The Brief | July 11, 2024

The Brief: Creating affordable housing and shared equity in West Baltimore

ImpactAlpha
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ImpactAlpha

Greetings Agents of Impact!

In today’s Brief:

  • WaterBottle’s cooperative approach to revitalizing West Baltimore 
  • Hayden’s AI-powered “urban operating system”
  • Linking Ghana’s shea farmers with global markets
  • After the end of the “Chevron deference”

Worker co-op turns distressed homes in West Baltimore into affordable housing and shared equity (photos). A dozen sweaty workers with industrial respiratory masks labored in stifling heat last month to dismantle rotting handrails, collapsing walls and crumbling stairs inside a pair of vacant homes in West Baltimore. The two-story, single-family properties in the Coppin Heights neighborhood, part of the city’s rainbow-colored stock of century-old brick row houses, were once well-maintained and occupied by members of a thriving Black working class. Now decrepit and empty, the structures are part of the city’s “Black Butterfly” of empty, abandoned structures. In the second installment in the three-part series, Real Revitalization, ImpactAlpha’s Roodgally Senatus takes a tour of WaterBottle’s strategies for restoring vacant houses in disinvested neighborhoods in West Baltimore – without displacement. After renovations, including electrical and plumbing, the worker-owned cooperative holding company will lease the homes to local residents at affordable rates, with an option to buy into the property’s equity. Workers rehabbing the houses will also share in the ownership.

  • Investing in people. WaterBottle, with 34 Black and Latine worker-owners, buys and renovates the houses. A social enterprise under the co-op’s umbrella, Appalachian Field Services, employs the construction workers. “We opened up some sober houses, providing guys coming back from prison and rehab and off the street a place to lay their heads and shower,” says Appalachian’s founder David Lidz, himself a recovering alcoholic. “And once they were stabilized and secure in their recovery, we trained and gave them jobs in the construction company.” Lidz says the model “creates a path towards real estate wealth for folks who maybe never would have a path to homeownership” and serves as a proof point for co-ops. “Workers will really be able to enjoy the kind of equity gains that we want in this thing that they’ve built,” he adds.
  • Non-extractive. WaterBottle acquires two-story single-family row homes and spends between $150,000 and $165,000 to buy and renovate each property. It has deployed $3.8 million of a $5 million line of credit from Seed Commons, a cooperatively-governed national community development finance institution, to acquire 22 properties in West Baltimore, and plans to acquire and fix up eight more properties by year’s end. Common Seed extended financing through its local entity Baltimore Roundtable for Economic Democracy, which provides debt financing and technical assistance to cooperatives, mostly in Baltimore. WaterBottle plans to triple its credit line via capital from larger impact investors. “We’ve developed pretty good tools to show that we are responsible deployers of that kind of investment,” says Lidz.
  • Catalytic capital. WaterBottle has completed renovations on eight single-family homes, which are leased to local residents for between $1,100 to $1,850 a month. The average two-bedroom unit in Baltimore rents for $1,610 per month; the average price of a four-bedroom is $2,179. The renovated properties are valued between $175,000 and $185,000. The $20,000 of equity wealth in each home, plus its future appreciation, will be allocated to members of the co-op. WaterBottle is creating a multi-stakeholder collaborative to allow tenants to buy in, based on how long they commit to stay in the neighborhood. Tenants will each become “one-vote members of the cooperative,” Lidz says. “We also anticipate having a separate class of shares that looks more like common stock that would get distributed to tenants over time, rewarding them for their longevity.”

Dealflow: AI for Accelerating Impact

TPG Rise Fund leads $90 million investment in AI for ‘smart cities’. Don’t even think about parking in that bus zone. Buses in Oakland, Calif., last month were outfitted with AI-powered cameras to detect parking violations in bus-only zones. The AI systems will transmit the evidence to law enforcement where, for now, a human will decide whether to issue a $110 ticket. The AI systems come from Hayden AI Technologies, Inc. which announced it raised $90 million in growth equity financing for its “vision AI solutions for smart cities.” The Series C round was led by the Rise Fund, the multi-sector impact fund of $222 billion private equity giant TPG. TPG’s Steve Ellis said Hayden’s offerings sit at “the intersection of accessibility, safety, and sustainability.” 

