Social Impact Investing

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Real Estate JP Morgan Urban Renaissance Property Fund financial First Investor Investor Multiple Investors Profile: Prudential Equity Equity Impact investment fund JP Morgan Urban Renaissance Property Fund 15% expected return >15% expected return deal Various Real Estate Transactions area of impact Urban Renewal geography United States “ The idea behind investing in the JP Morgan Urban Renaissance Fund was to earn market rate returns while supporting a project that propagates urban renewal and green development.” Preston Pinkett Head of Social Investment Prudential Multiple Investors JP Morgan set out to create the fund by drawing investments from a variety of investors Prudential Financial (http://www.prudential.com/socialinvestments) •• The Social Investments group at Prudential is responsible for investing over $400MM of both the Prudential Corporation and The Prudential Foundation’s funds •• The SRI group takes a 3-tier approach to investing its money: about 40% of the funds target market returns, 20% target significantly below-market returns but high impact investments and the remaining 40% target the middle of the two bookends, usually delivering strong returns, but low compared to the risk undertaken for the investment •• Prudential purchased $10MM of equity in one of the Fund Investment Vehicles (FIVs) of the JP Morgan Urban Renaissance Property Fund •• Prudential was attracted to the investment due to the ability to invest in both green certified development and urban renewal through commercial and residential projects JP Morgan Urban Renaissance Property Fund •• The investment thesis of the fund is targeted at the development and redevelopment of real estate projects in market rate, affordable and workforce housing, retail, mixed-use development, hospitality and other real estate sectors in Urban Renaissance Markets (URMs) •• The fund hopes to target the top twenty URMs in the US including: Manhattan-Bronx, San Francisco, Philadelphia, Chicago, Los Angeles, Minneapolis, and Newark •• The Fund intends, when feasible, to invest in residential and retail properties that are subject to “green” specifications, such as geothermal, and/or solar heating and cooling system, photovoltaic glass, and recycled building materials •• The Fund is also including cultural amenities and market-based after-school educational providers in its retail and mixed-use projects •• The Fund has $175MM of fully subscribed capital with $75MM more in the investor pipeline •• The targeted financial returns of the Fund are at market rate levels of ~15% net of fees 880 Glenwood Avenue, Atlanta •• The Fund made an investment in this 300K square foot luxury mid-rise apartment community in Atlanta •• The apartment complex comprises 325 one and two bedroom units •• The total development cost of the apartments was ~$46MM Impact social/environmental impact •• The 880 Glenwood Avenue investment has won several neighbourhood green recognition awards including: -- 2006 Urban Land Institute Development of the Year -- 2005 Earthcraft House Development of the Year -- 2003 Charter Award from the Congress of New Urbanism •• Greater environmental efficiencies will be achieved through the green building strategy financial impact •• Targeted financial returns at market rate levels of ~15%, net of fees 23
other real assets Lyme Northern Forest Fund financial First Investor Investor Multiple Investors Market rate return less Fund fees Impact investment fund Lyme Northern Forest Fund Limited Partnership Investment in Real Estate Above market rate return deal Chateaugay Woodlands area of impact Sustainable Forestry geography United States “We seek to recover development and nonconservation values of real estate through the sale of conservation easements and other ecosystem services (e.g. wetland mitigation credits and carbon offsets). We like these sales to occur within the first two to three years of our investment. During this time and afterwards, we and future owners are obligated to manage the property sustainably. On timberland properties, our goal is to demonstrate that sustainably managed properties can generate attractive cash flows.” Jim Hourdequin Managing Director The Lyme Timber Company Multiple Investors •• The Lyme Northern Forest Fund (LNFF) investors include high net worth individuals, university and college endowments, pension funds and foundations such as the Rockefeller Foundation The Lyme Timber Company (http://www.lymetimber.com) •• The Lyme Timber Company was formed in 1976 to invest in timberland and real estate using its own capital •• In 2002, the Company created its first timberland investment fund, the Lyme Northern Forest Fund, with $65MM in capital commitments and a 3-year investment window •• In 2005, the Company formed a second fund, The Lyme Forest Fund, with $190MM in capital commitments and a 3-year investment window •• The Lyme Timber Company’s investment thesis is to make timberland investments in partnership with conservation agencies or government entities to mitigate risk. In many investments, Lyme will retain the rights to sustainably manage the timberland on parts or all of the purchased real estate and will sell an option to a partner organisation allowing the partner to acquire fee interest portions of the property with high conservation value and one or more ‘conservation easements’ over the remainder of the property. The conservation easements permanently restrict development and require The Lyme Timber Company and future owners to sustainably manage the property •• The investments are typically exited by sale to another timberland investor; a part of the real estate is therefore perpetually conserved as managed timberland •• The deal sizes range from $4MM - $80MM; the nominal return on the investments ranges from 11-25% Chateaugay Woodlands, Upstate New York •• Chateaugay Woodlands is an 85,000 acre property adjoining the Adirondack Park in Northern New York •• The LNFF purchased the property from Domtar, a forests product company, for $18.5MM in late 2004 •• The purchase was made in partnership with the Nature Conservancy, a conservation agency, which paid $600K for the option to subsequently purchase a conservation easement over the woodland property •• LNFF