SEATTLE — Forterra, a nonprofit whose mission is securing places that are keystones of a sustainable future in the Pacific Northwest, today announced the first-round close of its new social impact investment vehicle, the Strong Communities Fund, with $10.25M raised. With Amazon and other high-flying companies fueling a red-hot economy around Puget Sound, more than a thousand new people arriving every week, and trends of gentrification and displacement growing harsher, the Strong Communities Fund is dedicated to keeping our region inclusive and welcoming to all. The fund is already helping secure properties for community space, affordable housing and small businesses in areas under intense development pressure.
“The energy in our local economy is exciting to see,” comments Tom Alberg, co-founder and managing director of Madrona Venture Group and an early investor in Amazon — as well as first investor in the Forterra Strong Communities Fund. “But there’s more to a great community than strong businesses. We also need cultural vitality, meaning a city that provides space and opportunity for people of all kinds. The Strong Communities Fund can help keep the qualities that have always made this place special.”
Forterra president Gene Duvernoy, a prime architect of the Strong Communities Fund, comments that “At virtually every City Council meeting people in this region sound off about the changes here —and how people of lesser means are being pushed to the suburbs. That’s neither just nor smart — a diverse community is a resilient community. I spent my first twenty years in New York City and most of these last forty in Seattle; I have a bead on both places. In Seattle, people who do well also want to do good. We respect the working class roots of this place. And in addition, this is a town that responds to innovation. Forterra’s Strong Communities Fund hits all three values.”
FORTERRA, A “LAND TRUST WITHOUT BORDERS”
In over 400 property transactions since 1990, Forterra has evolved from a traditional land trust concerned with Washington’s wildlands, farms and forests into a cutting-edge organization fully engaged with our cities, as well.
Whether it’s open spaces for nature and play, or cities with affordable homes and vibrant, diverse communities, it all begins with land. Nothing is more fundamental. So we work across the full landscape to secure real estate with a keystone role making the region environmentally resilient, economically robust and one of the best of best places to live.
In our rapidly growing cities this means bringing Forterra’s expertise, negotiation savvy, and resources to community partners pursuing land critical to equity and inclusion — such as real estate for affordable housing, community space, and small-scale businesses.
Before the Strong Communities Fund, resources were often the missing element. Now, with the Fund’s advent, Forterra has greater capacity to compete with other buyers in a tense real-estate market.
CAPITAL SOURCES AND HOW THE FUND WORKS
In addition to angel investors from the tech industry, capital for the fund has come from a wide swath of institutions and individuals, ranging from The Russell Family Foundation and The Seattle Foundation to leaders from the business sector such as BECU and the Master Builders Association of King and Snohomish Counties.
“Seattle Foundation is pleased to invest in this innovative model and invited other donors to participate as well,” says Seattle Foundation president and CEO Tony Mestres. “The real estate expertise of Forterra and the resources of its Strong Communities Fund give grassroots groups a new capacity to navigate complex land deals and ensure that more of our region’s development will be community-driven and inclusive.”
“Land is the most fundamental catalyst to the health of our ecosystems and cities,” remarks Nick Hanauer, co-founder of venture capital firm Second Avenue Partners and another early investor in Amazon. “This private equity fund buys and deploys targeted community real estate to grow neighborhoods into welcoming and affordable places for all. Efforts like this will keep Seattle and Puget Sound from becoming one-class enclaves, diminishing everyone.”
In addition to its strong social return, participants in the Strong Communities Fund will recoup their capital plus a simple 2% preferred return over the fund’s 10-year term. Forterra will be actively working to capitalize additional tranches of the Fund, mindful that $10.25 million only scratches the surface of the need.
EVEN BEFORE CLOSING, THE FUND SHOWS ITS POWER AT “THE MOST CONTROVERSIAL BLOCK IN SEATTLE”
At 23rd and E. Union, in the heart of Seattle’s historically-black Central District, is the block called Midtown Center, best-known for an iconic barbershop, Earl’s. The block is ripe for redevelopment, but along what lines? Longtime neighborhood residents were insistent that African-Americans not be left behind, but didn’t have the resources or real-estate know how to effectively press their case. They turned to Forterra, then in the process of capitalizing the Strong Communities Fund.
