The Brief: Law School News and Events

Financier Says Urban Investments Bring Good Returns
 
Jeremy Nowak, president and CEO of The Reinvestment Fund, believes neglected areas of big cities can prosper with smart money and he has the portfolio to prove it. The Reinvestment Fund started as a small community development organization in the Philadelphia region. It now finances neighborhood revitalization throughout the Mid-Atlantic.
Suburban migration after World War II left cities like Philadelphia scrambling for ways to reinvent themselves. Industrial sectors, once the heart of cities, were abandoned, leaving them to fall into a state of economic depression. But Jeremy Nowak, a nationally recognized leader in urban development, believes these communities can be revived as long as the price is right and the product is good.

Successful urban areas offer residents high quality, affordable housing and education, Nowak said. Without these "it is very difficult to sustain economic growth over the long term."

Nowak, president and CEO of The Reinvestment Fund (TRF), discussed the advantages of investing in inner city neighborhoods at the Institute for Law and Economics' Entrepreneurship Lecture last March. By applying expertise and more than $1 billion in capital to housing, schools and retail in underserved communities, TRF has transformed neighborhoods and created opportunities for economically challenged families. This approach, Nowak said, provides investors with valuable financial and social returns.

Philadelphia split into two cities after urban sprawl, Nowak said. Areas like Center City stayed vibrant, while neighborhoods like Brewerytown sunk into poverty after businesses moved out.

But TRF's Market Value Analysis, a program that analyzes local residential real estate market conditions, identified Brewerytown as an area with strong assets and potential to build on its existing strengths.

"Part of what we do in my business is we discover where the next burning bush is," Nowak said.

So, in 2002, TRF financed the construction of townhomes and the rehabilitation of former breweries into affordable apartments. And the neighborhood has transformed into a community of young families and professionals, Nowak said.

"We look at this information the same way you look at information when you make a decision on a stock or bond," he said. "That's what the difference is between doing it simply for social good and doing it in a way that has the discipline of a business."

Discipline, Nowak said, is what is missing in Philadelphia's inner city schools. That is why he invested in the Mastery Charter School Foundation, an organization that takes over some of the city's worst performing schools and institutes a modern management style that holds teachers and students accountable.

And he's already seen a return Mastery's student assessment scores compete with suburban schools and nearly every Mastery graduate is accepted into college.

"To some extent a school is a deal and I want to make that deal work," Nowak said. "And then I want to learn from that deal and make another 15 work. And through the quality of those transactions I want to see the system itself change."

Creating new opportunities for inner city communities creates new opportunities for investors, Nowak added.

"There is a market out there for high quality goods," he said. "That works both in terms of those social issues that we care about and the entrepreneurial issues that make them sustainable."