Social Impact in L.A.’s Opportunity Zones, with Martin Muoto and Reid Thomas

Martin Muoto

Why is social impact crucial to the long-term success of the Opportunity Zone initiative? Hear from the top urban Opportunity Zone fund, as awarded by the Forbes OZ 20, and the positive story of the impact that they are delivering in South Central Los Angeles.

Martin Muoto is founder and managing partner of SoLa Impact, a $115 million Opportunity Zone real estate impact investment fund located in South Los Angeles, and recent winner of the Forbes OZ 20 Grand Prize for best urban Opportunity Zone fund.

Reid Thomas is executive vice president and general manager of NES Financial’s specialty fund administration technology platform.

Click the play button below to listen to my conversation with Martin and Reid.

Episode Highlights

  • Why measuring social impact is essential to the success of the Opportunity Zone initiative.
  • How NES Financial has integrated Howard Buffett’s Impact Rate of Return (iRR) framework into their fund administration technology platform.
  • The opportunity that Martin sees in long overlooked and underinvested South Central Los Angeles.
  • How the Opportunity Zone tax incentive can be used as a powerful marketing tool to facilitate a more efficient capital raise.
  • The support that SoLa Impact’s social impact team is offering to its tenants during the ongoing pandemic crisis.
  • How affordable housing asset class may provide a recession-resistant investment.
  • NES Financial’s growth within the impact investing and Opportunity Zone industry.

Featured on This Episode

Industry Spotlight: SoLa Impact

SoLa Impact

SoLa Impact is a real estate fund management firm with a track record of investing in some of the most distressed communities in Los Angeles. Their $15 million Opportunity Zone fund invests in affordable housing and commercial centers in South Central Los Angeles, Watts, Compton, and other historically disadvantaged communities. Earlier this year, the fund won the Forbes OZ 20 Grand Prize as the top urban Opportunity Zone fund, as awarded by Forbes and the Sorenson Impact Center. SoLa’s Beehive (launched in September 2019) is the nation’s first Opportunity Zone business campus.

Learn more about SoLa Impact

About the Opportunity Zones Podcast

Hosted by OpportunityDb.com founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.

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Show Transcript

Jimmy: Welcome to the Opportunity Zones Podcast. I’m your host Jimmy Atkinson. Joining me today to discuss social impact in opportunity zones are Martin Muoto and Reid Thomas. Martin is founder and managing partner at SoLa Impact, a $115-million opportunity zone fund that develops affordable housing and commercial centers in South Central Los Angeles. SoLa was recently recognized as the grand prize winner of the Forbes OZ 20 for the best urban opportunity zone fund.

And Reid is no stranger to this podcast, this is his third appearance. And for those who do not know, he is executive vice president and general manager at NES Financial, the leading fund administrator in the opportunity zones industry. Martin joins us from Los Angeles and Reid us today from San Jose. Gentlemen welcome to the show.

Reid: Thanks, Jimmy. Good to be here.

Martin: Thanks for having us.

Jimmy: Absolutely guys. Martin, very good to have you on especially. I haven’t spoken with you yet, so great to get you on the podcast.

Reid and Martin, a question for both of you at the outset here. Today’s episode, we’re going to be discussing not just social impact but measuring that social impact, and the importance of that. So if you could both just convey your thoughts to me on how important is it that we conduct social impact measurement in opportunity zones funds. And, Reid, I’ll turn to you first if you’d like to answer.

Reid: Sure. Well, first of all, the opportunity zones initiative is a good initiative, it’s intended to do good and help solve one of the biggest challenges that this country faces. And ultimately the success of the initiative will be judged based on what kind of impact it actually had. And so measuring it from an overall program or initiative standpoint is fundamental in being able to determine whether or not the program was successful and whether or not it should continue.

Beyond that, there’s different segments. Some segments of investors are very interested in understanding the impact that the investment that they’re making, what kind of impact it’s actually going to have. In addition, you know, the investor demographic continues to change. Younger investors are more motivated it seems by making an impact with their investment dollars. And by extension, if something is important to investors, it’s important to fund managers. And then the final thing I’ll say is, you know, I think measuring impact is also important and helpful to developers that want to work closely with economic development corps, etc., to get help with permitting or entitlements and those types of things.

Jimmy: And, Martin, how about for you, what’s the importance?

