Downtown Rocky Mount, N.C., has seen better days.
Home to a thriving tobacco exchange and a prominent railroad junction a century ago, Rocky Mount's downtown now consists of a smattering of sleepy stores surrounded by rundown and boarded-up buildings.
But the dilapidated city center is poised for a makeover, thanks to a partnership between the city and the six North Carolina banks that serve the town of 55,000.
Last month the banks teamed up to form a $2.4 million loan pool earmarked exclusively for rehabilitating the downtown. It is not uncommon for banks to create redevelopment loan pools, but this one is unusual in including banks of all sizes, said Brad Frazier, the operations manager with Community Investment Corp., an arm of the North Carolina Bankers Association that is administering the pool.
"Ones like this pool are few and far between," Mr. Frazier said. "The ones that have been successful are usually huge, and most are in bigger cities like Chicago and not little old Rocky Mount."
Also, the city has agreed to mitigate the banks' risk by guaranteeing 20% of each loan.
Though the pool has yet to make a loan, Mr. Frazier is already trying to replicate the model elsewhere, including the small town of Mount Olive in southeast North Carolina.
"Our desire is to transplant this to other cities in the state and possibly even throughout the Southeast," he said.
Banks that have contributed to the Rocky Mount loan fund range from the $507 billion-asset Wachovia Corp. of Charlotte to the $70 million-asset First Carolina State Bank in Rocky Mount, with $70 million.
The other participating banks are the $102 billion-asset BB&T Corp. of Winston-Salem; the $19 billion-asset RBC Centura Bank (a Royal Bank of Canada unit in Rocky Mount); the $1 billion-asset Southern Bank and Trust Co. in Mount Olive; and the $780 million-asset First South Bank in Washington, N.C.
Michael Bryant, a Southern Bank regional executive who led the creation of the pool, said it took more than a year to get the team of banks to coalesce.
"Everyone saw the benefits of development, but the devil was in the details," Mr. Bryant said. "We had a group of larger banks and community banks with different philosophies, and it took some negotiating between the two to create a program everyone would buy into."
Mr. Bryant, who is also the chairman of the Rocky Mount Chamber of Commerce, said the idea for the loan fund came about during a roundtable discussion at the Chamber on ways to revitalize downtown. All banks in Rocky Mount had an interest in helping to improve the area, but most were wary of making what will likely be small, atypical construction loans, he said.
Banks are looking to make eight to 10 loans with the initial $2.4 million, and Mr. Bryant said that if these are successful the participating banks plan to contribute more for additional projects. The loans are structured as interest-only for up to two years during the construction phase and for the first year of operation. After that they turn into traditional 20-year construction loans.
Less than half of the roughly 50 buildings in Rocky Mount's historic downtown district are occupied, and most of the 50 are in disrepair. The aim is to turn them into mixed-used properties with retail on street level and apartments or condominiums on the higher floors, said Charles Penny, Rocky Mount's assistant city manager.
Several other city-funded projects are in the works, including construction of a new arts center, Mr. Penny said.
"We are really just starting to kick off redevelopment in areas of decline," he said. The loan pool "is just one of many reinvestment tools for downtown."
