How can Opportunity Zones be leveraged to create more affordable housing that has a commitment to sustainability?

Majesty Gayle is Senior Fund Manager of the Evo Opportunity Fund, which seeks to develop energy efficient workforce housing in Qualified Opportunity Zones by repurposing storage containers.

Click the play button above to listen to my conversation with Majesty.

Episode Highlights

• An overview of the Evo Opportunity Fund, which has a focus on both affordable housing and sustainability through the use of recycled storage containers and renewable energy systems.
• The advantages of reusing shipping containers as part of the homebuilding process, including availability, homogeneity, durability, and ease of transportation.
• The importance of prioritizing sustainability in all aspects of the building process.
• How the Opportunity Zone tax incentives are enabling funds such as Evo to develop single-family homes in low income communities.
• How additional tax incentives beyond the Opportunity Zone program can further mitigate the risk associated with building in distressed communities.
• Details of the Evo Opportunity fund, including IRR, target raise, and minimum investments.
• How Evo recycles capital from sale of its homes to comply with holding period requirements in its Opportunity Zone Fund.
• Evo’s commitment to being involved in the communities it builds through a charitable initiative that provides clothing, food, financial literacy classes, and other services.
• The focus on a “triple bottom line” that incorporates people, planet, and profit.

Featured on This Episode

• Majesty Gayle on LinkedIn
• Photos of Evo homes
• Opportunity Zones in Atlanta, Georgia
• New Markets Tax Credit Program

Industry Spotlight: Evo Opportunity Fund

The Evo Opportunity Fund, based in Atlanta, seeks to develop energy efficient workforce housing in Qualified Opportunity Zones by repurposing storage containers. The fund is raising $20 million in equity with a $50,000 minimum investment.

Learn More About Evo :

• Visit EvoOpportunityFund.com
• Visit the Evo Opportunity Fund Deal Room

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. How can Opportunity Zones be leveraged to create more affordable housing that has a commitment to sustainability? Here to discuss that topic with me today is senior fund manager of the EVO Opportunity Fund, Majesty Gayle. Majesty joins us today from Atlanta, Georgia. Majesty, welcome to the podcast.

Majesty: Thank you for having me, very excited to discuss this topic.

Jimmy: Yeah, excited to have you here as well, Majesty. Thanks again for joining. To get us rolling, why don’t you tell my listeners and me about the EVO Opportunity Fund? Who are you guys exactly? What do you do? What is it that you’re focused on specifically?

Majesty: Well, once again, my name is Majesty Gayle with EVO Opportunity Fund. We are a fund located in Atlanta, Georgia with a focus on not only affordable housing, but also sustainability within our building methods. Specifically, we’re focused on recycled materials. We do use recycled storage containers building materials, and we also utilize renewable energy systems and mechanicals and fixtures in our projects with the goal of cutting emissions and offering this type of technology to the lower income demographic. So, yeah, we are excited about our projects. We have about $50 million in gross development value in early stages of development as far as our pipeline right now and seems like we’ll be growing from there.

Jimmy: Good. I wanna talk with you more about capital raising and your pipeline a little bit later in the episode today, get into some of the nitty-gritty there, but first I wanted to ask you more about those the shipping containers you’re using, first of all, and also just what you’re building in general. What are some of the advantages of recycling shipping containers and how often does that tend to work out well for you guys? I know some jurisdictions may not allow them, but talk to us a little bit more about that.

Majesty: There are some challenges that come with doing anything considered novel, specifically with regulatory bodies. And that’s sometimes where we have difficulties, specific to suburban areas and more on the outskirts, but metropolitan areas and urban centers love the concept of re-purposing storage containers as building materials. They agree with the sustainability approach.

The main benefits there, I would say, with containers is that they’re readily available. They have some issues regarding bottlenecks with shipping them out or whatnot. So there’s a large amount of them located in the state that don’t really a home, they’re just kind of sitting. Also, the geometry of them allows for you to create kind of a template or cookie-cutter building methods revolving around our plans. Also, the shipping aspect, they’re very easy to move around. You can load them on a train, on a truck. There’s a lot of different things that you can do with them and also the durability of them. You know, it is made out of steel. So that helps out as well. There’s several pros there, but I will say that there are some jurisdictions that we do have challenges as far as getting the approvals to use them.

