An E³SG Impact Fund will be a real estate private equity fund, established as a partnership to raise equity for ongoing real estate investment. According to the MIT Innovation Lab, our technology partner, E³SG Realty Investments is the only national ESG and Sustainable real estate product specialist, offering the first and only such comprehensive technological platform, and we therefore aim to be the best-in-class sponsor.
Investors and capital partners, as limited partners (LPs), will be able to invest equity in the partnership. These funds, appropriately leveraged with money borrowed from banks and other lenders, will be 100% invested in high-impact ESG and sustainable real estate development or acquisition opportunities. Impact will be evaluated based on:
the ESG Scores generated through the first-of-its-kind proprietary E³SG Realty Technologies platform
traditional, though automated, measures of potential financial performance
the boots on the ground real estate and investment analysis of local SVN advisors
LPs will provide the bulk of the equity capital as passive investors, and will earn an early return of capital and a preferred return on capital invested. The Sponsor will also provide equity capital, secure the investment opportunities, manage the real estate and the fund, and earn fees based on its performance.
Through traditional and non-traditional (alternative) real estate acquisitions, but always within the new ESG asset class created by E³SG Realty Investments – in direct response to the demands of so many investors today, the company is creating innovative, diversified, first-in-class ways to generate long-term value as fiduciaries for our investors. Within the E³SG Fund Series, the business model involves the following leverage points to create value and generate superior returns for our clients:
By creating this new asset class, and a new technology to identify, organize, and benchmark such real estate assets, E³SG Realty Investments is developing a national pipeline of potential investments and deal flow that is not sourced by or available to other managers. As a new entity in the space, our capital-raising strategy therefore focuses first on the potential for strong returns, alignment of ESG interests, and clearly identified ESG opportunities, and second on the sponsor’s sustainability history and experience.
For this first fund, the amount of equity capital to be raised, including organizational fees, is set at a minimum of $25M and a maximum of $50M. The Fund intends to use leverage to create the total pool for investing, combining the Fund’s equity capital with various types and sources of debt capital. In terms of execution strategy, this fund size is deemed to provide the most appropriate balance between potential deal flow, timing and staging of LP’s pay-in, and generation of sustainable, preferred returns for the LP’s.
Organizational costs, which the sponsor will carry during the formation period, are estimated at about $400,000. These include formation costs for the legal entity or entities, filing fees, accounting fees, regulatory brokerage costs, clearing costs and the cost of producing marketing documents. We are currently generating a partnership agreement; offering and subscription documents; securing investment opportunities; and securing loans and other financing. We are also preparing the infrastructure to manage the fund and operate the properties.
Certain aspects of the technological platform – related to digitization and automation of document preparation and execution, underwriting, and closing – are already available in the marketplace or will be engineered in the near term. As such, LPs can expect a high level of transparency and a regular, organized, and consistent reporting structure.
This investment fund strategy is unique in the marketplace and provides a strong point of differentiation. As a start-up, with the E³SG Realty Technologies platform still in development, with more data being analyzed every day, certain of the investment properties are yet to be identified and we have reserved a 30% “blind pool” aspect to our current offering. However, on a manual basis, our data, brokerage, and investment analytical teams have identified (cherry-picked) the best of the currently available specific investments that meet the high impact definition, and those assets are included in the Fund’s offering memorandum, representing 70% of the total acquisition opportunity.
Going forward, it will be clear that sustainability is the singular, well defined, quantified, and qualified standard for all investments in the funds launched by E³SG Realty Investments. But in no respect whatsoever should this suggest a compromise of financial returns. By virtue of our proprietary data model, our focus on real estate assets (which already generate strong returns on the basis of appreciation and cash flow), and judicious use of leverage – and therefore our ability to manage risk, construct portfolios, design products, and better engage with investors – these sustainable investment options have the potential to offer clients the best possible outcomes. Examples of such options and future funds include the following:
E³SG Impact Fund 2
E³SG Circular Economy Fund
E³SG Chesapeake Triangle Fund
E³SG Diversity & Inclusion Fund
E³SG Transformational Fund
E³SG Sale / Leaseback, Off Balance Sheet Fund