Martin: Jimmy, thanks again for having me on. I think that it’s important in many dimensions. I’d start by saying in this day and age and particularly what we’re facing as a country with the COVID pandemic, it’s probably triply or quadruply important. Opportunity zones by their nature were designed to address underserved communities and low-income communities. And those communities and particularly around urban areas are now disproportionately being impacted by the COVID-19 pandemic.

These are folks that are often have entry-level jobs and in the communities that we serve in Los Angeles, Compton, Watts, and South Central, these are high populations of Hispanic and African-American populations that have historically had both economically and from a health perspective because of higher incidents of diabetes, high blood pressure, asthma and the like have been more vulnerable than other populations. And I think unfortunately the statistics are showing that now.

And so for opportunity zones across the country that are dealing with these vulnerable populations, not only having strategies that address the underlying drivers of these issues but also measuring how and what strategies really have an impact on things like healthcare indicators, longterm and short term economic wellness and the like are critically important today. So we are very pleased that we’ve been doing it for some time but realize that the problem is particularly acute in this environment.

Jimmy: Right, right, I think that’s important. And, Martin, I want to come back to you and hear more about how you’re serving those vulnerable populations where you’re doing your developments. But first, Reid, I want to turn back to you and talk to you about NES Financial and some of the social impact measurement that you’re doing there for the opportunity zone funds you administer. You actually recently began utilizing a framework that was developed by Howard Buffett, the grandson of Warren Buffet called the impact rate of return. How was that iRR framework developed and what is it exactly and what does it measure exactly? Can you unpack it a little bit for me, Reid?

Reid: Thanks for the question, Jimmy. And I believe it was, in fact, the first time I was on your show where we talked about NES’s focus in the social impact area. It might be helpful just to sort of set the stage there and then I can talk specifically about iRR. You know, we view opportunity zones as a specialty type of fund. It goes well beyond the traditional private equity fund where really what you have to do is accounting financial statements and the focus is really on generating yield. You know, in the opportunity zone environment, it’s really we view it as a mashup of, you know, a private equity fund with a tax incentive initiative. So there’s a whole bunch of tax-related evidence and tracking. Timing as to when money moves, as an example, is very important. So there’s a whole bunch of those kinds of things that need to be tracked.

In addition, although it’s not required, the whole purpose of the program as Martin pointed out, was really to help these distressed, underserved community. And so impact is at its core a critical element. So from the get-go, our approach was to develop a comprehensive solution that addresses all of those areas and to do it in a way that encouraged our clients to embrace tracking the impact of the fund which really meant that it couldn’t be cost-prohibitive and it had to be something that could be reported relatively easily.

And so to that end, you know, initially we had in our product we had built, you know, a framework that would track jobs created and those kinds of things and we continue to do that today. But what we really wanted to do was to find some type of capability that we could develop a computer program around, something that we could design algorithmically. And it was interesting because as I started looking around the market for potential partners and solutions, what I observed anyway was that many of the impact reporting that was getting done really looked like a fairly large consulting project. And the experts in the area would produce a detailed report at the end of it summarizing the impact potential of an investment as an example. And from my perspective, that felt cost prohibitive and complicated.

So when we came across Howard Buffett’s framework, you’re right, it’s called impact rate of return, that was something that seemed very formulaic to us. And Howard is a professor at Columbia University and has spent a lot of time working in this area. And he designed iRR to be something that really measures the efficiency impact of every dollar invested. So the closest to the financial term of iRR is of course, intentional. And at the end, what it does is it produces a mathematical result that compares or can compare one investment against another.

You know, it’s probably too long of a discussion to get into here but it takes a variety of factors, everything of course from project location, the capital stack, the type of development, over what period of time the investments are being made and so on to come up with this algorithmic answer. So we partnered with Howard, implemented that in our technology, and have rolled that out to our client base. It’s something that’s available to everyone. There’s no incremental cost to it.

Because if you start early and you set up the programming correctly, you know, really what you’re doing is tracking the movement of the money and what money is spent on and that’s what ultimately drives the calculations. So our clients have very…some of them use it as an internal modeling tool to help determine how they might make their project have more impact, others share that kind of information with investors. So there’s lots of flexibility in terms of how it gets presented but we’re really hoping that this can continue to catch on and ultimately become maybe a standard way to do impact reporting across the industry.

Jimmy: And what’s the output exactly? Is it a social impact score or rating that you’re providing to them? Or is it the number of jobs that are being produced, or the types of jobs that are being produced? What are we looking at here in terms of the output of the model?

