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Double Bottom Line Funds: Successful Private Equity Funds to Revitalize Low Income Neighborhoods

Double Bottom Line Funds: Successful Private Equity Funds to Revitalize Low Income Neighborhoods . 2005 MetroBusinessNet Annual Convening Miami, Florida February 17-18,2005 Belden Hull Daniels, President & CEO Economic Innovation International, Inc www.economic-innovation.com.

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Double Bottom Line Funds: Successful Private Equity Funds to Revitalize Low Income Neighborhoods

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  1. Double Bottom Line Funds: Successful Private Equity Funds to Revitalize Low Income Neighborhoods 2005 MetroBusinessNet Annual Convening Miami, Florida February 17-18,2005 Belden Hull Daniels, President & CEO Economic Innovation International, Inc www.economic-innovation.com

  2. What are Double Bottom Line Initiatives and Funds? • Regional Initiatives oversee Private Equity Funds • $3 billion managed by proven fund managers • Upper quartile private equity returns attract investors • Double Bottom Line Funds • Pull growth back into the urban core • Fully redeploy inner city infrastructure • Fund mixed-use, mixed-income and job generating projects • Generate large scale job, wealth & community impacts • Two Bottom Lines • The First Bottom Line: upper quartile market returns for investors • The Second Bottom Line—The Three Es:Sustainable E1conomic Development; Social E2quity, and Sound E3nvironmental impact.

  3. Double Bottom Line Initiatives & Funds have unique qualities: • Regional Initiatives link low income areas to the larger region • Low income areas only prosper by exporting to the larger region • Regions can only prosper if low income areas prosper • Large Scale makes a substantial impact—Billions! • Private Market Discipline drives the Initiatives and Funds • Double Bottom Line DNA is deeply embedded in the Funds • Successful Fund Managers profit by recognizing and addressing market failure • Initiatives measure and report success with both bottom lines

  4. Double Bottom Line Funds Focus Investments in: • Mixed-use commercial, industrial & housing projects • Affordable and mixed-income housing • Urban infill and brownfield cleanup • Transit-oriented development • Job and wealth creating business ventures • Profitable investment for developers and investors • Measurable job and wealth for community residents

  5. Double Bottom line Funds Are Capitalized to Succeed • Private equity produces higher returns by capitalizing on market imperfections • Proven, incented private management • High investor returns are appropriate to risk • $3 billion invested by banks, pension funds, insurance companies, foundations, endowments and others • Community sponsors oversee most funds • Close working relationship with the public sector

  6. Double Bottom Line Funds Use Private Market Discipline • Fund managers chosen in competitive process • Investors & community involved in selection • Fund managers protected by firewall & at risk • Accountability to community stakeholders • Sponsors participate in economic returns

  7. Successful Fund ManagersFind & Fix Market Failure: • Low Income Neighborhoods are Not Disadvantaged— They are Domestic Emerging Markets! • They have: • The nation’s only untapped labor force • Vast untapped disposable income to buy • Large tracts of underappreciated land close to the Central City • In place, and often underutilized, infrastructure. • Successful Fund Managers address these market failures for the benefit of both investors and community stakeholders • Private Equity Funds only make money when they find and fix a market failure • Community Stakeholders reap the jobs, wealth and community revitalization from success as a domestic emerging market.

  8. Double Bottom Line Funds: Investors Appreciate Returns • Banks like CRA credit plus high returns • Insurance industry likes avoiding CRA plus high returns • Public Pension Funds like DBL plus high returns • Foundations like high corpus returns, not low PRI returns • Faith based investors slow to come on board • Corporations & high net worth individuals are joining

  9. Double Bottom Line FundsCapitalize Strong Demand

  10. Not a just a Fund; a System! Funds I II & III Genesis LA Real Estate Funds

  11. Double Bottom Line Funds have exploded across the US Puget Sound Portland Coastal Maine Boston New York Philadelphia Sacramento Bay Area Baltimore/Washington St. Louis Los Angeles Albuquerque San Diego Shreveport Miami

  12. Not Just a Fund; A Family of Funds! Genesis LA Not-for-Profit Real Estate Fund I $85M Real Estate Fund II $150M Workforce Housing Fund I $60M Business Equity Fund I $30M Shamrock Shamrock Fulcrum Phoenix

  13. Many Models:Genesis LA Family of Funds • Genesis LA Not-for-Profit oversees the Funds • $300 Million currently under management • $1.5 Billion in deals generated • $85 Million Genesis LA Real Estate Fund I • Managed by Shamrock, the Disney Family Fund Manager • Returns far above promised high teens • Success in first fund leads to $150M Genesis LA Fund II • $150Million Genesis LA Real Estate Fund II • Now being built because of success of Fund I • $60Million Genesis Workforce Housing Fund I • Managed by Phoenix Realty • Supports “workforce housing” in LA’s urban core • $30Million Business Equity Fund I • Invests in minority entrepreneurs in LMI neighborhoods

  14. Many Models:$217Million Coastal Enterprises • $53M Coastal Enterprises, Inc.—the NFP parent owner • 25-year-old broad based CDC • Over 1,000 loans and investments in coastal Maine • Deal flow: micro loans, subordinated term loans & venture capital • $25M CEI Ventures, Inc.—wholly owned for-profit mgt firm • $5.5M Coastal Ventures Fund I • $20M Coastal Ventures Fund II • Similar Subsidiary Structures for: • CDFI: $10M CEI Community Ventures Fund • NMTC: $129M CEI Capital Management

  15. Many Models:Massachusetts Life Initiative • 1997 Massachusetts “CRA” Insurance legislation • Community Advocates/Legis Oversee Funds • $100 Million Massachusetts Life Initiative • Totally funded by Mass Life Insurance Industry • Invests with CDCs and Housing Associations • $100M already invested; starting 2nd cycle • Based on 25 yr, $500M MCRC: 18,000 jobs, 60%LMI • Real value not $, but capacity building • $80M Massachusetts P&C Initiative

  16. Many Models:American Ventures • South Florida Urban Initiative Fund • $30M first closing; $75M final closing • Focuses on Miami-Dade, Broward & Palm Beach • dense development • mixed-use, mixed-income • transit-related developments • Knight Foundation initiated process • Investors include: Citicorp, Wachovia, Knight • Albuquerque Urban Initiative Fund • Other regions in negotiation

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