Spurning OZs, Bobby Turner Pours $1B Into 'Real Estate As A Force For Good'
After raising $700M to provide workforce housing nationwide, a Los Angeles-based social impact investor has opened a second fund to raise an additional $1B for housing for the middle class in major metropolitan areas.
Turner Impact Capital CEO and principal Bobby Turner told Bisnow that now more than ever, there is a strong need to provide workforce housing for those stuck in the in-between: people who don’t qualify for affordable subsidized housing and can’t afford market-rate luxury housing.
Many of these residents are teachers, police officers and healthcare professionals, Turner said.
“Workforce housing is one of those critical issues that we face and needs to be addressed,” Turner said.
The new fund comes four years after Turner created the Turner Multifamily Impact Fund I. That fund, which launched in 2015, raised $700M and acquired 22 affordable workforce housing communities totaling 7,840 units in urban areas. Since 2014 when Turner founded Turner Impact Capital, his company has raised $1.25 billion and made investments throughout the nation.
The second fund has already acquired three properties: Sunset Lake, a 614-unit multifamily property in Chicago; Agave Falls, a 325-unit multifamily community in Austin, Texas; and SouthRidge, a 386-unit multifamily community in Washington, D.C.
Turner said although he is active in California building charter schools and healthcare projects, most of his second fund's workforce housing acquisition will be in other metropolitan areas.
Turner said his model can't work in urban areas in Los Angeles or major metro places in the state because of the cost of land and housing. Last month, the Los Angeles City Council voted to have city staffers produce a report on the number of residents who fall into the moderate income category, as well as how much housing is available to them.
"We are working with the state and local community [officials] to drive down the costs of development, and drive up our profitability," said Turner, adding that profitability is key to continuing to scale his model in other communities.
Also, while many of his projects are in designated opportunity zones or low-income neighborhoods, Turner said he does not plan to utilize the federal program. The opportunity zones program allows an investor to roll over capital gains into a long-term investment in any of the 8,700 designated zones nationwide in exchange for a tax break.
Turner called the opportunity zones program flawed and discriminatory.
"It’s an exclusive program and it’s discriminatory," Turner said. "This is only a program for those with unrealized capital gains to invest. In order for this program to be fair it needs to incentivize all types of investors. Pension funds and sovereign wealth funds, none of them benefit."
Turner said he remembers meeting and discussing the opportunity zones plan early on with U.S. Sen. Cory Booker (D-N.J.). Booker is one of the authors of the legislation.
"The ideas were brilliant but then it got watered down and became a wonderful tax break for the wealthy," Turner said, adding that does not necessarily benefit the residents in these zones.
At a time when the stock market and the economy are hitting all-time highs and doing well, Turner said, there is still a huge disconnect when it comes to creating housing for low- and moderate-income people.
There are more than 43 million renters nationwide and that number is growing, according to the Harvard Joint Center For Housing Studies. Nearly half of these renters are rent-burdened, meaning they are spending more than 30% of their income to pay for monthly rent.
“There are still more than 40 million people using food stamps, 22 million are rent-burdened,” Turner said.
Turner said while many investors and developers will take an older property and renovate or upgrade it and increase rent to market or a luxury rate, thereby pricing out existing residents, he has a different method to make it more affordable and create a pride in rentership.
In many minority communities, the biggest expense is turnover. There is usually a 100% turnover rate every two years, Turner said.
The Turner Impact model focuses on providing resident-enrichment services. For example, Turner's communities offer to subsidize a teacher's rent in exchange for that teacher helping at a community's after-school program. He will also offer a discount to a healthcare professional in exchange for a health screening, while a police officer renting could organize a community watch program or park their squad car in front of the building.
"This creates community prosperity, a sense of community and a sense of pride in our communities ... We are using business and real estate as a force for good," Turner said.
CORRECTION: TUESDAY, NOV. 5, 12:15 P.M. PT: A previous version of this story mischaracterized Bobby Turner's title and investment model. The story has been updated.