Catalytic Fund’s investments revitalize local communities
What do you get when you cross a forward-thinking real estate investment fund with the altruism of a community focused nonprofit organization? It’s called the Catalytic Fund and it serves Northern Kentucky communities.
“We bill ourselves as a nonprofit real estate investment company focused on creating catalytic change in the urban core of Northern Kentucky,” says Joe Klare, vice president of Real Estate Finance and Investments for the fund. “Our goal is to take real estate assets that are liabilities in their current state and transform them to create catalytic change; put them back on the tax rolls and turn them into community assets.
“Although we are an investment fund, we are mission-oriented organization. We don’t have shareholders. We measure our return on the quality and success of our developments rather than a dollar and cents financial return. We make investments via loans and equity investments in transformational projects that will have a high community impact.”
The Hotel Covington being an excellent example.
The Catalytic Fund supported Hotel Covington’s development by procuring a pre-development grant through Duke Energy’s Urban Revitalization Program, providing capital acquisition services and making a direct equity investment in the project. Hotel Covington was a challenging project involving the conversion of a Class C office building into a 116-room upscale boutique hotel. Developer Salyers Group restored the architecturally significant structure and created a unique destination for business and leisure travelers and the local community.
“It was a project that really needed to be done right because of its key location in the center of Covington,” says Klare. “Hotel Covington was also a challenge because it was not going to be a nationally branded hotel, like a Marriott or Hyatt.
“So, it was not just a matter of renovating the building, but really creating a unique travel destination, that celebrates what downtown Covington should be.”
Since its renovation, Hotel Covington has become a travel destination. Along with the Braxton Brewery and Madison Event Center, it serves as a transformational anchor for the entire neighborhood, spurring development of nearby businesses as well.
For locals it’s become a place to stay, but also a place to do business and a downtown meeting place. Indeed, Hotel Covington is currently being expanded. The project from the Salyers Group will add 12,000 square feet of street level retail, 60 VIP suite hotel rooms and 27,000 square feet of office space. The expansion will also include an urban bourbon distillery.
Another transformational project backed by the Catalytic Fund are the Kent Lofts, which were completed and started leasing just before the pandemic hit. The project was fully leased in just three months.
To facilitate the adaptive re-use of a historic manufacturing building into 6 loft-style, affordable market-rate apartments, the Catalytic Fund provided an acquisition loan that allowed the development group of Ashley Commercial, Orleans Development and Vision Realty Group to solve complex pre-development issues and assemble the capital stack to fund construction. Once the developers obtained construction financing, the Catalytic Fund provided a subordinate loan to bridge receipt of Historic Tax Credit equity.
“The development team really understood that these kinds of projects don’t come easy,” says Klare. “They take extra patience and a lot of extracurricular work. They worked with the local community to address zoning issues and worked to get historic tax credits, while we worked with them to structure financing for the deal.”
In total, the Catalytic Fund has created over $300 million in development across Northern Kentucky, in some 65 projects to date. There are plenty of new projects on the books as well, which include CiTiSCAPES 2022 in Newport and the Rayme/Burton Building in Dayton.
