Milwaukee’s disinvested neighborhoods are seeing once-boarded-up buildings revitalized, local businesses uplifted, and new schools and other facilities opened with the help of impact investing.
The most traditional form of philanthropy is a grant or donation, but there are some cases when an impact investment may be a more suitable option for an individual or organization looking for funding. Many recipients of these investments are seeking capital for real estate projects that may benefit minority communities, and that could open doors for them in the world of impact investing. This includes minority-owned businesses and nonprofit organizations.
Two major philanthropic entities in Milwaukee have taken on impact investing as a means to support community development: Bader Philanthropies and the Greater Milwaukee Foundation. Bader Philanthropies committed to impact investing in 2000, while the GMF’s first impact investment was in 2017. Through impact investing, Bader Philanthropies and the GMF have had a hand in many development projects in Milwaukee’s underserved communities.
Impact investing is not exclusive to philanthropic organizations like the GMF and Bader Philanthropies. Northwestern Mutual, for example, announced in October 2023 that it increased its impact investing fund to $175 million to support racial equality initiatives.
‘A new tool in a philanthropic toolbox’
Lisa Hiller, vice president of administration at Bader Philanthropies, said most foundations haven’t yet turned to impact investing because they’re used to traditional grantmaking. But impact investments serve as “an additional approach” to philanthropy.
“It’s a new tool in a philanthropic toolbox,” Hiller said.
Bader Philanthropies is a private foundation while the GMF is a community foundation. This distinction leads to some differences in program structures and may guide impact investment strategies.
The most common type of impact investing at these organizations comes in the form of program-related investments, or PRIs. The PRIs can be loans, equity or guarantees, and must be made with a charitable purpose. Most of the PRIs that Bader Philanthropies and the GMF deploy are low-interest loans. At the GMF, these are frequently loans to small businesses.
Impact investments require recipients to pay back the funding they receive, which is a key differentiator from typical grants.
“What it’s doing is it helps the organizations build their wealth and build their capability to get further credit where they can,” Hiller said.
Kermiath McClendon, impact investing manager at the GMF, said the goal of impact investing is to provide access to capital with a low-interest rate and on affordable terms as well as develop “that economic mobility for disinvested people.” The return on investment that the GMF receives as the loans are paid back allows those dollars to then be “recycled” back into the community, he said.
Franklin Cumberbatch, vice president for engagement at Bader Philanthropies, said many individuals or organizations who are coming to Bader for funding are “unbankable,” or don’t have solid credit or financial stability to get a loan from a bank.
“Even if they get a loan (from a bank), it’s going to be at a higher rate than what we would do, because we’re a charitable organization,” Hiller said.
With some impact investments, a Community Development Financial Institution may be involved. CDFIs can function like banks by providing loans and other financial resources, but their goal is to serve marginalized communities. CDFIs often “serve the nonprofit arena,” Hiller said.
Organizations can go to CDFIs for a loan in the same way that they can go to Bader Philanthropies, Cumberbatch said. In that situation, a CDFI may sometimes turn to Bader to help contribute if the financial risk is too high, he said.
“(The CDFI) could come to us and say, ‘We have this deal. It looks like it’s going to make a world of difference in the community,’” Cumberbatch said.
Bader Philanthropies fills the gap
Since 2002, Bader Philanthropies has committed more than $27 million in program-related investments.
Bader Philanthropies has made 63 PRIs, which includes 42 loans, Hiller said. Bader Philanthropies also made eight equity investments, one equity loan and 10 loan guarantees during that time. These PRIs have allowed Bader Philanthropies to work with for-profit organizations, as it cannot give grants to for-profit companies, Cumberbatch said.
Hiller said Bader Philanthropies made an $11 million equity investment in the past to Milwaukee-based Generation Growth Capital, a growth fund that invests in minority-owned businesses in the Midwest.
“The charitable part of that is investing in struggling or upcoming minority-owned businesses,” Cumberbatch said. “The main inhibitor to grow a minority firm is access to capital. So here we come in and take an equity position in a minority-owned firm to lift up other minority firms.”
In the past decade, much of Bader Philanthropies’ impact investments have been directed toward affordable housing efforts, Cumberbatch said.
“As these small developers build their stack to come up with the funding for a project that they’re doing, we fill the gap,” Cumberbatch said.
