New OZ Fund Will Bring Investment to Historically Black Colleges and Universities
The opportunity zones (OZ) incentive is a community development tool that provides tax incentives to help unlock investor capital to fund businesses in underserved communities.
In the case of the Renaissance HBCU Opportunity Fund, the specific communities served are neighborhoods surrounding historically black colleges and universities (HBCUs).
The fund is a partnership between the HBCU Community Development Action Coalition and community economic development advisory firm Renaissance Equity Partners, with Calvert Impact Capital providing professional advice. The fund is expected to raise $50 million. Robert K. Jenkins Jr., senior managing director of Renaissance Equity Partners, said there have been some tentative commitments from investors at press time.
“Almost half of the HBCUs across the country are located in OZs,” said Jenkins.
The fund will finance mixed-use developments on or near HBCUs. Potential developments include bringing grocery stores to food deserts and health care facilities to medically underserved communities, along with creating housing for various populations.
“Many of these schools are in very distressed neighborhoods,” said Ron Butler, CEO of the HBCU Community Development Action Coalition. “The fund will have a tremendous impact. This new capital will attract additional capital to bring in other needed developments.”
NMTCs Influenced Renaissance HBCU Opportunity Fund
Jenkins sees OZs having a similar impact as the New Markets Tax Credit (NMTC) program. “We see this fund as a logical extension of our work in NMTCs,” said Jenkins. The leadership of Renaissance Equity Partners has worked with the NMTC program since its inception. A longtime NMTC practitioner, Jenkins was the founding CEO of Hampton Roads Ventures, a successful CDE. “We anticipate the OZ [incentive] will attract private sector capital to reinvest in severely distressed communities.”
Jenkins said, “OZs mirror the community impact of the NMTC,” as the OZ incentive creates quality jobs, as well as goods and services, fresh foods and much more to distressed communities.
“This is another tool in our tool box to enhance neighborhoods near HBCUs,” said Butler. “We hope to drive a significant amount of investment into these neighborhoods. They need it.”
Kresge and Rockefeller Foundations’ Incubator
The Renaissance HBCU Opportunity Fund has been selected for the Kresge and Rockefeller Foundations’ OZ incubator, which provides technical assistance to bring funds to market.
“We are pleased that our fund is one of five that was selected to receive organizational support from those foundations,” said Jenkins. “We are extremely appreciative of the support we are receiving from the Kresge and Rockefeller Foundations and Calvert Impact. They share [our] mission to strengthen the economic vitality of HBCUs and their surrounding communities.”
“When the opportunity zones legislation came out, we were interested in understanding how to bring our experience (to the table) to ensure the benefit of the OZ incentive reaches residents who live in low-income communities,” said Beth Bafford, vice president of syndications and strategy at Calvert Impact Capital. “The first thing we’re doing is working with Kresge to build and run the opportunity zones incubator, to allow mission-driven OZ fund strategies to access technical advice, accounting advice and legal support.”
HBCU Community Development Action Coalition has been looking into the OZ incentive since the inception of the incentive. “Ron (Butler) spent the first three months of 2018 working with governors to get census tracts with HBCUs designated as opportunity zones,” said Jenkins.
Impact on HBCUs
“HBCUs are often islands of tranquility in deserts of poverty. Typically, HBCUs have nice campuses, but around them are slums and blight,” said Jenkins, a graduate of Howard University, a Washington, D.C., HBCU. “The (HBCU Community Development Action Coalition) wants to revitalize the communities around HBCUs.”
“Many HBCUs lack real estate infrastructure–retail, restaurants, shops, things that students need,” said Nicholas Silbergeld, senior investment officer at Calvert Impact Capital. “Schools need these services to attract and retain students.”
The Renaissance HBCU Opportunity Fund is working with HBCUs to develop a pipeline of projects, including mixed-use developments with housing and services and/or retail. Jenkins said the fund will finance the development of housing for a variety of populations, from junior faculty members to graduate students to current and recent students to GI bill students, and more.
Butler said the fund is also interested in financing the development of teaching hotels. Teaching hotels are fully functional hotels run by students. For example, management students and business administration students could run the front desk or organize conferences.
“Teaching hotels engage students in training programs,” said Butler. “The objective is to help students at HBCUs with their career and to enhance their ability to build wealth.”
“Teaching hotels provide an on-site, hands-on vehicle to train students with real world experience,” said Jenkins. “When the young people graduate, they will have hands on experience managing hotels.”
Bafford said this fund has three layers of impact. “One, involve HBCUs in the design of the projects. Give them a voice. Two, is the direct impact of creating more vibrant commercial corridors/housing options, which will attract students and professors. And three, how to structure the long-term benefit or ownership of these projects to benefit the universities themselves, potentially giving HBCUs an ownership option for projects after the 10-year investment period,” said Bafford.
HBCUs are a good place to invest capital in order to revitalize communities.
“HBCUs serve as economic anchors to communities all across the country,” said Silbergeld. “The intent is to direct capital into these locations.”
Butler said it is important to be involved in community development. “Partnering with other local, state and national organizations brings resources to communities and gets HBCUs involved in the community,” said Butler.
Bafford is focused on structuring the fund using the existing regulations.
“We need to structure amidst the current state of uncertainty. There are still a lot of unanswered questions. How do you structure a fund that is diversified across projects?” said Bafford. “There is enough certainty from the guidance so far to start, but we still have questions on how to put the final structure in place.”
Calvert Impact Capital is looking to help educate the market to benefit low-income communities across the country.
“It is important to provide support and expertise so [funds] can come to market in a timely and efficient manner,” said Bafford.
“Democratizing information benefits the entire market and creates a more informed community,” said Silbergeld.
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