The Member : Benjamin Franklin Bank

Before Benjamin Franklin Bank agreed to finance the Whitin Mill Project in Whitinsville, Massachusetts, several local banks had been unable to provide Alternatives Unlimited, Inc. with the level of funding it needed to finance the $9.2 million project.

“This is a unique project with unique components, including the green LEED (Leadership in Energy and Environmental Design) designation,” says Blain Marchand, vice president at member Benjamin Franklin Bank.

Mr. Marchand says Alternatives is an organization for which a “plain vanilla financing package” would not suffice. “We needed to get creative in putting together the financing for this project,” he says, adding that it was a combination of state and federal support as well as grant programs that made the financing work.

A major obstacle to financing the initiative was the value of the property as collateral. “We were talking about an older multilevel mill facility with multiple buildings in the Blackstone Valley,” he says. “There are a fair number of these facilities in the area, but they’re not the easiest building to liquidate if a bank had to go that route.

View of the Old Mill building at the Whitin Mill Project.

“Also an issue was the cost of restoring hydropower on the site, which was an expense that most projects would not have,” says Mr. Marchand. “These are add-on expenses for which a bank would typically not get dollar for dollar.”

In addition, the Whitin Mill Project was a mixed-use initiative that included a residential component, community space, a theater, a plaza overlooking the river, and renewable energy components, all of which add to the cost of the project.

“A lot of banks that looked at the project agreed to a loan-to-value that was much more conservative and that wouldn’t have provided the organization with the dollars it needed,” he says.

To make the project viable, Benjamin Franklin sought government support in the form of a $3.3 million U.S. Department of Agriculture Rural Development Guaranteed Loan. “That program allowed the bank to lend up to 90 percent financing — to be much more aggressive in its lending,” Mr. Marchand says. “It also allowed the bank to amortize the debt up to 40 years and provide the borrower with cash-flow relief, which a conventional lender would typically not be in a position to do.”

Mr. Marchand says a key to the financing was the diverse funding the initiative was able to attract. “You would be hard pressed to find a project that is so broadly supported,” he says, adding that financing came from many state and national foundations, including the Kresge Foundation.

“We also needed to get creative in finding assistance for the residential piece,” says Mr. Marchand. “Alternatives identified the Federal Home Loan Bank of Boston’s Affordable Housing Program (AHP) as a prime source of funding for the residential component. We were very happy to have the AHP, which provided a $200,000 grant, as a player in this project.”

Mr. Marchand says some of the initiative’s green features were costly and difficult to finance without grants. “There is some payback from the technology, but it’s very long term,” he says. “So it’s generally prohibitive for many for-profit companies to go after a LEED designation.

“But Alternatives’ nonprofit status made it possible to leverage support from organizations such as the Kresge Foundation, which is known for supporting green initiatives,” says Mr. Marchand. “Nonprofits such as Alternatives have a leg up on for-profit companies in going after these designations because they don’t require as fast a return on their investment.

“If the developer had to pay for everything out of pocket to obtain the LEED designation, the long-term savings, in my opinion, would not have provided a sufficient offset,” he adds. “But given the fact that they were able to bring in the Massachusetts Technology Collaborative, which provided a grant for the hydropower, and the Kresge foundation, they were able to make the formula work.”

Mr. Marchand said Benjamin Franklin did take into account the projected savings from reduced utility costs when calculating the borrower’s cash flow. “When a bank is providing money to any type of real estate project, it has to incorporate into its calculations the carrying costs. We gave them credit for having reduced costs for utilities.” T