In 2021, Bader Philanthropies committed a $775,000 loan to Fox Point-based developer General Capital Group for the MLK Library Apartments project, according to the organization’s website.
The project, which broke ground in 2023, involves redeveloping the Dr. Martin Luther King Jr. Library in Milwaukee’s Harambee neighborhood to include 93 units of affordable housing. The library itself will occupy 17,200 square feet of ground floor space. General Capital and Milwaukee-based Emem Group partnered on the redevelopment project.
“Because there have been so many positive completed libraries in this pattern, we really wanted to make sure there was one in this neighborhood,” Hiller said. “That was really important to us.”
GMF serves as a ‘resource to help grow healthy communities’
The GMF has made 38 impact investments so far, with 19 of them in priority neighborhoods such as Harambee, Brewers Hill and Halyard Park, McClendon said.
The GMF has committed $21 million in impact investments and has deployed $18 million of that total, McClendon said. At least 500 jobs have been created and retained through those investments, he said.
The GMF’s current vision is to deploy $30 million through 50 impact investments from 2020-2025, according to the organization’s website. Members of Milwaukee’s business community can also contribute to the GMF’s impact investment fund, McClendon said.
As part of its impact investing efforts, the GMF makes small business loans, equity investments and loan guarantees; 90% of the GMF’s impact investments are loans.
McClendon said the small business loans, which offer eligible businesses low-interest funding to be paid back in five to seven years, allow the GMF to help multiple businesses, industries and geographic areas at a time.
“It’s to help more of those mom-and-pop shops, and it has really helped us be closer to the community as well as a lot of community-driven organizations,” McClendon said.
Rise & Grind Cafe, a Black-owned business located at 2737 N. Dr. Martin Luther King Jr. Drive, received a $50,000 five-year loan through the GMF’s first round of small business loans. The GMF’s goal for its investment was to “reactivate” the space by providing funds for new equipment, signage and staff, McClendon said. The GMF also “stepped up” to provide COVID relief for the cafe, he said, because federal support for small businesses did not reach “disinvested people as much as the hope was.”
The GMF has also supported Riverwest Co-op, a grocery store and cafe, through impact investing because of its significance as a community resource, McClendon said. The access to fresh food that the store provides is needed in Milwaukee, where there are “disparities and food deserts.” The store also provides jobs and shelf space for other local vendors, he said.
“It is a huge gem for that community,” he said.
There are four focus areas for the GMF’s impact investments: education (including early childhood and K-12), equitable economic opportunity, housing, and the ThriveOn Collaboration.
The ThriveOn Collaboration is a partnership between the GMF, the Medical College of Wisconsin and Royal Capital. This includes the development of ThriveOn King at 2153 N. Dr. Martin Luther King Jr. Drive, which now houses the GMF’s offices and has been designed to be a community hub. ThriveOn King is located in Milwaukee’s Bronzeville district, another of the GMF’s priority areas.
“(Years ago Bronzeville) was a vibrant person of color community and commercial corridor,” McClendon said. “It was a lot of mom-and-pop shops. There’s a lot of history here, especially for Black communities. To be part of that, to invest in that, and continue to see the growth in it, I mean, that’s valuable. It’s priceless. It can be complex at times, but it’s totally worth the time and investment to move forward.”
The GMF has committed $11.5 million as part of its two mission-related investments, or MRIs, in the ThriveOn Collaboration. MRIs are more complex and are longer-term investments than PRIs, and the GMF is looking to make more MRI deals in the future, McClendon said.
In the realm of education, the GMF funded the construction of Dr. Howard Fuller Collegiate Academy’s new high school in Bronzeville, across the street from ThriveOn King. The GMF announced in 2022 that it had committed a $2 million impact investment loan to support the project.
McClendon said the GMF strives to create generational wealth, economic mobility and job opportunities in Milwaukee through its impact investing efforts. It’s important to “reactivate some of these boarded-up buildings and houses” to help establish healthy communities, McClendon said.
“This is one of our tools that we use to create those opportunities to drive the mission to make the work work,” McClendon said. “So that’s one of our reasons of why behind it, like, what else can we do as a foundation to contribute and be that resource to help grow healthy communities? Impact investing is a tool, and we’re trucking along.”
