Investors are getting smart about growth.

Urban revitalization isn't just good for the folks who live in inner city neighborhoods or those who want to but can only afford low-income housing.

As many corporations and public pension funds are finding out, it can make for a profitable investment, too.

Dubbed "double bottom line" funds because social and environmental benefits, not just economic gain, are prominent features of the expected return, smart growth private equity has enticed corporations--once wary of such investments for fear of being branded as slumlords--with superior rate returns and tax incentives.

The Genesis Los Angeles Real Estate Fund and Genesis Workforce Housing Fund, managed by Shamrock Holdings Inc. and Phoenix Realty Group respectively, have been prominent examples of successful smart growth equity, funding the conversion of vacant office space in L.A. into affordable for-rent and for-sale housing. Meeting a need to limit sprawl, take advantage of existing structures and create residential space more proximate to jobs, the fund also boasts impressive returns in the high teens, which have fostered increased demand.

"In San Diego we have a $300 million demand and $50 million worth of opportunity," said smart growth fund expert, Belden Hull Daniels at a June 10 Urban Land Institute panel held at the Association of the New York Bar. "We want $2 billion in the field within the next two years. We will exceed that, I promise you."

New York hasn't been without its own success stories. A panelist along with Daniels at the ULI meeting, Michael D. Lappin, President and CEO of The Community Preservation Corporation (CPC), outlined a number of his company's recent projects, including its most audacious, the restoration of the 12,271-unit Parkchester housing complex in the Bronx.

A 500,000 s/f shopping center in the area, also bought from Helmsley as part of the deal, served as a source of jobs and gave the area a degree of self sufficiency integral to the smart growth philosophy.

"With smart growth you want to encourage higher density living and mixed use," said Victor J. Sostar, senior VP of First Sterling Financial Inc. and moderator of the ULI panel. "That's what you have in the case of Parkchester, a community that's self sustaining with shopping and employment."

While most not-for-profit companies hire fund managers to manage their smart growth funds, CPC has acquired the multidisciplinary skills necessary to do virtually an entire project, including the design architecture, in-house,

"In order to fix neighborhoods, get the construction loans, the permit loans and take advantage of the multiple government assistance programs out there you need a system," Lappin said. "Not many people know how to put all those pieces together it's more than just putting up the money."

Currently, the company is involved in building affordable in-fill housing. A recent development on 16th street, which will be rented for market value, served as a feasibility test for future projects of this type.

"We had no idea what the market would bear for this development," Lappin said. "We had an efficient structure and it turned out to be perfect timing because the condo market has become hot. We want to apply this to lower income areas, mainly Brooklyn."

"We will build in this mode architecturally and still keep it affordable, probably around $650-$800 for a two bedroom apartment."

CPC has already attracted major investors like Merrill Lynch, HSBC Bank, JP Morgan Chase, Bank of America and the Arch Diocese of New York. And while tax and various other state and federal incentives get corporations in the door, good returns are what keep them coming back.