Reid: Well, the end result is a number. Just like, you know, you’d have a number for an IRR, a percentage number, a rate of return is what you would have. So it spits out a number. And then behind that, all of the things that you started to touch on, jobs created, what the impact might have been on the educational level in the area and so on and so forth are items that you can drill down and understand but it’s summarized in a simple number which makes it much easier to compare.

Jimmy: Good, good. Well that’s helpful. And, Reid, I’ll turn back to you in a little bit here and get some more about NES Financial toward the end, but I want to turn back to Martin. And, Martin before we really dive into the SoLa Impact opportunity zone fund and the social impact that you are producing in the Los Angeles area, I want to get a little bit of background on you and on the beginnings of SoLa Impact and really the beginnings of your entrepreneurial endeavors there in South Central Los Angeles. When did you first start SoLa Impact and why did you first start investing in real estate in South Central Los Angeles? Maybe you can tell me a little bit about some of your initial investments there.

Martin: Sure. In the interest of time, I’ll give you the short version of the story. I spent most of my career in private equity at a number of firms that were investing in technology and high growth industries. And then I came out to LA to help run one of our portfolio companies. It was a turnaround I started investing in real estate on nights and weekends and really looked across the Los Angeles landscape. And interestingly, most of the brokers and real estate investors we’re focusing on very rapidly gentrifying areas and areas that already had significant development.

And as I looked at the map and zip codes, I noticed that very few investors were investing in areas like South LA, Compton, Watts, you know, historically low-income areas that have really lived in the stigma of many of the issues that came out of the ’80s and ’90s in Los Angeles, particularly the LA riots, the drug epidemic and so on. And so this was an opportunity zone before the opportunity zone term and concept was invented. And I think as many investors, you look for where other folks are not going and, you know, very simply the investment thesis was look, even in tough areas, the vast majority of people are good, hardworking people that want a safe place for their kids. That was the very simple investment thesis.

And the other added aspect of complexity was, look, it takes real operational focus to be able to invest in these areas and really run a profitable real estate platform. And so we did that. I started doing it on my own in 2006 then formalized the fund in 2014, 2015. And, you know, our first one was $10 million, we then did a $50 million fund and our most recent fund which is a dedicated opportunity zone fund with the same investment thesis, the same operating strategy is a $115-million fund, and we’re having a few more follow on funds to that. That was the genesis of SoLa Impact.

Jimmy: Good. So you’ve been around the block a few times now. You’re not just springing up out of nowhere. You have a history of more than a decade of real estate investment in this area which is great. So you really know the area very well. South Central Los Angeles, not a great neighborhood. It conjures up for people around the country images of drug usage and gang violence, as you alluded to. There’s that stigma associated with it of the riots. You kind of walked us through your investment thesis already, but maybe could you make your case for Los Angeles as a whole?

Martin: I think that there are two aspects. One of them is that, you know, South LA, which is predominantly African-American, Hispanic still lives with a stigma that’s 30, 40 years old. And we felt that, you know, the stigma stayed but the vibrancy of the community and the resilience of the community had moved well beyond that. And if you look at, you know, the rents and the real estate prices, you could make good yields by giving people a high-quality product, meaning that it’s fully renovated, high-quality apartments in these areas. A lot of the folks that have been there for decades want to stay there and don’t want to move to other parts of LA but really want a much better product.

And unfortunately, a lot of the landlords historically had not invested much and, you know, certainly not in rehabbing and not in new construction in these areas. And so therein lies the opportunity. By definition, most investors want to find an area where you’ve got some operating complexity so that you can build a competitive edge and where other investors are not rushing to and so you can actually make very good returns.

What we did very early on which was not by any divine insight, but just through the Darwinian processes, we started partnering with a lot of nonprofits that we’re dealing with our tenant population and the community, folks who were dealing with domestic violence and folks that we’re dealing with veterans that had been homeless and drug abuse and rehab. And so we now have a network of about 40 nonprofit partners that are a virtual extension of our property management infrastructure and really help us administer services to our tenants in ways that effectively no other property management firm does or can. And so that’s a real competitive advantage in the medium to long term.

So it’s been a real symbiotic relationship between us, the stakeholders in the community. We work with faith-based organizations, the nonprofits, and even the public officials in terms of a public-private partnership. We now own 1500 units which serve about 3000 tenants and in the next 24 months we will be bringing to market another 1500 ground-up construction projects that are 80% of those that are covenanted affordable in a city where the acute housing shortage is estimated to be around 500,000 units of affordable housing. And that’s across, you know, California. There’s an acute need and it’s shown in homelessness and it’s shown in other statistics. And I think most urban centers have a similar problem. It’s not, you know, different shades of the same problem.

