2011 Annual Report As a leading source of private sector gap financing, Invest Detroit utilizes a variety of

managed for-profit and non-profit targeted funds to support economic development,

primarily in the City of Detroit. In 2011, these efforts continued to be focused on

support for commercial businesses and residential projects, emerging businesses and

neighborhood-based retail, and the creation and retention of jobs.

Since inception, Invest Detroit has played a lead role in collaborative initiatives to

support the revitalization of targeted areas of Detroit. In partnership with the business,

philanthropic and government sectors, we are building on previous successful

development strategies, and moving forward on initiatives for areas of critical

importance for the creation of a thriving and sustainable city.

Targeted investment is important. Strategic development projects under consideration

for funding by Invest Detroit managed funds will provide for optimal investment and

development results, and have been identified for their purpose, location, and initiative

support from our community partners. These Initiatives include: transit-oriented-

development which will service and redefine Downtown’s Woodward Avenue and Midtown

as an ever greater hub of activity for residents, workers and visitors; the Capitol Park

initiative which will provide for the redevelopment of a Downtown district, resulting in

increased population, retail density, and job creation; and the Retail Strategy, which

identifies and supports place-based urban retail. Plans to open a cluster of 15 to 20 new

retail stores in 2014 are well underway and on target.

To support these endeavors, we have expanded our outreach and fundraising efforts.

Since inception, Invest Detroit grant proposals have resulted in commitments totaling

$11.87 million. In the 2011 application round, Invest Detroit CDE was awarded a $30

million New Markets Tax Credit (NMTC) allocation from the U.S. Department of

Treasury’s Community Development Financial Institutions (CDFI) Fund, which will

complement the $40 million NMTC allocation award received in 2009. Additionally,

Invest Detroit Foundation received certification as a CDFI and applied for a $2 million

CDFI Fund Financial Assistance Grant which is pending. Successful grant proposals in

2011 have resulted in total commitments of $2.58 million.

Invest Detroit Mission & Market Focus

Invest Detroit is a leading source of private sector gap financing that utilizes a variety of

managed for-profit and non-profit targeted funds to support economic development

opportunities in underserved communities primarily in the City of Detroit. The efforts of

Invest Detroit are intended to promote job creation, expansion of the tax base and an

improved quality of life for residents of the communities it serves. Invest Detroit

supports businesses through financing for a variety of needs including:

Business expansion and purchase of equipment

Real estate development and redevelopment

Predevelopment costs

Neighborhood retail

Emerging businesses’ development costs

New Markets Tax Credit Equity

Loans for strategic projects are considered when potential exists for a long-term, clear

benefit which is critical to the economic development of the City of Detroit. This

emphasizes the Fund’s commitment to economic revitalization by financing projects that

would likely not be completed without the participation of Invest Detroit.

Managed Funds

Detroit Investment Fund The Detroit Investment Fund (DIF) is a source of private sector financing designed to be

a catalyst for investment in Detroit by financing qualified commercial and industrial

projects, and residential real estate development to stimulate economic development

and job creation. The DIF provides gap financing intended to leverage owner equity so

that the transaction merits traditional bank/senior lender financing.

During 2011, DIF experienced a slow return to a more normal operating environment.

Management continued its efforts to preserve existing real estate projects and to

protect partner capital while looking for opportunities to grow the loan portfolio. Loans

outstanding at December 31, 2011 totaled $41.9 million up from $39.8 million at the

previous year end. During the year $6.6 million in new loans were funded while $3.3

million in loan pay downs were received and $1.3 million in charge offs were incurred.

Highlighting the new loan volume, were a $3.0 million loan to Global Titanium, Inc.

(GTI) and $2.0 million in loans to The Auburn mixed-use development.

GTI processes titanium scrap and sells reprocessed titanium to the aerospace industry.

It also supplies titanium alloy to the steel and stainless steel industries for use in the

automotive and appliance industries. DIF’s loan to GTI refinanced the $2.0 million

balance of a previous loan and advanced an additional $1.0 million which was part of a

$3.5 million financing package for the company’s expansion into the titanium powder

market.

The total projected cost of the project is $11.2 million. The loan structure includes an

$8.4 million NMTC allocation from Invest Detroit CDE, and a $1.5 million bridge loan and

a $250K subordinated term loan from DIF.

In 2011, DIF management continued its efforts to reposition residential real estate

projects which have been adversely impacted by the continuing problems in the

residential real estate and mortgage markets. In doing so DIF has utilized $2.9 million in

capital to purchase the senior bank loans on 5 projects at significant discounts and is

working with the project developers to lease or sell the remaining lofts/condos. 55 W.

