Bank CDCs target center city properties

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by Jill Henry|ret||ret||tab|

SBJ Reporter|ret||ret||tab|

jhenry@sbj.net|ret||ret||tab|

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Great Southern Bank announced July 28 the creation of Great Southern Community Development Corporation. |ret||ret||tab|

"It is actually a subsidiary of our bank, so it will be wholly owned and we will get our capital from the bank," said Brian Fogle, executive director of the CDC and director of Great Southern's community development department. Fogle said that when he started the community development department in July 2002, a CDC was something he recognized that could be a tremendous tool for Great Southern. |ret||ret||tab|

Flexibility, Fogle said, will allow Great Southern's CDC to be involved in projects that a bank normally isn't allowed to do. |ret||ret||tab|

"We can get into real estate development. We can be equity participants in projects," he said. "Flexibility is a great thing. The other thing is it really allows us to be very responsive to community needs, and if there are needs within a neighborhood, a tough-to-develop project that maybe there's not enough investor confidence for the private sector to do it, we can either help share that risk with somebody or we can be a catalyst to get it started."|ret||ret||tab|

Fogle said that banks can't be real estate developers unless they're building something for their own use, and banks can't buy equity or stock, or be equity investors through the banking side of their business.|ret||ret||tab|

"Typically, the business of banking is deposits and loans, that sort of thing. What we can do through the flexibility of a community development corporation, we could actually buy and develop or buy and rehabilitate an old property not for our own use, but to help revitalize a neighborhood. We could partner with a nonprofit on a difficult-to-develop property to help share that risk with them," he said.|ret||ret||tab|

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Advisory committee|ret||ret||tab|

Fogle will rely on several sets of eyes and ears to be on the lookout for potential projects for the CDC. A community advisory board has been established, made up of directors of several nonprofits. |ret||ret||tab|

Members of the advisory committee are: Calvin Allen, Urban Neighborhood Alliance; Tom Finnie, city of Springfield; David Hockensmith, Council of Churches of the Ozarks; Samuel Knox, Unite of Southwest Missouri; Allen Kunkel, Ozarks Regional Economic Partnership; Yolanda Lorge, Grupo Latinoamericano; Larry Maddox, Affordable Lending; Fred May, FEMA - Long Term Recovery; John Rush, United Way of the Ozarks; Lloyd Young, The Good Community; Gary Funk, Community Foundation of the Ozarks; Sister Lorraine Biebel and Jan Horton, community volunteers.|ret||ret||tab|

"The purpose of (the advisory committee) is to better understand what the needs are in Springfield, what the needs are in our low- to moderate-income areas. We really look to them for ideas, suggestions and awareness of what those needs are," Fogle said.|ret||ret||tab|

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Projects|ret||ret||tab|

Great Southern's CDC is "not just limited to Springfield, but Springfield, at least initially, will be our focus," Fogle said, adding that the specific focus will be low- to moderate- income census tracts, typically center-city neighborhoods. "If there is a challenging project in one of our smaller communities, we certainly can become involved in those too."|ret||ret||tab|

Its initial project has been identified but Fogle declined to name it. |ret||ret||tab|

"We are just in the planning and feasibility stage right now. We hope to be able to make an announcement in early September, but right now it's still in the due diligence and planning stage," he said.|ret||ret||tab|

The needs of the private sector are important to Great Southern as well. "We do not want to compete with the private sector," Fogle said. "We do a lot of business with a lot of developers, and we do a lot of real estate lending, so we are very sensitive that we won't ever do anything that the private sector would do on its own. But what we can do is be a catalyst or help put together a difficult project because we can do it ourselves, or we can share in that risk. I think that's very key."|ret||ret||tab|

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Funding|ret||ret||tab|

Great Southern will fund the CDC as needed, as projects come up, Fogle said. |ret||ret||tab|

"There are some regulatory issues, and for any one project, we can't put more than 2 percent of our capital in surplus in. For any single project, we could not put more than $2.4 million of our money, as an owner, into it. Overall, without regulatory permission, there are some regulatory things you have to do. We can't do more than between $6 million and $7 million without additional regulatory permission," he said.|ret||ret||tab|

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History|ret||ret||tab|

Bank-owned CDCs first came to prominence in the 1970s when there were few alternatives for banks to invest in distressed communities. |ret||ret||tab|

"The first (bank-owned CDC) that I'm aware of was the Old North Carolina National Bank in Charlotte, which is now Bank of America," Fogle said. "They started a CDC in the late 1970s in response to a declining center city Charlotte. Because they were not getting developers or investors who would come into these declining neighborhoods, they actually went in, bought houses, redeveloped them and sold them and literally turned around the neighborhood surrounding downtown Charlotte."|ret||ret||tab|

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UMB Bank|ret||ret||tab|

While this makes Great Southern the first Springfield-based bank CDC, UMB Bank owns a CDC that has benefited the Springfield area now for about 18 months. Although UMB Bank is based in St. Louis, the headquarters for its south central region is located in Springfield. |ret||ret||tab|

"(The St. Louis office is) the administrative apparatus, but as far as directing and making decisions on programs and what we want to try and accomplish, it really has to be done here in the local community," said Bill Owen, executive vice president of the south central region for UMB Bank. |ret||ret||tab|

Owen said UMB's CDC works with the city and Urban Neighborhoods Alliance. "We offer, through our CDC, a direct loan to remodelers program for gut rehabs with the requirement that anyone who enters this program and gets financing through this program is required to sell these homes to owner occupation," Owen said. Other programs within UMB's CDC are below-market home improvement loans and an employer-assisted home loan program for employees of the city of Springfield. |ret||ret||tab|

CDCs, Owen said, are a marvelous thing, and the programs they offer are ways to complete what he called "the center city puzzle."|ret||ret||tab|

"The civic component is going extremely well. The commercial retail component downtown is doing very well. It's now a question of the housing stock," he said. "With these CDCs, if we can help revitalize the housing stock and bring people with disposable income back downtown to help support these retail businesses, to provide a nice environment for people to come down to the civic buildings and facilities, then we've really made Springfield a special place.|ret||ret||tab|

"This is a very critical component and I think it's great that Great Southern is stepping up to the plate and setting up a CDC, and that we can get more and more of these kinds of things going in the central part of town," Owen said.|ret||ret||tab|

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