Profile: Tom Darden

Having been attracted to clunker cars when he was a teenager, investing in an old, run down brick factory was a natural transition for Tom Darden. That brick factory eventually led to Cherokee Investment Partners, a private equity real estate firm focusing on environmentally damaged sites. Now, as chief executive officer of the Raleigh, North Carolina-based company, Darden invests in the broken-down scrap heaps of the real estate world – properties that many would view as worthless.

While Darden had always been interested in environmental issues, he came to private equity real estate in a more roundabout way. As a Morehead Scholar at the University of North Carolina, he majored in anthropology after being swept up in the fervor for preserving the environment in the 1970s. By the time he graduated from Yale Law School after studying environmental law, however, Darden had already decided that life as a lawyer was not for him.

“I had interned at a law firm during [the summer], and I did not like it,” Darden says. “Probably because I was not all that good at it. It was intangible. I was more interested in who won.”

Looking for direction, Darden interviewed with Boston-based strategy consulting firm Bain & Company during a campus visit. “It was a leap,” he says.

But at Bain, Darden learned about the application of data to everyday decisions, how to approach subjects qualitatively, how to “question assumptions” and, interestingly enough, how to spot private equity real estate talent – John Mazzarino, a Bain colleague – is co-founder and managing director at Cherokee.

While he was still at Bain, Darden's father-in-law presented him with an interesting proposal. He and several partners wanted to sell a company they owned, Cherokee Brick in Moncure, North Carolina, and they wanted Darden to analyze the business for them. With what he learned at Bain, compounded with his law knowledge and the tax classes he had taken at school – “I took every tax class Yale offered” – Darden examined the legal structure for the sale and did a tax evaluation of the company. Darden eventually bought the company himself, along with its larger rival, Sanford Brick, closing the deal for both companies in 1984. Approximately five years after graduating from law school, Darden owned seven brick plants – three in Texas and four in his home state of North Carolina.

In 1986, Darden received news that there was petroleum-con-taminated soil at one of the factories. State regulators suggested he take the polluted soil to a landfill, but as an environmentalist, Darden developed an alternative solution: use the contaminated soil in the brick manufacturing process. The high temperatures in the kiln burned the petroleum out of the soil and the uncontaminated residue was used to make bricks. This process not only helped to get rid of the tainted soil, it also saved the company time and money, as they mined less clay for brick-making.

But polluted soil was only one of the alternatives to clay that Darden used to make his products. Cherokee Sanford also began collecting blasted rust from foundries, firing it and turning it into bricks. From there, Darden got into recycling industrial waste. To fuel his brick factories, he gathered wood waste gratis from wood-burning plants instead of tapping into mineral streams, a costly process. This spawned Cherokee Environmental, a firm that focused on environmental clean-up and, by 1990, was the largest “thermal soil remediator” in the mid-Atlantic region.

Although his alternative way of making bricks was kinder to the environment than mining for clay, Darden was still dissatisfied with the amount of brownfields being ignored. “[Cherokee] came out of an opportunity to buy sites,” he says. “I was unhappy with simply applying what we had learned to our brick plants. I wanted to buy more sites.”

However, Darden does not take a simple “build and move on” approach to his developments. Cherokee looks to form a relationship with the people living around the brownfield sites, with an emphasis on improving their way of life. According to the firm's mission statement, Cherokee works “to leave things better than we found them.”

Still, Darden's passion for helping people does not end with turning a former landfill into a golf course or reviving an old textile mill for office space. He claims to have “decided early on, really, all I could do is work and spend time with my family,” but he still finds time for philanthropic activities. Darden currently serves on the board of Shaw University, the oldest historically black college in the southern US.

“I went to high school between 1969 and 1973, I was passionate about civil rights and I use my business activities to try and bridge the white and black gap,” he says. “Shaw University was one of the first universities set up in the South to provide free slaves higher education.”

Darden also had an interest in Africa at a young age – his honors thesis at UNC examined the environmental impact of the Westernization of Kenya's economy. At Cherokee, he also helped start the initiative to raise money for a small-enterprise loan program based in Ethiopia. There are six people employed in the program, which evaluates potential real estate and venture capital deals within the region. The company also helps promote adoption of Ethiopian children and wants to bring highspeed Internet service to the country, “so the West has access to the human capital” located there. Darden says there is even a prospect for another brick plant to fulfill Ethiopia's demand, while the country also has a need for environmental cleanup because of previous use of carbon-negative fuels.

Yet this philanthropy extends beyond Africa. The firm has raised $5 million to help create a home for abused and abandoned children at Oak Ranch in North Carolina. Cherokee is also raising money for an elementary school in India and for healthcare in Latin America and Africa.

Although he now mainly invests in brownfields, Darden's passion for cars – environmentally safe ones, that is – still remains. By the time he was twenty, he had already purchased four motorcycles and sixteen cars – mainly British sports cars – to fix up. In the late seventies, he started to draw hybrid cars based on theories in technical journals. Initially, he considered pursuing such a career after graduation, but his plans changed. Now, he drives one of those cars he used to sketch.

“I refuse to drive expensive cars,” Darden says. “I got caught up in the environment. Either we change the way we live, or we're putting ourselves at great risk.”

Cherokee Investment Partners
Head Office

Cherokee Investment Partners

702 Oberlin Road, Suite 150

Raleigh, NC 27605

Other offices: Denver, London

Additional management offices:

East Rutherford, New Jersey; Toronto, Ontario

Key Personnel:

Tom Darden, Founder and Chief Executive Officer

John Mazzarino, Co-Founder and Managing Director

20 other investment professionals

Funds:

Cherokee Investment Partners Fund II (1999): $250 million

Cherokee Investment Partners Fund III (2002): $620 million

Year established: 1990

Capital invested since inception: $600 million

Properties acquired since inception: 520

Properties divested since inception: 290

Current number of properties held: 230

Recent investment:

November 2004: Purchased the 232-acre former General

Motors of Canada manufacturing plant in Boisbriand,

Quebec, Canada

Recent sale:

May 2005: Sold a 22-acre retail development in

Oakland, California