Canfield provides a good example of our efforts to preserve projects and protect partner

capital.

In 2004, loans totaling $900,000 from DIF and

the Predevelopment Fund were funded for

the $5.2 million redevelopment of the 55 W.

Canfield project in Midtown, which would

result in 34 market-rate, for-sale loft units,

4,161 sq. ft. of commercial/retail space and

51 adjacent parking spaces.

The Auburn, LLC was formed to redevelop the

property located in Midtown Detroit. The

project represents the new construction and

redevelopment of a blighted property into a

56,000 square foot, mixed-use facility including

58 market-rate and affordable rental housing

units and up to 11 street-level retail spaces. The Auburn

55 W. Canfield

DIF provided the financing for the purchase,

improvement and expansion of a facility on the

property just north of its existing plant. This is

another step in GTI’s growth strategy. GTI’s

annual volume of titanium processed and sold

increased from 14.0 million pounds in 2004 to 38

million pounds in 2011. During this period GTI

has invested over $18 million in new facilities

and equipment and has expanded its employee

base from 60 to 142.

Global Titanium, Inc

The collapse of the real estate market stalled the project and the developers defaulted

on their senior debt and Invest Detroit loans.

A subsequent forbearance agreement provided for the conversion of the project to

rental and the purchase of twelve units by the development team with additional unit

sales required. DIF purchased the senior lender’s interest for $850K which represented a

significant discount and assumed first position on the collateral. This allowed for

positive cash flow on a rental basis supporting the interest carry on Invest Detroit’s

loans.

Working with the developers, a seller-financed mortgage program is being developed

with 100 percent of net down payments and the principal portion of the mortgage

payments made to DIF to reduce principal. A private mortgage company will market,

package and sell the mortgages when eligible. The loans will continue to be guaranteed

by the principals with a pledge of the remaining mortgages as collateral.

While the markets DIF focuses on have shown improvement over the last year,

management continues to focus on managing the portfolio as well as DIF’s mission of

providing gap financing to support economic development. To date DIF loans and

investments totaling $93.9 million have leveraged $558.9 in total investment.

38 Loans and Investments

$35.9 Million Outstanding

Total Available: $3,670,269

Projected Funding Needed: $10–15 Million

New Center Stamping Kales Building Kennedy Square

Broderick Tower

Investments in Portfolio Companies Have: Developed 1.43 million

commercial Sq. Ft.

Developed 2.15 million residential Sq. Ft.

Developed 335K Retail Sq. Ft.

Created or renovated over 1,300 housing units

Leveraged $559 million in additional investment

Created or retained 1,809 jobs Global Titanium, Inc.

Grand Papa’s Manufacturing & Distribution

DETROIT INVESTMENT FUND

Newberry Hall Restoration

Invest Detroit Foundation

Invest Detroit Foundation (IDF) is a 501(c)(3) organization and certified Community

Development Financial Institution formed in 2010. IDF promotes a higher quality of life

for residents of distressed communities, primarily in the City of Detroit through

attracting new industry, encouraging the development of business, housing,

transportation and other community resources. IDF provides loans and financial

assistance to promote community development and combat community deterioration

and economic blight.

The IDF loan programs provide funding, generally in the form of loans, to qualified

applicants to encourage revitalization and development. In concert with operating the

loan programs, IDF also conducts programmatic activities that include planning and

participating in developing strategies for urban revitalization.

The impact of the IDF loan programs includes the creation of jobs and training for the

unemployed and persons of low income, and providing quality housing for the low-

income community.

IDF funds provide loans which encourage projects where the necessary financing is not

available from traditional sources, or may be available, but at high rates and restrictive

terms. Financing may also be unavailable because of the credit risks of financing a

project in the designated area. Projects will also be evaluated based on whether they

have received support from local community groups, institutions and public agencies.

Loans and the repayment of funds are offered upon terms and conditions that are not

available from traditional private and public financing sources.

IDF Loan Programs include:

Lower Woodward Housing Fund

Predevelopment Funds

Urban Retail Loan Fund

New Markets Tax Credits

First Step Fund

Capitol Park

Lower Woodward Housing Fund

The Lower Woodward Housing Fund (LWHF) is a $15.37 million fund intended to promote

the development of a downtown neighborhood through loans to qualified residential and

mixed-use projects that will significantly increase the residential population of Detroit’s

downtown core. The Fund’s objective is to increase market demand and elevate

property values through concentrated residential real estate development in a targeted

area that attracts residents into the downtown, making the streets livelier, and

providing support for commercial and retail businesses.

