Impact Investing In Opportunity Zones, With Noelle St.Clair Lentz

Opportunity Zones aren’t just about tax benefits. They’re about creating a better future, both for investors and communities.

Noelle St.Clair Lentz, CEO at Allivate Impact Capital, joins the show to discuss how her firm is driving innovative investments that elevate communities and foster entrepreneurship.

Episode Highlights

  • How Allivate Impact Capital is focused on alleviating poverty, elevating communities, and activating entrepreneurial ecosystems through their Opportunity Zone investments.
  • How Allivate is able to drive investment into Opportunity Zones without displacing current residents.
  • The importance of combining financial returns with measurable community outcomes, emphasizing sustainable and equitable development.
  • Specific examples of Allivate’s OZ projects showcasing real-world impact.
  • How collaboration with various stakeholders, including local governments, entrepreneurs, and community organizations, help maximize the impact of Opportunity Zone investments.

Guest: Noelle St.Clair Lentz, Allivate Impact Capital

Featured On This Episode

About The Opportunity Zones Podcast

Hosted by OpportunityZones.com founder Jimmy Atkinson, The Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in the Opportunity Zones industry.

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Show Transcript

Jimmy: Welcome to the “Opportunity Zones Podcast.” I’m Jimmy Atkinson. Joining me on the show today is Noelle St.Clair Lentz. She is the CEO of Allivate Impact Capital, and she joins us today from Philadelphia, Pennsylvania. Noelle, it’s great to see you. Welcome back to the show.

Noelle: Thanks for having me, Jimmy. Excited for the conversation.

Jimmy: Absolutely. So, you joined the podcast… It’s been a couple years, I think, since you were on this podcast with me, Noelle. I know Allivate Impact Capital has done a lot of great work in the Opportunity Zones space, developing a lot of great projects. So, a lot of my viewers may already be familiar with Allivate Impact Capital, with you and what you are doing, but in case anybody missed that previous episode, or they’re not familiar with Allivate, can you tell me a little bit about yourself, and Allivate, and what you do?

Noelle: Sure. So, Allivate Impact Capital, we’re an impact investing firm, that invests across asset classes. We manage funds as a GP. And we’re really focused on, people often ask me, “What does Allivate mean?” It’s really a mashup of our mission, which is elevating communities, alleviating poverty, and activating entrepreneurial ecosystems, all through innovative capital solutions. So, Opportunity Zones is one of the many tools that we use to accomplish that mission. We were an early entrant into the Opportunity Zones space, both at our parent company, and then when we launched Allivate in 2022, to continue that work, just realizing that we do need these innovative capital solutions to help drive and mobilize capital to places that have historically been under-invested. So, for us, it’s really about listening to each community, understanding what are their unique needs, and what is their vision for themselves? And then how can we mobilize like-minded investors, to really help bring that vision through to fruition? And so, it’s really finding underutilized assets, not just physical assets, but we can talk about human capital too. But we’re really excited about the future of impact investing, and Opportunity Zones, again, is one of the many tools that we can use to advance those goals.

Jimmy: Absolutely. Opportunity Zones, a great tool in the toolkit for impact investors, developers, who are trying to create impactful investments in different communities all across the country. Can you tell me a little bit more about your investment thesis, what you mean by impact capital, or impact investments? And then maybe tell me a little bit more about some of the OZ projects that you’re most proud of.

Noelle: Sure. So, to date, we have two funds under management, separate asset classes, both Opportunity Zone Funds. So, one is a high-impact commercial real estate fund, where we’re investing in things like affordable housing projects, mixed-income/mixed-use projects, really focusing on projects that benefit long-term communities, and don’t foster displacement. So, we’re intentional about that. And also, how do we bring quality jobs to these neighborhoods? We really wanna think about how can OZ capital be a tool that helps these neighborhoods revitalize, and helps economic growth and mobility.

The other fund is focused on growth equity for diverse businesses. So, of course, the bulk of Opportunity Zone investment capital has flown into the real estate market, but there is a big portion of the program focused on operating businesses. So, we created that fund to provide growth equity for businesses between $1 million and $10 million in EBITDA. So, really, your lower, middle-market companies. And we focus on diversity of ownership and leadership. So, companies led by women and people of color. And through unique collaborations with corporate America, we connect those portfolio companies to key corporate clients that can help them scale to the next level. So, I’m happy to talk about examples in both of those funds. Happy to also talk about how we operationalize our impact goals, because, for us, we’re just as rigorous on the impact analysis and measurement and management as we are the financial and risk analysis, and measurement and management. And we’ve executed those funds with great JV partners. So, on the real estate side, we work with a firm called CEI-Boulos Capital Management, based out of Maine. And on the growth equity side, we work with Altura Capital, based in Florida.