Jimmy: Got you. And what does a typical home that’s built from a shipping container end up looking like at the end of the day? And are you able to incorporate more than one shipping container into a home? And I’m just curious, I’ve never seen one in the real world before. I’m curious if you could tell me a little more about what they end up looking like, what the floor plans look like. What’s the square footage plan look like also?

Majesty: Yeah. We actually have plans that range from about 1,500 square feet all the way up to 2,500 square feet, 4-bed, 3 to 4-bedroom, 2 to 3-and-a-half bathrooms roughly. And they look just like any other house, or I would say any other modern house. Typically, we apply siding and facades where you can’t necessarily tell that it’s a shipping container. So our structures just look more like they’re just very modern builds. So we still use this framing on the inside as far as lumber. And we also use facades on the outside. So it just looks very modern and you can honestly build them up however you want them to. They’re almost like Legos. So if you want it to build the Taj Mahal out of containers, you could, but we also have seen tiny homes built out of them as well. So it’s kind of wherever your imagination can take you there.

Jimmy: And I wanna talk with you now about the sustainability of your projects. You, Majesty, are a LEED-accredited professional, and I believe that the homes you’re building are LEED-certified, or will be LEED-certified. Can you talk a little bit about that aspect, the sustainability aspect that you’re bringing to these projects and what your goal is there and why it’s important?

Majesty: Yes, sir. We believe that it’s of the utmost importance to get in line with the sustainability push going on worldwide right now. There are some real effects happening in real-time. And I think that we all can kind of see them when it comes to climate and weather and just, you know, kind of our effects on the environment. So we decided to innovate in that direction specifically in housing. We see it happening pretty strongly in the automobile space, and we’re pretty much mimicking that by incorporating the renewable energy systems.

And our goal is to make these systems and this type of technology more affordable for, you know, lower-income demographics because they deserve to have sustainable solutions as well. So I got credentialed myself just to have a better understanding of what it means to be sustainable from every angle because it starts with the creation of a piece of material, not just when it gets to the site. And you also have to think about the actual waste that comes from the materials that you use. So you have to think more long-term or whatnot when it comes to that. So we believe heavily in that and our goal is to reach net-zero emissions in 10 years via our research and development in this space. So that’s really important to us on an environmental level to incorporate that into our operations.

Jimmy: Good. So you’re helping to minimize the amount of waste from construction materials because so much of the construction materials you’re using are shipping containers that you’re recycling. I think I’ve got a lock on that. And what about in terms of the efficiency of the homes? Are they using renewable energy or how are they doing that? I’m curious about that.

Majesty: Yes, sir. We actually install independent solar energy systems on our units. And this is, of course, optional for the home. Every homeowner isn’t necessarily interested in that. Many are though. So we installed solar energy systems onto the units. They have the ability to generate anywhere up to about 50% to 70% of the energy that they need to operate depending on the size. And they’re still tied to the grid, but they’re using less of the grid power than necessary and, you know, taking advantage of what the sun offers.

Georgia is a very wooded area. We don’t have as much sun as, you know, the West Coast maybe does, but we’re still taking advantage of what we can. And yes, also we have energy-efficient appliances and fixtures and mechanical systems as well. And the goal is just to, I guess you could say, decrease consumption of energy, which will help as far as emissions and climate goals.

Jimmy: Terrific. Let’s focus on the types of properties that you’re building now. And where are you building? You’re located in Atlanta like I mentioned at the top of the show. Are all of these projects located in the Atlanta metropolitan area? Are you spread throughout the Southeast? And what specifically are you building? What types of properties are you building?

Majesty: Right now we’re focused in Atlanta. That’s our area. It’s a pretty big market or whatnot. So there’s a lot of projects to work on here, but we are looking to expand out to a few other areas. We’re looking at some deals right now in Nashville, Birmingham, and in Jacksonville. So we will stay focused on the South for the most part, but we’re focused on single-family, residential. We do detached and attached, so homes and townhomes as well. And our average project is about 20, 21 lots, so smaller subdivisions and communities. And that’s kind of our goal with this fund is to create communities in these distressed areas.