Jimmy: Well, that’ll be a good start, that 1500 additional units. That’s spread across how many different projects?

Martin: We currently have five projects that are broken ground in the opportunity zone fund and we’re in various stages of development in additional eight. So we ultimately plan to do somewhere between 20 to 30 ground-up projects in the broader South LA area. Our sweet spot tends to be buildings that are 25 to 50 units. And historically those are the types of buildings that we bought. We bought over 130 buildings over the last 24 months, which I think most people would find incredibly exhausting. But these are usually 10, 20 unit buildings, you know, that are often dilapidated, have a lot of deferred maintenance, and require a tremendous amount of heavy lifting.

Jimmy: Right. So then reaching that substantial improvement test…being able to pass that substantial improvement test is not too much of a challenge in a lot of these buildings that you’re acquiring, is that right?

Martin: Yes. You know, we think that the opportunity zone legislation really was written in a very intelligent way to really promote the types of things that we’ve been doing historically. Number one is it requires that you are an active investor versus a passive investor, so you have to do the significant improvement. Secondly, it identifies low-income census tracks for the most part and, you know, therefore it really is addressing areas where these have been historically capital-starved areas. The third is that it requires a 10-year plus horizon and so the investors have to be patient to get the full benefit and often it does take time to really realize the returns.

And the fourth aspect is that it also encourages operating businesses in opportunity zone areas. And, you know, particularly with The Beehive, as you mentioned before, we believe that the way to really promote economic development in low-income areas is to ultimately enable job creation, to encourage innovation and entrepreneurship, you know, and make sure that that is coming from the community as well. And that really is why we expanded into The Beehive, which is now a seven-acre campus close to downtown to attract businesses into an area that historically they would not have considered, but because of the uniqueness of the buildings and the uniqueness of the campus we believe that it really is going to promote and encourage opportunities on operating companies. So beyond real estate, operating companies to come in and create jobs and really spread social impact. So we’re incredibly excited about that.

Jimmy: Right. You mentioned a lot of the qualities of the opportunity zone initiative. I actually think it just kind of seems like you are already doing opportunity zone type investments. You didn’t really have to bend your model much if at all. When did you first hear about the opportunity zone initiative and what were your initial thoughts and then also when did you first decide to launch a fund?

Martin: So, you know, we had heard about the opportunity zone initiative in early 2018 and felt historically, we’ve never used new market tax credits, we’ve never used low-income tax credits. We’re a developer that has used only private capital.

And most of the government programs we either just never figured out, weren’t smart enough or found just too cumbersome and figured that the opportunity zone legislation would be the same. And, you know, the person who introduced this to us kept coming back and going, listen, this was tailor-made for your investment strategy. And we looked at across our first and second investment fund, our fund one and fund two, and we realized that two thirds of the buildings were in opportunity zones…sorry, half the buildings were in opportunity zones, two thirds would have met the significant improvement test.

And so, you know, we went ahead and launched the opportunity zone fund, our opportunity zone fund in early 2019. I’ll make this important point which…because folks have said, well listen, wasn’t this just more of what you were doing? You know, we found that investors were more motivated to invest in genuine low-income areas, areas that had lived with this stigma and so it’s certainly allowed us to do two things, you know, really reach investors that previously weren’t as interested in social impact and suddenly are becoming more interested in social impact.

And secondly, it also allowed us to do much more ground-up construction because of the specific way that the opportunity zone was structured. That along with some zoning changes in Los Angeles allowed us to do that. And so in fund one and fund two we had primarily done rehabs but we had not significantly added to the housing stock of Los Angeles and so the opportunity zone legislation really unlock that and allows us to add to the housing stock which is just in critical need particularly on the affordable side.

Jimmy: It really does seem, Martin, that this opportunity zone initiative was tailor-made for your exact investment thesis and your way of doing business in these areas. I’m curious, how much faster are you raising capital for this opportunity zone fund versus your fund one and fund two now that you’re able to use the opportunity zone tax incentive as a marketing tool really to gain these private investor dollars?