financed half of the investment using $9MM of New Markets Tax Credit Financing at attractive rates •• In late 2008, LNFF sold a conservation easement to the State of New York for $10MM •• In early 2009, LNFF sold the timberlands, subject to the terms of the conservation easement, for $20 million Impact social/environmental impact •• The sale of the conservation easement to the State of New York (facilitated by The Nature Conservancy) will -- allow full public access to 38,400 acres of the property under a public recreation plan; -- maintain private hunting club leases on the property; and -- restrict all further development of the property. •• The structure of the conservation easement contract requires that sustainable forestry practices continue under successive owners •• The Forest Stewardship Council (FSC) has certified the property as adhering to its standards and criteria for forest management •• The Lyme Timber Company has been recognised with multiple awards for the quality of its management of the Chateaugay lands financial impact •• Taking into account operating income and losses, the sale of the conservation easement, and the sale of property subject to the conservation easement, the investment produced an equity internal rate of return of approximately 22% for the Lyme Northern Forest Fund (does not include asset management and promote fees paid to The Lyme Timber Company) 24 Investing for Impact: Case Studies Across Asset Classes
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Domini, shareholder advocacy and co
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Fund Azzad Ethical Mid Cap Fund Bri
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Fund Fund A Praxis Growth Index Fun
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development in the US, or are made
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concern, and submitting and voting
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sustain land trusts, to a meeting o
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that are often excluded from market
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Some organisations that have used S
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it helps identify the critical sour
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and shareholder trust through posit
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Approaches Some commentators have i
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Wieland and Handfield (2013) sugges
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EthicalQuote (CEQ) tracks reputatio
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Displaying commitment to CSR is one
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Brand Differentiation CSR can help
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takes health and safety, diversity
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advance with the practice of CSR wh
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Stakeholder Influence One motivatio
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Regulation Fifteen European Union c
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jurisdictions. E.g., some jurisdict
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"Impact investments can be made in
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venture capital community. Investor
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countries via local intermediaries.
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determining views of affected commu
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Another measure of economic impact
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The Board for the CCEG was to inclu
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17 Love Relationship Online dating
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Social Value Act 2012 legislation.
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Development released a report outli
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Benefits and Costs of Social Impact
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UK On 18 March 2010, Secretary of S
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US Massachusetts: The second of two
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Page 112 and 113: Notes _____________________________
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Page 116 and 117: Investing for Impact Case Studies A
Page 118 and 119: Contents What is Impact Investment?
Page 120 and 121: What is Impact Investment? Impact I
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Page 146 and 147: Venture Capital Aavishkaar Impact F
Page 148 and 149: eal estate Ignia Impact First Inves
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Page 152 and 153: The New York City Acquisition Fund
Page 154 and 155: Appendix Methodology The Investing
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Page 158 and 159: Cash Quasi Equity Public Equity Buy
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Page 164 and 165: SOCIAL IMPACT INVESTMENT: BUILDING
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SOCIAL IMPACT INVESTMENT: BUILDING
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Global Research 29 November 2010 Im
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Impact Investments: An emerging ass
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Advocacy Foundation Publishers The
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XVI for Drug-Free Communities Landm
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Vol. VIII 2022 ComeUnity ReEngineer
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Vol. XV 2029 Inner-Cities Revitaliz
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The e-Advocate Journal of Theologic
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Issue Title Quarterly Vol. I 2015 I
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The e-Advocate Juvenile Justice Rep
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2018 - The Theological Law Firm Aca
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About The Author John C (Jack) John
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Social Impact Investing

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