As the head of the New Boston Fund’s Urban Strategy America Fund, Kirk Sykes makes investments with an eye towards a triple bottom line: Financial returns, community development and sustainability. “The first bottom line can benefit, and at the same time, you can internally subsidize the ability to make the project desirable to a broader population,” he explained.
Before helming the USA Fund, Sykes worked as an architect and a developer. He was recently named deputy chairman of the board of the Boston Fed. “I joke that, if you can get past the pain, it’s really quite an exciting time,” he said. “There are quantum shifts happening in the way financial institutions work, in the way compensation is handled, and at the same time you’re having quantum shifts around the question of how do you heat a home? It is an exciting time, and we have to find a way to capture that message, so people don’t go to work beat up every day.”
Kirk Sykes
Company: New Boston Fund’s Urban Strategy America Fund, Boston
Title: President and Managing Director
Age: 51
Experience: 25 years
How do you navigate this environment, deciding when it’s time to batten down the hatches, and when it’s time to make moves again?
We haven’t seen a plethora of opportunities. People want to buy, but there isn’t that much to buy. Part of it is the size of the funds. [New Boston’s] USA Fund is a modestly-sized fund, a total of $190 million, and half of that is already invested. We consider ourselves fortunate that we don’t have to find that many great opportunities. We have to find some, ten or so in the next year and a half. If you’re a billion-dollar fund, either you have to make much larger bets, or you need to find a lot more small deals, and your risk goes up exponentially.
Have your yield requirements changed?
It’s more a change in terms of the types of investments. It’s a focus on cash-flowing assets, but probably not a big immediate bonanza in terms of value creation. You’d expect going forward you’d be able to buy at more attractive pricing, get your cash flow, and get your bump off of appreciation.
We’ve heard a theory that buyers are not yet buying because they think they can get 15-20 percent returns down the road, so why settle for 10 now?
It’s very difficult to time the bottom of a market. Most people who are smart don’t try to time that bottom, but they look for quality assets in primary markets. To talk only about returns is probably negligent to combining the desired look at return and risk profiles. We believe we will be able to get better pricing later on, but we also think there’s a place for cash-flowing investments now, as long as they’re in the right markets.
What’s been your experience so far with Olmsted Green in Boston?
Olmsted Green is an amazing project. Our partnership with Lena Park Community Development Corporation is a national model between a community development corporation and a capital partner leading a community towards the highest and best use of a piece of dirt which had gone unutilized for twenty years. We’re proud we’re one of the few cranes moving in town. The project has a diversity of components that allow it to move forward through difficult market cycles. Clearly our home ownership has suffered as the income aspects of the buyers have suffered, but our rental products have been able to move forward aggressively. We’re able to build out the site through a difficult market cycle with the anticipation that as fundamentals return to the market, there will be opportunities to sell smaller, attractive first-time homebuyer and empty-nester townhomes.
How do you go about investing with a social mission?
If you start with the premise that you’re a triple bottom line fund, you have to begin with the notion that you can’t have two out of the three. You won’t be doing anybody a service by doing an exemplary loss-leader project. At the same time, it’s not always a sacrifice that gets you to your second and third bottom lines. It may just be thinking about smarter, affordable greening, or trying to think about the optimal location for projects so they’re doing the most they can do in terms of economic development. It’s finding the needs and trying to address them as part of the whole project, rather than making them add-ons.
Top 5 USA Triple Bottom Line Results:
Olmsted Green, Boston, Mass. – Reclaimed a State Hospital site, abandoned for 20 years, from which you can hit a 7-iron onto a fantastic 18-hole Donald Ross Golf Course.
Cascades, Winooski, Vt. – Built a river walk along the Falls in the shadow of Burlington, Vt., and brought universities to an urban renewal area in the Green Mountains.
The Gateway at Quonset, R.I.– Sustainable retail that is the identity for a business park on a 3000-acre former Naval base and home of the Quonset Hut Museum, wind farm blade manufacturers and mega yacht repair.
The Conn. State Lottery, Hartford Conn.– Turned an empty warehouse into a place where residents now pick up checks worth millions of dollars.
Parcel 24 /Chinatown, Boston Mass. – Creating 325-mixed income residences on a site that was originally town homes demolished to make way for the highway in the 1950’s, and then recreated as a development parcel by the Big Dig.
