KCLBA views local banks as vital to its operation
Land bank feels lenders have responded positively to its mission.
Kent County Land Bank Authority Executive Director Dave Allen said the response his fledgling agency has received so far from the local banking community has been extremely positive.
“The presence of a countywide land bank gives them a one-stop shop to deal with real estate in Kent County, especially for the large national banks. I have a unique perspective on that because I used to be the director of a nonprofit developer and when I would approach a bank about a property, they would be a little reluctant sometimes to do anything creative with us because what they did for one they’d have to do for all,” said Allen, who once headed Lighthouse Properties, which is now LINC.
“But now I think, for the banks, they prefer to have one agency to deal with. It makes it much easier to get creative,” he added.
The local banks have become involved on different levels. Two offer KCLBA lines-of-credit.
The land bank has an operational line-of-credit for $100,000 with Huntington Bank, which is secured by the land bank’s general assets. Board members renewed it for another year a few months ago.
Founders Bank & Trust has agreed to a $350,000 construction line-of-credit with the land bank.
“I make no bones about it: We’re not a nonprofit; we’re a company. We’re a development company, and development companies need lines-of-credit,” said Allen.
Allen said the land bank taps into the Founders funding option when it redevelops properties on its own.
“We set up each project individually on that line. Then there is a lien placed on the property that we’re doing a development on, and it is extinguished when we sell the property,” he said.
Other lenders have donated foreclosed commercial and residential properties to KCLBA. Wells Fargo, Bank of America and Citibank have made those donations through the National Community Stabilization Trust.
Chase Bank has also donated properties but it has done so on its own.
Chemical Bank has made donations, too. One was a foreclosed Laundromat on Franklin Street in Grand Rapids. The land bank worked with the state and the city to auction off the business’s personal property. Now the agency is working on a plan to redevelop the commercial building with the Inner City Christian Federation.
Allen said those donations have made a “huge difference” — and not just to the land bank, but also to the community.
“These are properties that they do not deem as viable from a marketability standpoint,” he said of the banks.
“From my perspective and from a community perspective, they would dump those properties on the market and sell them for pennies. But instead, they donate them free and clear to the land bank and we’re able to get them redeveloped. So what could be a very problematic property in a neighborhood turns out to be completely redeveloped.”
The land bank sells most of the bank-donated properties to for-profit builders and developers, like the Fulton Group, Kwekel Cos. and Scott Scheltema, who redevelop the buildings.
“We’ve partnered with several developers and several builders that we sell those properties to because they have a great track record in doing significant renovations. They either resell them or rent them out.
“I want to be really clear: These are bad properties. These are severely blighted with lots of code violations. We take them and get them cleaned up, and these developers buy them. And we sell the properties to them based on the amount of investment they’re doing,” said Allen.
For instance, the land bank sold a blighted property on Alpine Avenue in Grand Rapids to the Fulton Group for $1,000. The property was condemned but not in bad enough shape to be razed. The land bank kept the purchase price low because the Fulton Group is investing about $90,000 to reinvigorate the property.
“What the bank donation allows us to do is to sell the property to a private developer at a price that allows them to maximize their investment in the property,” he said.
The banks are represented on the organization’s Advisory Council, a broad-based group of 15 individuals who offer the land bank their particular insights. Renee Williams of Huntington Bank and Greg Conway of Founders Bank and Trust have seats on the council.
Allen said it was important to have bankers on this committee.
“We wanted all sectors of development represented, and finance is a huge part of that. And they’ve done a really great job of helping us assess risk. Greg is kind of our ‘risk watchdog’ on the council,” he said with a laugh.
“But that’s what bankers do. Before they do a loan, they assess the risk of that loan. So it’s good to have sound fiscal people whose job is to look at sound fiscal management to be on that Advisory Council,” he added.
Although not a bank, another financial supporter of the land bank is the Grand Rapids Community Foundation. GRCF has created a program-related investment agreement with KCLBA that allows the foundation to make specific strategic investments on tax-foreclosed properties through the agency. The agreement is currently worth $400,000, but it may be expanded to $1 million next month.
“Just in general, I think the relationship between the Kent County Land Bank and both local and national banks is vital,” said Allen.
“We can’t do what we do if we don’t have a good relationship with the banks — both on the donation side in dealing with the problem properties but also on providing loans and lines of credit.”