Middletown Moving Forward has gained its first investor to create a new loan fund for financing redevelopment efforts in the downtown and airport areas of the city, said Director Calista Smith.
Similar funds in Hamilton and Cincinnati have successfully recruited job-generating businesses and attracted new investment to empty properties.
Duke Energy is committing about $500,000 to the nonprofit Middletown Moving Forward to start the revolving loan fund, said Tim Abbott, government and community relations manager for the utility provider.
“It is in investment into the organization and the Middletown community,” Abbott said. “We feel the timing is right and we’re at a critical crossroads to make sure downtown revitalization is successful.”
After Middletown Moving Forward obtained nonprofit status in 2014, a fundraising effort was launched with the goal of reaching about $5 million total worth of commitments to aid business development efforts in the city.
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“Landing our first investor helps bolster our strategy and will help us gain momentum in establishing our fund,” Smith said.
The group is modeling its efforts after other nonprofit economic development agencies such as Hamilton’s CORE Fund, which has raised more than $7.5 million since its launch at the end of 2012; and Cincinnati’s 3CDC which has invested heavily in the city’s Over the Rhine district. All of Hamilton’s spending so far has been on property acquisition, repairs and other costs to restore blighted commercial and residential buildings for sale to private developers. Even though the CORE Fund was started to provide gap loans, it changed strategy to respond to a greater need to help ready vacant buildings for new development, its Director Mike Dingeldein has previously said.
For example, CORE Fund successfully landed call center StarTek Inc. in a downtown Hamilton building it owns on High Street, which promises to create nearly 700 jobs.
Plans for Middletown Moving Forward’s money are to loan it into vetted business projects in the city and for other objectives that fit the nonprofit’s strategy, according to the group and Duke Energy. As developers and other loan recipients pay back the borrowings, the money can be re-invested into other qualified projects.
Typically, gap financing provides lower-interest capital with lengthier payback terms than traditional business loans to applicants that qualify. It’s not meant to be the sole source of financing.
“We are still focused on the gap financing. We also want to try to be more aggressive in attracting a wide variety of quality developers to Middletown,” Smith said.
It will likely be another 18 months to two years before Middletown Moving Forward begins considering and awarding any loan applications, Smith, the group’s director said.
Before it gets to that point, hopes are to raise more funds from more investors, Smith said. However, that doesn’t mean that all $5 million will need raised before loans are made, she said. That amount at which lending can start has not been set. It will also depend on the level of development activity in the city for which additional financing is needed, she said.
“We want to make sure we have a team of investors… so that we can spread the risk,” she said. “The goal is still $5 million but we may able to start some effort at a lower amount.”
Duke Energy sets aside a certain amount of money for economic development activities in its coverage area, Abbott said, who also pointed out this is not the same as a grant. The investment should generate a return for Middletown, he said. Historically, Duke at one time operated a regional headquarters downtown that is now a branch campus of Cincinnati State Middletown.
Middletown Moving Forward eventually expects to create a committee of investors to evaluate loan criteria, which Abbott plans to join, he added.
Nothing is being contemplated by city government at this time to invest in Middletown Moving Forward, said Middletown City Manager Doug Adkins.