Who – the protagonist
Martin Muoto, the CEO and Founder of SoLa Impact.
What?
SoLa Impact was founded as a for-profit social-enterprise real estate developer and rental management company.
Its mission has been to increase the amount of high quality affordable housing in low income communities, beginning in South Los Angeles – home to one million residents.
Martin, who enjoyed a successful career in venture capital after graduating from The Wharton School of the University of Pennsylvania, found a passion for helping those who lived in poverty in Los Angeles. This cause had particular meaning for him having seen the impact of poverty while growing up in northern Nigeria.
Martin began first investing in real estate in trendy LA areas on nights and weekends. However, he jumped into real estate full-time after discovering a market opportunity in the under-valued neighbourhoods of South LA.
Martin partnered with Gray Lusk, who ran a portfolio of around 300 units in another LA low-income community, North Hollywood, and founded SoLa Impact.
Why?
Fresh from SoLa Impact’s newest project, the Beehive, a 92,000-square foot commercial space that was funded by a $115m real estate fund, Martin was doing it all again with a $1b fund, known as the Black Impact Fund (BIF).
Martin was able to raise money through the creation of the New Opportunity Zone (OZ) tax-incentive programme, which encourages development in low-income areas.
The BIF’s mission would be to increase economic opportunities for black and brown communities across the US – the first time SoLa Impact had ventured out of LA.
In addition, 13% of the asset’s appreciation, fees, and ‘carry’ would return to the community via a Community Fund that distributed grants. The number 13 represented 13% of the US population who were African American in 2020.
When?
It was the summer of 2020 when thousands of Americans took to the streets to protest the disproportionate killing of black and brown individuals by police officers. Demonstrations quickly grew in size, particularly after the murder of George Floyd in Minnesota. This spurred Martin on to create the BIF, with the plan to open the investment fund in early 2021.
Where?
The BIF would invest in major US urban areas with significant black and brown populations and strong growth prospects.
Phase 1 would concentrate on the west coast, with phase 2 spanning the whole of the east coast, and Texas and Louisiana.
Key quote
What next?
Compared to the speed Martin had raised the previous funds, subscriptions for the BIF were lagging.
After some honest conversations with prospective investors, concerns included the negative reputation OZs had gained for enabling tax avoidance, the 13% allocation for social impact, and the pace of geographic expansion.
Martin would have to make some trade-offs between the financial and social goals of the fund.
An intriguing protagonist
Adlai said: “The homelessness crisis across the country highlights the challenges of the lack of affordable housing.
“In expensive real estate markets, there is little ability to develop affordable housing while producing market-rate returns for private investors. As such, the traditional model is that these housing units are built by non-profits using subsidised government funding.
“When I was introduced to SoLa Impact in South Los Angeles, I was intrigued. Martin Muoto, a black private developer, had developed a model for producing market rate returns and, therefore attracting hundreds of millions of private investment dollars into a community typically ignored by the private sector. This model needed to be shared.
“There are also very few cases that check this many boxes: protagonist of colour; addressing social challenges; social enterprise mission-driven business; Opportunity Zones; finance; and real estate development.”
Differing opinions
Adlai commented: “I was very impressed by the fact that an entrepreneur of colour, working in South Central Los Angeles, could gain the attention of, and funding from, traditional institutional investors.
“It was also interesting to see how people interviewed for this case reacted to Opportunity Zones. There were as many people who see it as a great opportunity for investment in under-resourced communities, as there are those who believe it is just a tax ploy to make rich people richer.
“As such, Martin’s ongoing need to retain the trust of local community members, while developing an Opportunity Zone, made for an interesting set of interviews.”
Engaged students
He added: “The students are very intrigued by this case. They see the need for affordable housing but do not typically know how it is funded. They have heard of Opportunity Zones, but don’t know much about them. And they are fascinated that they can see how a developer can build affordable housing at scale in an expensive city like Los Angeles.
“The case takes the time to explain each model, while also clearly describing the challenges that the protagonist faces. I was impressed by how prepared the students are to discuss the case in-depth after reading it.”
Identifying with the case
Adlai stated: “First, there is a great appreciation by the students of colour that they are learning about a social entrepreneur who has a similar lived experience. This is extremely important, as most business school cases do not have protagonists of colour.
“In the classroom, the students are extremely engaged. Those students who come at the case from a ‘social mission first’ point of view are looking to assure themselves that the developer isn’t taking advantage of residents, while the ‘profit first’ students are leery about how to make market-rate returns while accomplishing a social mission. This mix makes for exciting debates and in-depth analyses.”
‘All in’
Adlai concluded: “Make sure the protagonist is ‘all in’ to tell their story – warts and all. They must understand that a case is about their challenges, not just bragging about their wins.”