The LWHF is designed to work concurrently with other Lower Woodward initiatives that

include the following: Remediation/Raze/Renovate, Streetscape Improvements, and

50/50 Owner Match (i.e. façade improvements, building clean up and parking lot edges).

Collectively these initiatives represent a collaboration of downtown property owners and

stakeholders, the City of Detroit, Wayne County, State of Michigan and Federal

Government, and private Foundations and Corporations.

In 2011, the capacity of the LWHF was fully utilized due to the funding of the two loans described below and the Funder’s decision to repurpose $6 million.

The Fort Shelby Tower Apartments and Hilton Doubletree

Suites project represents 56 market-rate residential units atop

the 203 all-suite hotel which reopened in 2008. The LWHF

provided $1.7 million in financing for the residential portion of

the historic Fort Shelby Hotel redevelopment. Financing

terms provided the developer the flexibility that was needed

as the project was slow to achieve stabilization and operating

cash flow was tight.

The landmark David Whitney Building, located at the

northern entry point of Detroit’s Central Business

District, will be redeveloped into a 125-room boutique

hotel and 108 moderately priced 1- and 2-bedroom rental

apartments. The LWHF provided acquisition financing of

$1.75 million. This long-vacant structure will undergo a

complete rehabilitation and complement the on-going

effort to create population and retail density as part of

the West District / Transit Oriented Development

Strategy.

Fort Shelby Tower

The David Whitney Building

Lower Woodward Housing Fund . . .

Funding for the LWHF was provided by Business Leaders for Michigan (formerly Detroit Renaissance) in concert with The Kresge Foundation, Hudson-Webber Foundation and the Downtown Development Authority (DDA).

Total Available: $155,240

Projected Funding Needed: $6 – 8 million

Westin Book Cadillac Residences The Broderick Tower Kales Building

Urban Retail Loan Fund

The Urban Retail Loan Fund (URLF) is a revolving loan program intended to stimulate

economic growth and support for residential and neighborhood development in Detroit’s

Greater Downtown area by providing loans to neighborhood retail, service, and

storefront businesses. These businesses, in turn, will provide necessary goods and

services to the neighborhood, create and retain jobs, and promote a higher quality of

life.

The DIF created the Detroit Urban Retail Loan Fund in partnership with the Michigan

Economic Development Corporation to assist neighborhood businesses and drive

additional economic activity in the community.

Descriptions of representative URLF portfolio projects follow.

Yoga Shelter

Fountain Bistro is a restaurant located in Campus

Martius Park, which is in the epicenter of Detroit’s

Central Business District. The restaurant opened in

2010 and closed for remodeling in March 2011. A

$100K URLF loan funded the purchase of furniture,

equipment, a new ventilation system and various

other tenant improvements. The restaurant re-

opened in June 2011 and has benefited from the

influx of downtown employees and the robust

programming of the Campus Martius Park which has

an ice skating rink in the winter and lunchtime

concerts in the summer months.

Yoga Shelter Detroit will open a new yoga studio in

a Wayne State University Building in Midtown

Detroit, adjacent to Woodward Ave. One of the

owners has more than 10 years combined

experience as a yoga practitioner, business woman

and community leader. This represents a second

location of an existing local business. The $300K

URLF loan is bridging a $175K Wayne State

University grant as well as assisting with preopening

expenses such as furniture, advertising, inventory,

and carrying costs.

Yoga Shelter Detroit

Fountain Bistro

Urban Retail Loan Fund . . .

Canine to Five

Canine to Five provides dog daycare, training, boarding and grooming services. This Midtown business, located in the Cass Corridor, opened in 2005 and utilized a $50K loan from URLF in 2010 to fund capacity expansion and façade improvements. The demand for these services continues to increase and the owner is seeking additional funding to do another expansion. The staff is comprised primarily of Detroit residents, many of them students from Wayne State University.

Target Area

Greater Downtown including:

Corktown Downtown Eastern Market Midtown New Center Riverfront

Total Available: $658,752

Projected Funding Needed: $6 Million

Metro Foods

Yoga Shelter Canine to Five – Doggie Daycare

Fountain Bistro Campus Martius Park

Slows To Go

Investments in Nine Portfolio Companies Have: Developed 41,850 Sq. Ft.

Leveraged $3.34 million in additional investment

Created 134+ jobs

URBAN RETAIL

LOAN FUND

Predevelopment Loan Funds

Predevelopment Funds are intended to act as a catalyst for commercial, residential and

mixed-use development projects in targeted areas in the City of Detroit.

