Three years ago, JPMorgan Chase pledged to invest $100 million over five years in Detroit’s revitalization. On Wednesday the bank said it would expand that commitment to $150 million by 2019.
Chase’s dollars have helped build real estate projects, power small businesses off the ground, train unemployed workers for new jobs, and – perhaps most important – demonstrate a model of urban revitalization that could transfer to cities everywhere.
That model requires more than cash from a major bank like Chase. The bank partnered with a cadre of local partners that includes political leaders, local investment funds and philanthropic foundations. Peter Scher, Chase’s head of corporate responsibility, said a coordinated effort by all those local partners proved key.
The bank says the investment reflects how innovative finance can play a role in revitalizing distressed urban areas.
"We visit cities all over the world and you see the political leadership, the business leadership all doing good things but moving in a hundred different directions,” Scher said. In Detroit “the city came together and said we’ve got to focus on our priorities. Certainly the model we think is something that can be replicated in other places.”
Chase initially said its $100 million investment would be spread over five years. In practice, it deployed fully $107 million in just three years, and results were better than expected. Chase so far has suffered no defaults on loans it made through the effort, and Scher said $7 million of the money loaned out has been repaid quicker than expected, allowing Chase to re-deploy those funds elsewhere in the city.
Those investments included $50 million in community development financing, $25.8 million to revitalize neighborhoods, $15 million for workforce development, $9.5 million for small-business expansion, and $6.9 million in other investments.
Chase deployed its cash mostly through a series of Detroit-based funds, including Invest Detroit, the Detroit Development Fund, and the local office of Capital Impact Partners. The relationships worked because each brought needed strengths. Chase had the deep pockets, expertise and data; the local funds had the eyes on the street that could identify worthwhile entrepreneurs and projects.
Just one example: The Entrepreneurs of Color Fund created about 18 months ago. As of the end of 2016, the fund had awarded nearly 30 minority-owned small businesses some $2.75 million in loans through the Detroit Development Fund.
Chase put $3.5 million into the Entrepreneurs of Color fund, joined by the W.K. Kellogg Foundation that put in a similar amount.
"This loan has helped us expand to a second location to better serve our customers,” said Kirsten Ussery, owner of the Detroit Vegan Soul restaurant in Detroit's West Village district. “We're grateful to the Detroit Development Fund for helping us to grow our business.”
The second Detroit Vegan Soul will open on Grand River in northwest Detroit this summer.
Many important projects in the city either wouldn’t have happened without Chase’s involvement or would have been delayed. Among those:
The Auburn, a mixed-use retail and residential project on Cass Avenue in Midtown, cost $11.3 million to build. Chase put in $2 million of that, purchasing New Market Tax Credits issued to help fund the project. It was an important piece to close the gap in what developers were able to finance.
Then, too, the Rainer Court project at 711 Alexandrine, a renovation of a dilapidated apartment building, cost a little over $7 million, of which Chase funneled $5.3 million through Invest Detroit and Capital Impact Partners. Not far away, Chase contributed $8 million to the $65-million development of the Scott, an upscale apartment project on Woodward Avenue in Midtown.
Some of the developers in those projects, like PK Housing & Management of Okemos that developed the Rainer Court building, have now moved on to other projects in the Midtown neighborhood.
“Success begets success. You’ve got more investors coming to the market because of (Chase's) participation,” said Dave Blaszkiewicz, CEO of the Invest Detroit fund.
In the end, it was the combination of a major outside bank like Chase and the cadre of local partners that made these efforts possible. “I think there is a growing recognition this is the only way you can move the needle,” Scher said.
Mayor Mike Duggan called Chase “a true partner” in Detroit’s revitalization efforts. And Jamie Dimon, chairman and CEO of the bank, said in a prepared statement: "Detroit’s resurgence is a model for what can be accomplished when leaders work together to create economic growth and opportunity.”