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Detroit LISC Launches Business Planning Phase of Innovative Investment Strategy To Build Sustainable Communities in Detroit

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DETROIT, Sept. 22 /PRNewswire/ — Detroit Local Initiatives Support Corporation (LISC) has officially announced implementation of the business planning phase of Organizational Sustainability, and selected a dozen non-profit partner organizations that will receive funding and resources to help move the Detroit LISC Sustainable Communities agenda forward.

This announcement comes at a crucial time when the industry as a whole is adjusting to the impact of the current economic downturn. A catalyst for positive change in the industry, Detroit LISC remains focused on how best to respond to the current economic situation, and at the same time effectively revitalize the neighborhoods of Detroit.

Detroit LISC is investing $3 million over three years to foster and perpetuate its core Sustainable Communities agenda. But, it comes down to more than just dollars and cents. The business planning phase of Organizational Sustainability will zero in on the strategic business planning process, which is designed to examine and assess a community organization’s current business and operating model, as well as to proactively build flexible and resilient operating structures that are resistant to economic upheavals.

“We believe the business planning process will be extremely important in aiding our on-the-ground partner organizations to successfully chart their course for the future, and create a sound working business model that can weather any economic storm,” said Deborah L. Younger, Executive Director, Detroit LISC.

The 12 community development partners that will participate in the business planning phase of Organizational Sustainability, and help further Detroit LISC’s Sustainable Communities agenda are: Central Detroit Christian CDC; Creekside CDC; Focus: HOPE; Grandmont Rosedale Development Corporation; Greater Corktown Development Corporation; Jefferson East Business Association; Messiah Housing Corporation; New Center Council, Inc.; Southwest Detroit Business Association; Southwest Housing Solutions; Urban Neighborhood Initiatives; and Vanguard CDC.

Immediately, Detroit LISC will move forward with dispersing individual capital grants of $25,000 to support each community agency’s operating costs, and assign experienced outside consultants to work hand-in-hand with partner CDCs on the development of comprehensive organizational and business plans.

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After Detroit: Rigorous Research and Credit Selection Is the Key to Investing in Municipal Bonds

Detroit, Michigan, USA

Detroit recently declared bankruptcy, setting off the largest municipal Chapter 9 proceeding in history. There has been and will continue to be a lot of noise in the media, underscoring challenges but also presenting opportunity for experienced investors. In this interview, PIMCO senior vice president and municipal credit analyst Sean McCarthy and senior vice president and municipal bond portfolio manager David Hammer discuss the outlook for the muni market.

Q: What are your expectations for Detroit’s Chapter 9 process now that the city has filed for bankruptcy?
A: We expect that the bankruptcy process will be rife with headline controversy and legal challenges, and investors should prepare themselves for a long and contentious process with a lot of noise. Ultimately, there are several potentially precedent-setting issues that will be decided by the federal bankruptcy judge. It is worth noting that the Chapter 9 process may be unfamiliar to many traditional municipal bond investors as municipal bankruptcies are rare relative to corporate bankruptcies. Unlike the corporate Chapter 11 process, only the debtor (i.e., Detroit) can file a formal Plan of Adjustment under Chapter 9. There is also no liquidation test to protect bondholders in Chapter 9 since a municipality cannot be forced to liquidate its assets. These differences could ultimately set the bar low for overall recoveries. The emergency manager’s restructuring proposal for Detroit contemplates a recovery for unlimited tax general obligation (GO) bonds that is far lower than the historical average for municipal GOs.

The restructuring proposal contemplates a haircut on unfunded pension liabilities, which are protected from impairment in the State Constitution in Michigan, and gives all of the City of Detroit’s creditors equal priority across the capital structure, including holders of unlimited tax general obligation debt.

Any rulings contrary to the perceived priority of payments in the municipal market will be challenged by adversely affected creditors and may serve as precedent for future Chapter 9 filings, making the situation in Detroit relevant to all municipal market investors.

These facts all suggest a long and complex road to the ultimate reorganization of the city’s liabilities. The emergency manager is targeting a September 2014 exit from bankruptcy, but a conclusion may take several years. In addition, the importance of the rulings may ultimately lead Detroit’s case to the U.S. Supreme Court, which may need to decide on issues of state sovereignty, including whether federal law (Chapter 9) supersedes state law (Michigan constitution) with regard to reducing pension benefits.

