Odd Alliance: UM Stake in Real Estate Firm Ties it to Detroit Evictions

July 13, 2019, 6:23 AM

An investigative journalist finds a twisting trail of business links that connect the University of Michigan to at least 20 Detroit eviction notices obtained by a developer it backs with investment money.

Sarah Alvarez, a Bridge magazine contributor, documents actions that tie a February 2018 vote by UM regents to a buyer of 112 tax-foreclosed Detroit homes last October. The company, FDR Investments, is financed partly by the university's endowment fund.

Property records show the company spent about $2 million at last fall’s auction [on 112 homes] and was its single largest buyer. A total of 47 of the homes bought by FDR were occupied at the time of foreclosure, and evictions were filed in court on 20 of those homes, according to Wayne County records. . . .

[UM's] Board of Regents voted in February 2018 to allocate $30 million from its endowment to a related company: the Detroit Renaissance Real Estate Fund, which is owned by FDR’s two principals. . . .

UM records show regents invested in a private equity firm known as Fortus Partners, operated by developers Corey Hanker and Jordan Friedman. This April, Fortus Partners registered FDR Investments, LLC as a Delaware-based corporation with the state of Michigan

Fortus, a West Hollywood firm founded in 2011, says it "specializes in the Michigan single family turnkey rental model and has been providing investors with premium rental portfolios with above-market yields and returns." Its website is nonpublic, accessible only to investors and employees.

Hanker, its 43-year-old managing partner, earned an economic degree from the University of Michigan in 1997 and lives on Wilshire Boulevard in Los Angeles, according to a online directiory.

The partnership "targets undervalued homes that require varying degrees of renovation," Bloomberg posted on the day of the UM regents' vote last year. "The properties are held for rental income, but Fortus expects to dispose of the assets in bulk through a large portfolio sale."

The top of Bridge's presentation Friday.

Alvarez, an investigative reporter who took an in-depth look at the situation for Bridge, is founder and executive editor of Outlier Media, a three-year-old public interest journalism organization in Detroit. She earlier was a civil rights lawyer in New York City and a senior producer/reporter at Michigan Radio, a NPR affiliate based in Ann Arbor.

She personalizes the 1,800-word article, headlined "The University of Michigan invested big in Detroit; now come the evictions," by describing the experience of William Nunley. He rents a two-story house in the Fitzgerald neighborhood of northwest Detroit, where he, his wife and their three children have lived since 2016. The couple "had hoped to buy it from their landlord," Alvarez writes.

A surprise eviction notice last month changed that plan and the family's stability.

The construction worker said he was unaware the landlord had fallen about $6,000 behind in taxes and that the house was sold at Wayne County’s tax auction in October for $17,000. . . .

"We didn't know it was up for auction and we didn't know somebody else owned it," said Nunley, who said he kept current on his rent and had a good relationship with his landlord. "Then we got [termination of tenancy] papers." . . .

Nunley said he was shocked to learn his home's new owner is partially bankrolled by the University of Michigan.

(Staged photo: DepositPhotos)

The family moved two weeks ago to stay with the wife's mother as "a short-term situation,” as Nunley puts it.

A posted summary from the eight regents' first meeting of 2018 leaves it unclear "why the university, which has a $11.9-billion endowment, invested in Detroit real estate or how the deal came together," Bridge's coverage adds.

A memo to regents from UM Chief Financial Officer Kevin P. Hegarty explained that "Fortus targets undervalued homes that are typically two to three bedrooms and require varying degrees of renovation. The properties are held for rental income, but Fortus expects to dispose of the assets in bulk through a large portfolio sale."

Alvarez also quotes UM President Mark Schlissel, as well as an urban planning professor who retired from the university. The investment could make UM an "unintentional de facto slumlord" in case of a real-estate slump of if the two developers don't upgrade foreclosed homes, says Margaret Dewar, the urban policy specialist.

"I worry about the University of Michigan investing in this fund because the most likely outcomes of the fund's purchases in Detroit are counter to the U-M’s mission as a public university with a strong commitment to the city," Dewar said.

Read more:  Bridge Magazine

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