  • AI guardrails. Hayden’s Chris Carter envisions “a true urban operating system – processing data and generating actionable insights that help cities become more livable for everyone.” Hayden promises its AI platform can predict traffic congestion, monitor vehicles and optimize transportation networks. In Oakland, AC Transit officials expect Hayden’s system to deliver more detected violations than earlier software “to address and ideally eliminate the safety hazards,” the agency said on its website. Acknowledging “concerns surrounding the application of AI technology,” AC Transit said the system will have no facial recognition or biometric detection and images without evidence of parking violations will be destroyed within 15 days.”
  • Rise Fund III. TPG led last month’s $200 million investment in Foodsmart to provide personalized nutrition plans and food-benefits management. The private equity firm, which closed its third Rise Fund at $2.7 billion last year, is in the market with its second Rise Climate fund, as well as a new climate transition fund. TPG’s Global South Initiative last year announced an anchor commitment from the United Arab Emirates’ $30 billion Alterra fund. TPG has said it plans to grow its $19 billion in impact assets to more than $35 billion within two years. “We expect our climate franchise to drive meaningful growth throughout 2024 and 2025 as we build on our market leadership position and impact investing,” TPG’s Jon Winkelried said on TPG’s first-quarter earnings call in May.
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Wangara Green Ventures backs Sommalife to expand market access to shea farmers in Ghana. Africa’s shea industry employs nearly 16 million women, providing a critical input to the global confectionery and cosmetic industries. Land degradation and deforestation of shea trees is jeopardizing incomes. Ghana-based Sommalife is supporting livelihoods by linking farmer groups directly to international bulk buyers and also helping plant and protect wild shea trees. Wangara Capital Partners, also in Ghana, invested an undisclosed amount in the social enterprise to grow Sommalife’s operations, “with a special focus on women,” said Sommalife’s Mawuse Christina Gyisun. Sommalife so far has on-boarded 65,000 farmers, including more than 15,000 who are women. 

  • Access to markets. In local markets, middlemen and inefficiency eat into the profits farmers generate from selling shea butter, nuts and oils. Sommalife’s software helps farmers bypass middlemen and sell directly to international buyers. It also monitors trees, provides training on sustainable farming and tracks impact. A portion of the funding will help pre-finance producers.
  • Green innovation finance. Wangara’s impact fund makes equity and quasi-equity investments of $50,000 to $500,000 in small businesses in renewable energy and efficiency, waste management and climate-smart agriculture. FINCA Ventures and GSMA Innovation Fund for Climate Resilience and Adaptation provided earlier funding to Sommalife. 
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Dealflow overflow. Investment news crossing our desks:

  • Brazilian agtech startup Genica raised 68 million reais ($12 million) from Mitsubishi Agrex, Banco do Brasil’s venture fund (managed by Vox Capital), to make biological crop treatments that also improve soil health. (AFN)
  • Blue Earth Capital led a growth equity round for Delhi-based Arya, which provides post-harvest storage and financing to India’s small producers. Asia Impact SA and Quona Capital participated. (Inc42)
  • British International Investment loaned $20 million to London-based TerraPay to reduce the cost and time of sending remittances across borders in Africa. (BII)
  • Tanzania-based Nala raised $40 million in an equity round to enable people in the US, UK and Europe to send payments to friends and family in 11 African countries. (Techpoint)

Impact Voices: Policy Corner

The future of free markets and impact investing in the aftermath of the Supreme Court’s rulings. Impact investors have managed to keep sailing through shifts in the political winds by tacking toward bipartisanship and free markets. The Biden administration created new opportunities to crowd behind impact-aligned public policy. This term’s Supreme Court rulings – specifically the strikedown of the “Chevron deference” in Loper Bright Enterprises v. Raimondo – threaten to turn policy tailwinds into headwinds for impact investors. In the face of yet another vibe shift, Fran Seegull of the US Impact Investing Alliance calls for vigilance. “Let us ensure that these attacks playing out in the courts do not lead to harmful chilling effects across the public and private sectors,” Seegull writes in a guest post on ImpactAlpha. “Let’s be vigilant against the chilling of regulators’ responsiveness to public needs and the chilling of investors and businesses in pursuing prudent investment strategies to maximize opportunities and minimize risks.”

Agents of Impact: Follow the Talent

Justice Climate Fund names Amir Kirkwood, previously of Locus, as CEO… The Local Initiatives Support Corp. appoints Ruth Jones Nichols, previously senior advisor in the US Department of Housing and Urban Development, as executive vice president of programs… Toniic is looking for an Americas relationship manager… The Aspen Institute is looking for an impact director… Impact Charitable has an opening for a capital activation client and project manager.

The Miller Center for Social Entrepreneurship is on the hunt for a program coordinator… World Resources Institute is hiring a sustainable investing associate and a carbon finance manager in the Washington-Baltimore area… Upaya Social Ventures is recruiting a philanthropy director in Seattle… The Geneva Finance Research Institute at the University of Geneva seeks an impact measurement research intern.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– July 11, 2024