The case
Who – the protagonist
Martin Muoto, the CEO and Founder of SoLa Impact.
What?
SoLa Impact was founded as a for-profit social-enterprise real estate developer and rental management company.
Its mission has been to increase the amount of high quality affordable housing in low income communities, beginning in South Los Angeles – home to one million residents.
Martin, who enjoyed a successful career in venture capital after graduating from The Wharton School of the University of Pennsylvania, found a passion for helping those who lived in poverty in Los Angeles. This cause had particular meaning for him having seen the impact of poverty while growing up in northern Nigeria.
Martin began first investing in real estate in trendy LA areas on nights and weekends. However, he jumped into real estate full-time after discovering a market opportunity in the under-valued neighbourhoods of South LA.
Martin partnered with Gray Lusk, who ran a portfolio of around 300 units in another LA low-income community, North Hollywood, and founded SoLa Impact.
Why?
Fresh from SoLa Impact’s newest project, the Beehive, a 92,000-square foot commercial space that was funded by a $115m real estate fund, Martin was doing it all again with a $1b fund, known as the Black Impact Fund (BIF).
Martin was able to raise money through the creation of the New Opportunity Zone (OZ) tax-incentive programme, which encourages development in low-income areas.
The BIF’s mission would be to increase economic opportunities for black and brown communities across the US – the first time SoLa Impact had ventured out of LA.
In addition, 13% of the asset’s appreciation, fees, and ‘carry’ would return to the community via a Community Fund that distributed grants. The number 13 represented 13% of the US population who were African American in 2020.
When?
It was the summer of 2020 when thousands of Americans took to the streets to protest the disproportionate killing of black and brown individuals by police officers. Demonstrations quickly grew in size, particularly after the murder of George Floyd in Minnesota. This spurred Martin on to create the BIF, with the plan to open the investment fund in early 2021.
Where?
The BIF would invest in major US urban areas with significant black and brown populations and strong growth prospects.
Phase 1 would concentrate on the west coast, with phase 2 spanning the whole of the east coast, and Texas and Louisiana.
Key quote
What next?
Compared to the speed Martin had raised the previous funds, subscriptions for the BIF were lagging.
After some honest conversations with prospective investors, concerns included the negative reputation OZs had gained for enabling tax avoidance, the 13% allocation for social impact, and the pace of geographic expansion.
Martin would have to make some trade-offs between the financial and social goals of the fund.
Author perspective
An intriguing protagonist
Adlai said: “The homelessness crisis across the country highlights the challenges of the lack of affordable housing.
“In expensive real estate markets, there is little ability to develop affordable housing while producing market-rate returns for private investors. As such, the traditional model is that these housing units are built by non-profits using subsidised government funding.
“When I was introduced to SoLa Impact in South Los Angeles, I was intrigued. Martin Muoto, a black private developer, had developed a model for producing market rate returns and, therefore attracting hundreds of millions of private investment dollars into a community typically ignored by the private sector. This model needed to be shared.
“There are also very few cases that check this many boxes: protagonist of colour; addressing social challenges; social enterprise mission-driven business; Opportunity Zones; finance; and real estate development.”
Differing opinions
Adlai commented: “I was very impressed by the fact that an entrepreneur of colour, working in South Central Los Angeles, could gain the attention of, and funding from, traditional institutional investors.
“It was also interesting to see how people interviewed for this case reacted to Opportunity Zones. There were as many people who see it as a great opportunity for investment in under-resourced communities, as there are those who believe it is just a tax ploy to make rich people richer.
“As such, Martin’s ongoing need to retain the trust of local community members, while developing an Opportunity Zone, made for an interesting set of interviews.”
Engaged students
He added: “The students are very intrigued by this case. They see the need for affordable housing but do not typically know how it is funded. They have heard of Opportunity Zones, but don’t know much about them. And they are fascinated that they can see how a developer can build affordable housing at scale in an expensive city like Los Angeles.
“The case takes the time to explain each model, while also clearly describing the challenges that the protagonist faces. I was impressed by how prepared the students are to discuss the case in-depth after reading it.”
Identifying with the case
Adlai stated: “First, there is a great appreciation by the students of colour that they are learning about a social entrepreneur who has a similar lived experience. This is extremely important, as most business school cases do not have protagonists of colour.
“In the classroom, the students are extremely engaged. Those students who come at the case from a ‘social mission first’ point of view are looking to assure themselves that the developer isn’t taking advantage of residents, while the ‘profit first’ students are leery about how to make market-rate returns while accomplishing a social mission. This mix makes for exciting debates and in-depth analyses.”
‘All in’
Adlai concluded: “Make sure the protagonist is ‘all in’ to tell their story – warts and all. They must understand that a case is about their challenges, not just bragging about their wins.”