Predevelopment financing assists both individual developers and community

organizations by providing funding for costs incurred in the early stages of a project,

such as environmental studies or appraisals that facilitate the project’s pursuit of

traditional financing. To be considered for a loan under this program, applicants must

be able to contribute meaningful owners’ equity in their projects, present a viable

business or project plan, and demonstrate a successful track record.

In 2011, the Predevelopment Fund closed the following two loans.

The Detroit Catholic Pastoral Alliance (DCPA) is a non-profit corporation providing

community resources in neighborhoods hit hard by the closing of local parishes. DCPA is

developing a new mixed-use property on the eastside of Detroit in the Gratiot Woods

Neighborhood. Eleven affordable residential apartments on the second floor will

complement first-floor commercial space. The Predevelopment Fund provided a

$200,000 revolving credit facility needed to meet a variety of predevelopment expenses.

In addition to creating new permanent jobs, the completed project will be critical for

expanding outreach activities in DCPA’s targeted neighborhoods.

The Warren/Conner Development Coalition is a non-profit organization working to

improve quality of life issues for Detroit’s eastside communities. Several of its

subsidiaries own properties in various stages of development, all of which are designed to

remove blight, create jobs and assist local businesses. The organization is completely

renovating an historic building for residential and commercial use.

Warren/Conner Development

Predevelopment Loan Funds …

A new parking lot and small park will complement the redevelopment. The

Predevelopment Fund provided a $130,000 loan to bridge the DEGC’s Retail Readiness

Façade Grant Program financing. This loan provided support for an established

community organization expanding its outreach and revitalization activities on the east

side.

Target Area

Predevelopment Funds

target Detroit’s

Woodward corridor and

mirror the Live Midtown

and Live Downtown

boundaries. For

nonprofit and community

development projects,

the entire City of Detroit

is eligible.

Total Available: $807,062

Projected Funding Needed: $1 Million

New Markets Tax Credits

The New Markets Tax Credit (NMTC) Program attracts private businesses and

development by offering tax credits worth 39% of the value of the investment in low-

income communities, claimable over seven years. Invest Detroit CDE received a $40

million NMTC allocation in 2009 and a $30 million NMTC allocation in the 2011 round

from the U.S. Treasury’s CDFI Fund.

The purpose of the Invest Detroit NMTC allocation is to support the development of

commercial and mixed-use real estate projects in Detroit by expanding the availability,

affordability, and access to commercial capital. Capital will be made available for real

estate development, building improvements and new commercial activity. To be

considered for an allocation, projects must be located in an eligible area and applicants

must have relevant project experience and be able to contribute meaningful owners’

equity in their projects. Descriptions of representative NMTC projects follow.

Motown Construction Partners LLC is

renovating the historic, 34-story Broderick

Tower Building located at the entrance of

the Central Business District (CBD) on

Woodward Avenue. When complete, the

Tower will include 127 market-rate rental

units and 23,485 sq. ft. of commercial

space. This project will bring market-rate,

rental units to Detroit's CBD, provide up to

150 construction jobs and, upon completion

and lease-up, provide 75 retail and office

jobs. The Broderick Tower project utilized

a $7 million NMTC allocation from Invest

Detroit CDE as well as loans totaling $2.55

and $2.5 million from the DIF and LWHF,

respectively. Completion of the $57 million

redevelopment project is scheduled for fall

of 2012.

The Broderick Tower

Entrance to the CBD

New Markets Tax Credits . . . Community Health and Social Services (CHASS) is a community-based, not-for-profit

organization formed to provide comprehensive, accessible and affordable health care

and support services, with emphasis on the underserved African American and Latino

populations in Detroit. Construction of a new $17 million health and administrative

center will give CHASS more than three times the amount of space it currently has,

enabling it to double the 15,100 patients it sees annually and creating 52 positions, from

health care and dental provider to clerical staff. The CHASS Center project utilized a

$7 million NMTC allocation from Invest Detroit CDE. This development will bring quality

health care to the underinsured and uninsured populations of Detroit. Funding of the

$17 million project was finalized February 2011 and construction is scheduled to be

complete mid-year 2012.

Community Health and Social Services

First Step Fund The First Step Fund (FSF) represents a partnership of the Invest Detroit Foundation,

TechTown, Ann Arbor SPARK and Automation Alley intended to support a revolving loan

pool to provide financing to emerging and newly-formed small businesses in southeast

Michigan that have successfully completed a training program through a qualified

regional business incubator/accelerator.

