City neighborhoods nationwide, like Roxbury’s Dudley Square in Boston, could benefit from the recently launched Community Revitalization Investment Program.

An investment program recently launched by a Boston-based firm may help jumpstart much-needed revitalization efforts in neighborhoods of cities across the United States and within Massachusetts. But unlike most government-connected programs that specifically target low-income residents and often use grant money, this infusion of funds into inner-city areas is a for-profit venture, aimed at those in a middle-income range.

AEW Capital Management, a real estate investment advisory firm, several weeks ago began looking for projects nationwide that might make good candidates for its new Community Revitalization Investment Program, backed by an institutional investor who has committed $50 million in equity to the endeavor.

“We’re looking for a way to provide ongoing revitalization to the community,” said Martha Thurber, a principal and director of communications for AEW.

Rather than just focusing on the residential portion of revitalization or its commercial aspect, Thurber said her company feels that the right mix of both is needed for successful revitalization, and that will be reflected in the scope of projects selected for the new program.

“We’re not just going to look at multifamily housing,” Thurber said. “Primarily, we will be looking for a mix of multifamily and retail projects.

“Retail is what brings people into the neighborhood. It serves as a center for people to gather.”

Thurber added that AEW is also looking at single-family investment opportunities. “If you have homeowners invested in a neighborhood as well, it helps to stabilize the area,” she said.

Because the Community Revitalization Investment Program is focused on already-developed urban areas, many of the projects likely will involve adaptive re-use of existing structures, such as turning old industrial space into new residential and mixed retail units, according to officials at AEW. But, in keeping with the idea that successful community revitalization includes a mix of just about everything, other projects may also find their way onto AEW’s radar screen.

“It’s not out of the question that we would work on something industrial,” Thurber said. “It’s just expected the majority will be retail or residential.”

Efforts to source potential projects began only about seven weeks ago, but the investment program’s roots at AEW go back about a year.

“This is a client with whom we’ve been working on a variety of programs, and this is something they brought to us to do for them,” Thurber said, adding that the client wished to remain unidentified. “We responded to their needs. We have a lot of contacts in the local communities where we’ve been working for 20 years.

“We will be working with people we’ve worked with in the past, as well as developing relationships with folks we really didn’t know before. But from our client’s perspective, we were good in the communities”

Thurber said the idea behind the program was to have an impact on inner-city residents whose incomes fall within the range of 80 percent to 120 percent of the area median.

“We want to hit either shoppers or residents who have that income,” she said. “The tax-advantaged programs that are out there are targeted toward lower-income residents. But in order to have a positive impact on an area for the long term, you need to have people around that can afford to shop or live in market-rate housing, not just benefit from a tax rate.

“The project has to make sense on its own; that’s why we’re looking at this income range.”

Somewhat Insulated
AEW is looking at major metropolitan areas coast to coast for the projects which, while they may bring to mind inner-city revitalization, need not be located in the inner city. In places like Boston, for example, many of the likely candidates for financing will be located in inner-city neighborhoods because of the layout of the area. In areas where the city stretches far out, such as Los Angeles or Houston, Thurber said projects could be located on the outskirts of town.

“Our client provides an equity cap in areas that are not generally targeted,” Thurber said. The money provided through AEW would be leveraged with third-party debt to make up 65 percent to 75 percent of a project’s cost. Thurber estimated the program’s $50 million in equity would result in about $200 million in overall investment.

“This is the first type of investment program we’ve done with this focus,” Thurber said of AEW, which manages about $6.1 billion in capital that is invested in $9.3 billion of real estate assets and portfolios. “We’ve been around for 20 years … and we’re well-known. It’s one of the reasons we were selected, and we’re optimistic that we’ll do well.”

That optimism comes at a time when warning signs suggest the economy is cooling down, which could affect financing for development projects.

“This program was first developed at a time when the economy was a little brighter,” Thurber conceded. “But our research group feels the multi-family and retail market will be less affected. The demographics of the multifamily market are not going to change just because the economy slows down.

“The people in these communities, most of them are renters and most of them will continue to be renters.”

The retail investment component of the program also likely will not be affected by an overall economic downturn, Thurber predicted.

“The retail we’re targeting is somewhat insulated from what’s happening with the rest of the economy,” she said, explaining that the retail envisioned by AEW includes smaller stores that provide neighborhood residents with necessary goods and services.

“People will still need to buy food,” Thurber said. “If you were talking about a regional mall, the stores there might be more exposed to what happens in the economy. These are the essentials.

“Hopefully, we can get past the equity hurdle. We’ve only been doing this for a month or six weeks. We’re very optimistic that placing capital in these projects will be profitable for everyone involved.”

There is no firm deadline for investing all of the $50 million, but Thurber hopes to put all of the money out in about a year’s time. No announcements of project financing have been made as of yet.

“We’re looking for transactions,” she said. “Once we get one or two closed, and get a good project financed, hopefully we can build on that momentum.

“We’re not out trying to find financing for some trophy office project, which makes it more difficult. But the impact of this will be more beneficial.”