Q: Is the Detroit bankruptcy an idiosyncratic event or a sign of systemic stress in the municipal bond market?
A: Detroit’s economic collapse was attributable to a variety of long-term secular trends specific to both the city and the U.S. automotive sector, which steadily lost global market share over three decades. These trends initiated a feedback loop that drove the destruction of the city’s tax base. The city’s fiscal condition eventually became untenable when revenues were overwhelmed by rising debt service, including expenses owed to retirees.

Investors in municipal bonds should consider carefully the promises governments have made to public sector employees and whether they are willing and capable of meeting those promises in the future. According to research compiled by the Center for Retirement Research at Boston College, which included data for plan assets for 90% of U.S. states and 30% of U.S. cities, the total unfunded pension liability was approximately $1 trillion for fiscal year 2012. At the same time, employers contributed only 80% of their annual required contributions (ARC) to plans during 2012. These figures exclude public unfunded healthcare obligations, which are generally funded on a pay-as-you-go basis. At PIMCO, our municipal credit research team carefully examines an issuer’s entire capital structure, including obligations from tax-supported debt and pension and healthcare plans, as a key component to our bottom-up credit process. Analysts regularly make adjustments to capture all these obligations in our debt metrics and consider an issuer’s historical contribution pattern to their retiree obligations as well as any reform measure when forecasting the growth of future liabilities over the cyclical horizon.

Q: What are the implications of the Detroit bankruptcy for investors in municipal bonds?
A: The Detroit bankruptcy is challenging the perceived priority of payments within the municipal capital structure. It has long been assumed by many investors that unlimited tax GO bonds and pension benefits were at the top of the municipal capital structure, followed by limited tax GOs, then pension obligation certificates (POBs) and all other general fund claims, and, finally, retiree healthcare obligations. The emergency manager’s plan, however, puts all of these obligations on equal footing. And while we expect that legal challenges and negotiating may restore some hierarchical separation to these classes, lower recovery assumptions for GO bonds are still likely to be the most significant result. The outcome will help define the options for Detroit to reorganize, and also clarify the balance of power between unfunded pension claims and bondholders. If there’s a positive, it is that the Detroit reorganization ultimately may clarify the parameters for negotiations between pensions, bondholders and politicians, and lead to a call to arms for greater pre-emptive pension reform in other stressed states and cities.

Q: Do we expect there will be federal intervention?
A: PIMCO ascribes a low probability for a direct federal bailout simply because the federal government is more likely to let the process play out through the Chapter 9 proceeding, particularly as there is the potential for precedent-setting outcomes. Intervention could also create a disincentive for pensions to negotiate outside of the Chapter 9 process by introducing moral hazard.

The White House recently sent a delegation to Detroit which pledged on behalf of the administration a modest $320 million in federal and private-sector funding for rehabilitative purposes (e.g., transit repairs and blight demolition) instead of debt relief. The federal share of this funding includes largely a redirection of already approved grants and not newly appropriated funds. If the bankruptcy is drawn out over an extended period of time without a foreseeable exit, Detroit may need additional financing, but in our view a major federal bailout is unlikely.

Q: What about Detroit’s water, sewer and other essential services bonds?
A: PIMCO has long favored special revenue essential service bonds over GO bonds. Detroit Water and Sewer bonds are payable by a pledge of and statutory lien on net revenues of the water or sewer system, and as such benefit from provisions in the federal bankruptcy code ensuring that the pledge is not affected by the petition. However, that does not mean that there will not be some kind of haircut on these bonds. First, many of the bonds were issued with higher coupons and were trading at a premium prior to the announcement of the restructuring plan. The current plan calls for redeeming these bonds at par to issue new notes at prevailing market rates that, while still preserving capital, would create financial losses for existing holders. The proposal also calls for a “transaction payment” to be paid senior to debt service on the exchanged notes, which would be an additional cost to existing bondholders. Most recently, the emergency manager revealed in a deposition that the city may attempt to access $1.2 billion maintained in the water and sewer system’s capital fund, which would adversely impact the quality of the system’s services. These costs are dramatically different from the loss severity proposed for GO bonds, and any attempts to modify the terms of the notes or subject bondholders to exorbitant charges would be a source of contention and likely lead to legal challenges, as they have in the past.