We’ve just seen that when you develop and beautify an area, it typically raises the energy levels and, you know, kind of the mindset of the area. So that’s kind of our goal and that’s our focus is just single-family for-sale housing. We don’t do any rentals. One of missions is to empower new homeowners or new home buyers or prospective home buyers. So we focus on for-sale housing only.

Jimmy: Good. And you’re focused specifically on revitalizing distressed areas. So you line up, or I would say your mission aligns very nicely with the intent of the Opportunity Zones incentive. Talk to me about that a little bit. Why is the Opportunity Zones program important to you? How is it helping you raise capital for this fund?

Majesty: Man, I speak very highly about this program very often. I think that it is a very generous program. I’m glad that it was put into effect. Essentially what it does for someone like myself who develops in these, you know, difficult areas is mitigate risks for our capital partners. So the tax benefits are, I just can’t think of another comparison or whatnot. So it helps to bring capital to these projects where we had difficulty before due to the high risk of the demographic that we’re working with. So I’m very grateful for that. And thus far, we’ve been able to get a lot of attention to these projects and to these areas, not only from private investors but also from institutional investors. And I would have to say that that’s specific to our model, of course, but definitely the program helps out with mitigating that risk and taking the conversations further.

Jimmy: Yeah. In theory, it’s supposed to provide an easier access to capital and in practice, it sounds like it may actually be achieving that for you, which is terrific. You’re also focused on not just building housing in Opportunity Zones and in distressed communities, but also building affordable housing. And you’re also employing affordable housing tax credits and working with CDFIs. Can you talk about that aspect of your capital raise and how do you end up stacking those credits on top of the Opportunity Zone equity?

Majesty: Yes, sir. The CDFIs and the capital that come from that space helps to get a lot of projects done. So bring in both of these programs are the benefits of, you know, different programs together just mitigates the risk even more. Specifically, CFDIs are able to provide funding for construction costs and the fund is able to provide capital for manned acquisition and kind of the pre-development phase. So that’s kind of how our capital stack works. We’re about 70/30. Our debt portion is from affordable housing lenders and 30% from the equity participants. So it helps out. Otherwise, we wouldn’t have the capital to do the land acquisition and the construction.

It requires a public-private partnership to make affordable housing happen due to the cost and the risk and different things like that involved. So matching both of those together seemed to work perfectly for our capital stack and allows us to scale and to provide more supply for this shortage that we’re dealing with.

Jimmy: Yeah. I’d imagine it’d be much more difficult to provide this supply of affordable housing without access to these programs, both Opportunity Zones and affordable housing financing and tax credits. Is that fair to say? I wanna talk about the returns now. What does it do for the profitability of the deals that you’re working with?

Majesty: You know, real estate is hot right now. I will say that it can be a bit scary if you don’t look at it with an optimistic point of view, but it’s hot right now. So our projects are doing very well. We do target a 20% IRR for the fund, but our projects just for the past several years have had an average of about 60% cash-on-cash return. So we’ve done pretty well there with our model, and we’re looking to pass that along to our investors. And that also comes with the 8% preferred return as well, just to make sure that they get taken care of first.

Jimmy: And in terms of the equity piece, specifically the OZ fund that’s providing the equity for this project, what’s your target raise, and what’s your minimum investment?

Majesty: The minimum investment is $50,000 and our target raise for our Series A round is $20 million and the maximum raise for our fund is $250 million, but we expect to be able to do a lot of good with the capital that comes from our fund in conjunction with the CDFI funds.

Jimmy: Yeah, that is a pretty good amount of capacity there if you’re able to blow through your minimum target number, certainly. I wanna talk about the holding periods now within your fund and your exit strategy. So you’re developing these projects. They average about 20 to 21 lots, but they’re not built to rent. They’re single-family, for-sale residential is what you’re building. So what’s your average project holding period and do you have a system to recycle that capital within the 10-year hold?

