Howes: Marygrove rescue shaped by Kresge, founding IHM

Daniel Howes

Detroit — The reinvention of Marygrove College is just beginning.

President Elizabeth Burns and Marygrove College feared foreclosure a little more than a year ago. A multimillion-dollar rescue is now underway.

Undergrads no longer walk the Gothic campus, since last month devoted only to 434 graduate students. The iconic Madame Cadillac building, its Pewabic tile floors worn by decades of soles, stands mostly empty, a reminder of much better days on 53 acres nestled between the city’s Bagley and Fitzgerald neighborhoods.

The college opened in 1927 by the Sisters of the Immaculate Heart of Mary isn’t yet dead. Its leaders and those who helped them avert a catastrophe on McNichols are looking to shape Marygrove’s next act as a hub of urban education — thanks to an ongoing multimillion-dollar rescue by the Kresge Foundation and $10 million in loans and guarantees from the IHM, its founding order.

Marygrove is a familiar Detroit story to anyone who’s been paying attention the past decade: a storied institution evoking the city’s Golden Age lurches to the precipice of collapse, a victim of changing times, demographic shifts and management that failed to react to both before declining revenue and rising debt proved too much to bear. Its downward spiral, however, was not sudden.

By the end of this week, the college's buildings and land are expected to be owned by the Marygrove Conservancy, a nonprofit created last September that would be responsible for maintaining the campus and relieving the school of a pressing financial burden. A $1.2 million assistance fund, established by Kresge for former undergrads, this month became available to past students.

None of this has been easy. Between fall 2013 and fall 2016, undergraduate enrollment fell by more than 50 percent, from 1,041 students to 491. Reckoning with the sharp decline and financial reality offered Marygrove’s trustees a grim choice: cut costs by eliminating undergraduate programs and reducing the faculty by as much as 75 percent, officials say, or risk losing the college to foreclosure, bankruptcy, asset sales or all three.

“We had closure plans,” President Elizabeth Burns said in an interview, referring to December 2016, when the college feared Comerica Bank would begin foreclosure proceedings the next month on an outstanding loan of more than $7 million. “We had announcements written. We knew what we were going to do, we knew what we had to do. That’s how close we were.

“What would have happened? I don’t actually know. But I don’t think the college could have continued because I think they were going to have to sell the property for whatever they could get to pay off the loan, to pay off the debts. It would have been awful.”

It would have been, for Marygrove’s legacy and City Hall’s plans for reviving the surrounding neighborhood. But it didn’t happen, tracing an arc of rescue this town has seen before. Think General Motors Corp., at the time the largest Chapter 11 case in the nation; think the city of Detroit, whose historic municipal bankruptcy culminated in the “grand bargain” to protect pensions and art; think cultural groups forced to reinvent themselves.

Crisis long time coming

Marygrove’s predicament is not unique.

All over the country, small liberal arts colleges with even smaller endowments to fund operations are struggling with slipping enrollment, the lifeblood of annual operating budgets. But at the picturesque campus at the corner of McNichols and Wyoming, geography combined with demography fueled an existential crisis arguably 50 years in the making.

The 1967 Rebellion, the preferred noun at Marygrove, dramatically impacted enrollment. Young students then like Burns, now the sitting president, persevered, eventually becoming a pediatrician and medical school professor. Many classmates did not stay. Enrollment dropped, beginning a shift toward a predominantly African-American and less affluent student body hailing increasingly from Detroit itself.

Interim President Jane Mary Howard promoted a program called “68 by ’68,” which aimed to enroll 68 African-American students for the 1968 academic year, according to the IHM and former Marygrove President Glenda Price, who retired in 2006. Howard succeeded. Because neighboring University of Detroit long admitted women alongside men, the all-women Marygrove in 1972 decided to admit men.

“You just can’t stand still,” said Price, the first African-American and first non-Catholic to lead Marygrove. “And that’s exactly what happened. You wake up and you say, ‘Oh, my heavens, here we are.’ The institution was fragile. It’s been fragile through its entire existence.”

The college’s place in Detroit is rooted in the social justice tenets of the IHM, a Monroe-based order with 301 members worldwide whose median age is 80 and whose bond with Marygrove is undeniable. The IHM’s aging ranks and their commitment to Detroit, to helping the poor and disadvantaged, drove its decision to sell the campus and its buildings to the college in 2009.

It’s also why the order, led by President Mary Jane Herb, agreed to tap its investment fund to halt the collapse of Marygrove. Just before Christmas 2016, Sister Jane, as Herb is called, did something she rarely does: interrupted at prayer, she answered a call on her mobile phone from a number she did not recognize. It was Michael Ritchie, Michigan president of Comerica.

“We’re willing to work something out here,” she remembers him saying. If they couldn’t, Sister Jane and others involved in the negotiations believed, Marygrove likely would slip into foreclosure and its assets could be liquidated to pay creditors.

A wrenching experience

Aaron Seybert had been one of Kresge’s social investment officers for less than a year. He was visiting his parents in Mount Pleasant for the holidays, and three days after that Christmas he holed up in his dad’s office trying to help Marygrove avert disaster.

“My first blush of this was,” he remembers thinking when he first started studying Marygrove’s financials, “this is a mess, a total mess. The business model is fundamentally flawed. Enrollment has been down, down, down. They just had antiquated systems. That lack of information was very challenging to me.”

