Crain’s Detroit Business
June 21, 2022
A new $11 million fund is aiming to help Black and Brown developers in Detroit access capital.
Ebiara, named after a type of wood from West Africa, is funded by $10 million from the Troy-based Kresge Foundation, with Invest Detroit contributing $1 million and acting as fiduciary and Detroit developer Roderick Hardamon’s firm, Urge Imprint, serving as operating partner.
It is unique in the Detroit market in that it provides funding directly to businesses for operating capital and building a transaction pipeline instead of issuing loans directly to projects by developers of color.
“If you’re really going to try to provide an opportunity for wealth creation, scalable economic advancement, so that Black- and Brown-owned development firms — not just developers, but true firms — have the opportunity to have systemic impact, we have to change the model in which they are funded,” said Hardamon, chief executive officer and chief strategist for Urge Imprint, which is also providing technical assistance. “The goal here is to put the capital into the firms, not just the project.”
Hardamon credited efforts like Capital Impact Partners’ Equitable Development Initiative; the Affordable Housing Leverage Fund by Detroit Local Initiatives Support Corp., the city and Michigan State Housing Development Authority; and the Detroit Housing for the Future Fund with providing critical funding and training for Black and Brown developers and said they are “wonderful components of the ecosystem that are critical and necessary.”
The fund, announced Tuesday, expects to be fully deployed within three years and have a multiplier effect of 10 to 20, meaning that it is anticipated to result in $100 million to $200 million in investment.
Ebiara anticipates working with approximately 10 developers, according to a press release.
There are effectively two tranches to the fund: The smaller tranche for loan capital to small development firms and the much larger remainder of the fund to be dispersed in larger batches, said Tosha Tabron, social investment officer at the Kresge Foundation, and Hardamon.
Ebiara will serve as a key gap, Tabron said.
“The patient capital that comes usually in the form of equity is not there. That comes from people who have generational wealth or access to generational wealth,” Tabron said. “In order for more projects to get done in the city of Detroit by people who live here, we really needed to have some dollars that were patient, that can wait. They could sit for 10-plus years. That’s just not available in the marketplace unless it’s from friends and family.”
For early-stage developers, Ebiara can be a lower-cost alternative to traditional equity partners, ranging in the 6.5% to 10% range compared to perhaps 15% interest for traditional equity or more than 17% for venture capital, Hardamon said. In addition, Ebiara offers coaching and technical assistance working through city and other agency processes and approvals.
The larger tranche can be used for anything from office supplies to hiring people, Tabron said.
“What we want them to do is grow an operating business that will continue to develop affordable housing in the city of Detroit or commercial development in the city of Detroit,” Tabron said.
Tabron said she hopes this pilot fund can serve as a springboard, eventually growing to perhaps $100 million or more.
Keona Cowan, executive vice president of lending for Invest Detroit, a major financial player in Detroit development, said the program is just a start.
“This is certainly a pilot and hopefully a catalyst for future investment,” Cowan said.
“This is going to be supportive in alignment with our focus our mission, which is lifting up and providing access to capital for the unbanked, underbanked community and frankly, if we look around at our minority development community, access to capital for their projects is one thing, but access to capital from an ability to meet equity calls in their projects is something totally different.”
To qualify, firms must be 51% or more owned by someone from the BIPOC community.
Much of the downtown Detroit development landscape is shaped by white developers, with a handful of exceptions, although a raft of projects — at varying stages of the process ranging from pre-development to construction — outside of the central business district have been taken on by Black developers, working either by themselves or with development partners. Those developers range from Hardamon himself to Clifford Brown, Sonya Mays to Dennis Archer Jr., Jason Jones to Edward Carrington.