Martin: I think that again the way that the opportunity zone structure worked was really intelligent in giving investors 180 days after the realization of a capital gain to put that into a fund. And as a result, I’d say it probably was 2 or 3 times faster, partly because you didn’t have to negotiate around the length, or explain in our case, the length of the fund and why we needed a 10-year horizon that was set by the government. There was a motivating factor for folks that were reaching the 180-day mark that they had to put it in, whether it was SoLa Impact or other opportunity zone funds.

And there are dozens of really great, really smart funds, some have been recognized by the, you know, the Sorenson Impact Center in Erie, Pennsylvania, and Alabama and Denver, Colorado. I mean these are really smart and, you know, driven folks that are combining for-profit motives with real social impact. So we were again, just very fortunate to be part of an outstanding group.

And we were recognized as a top urban OZ fund. And that really, it’s a testament to a lot of things. Partly it’s our track record that we’d been doing this for a long time. Partly to what, you know, Reid had pointed out is just we had driven our business from the beginning to be very measurement oriented along the lines of the, you know, the impact rate of return. And we did…from the outset we started to survey our tenants to really understand what was the key metrics in their wellbeing and monitor that over a very long period of time. And so we had tremendous data and continuing to have tremendous data to figure out what works and what doesn’t work.

Because a lot of the programs, even programs we thought would be great, may not have this intended impact and programs we thought that might not be as effective have really expanded. And as a result, I’ll just give you one example, we’ve focused a lot of our social impact efforts on the youth in our communities, meaning that really getting into young people early around financial literacy, around entrepreneurship, around investing, and around the importance of education and beyond evangelizing to them. You know, as an example, we did $100,000-scholarship fund funded by the operating company and our investors to encourage young people in South Central Compton, and Watts to continue to pursue higher education and it’s been incredibly well received and really, you know, just tremendously accepted by the community.

Jimmy: That’s incredible. I mean, this program, this opportunity zones tax initiative, the policy, it’s incredible. The power that it has if it’s utilized, effectively utilized in the right way. And I think you’re doing just that at SoLa Impact. Like I said, it’s tailor-made for you. I mean, the fact that you’re able to raise capital two to three times faster than you may otherwise just speaks to how powerful the tool is for raising capital.

You mentioned the Forbes OZ 20. You were one of four organizations that were honored at the Sorenson Impact Center’s Winter Innovation Summit in Salt Lake City earlier this year, along with the City of Erie, Opportunity Alabama, and Four Points Funding there in Colorado. Can you tell me a little bit more about that experience and what it was like to be nominated and then what it was like to be selected as a grand prize winner? What was that like for you personally, Martin?

Martin: It is incredibly humbling in one sense because it really demonstrated the work of dozens of people in our organization that really have taken social impact incredibly seriously from the outset, measuring social impact, demonstrating it, articulating it, and most importantly, doing it, putting it into practice on a day by day basis in terms of the now hundreds of lives that we are impacting. And so it was really both gratifying and humbling.

And I think that, you know, to administrators, you know, like Reid’s organization that has pushed opportunity zone funds to measure the social impact explicitly and hold themselves accountable, you know, regardless of the specific metric, and I think that, you know, there’s ones like the impact rate of return that are better than others, but I think collectively we challenge all opportunity zone funds regardless, you know, that this is an incredible opportunity that the government has laid out.

But it’s also an incredible responsibility. It’s a responsibility to go into communities that have been historically neglected, that have been starved for capital and really do good work. And that could be coming in a variety of fashions but ultimately it needs to be demonstrated. And we challenge other opportunity zone funds, and their investors to ask that of their funds to say what real work are you guys doing? And you know, I think it’s easy to determine and distinguish between folks that are greenwashing, I guess would be the term, or just sort of paying lip service to social impact versus folks that are doing it day in and day out.

I think, again, without being too long-winded about it, I think the COVID-19 pandemic brings this to the fore. You know, you and I talked a little bit about what we’ve done in terms of every Thursday we have a food drive. We’ve identified our population that’s the most vulnerable, you know, 65 plus and those that are homebound and have health conditions, we are delivering food to them every Thursday, you know, working with our food bank partners. We have done a now $30,000…we set out to raise $20,000, we’ve raised $30,000 in a tech drive to provide Chromebooks and laptops with free or subsidized internet access to our tenants’ kids that are homebound that don’t have technology tools to enable them to continue to learn, and so assisting them with that.

