Fund launched to back rehabilitating housing

BUSINESS DIGEST

April 07, 2006|By JAMIE SMITH HOPKINS | JAMIE SMITH HOPKINS,SUN REPORTER

Enterprise Community Partners, the affordable-housing brainchild of Columbia founder James W. Rouse, launched an investment fund yesterday with Deutsche Bank to reach beyond usual sources of capital for revitalization efforts and attract new blood - and money - to the cause.

They hope to raise and invest $15 million. The bank will target corporations and well-off individuals who like the idea of investing in the redevelopment of lower-income neighborhoods but don't have experience doing it. That would expand the circle of funding beyond financial institutions, the traditional lenders.

Columbia-based Enterprise expects the fund to help with the cost of constructing or rehabbing more than 3,000 homes in the next five years for low- to moderate-income families, producing financial as well as social returns. Deutsche Bank will solicit $12 million at 4 1/2 percent interest and $3 million at 2 1/2 percent interest.

"This is a way to diversify your investment portfolio but do it in a way that gives back to the community," said Kristin Faust, manager of the newly formed Enterprise Social Fund.

It's an idea that's gaining favor. The Calvert Foundation in Bethesda, for instance, offers several funds for those interested in investing in community development.

The nonprofit Enterprise Community Partners, formerly known as the Enterprise Foundation, says it invests about $1 billion a year in communities, doing so in part with for-profit subsidiaries that pump money back into the affordable-housing mission. Funds go to community-development organizations working on projects scattered across the country's major cities, including Baltimore and Washington.

Deutsche Bank both invests in and donates money to Enterprise; the idea for the fund grew out of that relationship.

"We have a long history and a great deal of confidence in the work of Enterprise," Gary Hattem, managing director of the bank's Community Development Finance Group, said in a statement. "The fund provides us with the ability to share the opportunity to invest in America's communities."

The fund is expected to get 80 percent of its money from institutional investors and the rest from individuals. Deutsche Bank is guaranteeing 20 percent of the total capitalization of the fund, which will be liquidated after five years.

Community redevelopment is not the highly risky investment it might seem. Faust, who also runs a separate loan fund for Enterprise, said that 22-year-old initiative has a loss rate of less than 1 percent.

jamie.smith.hopkins@baltsun.com

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