Q: Should investors alter their approach to municipal bonds in light of Chapter 9 bankruptcies?
A: PIMCO continues to have an underweight bias on local GO credit. The vast majority of our municipal exposure is in bonds backed by dedicated revenue streams.

It is still important, however, for investors to understand the credit strength of the underlying service area and the related municipality or territory for revenue-backed bonds. Although revenue pledges can offer a secured interest, essential service revenue credits can still be adversely affected if the local service area is weak or if the related municipality is under financial stress. In some instances, the municipality or territory may transfer cash from enterprise funds or municipal utilities to bridge operating deficits or, conversely, support the utility’s obligations with government loans. Rating agencies are also likely to downgrade affiliated revenue bonds as the underlying area becomes more stressed. These weaknesses could result in spread widening, diminished liquidity and an increase in mark-to-market volatility.

Post financial crisis, the municipal bond market has transitioned from a duration-based market to one driven by credit, combining investment grade, high yield and distressed issues. The municipal credit research team looks at the management of municipalities the same way we look at the management of a company, examining its fundamental health and the potential aggregate demand for services in the underlying area. Our municipal credit research analysts build forward-looking models for revenue bonds, which are based on both the future cash flow and the financial strength of the underlying service and incorporate PIMCO’s cyclical forecasts. These projections help us focus on avoiding spread-widening events before they occur. This type of bottom-up analysis is geared to help avoid blowups and can also identify opportunities created by the type of indiscriminate or forced selling we have seen in the wake of the Detroit filing. At the moment, for example, we’re seeing some high quality revenue-backed bonds offered at distressed prices. This repricing is temporary, but it has made many bonds inexpensive relative to their value.

Why Do I Need A Property Management Company in Redford?

Many first time landlords decide to “get their feet wet” by buying a single family home to rent out. The idea of hiring a property manager will probably never enter their minds. They think, “What could be so hard about renting a house?” it is not easy; trust us, that is why there’s property management companies.

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Michigan has very stringent Landlord/Tenant laws. If you don’t follow them to the letter, you could get into serious legal trouble. You are required to include certain provisions in your lease. You are also prohibited from including other provisions. Get it wrong, and your tenants could ultimately sue you.

Security deposits are also carefully regulated. You can only take a certain amount. You must keep it on deposit, or post a bond. You must return it to the tenant within a specific time period, following exact procedures. Your failure to do so can result in your tenant suing you, and you being liable to him or her, for twice the amount of the deposit.

Your municipality may have rental ordinances as well. You may have to register your home with the municipality, have it inspected by their inspectors, and bring it up to code before you are permitted to lease the home. You may have to have the property re-certified every couple of years.

Then, there are the actual day-to-day duties of being a landlord;

  • Advertising and showing your home
  • Finding a tenant
  • Taking applications
  • Credit & background checks
  • Rent collection
  • Maintenance requests
  • evictions when necessary, etc.

Again, there are specific procedures that must be followed. Not following them can get you into trouble.

What a Property Manager Does for You

A Property Manager handles all of this for you. You turn your home over to him, and he handles the rest.

  • He deals with the municipality to obtain a Certificate of Occupancy
  • Advertises and shows the home
  • Takes applications
  • Checks credit and backgrounds
  • Drafts the lease
  • Collects the rent
  • Handles the security deposit
  • Deals with maintenance issues
  • Takes the tenant to court if necessary

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How to Select the Right Investment Rental Property

 

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The key to successful rental property investing is locating and purchasing the best rental properties that will generate consistent income.

You will probably begin by searching for rental properties on your own, but you may want to enlist the help of a real estate broker who specializes in investment rental properties. Often, brokers will learn of properties as soon as they are put on the market and give you notice before the news is widespread. Brokers may also know the neighborhoods and have useful information about taxes, expected rental rates and more.

Even before you start looking at investment rental properties, you need to have clear knowledge of your finances and have all of your assets and debts in order. Know your credit score, and check your credit report with all three credit agencies for any possible inaccuracies that could get in the way of you being approved for a mortgage. Also, how much you can afford to spend.

Do thorough research on the local real estate market. Doing this can help you ensure that you make a purchase and pay the right price; this will help provide a profit margin large enough to handle any occasional vacancies and still leave you with a profit.

