Friday, May 25, 2007
Commercial Real Estate Direct Staff Report
Pembrook Capital Management, an investment management company formed by former CharterMac senior executive Stuart J. Boesky, is said to be well on its way to raising a fund that would pursue Community Reinvestment Act-eligible investments.
The New York company is said to have completed raising some $65 million for the fund, Pembrook Community Investors LLC, which could be leveraged into some $400 million of investments. Few specifics of the open-ended fund could be learned - Pembrook declined to comment - but the vehicle is believed to be similar to several other "socially conscious" funds that have been put together.
Such vehicles allow lenders and other institutions that are required to meet requirements under the Community Reinvestment Act, a law that was passed in 1977 that requires lenders to invest in the communities in which they operate.
Among such vehicles is the San Diego Smart Growth Fund sponsored by Phoenix Realty Group of New York. The $90 million fund, capitalized in large part by the California Public Employees Retirement System, makes investments in market-rate housing for middle-income households as well as retail projects in urban neighborhoods in San Diego County, Calif.
While many lenders opt to make CRA-eligible investments on their own by, for instance, writing loans against low-income housing or retail centers in urban areas, many have chosen to invest via funds because of the diversity they provide. Small institutions, meanwhile, might not have the resources to properly vet potential investments.
What's more, such funds, which are generally managed by experienced operators, tend to have shorter investment horizons than such loans. Pembrook's fund, for instance, is expected to have a five-year investment period.
Like other similar funds, Pembrook's will pursue investments primarily because of their economics. After all, if it didn't, it would be tough to sell to prospective investors. Indeed, despite its relatively short history, Pembrook has shown a penchant for making socially responsible investments. Among its first was a $7 million mezzanine loan on the PPL Center, a 252,193-square-foot office building in a federally designated Empowerment Zone in Allentown, Pa. It also recently bought $15 million of bonds issued by the Seneca Nation of Indians that would finance infrastructure on land the Seneca tribe owns in Western New York State.
The fund will likely pursue seniors-housing properties that could be redeveloped in low- to moderate-income areas, as well as affordable housing. It would also invest in properties in Empowerment Zones and in the Gulf Opportunity Zone.
When Boesky had launched Pembrook last year, he emphasized his desire to invest in a socially responsible manner. At the time, he said, "There is a way to be socially responsible in one's investment approach while making economically astute and rewarding investments."
Boesky has a deep background in making such investments. When he joined what was then CharterMac some 22 years ago - it is now called Centerline Capital Group - the company specialized in providing equity for affordable housing properties. It did that largely by putting together investment funds that received tax credits in return for the equity they provided and investing in tax-free multifamily housing bonds.
Comments? E-mail Orest Mandzy or call him at (215) 504-2860, Ext. 211.
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