The vehicle was in the works for a while, says Peterson, who explains that he and the SCP chairman Gene Zink--a former top executive at Duke Realty--had known each other for several years, back when Peterson was mayor. "We began talking about a real estate fund that would be different from what SCP had been doing since its founding three years ago," relates Peterson. "This fund would focus on underserved and disinvested urban communities. Historically, many urban neighborhoods have not seen the level of investment in real estate development that suburban areas have seen.
"We felt it was important to try to bring real estate investment capital to these areas that often are neglected by the traditional real estate industry," he continues. "Some have just never received much investment and some were once-thriving areas that saw a lot of capital flight--store closures, the deterioration of housing stock and the loss of other commercial enterprises. We felt like this was an important thing to do. It's something you have to have a strong desire to do."
The firm has a strategy of "triple-bottom line investing". This means it invests not only for monetary returns, but also to bring about positive community benefit and promote green development. "Funds like this have a slightly different mission than traditional real estate funds," says Peterson. As for environmentally conscious investment specifically, he adds, "SCP is a strong believer and supporter of green development and best practices for existing buildings. It has a strong policy on green development. This fund promotes green buildings, LEED-certified buildings and best practices up to and including certification for existing buildings. The overall approach is two-pronged--both from a technical standpoint in terms of certification and best practices, but also from an ethical standpoint."
The fund will invest, as an equity partner, in such ventures where there would likely be a development partner as well, says the managing director. While he would not disclose many specifics about the fund or its investment goals--including the investors in the vehicle, yield expectations, target geographic markets and capital raising goals--he did indicate it would look at a variety of investment options.
"We want to look holistically at communities where the commitment of real estate investment capital can be part of a transformation of a neighborhood," says Peterson. "That may involve residential development, retail or other forms of commercial development. And where there are community partners who have a strong desire to help improve their neighborhood, not just neighborhood associations or community development organizations, but also faith-based institutions, nonprofit organizations, human service organizations, local governments--all of those kinds of people are typically going to be in the mix in this type of larger holistic redevelopment program, and we want to be part of that." The firm is currently raising capital for the vehicle, and has no target date as to when it intends to make its first investment.
Peterson brings considerable experience in the public sphere to his position. He served two terms as Mayor of Indianapolis, from 2000 to 2007. He and his family also established the Precedent Cos., a group of real estate development and financial services companies, and he is a founding member and board chair of the Mind Trust, a nonprofit that aims to dramatically improve public education for underserved students. He is part of several other public-minded organizations.
His background as mayor will help him spearhead this fund, he says. "When I was mayor, the whole issue of neighborhood redevelopment was something I was passionate about, and bringing investment back to disinvested neighborhood is something I worked very hard on," he relates. "I had a lot of experience with the associations and organizations that typically are the stakeholders in challenged urban neighborhoods."
SCP's other fund, Strategic Partners Value Enhancement Fund, is a discretionary vehicle that has already invested more than $1 billion in total capital. Based in Chicago, SCP is a real estate investment management firm that focuses on value-added commercial and multifamily acquisitions through joint ventures with operators.
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