Created with Sketch.
Impact Real Estate Investing
41 minutes | 14 days ago
The world beyond banks.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE Eve Picker: [00:00:11] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Annie Donovan, COO at LISC, an organization deeply rooted in the community. Annie has built a truly remarkable career in community investment by embracing a pursuit of fairness in economics and finance. She found her way to this mission through her roots in Pittsburgh, growing up in a working-class family where she was exposed to ideas of social justice early in life. In no particular order, she has served as a senior policy adviser in the Obama administration's Office of Social Innovation, as the CEO of the social enterprise, Core Metrics, heading the Community Development Financial Institutions Fund, and she spent two decades at Capital Impact Partners, all before taking over as COO at LISC. Be sure to go to EvePicker.com to find out more about Annie on the show notes page for this episode, and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change. Eve: [00:01:39] Hello, Annie, I'm really honored to have you on my show and pretty excited to talk to a fellow Pittsburgher. Annie Donovan: [00:01:46] Well, thank you, Eve. I'm very happy to be here and I'm always thrilled and delighted to talk to Pittsburghers. Eve: [00:01:55] Good. So, the first question I have is actually about Pittsburgh. So, you grew up in Pittsburgh, and I'm wondering how that shaped the way you see the world. Annie: [00:02:04] Thank you for that question. It very much did shape the way I see the world. Well, first of all, let me just tell you a little bit about my context. I grew up on the North Side of Pittsburgh. From an Irish Catholic family, I am the 10th of 11 children. Eve: [00:02:19] Wow. Annie: [00:02:19] My father's family, so he was first generation American. His parents both came from Ireland. They actually bought a house on the North Side. So, the way that my, my parents were actually able to afford to raise a family that big was because my grandparents passed their home on to my parents. And so they never had to pay a mortgage. So, yeah. So, that's how we sort of made ends meet economically, and, you know, were able to create some mobility in our family. Eve: [00:02:58] What neighborhood was that? Annie: [00:03:00] Brighton Heights. Eve: [00:03:01] Brighton Heights. Ok. Annie: [00:03:03] But the things about Pittsburgh, you know, when you're from there or when you've lived a long time there, you know, Pittsburgh can take a hit for, you know, being provincial. And that's certainly the case. I mean, in my parents' generation, my parents had an ethnically mixed marriage because, you know, my father was Irish, and my mother was part German. But in their generation, people even went to church based on ethnicity. So, you know, so there's a lot of that sort of ethnic pride and it can feel a little provincial. But Pittsburghers are also very unpretentious and very warm and open hearted, I think, and just possess a lot of resilience and, you know, grit. Those are qualities that I'm very proud to have had instilled in me growing up that I've relied on throughout my career. Eve: [00:03:58] So, you know, I think also what I noticed in Pittsburgh and I heard stories about the steel mills actually purposefully separating neighborhoods into ethnicities. Annie: [00:04:09] Yes. Eve: [00:04:10] And that sort of prolonged that here. Annie: [00:04:13] Yes. Eve: [00:04:13] And it's made the city architecturally interesting ... Annie: [00:04:15] Yes. Eve: [00:04:15] ... because the neighborhoods are really distinctive and unique ... Annie: [00:04:20] Yes, yeah, very much so. Eve: [00:04:21] ... and look very different. It's fascinating. And then, of course, there's the managers neighborhoods and the steelworker neighborhoods, so you know ... Annie: [00:04:28] Right. And you know, interestingly, what happened in my family, I grew up in a working-class neighborhood and it was very working class. My father actually went to school at night and earned a college degree from Duquesne, and he was the only person in the neighborhood who had a college degree. And he was an accountant. He worked for the Allegheny County. So, we had this interesting blend of, you know, when our country was experiencing sort of white flight. Right, so lots of white folks moving out to the suburbs. Eve: [00:05:03] Yes. Annie: [00:05:03] And those white folks moved out and then they went on toward more upward mobility. And we stayed in the working class neighborhood. But we were still, in my family, able to experience upward mobility because we owned our home. And my father had a college degree. Eve: [00:05:21] A degree, yeah yesh, yeah. What led you into the world of community finance? Annie: [00:05:25] I had always had, I think, a heart for social justice work. I thought a lot about poverty, and I thought a lot about the kind of injustices that were in my world growing up. Of course, I was born in 1964, Pittsburgh being, you know, not only ethnically divided, but lots of really hard lines around racial division, as well. Eve: [00:05:54] Yeah. Annie: [00:05:54] And I have to say, I have to hand it to my mother, because when we were growing up, this is probably the mid-70s and my brothers ... well, so, in my family, there are six girls, and then three boys, me, and a boy. So, it's almost like having two generations, you know. And I grew up with the boys. They wanted to start a street hockey league. And you know so, of course, I was out there playing street hockey with them. I'm a Title IX gal, and they were looking for a coach. And so they put an ad in the newspaper and a guy responded to it. And his name was Curtis. He was from the Hill District. And of course, the Hill District is the historically Black neighborhood. And so they signed him up and he came over to Brighton Heights, which was a very white place, and coached the street hockey team. For me, you know, they just got me thinking about, like, why why do we have these divisions? And I have these ideas of what people from from Black communities were supposed to be like. And he wasn't like that. He wasn't like my image. And my mother, you know, they'd play street hockey and it'd be time for dinner, and of course, whoever was around my mother invited in for dinner. So, often times Curtis would eat dinner with us. When we said Grace before dinner, the way he bowed his head and prayed, you know, it just struck me that everything I'd kind of learned about our Black neighbors I didn't see in him. And so this is what got me thinking, like, what was all that education about? And so I've always been on a quest to understand what these racial lines are, too, and what the class lines are. And so, you know, I studied economics in college. Early on in my journey there was a 101 economics class and we were learning about rational thinking and optimization. Annie: [00:07:53] And I remember thinking, well, this isn't really a fair way to allocate resources across a society. And so I said that to my professor afterwards, who was, you know, a classically-trained economist who was like, Chicago School. And he said, well, this isn't about fairness, it's about efficiency. And that was like, OK, I've found my mission. And so, you know, and then I joined the Peace Corps, went to the Peace Corps after college. You know, lived in a very poor place. And then, you know, then it really sunk in because the people that I lived around were supremely resourceful and smart and really dirt poor. And so, what was that about? So, that's when I became sort of even more fiercely committed to it. And, you know, that's so, that's been the pursuit of my career since then, is how do we use the tools of economics and finance, and how do we rewrite them in a way that produces a more inclusive prosperity, because we are leaving a lot of talent on the table. Eve: [00:09:10] Ok, so you've had some really big roles from the White House to the head of the CDFI Fund. And now you're at LISC. And I'm wondering, I'm familiar with LISC, I actually benefited from a loan from LISC years ago ... Annie: [00:09:23] Good. Eve: [00:09:23] ... for one of my projects. And I'm wondering what brought you there. Annie: [00:09:28] Yeah. So, what brought me to LISC was, so after my experience at the CDFI Fund, I knew I wanted to go back into practice, because that's kind of where my heart and soul lies. And so, one of the characteristics about LISC is that it is very committed to local – 'local initiatives' is part of our name. And I wanted to be in a place that was toiling more closely to the ground. You know, we have local offices, we have 35 and growing, local offices that really are programmatically focused and focused on capacity building alongside lending. And so, that's where I saw the ability to more closely connect those pieces and not just be finance oriented. But to get deeper, closer to the community. And then the second thing was I saw in Maurice Jones, a leader in our industry who is boldly ambitious, is ambitious for the sake of impact, and I was attracted to that as well. So, yes, so that's what drew me to LISC. Eve: [00:10:41] Then like about community capital, what does community development capital look like today versus 20 years ago? Annie: [00:10:49] Yeah, that's a really good question. So, I think 20 years ago, if you think about, or even 25 years ago, you know, the sort of the history of community development or community capital, community investment ... The community investment world, really, it braids together organizations and institutions that come from different origin stories. So, there's the origin story of the black-owned banks and minority depository institutions that got underway right after emancipation, for Black Americans to build wealth. There is the credit union movement that was tending to people of modest means who wanted to come together and save together and, you know, have access to financial services that were owned and controlled by them. And then you had the nonprofit loan fund world that emerged because community development really took shape in the war on poverty and the commitment of the federal government to funding community development corporations. There was an era there where there's a lot of federal funding, and we can talk about urban policy and how that, you know, CDCs kind of shifted urban policy. But then in the beginning of the Reagan era is when the feds really pulled back. And that's when loan funds really started to emerge to say, well, we have to create new ways to finance the activity of community development. And that's when the loan funds really started taking root. And then when Clinton came into office, he created the CDFI fund. And that has been a really important policy innovation, still as a policy innovation today, that has been investing the kind of equity capital that the industry needs to grow, that you can't really get anywhere else. Annie: [00:12:46] So, the industry has really blossomed, partly because we had good seed capital and partly because we just have been a bunch of people who have had a faith in the people and the communities that we're investing in and have found a way to work with traditional and non-traditional sources of capital, to blend them in a way that allows investments to work in, you know, places where, you know, my old economics professor would have said you wouldn't invest in because it wasn't efficient, the rate of return wasn't commensurate with risk, and all those sort of traditional measures, you know, that's the reason capital doesn't flow to some of the communities that we care about. And we are becoming more mainstream. And even though we're still a tiny percentage of the financial services sector, I think through, even through the pandemic, you start to see CDFIs emerge, getting more attention in mainstream media. And certainly LISC has gotten a lot of, we've been able to raise a lot of resources through this pandemic because there's a recognition, and we've not only done the investing and gotten the money there where people said it can't go, but we've done it financially in a fiscally responsible way. So, we've proven that the places and the people we're investing in are creditworthy. That has allowed this industry to grow. And I think it's going to continue to grow. I'm optimistic about that. Eve: [00:14:19] Years ago, I helped found a CDC in Pittsburgh. And what was really fascinating to me, because I was pretty new here and I didn't really understand this lay of the land very well, you know, I sort of dropped in from another country. But, you know, all of the work we did was to get us to the same place as neighborhoods and places that were doing OK. And I've been in, I've been in this work for a long time and we never seem to get there. And so, I'm wondering, you know, because when you take a step forward with CDFIs, and maybe this is, you know, a really naive way to look at it, but you take a step forward with CDFIs, and you take a step back with banks who no longer really want to bank in or lend in communities, or want more equity or want, you know, more traditional products to lend in, and it's just this never ending catch up, so, how does it all get better. Annie: [00:15:30] Yeah. So, of course, I, I've been doing a lot of thinking about this and I think a lot of, a lot of folks have been soul searching around this, particularly because of the uprisings, demanding more, you know, racial, that we address racial equity. And so, it does often feel like, you know, some days it really just feels like we are just doing the work of bandaid, you know, putting bandaids on things. And that's, that's where I think this the work right now is really important because we can't be satisfied with what we've done because it's clearly not enough. And, but I think we are in a moment that we have to take, make the best use of, because we can't do this on our own, as our, with our little bitty organizations. And even if we're a billion dollars or two billion dollars or 10 billion dollars, we're still to itty bitty to to create change on the scale that needs to be, that needs to happen. But that doesn't mean this stuff shouldn't happen. And it's, and it does have to happen because even over my career, you know, 25 years ago if somebody had said that you'll be working for a CDFI or you will help the, you know, build a CDFI, that will get to be a billion dollars. You know, wow, that would have been, because we, these loan funds were starting at, they just wanted to get to 10 million, you know. Eve: [00:17:04] Right. Annie: [00:17:05] And and we we wouldn't be we wouldn't have the opportunities that are in front of us now if we hadn't taken all those baby steps to get to here. So, over the long haul, you know, I hope that we can get there. But, you know, there's the bigger, we have to be able to impact the bigger picture. And, you know, for example, it was discouraging to me when I was at the CDFI Fund, and the second two years I was there under this administration that, you know, that a tax policy got, got enacted that just, you know, felt like it was going to undo everything that we were trying to do. So, there are these macro forces that, you know, that we have to try to turn the tide on. Eve: [00:18:04] Yeah, that's depressing. But I know (laughter) but I know it's a really long patient game because I've been, I've seen that, you know, on things I've worked on that initially were like, what are you doing? You're nuts to now being, OK, this is mainstream. Like co-working or lofts downtown or revitalizing downtowns ... Annie: [00:18:27] Exactly. Eve: [00:18:27] ... or all of that. And we're actually ... Annie: [00:18:29] Exactly. Eve: [00:18:29] ... I think you're right. We're in a moment. All of the progress we were heading towards has been unbelievably compressed by everything that's happened this year. So, maybe that's a good thing, but ... Annie: [00:18:44] Yeah, and I think that it's also very complex too, right? Because, even we see in some places tremendous progress running exactly alongside of things that feel like tremendous regression ... Eve: [00:18:56] Yes. Annie: [00:18:56] ... you know, so, and both of those things are happening at the same time. Eve: [00:19:01] Well, what's ... I'm going to ask you, may not know the answer. But I really puzzle about what's happening in traditional financial institutions. So, you know, I have this crowdfunding platform and what's been startling to me and, you know, and our purpose is to help raise money for creative change-making projects and help developers get a little equity together, that seems to be a little more and more equity every year as