“The mere possibility of the Fund being deployed got Forterra and Africatown a seat at the table,” observes Doris Koo, now of Yesler Community Collaborative and formerly president and CEO of Enterprise Community Partners, a national affordable housing group. “The deal never would have occurred without that leverage.”
Ultimately Forterra helped the Africatown Community Land Trust secure over 20,000 square feet, or 20 percent of the property, for highly affordable housing, room for community-owned businesses, and a public gathering space. Forterra provided surety for the acquisition, ultimately transferring the purchase-and-sale agreement to a joint venture of Africatown and Capitol Hill Housing, a nonprofit affordable housing developer.
“The Central District has been the home of the African-American community for over 130 years, shaped by restrictive housing covenants and enduring discriminatory policies such as red-lining,” says K. Wyking Garrett, president of Africatown Community Land Trust. “And yet it thrived, providing a cradle for African American culture and achievement that has enriched not only Seattle, but the world. Many in our neighborhood have already been displaced by gentrification, but at Midtown we made a stand for an inclusive future — and Forterra helped us succeed. This now becomes the hub where a new generation can nurture the beauty and brilliance of those in the African diaspora who make this region home.”
FIRST OFFICIAL FUND INVESTMENTS
Immediately upon closing, part of the equity in the new Strong Community Fund’s was deployed for two high-profile properties.
Africatown Homeownership Project. The first project, in partnership with Africatown Community Land Trust and Homestead Community Land Trust, closed on January 4, 2018. It involves an 8,000 square foot parcel on South Walker Street near Rainier Avenue — an area under particularly acute development strains.
The aim is to build homes that lower-income families, including families of color, can affordably buy — and start stanching a trend The Seattle Times recently headlined “The rise and dramatic fall of King County’s black homeowners”. (In 1970, almost half of King County’s black households owned their home — well above the national average of 42 percent. Today’s rate is 28%, making this the country’s fifth-worst county.)
The Fund loaned $775,000 for the purchase. “Owning property is the American dream,” asserts Michelle Connor, Forterra’s Vice President of Strategic Enterprises, who brokered the deal. “It’s key to community identity, stability and self-determination. We’re honored to join with the Africatown and Homestead to advance a critically-needed affordable-ownership model that will help more families have a home they can own, love — and build wealth from, like others in our country have done for generations.”
Thanks to the way the project is being structured, new homes will be sold to income-qualified buyers for roughly half what they’d cost in the open market. In exchange, upon selling owners will accept a more modest return, letting the homes will remain affordable to the next generation of income-qualified buyers.
Wadajir “Together” International Market. On January 5, 2018 the Fund invested $3M to purchase a motel and surrounding property in Tukwila, a suburban community near SeaTac Airport. The land is on International Boulevard across from the Abu Bakr Islamic Center, the cultural and spiritual center for Puget Sound’s 30,000-strong Somali community — and Forterra’s project partner.
The long-term vision is for the property to become community-owned affordable housing and mixed-use commercial space. Short term, the motel will repurposed as an international market for a variety of refugee- and immigrant-owned micro-enterprises that are facing displacement in this fast-changing community, with other parts of the property serving as start-up housing for just-arrived immigrant and refugee families.
“It’s going to mean a great deal to those of us involved in the Abu Bakr Islamic Center, and to our whole community,” says Tukwila community member Zak Idan. “This property could have so easily been lost to some other less community-oriented purpose. Thankfully, because of Forterra’s know-how and its Strong Community Fund, our community can start to dream a bigger dream.”
Zak Idan, Tukwila Community Member
K. Wyking Garrett, CEO, Africatown Community Land Trust
Tom Alberg, Managing Director and Co-founder, Madrona
Nick Hanauer, Partner and Co-founder, Second Avenue Partners
MORE ABOUT FORTERRA
Dedicated to regional sustainability in all its dimensions — environmental, social, and economic — Forterra secures places across Washington’s landscape that are keystones of our shared future. Using skills in community-building, negotiation, real estate, land stewardship, and policy advocacy, Forterra has over its 25+ year history been part of more than 400 separate land transactions. These have now protected greater than 250,000 acres with a value exceeding $500 million — from remote wildlands, to working farms and forests, to city parks, to urban property for affordable housing. More at forterra.org