Inner City Revitalization

Abstract

The Canyon Johnson Urban Fund (CJUF) invests in inner city communities. The objective is to not only gain a solid return of over 30% on their investments, but to also have a much needed positive social impact on the communities in which they invest. The socially responsible objective is not to gentrify these areas but also to develop projects that will serve these untapped markets by providing opportunities for the residents.

This case study exams two opportunities for the fund. The first being a property located on Hollywood and Highland. The 640,000sq/ft retail complex and hotel was brought to the fund by a reputable developer. The second was an opportunity on Sunset and Vine Street. The 623,000sq/ft mixed use residential and retail development was brought to the fund with anchor retailers in place.

The objective of this analysis is to make a recommendation as to which opportunity to go with.

Investment Criteria

CJUF only invested in areas where there was a minimum of 40% minority population and a density of at least 250,000 people within a five mile radius. Both projects satisfy this initial requirement. Turner then applied the following underwriting requirements:

1. Measuring excess demand for retail and housing

2. Securing explicit support from the community

3. Finding a developer willing to contribute a minimum 15% of equity to the deal

4. Identifying an exit strategy

5. Making sure there were no entitlement or zoning issues

Investment Analysis

The projects are a couple of blocks away from one another. It can be assumed that the resident demographics are of a similar nature. However, the actual draw of each project will be quite different. Hollywood and Highland is at the epicenter of “old Hollywood”. The project was aimed to build up the tourism industry of the area. Not only would the hotel attract tourists to stay and spend in the epicenter, it would also feature a theater that would host the Academy Awards, among other...