The Bay Area Family of Funds is a regional effort to attract private capital into low and moderate-income neighborhoods through “double bottom line” (DBL) investing.
The Bay Area Family of Funds is a regional effort, developed by the Bay Area Council, to attract private capital into low and moderate-income neighborhoods through “double bottom line” (DBL) investing. The Family of Funds leverages its investments in these communities through projects that promote smart growth, address poverty, support local businesses and clean up contaminated sites with market-based solutions.
It has raised over $215 million for DBL investments through four separate funds: the Bay Area Smart Growth Funds I & II, the Bay Area Equity Fund, and the California Environmental Redevelopment Fund. The Funds’ investors consist of banks, foundations, pension funds, insurance companies, individuals, and other corporations, and are expected to leverage $1 billion of investment in Bay Area low-and-moderate income communities over a ten year period.
These market-based investments will simultaneously address economic prosperity and environmental quality in underserved neighborhoods throughout the region. This smart growth program will engage the Bay Area’s disadvantaged communities to capitalize their underutilized workforce, land, and resources in ways that create wealth for existing low-to-moderate income community residents and contribute to continued regional health and well-being.
Investments from the Bay Area Family of Funds require “double bottom line” (DBL) returns; risk-adjusted market rates of financial return for its investors (the first bottom line) and significant economic, social, and environmental returns for the communities (the second bottom line). The second bottom line objectives are focused on the following areas:
A $66 million real estate equity DBL fund, the Bay Area Smart Growth Fund I focuses on projects designed to make a measurable impact in community revitalization, while generating favorable rates of financial returns for its investors. These include investments in retail, office, commercial, and industrial projects, as well as multi-family and select single-family housing opportunities in or near neighborhoods with median household incomes at 80% of Area Median Income (AMI) or less. Since closing in 2002, over 98% of the fund has been invested.
As one of the first regional DBL real estate funds, Smart Growth Fund I has demonstrated that DBL real estate investment can produce significant housing, job, and community benefits in low and moderate income neighborhoods, while simultaneously meeting the financial return objectives of institutional investors. A new fund, the Bay Area Smart Growth Fund II, is currently being formed.
• $80 million invested in 15 deals, 10 deals realized or partially realized, with returns exceeding projections
• 134 permanent jobs created, 2,200 jobs projected, and 1010 jobs preserved for a total of 3,344 permanent jobs – about one job for every $23,325 invested
• 870 for-sale homes being built or renovated, with at least 215 units affordable to purchasers at 80% of area median income or lower
• 1,271,554 sq. ft. of new or upgraded retail development and 577,000 sq. ft. of new or upgraded office/light industrial development
• 6 of the 7 new construction projects utilized green construction measures
Managed by JPMorgan H&Q, the Bay Area Equity Fund is a $75 million venture capital fund. As a DBL private equity fund, it seeks to deliver market-rate venture capital returns while enabling social and environmental improvement in the Bay Area’s LMI neighborhoods. The fund invests in rapidly growing companies that are located (or are planning to locate) in target neighborhoods and can generate high quality jobs and wealth for residents in these communities. Investments focus on rapidly growing technology, consumer products and services, and health care companies that provide benefits to residents of target neighborhoods. Since its close in June 2004, the fund has been helping its portfolio companies implement tailored DBL programs to encourage connections to the communities from their early stages.
• $37.8 million invested in 18 companies to date, producing 746 new jobs since inception. An additional 257 jobs are projected in the Bay Area from these investments.
• Liquidity events for investments in the health-services and cleantech industries.
• Launched a state, regional, and local effort to keep potential investment Solaicx, a solar company, in California to create over 350 jobs.
• Joined with portfolio company, Five Prime Therapeutics, to help in developing the Mission Bay Community Outreach program.
• Joined with portfolio company, Efficas, to highlight successful launch of a new high-value agricultural crop in Contra Costa County.
CERF funded largely through the initiative of the Bay Area Council, is a $34 million bank-funded, statewide, environmental clean-up fund with 25 percent of its investment capital targeted for the Bay Area. CERF is a revolving loan fund with an in-house investment manager, and serves developers, businesses, public entities, and others dealing with contaminated sites. In addition to site remediation, CERF also lends for purposes such as acquisition, construction, pre-development costs, and rehabilitation as long as there is remediation or contamination cleanup involved. The fund began investing in December 2003.
• $60.4 million in transactions through 18 completed deals in California
• Over 570 acres of land have been remediated for brownfield development
• 6 deals have been completed in the Bay Area, representing $13.7 million in transactions
• $12 million in pending Bay Area transactions
With the demonstrated successes of the existing funds on achieving both bottom lines, the Bay Area Council is currently capitalizing a fourth fund, Bay Area Smart Growth Fund II. With a first close at $41.25 million, which took place May 31st, 2007, the fund is now actively exploring real estate investment opportunities around the Bay Area. This fund, like the Smart Growth Fund I, invests in spectrum of real estate projects including retail, office, industrial, and housing (for sale and rental). Mixed-use, urban in-fill, and transit-oriented projects are encouraged as investments that serve to revitalize underserved neighborhoods.
Kennedy Wilson, Fund Manager for Bay Area Smart Growth Fund II, has had a long term commitment to the Bay Area, demonstrated through its two local offices staffed with over 120 real estate professionals. Together with the Bay Area Council, Bay Area Smart Growth Fund II offers investors the opportunity to participate in a double bottom line fund that will produce superior financial returns to the private equity investors (the first bottom line) and superior returns of quality jobs, wealth creation, and community revitalization to the community stakeholders (the second bottom line).