The Power Of Purpose: How Purpose Drives Profit At Turner Impact Capital
At the polished but understated offices of Turner Impact Capital in Santa Monica, Bobby Turner speaks with the precision, zeal, and glee of someone who has clearly found their life’s purpose. “I went to the Wharton School and graduated in 1984 with a black belt in how to create wealth. I always assumed, and I think I was misinformed, that with the accumulation of wealth would come the accumulation of happiness. But I realized very quickly, working for Drexel Burnham Lambert in the Eighties, that the accumulation of wealth was not enough for me. They weren’t accomplishments that were necessarily aligned with my values. No one gets happy by being in survival mode, but I realized very quickly that making money for just the sake of making money was not going to make me a happy human.”
His journey to find deeper meaning took a familiar turn towards philanthropy. “So maybe in my desire to buy my redemption at an early age, or maybe get a sense of balance, I became a philanthropist as my night job. But I struggled there too, and it wasn’t with the moral discomfort that came from making money off of people’s misfortunes, but rather the emotional discomfort that came from just putting band-aids on issues. Most not-for-profits really just treat issues. They are reactive, not proactive, and they are not particularly good at creating innovative, scalable, durable solutions that stick – and nor is the government. And so I evolved into a capitalist who is also someone who is very empathetic for those less lucky than I was.”
Power of purpose through social impact
Turner Impact Capital is now one of the most innovative and successful social impact investment firms, because of their laser-focus on their purpose which is “to create innovative and durable solutions to today’s challenges by investing in community-enriching infrastructure in underserved communities,” and also because of their uniquely innovative approach to solving problems in those aforementioned communities. With over $3 billion in investment potential, and partnerships in place with like-minded investors Andre Agassi, Eva Longoria, and Chris Paul, Turner is well-placed to capitalize on the boom in impact investing. But to get there, Turner knew he had to deal with two massive issues first.
“The two words that clearly define investing to address social injustice are ‘arrogance’ and ‘distrust’: ‘arrogance’ from those of us who had capital who assumed… we knew what was best for the community, and ‘distrust’ from those that suffer the injustice of living in that community who believe capital is just there to make money. What I realized is that if I wanted to make a go of this business, if I truly wanted to make money while at the same time use business as a force for good and enrich communities with services and options, and candidly with hope, I had to bridge that gap between arrogance and distrust.”
This manifests itself in the hyper-diverse and specialized team at Turner Impact Capital, hand-picked to solve seemingly intractable problems in creative ways.”We’ve gone from one employee to 174 employees: we’re 87 percent diverse, we’re also 45 percent women. We’ve got an incredibly diverse group of people ethnically, culturally, religiously, and in terms of sexual orientation. I think gender is also critically important because when we think about who in a family is making decisions when it comes to education or housing or healthcare or even shopping, it’s going to be the mother. So how can we sit around a table as a bunch of men and assume that we understand the challenges?”
Walking around the office, Turner introduces me to his team members, ranging from an ex-DEA officer to former teachers. “The reason we have built this business around diversity is that enables us to do what we’re supposed to do, and that’s act as a fiduciary for our investors. To be a fiduciary, you have got to be able to identify, quantify, and mitigate all the risks associated with an investment. Most traditional real estate investors don’t think or understand how to identify gang-related issues, civil unrest, drug issues. Name me a private equity firm that has a former law enforcement agent on staff. Name me a single private equity firm that has a primary care physician or a former classroom teacher on staff. We have to be not only of the community but of the issue as well, so that we can again bridge that gap.”
Turner Impact Capital’s integrated approach to their three main focus areas–housing, education, and healthcare–starts with treating them in a systemic way, finding value between sectors. In housing, for instance, instead of doing what most real estate firms do–which is to buy housing inventory, gut renovate them and sell them at higher prices, accelerating gentrification and making them unaffordable to the middle-class–Turner focuses on improving revenue by reducing turnover.”We’ll buy a property and we enrich it with services–our goal is to drive tenant satisfaction. We provide services like education, like health care, like improved security. And how we do that is we take a subset of our units, call it two percent of our units, and we set them aside and we recruit teachers and policemen and healthcare workers to live in our property. And in return for the subsidized rent, they’d pay us in in-kind services. So the teachers will establish mentoring and tutoring lounges. We have law enforcement agents that are parking their squad cars out front — that surely dissuades people from transactingany illegal business. We’ve got allied healthcare workers, we have health fairs, we have financial literacy fairs.“This is how, by focusing on purpose, you can drive profits,” said Turner. By focusing on enriching the safety, health, and needs of his tenants in this creative way, Turner has been able to quickly drive tenant satisfaction up–going from 30 to 85 percent in just two years. This correlates with a corresponding increase in duration, driving lease terms by 26% by driving down the economic drivers of loss–vacancy, bad debt, and turnover expensing.
Turner is eager to share his playbook because his number one goal is to bring more players into his space. “Candidly, my legacy will not be defined by how much change I had in my pocket. It will be defined by how much change I made in the world. So we’ve been in the business of not only proving that you can do good and do well, but we also have the evidence to refute those assumptions that if you superimpose a societal metric on a financial model, you’ll sacrifice yield. It’s not the case. In fact, I now have 25 years proving that not only do you make great returns, but you also make even greater risk-adjusted returns when compared to more traditional investment theses because we’re not speculating. But I’m not afraid of competition. I’m afraid that there’s not enough competition. These issues are so daunting, so much bigger than me. There are 14 million families living paycheck to paycheck because of the lack of housing affordability. With my first private equity fund, I’ll be able to save 10,000 units. Who’s going to handle the other 13,990,000?” Ultimately Turner strikes an optimistic note. “The people that are responsible for deploying capital today look like me. We are white, we’re in our fifties or sixties, and 20 years from now we will be gone and the next generation of innovators and CEOs will grow up in an environment where the definition of success for business is different than when we were trained. So I’m incredibly optimistic that when we hand over the leadership positions, it will be to leaders that recognize that business has to be a force for good and can be a force for good.”
This article originally appeared in Forbes