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Developer looks to raise $1B for investing in minority communities

SoLa Impact LLC CEO Martin Muoto joins Yahoo Finance's Kristin Myers to discuss his initiatives with the "Black Impact Fund."

Video Transcript

KRISTIN MYERS: Well, developer Martin Muoto is aiming to raise $1 billion to invest in black and Hispanic neighborhoods. And if he's successful, it will be one of the largest commercial real estate funds focusing on minority communities. So we're joined now by Martin Muoto He's the CEO of Sola Impact LLC. Martin, thanks so much for joining us today. I'm very excited and interested in this conversation. I want to get into the impact in just a moment. But I wanted to first ask you about where this fund is investing. I know it's going to be investing in opportunity zones and I wanted to ask you why? Especially since that program has been repeatedly criticized for failing in its mandate, really, to create jobs, boost local economies in some of these minority neighborhoods. So why were some of these areas your areas of focus?

MARTIN MUOTO: Thanks, Kristin. Thanks for having me on the show. I think that the billion dollar Black Impact Fund is actually three things. And one of those three is a vehicle that invests exclusively in opportunity zones in minority communities. Unfortunately, the correlation is high, meaning that many of the Black and Brown communities that we have invested in, that we will invest in are low income communities. And so therefore, at least half of that will be in opportunity zones in Black and Brown communities.

The other section is a $500 million opportunity zone fund that will invest in close proximity to the opportunity zones. And as you pointed out, the opportunity zone what was designated as an opportunity zone in many communities was very random and arbitrary, meaning that one side streets up to the zone, the other side is not. And so that will allow institutional investors, pension funds, endowments, and the like to invest in Black and Brown communities, in some respects getting the benefit of the appreciation that's happening in opportunity zones and really being able to to make meaningful change in those areas.

I think what's really important to note about the Black Impact Fund is that both of those vehicles, the opportunity zone vehicle and the non-opportunity zones vehicle will have 13% of all of their appreciation as well as 30% of the fees that will go to what we're calling the Black Impact Community Fund, which will really further many things, but really align the interests of the community with the fund. And I can go into that in more detail if you'd like me to.

KRISTIN MYERS: Well Martin, I'm actually hoping that you can highlight some of the impacts because I had been reading, essentially, about some of the knock on effects. This isn't something that you guys have never done before. You guys have been investing in a lot of these minority communities. And you've seen, one, incredible returns, which I definitely want to ask you about next. But you've also been seeing how there's been great impact, not only inside the community, but I'm also really interested in almost like the peripheral areas outside the direct development zones that you guys have gone into. So what are you anticipating is going to be the impact once you guys raise all the money for this fund and really can start getting in there and start developing affordable housing and building up some of your other initiatives?

MARTIN MUOTO: That's a great question. The first base of our strategy has always been affordable housing. But really, that's just first base. What we also believe strongly in is that it needs to be accompanied by investments in education, specifically, and access to education for young Black and Brown people in these communities. And more particularly in technology education. So as an example, we are a way through building out a tech center that will be South LA's first technology center for young Black and Brown people. We call it the Tech YMCA, meaning that 30 years ago you'd go to the YMCA and learn about sportsmanship with the one in 10,000 chance that you make it as a professional athlete. Today, we think that it's important for young people to have a place where they can learn about eSports and gaming and coding and all the peripheral jobs in that industry.

And so that's one example of many. What you showed there was what we call the Beehive. It's a project we have our origins and a lot of our investments have been in South LA, the South Central Los Angeles, which is obviously one of the more notorious historical neighborhoods but has really experienced a rebirth of sorts. And we have been investing in affordable housing and access to educational technology and, really, economic development and job creation. And really, that's the third lever of this.

And so again, for investments in Black and Brown communities, it's not simply about real estate. It's really about expanding that mandate, being incredibly inclusive, and ensuring that the community sees the benefit of those investments. And really, that's how we've been able to get traction and deliver really good results.

KRISTIN MYERS: Right. Martin, I only have time for about one more question with you here. I'm wondering how you make a program like this successful with long term positive impacts and what are some of the biggest hurdles as you see it to some of these projects that you guys are doing?

MARTIN MUOTO: I think that it really requires an alignment of not only the community interest, but the cities that we're investing. It certainly requires mission-aligned partners. And as you are aware, there's been a number of organizations that have made incredible commitments to diversity and inclusion. I think that we're really hoping that the large institutional investors come along and really provide that access to capital. It's been a key issue and one of the reasons why we've committed 13% of the returns to the community is 13% of the country is African-American, but only 1% of fund managers are minority investors. And that shouldn't be, right? 13% of the country are African-American, but only 1.5% of architects are African-American. And it shouldn't be.

So our view is we have to find ways to change that dynamic. And it really requires the alignment of private capital, institutional investors, and, ultimately, the politicians and the city to really come together to make this happen.

KRISTIN MYERS: Right. So many stakeholders need to be getting involved to make this a success. Martin Muoto, CEO of Sola Impact LLC. I loved this conversation. I look forward to being able to chat with you again in the future. Thank you so much for joining us today.

MARTIN MUOTO: Thanks for having me, Kristin.