On Wednesday, Los Angeles-based social impact real estate investment firm SoLa Impact announced that it is launching a $1 billion ‘Black Impact Fund,’ which will invest exclusively in Black and Brown communities in major urban markets. The fund will be comprised of a $500 million Opportunity Zone (OZ) Fund and a side-by-side, $500 million non-Opportunity Zone Fund.
In announcing the fund launch, SoLa Impact CEO Martin Muoto, who is also founder of the Black Impact Fund, said, “After a decade of successfully investing in Los Angeles‘ African-American and Latinx communities, we have learned a great deal about how to deliver near-term and long-term dividends for both the investors and the community. Ultimately, it is about creating shared prosperity and racial equity. In light of all the country is going through, it is clear the size and scope of the problem requires a bold and ambitious response. The time to act is now.”
Thirteen percent
SoLa Impact was recognized earlier this year as the nation’s Top Urban Opportunity Zone Fund by Forbes Magazine and Sorenson Impact. The company was also named the 7th fastest growing minority-led private company by Inc. Magazine’s 2020 Inc5000 list.
“We believe that to achieve superior returns, investments in communities of color require diverse fund managers that are intentional and inclusive in their strategy,” offered Muoto.
A key feature of the Black Impact Fund is its approach to ensuring that communities also benefit from the Fund’s investments. Thirteen percent of all asset appreciation and fees earned will go toward funding an affiliated, not-for-profit Black Impact Community Fund.
Sherri Francois, Chief Impact Officer of the Black Impact Fund, added, “Thirteen percent is an important number – not only because it represents a very meaningful ‘impact allocation’ that goes directly towards the communities we invest in – but it also represents the percentage of African Americans in the U.S. and pays homage to the Thirteenth Amendment.”
The Black Impact Community Fund will continue to expand SoLa Impact’s tradition of ensuring access to education by providing academic scholarships and building technology learning centers for young people. In 2019, the Black Impact’s predecessor fund, SoLa Impact, provided over $100,000 in scholarships. This year 2020, SoLa Impact’s foundation is awarding over $1 million in vocational scholarships to South LA residents, aided by the generosity of the Oprah Winfrey Charitable Foundation, Jimmy Iovine, and several leading philanthropists and corporations committed to racial equity.
The Black Impact Community Fund will be able to leverage the for-profit Fund’s size, operating efficiency, and purchasing power to build “for-sale” housing for community members to purchase at cost. The goal is to encourage home ownership and further enable the community to participate in wealth creation, closing a perceived impact gap in Opportunity Zone investment approaches that have left communities largely unable to participate in economic upside.
Seeking mission-aligned institutional investors
In addition, the side-by-side $500 million non-Opportunity Zone Fund allows endowments, foundations, pension funds, and other mission-aligned institutional investors that have previously not been able to participate in the Opportunity Zone tax benefit, to invest and become meaningfully involved.
“While we believe the Opportunity Zone legislation has the potential to significantly benefit these communities, the areas designated as OZs have been somewhat inconsistent,” Muoto said. “As a result, we are seeing incredible deals literally ‘across the street’ from our Opportunity Zone properties that our OZ Fund could not invest in. The side-by-side non-OZ structure allows the Black Impact Fund to access undervalued real estate assets and broaden its reach and its impact.”
The Black Impact Fund will partner with regional developers to enable greater access to capital and to create local jobs. The Fund’s sponsors have already been approached a number of developers and city mayors to help bring the Black Impact Fund’s OZ and non-OZ capital to underserved and underinvested communities.
“Our local partners gain the benefit of our experience in investing in Black and Brown communities; our rigorous operating procedures and financial reporting; our national, volume-based purchasing platform; and importantly, our programs to deliver real and sustainable social impact. These levers materially drive down the costs of development and construction, which results in higher-quality, lower-cost housing for the community and better returns for the investors and developers. We believe this inclusive model will give us access to better investments and stronger partnerships – particularly in communities of color where minority-led builders, architects, and developers have struggled to access capital.”
Muoto concluded, “In many ways, the Black Impact Fund is really a full realization of our motto of ‘Doing Well by Doing Good.’ There is now a broad consensus that investing in African American and Latinx communities and fund managers is critical; and dozens of banks, Fortune 100 companies, foundations, and endowments have made public commitments to do so. The Black Impact Fund is about creating practical solutions to the growing racial and income inequality that continues to polarize the country.”