banks change their position on what they lend for. Because we think that creative, those projects are important for making cities better. B Annie: [00:19:41] Yeh, yes. Eve: [00:19:41] But it seems to me that they're retracting even further because we're just being flooded at the moment, and equity requirements go up. It just seems to be harder and harder to borrow money, to do things, that are different than the things we have today. And we know we need to do things differently to fix some problems. Annie: [00:20:09] Yeah, yeah. Well, the way I think about this and what I see from my perch is that I think that we have to, we have to start thinking about the world beyond banks, and, you know, think about and work hard on this, you know, the idea of having broader stakeholders. I mean, banks have been brought to the table on community finance because of the Community Reinvestment Act. Eve: [00:20:45] Right. Annie: [00:20:45] And so, so what are the ways in which, you know, there might be policy levers that need to be pulled to get more folks to the table. But also, you know, what the next generation of employees and employers, I mean, I think that we're in for change and I'm really hoping that we're in for change with the next generation of leaders. Because they have been raised with different expectations and they are already changing, corporate, the way ... corporations are reacting. And you see now, you know, we've been the beneficiary of, you know, almost a 100 million dollars in corporate contributions that are going out to small businesses, as, you know, in this pandemic, in the form of relief grants. Eve: [00:21:44] That's pretty fabulous. Annie: [00:21:45] And what we did was, the first one that came in, the first corporation that came in and said, can you do this for us? And we said, yes, we can do it for you, but we're going to do it in our LISC way. And that means we are going to get to community-serving businesses that are majority-owned by people of color and women. And they said, OK, cool. Go ahead and do it. So, you know, and then the next company that came in said we want to buy that, we want to buy, especially as PPP, the paycheck protection program and SBA, major piece of the the CARES Act, you know, was clearly written in a way that was just going to follow the old rules for how you distribute capital. And then people started saying, wait, wait, wait, there has to be other ways to do this. And so the work that we were doing was tipping the scales. We put our thumb on the scale in favor of community-serving small businesses and gave preference, and we're ending up with, you know, somewhere in the low 90 percent, of the businesses that we're funding, are owned by people of color. Eve: [00:23:04] That's pretty great. Annie: [00:23:05] And yeah, and in the paycheck protection program, we got to about 80 percent of our companies being minority women- and women-owned companies. And when you put together and in the, on the private sector side, our formula was where we're going to advantage certain census tracts. We're going to advantage minority ownership and women ownership, and we're going to advantage certain size. So, when you line all those up, it's not that hard to come up with lots of folks to invest in. And that's where our money's gone. Eve: [00:23:43] So, another question I have is looking at the other side of it. If a real estate developer has access to community capital, what should her reciprocal responsibilities be to that community? Annie: [00:23:59] I think that's really, really very important because, and we have to all get better at this as well, in terms of how we doing community engagement, and how we're bringing people into ownership of what happens at the community level. And so I think, you know, there are just these models and this seems to me to be what's out there on the fringe right now, you know, and it's always what's happening on the fringe that's eventually going to be where where we all go, hopefully. But what I see is, I've been been advising on a project that's being done by a foundation of philanthropy. It's not a traditional philanthropy. It's one of the newer philanthropies. And they are, they're going to do they're investing in a real estate project in a very, one of the most distressed census tracts in Washington, D.C. And they are bringing together community stakeholders to say, how do we create a vehicle for people who live in that community right now before the development happens? How do we create a vehicle for them to invest in it and to get ownership in it? And those are, I think, the kind of strategies we need to be thinking about. You know, how do we, because otherwise if you just let this play out via market forces, you get gentrification a lot of times. Eve: [00:25:40] Right, right, right. Annie: [00:25:42] So, you know, we don't want to go in that direction. And that that means giving people real ownership stakes. Eve: [00:25:48] I mean, I agree. That's what we at Small Change, I'm having similar conversations with some very large developers who are starting to think about that ownership piece, in really humongous projects in D.C. and New York. And it's really exciting to see that people are thinking about it. It is hopeful. Annie: [00:26:08] So, yeah. And if you think about like, so, another example, and this is not at the project level, this is at the fund level. But, you know, we're managing we're going to be managing money on behalf of Netflix. And Netflix went out, and this was somebody inside Netflix who said, you know, in their treasury department, why are we sitting on all this money and not thinking about where it's invested? Why don't we get this to black-owned institutions and, you know, and that, and that's when, so, you know, like back to your question, when are we ever going to see this get better? I mean, that's when it's going to get better, right? When that person inside that corporation goes to the CEO, and the CEO says, yeah, absolutely, why aren't we doing that? Eve: [00:26:53] Yeh, yeh. Annie: [00:26:53] And then you put it out there. And once, when Netflix put that out there and they made the investment in us, we had so many corporations respond to say, well, how do we do that, too? So, that's what we have to do. We have to create the bandwagon. But the bandwagon that's moving money in this direction. Eve: [00:27:12] Yeh. Yeh, yeh. So, I mean, how would you define impact investing then? Annie: [00:27:20] Ok, so impact investing to me, I always define it as it's a spectrum, right, because I like I think it's important for all of us to have a big umbrella and be inclusive. Right? And on one end of the impact investing spectrum are the folks that would say, you know, you can invest, and do good and do well at the same time. Right? And there's not really a trade off. And then the other end of the spectrum is, you know, where my work has always been, which is on the whether you call it concessionary or catalytic capital, where you're trying to, because on that that first end of the spectrum, you're not disrupting any kind of the market forces. You're sort of saying the market can do this, but there's something missing in terms of information flow. So, if everybody had perfect information, then you know that that would solve the problem. So, I've never bought into that because I don't think that it accounts for the systemic racism that exists in our society and in our economy. And so, I think you have to be more disruptive than that. And that requires capital that, that is, that can be designed in a, and stacked and engineered in a way that allows more people to get access to it, to do the kind of projects, to create the kind of businesses that are going to let them into, you know, more economic activity. So, yeah. And my dream is always in my work is always trying to think about, how do we get the people who are on one end of the spectrum down toward the catalytic end? Because if you want to disrupt poverty, you can't do it on the market end, purely market end. Eve: [00:29:28] No. Interesting. I mean, impact investing has been growing, I still think it's small. Do you expect, I'm, I suppose I'm wondering if you expect this, the events of this year to rapidly increase interest in that, too. Well, certainly if you see it from Netflix. Annie: [00:29:52] Yeah, I think I think it is. And I think the question is, you know, the question that's on our mind at LISC is how do we, how do we convert the short-term interest into long-term relationships. Because, and how do we get people to see? Because actually, frankly, in the short run, it's good for a corporation's brand to step up and do this kind of work. Eve: [00:30:17] Oh, yeh. Annie: [00:30:17] I mean they're ... Yeah, and there's not really much at stake there. And frankly, you know, they could direct, if they wanted to, they could purely direct this out of their PR budgets. Eve: [00:30:28] Yes. Annie: [00:30:29] You know, and so how do we, how do we, you know, convert people to the long-term play? That's the work that's in front of us right now. Eve: [00:30:40] Right. So, Just shifting gears a little bit, how, you know, what do we need to think about to make our cities and neighborhoods just better places for everyone? Annie: [00:30:55] Yeah. I think that we have to, we have to think comprehensively, first of all. So, I don't think, that's the other another reason that I wanted to join LISC is because I like the comprehensive approach. Because I don't think there's any one dimension to neighborhood life that is a silver bullet. Right? So we have to invest more in education and housing stability is fundamental to economic mobility. And so, we have to invest in all of these things. And, you know, back to, back to the big picture of tax policy and how we tax and spend. I do think we just, the thing is, we know exactly what we need to do. Eve: [00:31:54] Yes. Annie: [00:31:55] We just have to invest in it. Right? We know the payoff of early childhood education. We know the payoff of education in general. We know the payoff of preventive health care. So, you know, what more evidence do you need? We just need to have the will and the commitment as a society. And once that's there, I think everything else follows. Eve: [00:32:24] Yeh. And I see physically, too, we know the payoff of neighborhood parks and better streets and better lighting and all of those things that everyone wants in their own neighborhood. And some people don't have. Annie: [00:32:39] Right. And we have to develop we have to develop our collective will to say that that's not OK. That's not the world we want to live in. Eve: [00:32:49] So, what community engagement tools have you seen that have worked that, you know, you mentioned that that's a critical piece of it and that's hard. Annie: [00:32:59] It is hard. It's hard for a lot of reasons, one of which is that when community developers who don't know community, if they don't know the community, if you're coming in to this, you know, as a sort of professional, you may have certain assumptions about what people, and I think one of the things we make a mistake on this all the time, like what does the community want? Well, you know what? Not everybody in the community agrees on what they want, just like, and just like in your community, you know. Eve: [00:33:35] Yes. Annie: [00:33:35] So, I think starting with listening, and being open is really, really important. And so, I mentioned a, you know, the project where, you know, in Washington, D.C., where the funder was coming in and actually saying, OK, we want to do, we want the result of, to be that people have an ownership stake. But why don't we find out from the community what that means to them, how they would do it? What, is that what you, is that what's really wanted? You know, so I think, you know, good community engagement starts with listening, not making assumptions and and bringing people in and just providing the space for voices to be to be heard and listened to. And, you know, just having a faith in that. That that's, you know, that that's going to going to lead you down the right path is a good way to get people involved. And I think that also, you know, when I started my career, after I got back from the Peace Corps, I went to work for the Campaign for Human Development. And in that work, we funded a lot of community organizing. And the ability of communities to organize themselves is also an important piece of this. Like the, there's very little investment that goes into community organizing. And I think that's a really important component. Eve: [00:35:24] You know, that's what I was just going to say, because I think about, like when you're a very large developer doing a large scale project, you can absorb that community organizing piece. Annie: [00:35:35] Yes. Eve: [00:35:35] But when you're a small developer doing like interstitial projects that are, you know, fit into a neighborhood, that becomes a pretty heavy lift in terms of resources ... Annie: [00:35:46] Exactly. Eve: [00:35:46] ... and there to help, and how do you get that done properly. It's really, it's hard. It's hard. Annie: [00:35:53] Right. Right. And it's also, you know, and we need more philanthropy dollars in that because that's a really hard role for government to play. And we administer a lot of Section 4 money, and that's out of the HUD budget, and that's for capacity building of local organizations, and, tt's really hard money to work with. Eve: [00:36:16] Yes. Yeh, yeh. Annie: [00:36:16] You know, it's, so there's a need for investment in, of flexible dollars into neighborhood organizing and leadership development. Eve: [00:36:27] Yeah, no, I agree. So, what's what's next for you and LISC? I mean, what do you think the next five years will look like in this pretty fast-moving time that we're having here? Annie: [00:36:40] Yes. So. Well, I think that we are on a pathway, move, you know, moving to the next level of growth and scale. And for us, that's about how do we, how do we use the assets that we've built so far to get to the next, to get to that next level? And I think for us, you know, putting impact first, you know, the racial equity piece of this is really important. And I think, I am very hopeful that we are going to be able to do the deeper work there, that we're going to, you know, take, choose the pathway of doing the harder, deeper work. Because the long-term outcome is going to be better. And we're going to, you know, try to bring our partners along for that ride. And I think that we are through this period, we have greatly increased our capacity to reach small businesses, and to think about inclusive economic development. How do we build the infrastructure for more inclusive economic development? And ecosystems that support community, small community-owned or locally owned small businesses? And, you know, and we have to be thinking about how are we disrupting systems? So, because we're at the edges of them now, you know, in terms of their usefulness and we have to build something that's built to suit, for the next level of scale. So. Eve: [00:38:41] Thank you very much. I really enjoyed the conversation. And I can't I really can't wait to see what you build and where LISC goes and where you go with all this. Annie: [00:38:52] Well, thank you and I love the work that you're doing, every dimension, you know, that, every strategy that brings in more capital and the, you know, more of the kind of equity capital that you're pulling in and democratizing that, I think is a really powerful strategy. And I also wish you the best. Eve: [00:39:17] Yeh, all takes ... Thank you, Annie. Annie: [00:39:19] Yes. I can't wait to. I can't wait to see that happening. Eve: [00:39:22] Bye. Annie: [00:39:22] OK. Bye, bye. Eve: [00:39:29] That was Annie Donovan. Annie thinks we need to start thinking about the world beyond banks. We need to find a way to let communities invest in order to change how we tackle development. To give them a real stake in their own future. Listening is key, as is providing the space for people to be heard. For Annie, impact investment needs to have a big umbrella and be deeply inclusive. She also understands playing the long game, saying that we know exactly what to do, but that we need to develop as a society, the collective will to invest in that knowledge. You can find out more about impact real estate investing and access the show notes for today's episode at my website, EvePicker.com. While you're there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Thank you so much for spending your time with me today and thank you any for sharing your thoughts. We'll talk again soon. But for now, this is Eve Picker, signing off to go make some change.