Majesty: Yes. Our projects range from about 12 to 18 months, depending on the size. We do pre-sell all of our units before we typically go into vertical construction. So we’re fortunate we have a great team that we work with at Keller Williams that does that. So we’re in and out of our projects pretty quickly. And we just look to reinvest that capital into deals that are waiting in our pipeline, whether they’ve just had land development completed or whether we have them under contract. So it’s a churn in a sense, and we expect to be able to get about 5 to 7 turns of the capital over a 10-year period. So yeah, we’re looking to kind of continue doing deals and operate with a quick turnover type system. And that’s pretty much how we have it structured.

Jimmy: Okay. Majesty, that sounds great. And in addition to managing the EVO Opportunity Fund, you also run a nonprofit that offers supportive services to the residents of your projects. Can you talk about that a little bit? What is that and what types of services do you offer?

Majesty: We quickly noticed in our career with development in these areas that if you don’t provide supportive services along with the housing, then typically your initiatives won’t go very far. So we decided to go ahead and offer basic needs type services in the same areas that we’re doing these projects in an attempt to uplift the community and continue to uplift the community, but also not so that we’re not a stranger in the community in the sense that we just kind of come in, develop, and leave.

Some of the services that we offer would revolve around clothing for kids and for school-age children, things like that. We also have a food distribution or food rescue program that we partnered with Whole Foods and Freshly on. And we also offer credit counseling, financial literacy class, things like that so that the people that are engaging with the residents of our community or even possibly live in the community, have some services that will continue to enrich their lives so they can continue to expand and build their own generational wealth and move up in life accordingly.

Jimmy: Going back to your fun now, Majesty, what makes your fund important and how does it differ in your mind from most other Opportunity Zone funds that we might see out there?

Majesty: I would say what makes us different…there’s a few things that make us different. One is that we’re very big believers in diversity. We are Black-owned, we are woman-owned as well, so that has a big effect on how we operate. And so far we’ve seen those effects be very positive. And also our commitment to sustainability so far is unmatched. We’re very serious about our goals with sustainability and housing, and we see where things are going as far as the current administration and their policies and their goals. And we feel that we’re aligned with them as well as the United Nations and their development goals that they have for 2030.

So that’s important to us and we’re glad to be aligned with, but, you know, for the most part as well, the affordable housing approach. Opportunity Zones are supposed to spur economic activity in low-income areas and that’s exactly where we’re operating. We’re not building luxury houses or luxury condos or apartments or anything like that. We’re actually providing real services that real people need. And we have a track record for doing so before funds like this existed.

So I think that, you know, our commitment to servicing our community is pretty clear and easy for anyone to see. And that’s our goal. We wanna make sure that we have more than just a profit, you know, kind of incentives. And that’s what we do here. We definitely believe that we’re a triple bottom line type company where we look at people, planet, and profits. So we’re happy to say that we’re doing that and glad that the program exists for us to be able to do that.

Jimmy: Fantastic. A triple bottom line approach, people, planet, and profit, very worthwhile approach. Majesty, it’s been a pleasure speaking with you today. Before we go, though, can you tell our listeners where they can go to learn more about you and the EVO Opportunity Fund?

Majesty: Yes, you can go to www.evoopportunityfund.com. We actually have a completely digital experience for anybody that’s interested. You can gain access to our deal room, see everything that’s happening on the website. You can also subscribe completely through the website and you can also schedule a call directly with myself or anyone else with the organization to talk about your goals and also talk about our mission and how they can come together and do well while doing good. So evoopportunityfund.com is where you get more information.

Jimmy: Excellent. Please do visit evoopportunityfund.com to learn more. And for our listeners out there today, as always, I will have show notes for today’s episode on the Opportunity Zones Database website. You can find those show notes at opportunitydb.com/podcast, and there you’ll find links to all of the resources that Majesty and I discussed on today’s show. Majesty, it’s been a pleasure. Thanks for joining me today.

Majesty: Thank you for having me.

Jimmy: That’s it for our show today. A huge thank you to you, our listener. If you liked this episode, please rate and review us on iTunes. The “Opportunity Zones” podcast is produced by the Opportunity Database. Visit opportunitydb.com to learn more about Opportunity Zones and Opportunity Zone fund investing. You can learn how to subscribe to this podcast and read more about today’s guest in the show notes by visiting opportunitydb.com/podcast. And we’ll be back soon with another episode.