Jimmy: Good. So, give me some examples. So, there’s two different funds. One, a CRE fund, commercial real estate fund. The other one helping support smaller operating businesses. Let’s look at the CRE fund first. What types of projects are included in that fund? Maybe you can tell us how many projects? Do you have pipeline projects that you’re still performing diligence on, that may be brought into the fund? And in which locations around the country are you focused on?

Noelle: Great question. So, that’s a national fund. We launched this fund in 2022. It’s $50 million total size. And it is fully deployed into a diverse portfolio of six high-impact projects. Through those projects, we were able to foster the creation of just under a thousand units of housing, predominantly affordable housing, additionally, some workforce housing, and over 2000 jobs created. So, these projects are located in Indianapolis, Dallas, Seattle, Los Angeles, and Houston. And if I could just highlight one, you know, they’re all wonderful projects, but the most recent close was in Houston, and that’s our home headquarters of our firm, so it’s a special market for us. In downtown Houston, this project’s called the Bread of Life Permanent Supportive Housing Project. And it will create 31 units of permanent supportive housing. So, essentially bringing people out of chronic homelessness, into quality housing. And this was a building that was originally created as a youth center and a gym, from Destiny’s Child. So, this is from Beyonce Knowles’ church, St. John’s downtown church. The developer, Bread of Life, unfortunately, this building had a fire, and so it was really not being used. And so this project will rehab this underutilized asset in that community, bring it back to life. And it’s not just the housing, but also working with Temenos CDC. They are bringing wraparound services, so the residents will have access to case management, and mental health services, and resources to other nonprofits that can help their economic mobility and path forward into self-sufficiency.

So, projects like this don’t just happen, Jimmy. It takes a lot of intentionality between public, private, nonprofit stakeholders. And OZ capital was one tool, but also there was subsidy from Harris County, and the support of the HUD project-based vouchers. So, complexity, I think, is one thing you’ll see in each of our projects. But again, we’re trying to help capital flow to places that it naturally doesn’t on its own. In my experience, capital flows to the path of least resistance. So we’re saying, how do we use these tools, in collaboration, to really solve these urgent problems that have been plaguing these communities for far too long?

Jimmy: And a few moments earlier, you also talked about displacement. Displacement is a problem. It’s a criticism of the Opportunity Zone program, brought up by some of its detractors, is some of the capital that’s coming into these Opportunity Zones, is it displacing the current residents? And that’s something that nobody wants to see happen, but it does happen. It is a consequence of development, of taking some older buildings and improving them, or tearing down older buildings and building new. But you said to me a few minutes ago, I think, basically, what you said is you’re intentional about making sure that you don’t displace residents, or you limit the amount of displacement that occurs. How do you do that? What’s your process in thinking about displacement?

Noelle: Yeah. So, I mentioned our portfolio created about 1,000 units of housing. Of that 1,000 units, 726 are formally restricted, meaning there’s some covenant, either from the subsidy coming into the project, or from our OZ equity, that says we’re gonna preserve these affordable rental rates for X number of years. For example, in Seattle, we invested $15 million into a project called Atrium Court in the Othello neighborhood. That project benefited from low-cost debt from the Amazon Housing Equity Fund. And Amazon, as a condition of providing that low-cost debt, required the affordable rental to be locked in for 99 years. So that’s really gonna help this thriving neighborhood preserve affordable and workforce housing, while also creating additional types of housing, right? Because I think we also don’t wanna concentrate low-income housing. It’s important, you know, we’ve seen the moving to opportunity research from Raj Chetty. It’s important to have this housing in areas where there is access to quality education, and transportation, and other you know, benefits. But, it’s also important to preserve housing for those long-time residents, or others. In the case of Amazon, I think it’s important to them to make sure there’s housing that’s affordable for their workforce, and, you know, for other people, like doctors and teachers and police officers. So, for us, it’s always weighing all of those things. That project that I mentioned in Seattle’s also a transit-oriented development, so it’s, you know, has access to jobs throughout the city. So we try to take a really holistic look at the project, and how it, again, will foster neighborhood revitalization, but also economic mobility for the lower-income population.

