NJBIZ-$200 Million Opportunity Zone Investment Newark
Updated: Apr 18, 2019
This article is written by and featured on NJBIZ Website.
MPAC Solutions works to build investment and spur growth in Newark.
By: David Hutter April 15, 2019 5:00 am
Michael Anderson and Gailyn Rawls founded MPAC Solutions as a mid-point for businesses to raise funds, focusing on communities underserved by venture capital. Now they are trying to raise $200 million to invest in federal Opportunity Zones, the centerpiece of an ambitious plan to participate in redeveloping Newark.
“Despite good intentions, the state and private [venture capital] firms have a dismal track record of investing in businesses on the basis of merit,” Anderson said. “MPAC collaborates with public-private leaders to help develop businesses founded by people of color and those who are focused on such communities to support a thriving social impact.”
Created by the Tax Cuts and Jobs Act of 2017, the Opportunity Zone program is designed to spur economic development by providing preferential tax treatment for investments in certain areas. The federal government has approved zones in 75 municipalities and 169 census tracts in New Jersey.
U.S. Sen. Cory Booker was one of the key sponsors of legislation creating the federal Opportunity Zones, several of which are in Newark.
Anderson and Rawls are working with Peter Stein, the founder and chief executive officer of New York-based SporTech Ventures, a firm whose mission is to service, operate and invest in emerging sports technology and media ventures.
Stein became acquainted with Anderson at the Overwatch Championships, an esports event, at the Barclays Center in Brooklyn as fellow guests in the Comcast Suite. Stein called it “a scene out of a movie and it’s been one ever since. We’ve been pounding the pavement, logging the miles, and putting in the late nights since to align this opportunity.”
Stein declined to speak to specific sources of funding but said he is engaging with MPAC Solutions to lead the capital formation process. His priority is to structure investments in a way that embraces, empowers and leverages the stakeholders within the Newark and New Jersey ecosystems.
“This extends from the very top at the political level, to the universities, community organizations, and a new era of local leaders ignited by Booker’s legacy,” Stein said. “It’s truly inspiring to see the passion fueling the project and eagerness of prominent current and former athletes dedicated to creating impact.”
Fear of big money
“Capital gains is a concept that largely applies to the wealthy, and this legislation scares low-income community citizens who are fearful of the negative aspects of gentrification,” Anderson said of the Opportunity Zone tax breaks. “We want to ensure local stakeholders are represented when big asset managers, not always with the best intentions, invest in communities via Qualified Opportunity Zone Funds. For the most part, big money has ignored emerging diverse communities for decades.”
Anderson added that one of his priorities is to guard against financial exploitation and rising real estate prices. “For instance, San Francisco has the largest income gap of any U.S .city driven by technology,” he said. “As Newark becomes a tech hub, MPAC is concerned with diversifying the beneficiaries of wealth creation. The Opportunity Zones policies can be great for our communities, but it’s up to us and Senator Booker to ensure it doesn’t trigger massively rising prices at the expense of the people, and greater inequality that is good for no one.”
Anderson said he is working with leading black investors from the family office world.
“Allocating $200 million into our 4-pronged approach including venture capital, private equity, and real estate affordable housing will disrupt how communities like Newark live, work and play,” Anderson said. “We will have a multi-billion dollar impact on our city and our state. The [qualified Opportunity Zone] is a step in that direction.”
“But like [technology company Audible founder] Don Katz and [Amazon founder] Jeff Bezos stress, we’ve taken the time to vet the right partners that are missionaries committed to ecosystem building, and not ‘mercenaries’ interested in making money in a completely unsustainable and exclusionary practice,” Anderson said.
“One evening we were hosting people,” Rawls, a graduate of Pace University’s Lubin School of Business, said of how she met Anderson. “I was hosting my friends. We ended up at the same event. A day later we went on a date. We had similar ideas about what we wanted to do in the business world. He worked in finance and I worked in marketing. We thought there was a need to represent underrepresented people – black entrepreneurs and women – in venture capital. That was in 2018.”
She takes care of the marketing, handles the website, expands the company’s exposure on social media and organizes events with sponsors.
“It is our baby,” Rawls said of MPAC – the name MPAC her partner’s full name, Michael Paul Anderson, plus the word Civilization. “We have great passion and love especially being able to help people.”
She said their greatest challenge is getting people to understand their vision. Anderson wants to help provide black Americans with the same access as others in every aspect of life including business opportunities.
Less than one percent of institutional capital goes to black Americans, Anderson said. Black Americans comprised 13.4 percent of the population as of July 1, 2018, according to the U.S. Census Bureau.
“The focus of MPAC is to shift that paradigm,” Anderson said. “Instead of having generations of loss, death, and incarceration, let’s create generations of wealth, opportunity and access.”
Anderson launched MPAC’s independent business development service to redirect dollars missing from the economic system by catalyzing the four pillars of power: culture, technology, community and finance. He said he wants to connect culture to capital, helping underrepresented founders and communities raise millions of dollars globally.
He envisions helping to “create opportunities to detour people who might not ordinarily envision themselves ascending.” He lamented his cousin who aspired for a career in computers yet has been in prison for most of his adult life.
“I look forward to working with our allies in the Murphy administration to create a $200 million qualified opportunity zone fund,” Anderson said.
Gov. Phil Murphy has touted creating a stronger, fairer New Jersey as part of his plan on economic growth. He says his plan begins with expanding opportunity equally across all communities.
“The Opportunity Zone Program will be a vital resource in stimulating long-term economic growth and investment in cities and towns that need it most, and more importantly, in generating economic opportunities for our residents,” Murphy said in a prepared statement.