Prominent Utah investor’s US$150 million fund eyes real estate projects in secondary US cities that promote social good

Real estate moguls, banks and money managers are rushing to capitalise on a new US tax break rewarding investments in poor communities. Now, one of the biggest names in impact investing is aiming to prove the perks are about more than profits.

Jim Sorenson, a prominent Utah entrepreneur, investor and businessman, plans to announce on Monday that Catalyst, a private equity firm he helped found, is raising US$150 million to invest in opportunity zones. The group’s first fund, which Sorenson is seeding with US$10 million, will focus on developing real estate with an eye towards delivering both market-rate returns and measurable social good.

Sorenson was an early backer of the incentives tucked into the 2017 US tax overhaul. Since its passage, though, a debate has broken out about whether the benefits will turn out to be a handout to the wealthy. Nothing in the law requires investors to promote social good with their investments. Some of the more than 8,700 zones selected are already on the upswing and attracting private capital.

For do-good investors like Sorenson, that is a chance to lead by example.

With Catalyst, the goal is to “really let my actions correlate with my speech,” he said in an interview. “This is a great opportunity to generate a return and make a positive contribution to society.”

That means avoiding zones in coastal metros favoured by investors, such as New York, Washington and the San Francisco Bay Area. Instead, Catalyst has been weighing projects in cities that have struggled to attract the same levels of funding for new businesses and real estate, such as St Paul, Minnesota; Ogden, Utah; and Louisville, Kentucky. The firm has identified 50 potential projects valued at more than US$2 billion, though it plans to spread its first fund across only about 10 to 15.