A former banker for JP Morgan Chase & Co., he reacted as most bankers would, even a veteran of JP Morgan’s community reinvestment practice: “Let this thing collapse and we’ll catch it on the bounce. We’ll just start over. The alternative scenario: if this thing would have gone dark, it would have been a complete and unmitigated disaster.”

For its students. For the college’s legacy as Michigan’s only predominantly African-American small liberal arts college. For the neighborhood, targeted by the Duggan administration in its efforts to revive corners of the city fortunate enough to be near institutions like Marygrove and the University of Detroit Mercy virtually next door to the east.

Financial reality intruded. Comerica held a loan of more than $7 million on the property. The school owed nearly $6 million to the IHM. Wayne County held a lien on the campus for $550,000 the college had borrowed under the Neighborhood Stabilization Fund. The U.S. Department of Education, an underwriter of student financial aid, told Marygrove in August 2016 that it would need to provide a $7.2 million letter of credit within 75 days or students could not receive financial aid.

The federal requirement was later reduced. The Comerica loan was refinanced by Huntington Bank, which does not hold a mortgage on the campus — but, Seybert says, the IHM holds a $5.9 million senior mortgage and Kresge holds a $500,000 million junior mortgage. It was, Sister Jane recalled, “a perfect storm.”

The financial wave threatened to swamp Marygrove, to imperil its undergraduate programs, to force the trustees to declare what is called “financial exigency.” A technical term akin to bankruptcy, that would empower the leadership to pierce the lifetime-job guarantees of faculty tenure.

That’s exactly what the college’s leaders decided to do last summer. And a confidential report from Credo, a higher education consultant, helped senior leaders and the trustees reach some difficult conclusions. Marygrove refuses to make the report public, but Burns (and others) described its findings as critical and “very tough ... tough to read.

“It was holding a mirror to what was going on in the curriculum. It was data, and the data said it was unsustainable. It helped the board make a decision on where it was going.”

Facing a steepening decline in enrollment, they axed the undergrad program. They eliminated 30 of Marygrove’s 42 faculty positions and intensified talks with Kresge and the IHM over the future of the school, its property and how it all could be reimagined in a city hungry for meaningful neighborhood revitalization.

It’s been a wrenching experience — undergrads forced to look for new schools, faculty members displaced, their tenured jobs-for-life reduced to cruel jokes. To save money, an estimated 75 percent of grad students do their work online, a cyber convenience that Imam Steve Elturk proudly avoids.

“It’s been really great to be back in the classroom and meet one-on-one with professors,” said Elturk, 63, imam at the Islamic Organization of North America who is studying for a master’s in social justice. “That’s very unfortunate that enrollment of undergrads has gone down” — an accelerating trend that left the college leadership few choices.

“The last thing we would have wanted to see is that campus sold off for debts or whatever,” Sister Jane said in an interview in her office in Monroe. “We’re committed to the mission.”

How the next step in that mission could be realized is an early work in progress, people deeply involved in the process say. Marygrove and the IHM insist the next iteration should be built around education and serving the local community. They see a preschool and K-12 school potentially located alongside graduate programs, possibly operated by Detroit Public Schools or a charter operator.

Kresge sees the potential to develop a new model for urban education and community redevelopment, a chance to generate revenue for the site and deliver on the promise that the big money behind so much change downtown is turning to where the real Detroiters live and work. And what better place to do that than in a unique Detroit neighborhood?

“Everything we’ve done in the Marygrove situation has two drivers,” said Kresge CEO Rip Rapson. “One is the importance of the institution itself. But second is the importance of the geography. What makes this so compelling is that the institution is critical to the geography. Without Marygrove in some form at the core of this geography’s revitalization, we are in an almost impossible situation.”

The Liberal Arts building on the campus of Marygrove College.

Uncertainties remain

For all the pain and upheaval of the past few years, Marygrove is lucky.

It’s in the right place. It’s got true friends like the IHM, whose sisters are committed to education and community service in Detroit. Kresge has a demonstrated record of investing in Detroit, the Marygrove rescue being one of its most recent projects. The Duggan administration is keen to see that corner of the city continue revitalizing.

And the past decade of institutional failures followed by improbable rescues has created a sort of civic muscle memory. Even as artifacts of Detroit’s past stumble, ad hoc coalitions form to unwind financial obligations, to repurpose missions and to redirect those institutions in more productive directions.

“They do,” said Kathryn Benesh, chair of Marygrove’s trustees and a senior partner at Deloitte LLP. “They bring it back to life, and they think about how to do other things. This is going to be an important legacy for the city ... and for the neighborhood.”

It’s barely the end of the beginning. Transferring the campus land and its buildings to the Marygrove Conservancy would remove those assets and any associated debt from the college’s books. The conservancy would assume the debt, though not all of what is owed by the college.

How much the rescue and continuing operation of Marygrove will cost is anyone’s guess. The school isn’t sure how much its growing bill for deferred maintenance totals, nor is Kresge. The foundation’s board, which already has pumped roughly $16 million into the Marygrove rescue over the past two years, is asking questions. The answer so far: we’re not sure.

The intervention by Kresge and the IHM could be saving more than a 91-year-old college. The neighborhood’s Live6 Alliance economic development arm is just a few years old, and it will have a seat on the conservancy board. Plans to revive the McNichols and Livernois corridors are underway, as are designs for a “civic commons” to pull the neighborhood together.

“That really will be a changed neighborhood three years from now,” said Antoine Garibaldi, president of the University of Detroit Mercy. “To have a whole corner go dark would not have been an ideal situation for attracting business” — or for much else.

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Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.