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Jeremy Nowak
Executive Director, The Reinvestment Fund
Philadelphia, PA

Interviewed by Lynn Adler and Jim Mayer
Producers of Faith, Hope and Capital

Q: How did The Reinvestment Fund get started?

JN: In the mid 1980's, actually around 1984, there was a lot of interest in social investment in this area. I think it was spurred in part by some efforts to rebuild inner-city neighborhoods that needed capital. But, it was also spurred in part by the politics around anti-apartheid work. At that time, when people were thinking about getting corporations to disinvest resources in South Africa, one of the logical questions was, if you're going to take money out of some place, where are you going to put money in? So, the effort to create The Reinvestment Fund came out of interest by three different kinds of constituencies. One group was potential investors, people that were looking for vehicles to put their money in places that fit their values. A second group was people who were working in the inner-city and trying to figure out how to get accessible and flexible capital to do development projects, housing and economic development projects. Finally, there were a lot of people with technical skills in banking and real estate development and accounting and law, who were looking for an institutional medium in which to both express their values and use their skills. Those three constituencies, the investors and borrowers and technicians really were the organizing focus around 1984 and 1985. They came together and got a small grant from a local Philadelphia foundation to hire someone to put the organization together, and that was me. It took off from there. Prior to that I had been working as a community organizer in a neighborhood called Logan, which is in the upper part of North Philadelphia. I had worked for a few years as a block organizer, organizing blocks around housing and crime and safety issues, things like that.

Q: So why did this opportunity appeal to you?

JN: Working in an inner-city neighborhood, I saw that the issue of capital was critical, and that it was an issue that often was avoided, or often wasn't thought about. So I saw that while civic organization, and civic power were fundamental to social change, capital was also. This seemed like an opportunity to combine organizing talent with an interest in how to put capital in the hands of organized people.

Q: How much money did you start off with?

JN: Here? We had nothing. It's like politics, in the best sense of politics--organizing. This is a retail business, person by person, in a relationship. So, we're a $45 million organization right now, but it took us three years to have one million dollars. In the first year we organized about a quarter million dollars, and then we just built slowly. We learned how to lend, how to invest, we built credibility with different constituencies. In the beginning, the people who invested in the reinvestment fund were people who were predisposed to do this out of liberal social values, or people from the church community, often Roman Catholic orders and some of the mainline Protestant denominations. But, as we built more credibility we got more interest from banks and insurance companies, from foundations and from hundreds and hundreds of individuals. So, for us it's always been incremental-- it's been conversation by conversation and meeting by meeting. In that sense we've organized money here in the way we organize people when we did a house meeting at a block. For us, the analogy held and still holds.

Q: There was a lot of organizing going on in the 60s and 70s. How is this different?

JN: We're organizing people as a way to organize money, and we're organizing money to back projects for people who don't normally have that kind of money on their sides. That's one thing that's different. The second thing that's different is we don't spend as much time talking about what it is we're against or what it is we don't like as we spend talking and thinking and planning and investing in things that we like and want. So the vision is affirmative and constructive and it's forward thinking and it believes in a future. The third part of it is that we're an organization that's built on accountability and reciprocity. Reciprocity not only to the customers--the neighborhoods and small businesses or day care centers or community development corporations--but to investors and money, and we take that relationship very seriously. So we're an intermediary between those constituencies and we manage the tension between the interests of those different constituencies. I think that the style of organizing that happened in the 60s and 70s did not always have to manage that kind of tension or didn't always have the same kind of culture of accountability. We're people who have to deliver not just in our social values, but we have to deliver in projects and deals. We have to be planners and bankers at the same time, organizers and investors.

Q: When you started out, what was your thinking about the banks and financial industry? I'm asking because when we first started doing our research here we were thinking that banks were the problem.

JN: When I first started out, I came from the perspective that it was most important to figure out how to get conventional financial institutions to be accountable to the neighborhoods we invested in, how to make them do that. To a large extent I believe that's still important. At the same time I would say that over the last ten years I've watched and understood more about how the financial services industry has changed and has restructured itself, so there are not as many banks. They're larger and they don't look like banks of ten or fifteen years ago in terms of the products that they provide. It's given me a better understanding that there are a couple of different ways to hold banks accountable. One way is to advocate that they provide credit in those neighborhoods, but at the same time to figure out how there are roles for organizations like ours to serve those markets that banks are really not as well positioned to serve. If you are a $70 billion financial institution and you're trade area is twelve different states in the East Coast and Midwest, it's harder to position yourself to make a $65,000 construction loan for a daycare center in Camden. You can understand that to some extent, organizationally. And so, I think the question for us is, how do we help put that bank money there, sometimes as recipients of investments from the bank, sometimes by lending money for the bank. This is an industry that is fundamentally different than ten or fifteen years ago. In that sense, I'm not nostalgic. I'm not trying to bring back a sense of banks as they were in the mythical good old days. We're advocates but we're realists, we're pragmatists.