Fixer-upper types of houses present their own particular advantages and disadvantages. The advantage is that the initial investment price can be far lower because of the repairs required. The disadvantage is that a house in disrepair can quickly become a money pit when unseen problems arise. Unless you have contracting and construction skills, it is often best to purchase an investment rental property that is less likely to need extensive renovation.

All investment property should be fully inspected before you make a purchase. Hire a professional to ensure that all electrical and plumbing installations meet the codes, that there are no hazards such as lead paint, and that there are no structural issues that could be unsafe or require potentially costly repairs. A complete home inspection can save thousands of dollars in surprise repair bills and is an expense that you should consider worthy. Continue reading

About Detroit Michigan

Detroit is the most populous city in the U.S. state of Michigan and the largest city on the United States–Canada border. It is the seat of Wayne County, the most populous county in the state. It is a primary business, cultural, financial and transportation center in the Metro Detroit area, a region of 5.3 million people. It is a major port on the Detroit River, a strait that connects the Great Lakes system to the Saint Lawrence Seaway. It was founded on July 24, 1701, by the French explorer and adventurer Antoine Laumet de La Mothe, sieur de Cadillac and a party of settlers.

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The Detroit area emerged as a significant metropolitan region within the United States in the early 20th century,  and this trend only hastened in the 1950s and 1960s, with the construction of a regional freeway system. Detroit is the  center of a three-county Urban Area (population 3,734,090, area of 1,337 square miles, a 2010 United States Census) six-  county Metropolitan Statistical Area (2010 Census population of 4,296,250, area of 3,913 square miles), and a nine-  county Combined Statistical Area (2010 Census population of 5,218,852, area of 5,814 square miles). The Detroit–  Windsor area, a commercial link straddling the Canada–U.S. border, has a total population of about 5,700,000. The  Detroit metropolitan region holds roughly one-half of Michigan’s population.

Known as the world’s automotive center, “Detroit” is a metonym for the American automobile industry. Detroit’s auto industry was an important element of the American “Arsenal of Democracy” supporting the Allied powers during World War II. It is an important source of popular music legacies celebrated by the city’s two familiar nicknames, the Motor City and Motown. Other nicknames arose in the 20th century, including City of Champions, beginning in the 1930s for its successes in individual and team sport; The D; Hockeytown (a trademark owned by the city’s NHL club, the Red Wings); Rock City (after the Kiss song “Detroit Rock City”); and The 313 (its telephone area code).

Between 2000 and 2010 the city’s population fell by 25 percent, changing its ranking from the nation’s 10th-largest city to 18th. In 2010, the city had a population of 713,777, more than a 60 percent drop from a peak population of over 1.8 million at the 1950 census. This resulted from suburbanization, industrial restructuring and the decline of Detroit’s economic strength. Following the shift of population and jobs to its suburbs or other states or nations, the city focused on reestablishing itself as the metropolitan region’s employment and economic center. Downtown Detroit has held an increased role as an entertainment destination in the 21st century, with the restoration of several historic theatres, several new sports stadiums, three new stadiums, and a riverfront revitalization project. More recently, the population of Downtown Detroit, Midtown Detroit, and a handful of other neighborhoods has increased. Many other neighborhoods remain distressed and even heavily abandoned.

The Governor of Michigan, Rick Snyder, declared a financial emergency for the city in March 2013, appointing an emergency manager. On July 18, 2013, Detroit filed the largest municipal bankruptcy case in U.S. history. It was declared bankrupt by Judge Steven W. Rhodes of the Bankruptcy Court for the Eastern District of Michigan on December 3, 2013; he cited its $18.5 billion debt and declared that negotiations with its thousands of creditors were unfeasible. On November 7, 2014, Judge Rhodes approved the city’s bankruptcy plan, allowing the city to begin the process of exiting bankruptcy. The City of Detroit successfully left Chapter 9 municipal bankruptcy with all finances handed back to Detroit beginning at midnight on December 11, 2014.

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INDEPENDENT ADVICE

Detroit Property Management has worked with investment funds and high net worth individuals in dealing with each stage of the investment process

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PORTFOLIO DEVELOPMENT

Detroit Property Management has built up a strong network of clients and professionals and is active in acquiring and disposing of properties on their behalf

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PROPERTY MANAGEMENT

Detroit Property Management has experience in developing property in the USA: Assessment of development proposals, Negotiation of contracts

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