New Boston Fund successfully developed One Brigham Circle in Boston, a project that brought retail to an urban area. The company hopes its new endeavor, the Urban Strategy America Fund, will produce similar results in Connecticut.

Boston-based New Boston Fund might be best known in Connecticut as the owner of office properties like 100 Pearl St. in Hartford and the Rocky Hill Corporate Center, but a new fund just announced by the company promises to put more emphasis on urban economic development and smart growth.

“Those are two flavors that are in this,” said Kirk Sykes, president of the Urban Strategy America Fund, which initially closed earlier this month with $100 million in investor commitments.

Investment in workforce housing, urban industrial space and urban retail space is the cornerstone of the new fund, and the company is aggressively looking to form partnerships with organizations in Connecticut and pursue projects in the state. Among the fund’s biggest investors is the State of Connecticut Retirement Plans and Trust Funds.

The residential component is about half of the investment strategy, according to Sykes. In Connecticut, as well as in other urban areas on the eastern seaboard, there is a need for both mid-market and lower-income housing. The fund aims to help keep low- to middle-income families in states like Connecticut and Massachusetts, where high home prices are driving some people away.

The fund has closed on its first project, a former state hospital site in Boston that will be converted to 500 residential units. The $140 million project, dubbed Olmstead Green, will have 287 market-rate townhouses and condominiums, 153 affordable rentals, 84 units of affordable senior housing, an urban farm, a community education and job advancement center and a four-season athletic and recreation facility. It also will include a 128-bed skilled nursing and mental health rehabilitation facility that will be built along with an 11,000-square-foot office building for Heritage House and Department of Mental Health programming.

“It’s sort of a holistic approach to developing communities,” Sykes said.

Other uses for the fund will be development of retail space in underserved urban communities to keep residents from having to go outside of cities for groceries and other goods; investment in warehouse and industrial space to keep businesses in cities; and investment in office space for hospitals and universities to help add jobs to cities.

“Our goal is to benefit the communities of our investors by fostering opportunities to enhance the quality of life for the residents and businesses while increasing the tax base and stimulating growth in these communities,” Sykes said in a prepared statement. “These goals – and our commitment to mid-market and low- and moderate-income housing – align our strategy with the goals of our investors, especially those investors who are subject to the Community Reinvestment Act. Urban areas represent the fastest-growing demographic and a largely untapped source of investment opportunities, offering our investors an opportunity to do well by doing good.”

‘A Well-Balanced Mix’

New Boston Fund has had similar strategies on previous funds, but this is the first stand-alone urban fund, according to Sykes. It has been popular with investors because it allows them to earmark a portion of the investment for use in their own localities. New Boston Fund expects success because of its previously-proven ability to get a return on opportunities that are either overlooked or not well-executed by others, according to Sykes.

New Boston Fund successfully developed One Brigham Circle in Boston, a project that brought retail to an urban area. The project was the 2004 Building Owners and Managers Association Project of the Year and has 190,000 square feet of office/retail space, 350 parking spaces and a 5.5-acre public park.

One Brigham Circle was a public/private joint venture of New Boston, NDC Development Assoc. and the Mission Hill Development Corp.

In addition to the State of Connecticut Retirement Plans and Trust Funds, the Massachusetts Pension Reserve Investment Management Board, Blue Cross and Blue Shield of Massachusetts, Wachovia Corp. and John Hancock Life Insurance Co., among others, have invested in the USA Fund.

The fund will be a $200 million closed-end, commingled fund organized for institutional investors to take advantage of real estate investment and development opportunities in urban and economically targeted areas.

“The USA Fund caters to investors who want to do well by doing good, who want to catalyze economic development in their region of influence while investing in a diversified portfolio along the East Coast and want to receive competitive rates of return,” said Jerome L. Rappaport Jr., chairman of the USA Fund, in a prepared statement. “The urban marketplace offers significant, worthwhile investment opportunities in contrast to the hyper-competitive acquisition marketplace. This is the right product at the right time. The geography of our strategy is aligned with the markets of our investors: This is the cornerstone of our fund. Investors can elect to request a portion of their investment be assigned to their geographic footprint.”

The fund is designed to offer investors diversity in the asset types and locations in order to minimize risk and maximize returns.

“This fund follows six very successful commingled funds organized between 1993 and 2003 that have catered to a well-balanced mix of investors who are seeking current cash flow, superior overall returns, capital preservation and portfolio diversification,” said David H. Keiran, senior vice president of New Boston Fund, in a prepared statement. “We have a deep, experienced team and an organization that has consistently delivered strong returns, and we are proud of our consistent track record of sponsoring co-investment and industry-leading performance over the last 12 years.”