with Chase in Detroit, said of the Rainier project. “The fund we set up is meant to address that sort of thing.”
The Rainer is a 1920s-era apartment that until recently had 56 units ranging from 250 to 500 square feet and was about 40% occupied, including squatters who weren’t paying any rent. When reopened in 2015, the building will include 36 market-rate units renting for $750 up to $1,300. There will also be about 1,800 square feet of retail space on the ground floor. The total project cost is $6 million.
The Rainer Court project is being done by PK Housing & Management, an Okemos-based family-owned development firm. Chris Potterpin, vice president of development and son of the founder, said the firm has done mostly rural projects until now but was interested in working in Detroit. The developers met with Susan Mosey, executive director of the civic group Midtown Detroit Inc., to find an appropriate building to work on.
The Chase money passing through the CDFIs is important for three reasons: It means the interest rate charged to developers on projects like the Rainer is below market rate by up to 1 percentage point; the term of the loan is much longer than a traditional bank would allow, and the loan-to-value ratio is up to 120% instead of the more traditional 80% ratio, meaning that a CDFI lender like Capital Impact can make larger loans to offset the low appraised values typical in Detroit.
“You just don’t see that with traditional companies,” said Melinda Clemons, a senior loan officer with Capital Impact Partners who worked with developers on the Rainer Court project. “Our commitment is to assist undeserved communities with revitalization, and Detroit is one of our core areas that we provide financing in.”
Mosey said the Rainir work is one of several rehabilitation projects taking shape near Alexandrine and Third and on Selden one block to the south. The new residential apartments coming online in the various projects are needed because existing buildings in Midtown like the Auburn and the Park Shelton are running waiting lists.
“We are desperate to get as many units as we can out there,” Mosey said.
The former residents of the Rainer were relocated to other affordable units in the area with help from Midtown Detroit Inc., she added.
