In a recent Counsel of Development Finance Agencies (CDFA) webinar, as part of an Equitable Lending Learning Series, industry leaders gathered to discuss Strategic Partnerships for Sharing Financial Risk. The event featured Dr. Joann Massey, vice president of operations at EDGE, along with Thelma Adams Johnson, president and CEO of ACT! Albany Community Together, Inc., and Linda MacFarlane, executive director of the Community Loan Fund of the Capital Region. The discussion focused on forming deliberate alliances to mitigate risks in impartial lending projects and promote inclusive economic growth, particularly in underserved communities.
Insights on equitable lending and partnerships
In the webinar, Dr. Massey emphasized the crucial role of fair lending initiatives in fostering inclusive economic growth. She highlighted how strategic partnerships can enhance these by leveraging resources, expertise, and funding from various stakeholders.
Equitable lending often comes with inherent risks, including financial, operational, and reputational challenges. Dr. Massey underscored that collaborations are essential for mitigating these obstacles. By spreading the risk across multiple stakeholders, the financial exposure for any single entity is reduced. Sharing the financial burden and operational responsibilities ensures a robust support system, allows businesses to utilize their partners’ unique strengths, and makes the approach more sustainable and scalable.
The role of financial institutions, community organizations, and philanthropy
Dr. Massey detailed how various community stakeholders can contribute to equitable lending programs. Financial institutions provide capital and financial expertise, community development organizations offer local insights and community engagement, and philanthropic foundations supply funding for sustainability. Additionally, technical assistance providers can deliver training and resources for both borrowers and lenders, enhancing the effectiveness of these measures.
Examples of successful collaborations
For EDGE, alliances have proven invaluable in working with both public and private developers to serve the public interest. By aligning public and private goals, we are creating sustainable growth that benefits the entire community.
Dr. Massey shared several successful EDGE partnerships that have led to transformative projects in the Greater Memphis Area. One notable example is the $261 million renovation of 100 North Main, the tallest building in Memphis, which has been vacant since 2014. EDGE contributed a $5 million loan, later increased by an additional $1.8 million, to aid pre-demolition work. This endeavor aims to reactivate the iconic skyscraper and stimulate further economic development in the downtown area.
Another significant venture is the Sterick Building, once one of the tallest skyscrapers in the world. EDGE invested $4.2 million for the acquisition and refurbishment of the building’s parking garage and service areas. This purchase facilitated the necessary parking infrastructure, enabling the redevelopment of the Sterick Building.
Additionally, the Northside Square project, set to open in late 2024, exemplifies the impact of public-private collaborations. This development will provide office space, education and healthcare services, food and beverage areas, and community event rooms. EDGE assisted with a 20-year Payment In Lieu Of Taxes (PILOT) agreement, ensuring affordable housing units and a high occupancy rate.
Financial tools for risk mitigation
Dr. Massey also discussed various financial tools available to reduce risk exposure in equitable lending. Loan guarantees, credit enhancements, risk-sharing agreements, and interest rate subsidies are some of the mechanisms that can lower the cost of borrowing for underserved communities and encourage lenders to extend credit.
The presentation concluded by emphasizing the importance of strategic partnerships in creating successful, sustainable, and fair lending initiatives. These collaborations enable organizations like EDGE to launch and sustain programs that support underserved entrepreneurs and small business owners. By leveraging public and private resources, EDGE drives significant economic progress and creates a path for a more prosperous future in Memphis and Shelby County.