Bank of America & Marshall Heights Community Development Organization
Leveraging the breadth of capital power, innovative solutions and technical skills to ignite a new future for Marshall Heights
Reprinted with permission from Social Compact.
Financing a Nation's Growth Today, as America's largest bank, Bank of America is investing its corporate strengths in helping to build the long-term strength of America's communities and businesses. Bank of America holds more domestic deposits than any other bank nationwide. And, by a wide margin, the bank makes more loans to America's small businesses than any other bank. A Continuing Community Strategy At Bank of America, success is measured in terms of impact, volume and expertise. Impact
In the almost 100 years that Bank of America has been in existence, community development banking has always been a core business strategy. Many would say that Bank of America pioneered the business of community development - lending money to families and businesses to rebuild their community after the San Francisco earthquake of 1906.
For Bank of America, investing in the future of America's lower- income communities is not a compliance response, it is an important business opportunity and core business line. By leveraging diverse business lines, capabilities and flexible products, low- and moderate-income markets have proven to be a profitable and valuable business segment. Twenty-one percent of its low/moderate customers are among the most profitable banking group.
Volume
In 1998 Bank of America provided:
- $9.7 billion in loans to small businesses
- $8.2 billion in mortgage capital to low- and moderate- income customers
- $3 billion in consumer credit to low- and moderate- income customers
- $700 million in affordable housing development financing
- $100 million in grants to support education, affordable housing and community building initiatives
Expertise
Bank of America has assembled and deployed one of the most extensive and talented teams of community development professionals in the country. The largest private sector effort of its type, Community Development Banking consists of more than 650 professionals. By leveraging the Bank of America lines of business - retail sales, conventional small business lending, mortgage and commercial real estate finance - Community Development Banking is able to increase the Bank of America impact in low- and moderate-income communities. Key to its success understanding local markets is its strategic alliances with highly effective local community development organizations.
Partners for Change
Nowhere is this strategy more effectively demonstrated than in Washington, D.C. through its partnership with the Marshall Heights Community Development Organization. MHCDO is a community development organization with over 20 years of experience evolving and executing a very sophisticated, comprehensive neighborhood development strategy that is building strong communities where families can live and work.
The partnership began with a $3.6 million loan for the East River Park Shopping Center in 1986 when MHCDO had less than ten people on staff. In 1987, MHCDO ventured into the development of affordable single-family dwellings and needed a line of credit for acquisition and construction, but its lack of experience presented a challenge to lenders. Bank of America stepped up with a $250,000 line of credit backed by a third party guarantee from Local Initiatives Support Corporation. Today, that line has grown to $1 million with a borrower guarantee and has produced over 60 homeownership opportunities.
As MHCDO developed the capacity to take on larger developments, Bank of America was there with capital reinforcements, such as the construction loans for the 22 townhouse Fort Chaplin project currently under construction. When MHCDO moved into commercial development, the Bank of America Small Business Investment Company provided investment capital in the first minority-owned Chesapeake Bagel Bakery franchise, in which MHCDO is a partner and investor.
The partnership has led to a number of ambitious projects, the most enterprising of which is Northeast Business Park. Bank of America and MHCDO led the effort to transform this abandoned, 4.5-acre industrial site in Washington, D.C. into a thriving incubator for small businesses. The partners' combined talents - the ability to create innovative solutions, a breadth of financial product offerings, and excellent technical skills - were leveraged to ensure the success of this complex development. Unique to the financing was a $1 million equity investment from the Bank of America Community Development Corporation, a rarity in real estate deals because investments are unsecured and much riskier than conventional real estate loans. Bank of America CDC also provided a 10-year, $1 million unsecured loan.
Today, renovations are complete on a 7,200- square-foot small business incubator that houses six start-up, minority-owned businesses. Lease negotiations are underway to also build a new facility that will bring 75 new, higher- paying jobs to the community.
The next challenge and vision: an in-fill housing development plan for three neighborhoods in the same area. This development gives the bank the ability to invest capital, to make home mortgage loans and to attract new retail customers in an underserved area. For the Marshall Heights CDO, bringing new, quality homes to the community is critical to building the long-term strength of the neighborhood.