47 minutes | 21 days ago
Spread the wealth.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE Eve Picker: [00:00:10] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Charmaine Curtis, who's had a significant career as a real estate developer on the West Coast. She owns her own company, Curtis Development and Company, and she's focused on impactful housing projects trying to crack the affordable in the land of unaffordable. But we're not video blogging, so you probably don't know that Charmaine has two strikes against her. She's a woman and she's Black. And if you've ever wondered what that's like, here's a chance to learn. Charmaine says that she didn't know what she was up against until she was in her 30s, when reality struck. "How much more personal wealth would I have, she wonders, if I were a white man?" Eve: [00:01:12] Be sure to go to EvePicker.com to find out more about Charmaine on the show notes page for this episode and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform. Small Change. Eve: [00:01:36] Hello, Charmaine, it's just lovely to have you on my show. Charmaine Curtis: [00:01:40] Well, it's really nice to meet you. Eve: [00:01:42] Yes, I hope we meet in person some day ... Charmaine: [00:01:45] Me too. Eve: [00:01:45] ... when this silly pandemic is over, right? Charmaine: [00:01:49] Yes. Eve: [00:01:50] So, I wanted to ask by, start by asking you what, what drew you into real estate? Charmaine: [00:01:59] It was a very serendipitous and intentional way. I got a master's degree in urban planning from UC Berkeley with every intention of being a planner and, you know, doing my part to save the world. And then I got jobs as, not counterplanner kind of jobs, which is, I think that most people think of planning, they think of people who are sitting at a desk in a municipal building and, you know, giving people information about what they are or not allowed to do on their properties. I worked for the redevelopment agency in Berkeley. But my first job, first of all, was working for Libby. Eve: [00:02:35] Oh. Charmaine: [00:02:35] Doing market studies. Yeah. You probably didn't hear that part. Eve: [00:02:39] No. Charmaine: [00:02:39] Yeah. Yeah. So, yeah, Libby was the first person I worked for out of grad school. Eve: [00:02:45] For our listeners, Libby, Libby Seifal heads up a growing women's development collaborative that we're both part of. So backgrounds. Go ahead. Charmaine: [00:02:54] So. I went to work for the city of Berkeley, for the redevelopment agency, and I was just a young whippersnapper who threw out into the wilderness when they were trying to expand ... into a couple parts of the city. And, so I got chewed up in that process with very little support and realized I was really not interested in being a public employee. But I didn't know what I wanted to be at that point, because I had just spent these years getting a graduate degree. And then I serendipitously was introduced to a developer who was starting his own company and looking for a young whippersnapper to come and work for cheap and help him build this company. So, that's what happened, that, you know I kind of fell into the business, not intentionally, but through that introduction, which, which was great because I got to work on some super exciting projects in San Francisco that were really pioneering. And I got to learn the business, at least that side of the business. It was, it was a for-profit company converting loft buildings or warehouse buildings into lofts, which was a new thing for San Francisco, a very old thing for New York, but a new thing for San Francisco. So, that's how I got into the business. And I did that for a few years and really got, you know, sort of trial by fire, learning that, you know, all about entitlements and actually worked on one of the first low-income housing tax credit syndications in the country. Eve: [00:04:32] Oh. Charmaine: [00:04:32] We did all kinds of, it was just, it was a wacky thing. You know, some of it was consulting work that we did for others. But so, I got, I got a real broad range of experience in that, in that company. Eve: [00:04:47] Kind of always the case when you're in a small company, isn't it? You get to do everything because there's no one else to do it. Charmaine: [00:04:54] Yeah, and small was me and him. That was it was just the two of us at the beginning. And it was really, it was a great experience. And then it was a challenging experience as the company was growing. And I kind of felt like I was not able to grow as much with it at some point because other people were brought in. And so I decided to move on. And that was in the early 90s. And I decided I really wanted to learn the affordable housing side of the business and build some affordable housing. I mean, I was sort of, back to, you know, my part and trying to save the world, and I got a job working with an organization, it was called Catholic Charities at the time in San Francisco, but was later acquired, shall we say, by the Sisters of Mercy, who were starting their own development, affordable housing development, company, which is now, as you probably know, a pretty large national company, a non-profit, and based in Denver. And so that was really an interesting transition from being part of the male dominated Catholic Church to moving into the female dominated part, which was a revelation. And so many amazing, I mean, the women who were, who started that organization, including Sister Lillian Murphy, who died last year, I think, were just extraordinary women in every way, just in terms of their true passion for providing affordable housing and alleviating poverty, you know, trying to make a dent in poverty, not just, you know, putting people in buildings. And just because they were brilliant, you know, any of these women could have run a successful for-profit development venture. But, you know, they were nuns, and so they put their talents into building an operation to build more and more affordable housing, which is, now it's just, it's, it is, as I said, one of the largest nonprofits in the country. And, you know, that was also super informative experience for me. Also a burnout, because, you know, if you've worked in affordable housing, you know that at least here in California what it takes to put an affordable housing development together is like 10 pieces of funding, small pieces of funding from, from multiple sources and then trying to marry those sources. And the brain damage and the transaction costs of affordable housing is excessive. I was also, you know, I was being a project manager, and then I was, I was managing people, and then also managing projects, which just totally a recipe for burnout. You just can't do both. Eve: [00:07:52] Right. Charmaine: [00:07:53] I decided to take a break, and actually decided to go to film school, which I did ... Eve: [00:07:59] Oh wow. Charmaine: [00:07:59] Which I did well. And I went to film school at San Francisco State, and for a semester, and during that time, I was also working and doing consulting work for Mercy and others, and to support myself. It was something that I was passionate about, but it was also something that, you know, I didn't feel I had the financial bandwidth to pursue. Charmaine: [00:08:28] I grew up in a working class family and I wasn't really intending to be a working class person, myself. You know, the goal was to move beyond that. And to do my family proud, and to do myself proud in terms of being able to do what all generations want to do, which is just do better than the one before or the ones before, especially when you're your Black person in in this country. And I had opportunities growing up because I was recruited into a program called A Better Chance. And I left my home in Cleveland to move to Minnesota where I went to high school for three years, and went back home on vacations. That program is a program that was founded on the East Coast back in the late 60s, early 70s, to identify promising young people, kids in inner city areas who were in crappy schools and to give them an opportunity to go to, initially boarding schools on the East Coast, but it expanded to the school like I went to in the Midwest, which was a public high school in a really wealthy suburb. So, I ended up getting into Dartmouth College after that. And so, you know, I was a smart kid and I had these opportunities and, you know, and I seized them. But, you know, getting those opportunities and taking advantage of them doesn't mean that you kind of leave behind all of your, you know, the baggage of coming from a family that, where my mother, everybody worked two or three jobs. And my mother grew up picking cotton in the South. And, you know, it's really not until, I would say probably in the last 10 years of my life or so, that I've really been able to sort of think about the impact, the sort of generational impact of, of poverty and, you know, slavery and racism in this country. Eve: [00:10:29] Yeah, well, it sounds like in one generation you've come a long way. Charmaine: [00:10:34] Indeed. I mean, I'm the one who from my immediate family that left Cleveland and, you know, kind of made my way in this insanely expensive world of San Francisco. So, after that, I kind of did some consulting on my own, and then when I went to work for a company, there was a for-profit developer. But they develop both market rate and affordable housing, which was kind of the best of all worlds for me. And I ran the multifamily part of that company and under a really great boss who is still somebody who I'm really close to. Art Evans, who was a, I think, a real visionary in the, in the field. And who came out of a redevelopment background and held that vision of both doing well and doing good. And I would say probably more doing good, ultimately. Art, he did a lot of really great work and ended up getting clobbered like a lot of people in the, in the Great Recession of 2008, 2009. Eve: [00:11:36] Yeh. Charmaine: [00:11:36] And then, I just did the addition the other day. I've been out on my own as long as I've worked for other people in the business. I've been on my own since 2004, and started out doing my own development, building condos in the East Bay and working on some stuff up in Seattle. And at the time I thought I had a financial partner who I thought was going to back my business, but that ended up not happening. And so I really ended up on a shoestring putting these deals together, between my own capital, and back in those days before the recession, you could do really high leverage ... Eve: [00:12:11] Right, right. Charmaine: [00:12:13] ... with participating debt and other kinds of financial participation by investors. And so, anyway, that was, that ended up being a, not a wise thing under the circumstances, which, of course, no one could have anticipated what was coming. Eve: [00:12:28] No one. No one. That was a disaster. Charmaine: [00:12:31] Yeah. And so, I built a couple of really nice projects that were in, what I would call transitional neighborhoods, which was the focus of my business plan, which was looking around the edges of, and looking at, you know, where people in San Francisco were fleeing to, frankly. Which was parts of Oakland and Berkeley, and seeing that those neighborhoods were ripe for ... Eve: [00:12:57] Yes. Charmaine: [00:12:57] ... change and also wanting to build an entry level product, not trying to ... Eve: [00:13:03] Not luxury. Charmaine: [00:13:03] ... not luxury, not, I would, I've never been interested in that, which I think was ultimately one of the reasons that my potential financial partner decided that he didn't want to invest in me, because I wasn't thinking that way. I wasn't thinking huge and expensive. My interest really is much more in transformation of neighborhoods in a relatively organic manner. Eve: [00:13:26] And isn't that in the end, a little bit more recession proof, or a lot more recession-proof. Charmaine: [00:13:31] Oh my God, if that was exactly my thinking at the time. Yeah. Eve: [00:13:35] In 2008, 2009, I had a number of buildings in Pittsburgh that I had redeveloped, sort of against the grain. They were transformational. They were, I don't want to say luxury products, but they weren't affordable because I couldn't, just couldn't get the numbers right. But they were different. And honestly, I barely felt the recession. It was very odd because they were in underserved neighborhoods and places that most people weren't looking at, just as you said, on the edges. Right? Charmaine: [00:14:05] Yeah. Eve: [00:14:05] It was an interesting learning experience for me. Charmaine: [00:14:09] Yeah. You know, if I'd been at a different stage in those projects, I might have been able to pull it out. But one was not yet complete. It was about 75 percent done. And the other one was basically complete. Eve: [00:14:21] Oh yeh, almost done, yeh. Charmaine: [00:14:24] We were just starting sales. So, it was, you know, lenders were not feeling it. Eve: [00:14:33] That's really painful. Charmaine: [00:14:33] Oh my God. Eve: [00:14:34] Oh, that's painful, you know. Charmaine: [00:14:36] It was awful. And it really, I think took me a good 10 years to recover both financially and emotionally from it. Frankly, it was really, it was devastating. It was, you know, I talked to, I was talking to one of the local developers here who's done well and I think comes from wealth. And that, he said to me we were at a conference or something and he said, I personally lost six million dollars. And I'm like, oh, really? Well, I kind of lost everything except for my house. And so, you know, sorry, but our pain is not equal. Eve: [00:15:09] Yeh. Charmaine: [00:15:09] So, it, yeah, it's, that's the difference, you know for me in a way that crystallizes the difference between being a Black woman who comes from where I come from, with my sensibilities. Right? Not just, I didn't get into development, too, I mean, I think maybe initially I did kind of get into development to become a rich person and, you know, prove that that's possible for a Black woman to do that in the industry. But it's the difference between being, you know, someone who doesn't come from resources versus someone who does. And who is then able to build more races on top of those resources, that provide the cushion that you need when the shit hits the fan. So. It was a crystallizing experience for me that way, in terms of, the just the stark difference. Everyone was not impacted equally by that. What happened, for sure. Since then to, that my daughters were born in 2008. I was lucky to, you know actually marry later in life and have these two girls with my husband. And that was 2008. While the world was crashing down around me, I was also pregnant and with twins and ... Eve: [00:16:20] Oh! Charmaine: [00:16:20] So, they were born in late 2008 and I spent the next few years just rebuilding, basically, and working on a really interesting project I worked on exclusively for a few years, which is a master plan and community work and both, internal community work with this public housing project in San Francisco and, and the surrounding community to re-envision what was a 600-unit project over 39 acres into what would be, what will be a 1600-unit mixed-income project and ...you know, in addition to working all the physical planning, working with the community to get their buy in and support, and working with the folks who live in the public housing to help them envision a better future, and to bring a new way of working with very low-income people. That's ongoing, and that is really, I didn't do on my own, or at all. There were many other people involved in this community building effort and really, in recognizing the trauma that comes with generational poverty and all the, you know, the things that happen to people who live in poverty and that keep them down. And so, that has been, and continues to be, a reasonably successful effort to lift, not just rehouse people in better housing, but to sort of lift them up and provide, protect the developmental health of the littlest ones, in particular, by also helping their parents. Eve: [00:18:06] yes. Charmaine: [00:18:06] So, that was a really great opportunity for me to do this amazing work on what will be a transformative project in that