ImpactAlpha, Jan. 27 – Cincinnati-based Fifth Third Bank will invest a capital gains windfall in affordable and workforce housing and other community development projects within its 10-state footprint.
The $100 million investment will be divided between four regional investment partners, including National Equity Fund, an affiliate of New York-based Local Initiatives Support Corporation (LISC), Raymond James Tax Credit Funds, Chicago-based Decennial Group, and Fallbrook Multifamily Investments.
“We have always thoughtfully invested in our communities, and the Opportunity Zone legislation allows us to take the next step,” said Catherine Cawthon, head of Fifth Third’s Community Development Co.
Opportunity Zones were established as part of the 2017 Tax Cut and Jobs Act to spur investment in economically-distressed neighborhoods. The law provides hefty tax breaks to capital gains that are re-invested in the designated zones.
Return on assets
At an an event in New York on Friday announcing the commitment, leaders from LISC, Fifth Third, and other partners stressed their intent to put community well-being at the center of the process – in stark contrast to some widely publicized deals that have drawn criticism for their dubious community benefits.
“This is not a transaction,” said LISC president & CEO Maurice Jones. “This is an effort to capitalize on the assets that are already there, and the No. 1 asset is people.”
The partners will identify and underwrite OZ investments and report on impact metrics such as the number and quality of jobs created and median income levels for housing. The first projects are expected to be announced by mid-year.
Cawthon pointed to promising deals in the pipeline, including a partnership that would bring a grocery store to a food desert, the redevelopment of affordable and workforce housing, a shared commercial kitchen, and other projects that are part of larger strategic growth initiatives within cities.
Fifth Third’s OZ commitment is a rare capital gains investment in the zones by a traditional bank. More banks have made loans to Opportunity Zone developers, qualifying for Community Redevelopment Act credits but not capital-gains tax breaks.
Another example: PNC Bank created a $486 million OZ fund in 2018 to invest in affordable housing and revitalization projects.