How NKY's 3CDC takes risks, accelerates rebirth

Posted at 4:00 AM, Sep 25, 2015
and last updated 2015-09-25 04:00:23-04

COVINGTON, Ky. – The Catalytic Fund of Northern Kentucky is willing to take the kinds of risks that might scare off a traditional bank.

Those risks center on residential and commercial development projects in five older cities that hug the Ohio River shore, from Ludlow on the west to Dayton on the east. Inside those bookends are Newport, Bellevue and Covington.

According to president and CEO Jeanne Schroer, Catalytic was created for projects like the Pike Star development, at 108-112 W. Pike St. in the heart of Covington’s once-thriving downtown business district.

Pike Star, in a building old enough to qualify for historic tax credits, stalled out a few years back because lenders weren’t thrilled about spending $1.1 million on a mixed-use project that included seven apartments over 4,500 square feet of commercial/office space at ground level, Schroer said.

“The lenders weren’t comfortable with commercial space with no pre-lease, and we played a key role in getting the project (fully) funded,” Schroer said.

Part Of The Package

Schroer was quick to point out that a number of other entities played critical roles in the Pike Star project.

“Our transactions are a little non-traditional. We take a little more of a risk, and we don’t want to replace the bank, but we do come behind them with a little piece of it (the funding),” Schroer said. “We are one part of a bigger capital stack.”

Pike Star, for example, received a second mortgage loan for $170,000 from the fund, making the project more palatable to the primary lender by reducing its “exposure” on the property, she said.

Developers for the project are Covington’s Orleans Development, Mark Tischbein and the Center for Great Neighborhoods. UpTech, a technology incubator, occupies the ground-level offices that so troubled the lender providing the first mortgage.

Earlier this month, the Catalytic Fund also received a kind of “stamp of approval” from the federal government when it was awarded a $700,000 grant from the Treasury Department’s Community Development Financing Institution Program. That money will allow Schroer and her staff -- who work out of offices in Covington's RiverCenter high-rise -- to create a pre-development fund.

“This will provide money to prepare sites and buildings for development, including structural assessments and plans for buildings, site acquisition and preparation,” Schroer said.

The grant to the Catalytic Fund was one of three that went to applicants in Kentucky and one of 123 that were awarded throughout the country.

Catalytic also was one of three first-time recipients in the U.S. this year.

Although Catalytic was created in 2008 by Vision 2015 -- now known as Skyward, a long-range planning project for Northern Kentucky with a mission to work inside of the five “urban core” river cities -- all of the fund's investments so far have been in Covington.

Five of the fund’s six projects include apartments and townhomes, and three of those include commercial space on the ground floors in an effort to utilize storefront property that had been vacant.

Schroer said the Catalytic Fund also has made an investment of $500,000 in the Hotel Covington, the $21 million boutique hotel under construction at Seventh and Madison in what had been Covington’s city hall.

After a closing Wednesday on the what is described as the Tanino’s property at 114 W. Pike, the fund has investments of about $2.2 million in the six Covington projects. Plans for Tanino’s call for four apartments and ground floor commercial space in a $560,000 rehab.

Moving Beyond Covington

Schroer said Catalytic has no plans to spend all of its time and money on Covington developments. The fund recently hired Joe Klare to work exclusively with the other cities.

“We want to work in all five of the cities, and we are looking for projects and opportunities,” she said.

The Catalytic Fund played a role earlier this year with the city of Bellevue in an effort to find a developer for the long-closed Marianne movie theater. One developer has shown some interest in the project at this point.

The fund also provided “standby financing” for the $8.7 million Scholar House apartment complex on Sixth Street in Newport. Schroer said her fund was prepared to make a loan if other sources weren’t available.

Newport will be in the spotlight Sunday through the Catalytic Fund’s Beyond the Curb urban living tour, which will feature 13 properties that will be open to the public from 10 a.m. to 4 p.m. Tickets are $15 in advance and may be purchased on Sunday for $20 at 403 Monmouth St., a historic Carnegie Library building.

The first urban living tour was held in Covington in April, and two more are scheduled next year for Ludlow, Bellevue and Dayton.

As might be expected, a couple of Covington boosters are incredibly enthusiastic about the Catalytic Fund’s investments over the last 30 months.

Kentucky Version Of 3CDC

Covington City Commissioner Chuck Eilerman, who sells commercial real estate for a living, had flattering things to say about the fund and Schroer, who has been with the fund since it launched its effort to attract investors in 2008.

“It’s not hyperbole to say that the fund has been transformative,” Eilerman said.

He likened the Catalytic Fund to a smaller, more limited version of 3CDC, the organization that was created to revitalize Cincinnati’s downtown and now plays a key role in rebuilding the Over-the-Rhine neighborhood just north of the city’s Central Business District.

“It’s been key to virtually every new project downtown,” Eilerman added as he rattled off a list of the fund’s investments. “They have made all the difference.”

Hub Of The Wheel

Pat Frew, executive director of the Covington Business Council and the Urban Partnership, also had high praise for the fund and Schroer, who is a member of his board.

“The Catalytic Fund is the hub in the wheel, if you will, for all the transformative economic development projects happening in the Central Business District,” Frew said. “Without the leadership of Jeanne Schroer and her very capable team, these complicated initiatives would not make it to fruition.”

The fund also has played a supporting and planning role in two other recent Covington projects: the Kentucky Career Center, which includes state offices, and the Life Learning Center, a social service agency supported by United Way.

All told, Catalytic has played a role in projects worth about $52 million, Schroer said.

The investors who committed to the $10 million fund are BB&T (formerly The Bank of Kentucky), The Carol Ann and Ralph V. Haile Jr. US Bank Foundation, Central Bank, Corporex Companies, Duke Energy, Fifth Third Bank, First Financial Bank, The Greater Cincinnati Foundation, PNC Bank and US Bank.