part of San Francisco. And now I am doing development on my own or with others and co-development capacity. And I'm still doing, I'm doing development consulting work. That gig with the nonprofit, where I did the master planning work and all that other work, was a consulting gig. And so, you know, really just the last many years been about finding the balance between supporting my family in this insanely expensive town and reinvigorating my development career as a principal, which is where it's at for me because I like to create things, you know. Eve: [00:18:52] Yes, I know that. Charmaine: [00:18:54] And in order to create, you need to have some measure of control ... Eve: [00:18:57] Yeh. Charmaine: [00:18:57] ... which is when I started my business, in 2004, that was a moment when I was just on fire with, with passion to make buildings and be a part of transforming neighborhoods. Eve: [00:19:10] Yeah. Charmaine: [00:19:11] And I feel like I've kind of rediscovered that, that passion in the last few years. Eve: [00:19:16] It's such a great thing to make, like something happen out of nothing. Charmaine: [00:19:20] Exactly. Eve: [00:19:20] It's so great. There's really nothing like it. Charmaine: [00:19:22] Yeah. And it's, I mean, that's really, I'm just a very, you know, goal oriented, like I can see it and touch it and feel it at the end of it, I'm so happy. If I can't touch it, see it and feel I'm like, what am I doing? What is, what is this? Eve: [00:19:35] Yes. Charmaine: [00:19:37] So. I'm definitely a ... touch feel person and love, love to see the results. Eve: [00:19:43] Oh yeah, me too. So, you are a Black woman in an industry that is incredibly, heavily dominated by white men, and I know that's impacted your work, but I'd love to hear from you ... how. Charmaine: [00:19:59] You know, I will start answering that question by talking about a TV show I watched last night, which is a new show on Hulu called "Woke." And it's really interesting. I suggest you check it out. It's ... Eve: [00:20:16] I will check it out. I'm writing it down. Charmaine: [00:20:18] I think it just dropped last night. And it's based on the life of a cartoon artist, named, I think, Keith Knight, who invented these cartoon characters. And I don't know if the true story is butter and toast, but those were the characters, the cartoon characters in his strip, that he was, that this show was talking about. And how this guy, this Black guy thought that he was kind of exempt from, you know, the impact from being impacted by Blackness in this country until he was taken down by some cops and, you know, thrown to the ground and guns at his head because they thought that he was a mugger who had just been reported, and how that experience transformed him, and his thinking, and his perception of himself in the world. It's the first one, I just watched the first one, and I'm like, oh, my God, that's kind of me in my 30s, you know. I thought, oh, my God, I'm, I'm smart, I'm driven, I work hard, and therefore I will succeed in this business. And, you know, while there's always, you know, when you're a Black person who comes from poverty in this country, I think there's always another part of you that's back there saying, hh, that's not going to happen, Come on. But I, basically I would say I took for granted, for a very long time, what a disadvantage I was at being a Black woman in the business. I thought my smarts was enough. And it, you know, it's just not. Eve: [00:22:01] And, It should be enough, right? Charmaine: [00:22:02] Well, yeah. In a in a in a perfect world. Eve: [00:22:06] In a perfect world. Yeah. Yeah. Charmaine: [00:22:08] But, you know, in a way I, I think it was liberating to not see that limitation, like, at least not ostensibly. I probably felt it more than I saw it. And you know, and I, I built a great reputation here in this city and this region, parts of the region, anyway. But what I would say honestly and truthfully, and this is, this comes from somebody who was really hard on herself a lot of the time. If I were a white dude in this business with my skills, ability, talent, vision, I would be, you know, five times richer than I am. And have more opportunity thrown at me than I do. You know, it really just took me a really long time to actually come to that conclusion because I'm so driven, and have, and took so much for granted, frankly, about what my smarts and what my drive would get me. That said, you know, if I look sort of relative to where I come from, what my background is, you know, my mother picking cotton, my stepfather working eight thousand jobs to support us, I've done well, especially in this region where it's so hard to live. But would my career have taken a different path if I were a white dude? Absolutely. And I, I think there's a level of just not being taken seriously as a Black person in this industry. It's not even at that level. It's almost just like it's not not being taken seriously. It's just not being seen. And, and .... you're, it's not like you're invisible, but it's almost like you're invisible. Because there's a presumption that especially as a Black woman, I mean, there are some Black men in this industry in the Bay Area who've done well. Not many. I'm going to say three. Eve: [00:24:17] Yes. Charmaine: [00:24:17] But as a Black woman, I think it is just, it is just a given on a very subconscious level, for most people that you are not, you don't have what it takes to, you know, to do what white men can do in this business. And I think it's on some level that is something that I internalized at some point in my career. And in addition to, just all the internal stuff that Black people experience in this country, you know, from living in generations of the degradation of racism, that you see and that you don't see. Right? It's almost the unseen stuff that is worse than ... and you've heard, probably heard people say, I'd rather be Black in the south where the racism is just in your face than be Black in the north, where it's, it's implicit and unspoken, but very real nonetheless. It's hard to know, you know, what we were talking about before we started, you started to start recording, it's hard to know what you don't know. It's hard to know how your life and career trajectory would be different if you were who you were in a different body ... Eve: [00:25:33] Right. Charmaine: [00:25:34] ... in the body of a white man. So, it's, You know, it's complicated. Eve: [00:25:40] It's actually quite heartbreaking. Charmaine: [00:25:42] Yeah. Eve: [00:25:42] You know. Charmaine: [00:25:43] Even before the events of this year, I've been, and when I started out in 2004, it wasn't like I didn't understand that I was a Black woman in the business. I did. And part of what I really wanted to prove, and want to prove is that a Black woman, you know, a smart Black woman who is hard-working and can accomplish anything, basically, like no limitation. There are no limitations, you know, and there are, obviously. But there's still that drive in me to prove that a Black woman can be a serious success in this business. How I'm defining that, now, is probably different than it was then, because I am really about creating a different kind of world. I'm not, you know, when I was younger in the business, I was like, this is, I'm going to make a ton of money, I'm going to prove, because the measure of success in this industry is wealth. I've had this conversation with my husband many times. It's like, what a success look like in the development business. If you are a white guy, it looks like, or if you're anybody, it looks like how wealthy you are and how much money you've made. And the world is just the direction that we are moving in. I feel like it is really vital that people like me, and everybody, deploy their talents in the interest of the whole and not just themselves. That's the world I want my kids to be able to grow up in, is a world that's not a winner-take-all world, and so, that's really kind of how I'm thinking more, lately, is how can I deploy my talents in a way that's going to help to create that world where development can be a force for real transformation. And what needs to happen in the industry for that to happen? What conditions need to exist for that to happen? And there's so many different parts of it, I know that you are familiar with because you're a developer. Eve: [00:27:48] you know what you're saying really rings for me, too, I think when I was younger, I always thought I would figure out a way to fit in to the structure of the world the way it is. And quite a while ago, I heard the first female three-star general of the Army speak, and someone in the audience asked her like, well, how do you fit into that power structure? And she, she drew a circle on a chalkboard and she said, OK, here's the power. And you keep the circle, and you keep trying to get in, and you keep trying to get in, and you keep trying to get in. And eventually you give up and you go over here, and she draws another circle, and you make your own circle of power. And I think that, you know, there are some people who are never going to change that first circle, but then there are the rest of us who want to do something different. Charmaine: [00:28:35] Yeh, yeh, and it's really about building a movement and, or being part of a movement, and helping to build a movement to a more equitable way of developing ... Eve: [00:28:44] Yes. Charmaine: [00:28:44] ... our world. And I've been thinking a lot in the last few years about just how there's sort of two, especially here in the Bay Area, there's really two kind of extreme ends of the spectrum. Where we have a really robust nonprofit community on one end, which is largely, mostly comprised of white people, just as an aside, and a very robust market-rate world of development, which is mostly, also, white people ... Eve: [00:29:15] Also white people ... Charmaine: [00:29:15] ... more women on the nonprofit side, for sure. Eve: [00:29:20] Yes, absolutely, because they paid less. Right? Charmaine: [00:29:23] Yeah, exactly. And, and they are, you know, they're just, I don't know, I don't know what the difference is. There's so many differences between women and men. Eve: [00:29:31] It's the same profile in Pittsburgh. I have to tell you ... Charmaine: [00:29:34] Yeh. Eve: [00:29:34] ... it's exactly the same. Charmaine: [00:29:36] Yeh. Eve: [00:29:36] It's really interesting. Charmaine: [00:29:37] But there's a sort of middle ground that's not occupied. And I think that there is a middle ground. I think there should be a middle ground, and that it should be occupied by people like me who want to use their talents to develop in a more equitable way. Which means in a way that really is not profit driven, but in a way that is driven by market principles, in a way. Because I do believe, personally, and I, this may be a controversial statement, I think that the non-profit world is not driven by the same principles that the for-profit world is. Eve: [00:30:14] Oh, no, I totally agree, I totally agree. Charmaine: [00:30:16] I've been on both sides. I've seen it. I've seen how I treat my money, like actually my, you know, versus some ... Eve: [00:30:26] No, absolutely. Charmaine: [00:30:26] ... government entity that's like three, you know, three things removed from me. So, I do believe there is a real difference. And I've been on both sides, and I developed for my own account, and I know how to drive a deal and move in to reduce the cost to the lowest possible amount while producing something that I don't have to be ashamed of. Eve: [00:30:49] Well, you're driven, you're driven by urgency, and much of the nonprofit world is not, because they don't have to worry about the costs and staying alive in the same way. Charmaine: [00:30:59] Right. The cost or the time. Eve: [00:31:01] Yeah. Yeah. Charmaine: [00:31:02] And I'm not blaming anybody or anything. This is just the system that we have created. Eve: [00:31:08] Yeh. Charmaine: [00:31:08] And I really believe, I believe very strongly, and I've been talking about this for, you know, a few years now, that I believe that there is a third way to do development. You know, where I am not interested in trying to, I don't want to generate tons of profits for anybody else. And I don't want to generate, I don't need to generate tons of profit for myself. I would like to make money, a reasonable amount of money, that is commensurate with whatever the level of risk is that I'm taking. And the less risk I take, the less money I make. And the more, the less profit somebody else makes, the more we can use that for the benefit of the people we're developing for. And I've been thinking about that ... Eve: [00:31:50] Yeh. Charmaine: [00:31:50] ... largely here in the context of missing middle housing, which is truly missing, like, gone, like doesn't exist. Eve: [00:31:58] Really. Charmaine: [00:32:00] And I don't know how you do missing middle housing. It's really a fee-driven business. It has to be in, if your heart is in the right place and you're coming at it from the right perspective and in the interest of long term affordability, and not just, you know, a five, 10, even a 15-year old and then flipping and realizing gains ... I think you really you really are coming at it from that perspective of, this is a fee business, this is a fee driven business, which nonprofit development is too, but it's a fee-driven business that brings market-driven principles to the production. Eve: [00:32:38] Yeah, so you produce something and then it has a life of its own. Charmaine: [00:32:41] Yeah. And there are many, many elements to this. A lot of people are talking about, you know, modular is one aspect or building innovation, since we build buildings like cave people did, basically, to a large extent. And innovations in financial markets, which means really bringing people into financial markets who are not looking at achieving the, a typical kind of market return that you would get if you were investing. Eve: [00:33:09] Yeah, well, that's that's the key. Charmaine: [00:33:11] That is the key. Eve: [00:33:11] That capital is less greedy. Charmaine: [00:33:13] Exactly. Eve: [00:33:13] Yeh. Charmaine: [00:33:14] Taking the greed out of the bit, of this part of the business. And I'm a pragmatist at bottom. And so I'm like, we live in a capitalist world, in society. I'm like, that's, let's just say that, that's what we are. We're going to, that's always going to be a big part of who we are and how we live. And, you know, the nonprofits are doing God's work. But I do believe there is room for a third way to approach how we get stuff done. And we just have to bring, bring all of the all the, you know, creativity and passion, and bring others along into ... Being real about it. Because in the world of social impact investing, I, I hear about it a lot. I have not, I can ,I can't tell you that I've seen one development that I think benefited from whatever that is, at least the kind of development I'm talking about. There's like a new organization in San Francisco that is attracting, I think, real social impact capital. It's still money coming from wealthy people who expect a return, which I actually find that, slightly appalling, because I, I do think that if, you know, the one or even the five percent deployed even a portion of their capital in a way that was like, eventually give me my money back, and I don't expect you to give me any return on it, but I'd like it back someday. Eve: [00:34:46] I don't mind a return that keeps up with inflation, but I'm with you completely. I posted on Small Change, I've listed projects that are affordable housing and heard complaints about the return not being high enough. And I'm actually, how can I say, unhappy with where we are, because I think the return should be as low as three percent ... Charmaine: [00:35:08] Yeah. Eve: [00:35:08] ... to really build affordable housing. And yet, I have to admit, I'm scared of listing a project with a return that low. I had a conversation with an amazing developer of a project just like that that really, you know, should be on that platform. And I don't know if anyone's going to invest. Charmaine: [00:35:26] Yeah. Eve: [00:35:27] Because it's not enough money for them. So, if they really want impact. I mean, don't