Jimmy: That’s great. That’s great what you’re doing there. The subsidies really help out a lot, keeping those rents in place for the current residents, so they don’t get displaced. So, talk to me about your other fund now, that operating business fund, where you’re helping to fund some smaller, medium-sized businesses. And tell me about what else Allivate may be working on.

Noelle: Great. So, that fund’s a little smaller, just under $15 million now, though we are still fundraising a bit for that. We do have some dry powder in that fund. So, for your listeners, you know, if there are lower/middle-market companies that are OZ qualified firms, that are looking for growth equity, we would love to talk to them. Again, our focus is on diverse ownership and leadership teams, and companies that can benefit through those connections to corporate America. So, I’ll give you an example. We invested in a firm. The largest retailer in the U.S., I won’t mention their name, came to our team and said, “We have a growing Puerto Rican customer base, and they’re looking for this certain type of bread called pan sobao. And they didn’t have a local distributor. So our JV partners that I mentioned, Altura Capital, went to Puerto Rico, found a firm called Cidrines, who was really skilled at making this type of bread, helped them open a second facility in Lakeland, Florida in an Opportunity Zone. And now their bread is carried in thousands of stores, from Walmarts, to HEBs, to Krogers. So, there, again, it’s really finding these companies that are poised to scale, giving them the growth equity and those key connections, and then exiting. So, we want them to maintain their status as a women or minority-owned business, but we wanna provide that capital. And so, for those who are working on Opportunity Zones 2.0, and what that will look like, and more involved on the policy side, I just think making it easier for operating businesses to also tap into this capital is critical, because we’ve seen, for the few firms that we have invested in, how transformational it can be for their growth, and for job creation in those areas.

Jimmy: No, very good. Allivate Impact Capital. Impact, the word “impact” is in your name and you’re very intentional about creating impact, but when it comes to making investment decisions, how do you think about impact, and how do you track it also?

Noelle: Yeah, that’s really important. So, as I said earlier, we really try to operationalize our impact goals. And what I mean by that is, you know, it’s not an afterthought, or we’re trying to put it in a pitch deck and then in an annual impact report, but not think about it in between. It really infiltrates everything that we do. So, I’ll give you the example of our real estate fund. In that fund, we established a social impact advisory board, made up of some of the community development finance leaders who have been at this for decades, right? Opportunity Zones is a newer program, but folks like CDFI leaders have really cracked the code on how to do this well, in a way that really benefits communities. So, we brought in people like Buzz Roberts, who led the National Association of Affordable Housing Lenders, and Annie Donovan, who previously led the CDFI Fund, and several others, and we’re so blessed for their involvement in our work. But each of the deals, we have to bring to that advisory board for an endorsement before it goes to the investment committee. And they’re really holding us accountable to our impact goals, both that it aligns with the Community Reinvestment Act, which is something that all banks have to meet, to make sure that banks are lending and investing in all of the places where they take deposits, including low-income communities, because some of our LPs are banks, and are investing in our fund as a CRA-motivated investment.

But also, we adopted the Opportunity Zone Impact Reporting Framework, that was put out early on, right after the OZ program was passed, by the U.S. Impact Investing Alliance, the Beeck Center at Georgetown, and the Federal Reserve Bank of New York. And that looks at things like community engagement, and transparency. And so, this advisory board holds us accountable to the goals of the CRA, and the goals of the impact framework that our fund adopted. And so I think our investors take a lot of comfort knowing that we put as much effort into the impact side in these projects. And, you know, it is more challenging. In our first fund, we looked at over 250 projects, to get to a portfolio of 10. And the gating criteria on many of them were that they did not meet our impact criteria. So, again, as we’re thinking about Opportunity Zone 2.0, there are tools out there, like that framework, that are great industry standards for how we can do this in a way that really does benefit communities.

Jimmy: Well, that’s great. I’m happy to hear that you’re using the OZ framework developed in part by the Beeck Center. I had them on the podcast a very long time ago.

Noelle: Excellent. That’s great.

Jimmy: I think 2019 or 2020, if I’m not mistaken, had them on the podcast. But it’s good to hear that that is still kicking around, and some of these funds, like yourself, are using that impact investing framework. It’s not required, of course, under the current statute and regulations governing Opportunity Zones, but it’s great to see, because there is really this overlap between impact investing and Opportunity Zones, that I think should shine through more often. What about trends, Noelle? I’m curious, what trends do you think that impact investors should be watching throughout the rest of this year 2025?