Our social impact team which is now eight people strong has turned into a complete call center to help our tenants apply for every local, state, federal stimulus and form of assistance. I mean half the battle is navigating through the system and decrypting the requirements of these new stimulus packages and other forms of assistance. So our social impact team is assisting our tenants in filling out applications and providing the backup information. I joked that somewhere in DC folks are getting applications from our tenants and they’re going wow, these are the best applications. There are no grammatical mistakes. There are no spelling mistakes. These guys from South LA are giving us the best applications. And that is by design. We are doing everything we can to make sure our tenants are protected economically and other ways.

And ultimately that is the very definition of social impact. We use the term, you know there’s Ibo greeting that asks how are you doing? And our response, the Ibo response is we do well if you…I am doing well if you are doing well. I am doing well if you are doing well, right? And so we are going to do well if our tenants do well and if they’re better equipped.

And so the last thing I will do is mention that this week we are announcing a COVID retraining and recovery fund. It’s really not a fund per se, it is an initiative to allow folks that have been impacted by COVID-19, they’re out of a job or have been furloughed, to go back to school to retrain and retool for jobs that are going to be more, you know, in higher demand post-COVID. I mean we need to look at longterm solutions to this because inevitably, whether it’s in 5, 10 or 15 years from now, we’ll have another pandemic, we’ll have another epidemic, whether it’s a financial crisis or a health crisis, you know, heaven forbid, but we want to make sure that members in our community are retrained for healthcare and technology jobs particularly that not only help protect the country from the next pandemic in whatever form but also have higher-paying and more sustainability are more inoculated to the next pandemic. So we’ve raised $250,000 from the operating company and our investors. We are just thrilled. We’re hoping that other opportunity zone funds join us in this challenge to really train our communities and retool them, retrain them for a post-COVID economy.

Jimmy: That’s incredible, Martin. I am doing well if you are doing well, I really like that. I really like that…I like that expression. You guys are really going above and beyond the bare minimum of the program and you’re actually living out the policy’s intent. I feel like the opportunity zone initiative may have gotten off on the wrong foot in several places, and there’s a public perception problem with it where a lot of people believe it’s just a tax scheme for the super-wealthy. But, Martin, you’re proving otherwise here today on this podcast, going to show us just how far you’re going to rebuild these downtrodden neighborhoods, provide more affordable housing stock, and then going above and beyond and helping your tenants in these areas, I think that’s incredible.

Now social impact aside, you know, Martin, I know that you’re a businessman as well and you’re not a nonprofit charity organization so what about the financial returns that may be important to the investors? And I know you’re not at liberty to discuss your current OZ fund offering as it’s a currently open fund, but maybe you can speak about some of the returns from some of your past funds, fund one and fund two and maybe some of your other real estate projects in the past. What type of financial returns have you seen in the past?

Martin: We have seen double-digit financial returns both on a cash on cash basis and an IRR, both on the internal rate of return as well as an impact rate of return. And I, you know, without and being clear that these…the past performance is no indication of future performance, I think that what we find is that affordable housing is an incredibly recession-resistant investment theme. When there’s an impact on the economy, people walk down the scale to going into lower-priced rents, often in lower-priced areas. And so we saw this in 2008 where the rents and the demand for housing in the Los Angeles area, in some areas stopped or declined, but in South Los Angeles it did not at all. It was incredibly high throughout the 2008 crisis and rents didn’t move.

And again, there’s just this incredible shortage of affordable housing in most urban areas in California, across California particularly in San Francisco and Los Angeles where we focus. And so we think it’s an incredibly recession-resistant theme, and one that will ultimately bear out in the medium to longterm post-COVID. So we’re hopeful, but we also recognize the thousands and now hundreds of thousands and millions of lives that are being impacted and we’re very sensitive to that. So I think we want to just be part of a bigger intelligent response to this pandemic that deals with underserved and vulnerable communities.

And again, I think that this an incredible opportunity for the opportunity zone fund community and their investors to respond with, you know, for-profits solutions and combining private and public partnerships and coming up with more intelligent ways to deal with this. And so what I shared is not to highlight just what SoLa is. We hope that other funds are improving our ideas and doing their version of those in their respective communities.

Jimmy: Right on, Martin. I agree. I think this type of help is needed now more than ever and especially in these economically distressed communities, which will be the ones that are hit hardest by this pandemic. Reid, I haven’t forgotten about you. I want to turn back to you now.

Reid: I just love listening to that story. You know, you’re right on with the idea that this started out to be sort of a negative narrative about opportunity zones in the media. And things like what Martin is doing is absolutely in line with the spirit of the program and it’s important for those messages to get out. So I’m happy to sit here quietly and listen to that story.