people understand that the higher the return on equity, the less affordable the housing? Because, I don't ... Charmaine: [00:35:38] I think some people do and some people don't. And I think there's a significant education aspect to this that has to occur so that people do understand that there is a direct relationship. Eve: [00:35:50] Yeah. Charmaine: [00:35:50] I think that we will eventually, hopefully be in a world where there is a concept of 'having enough.' Eve: [00:35:57] Yeah, yeah, yeah. Charmaine: [00:35:58] If you have a net worth of 100 million dollars, that's enough. And you can then use the rest of whatever you have in a way that is to the benefit of the general good. And those who don't have. Eve: [00:36:11] Yeh. Charmaine: [00:36:11] And that's really what we need. We need a paradigm shift in how we think about our individual responsibility as citizens of the world. Eve: [00:36:22] Yeh, and then, of course, there are the small investors who've never had a chance to invest before. You know, where that 500 dollars ... Charmaine: [00:36:29] Yeh. Eve: [00:36:29] ... really matters, maybe even more than the millions of the billionaire. Right? And I want them to get a return. It's very difficult. It's very inequitable. Charmaine: [00:36:39] Yeah. Eve: [00:36:39] So my next question would be, well, you know, what would you change to make the real estate industry a more equitable place for Blacks and women? Maybe just ignore the rest of them? Charmaine: [00:36:52] Yeah, you know, I mean, that's obviously, there's no magic bullet. There's no, I mean, we're seeing now in 2020 how deeply ingrained white supremacy is in our culture. A couple hundred years after slavery ended. So, I am not naive about the, and I don't like to be airy fairy and unrealistic about the possibilities. You know, I think that one thing I see in San Francisco happening is that, at least in the nonprofit world, is that nonprofits are making an active effort to hire more Black people on their staffs, which I applaud, especially if you are hiring people and then supporting them in the way that they need to be supported, and not just having people be window dressing. So, how do how do we change the hearts and minds of Americans who don't even perceive themselves as being racist, but who have, you know, probably relatively deep implicit bias, which is a lot of what I was talking about earlier that I have experienced with, that I didn't even know I was experiencing, right? Is the deep, implicit bias of people who think that Black people are not as smart and not as whatever, as others, as whites or Asians, if it is a true awakening or call to action or whatever that's happening now that's also, you know, both sides are kind of awakened. Right? Eve: [00:38:13] Right. Charmaine: [00:38:13] But if it's happening and this leads to a reckoning that is not, hopefully, violent, and that doesn't tear us apart, I think that this is a very good thing because I do see more white people that I know than ever before trying to examine their own racism and ... people who never thought of themselves as racist, which is very important because if you think you're not racist and you're white, you are not woke, you are not awake. And so it's very important for, and it's not a blamey thing, it's just like, this is the work. This is the work that must be done, if we're going to change this world so that Black kids have an opportunity anywhere near what a white kid can have in this country. And, you know, begins at that level of zero, you know, like birth and what you are born into. What happens to you between the ages of zero and five, how your psychology is, develops and it's impacted by that and other things, and your sense of agency and capability and power in the world. That's got to start at zero. It is remediable to some extent along the way. Right? And I'm kind of proof of that. Eve: [00:39:38] Right. Charmaine: [00:39:39] But, you know, that's like one level of what has to happen. And, and making opportunities or providing opportunities for more Black people and people of color consciously, and not just consciously in the hiring and then bringing in, but then once people are in, giving them what they need, helping them to succeed and not just taking for granted, we did the hire, now we're done. So, there's that level of building opportunity. And I think that we need more Black people in the industry and just getting more Black people in the industry and whatever ways that happens will be a good thing. I did not know until, maybe until I was in graduate school what a developer was. Eve: [00:40:32] Yeh, I was a bit older, actually. Charmaine: [00:40:34] Yeah, right. I mean, it's like, it is amazing how many people who I told them, when I tell them I'm a developer, they're like, what is that? Still. Right? So ... Eve: [00:40:43] Yeah. Charmaine: [00:40:44] So, teaching these little, kids at a very young age, what the opportunities are in life in general outside of the what everybody thinks of as being a doctor, a lawyer, you know, or a business person, in general, that there is this whole world where how our physical world is created, that is dominated by this industry. Eve: [00:41:09] Yeah. And, you know, real estate surely should play a really big role in, in shifting generational wealth as well. I'm not, I've been thinking about that, and I think there are ideas, all sorts of ways that that might happen. I'm not exactly sure how yet, but wealth has to do with property ... Charmaine: [00:41:30] Right. Eve: [00:41:30] ... not just cash. Charmaine: [00:41:32] That's right. That's why the wealthiest people own, families in this country up until recently, were real estate families, by and large. Eve: [00:41:40] Right. Charmaine: [00:41:42] Now it's tech. But ... Eve: [00:41:43] Yeah. How do you teach that? How do you make that shift, make that happen? Charmaine: [00:41:50] You heard me say earlier that, you know, and I have this conversation. I've been having this conversation with a guy I met recently who's a Black guy, who's doing some investing, and he is about, you know, sort of the wealth building, as a Black person in the, in the industry. And I get that, and I understand that, and I don't not support that, but I cannot really abide wealth building amongst a very few people, while other people are out in the cold. Eve: [00:42:25] Yeh. Charmaine: [00:42:25] That's not sitting right with me anymore. Eve: [00:42:29] Yes. Charmaine: [00:42:29] So, I'm torn about it. I mean, you can hear it in my voice. I'm torn about it because I do want to see more Black people succeed, but I want to see a lot more Black people succeed. You know, not just a few. Eve: [00:42:44] Yeah, yeah. Charmaine: [00:42:45] So how do we do that? We spread the wealth. You know, we have to find ways to spread the wealth. And that goes back to my comment about needing a paradigm shift in how we think about our responsibilities as humans on the planet, to each other and to our children and to other people's children. I'm interested in building wealth. I'm just not interested in building ... Eve: [00:43:12] Uber wealth. Charmaine: [00:43:12] ... yes, I'm not interested in being, you know (laughter) how many people in the world can have a net worth of ten million dollars? Can everybody? You know, is that a possibility? Is that a.. Eve: [00:43:27] It's an extra interesting calculation to do if you. Charmaine: [00:43:30] Yeah. Is that a theoretical possibility even, you know? And ... Eve: [00:43:30] That's really interesting. Or even a million, you know. Charmaine: [00:43:38] Yeah. What are the, what are the trade offs there? And I don't know what they are. I just know that everybody can't be rich. So then, you know, then I back off, I keep backing away from that, what can everybody, what is enough? And I start with, I really start with, like housing. There's some things people should just absolutely, simply be entitled to. And housing, stable housing, stable, sanitary, decent housing is one of those things. And access to an education and the resources that you need to learn, that are not just about teachers and schools, but if you need, you know, help with your mental health or whatever you need help with to be somebody who's able to learn and be a real contributor. These are basic things. And then we, we do these basic things, we build a better world where there will be more of everybody, more opportunity for everybody. Eve: [00:44:39] Yes. Well, you're going to make me cry, so I'm going to try harder. I hope everyone who listens will try harder, too. But I've really, really enjoyed this conversation. I feel awful ending it. But I'm going to now. Charmaine: [00:44:56] Well, I'm looking forward to talking more with you. Yeah. Eve: [00:45:00] I would love to meet you in person. And maybe there's some joint venture we can do. I love doing development and I love hearing about what, what you're working on. So, thank you very much. Charmaine: [00:45:10] Thank you, Eve. It's really great talking and, we will be in touch. Eve: [00:45:23] That was Charmaine Curtis, a real estate developer, a Black woman in a largely white, male industry. It's hard enough to be a real estate developer and make a living at it without those additional two strikes against you. But that is exactly what she is doing. Eve: [00:46:03] You can find out more about impact real estate investing and access the show notes for today's episode at my website EvePicker.com. While you're there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Thank you so much for spending your time with me today. And thank you, Charmaine, for sharing your thoughts. We'll talk again soon. But for now, this is Eve Picker, signing off to go make some change.
23 minutes | a month ago
Everything old is new again.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE Eve Picker: [00:00:11] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Daniel Dus. While Daniel has forged a career taking him to the top of the solar industry class, his heart is someplace else, in the Berkshires. That's where he grew up and that's where he's planning his next act. The Berkshires, Massachusetts, is rich with travel destinations and has an amazing inventory of luxury estates dating back to the 1800s. As industry collapsed, so did the use of these estates. Many of them stand dramatically underutilized today. And that's where Daniel and his team come in. You'll want to hear how Daniel is planning to reposition these estates for the sharing economy. Be sure to go to EvePicker.com, to find out more about Daniel on the show notes page for this episode. And be sure to sign up for my newsletter, so you can access information about impact real estate investing, and get the latest news about the exciting projects on my crowdfunding platform, Small Change. Eve: [00:01:42] Hello, Daniel. Thanks so much for joining me today. Daniel Dus: [00:01:44] Thank you, Eve. Great to be here. Eve: [00:01:46] So, your career has been in the solar industry, and I would love to start by just hearing what you've accomplished in your career. Daniel: [00:01:56] Yes. 15 years in solar now. I've had the pleasure of helping create and build some of the largest solar companies and projects in the solar space, in the United States, over the last 15 years. Currently, with a company, when I joined, had just completed its first solar project, and it's recently ranked the largest solar company in the world with 15.4 Gigawatts of operating and contracted projects. Eve: [00:02:25] Oh, wow. Daniel: [00:02:26] So, seeing growth like that in the space, which is really focused on carbon, SOx and NOx, emissions reductions, is really, really been exciting – to see the industry go from almost nothing 15 years ago, to now solar is number one in energy in terms of new, installed capacity year over year. So, just that transition, rapid transition, has been exciting to be a part of. Eve: [00:02:52] Yeah, I'll say. So, what's your background? How did you get into the solar industry? Daniel: [00:02:58] Actually came into solar out of a focus on real estate. I spent a few years developing real estate along the East Coast U.S., and that's where I was exposed to the trades, financially structuring projects, and ended up selling those assets, but it, this was right in the middle of the financial crisis. Nothing really made sense. Went back to get an MBA and launched my first solar company out of the Drexel business incubator, so ... and the rest, as they say, is history. Eve: [00:03:30] Oh, very good. So, that brings us back to where you are today. Because I've gotten to know you for an entirely different reason. And that's your new company that you're starting up, called Shared Estates. So, why the name Shared Estates? Tell me a little bit about that. Daniel: [00:03:45] We fell upon it as an exemplification of our primary objective, or one of our primary objectives, which is to bring these beautiful, historic, storied estates that in the past have primarily been in the hands of the wealthiest U.S. families, and bring those into the reach of the middle class. In many cases, our properties will cost less per person than a standard hotel room would, but with significantly different benefits and amenities. So, we really want the community to enjoy these spaces, use these spaces. One of the really fun things about the business is seeing families and friends create memories in these spaces. So, it's a major driver for us. Eve: [00:04:30] Basically, buying and repurposing enormous luxury estates, and sharing them in the shared economy. Daniel: [00:04:39] Yeah, that's exactly right. And our geographic focus offers quite a few of these properties. The Berkshires of western Massachusetts, also known as inland Newport, often, was developed in the 1800-1900s. Many of the wealthiest families built these estates there. They called them 'country cottages,' but these are often multi-100 acre, often over 10,000 square foot properties. And there's not as much of a market for these properties as single family, second or third homes today as there was then. And they often end up being very underutilized. I mean, talk about an underutilized asset. Often, they may be used a couple of weeks a year, a few weeks a year, by these families. And so, we're taking those estates and we're putting them into the shared economy where they can be much, much more accessible both to the local community, as well as to the tourist economy there. Eve: [00:05:35] That's really interesting. How did you come up, upon this idea? Like, it's an unusual take on a real estate company. Daniel: [00:05:41] It's a good question. I wish that I could say that I analyzed the market, that I did a bunch of market data research and saw that large group, short-term rentals was a rapidly growing subset of the short-term vacation rental market, and the broader tourism market. But that's not the case. I fell into it entirely. I was living in Manhattan and purchased a property in the Berkshires, which is where I was born and raised, and originally was going to use it for weekends, myself, and went through a deep rehabilitation process, and ended up taking a job in Philadelphia, so moved a little too far away to really use it for myself. And I put it on HomeAway VRBO, originally at, I think, $350 per night. And I figured if it rented 20, 25 percent of the time that it would cover its own mortgage and that would be a win. Well, it booked so much in the first 72 hours that I had to raise the price multiple times, and it now books for well over a $1000 dollars a night, and books 65, 70 percent occupancy. So, it's just such a phenomenal project that it really opened my eyes through the process of developing and listing the property to this underserved market, right? There are very few, if any, large-format, short-term rentals in urban areas, because if they existed they'd be exceedingly expensive. But, in rural America, there are a lot of these properties that are beautiful and really underutilized today. So, it, really fell into it. Eve: [00:07:18] Was that first property the Playhouse? Daniel: [00:07:20] Yeah, that's right. So, the Playhouse is a great example. It was originally built by George Westinghouse in the late 1800s. It was the first place in the world ever powered by AC electricity. He built an AC microgrid there to test what was really the theory of Tesla and the products being developed by Westinghouse and Stanley. So, we know that President McKinley, Tesla, Stanley, Lord Kelvin all visited the property. Westinghouse in the late 1800s had an electric boat; he had an electric car he drove around the property. It was really a leading point of innovation at the time. And this particular structure was called the Playhouse because he built it as a gymnasium, basically, for his children. 