Step 6: Create a Catalytic Development Company
We’ve reached the halfway point in the “Turning Around Downtown: 12 Steps to Revitalization” series. Along the way, we have learned a lot of about how development can happen, what types of organizations should be in place to help facilitate the hard work and how to involve the community in the vision. In Step 6, “Create a Catalytic Development Company,” we learn about the reasons traditional real estate developers are not drawn to city centers on the cusp of revitalization and how to get over that hurdle.
What most real estate developers are comfortable investing in are conventional suburban developments like big box stores and strip malls that are primarily car-oriented. Successful downtowns need the opposite. Thriving city centers are integrated, incorporate a mix of uses and prioritize pedestrians. “The very fact that a downtown sorely needs revitalization generally scares off the development community. The market risk is perceived as being too high for most developers, most of whom do not relish being pioneers” (Leinberger 11).
A “catalytic developer” is an organization formed to lead the first project or projects “that the market and consumer research shows have potential demand but are still a risk” (Lienberger 12). The role of the catalytic developers is to make a bet on the future of the downtown, support a broader vision and take on some of the initial risks of being the first. This leadership then demonstrates to the more traditional developers that there is a viable market within the downtown.
“The major challenge a catalytic developer faces…is likely [that] there will be little return on invested equity capital” (Lienberger 12). Based on the risks associated with downtown development in the early years of revitalization, those who invest early are likely to see little to no return on their investments. Over time as success attracts success, the returns on the initial investments will begin to come, but it will take time. “A catalytic developer is a manifestation of “doing well while doing good” or “double bottom line” investing” (Lienberger 12).
Albion is fortunate to have individuals and organizations that can be seen as catalytic developers in their own right.
- Kids ‘N’ Stuff Children’s Museum put their stake in downtown Albion in 2003. Though not a real estate developer, they have maintained and improved their downtown building and serve as an attraction for many visitors to Albion.
- The historic Bohm Theater underwent extensive restoration and renovation thanks in part to the Albion Community Foundation and many generous donors in starting in 2011 and finishing in the fall of 2015. The Albion Community Foundation served as the catalytic developer in this instance and their investment in our downtown sparkles every night when the marquee turns on.
- Albion College and its alumni have served as catalytic developers as well with the creation of the Ludington Center and the Courtyard by Marriott Hotel. Each project was a significant undertaking that has enhanced the fabric of the downtown district but likely would not have happened without those who were willing to take on the considerable risk.
- Most recently, Albion Malleable Brewing Company (opened May 2018), Peabody Lofts (opened September 2018) and Foundry Bakehouse and Deli (opened April 2019) have been lead by individuals who see the broader vision for downtown Albion. These projects were completed in part through financing granted by the Michigan Economic Development Corporation. However, there have been significant personal financial investments made in these projects as well.
Together, each of these projects is a catalyst for the next. With each subsequent success, the next project becomes just a bit easier, but we must keep the momentum. Albion Reinvestment Corporation is committed to continuing the momentum with projects like Superior Street Lofts, which will be located at 315 S. Superior Street and many more. We also hope that those that are watching Albion see our track record for success over the past decade. There IS an opportunity in Albion, and we want you to join us! How can you be a catalyst for Albion today?