$250m fund targets mid-market developers.

Phoenix Realty Group has announced plans to raise a $250 million fund that will ultimately help finance projects by community-based developers building homes that the city's office workers, cops and teachers can afford.

"Land supply here is shrinking which is creating a huge pressure on local communities to provide housing for middle-class workers like firemen, teachers, EMT workers and police who don't want to have to commute two hours or more to work every day," said Ralph Raciti, managing director of Phoenix, which has made its mark in middle-market urban development in the Californian market with investors that have included the California Public Employees Retirement System (CalPERS), JP Morgan Chase and Citicorp North America.

Unlike larger equity funds that look for major developments to invest in, the Phoenix fund--called the Metropolitan Workforce Housing Fund--will fill a void among smaller-scale developers whose projects will help plug a big gap in the affordable housing market, according to Raciti, who said he is already in talks with developers and investors in the tri-state area.

Raciti said the fund will target the type of developers that have, in the past, had to go cap in had to friends and family to raise their equity stake for projects that could never attract the kind of institutional weight the Phoenix fund will carry.

J. Michael Fried, CEO at Phoenix, said some of the top-flight institutional investors who are already reaping the rewards of the successful Californian projects could re-up for the new Manhattan fund.

"We hit the ground running with our business plan in California and we're hitting the ground running here, too," he said. "Our investors are attracted to workforce housing investments because they can earn competitive, risk-adjusted returns and access a market they could not otherwise reach as institutional investors."

By partnering to make equity investments with community-based developers, the new fund's capital will be leveraged to provide over $1 billion of residential and commercial development, according to Fried, who added that individual project investments may range from $3 million to $20 million for projects that could range in size from $10 to $100 million.

It is estimated that the construction of the Metropolitan Fund's residential and commercial developments will yield $50 million in sales tax revenue in the tri-state region. The completed housing and retail developments also will yield significant property and sales tax revenue for the states.

The mostly attached housing--with a median price of $400,000--will be targeted at households making 80 to 200% of the median income. By way of example, those figures translate into $45,000 to $112,000 in Essex County, New Jersey; and from $70,000 to $175,000 in Nassau County, New York and Fairfield County, Connecticut.

Phoenix Realty currently manages the $103-million Genesis Workforce Housing Fund, the $90-million San Diego Smart Growth Fund, and the $50-million California Urban Housing Fund which together will provide more than $1.5 billion of workforce housing and community revitalizing commercial properties in California.