7000 square feet. He had a bowling alley in the building ... Eve: [00:08:13] Wow. Daniel: [00:08:13] ... and he later converted it into a theater space, for when his kids were getting older, and entertained there. So, it's a beautiful open floor plan building ... Eve: [00:08:25] Yeh, I've seen photos of it. It's stunning. It's beautiful. Daniel: [00:08:27] Yeah. And it was, when we took it, our architect told us that it was structurally failed. It was literally ready to fall over, and required a lot of structural work to maintain the open floor plan and to make it structurally sound. But in the process, we created a space that has really resonated with folks, where they can bring groups of families, family and friends, and enjoy each other and celebrate each other – weddings, anniversaries, birthday parties and other small gatherings like that. Eve: [00:08:56] I think you told me that it was ranked number one, or is ranked number one place to stay. Daniel: [00:09:03] That's right. Yep. It, on YVRBO, it quickly shot up to the most-booked, most-reviewed property out of over 500 properties listed in the county on VRBO. Eve: [00:09:13] That's amazing. That's a great story. Daniel: [00:09:16] It was. It was. You know, I love the space. I love the property. It means a lot to me and I love that folks get to make memories there. Eve: [00:09:26] So, how does this fit in with your solar background? Daniel: [00:09:32] Yeah, it's a, it's a good question and one I get often. Solar development, financing and construction is very similar to real estate development, financing and structuring. You're talking about zoning approvals, you're talking about geotechnical studies. If you're doing any ground work, you're talking about structuring projects for financing, financial modeling. You're talking about construction and ownership and operation and optimization of assets. It's all exactly the same in both industries. It just is that the asset itself is slightly different, but a lot of overlap there. I'm a Stanford-certified project manager, Villanova-certified Six Sigma, and that's because developing processes for execution of these projects is really at the core of these businesses. So, I think there's just a ton of overlap. Eve: [00:10:24] Yeah, but I suppose I'm also wondering, what of your love for the energy industry are you going to bring to these properties, because they weren't built that way? Daniel: [00:10:34] Yup. That's exactly right. And Shared Estates is also, to a large extent, a conduit for investment in a carbon neutral and sustainable asset. That's, all of our properties will be carbon neutral, offset by either on-site or off-site renewable energy projects, which we're very excited about. And so, we will bring that attribute to all of our properties. Eve: [00:11:02] And I think probably some other features that I've heard about, but we'll go into that later. So, In the Berkshires, which you seem to be focusing on, how many underutilized estates are there? Daniel: [00:11:14] There are a surprising number of them. Again, it was over the span of over 100 years of this economy developing and building, but also had an industrial heyday, itself. General Electric had a major presence there, thousands of jobs. So, there are dozens and dozens and dozens of these estates, in varying states. Some of them are really in rough shape, frankly. These historic properties really need dramatic investment to help bring them up into today's standards, with IT infrastructure, you know, sometimes structural upgrades, definitely bringing back their former glory and beauty. So, everything from landscaping to paint, new fixtures, etc, is all really critical for these properties. And we try to do that and maintain historic elements of them, as well. So, at the Playhouse, for example, we retained the original Westinghouse lighting fixtures from the 1890s. Eve: [00:12:14] Oh, lovely. Daniel: [00:12:14] And so, we do our best to keep the historic elements of the properties. But there are a remarkable number of these in the Berkshires. And frankly, nationally, there are a lot of large, rural farmhouses that are not in their heyday today that could use deep renovations, and other properties that really are, I think, historic to America and deserve to be rehabilitated and brought into the shared economy, which in my opinion, is one of the best possible uses for them. Eve: [00:12:45] If I want to rent one of your estates how will it compare to holding a gathering in a traditional local venue like a hotel, just price-wise. Daniel: [00:12:55] In my opinion, this is the core to our ultimate success. The macroeconomics of our properties versus the alternative. There's kind of no comparison in my mind. Our properties will often be less per person than a standard hotel room would be, but our properties will have ... in the next project we're doing, we'll have 40 acres of private space, it'll have a dedicated pond, docks. It'll have a five-acre vineyard, greenhouses, multiple living spaces, multiple dining rooms, multiple quiet spaces, an office, library. All for your own private use with yourself, your friends and your family. You just have to get a group of family and friends to travel with you. But, in terms of the amenities, there's just no comparison. These are the most luxurious possible properties. And with the right group of friends and family, on a per person basis, they could be less than a holiday. Eve: [00:13:52] That's amazing. Daniel: [00:13:54] Yes. Eve: [00:13:54] So, this is really the shared economy in a very different way. Daniel: [00:13:58] That's right. Eve: [00:13:59] So, you have the Playhouse under your belt. You said, you mentioned the next property. You want to tell us a little bit about that one? Daniel: [00:14:06] Sure. Yeah. We are calling it the Freeman Berkshires. So the Freeman is currently an 11,300 square foot brick mansion on about 40 acres, with a private pond, tennis court. We are going to deeply renovate, rehabilitate this property, new fixtures, new paint, add some square footage, hopefully. We're going to install a 500 square foot English-style greenhouse and extensive gardens, five acres of vineyard, and in-ground pool, and really bring this into 2020. Modern IT infrastructure. Games rooms and a virtual gaming room, so that there's something for all generations. The name, the Freeman Berkshires comes from a local woman, Elizabeth Freeman. She was the first African-American slave to sue and win her freedom under the Massachusetts constitution. And she was abused at the hands of her, quote unquote, Master's wife. And so, the property will be a tribute to her. We'll be installing a sculpture garden by local artists in tribute to Elizabeth and her story. And we'll be donating a percent of profits to the Elizabeth Freeman Center, a local nonprofit that's been operating since the 1970s, serving battered and abused victims of assault and sexual assault. And so, we're very excited, and that local nonprofit engagement is part of every property that we've done and will do. The Playhouse contributed to St. Jude's, Sierra Club and the local Humane Society on a recurring basis. So, we're very excited about the Freeman Center contract and we'll be closing imminently here in the next weeks. And so, we can't wait to get started on it. Eve: [00:15:54] So, tell me a little bit about financing. I mean, I have been hearing over the last few months the difficulty that people are having financing anything unusual in the real estate market. And this is definitely unusual. Daniel: [00:16:08] Yeah. And in fact, our biggest challenge, Eve, is that these are rural projects. They're all in rural America. And what I didn't realize before going to the market the first time, a couple of years ago, for commercial financing in rural America is that many banks will simply not finance projects in rural United States. They're very focused on urban areas, suburban areas. Commercial lenders like to invest in New York, Manhattan, Philadelphia. They basically red-line rural America, and in places like the Berkshires that really need economic development, that's a real problem. Eve: [00:16:47] Did they just come out and say we don't lend in rural America. Daniel: [00:16:52] Yeah. I have had dozen of lenders simply say, you know, we do not invest in rural properties. Which ... Eve: [00:17:00] Wow. Daniel: [00:17:00] It's kind of like red-lining. Right? I mean, I can't think of any other ... Eve: [00:17:06] Yes. Daniel: [00:17:06] ... comparison. So, it was pretty shocking, frankly. The local banks are fantastic and supportive, but they often have relatively modest caps on the amount of capital that they can contribute. And so, the value of Small Change really shines here in its ability to help bring capital into places like this, and frankly, to offer the ability of the local community to invest. As you know, traditionally, only accredited investors can invest in GP/LP-type structures like ours, and that's highly limiting, you know. The local community is not, on average, worth a million or more dollars, but they're the ones that, they deal with the tourist economy every day, they often work in the tourist economy, and so, they should be able to benefit from that economic activity. Eve: [00:17:53] So how are you financing this project if you don't have the bank? How do you do it? Daniel: [00:17:57] Yeah, this project is particularly unique. We've obtained seller financing for a large portion of the acquisition cost, actually 95 percent of the acquisition cost, allowing us to focus our equity on the rehabilitation and upgrade of the property and aesthetic improvements. And we will be conducting a Small Change raise. So, we're excited. Eve: [00:18:20] Yes, we're excited, too. So, but how long did it take you to negotiate the seller financing? That's not an easy thing to accomplish. Daniel: [00:18:28] It was almost a year, Eve. Eve: [00:18:29] Wow. Daniel: [00:18:29] Of what it was about 11 months of back and forth, and educating the seller on us, what we've done, what we plan to do ... Eve: [00:18:38] Wow. Daniel: [00:18:38] ... and ultimately reached a deal that we're really happy with and I think they're happy with, too. Eve: [00:18:43] So, tenacious must be your middle name. Daniel: [00:18:47] You have to keep that deals, right ... Eve: [00:18:49] Yeh, yeh, yeh. Daniel: [00:18:49] ... that's the nature of development. Eve: [00:18:51] So, final question for you. What's your big, hairy, audacious goal? Where are you going with all of this? Daniel: [00:18:58] For Shared Estates, specifically, I'm born and raised in the Berkshires. I love the Berkshires. I drove by these properties when I was a kid and fell in love with them. And the Berkshires is a really special place. The Boston Symphony Orchestra summers there at Tanglewood, has the oldest and longest performing dance center in the country, Jacob's Pillow. It has one of the largest standing Shakespearean companies in the world, frankly. And these beautiful bucolic views. It's just a phenomenal and special place. And I really want Shared Estates to contribute to the local economy, through taxes, through the nonprofit contributions we'll be making, hopefully through investments by the local community in the business. I want the business to be 'by and for' the local community. And I want it to contribute, honestly, millions and millions of dollars of benefit, both direct and indirect, to local businesses. Every one of our properties supports local businesses. We champion and celebrate local businesses. We have local gift baskets and literature, and we really try to get folks who sometimes travel ... they used to travel from Europe, now generally in New York and Boston, as those families are traveling more domestically. And we've seen a dramatic uptick, frankly, in our activity in rentals. Eve: [00:20:19] Oh, that's interesting, yeh. Daniel: [00:20:19] But we really want this to be a massive engine of growth for the local economy, and to be a benefit to the local organizations there. I mean, that's, that's really our goal. Eve: [00:20:30] That's a pretty fabulous goal. And I hope you're incredibly successful. So, thank you very much for joining me today. Daniel: [00:20:37] Thank you, Eve. It's been a pleasure. Eve: [00:20:38] I hope I get to visit sometime. Daniel: [00:20:40] Absolutely. Us, too. Eve: [00:20:41] Ok, bye. Daniel: [00:20:55] Bye. Eve: [00:20:55] That was Daniel Dus. He's planning a comeback for the many underutilized luxury estates in the Berkshires. Daniel and his team plan to reposition them for the sharing economy. Not only will they be available for middle class families to enjoy, they'll be carbon neutral renovations, making them the ultimate recycling projects. And he's taking the democratization of these estates one step further by offering the opportunity to invest to anyone over the age of 18. These estates won't just be owned by the wealthy any longer.Eve: [00:21:42] You can find out more about impact real estate investing and access the show notes for today's episode at my website, EvePicker.com. While you're there, sign up for my newsletter to find out more about how to make money in real estate, while building better cities. Thank you so much for spending your time with me today. And thank you, Daniel, for sharing your thoughts. We'll talk again soon. But for now, this is Eve Picker, signing off to go make some change
32 minutes | a month ago