The FSF provides emerging companies with access to capital, focused mentoring in areas

consistent with growing the business, and a network that will work to foster demand and

create opportunities. FSF support is meant to address the deficit of financing in the

marketplace and to promote economic development by identifying, nurturing and

fostering demand for early stage, commercially viable businesses resulting in job

creation and increased tax revenue for the region.

The FSF has completed the following since its launch in March 2010

Reviewed 220+ business opportunities Completed 34 investments in 33 companies

27 companies have raised additional capital from other investors Coliant Corporation received a FSF follow-on investment of $50,000 in

December 2011 (hence 34 investments have been made in 33 companies). 45% of FSF investments are located in greater Ann Arbor, 40% are in Detroit

and 15% are in Oakland county 23.6% of FSF investments are in women-owned / women-managed companies.

20.2% of FSF investments are in minority-owned / minority-managed companies.

FSF has invested in four university spin-offs and an additional two start-ups formed by university graduates.

FSF completed 12 new investments in 2011 - FSF Highlights of 2011

Completed first follow-on investment in Coliant Corporation by increasing its investment to $100,000. FSF’s second tranche investment of $50,000 leveraged $450,000 of additional investment in this company with 15 employees.

FSF Portfolio companies: De Novo Sciences, Fusion Coolant and Are You A Human

Represented the three leading winners of the Accelerate Michigan Business Plan Competition

First Step Fund . . .

FSF has deployed approximately $1.55 million to date.

The Fund has realized losses of approximately $50,000 as two portfolio start-ups have

folded. The loss ratio of the Fund is approximately 3.23% which is well below the

established 20% threshold.

Portfolio Metrics:

Generated revenues:

Companies have generated over $9.6 million in trailing twelve-month revenues

Jobs:

Companies have created or retained 202 jobs

Leverage of additional capital:

Companies have attracted $30.3 million from other sources yielding a leverage

ratio of 20X

Patents:

Companies have licensed or filed for 101 patents

Algal Waste Water Treatment Systems

Shepherd Intelligent Systems Fleet management systems

Delphinus Cancer Detection Systems

Ix Innovations Pico Ammeters / Next generation measuring instruments

Accio Wind Energy Systems

Investments in 34 Portfolio Companies have: Generated $9.6 million in

revenues

Leveraged $31.6 million in additional capital

Created 225+ jobs

Produced 101+ patents

Ongoing Revitalization Efforts

Greater Downtown Detroit has benefited from major renewal projects that include the

relocation and new construction of the main bus terminal, structural improvements to

Washington Boulevard, the resurfacing of Capitol Park and new investment on Michigan

Avenue with ongoing improvements to the connector streets. Landmark buildings have

been redeveloped and financing for additional historic redevelopment projects has

recently been completed. Rock Financial has been added to the list of corporate

stakeholders investing and residing in the Greater Downtown and employers are adding

staff. Major initiatives supported by the business and philanthropic community are

planned and underway. Significant investment has been made, however the need is

great to provide funding and support for strategic priority projects to continue the

momentum for revitalization.

Corporate collaboration with the foundation community has helped to drive economic

development efforts that include the successful Live Midtown and Live Downtown

initiatives. The Henry Ford Health System, Detroit Medical Center and Wayne State

University, collectively representing over 30,000 employees, donated $200,000 each to

the “Live Midtown” initiative which is also supported by an additional $600,000 in

matching money from foundations and MSHDA. Live Midtown incentives of over $1.2

million have been made available to residents or potential residents that include up to

$25,000 over five years toward buying a house or other cash amounts for existing and

new renters. Live Midtown is a part of the Anchor Strategy and works along with the "15

X 15" initiative and seeks to attract 15,000 young people with a four-year degree or more

to repopulate Detroit by 2015. The well received Live Downtown program emulates the

Live Midtown initiative and seeks to create population density in the downtown core.

Live Downtown is a five-year, more than $4 million initiative that will provide cash

incentives to employees who choose to move to Downtown Detroit and live where they

work and play. The companies currently participating in the program are Blue Cross

Blue Shield of Michigan, Compuware, DTE Energy, Quicken Loans and Strategic Staffing

Solutions. These recent efforts and emphasis on renewal have attracted residents to the

Downtown.

The need is great to stabilize and assist current and future efforts by developers and

businesses. The 2010 Residential Market Potential for Greater Downtown Detroit Study

identified over 14,500 households as the potential market for new housing units within

Greater Downtown Detroit. Retail and project specific plans will serve to retain and

attract area residents and visitors, and support entertainment, retail and restaurant

venues culminating in a vibrant, active, walkable environment.