NEW YORK—Morgan Stanley, TruFund Financial Services and the Ford Foundation have launched the Impact Developers Fund. The $26 million fund will provide capital to what the trio call "emerging impact businesses" that lack access to adequate affordable capital. These companies include minority and women owned real estate development companies that build, own and operate affordable housing and provide value-adding social services to residents.
The equity capital the fund will provide will be used for working capital to acquire, develop and operate affordable housing and community services.
The fund will also provide capital solutions, including debt and equity, that can be tailored to the needs and capacity of the business.
The Impact Developers Fund has identified its first cohort of clients and it is anticipated that future rounds will expand to serve more minority developers.
Managed by TruFund Financial Services, a minority-led nonprofit financial services organization, the Impact Developers Fund will be seeded by Morgan Stanley and the Ford Foundation.
"Morgan Stanley is proud to partner with the Ford Foundation and TruFund Financial Services on this important initiative that will help expand racial and gender diversity in the community development field by increasing access to capital for the next generation of developers," said Shelley O'Connor, chairman and CEO of Morgan Stanley Private Bank and Morgan Stanley Bank, in prepared remarks.
Women and minorities face an unusual struggle to access the capital needed to grow their businesses in all industries, particularly real estate, the companies pointed out as they made the fund's announcement. For example, African Americans receive only 2% of all SBA loan products. This lack of capital available to minorities to start and grow their businesses is also reflected in the shortage of minority-owned companies in the affordable housing industry.
Although data on the number of women and minority owned affordable housing developers is opaque, a 2019 study by Harvard Business School and Bella Research identified only 17 women-owned and 21 minority-owned real estate investment firms among the total universe of 967 firms listed in the Prequin database, less than 5% of the industry. The percentage of real estate assets under management is even lower, with women and minorities representing about 0.8% and 1.2% respectively, of the industry totals.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