Yes, in my backyard.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE Eve Picker: [00:00:13] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Two years ago after a substantial career in economic development, Patrick Quinton co-founded a startup in Portland, Oregon. Dweller manufactures Accessory Dwelling Units with the goal of addressing the very pressing housing needs of that city. Patrick knew that the city had the most ADU friendly code of just about anywhere, a 32x14 foot ADU could be set into a typical 50x100 foot lot without hitting the setbacks, and without requiring city design review. And so, Dweller was founded. You'll want to hear more. Be sure to go to EvePicker.com to find out more about Patrick on the show next page for this episode, and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change. Eve: [00:01:35] Hello Patrick! Thanks so much for joining me today. Patrick: [00:01:38] Thanks, Eve. It's great to be here. Eve: [00:01:40] Great. So, a couple of years ago, you co-founded a company called Dweller to address the pressing housing shortage in Portland, Oregon. And you've had a pretty substantial financial and economic development career. So, I'm wondering what prompted you to move to the uncertainty of a startup life? Patrick Quinton: [00:02:01] Yeah, I sometimes ask myself that as well. My most recent job, prior to this, was I ran the city of Portland's development entity. At the time it was called the Portland Development Commission. It's now called Prosper Portland. But, obviously in that role I had my hands in a lot of different, large-scale projects, and had benefit of lots of public funding, and so had an opportunity to have an impact in a way that, across a lot of different things, but when my time came to leave there and I was thinking about, not just kind of what I wanted to do next, but what type of role I wanted to have, I really felt like I wanted, you know, to use the cliche, roll my sleeves up and really be closer to the work. And in particular, I had been thinking a lot about private models of solving any of a number of public issues. And certainly affordable housing was at the top of the list. So, you know, I didn't leave with the idea of starting an ADU year company. I left to try and explore and think about, you know, what to do next. And my business partner, Brian, came to me with this idea, and at first I didn't think it was the right idea. I didn't think it had the opportunity to have as much of an impact as I had hoped. But the more I thought about it, the more I realized it really was the right opportunity to both build affordable housing, you know, to really have a direct impact, but also to prove a model that we both felt people had been toying with this, but really not making any progress. And so, it's always kind of a leap, and it's always, you got to drink a little bit of the Kool-Aid, but we really did feel like we were on to something new and kind of at the beginning. And so, you know it's been a fun adventure. Eve: [00:03:57] Dweller manufactures ADUs, right? And for those who don't know who are listening, what's an ADU? Patrick: [00:04:04] Yeah, so ADU stands for Accessory Dwelling Unit, which is an unfortunate name for something that we're trying to popularize. But it just means that it's a secondary, permitted unit on a residential property. It's typically referred to as a backyard cottage or a mother-in-law unit. But, in any form, it is a second living unit. And because it's a separate permanent unit, it can be used as a rental. It can be used to house a family member. Obviously, it can be used for somebody to have, you know, their TV room, but its power is in, it creates another housing unit on land that nobody assumes can accommodate any more housing. And so you're able to drop in additional housing supply without really having to acquire new land, or even disturb the kind of existing fabric of a neighborhood. So, it's backyard housing. I mean, that's kind of the easiest way to talk about it. Eve: [00:05:04] So, it's a density play. It's really kind of utilizing expensive land in a more efficient way. Right? Patrick: [00:05:11] Exactly. There's no way that anybody could develop housing on the land in these types of neighborhoods without this type of unit that didn't have to acquire land and can be built on a small scale. It's the ideal way to take advantage of this excess land. Eve: [00:05:27] So, tell us about your model and how you arrived at it. Because I think there's lots of different ways of building ADUs. Patrick: [00:05:34] Once we dive into the ADU world and you learn more about it, you know, and we're on the West Coast, so the West Coast has been doing this for a while, you look and you see lots of ADUs have been built. But, basically, what's been going on is people who have money have been building a lot of kind of cool backyard houses. And so while they've been proving that you can do this, it really hasn't been available to mainstream homeowners who aren't sitting on a ton of money. So, we really wanted to create a model that would get a lot of ADUs built, but more importantly, really open the market up to more mainstream homeowners. So, we wanted to bring the cost down for ADUs and then help them finance it. And we brought the cost down by developing standardized ADUs that are built in a factory. So, high quality construction, but we're just taking out a lot of the waste and inefficiency that happens with building a unit on site. And so, that's really made our ADUs a lot more affordable than your average ADU. And then the second thing is, we've created a way for homeowners to finance an ADU without putting any money into it themselves. So, those are the two main things we wanted to address. And we feel like with those issues solved, we think, yeah, now your average homeowner and thousands of similar homeowners can now put ADU on their property when, you know a few years ago, that really was impossible. Eve: [00:07:06] Can you share with us how much it costs to build one of these pre-manufacturing units? Patrick: [00:07:10] So, our typical project is about 120,000 dollars, all in. So, that means that, you know, a homeowner can come to us ... Eve: [00:07:18] That's very reasonable. Patrick: [00:07:19] Yeah, when you consider the average price of an ADU here in Portland is around 200,000 dollars. And the average price in other West Coast markets in California, and Seattle, is around 300 or higher. So, yeah, 120 brings it into the range of affordable for many homeowners. It's still a big financial decision, but it's definitely a lot easier for homeowners to get over that hurdle. Eve: [00:07:44] Yeh, I'll say, that's pretty reasonable. And then, so, how many units have you built and operate to date, as a start? Patrick: [00:07:51] We built 15 units in total, and then, you know, I know we're going to get into this, but we actually own nine of those. So, we operate nine of those as a small portfolio of affordable ADUs rentals and we rent those out to long-term rentals. So, local residents, and they're sprinkled throughout the city of Portland. The other units we just sold. There's homeowners who come to us and have the money and want to buy from us. And we're happy to do that. And homeowners who buy from us who have money, you know, they like the efficiency, the no-hassle aspect of it as well. So, it's not simply that, you know, homeowners can afford it. It's that ADUs have traditionally been a big project for a homeowner. It's, they become a mini-developer and most people just don't have the time to do that. Because there's a lot of pitfalls along the way. So, we also attract a number of buyers who just want to buy ADU like they buy a car, or some other big purchase. They don't want to have to learn how the car is manufactured. Eve: [00:08:51] Right. Where are these located, the ones that you built? Patrick: [00:08:54] They're located in residential neighborhoods throughout our city. You know, Portland is, like many cities is, has tons of great residential neighborhoods. And what people don't realize is that in most cities, even in the city itself, you know, you walk down any residential block and there's a nice big backyard in these properties. Eve: [00:09:16] Yes, yeah. Patrick: [00:09:16] And so when you look across the landscape in Portland, where most of the residential neighborhoods are, if you were to fly over them, you would see all this space that you really don't see from the street side. And a lot of them are really modest neighborhoods with bungalow-style houses and homeowners who, you know, they want to have the extra income. That's really the prime motivation. Eve: [00:09:37] So, you are doing two things. You're creating affordable homes and extra income for people who need it. Patrick: [00:09:44] Yup, yup. Eve: [00:09:44] And the third thing I'm realizing as you're talking about this ... ADUs are built in places where there's already infrastructure. And so, they're going to be close in, and provide housing for people perhaps without needing a car because the developed neighborhoods have transit, etc.. Patrick: [00:10:00] From an urban policy perspective, that's one of the reasons why so many jurisdictions have been promoting ADUs, is because it's an easy win on the housing side. You don't have to fight over how you develop a big corner lot. You're dropping it in. You don't have to build new streets or sidewalks, like you're saying, and you get to take advantage of existing parks. And even, you know, schools. Like people ... this is an understated aspect of this. But when a household that typically rents gets the rent in a neighborhood that's primarily single family, owner-occupied houses, they're generally accessing better schools. And so, it opens up even that, for renters. Eve: [00:10:40] Yeah, probably better shopping and proximity to grocery stores, etc.. Patrick: [00:10:45] Exactly. Eve: [00:10:46] Yeah. So, what do they look like? Do you have a number of models? Patrick: [00:10:50] We do now. You know, as like any company, we started off with one model. You know, we really were trying to work out the kinks, but also just kind of see where customers are. But we generally sell units that are between four and 500 square feet. It looks like a one bedroom apartment. There's a lot of talk about tiny homes these days, which is another really great form of housing. But ours are bigger than that, and most ADUs are, and they look more like apartments than what people will see in a lot of these tiny home images. So, they have full bedroom, full bathroom, usually a shared kitchen, living space. ADUs can come in all sorts of architectural forms. But what's interesting about it is a lot of them have, what they call a shed roof or mono slope roof, which is different than most houses which have the peaked roof, gable roof. So, ADUs tend to have a little bit of a different feel there ... Eve: [00:11:41] It's a little bit more of a shed aesthetic, like the garden shed, yeh? Patrick: [00:11:46] Exactly. When you look into the back yard, you don't see a mini house. You see a structure that looks more like a larger shed. Eve: [00:11:54] Yeh. Patrick: [00:11:54] But inside it's built out like, you know, any apartment that you would see in a big apartment building. Eve: [00:12:00] Right. I've lived in a 450 square foot unit and loved it. It was the perfect size and there were two of us. So, if you don't have too much stuff, it's great. What makes them affordable? This is a loaded question, because I know you're also striving for affordability, just through your mission. I suppose the question is not what makes them affordable is small and well-thought through manufacturing, but what's your affordability mission beyond that is, I suppose, what I'm asking? Patrick: [00:12:31] I do want to actually just talk about one thing that, about affordability, before we get into making them affordable rentals is, and there's a lot written on this. You know, the average cost of a new housing unit is, you know, if you're talking about an apartment building or something like that, here, it can be 300 to 400,000 dollars, a unit. In California, the Bay Area, right, they're talking about 700 to 800,000. And ... Eve: [00:12:56] It's crazy, yeh. Patrick: [00:12:58] The mere act of building a new housing unit has become so expensive. And when governments and other organizations that care about affordable housing are rounding up dollars to build new affordable housing, they have to find a lot of money to build a number of housing units of any scale. So, to say I can build a housing unit for 120,000 dollars, regardless of what the purpose is, that's a big deal. And there are other companies doing this. So, the ADU industry is positioned to add a lot of housing supply at a price per unit that almost no other aspect of the housing industry can achieve. And, you know, one of the main savings is we don't have land cost. Right? So, it's not magic. It's not like, you know, somehow we've figured out the magical way of building that takes out of the cost. It's that we're leveraging existing land. So, basically, if it's a homeowner, the homeowner is kind of contributing that land to this transaction. But it's not money that we have to find. And then we generally, because we build small units, and if you are building the way we build in a standardized fashion, then you can take out all these inefficiencies, as I mentioned earlier. So, that's like this whole powerful part of the ADU world is ... Eve: [00:14:14] Yeh. Patrick: [00:14:14] ... if we really can figure out how to get thousands of ADUs built, we're going to be building those units at a lower cost per unit than pretty much any form of housing. Eve: [00:14:26] I mean, when you look at a multi-unit building, you're talking about fire sprinklers and stairs and elevators ... Patrick: [00:14:32] Exactly. Eve: [00:14:32] ... and, you know, accessibility, really expensive. Patrick: [00:14:36] Yup. Eve: [00:14:36] And all of that has to be subsidized to keep it affordable. Patrick: [00:14:39] Yeah. Eve: [00:14:40] So, tell me about the ground lease and, you know, who's interested in it. And what sort of success you're having finding people who want to do this. Patrick: [00:14:49] And so, as I mentioned earlier, we really wanted to help address the financing challenge for homeowners, and just a bit on that. So, basically an ADU is typically a project. It's taken on by a homeowner and the homeowner has to not only manage it, but pay for it. Eve: [00:15:03] They have to hire an architect and probably an engineer. Patrick: [00:15:05] Yeh. And so when homeowners go to pay for things like this, they typically are going and getting home equity financing. I mean, obviously, there's people out there who might have that money just sitting at the bank. But that's, that's typically not most people. So, they go and get home equity loans, and I think the home equity loan has certainly become pretty widespread over the past 20 years. So, everybody gets that that's out there. But when you really dig into the numbers, lots of people are sitting on small amounts of equity. Very few people are sitting on a lot of equity, certainly enough that's going to allow them to pull, you know, 120,000 dollars out in our case, but for the average cost, you're talking about a lot more. Eve: [00:15:48] Right. Patrick: [00:15:48] And even then, you're asking people to take out what is basically the bulk of their life savings. It's you know, the statistics all indicate that most people have their net worth tied up in their home. So, like, that's the ADU financing challenge is, it's all home equity based and most people don't have it, and the ones who do have to make this massive decision and ... Eve: [00:16:11] Oh yeh. It actually turn them into mini developers. You're asking homeowners to be real estate developers and work through all the issues around that. That's a lot. Patrick: [00:16:19] And so, that's just a risk profile that you're not going to find in your average homeowner. So, we wanted to figure out how do you finance this in a way that takes out all of those obstacles. And so we came up with, we didn't invent it, but we're one of the first ones to really try it, is to use what's called the ground lease. Under a ground lease we lease a part of the homeowner's property. So, we generally lease a defined part of their backyard. And then by doing that, we then have the right to develop on that part of the property, and then we develop the ADU ourselves using our own capital. So, we're building the ADU on the homeowner's property at no cost to them. And then we own the ADU then and we're able to manage it and rent it out. And then we share a percentage of the rent that we collect each month, back to the homeowner. And that's essentially our lease payment to them. So, once again, we're tenant in their backyard because we've leased that part of their backyard, so we owe them monthly rent. And so we pay them that as a percentage of the rent. And then the homeowner has the right to buy us out of that lease at a prearranged price at some point during the lease. Patrick: [00:17:33] So, in essence, the homeowner is getting the ADU on their property at no cost to them, and then they can, when the time is right for them, choose to pay us back. Right? So, it operates like a loan, but it's not a loan. It's, you know, it's us going in and building and owning the ADU. And we think this is a particularly well-suited type of financing vehicle for ADUs, because not only does it overcome these challenges that we're seeing for homeowners who want an ADU but can't finance it or can't pull the trigger on taking all their equity out. But it also puts these ADUs immediately into the rental market, because we're owning it and then we're managing it like any other long-term rental. So, not only are we getting ADUs built, but we're getting them immediately available to local renters, which is one of the big policy objectives for promoting ADUs, is to have more affordable rental units. And then when the homeowner buys it out, they can decide if they're going to keep it as a rental. But for at least some period of time, five, 10 years, it operates as a rental unit in neighborhoods that really need it. So, it's just this kind of unique way of looking at how to get over the financing hurdle that has all these ancillary benefits. Eve: [00:18:53] So then, you're launching a crowdfunding campaign to raise equity on my crowdfunding platform, Small Change. And why are you doing that? Patrick: [00:19:04] The financing challenges don't go away just because we're building on aground lease. Somebody still has to fund this. And so, that financing challenge