Cleveland nonprofits look to bring Equitable Development Initiative to the city

Two Cleveland nonprofits hope to help minority real estate developers scale up, with a new training program that, they say, must be part of a broader systemic shift.

Cleveland Development Advisors and Village Capital Corp. are exploring the potential for a local version of the Equitable Development Initiative, an effort born in Detroit in 2018.

Created by Capital Impact Partners, a nonprofit lender based in Washington, D.C., the program is designed for minority developers with some experience in the industry. Participants not only take classes but also work with mentors and get assistance finding financing for deals.

The local push, toward a program launch this year, reflects a growing recognition that there are few developers in Cleveland who identify with the communities where they’re building.

“This has been an ongoing conversation in the real estate profession here locally,” said Sheila Wright, an emerging developer who participated in a market assessment conducted last year by Capital Impact Partners for Cleveland Development Advisors and Village Capital.

Wright and Angela Thi Bennett are the co-founders of Frontline Development Group LLC, a company behind an ambitious plan to build more than 240 homes in Hough, on the city’s East Side. The longtime friends, both 52, are rare Black women in a largely white, male industry.

For the last two years, Bennett and Wright have been trying to get their first six homes out of the ground. They’ve encountered bureaucratic snarls, political complications, appraisal shortfalls and design challenges. But their loyal buyers have stuck around, with high hopes for being part of a mixed-income, mixed-use neighborhood off East 66th Street, near historic League Park.

“It’s a tough industry to get into, regardless, unless you are coming with a considerable amount of resources,” said Wright, who formed Frontline with Bennett in late 2018.

Capital Impact Partners saw the difficulties firsthand in Detroit a few years ago.

In 2017, the federally certified Community Development Financial Institution examined its track record in the predominantly Black city. Most of its loans went to projects, including housing, that filled a need in low- and middle-income communities, said Nicholas Pohl, who heads up business development in the Great Lakes Region.

But 90% of that money was flowing to financially comfortable white developers.

“It obviously did not sit well with us,” Pohl said.

The nonprofit worked with investment bank JPMorgan Chase & Co. to build a two-year program specifically for minority developers living in, and aspiring to shape, Detroit’s neighborhoods. The initiative expanded to the nation’s capital in 2019 and recently popped up in San Francisco.

Classes dig into budgeting, real estate finance, project management, legal issues and community engagement. Mentors and alumni say the program has evolved, shifting from a theoretical final project to a real-world one, for example, and helping graduates gain access to low-cost financing and sites owned by local governments and community groups.

“There are opportunities for real outcomes,” said Cliff Brown, a Detroit real estate developer who has served as a mentor and adviser since the program’s inception. “This program, like any other program, is not perfect. But I think there’s a strong group of people that are working to truly help people and to listen and to create opportunities.”

Brown, a Toledo native who is looking for development projects in Ohio, expects to be involved with the Cleveland program if it moves forward.

Cleveland Development Advisors asked Capital Impact Partners to look at the city last year.

Local organizations including Village Capital and the Cleveland NAACP also were talking about how to foster a more diverse crop of developers. Other training programs in Cleveland focused on the basic principles of development or commercial real estate professions, but there was a gap in support for practitioners who had development experience but still were struggling to grow.

An affiliate of the Greater Cleveland Partnership, Cleveland Development Advisors provides mezzanine, or secondary, debt and allocates federal New Markets Tax Credits to projects in low-income areas. Village Capital is the lending arm of Cleveland Neighborhood Progress, a nonprofit focused on neighborhood revitalization.

In 2019, Village Capital rolled out Contractors on the Rise, an effort to help minority contractors build up their businesses and renovate homes in the city. That pilot program was largely successful and will be replicated, said Dione Alexander, Village Capital’s president.

But it quickly became apparent that Cleveland needed a sister program for developers, she said. Village Capital encountered business owners who, even with years of experience, lacked guidance, a deep understanding of finances or the resources to hire staff.

To avoid duplicating work, Village Capital and Cleveland Development Advisors teamed up. They asked Capital Impact Partners to talk to 50-plus people, including developers, lenders, attorneys and real estate agents, to get a better sense of the landscape.

The partners said they aren’t ready to release the resulting market study. They want to sit down first with other civic leaders and public officials, including Mayor Justin Bibb’s administration, to talk about the findings and ways to nurture businesses and generational wealth across the city.

It’s still unclear exactly how the new training program, and ancillary services, will be funded.

“We’re being very thoughtful about how we put this together,” Yvette Ittu, president and CEO of Cleveland Development Advisors, said of what she characterized as a nascent collaboration.

Pohl and Jeff Mosley, the initiative’s national leader, said that developers in Cleveland told them about how hard it is to fund land acquisition and, without ample cash on hand, to make it through a predevelopment period that can take years. Developers struggled to navigate what they described as byzantine local processes, from attempting to acquire lots through the city’s land bank to dealing with multiple departments and agencies.

“As one person put it,” Mosley said, “there are many doors to go through and different keys to each door. They don’t know how to proceed.”

Cleveland has a strong track record for creative lending, including civic programs that allow for higher loan-to-value ratios than traditional banks offer, said Josh Rosen of Sustainable Community Associates, a Tremont-based developer that has worked with Cleveland Development Advisors and Village Capital.

But, he said, “it’s a very difficult space to attract private equity to, especially when you’re working in not what are seen as the hot neighborhoods.”

Lack of equity is a huge hurdle for rising developers, particularly for people without family wealth to draw on. Rosen, who had zero real estate experience in 2002 when he teamed up with friends Naomi Sabel and Ben Ezinga to tackle a mixed-use project in Oberlin, participated in the Capital Impact Partners survey last year and is open to serving as a mentor for the Cleveland program.

“We’ve done over $100 million of work, but we still need mentors,” he said. “It’s critical that you’re able to pick up the phone and call people who have done these sorts of things before.”

Cecily King was part of the Equitable Development Initiative’s first cohort in Detroit. The program helped her transition from consulting for other developers to pursuing her own projects. She honed her business strategy, met new people and found fresh ways to collaborate with existing contacts.

“It’s really important for there to be minority developers that look like the communities that projects are happening in, because I think there is often this tension between the community and developer that doesn’t need to exist,” said King, a Black New Jersey native who moved to Detroit in 2015 to work in the city’s housing and revitalization department.

“Representation is incredibly important,” she added, “because real estate is, frankly, one of the most ubiquitous things in society. It’s where you live. It’s where you shop. It’s where you go to school.”

When Thomas Houston first heard about the initiative, he was skeptical.

As a community development practitioner in Washington, D.C., he’d seen plenty of programs that purported to help Black people — but that came to little more than platitudes.

He’s now a champion of the Equitable Development Initiative and an active alumnus, partnering on deals with a fellow graduate and a mentor and tapping financing from Capital Impact Partners.

“This course is designed to teach you all of the stuff that white men kept to themselves for years. … It almost pulls the veil off what we’re not supposed to know about the basics of development,” said Houston, the executive director of a community development corporation called Medici Road.

His organization is starting to look for projects in…