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Double Bottom Line Funds: Successful Private Equity Funds

to Revitalize Low Income Neighborhoods

2005 MetroBusinessNet Annual ConveningMiami, Florida

February 17-18,2005

Belden Hull Daniels, President & CEOEconomic Innovation International, Inc

www.economic-innovation.com

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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.

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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

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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

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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

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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

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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.

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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

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Double Bottom Line FundsCapitalize Strong Demand

$0

$50

$100

$150

$200

$250

$300

Demand Fund I

San Diego Smart Growth 2002-2010

mil

lion

s

Housing

Comm./Ind.Total

Column 4

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Not a just a Fund; a System! Funds I II & III

$0$20$40$60$80

$100$120$140$160$180$200$220$240

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Years

$ M

illio

ns

Fund I

Fund II

Fund III

Genesis LA Real Estate Funds

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Double Bottom Line Funds have exploded across the US

Bay Area

Puget Sound

Boston

Los Angeles

San Diego

Sacramento

Portland

Miami

Albuquerque

St. Louis Baltimore/Washington

Shreveport

Coastal Maine

PhiladelphiaNew York

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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 Phoenix Fulcrum

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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

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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

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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

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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