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Prudent Investment in Urban Revitalization
Belden Hull Daniels, CEOEconomic Innovation International, Inc
Deborah La Franchi, CEOStrategic Development Solutions
Pension Funds & Urban RevitalizationBaltimore, MD
June 7, 2006
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Double Bottom Line (DBL)Private Equity Funds
1st Bottom line: Superior Risk-Adjusted Market Returns 2nd Bottom Line: Measurable Urban Revitalization
Rapidly growing $6.5 billion industry: “doing well & doing good”
Targets investment in low-income communities
Managed by proven private equity fund managers
Creates superior risk-adjusted market returns for investors
Creates jobs and economic opportunity
Provides flexible, responsive, value-added capital
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Market Discipline; Accountability
Private-sector discipline is central
Risk-adjusted market rate returns (mid- to high-teens)
Fund Sponsor sets the second bottom line goals
Fund Managers chosen in national competitive process
Fund Sponsor makes Fund Manager selection
Investors must approve Fund Manager
Fund Managers protected by firewall & at risk
Accountability to Fund Sponsor & community stakeholders
Fund Sponsor participates in financial returns
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Repeat Institutional Investors
Commercial Banks: B of A, Chase, Citibank, Union, USBank, Wachovia, WaMu, Wells and others
Insurance Companies: AAA, Axa, Hancock, Liberty, Mass Mutual, Mercury, Met Life, NY Life, Northwestern,
Pacific Life, PMI, Prudential and others
Foundations: California Community; Annie E Casey, Danforth, Ford, Jacobs, Heron, Knight, MacArthur, McCune, McDonnell, Sand Hill and others
Public Pension Funds: CalPERS, CalSTRS, Contra Costa County, Connecticut, Illinois, LACERA, LACERS, MassPRIM, NYCERS, NY Common and others
Union Pension Funds: AFL-CIO Housing & Building Trusts, SEIU and others
University Endowments: Washington University and others
High-Net-Worth Persons: Bay Area, Northwest Louisiana and others
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Proven Fund Managers
Access Capital
Boston Capital
Canyon/Johnson
Cityscape Capital
Community Preservation Corp.
Equibase Capital Group
Enterprise Community Investment
Fidelity Partners
Hanover Financial
Hunter Chase
Ironwood Equity Fund
Kennedy Wilson
Landmark Equity
MacFarlane Partners
Massachusetts Capital
Pacific Coast Capital Partners
Phoenix Realty
The Reinvestment Fund
Shamrock Holdings
Urban America
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III. Case Study: Genesis Family of Funds
Genesis LA
Not-for-Profit8 staff &
Board of Directors
Genesis Real Estate Fund I
$85 Million
Mgr: Shamrock
2000
Genesis Real Estate Fund II
$102 Million
Mgr: Shamrock
2005
Genesis Workforce
Housing Fund I
$103 Million
Mgr: Phoenix Realty Group
2004
GenesisGrowth Fund I
$30 Million
Mgr: Fulcrum Capital
2003
Genesis Community
Investment Fund
$1 Million
Mgr: Genesis LA
2000
Genesis NMTC Fund
$120 Million
Mgr: Genesis LA
2005
$450 million capital
$1.5 billion deals in LMI areas
100% Self-sufficient not-for-profit
Continues to create Funds
Works with small – medium sized developers
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Case Study: Genesis Workforce Housing Fund I
Managed by: Phoenix Realty Group
For-Sale Housing: Single Family Detached, Townhouses and Condo
S. California’s Underserved Communities (LMI)
$102 million: Financing for Real Estate Development
Investment of $2 to $20 million
Fund to Provide Institutional Capital to Local Developers
Income of Buyers: 80% - 150% AMI, flexible to 200% AMI
Nurses, Teachers, Firefighters, Police, Office Workers
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Case Study: Genesis Workforce Housing Fund I
Avenue 26 Condominiums
City of Los Angeles, Lincoln Heights
New construction of old factory site
Adjacent to Gold Line Metro station
Not-for-profit Developer
165 for-sale residential units
Child care center
Community arts center
Retail/office component
Senior affordable and tax-credit units to be built on adjacent site
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Case Study: Bay Area 2nd Bottom Line
Soon: Four funds, $300 million capital, $1 billion in deals
First Fund: $66 million Bay Area Smart Growth Fund I
First 3 Years: $51 million invested in 10 projects:
100% of projects are smart growth & “Three E”
1121 permanent & construction jobs created & retained
633 units of affordable for-sale homes developed
1.2 million sq. ft. of commercial space developed
1.6 million sq. ft. of affordable housing developed
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IV. Creating a Maryland Regional Workforce Housing Fund I
$60 - $90 Million Maryland Fund generates $$180-270 Million in deals
100% Smart and Sustainable Growth projects
Preservation and conservation of open and recreational space
Revitalization of downtowns with mixed-income and mixed-use projects
Family housing for firemen, school teachers, policemen, nurses etc.
Transit-oriented development for livable & walkable communities.
Maryland Enterprise Fund Sponsor oversees Fund.
Enterprise Community Investment, Inc. Fund Manager brings track record.
National pool of repeat institutional investors have high interest
Now More Across Country: New England Workforce Housing Fund I
Project sizes range from $15 – 30 Million
• Commercial Banks• Pension Funds• Insurance Companies• Corporate Investors• High-Net Worth Individuals
• Raises $100M from Investors• Private -Sector Fund Manager• Makes investment decisions
3. I nve s t o rs
Project B
Converting dilapidated buildings to new attractive workforce
Condominiums
Enterprise Community Investing , Inc. is creating a Maryland Workforce Housing risk -adjusted market-rate-of-return private equity fund . This $100 million Fund will target housing for families that are at 80% - 150% of average median income .
4. Real Estate Projects
Project C
Re-position abandoned buildings for new workforce housing
developments
$3M – 20 M each
• Shares in Fund Manager’s fee annually • Financially self -sustaining from Fund Manager’s fee• Helps develop early stage projects
• Provides capacity to developers• Receives 2% annual management fee • Invests the $100M ($1M – 20M in each project )• $100M investment plus profit is returned to investors
(target net returns to investors of 12% to 16%)
2. Maryland Regional Workforce Housing Fund I
Project D
Other Similar Housing Investments
Project A
Single Family Detached Homes affordable to the workforce
$ 100 Million Inves tments
• Manages creation of the Fund• Receives seed funding back once Fund is closed • Hires staff - regional economic development
assistance
1. Not- for -Profit Sponsor : Enterprise Maryland
Maryland Regional Workforce Housing Fund I
P rojects return invested capital plus profi t
$100 M Investment
$100 M Investment + Profit
$100 Million + Profit