February 03, 2005
Community Investment Surpasses the $1 Billion Mark at The Rock
by William Baue
The Prudential Financial Social Investment Program, one of the oldest community investment programs
in the country, has distributed more than $1 billion before its 30th anniversary.
In 1976, a century after its founding to provide insurance to low-income working-class families in
Newark, New Jersey, Prudential Financial (ticker: PRU) launched its Social Investment Program to fund community investment projects that do not
qualify for mainstream lending. Now, almost 30 years later, the Social Investment Program has
surpassed the $1 billion mark, with more than $228 million worth of financing going to affordable
housing and nearly $30 million supporting minority entrepreneurship.
helps to maintain Prudential's original mission, which was serving poor people, mostly people of
color, primarily African Americans," said Mark Pinsky, CEO of the National Community Capital
Association (NCCA), a community
development financial institution (CDFI) network. Mr. Pinsky also chairs the Federal Reserve Consumer Advisory Council, which directly
advises the Fed's Board of Governors on issues such as the Community Reinvestment Act (CRA). "They're steady, they're
very quiet about it, they're not flashy or high profile--I'm surprised they're hitting $1 billion,
but when I think about how long they've been at this, I realize it isn't at all surprising."
"There aren't many players who've done a billion dollars worth of community development
investing, other than some banks who have done a wide range of investments under the CRA that are
not as targeted as what Prudential has done," Mr. Pinsky told SocialFunds.com.
Prudential's Social Investment Program targets three broad areas: education (dubbed "Ready to
Learn"), affordable housing and economic development ("Ready to Work"), and community services
("Ready to Live"). The program particularly targets two program areas: affordable housing
preservation and charter schools. Since its establishment, the program has helped finance 48
charter schools nationwide, including roughly half of New Jersey's 50-odd charter schools.
For example, the program provided an $800,000 mortgage to North Star Academy Charter School, the premier charter
school in downtown Newark, which in 2004 achieved a 100 percent college attendance rate. However,
the "Ready to Learn" umbrella extends beyond charter schools. For example, the program rescued a
neighborhood that had a shortfall of preschool openings by providing a $1.2 million mortgage to
Newark's Smith Street Preschool in 2004, allowing it to add six new preschool classrooms serving 90
kids and a therapeutic nursery serving seven children.
These examples also illustrate the
program's geographic targeting, which focuses on its home base of Newark and the neighboring cities
of Irvington, East Orange, and Orange. It also targets specific neighborhoods in four other cities
where Prudential has a significant business presence: Los Angeles, Minneapolis, Philadelphia, and
Jacksonville, Florida. Additional cities open to consideration include Atlanta, Chicago, Houston,
Phoenix, Washington, D.C., and Hartford, Connecticut, as well as projects with a national scope but
a particular slant toward these markets.
While financial returns take a back seat to
social returns in decision-making, nevertheless "we intend to recover our investments and earn a
fair rate of return on our portfolio," states the program website. Loan amounts are no small
potatoes: investments originating from the Prudential Foundation starts at $500,000, and $1 million for investments from
Prudential Financial, with a $15 million maximum. Borrowers bridge the gap between nonprofit and
for-profit organizations, as do the financiers.
"Prudential's social investment activities
have encouraged partnering between private and public funders," said Robert Rubin, former US
Secretary of the Treasury and a member of the Office of the Chairman of Citigroup (C). "I know that
Prudential is also focused on broadening the use of credit enhancement and the possibility of
applying asset securitization to community development."
"All of this could offer great
promise for expanding the capital available for community development," Mr. Rubin added.