Q: Why don't we talk about specific places where The Reinvestment Fund is involved-- North Camden, where we just were.

JN: That's actually one of the favorite places of mine we've been involved in. North Camden is one of the poorest neighborhoods in Camden, which is quite a contest to win. It's probably one of the poorest neighborhoods in the region, and also one of the neighborhoods that's the best organized in terms of civic organization. We got involved in North Camden in the first four or five months of lending. We had just a few hundred thousand dollars in the organization and we had a request from the North Camden land trust to provide a rehabilitation loan. Prior to rehabilitating their own houses, the community group there had "squatted" several hundred homes in the neighborhood--these are all abandoned houses--and then won the right to the titles from the city. The best homes they didn't need to rehabilitate, but some of the other homes they needed to rehabilitate. I remember on the first house I looked at for a loan in North Camden, a very small loan--$40-$50,000. It had no back wall and only a limited amount of its side wall, and I remember going back and saying, "Oh my God, I don't know if these guys can pull this off!" We had very little room for any error to start up a little loan fund. So, it was one of these loans that you had to make on faith. There was no collateral value in North Camden, trust me. We made that loan, and since then they have rehabilitated well over a hundred units of housing and have got their own thriving construction company doing some great stuff. I remember when they were going to build the second prison on the water front in North Camden. Remember, Camden is a city where building prisons looks like economic development, and is sold as that. One of the people in the community groups told me that if they built the second prison, someone had estimated that over 25% of North Camden residents would be prisoners, which is a pretty gloomy statistic. The neighborhood group protested the construction of that prison, and they stopped it. But people rightly said to them--at the state level and the city level and bankers and investors--if your vision for this waterfront isn't that, what is your vision for this neighborhood and this waterfront? It was really that question, along with some questions some banks asked us about North Camden, that led to the creation of the North Camden plan, which is this comprehensive ten-year revitalization plan that they're well on their way to implementing. For the first 4-5 years of our lending in North Camden, no banks would refinance any of our loans. They would say they were going to look at it and look at refinancing the loan, but they never really looked at it. I remember talking to a banker, sitting with him having a beer on a late Friday afternoon, and I asked him to just level with me. "What is it? What's the story?" And he said, "My God, there's not even a fire station in North Camden. How can I sell any of these loans to a committee? There's nothing there." And I said, "Well, what would it take?" He said, "What it would take would be a vision, a long-term vision, a sense of where this is going, how a neighborhood is going to build some assets, build some value." So, the other thing that the North Camden plan addressed, besides saying that the neighborhood groups were for something, not just against the construction of the prison, was it addressed the concerns of the investors. And the concerns of investors are that there's going to be some long-term value, that if they invest there, their investment is going to have some stability, some market. It's really the interesting confluence of public policy, private-sector need, and civic organization that sort of comes together in North Camden to do some unusual things in what might be the most desperate market in the area.

Q: Tell us about the Nehemiah housing development you financed in West Philadelphia.

JN: The important thing to understand about Nehemiah is that it's not a housing development. It's a housing development in that we built houses here, but it's really an organizing project. The congregations that came together to create Nehemiah did it as an expression of relationship and power, more than as an expression of themselves as good developers. It was a way for them to show that you could rebuild parts of the city at some scale. You see, there are whole parts of Philadelphia where the real estate markets collapsed, where there are thousands of abandoned units and lots. Previously, moderate income or affordable housing developments in the city happened in very small ways--ten houses here, five houses there, usually very costly, but usually in ways that didn't really turn a real estate market around, or really didn't rebuild a community. If you're going to make a dent in that market, if you're going to try to turn neighborhoods around you've got to redo it at some scale. But to do that takes more than money and it takes more than being a good builder and developer. It also takes being able to aggregate the kind of political power that you need to be successful. So I think Nehemiah is really about power, fundamentally, more than just about building and financing. It's really the story of people coming together with enough power to be able to change the way business was done in the city.