Noelle: Yeah. So, as I even mentioned in some of my examples, a lot of the flow of impact capital is reliant on different subsidy programs, or regulatory programs, like the CRA. So, as we see shifts in policy, I think it will be important for us as impact investors to process quickly what that means for us and the way we’re investing. So, that will be increasingly important in the years to come. But I also think, watching the macroeconomic trends, for example, on the home ownership side, it has been increasingly challenging for first-time home buyers, right? And that has been predominantly the way that we build wealth in this country. So, we are really focusing in on employee ownership as an alternative path towards building wealth, and getting at some of those, not just income inequalities, but wealth inequalities that we experience in this country. And so, looking at impact investing through an employee ownership lens, not necessarily an asset class, is an area where we’re very excited about going forward.

Jimmy: Well, tell me more about that. What do you mean by employee ownership? Are your employees at Allivate participating in the ownership of Allivate Impact Capital, or the fund, or the underlying assets? Are you talking about some of the businesses that you’re incubating, essentially, within that fund? And…

Noelle: Yeah. Great question, and I’m happy to say both. So, our parent company is predominantly owned by our ESOP, our Employee Stock Ownership Program. And that really is core to our ethos. You know, we pride ourselves on having an ownership culture, because it changes the way you show up for work, right? You’re not just clocking in and clocking out and collecting a paycheck. What you do directly ties into the company’s performance, which directly ties into your own wealth-building potential, or retirement savings, or, you know, sending a child to college or caring for an aging parent. So it becomes very tangible to people. And so, we are incubating a fund where we would finance ESOP conversions. In our country, over 50% of business owners are 55 or older. You often hear about this talked as the silver tsunami. Project Equity has done a lot of great work on this. Alison Lingane, who created the Ownership Capital Lab, we’re blessed to have her on our board. But this is a growing trend. And so we’re trying to think about how do we, as these business owners are thinking about their succession planning, provide the capital they need to essentially sell their companies to their employees, and create that conversion for employee ownership. And you’re starting to see this in private equity too, with the nonprofit ownership works, and KKR, and other firms thinking about, in private equity acquisitions, how do we work in some profit sharing with employees, just to boost things like employee retention and productivity?

So, this is one example where, you know, oftentimes, when we talk about impact investing, people think it requires or necessitates concessionary returns. This is one where if you look at the research, employee-owned companies tend to outperform. So it’s actually better for our investors. And so, we’re looking at this from a private credit strategy. More to come as we incubate this fund. We’re very much in fund formation mode, but we definitely think that’s a trend to watch for impact investors going into 2025.

Jimmy: That’s interesting. So, ESOP-controlled companies outperforms, that delivers a better bottom line to your investors, but it also aligns with your mission, your impact-driven mission, of helping reduce wealth inequality in this country. Is that fair to say?

Noelle: Absolutely. Yeah. So, I’m a big proponent on, you know, impact doesn’t mean lesser returns. It doesn’t mean less rigorous management. If anything, it requires a whole additional skillset on top of your traditional financial management. So, I like to think about impact investing products across a range of risk, return, and impact. And this is one where I think it’s clearly high-impact, but also, as the research has shown us, these companies do tend to outperform.

Jimmy: Excellent. Well, Noelle, it’s been a pleasure speaking with you today, learning a little bit more about what you’re up to, getting the update about what’s happening at Allivate Impact Capital, and with a lot of your Opportunity Zone-based investments. Before I let you go, if we have any investors or other listeners out there who are interested in learning more about Allivate Impact Capital, and your mission and your team and yourself, where can they go to learn more about you?

Noelle: We’re very big on LinkedIn, so please follow us, at Allivate Impact Capital. Or you can visit our website, www.allivate.com, for case studies, and updates on where our team’s headed for events. But yeah, look forward to connecting with those working in similar areas, and thanks for having us on the show, Jimmy. It’s always nice to catch up with you.

Jimmy: Absolutely. Likewise. And for our listeners out there, I will, as always, I’ll have links to all of the resources that Noelle and I discussed on today’s podcast episode. I’ll also make sure to link to Allivate Impact Capital’s website and LinkedIn profile. If you liked this episode today, you’re watching us on YouTube, please give us a thumbs up, and be sure to subscribe to us on YouTube or your favorite podcast listening platform, to always get the latest episodes. Noelle, again, it’s been a pleasure. Thanks so much today.

Noelle: Thank you, Jimmy. Take care.