LOS ANGELES—Turner Impact Capital has launched a multifamily fund to acquire and manage as much as $1 billion in apartment communities. The multifamily fund is an expansion of the company's social impact investment model, which aims to simultaneously create effective social change while producing healthy risk-adjusted returns. The multifamily fund will supply demand for workforce housing in urban market across the US, and will target tenants with incomes 80% of the market median.

“The primary objective of Turner Impact is to make money, but I believe that social impact investing can generate better risk-adjusted returns than traditional value investments or opportunistic investments,” Bobby Turner, principal and CEO of Turner Impact Capital, tells GlobeSt.com. “At the end of the day in real estate investing, people are speculating on demand. What is wonderful about social impact investing is that we are not speculating on demand. It is the issues in society where the demand so outstrips supply that it creates an economic opportunity. It is also a marketplace where the traditional investor in these issues has been the government and or philanthropy. By eliminating the risk of creating demand by fulfilling the existing demand, you can create a better risk-adjusted return.”

Turner notes that today, 25% of all renters in America spend more than 50% of their income on rent, while 50% of renters spend 35% of their income on rent. “This inequality in income versus rent comes at the cost of food security, healthcare security, education and all sorts of enrichments that families need to thrive and have hope,” says Turner. “To me, there is a huge mismatch in supply and demand of quality affordable workforce housing.” However, this is not a problem that can simply be solved by building new workforce housing, because, there is no way to build affordable housing and produce returns for investors. “You can't build affordable workforce housing; economically it doesn't make sense,” he says. “There is not a market-rate return that can be driven today by building new workforce housing given the cost of land, labor, materials and financing if you want to maintain affordability. What I can do is buy, preserve and enrich.”

Turner will be targeting the same existing properties that a value-add or opportunistic investor will target, and, more importantly, he is willing to pay the same price for the property. However, rather than renovating the building and then driving profits by increasing rents, he plans to drive profitability by stabilizing tenancy in his properties. “The biggest expense of owning and operating workforce housing is turnover,” says Turner. “If one can think of an innovative management model where you can change the relationship between the landlord and the tenant, you could actually increase the duration of tenancy.”

He is going to accomplish this—somewhat lofty goal—by subsidizing a select number of units for community supporters, like teachers and law enforcement, who, in exchange for fully subsidized housing, will provide community enriching programs, like a neighborhood watch and tutoring programs for children living in the property.

The fund's investors include Citi Community Capital, the University of Michigan endowment and Rockefeller Brothers Fund. Only days after announcing its launch, the fund had already completed its first acquisition, a 599-unit apartment complex in the Washington-Arlington-Alexandria metropolitan area of Maryland for $56 million. “This is a way that one can do well financially and do well by society without sacrificing yield and or mission,” says Turner. “That is the backbone of what we are trying to accomplish here.”