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Social Impact Investing: Cape Fear Collective Aims For $10M

By Cece Nunn, posted Feb 2, 2021
A Wilmington organization has already deployed $1.8 million through a platform that allows companies and individuals to invest in the community’s needs. 

Cape Fear Collective, a social impact nonprofit organization, created a social impact investment initiative, Collective Ventures, with the goal of attracting $10 million in investments in the first year. The goal is to buy local efforts that include establishing and keeping affordable housing and supporting workforce development.

Another aim of the initiative is to work in conjunction with, rather than to replace, philanthropic giving, CFC officials said.

Already, the program has received a $2.5 million investment from Live Oak Bank. Of that, $1.8 million was used to purchase a portfolio of 20 rental units to address affordable housing in the area, with 17 in New Hanover County -- mostly in downtown Wilmington -- and three in Pender County.

The rest of the initial money will go toward rehabilitating the houses. CFC and partner organizations will work with existing tenants on their goals for renting or owning.

The CFC initiative also has an additional $1 million in commitments from individual investors for the upcoming capital raise.

“We take in investment capital and then we distribute it to a number of subsidiary vehicles or programs, and each of those programs is supported by a small coalition of nonprofit organizations that we're working alongside,” said Patrick Brien, CEO of Cape Fear Collective, explaining the initiative further. “Using housing as an example: We'll take investment capital, and we'll purchase housing units. We’ll purchase single-family homes. We could look at apartments and other types of property.

"And then we work with our nonprofit partners like Habitat for Humanity, Good Shepherd, [Cape Fear Community] Land Trust, LINC [Leading Into New Communities] to convert those homes through their pipelines into affordable housing, and that could be permanent supportive housing, that could be affordable rentals or affordable ownership programs.”

By bringing the investment capital to the table and partnering with nonprofit groups that have the expertise, Brien said, “we are able to do this more at scale than one property at a time.”

And by working with local nonprofit partners and Realtors specializing in first-time homebuying, the initiative is trying to protect Naturally Occurring Affordable Housing (NOAH) stock in the region while providing a return on investment between 2 and 5%, CFC officials said.

When it comes to housing portfolios like the one in CFC's recent social impact investment, they can be snapped up by buyers who aim to turn the homes into more expensive units.

“One of the concerns of those of us who partnered with Cape Fear Collective is that as these portfolios go on sale, the investor-purchasers are more interested often in moving out of the affordability area,” said Steve Spain, executive director of Cape Fear Habitat for Humanity. “They just want to make as much money as possible and often that means some modest repairs and then less modest increases in rents.”

Spain added, “It’s the first time anybody’s done anything like this that we can find really anywhere. I think it’s a fantastic long-term asset for affordable housing because one of the biggest challenges in housing is funding for purchase, repair and infrastructure, and the cost of borrowing the funds you need to do that on the commercial market make it way harder to keep things affordable when you’re done.”

Affordable housing is just one example of the needs the initiative is targeting initially. The others, which are also going to be set up to yield a 2 to 5% return, include workforce development through a career impact bond program, partnering with StepUp Wilmington, Cape Fear Community College, Community Care of the Lower Cape Fear, The Harrelson Center and LINC; small business growth through a revenue share loan program, partnering with The Kairos Center and Genesis Block; and transportation through an automotive sales and financing initiative, Mission Driven Motors, also partnering with The Kairos Center.

CFC is currently working on the career impact bond program pilot with the help of a grant from the Kate B. Reynolds Charitable Trust.

The planning grant will also fund the creation of a market analysis culminating in an inclusive economy report later this year that will be used to target investments and partners that support upward economic mobility, CFC officials said.

“The career impact bond is a product that I first saw when I was working in Africa, but it's starting to pick up a lot of traction here in the United States in particular,” Brien said. “And essentially what we're doing there is we're working with nonprofit partners and training institutions to provide equitable financing for upskilling and training but more so focused on things like child care or housing support or food support, the things that are barriers for folks to go from being underemployed to sustainable career paths.”

The ROI would come from the financing being paid back through an income-sharing agreement that sets the repayments based on a percentage of the individual's income and includes extensive grace periods, safety nets in the event of economic downtowns or joblessness, and continued case management, Brien said.

Wilmington-based nonprofit The Kairos Center is working with CFC to broaden its small business programs.

"Our idea is that in order to really have a significant impact on the community that we serve, we really needed to help people start businesses," said Glenda Tate, founder and CEO of The Kairos Center.

The aim in working with CFC is "to get some help with expanding that so that we could serve more customers, start more businesses," Tate said. "We see lots of people who are really talented when it comes to desire and skills but they needed someone to come along beside them and help them with things like business plan development, marketing, the financial systems that you need to incorporate."

For the transportation part of the initiative, the problem CFC is trying to solve is how to get people into reliable vehicles that are fairly and affordably financed, Brien said. The program would involve purchasing cars at auctions or through partnerships with local dealers and taking referrals from nonprofit partners.

“A big problem that we hear all the time in the community is transportation so if we can provide some alternative methods for getting to that, I think it can be really useful,” Brien said. “It also opens up housing options, opens up workforce options because folks with reliable transportation can maybe access a community that's a little cheaper to live in farther out of town.”

CFC has more information about social impact investing on its website and has plans to involve more areas in the effort.

“We're looking to build partnerships, particularly in rural communities throughout Southeastern North Carolina,” Brien said. “We'll be expanding this program to Brunswick, Pender, Columbus, Bladen and Onslow counties in the near future.”
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