Jimmy: Absolutely. Well, thank you. Thank you for that. But I do want to bring you back in now toward the end of our conversation here, just to kind of tie everything back together for us. Reid, I know when we spoke, you were on the podcast last summer with me and at the time you were servicing 32 opportunity zone funds, NES Financial was… How has NES Financial’s foothold grown in the opportunity zone space since then? And do you think that your focus on measuring social impact will drive continued growth for NES?

Reid: Good question. So, you know, we’ve continued to do very well in terms of the fund administration elements of opportunity zone funds. I think as of this week, we’re at 75 opportunity zone funds under contract now, which we think makes us by far the largest provider. But you know, we also are actively in discussions with many different funds. And so we have what we think is a pretty good view of what’s really going on in the industry from an overall trends perspective. And we actually think this could be, you know, once the sort of dusty settles here…

Martin talked a little bit about how certain types of investments, affordable housing, in particular, might be counter-cyclical and we think that’s certainly true and we think that there’s a number of countercyclical kinds of investments like that that are well suited for opportunity zones. And when you combine that with the big market sell-off that’s happened in February and March and the sort spirit of doing good that’s emerging as a result of the pandemic, you know, all of those things we think line up to be good drivers of maybe additional investments into opportunity zones here towards the end of the year. So social impact, as that continues to grow in importance on people’s minds, obviously our solution is uniquely positioned.

But, you know, beyond that, you know, our company as we discussed, I think the first time, was really founded with this idea of, you know, we want to help these well-intended initiatives to succeed in doing the good they’re intended to do. And so we’ll always be driven by this idea of, you know, tuning solutions to be purpose-built to track and measure the good that they’re actually doing. And so we’re certainly seeing the growth in the opportunity zone space. But, you know, we’re also being successful now in non-OZ impact-related funds.

As you…I think you may have read, you know, our company was recently acquired by a company called JTC Group, headquartered out of the U.K. as sort of their entry into the United States and they have large fund clients globally. And so this is an opportunity for us to leverage the good work that we’ve done in this space here and hopefully do more good on a global basis because impact investing and the results of this pandemic are certainly not a U.S.-only phenomenon, they’re global trends.

Jimmy: That’s great. I wish that both of you will keep on doing all of the great work that you’re doing within the impact investing space, both NES Financial and SoLa Impact. Reid and Martin, we’ve gotten toward the end here. Thanks for joining me today. Before we go, can you tell our listeners how they can learn more about NES Financial and SoLa Impact? Reid, I’ll start with you. You can tell our listeners how they can learn more about NES.

Reid: Sure. Our website, you know, we can be found at www.nesfinancial.com. And on there, there’s information as to how to contact us, lots of learning materials and lots of information about our various solutions. And of course, if you’re…if anybody out there is interested in learning more about our product, maybe even seeing a demonstration of how the solution comes together, we’re always happy to oblige. But thank you, Jimmy, again for having me.

Jimmy: Excellent. Absolutely. And, Martin, to you, how can our listeners learn more about SoLa Impact?

Martin: Jimmy, thanks again for the platform. Our website is SoLa as in South LA, so it’s solaimpact.com. I also would just want to thank you for your resources. We turn to OpportunityDb early on for additional information as the opportunity zone legislation was rolled out, and you’ve certainly been a central point for keeping up to date and getting information on the industry. So thank you for your efforts.

Jimmy: Thank you for the kind words and you’re very welcome. It’s my pleasure to do what I’m doing here for the opportunity zone industry. For all of our listeners out there, I will have show notes on the Opportunity Zones Database website. You can find those show notes at opportunitydb.com/podcast and there you will find links to all of the resources that Martin, Reid and I discussed on today’s episode. Martin and Reid, again, thank you so much for joining me today. Have a good one.

Reid: Thanks so much.

Martin: Thanks for having me.

Jimmy Atkinson

Jimmy Atkinson

Hi, I'm Jimmy Atkinson... I founded OpportunityDb in August 2018. I'm a veteran Internet entrepreneur with a background in economics and Web marketing. I previously founded ETFdb.com. These days, I am passionate about impact investing and tax-advantaged investment opportunities. At the crossroads of these two ideals is the opportunity zones program, a place-based tax policy intended to economically transform some of the poorest areas of the United States with new real estate and business development.

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