then gets pushed onto our shoulders. And so we've tried to figure out how to fund the development of new ADUs using a lot of traditional financing methods. And so, if you think about a real estate transaction, you know, you have some equity, you go out and you borrow money from a lender, and usually you can kind of piece together the right capital sources. But this structure is unique in that we don't own the land and we don't have rights to the land. So, you're asking lenders and investors to really bet on this structure and the stream of income from it. And even though I would argue until I'm blue in the face, how secure this is and what a great investment this is because of the regular income coming in, it doesn't look and feel like what lenders and investors are used to seeing. And so, it doesn't fit in one of these boxes. And so, we've tried to look for traditional lenders, non-traditional lenders, all sorts of folks who fund even affordable housing projects. And we just haven't found lenders who are willing to do this with an eye towards scale. And so, at the end of the day, we felt like there's a lot of interest in this type of housing. There's a lot of people that we talk to who love the idea of ADUs, who really want to see more ADUs built. These are average folks who want to help with the affordable housing crisis. And so, we actually have always thought in the back of our minds, you know, this would be a great crowdfunding opportunity, but we really thought, you know, we should be funding this in a traditional way. And we had to beat our heads against the wall for a long enough time before we decided, you know what, let's actually look into crowdfunding because we feel like there's a really strong interest out there for what we're doing. Eve: [00:20:58] Yeah. So, the challenges never end. Right? So, you've got a product that sounds like it's scalable, that may really help the affordable housing crisis. And yet you've not been able to find a lender to, at least lend, yo know, 60 percent of the cost of building these, even if you have to go find equity, which I personally find really shocking ... that we don't have lenders in this country that can think a little bit out of the box. I mean, there are, as you said, non-traditional lenders, lenders that are focused on affordable housing, nonprofit lenders with a mission to help affordable housing. What has to change for this to work? Patrick: [00:21:39] Yeah, this is multi-layered. So, the first thing is that I think that everybody can point fingers at each other. So, I think your actual lenders would point fingers at regulators and their auditors, and say, if I put this loan on my books I am going to get killed when audit comes around. Or they're going to say, point to actual, you know, this is how we have to underwrite them. So, you have that. I do think you have, regulators and auditors might come back and say, we don't say they can't do this. They just have to kind of make the case and show us how it's collateralized. So, I think some of it is this, like, you know, do I want to take this fight on as a lender when I can go look for another deal? So, I think there's a lot of this, like, who's self-interested enough to make it happen. And so, that gets to the second layer, which is getting scale on this proves it out, and then it will give, I think it'll begin to open up the eyes of lenders. So, I do think we need to prove out that there's a market for not just a lot of ADUs getting built, but also for folks with money that folks who deal in much bigger numbers with more zeros than we do right now, say, hey, I can put 10, 20, 50 million dollars to work right away, into this market. Now, I'm interested. So, I think we're in the chicken/egg classic stage. We've got to prove it out, get some scale, and show people not just that it's safe, because I think that's actually the easier argument to make. It's really can this thing be scale, can achieve scale, and can it really end up putting a lot of money to work? And so, whether it's a regulated lender or a group of lenders that come in and do this, or whether it's some more of a kind of investment banking type of approach, I think that scale is going to unlock, you know, one or both of those eventually to get more money into this market. Eve: [00:23:31] Or maybe crowdfunding is, if enough investors ... Patrick: [00:23:33] Crowdfunding, right. You're more the expert. I'm new to this. My natural inclination to think its smaller scale. But you're right, that, you know, the beauty of crowdfunding is maybe it is. Eve: [00:23:44] There are other platforms that have gone fairly large scale ... Patrick: [00:23:47] Right. Yeah, exactly. Eve: [00:23:47] ... but they have a very traditional real estate projects. Again, they're kind of following the model. So, I think Small Change is a bit unusual in that it will help developers like you with unusual projects that are awkward to finance is the only other way to say it, like awkward to finance, because we think that in the long run it's the right thing to do. So, I'm really excited you're doing that on our platform. Patrick: [00:24:11] I have one of our early investors, friends of family, this is a long time friend of mine. She does a lot of investing and she was one of the people who was really nudging us to explore crowdfunding. And she thinks just like you do, she thinks, like this is the way to scale, like she thinks this is just going to grow, and she has money to invest, so lots of options as an investor and she is sold on crowdfunding. So, she's in a lot of different crowdfunding deals. She believes this is the way to go. So, you, I think you're right. Eve: [00:24:42] Yeah. I mean, its, instead of investing your money in a bank or mutual fund, you invest it directly into what you care about. And that's a pretty beautiful thing. Patrick: [00:24:52] Yup. Eve: [00:24:53] Hopefully, there are enough affordable housing advocates out there who want to invest in affordable housing that will help you, and maybe we can find them. What does scale look like for you? Patrick: [00:25:04] I think scale, obviously, it involves not just numbers, but I think multiple markets. We operate on the West Coast, so we see the housing crisis really clearly, you know, and it's all relative. So, sitting in Portland, Oregon, we have a housing crisis. But then what we hear about in California, or up in Seattle, we know it's even more challenging. And then we know that communities across the country are all experiencing this. So, I do think that we want to see us being able to offer this ground lease product in other markets. And, you know, the beauty of what we're doing, and I think what's happening in the ADU industry, is that we don't have to be the builder. We can work with other builders and help them serve more customers in their markets by bringing this financing product to them. And we're seeing a lot of growth in new ADU builders who are building more affordable units in other markets. So, the issue is not going to be capacity. It's going to be how do we bring more financing options to homeowners? So, we think that's where the scale comes from, is being able to partner with builders in other markets. Eve: [00:26:13] And I agree. So, I have to ask, are there any other current trends or innovations that you think might help this crisis or might help construction costs come down, that you've been tracking? Patrick: [00:26:28] I'd like to be more optimistic. I do believe in cycles, so I think we're going to get out of this current moment. Where in the construction industry where costs are rising and we do have backlogs. The timber price goes up, there's no way to, you know, the housing costs go up. So, we're definitely in a challenging cycle there. I think that the more efficient that we build, the less waste that you have in the construction process, I think the less susceptible you are to those price changes. We're just going to get more and more efficient and there may be alternative timber products that are able to also drive the cost down there. I think the other issue, which kind of gets in a little bit into the weeds, but building a prefab or factory built AU, however you want to call it, you know, there's challenges in getting that unit into the backyard of an existing house. So, you can imagine a regular residential street in an urban neighborhood, or even suburban neighborhood. It's not like you can just back the thing in the backyard. It's usually not enough space. So, we're using cranes and all sorts of things. We have power lines. We have ... Eve: [00:27:36] Wow. Patrick: [00:27:37] ... lots of obstacles. So, there's a lot of properties that have space, the homeowners ready to go, the whole thing, and we can't get there. So, we're seeing a lot of innovation on how can you basically take the house and be able to, like, construct it on site. So, house-in-a-box. So, there's prefab walls and things. But how can you make that process as efficient as building it in a factory, but eliminate a lot of the installation challenges that we have? If you can, if we could figure out how to get those types of units into pretty much any property, regardless of how much space you have to install, or what obstacles in front, I think that itself is going to open up ... Eve: [00:28:17] Right, right. Patrick: [00:28:17] ... the ADU market. I think that innovation will happen. I think it'll happen more quickly than the financing innovation will happen. It'll make the financing challenges even more acute because you have more homeowners who are ready to move forward and they're looking at a, you know, 100,000 dollar ... And the other thing I'll just say which, every industry in the world can say this, but, you know, Amazon talks about selling these houses and you have an Airbnb, you have all these companies out there with massive scale that may or may not be able to carry through on this, but we should probably assume that some company of prominence is going to come forward with a solution as well. And I think it's good for the market, assuming they do it responsibly. Amazon says I can sell you a 20,000 dollar house, that's not, it's not it's an irresponsible thing. But it could really help with innovation, it could help with efficiency, those kind of things. So, I do think we're going to be seeing that in the next few years. We're going to be seeing some large companies that you wouldn't expect to be in the middle of this, are doing it. Eve: [00:29:25] I think it's a great idea, and I wish you all the best of luck. I can't wait to see how you grow and I hope you make your way over to the East Coast sometime, as well. Patrick: [00:29:37] Thank you, Eve. We do, too. We love the West Coast, and there's certainly a lot of work to be done out here. I get a lot of phone calls from folks in your neck of the woods. Atlanta, D.C.. We really do hear from people all over the country who want to see our model there. Eve: [00:29:50] So, financing, we've got to figure it out. Thank you very much. Patrick: [00:29:54] Thank you, Eve. Eve: [00:30:02] That was Patrick Quinton. Patrick launched Dweller to help address what he thinks is the most pressing issue in Portland, Oregon, right now: a critical lack of affordable housing. He applied focus to the problem and decided that in order to scale, he needed to deal with some key friction points. The first is the complexity of building an ADU, which most homeowners can't and won't tackle. And the second is finding financing to build one, which most homeowners don't have. By entering into a ground lease with the homeowner, and building and financing the ADU for them, Dweller has made the process as easy as can be. But now Patrick must struggle with an industry in its infancy and lenders who are not quite ready to go down the path of financing ADUs built on a ground lease. These are the growing pains of a company that is first in the marketplace. Eve: [00:31:06] You can find out more about impact real estate investing and access the show notes for today's episode at my website EvePicker.com. While you're there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Thank you so much for spending your time with me, today. And thank you, Patrick, for sharing your thoughts. We'll talk again soon. But for now, this is Eve Picker, signing off to go make some change.
38 minutes | a month ago
The elephant in the region.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE Eve Picker: [00:00:10] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Heather Hood, VP at Enterprise Community Partners and Market Leader for Northern California. Heather works to ensure low- and moderate- income residents have access to affordable, quality housing in Northern California. She's written influential pieces on housing issues, helped to create technical assistance programs and co-chaired Oakland's Housing Cabinet. Heather believes there are a few reasons why we are in the affordable housing pickle we are in. NIMBYism has failed us. Construction costs and the cost of land have soared. We need to permit higher density. And it takes far too long to get permission to build a building – the production line needs to be sped up, dramatically. You'll want to hear more. Eve: [00:01:13] Be sure to go to EvePicker.com to find out more about Heather on the show notes page for this episode, and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change. Eve: [00:01:40] Hello, Heather. I'm just delighted to have this opportunity to talk to you today. Heather Hood: [00:01:44] Well, thank you, Eve. It's nice to be here. Good morning. Eve: [00:01:47] Good morning, well, midday for me, but good morning to you. So, you're working on perhaps one of the most difficult challenges of our time, affordable housing in California. And I was hoping we could start talking about how our real estate industry has failed everyday people. And why is there such a huge gap between housing available and the need? Heather: [00:02:14] Ah, well, I'm not really sure .. Eve: [00:02:18] It's a difficult first question. Heather: [00:02:18] Yeah ... it's a complicated one to unpack. I want to back up there a little bit and question that it's the real estate industry that has failed the population. I think we've all failed. And we do not have enough homes for the population. And that's just a simple question of math. There are millions of people who need homes, but we've grown, in our state and with our economy, with jobs, too much and too fast without having a housing production keep up with it. So, that's got our whole system out of whack. We don't have enough housing at any level of affordability, and especially for low- and moderate- income people. Eve: [00:03:02] Yeh. Heather: [00:03:03] The way that that has happened, really ... the reason I was questioning your frame that it's the real estate industry is because there's been many proposals all around the state for housing to be built, in the last 30 years. And our population, especially homeowners, have resisted letting it be built. And so that NIMBYism, "Not In My Backyard," has crimped our production line, construction line, to the point where we're choking now without enough housing. Eve: [00:03:34] So, really, we've failed ourselves, right? Heather: [00:03:38] We failed ourselves. We failed to see beyond that thing we, some of us may not have wanted on the end of the street. And we thought, oh, it's going to cause traffic or change the character of the neighborhood or invite too many kids into our schools or whatever it was. We, the big We, were nervous about it, and wouldn't let it happen. Eve: [00:04:00] So, one of the key things going wrong is, is NIMBYism. And, you know, I thought for a long time developers were really focused on building housing for particular markets. Like, you see a lot of these platform projects with small one-bedroom studio apartments aimed at millennials, that isn't ... you don't think that's part of the problem? Heather: [00:04:25] Sure, I think that there are multiple problems within the big problem. The big problem is we don't have enough housing. And the construction costs have gotten so darn high with fees and materials and labor and so on. Cost of land, because land is at such a premium, that our private developers feel forced into figuring out how to squeeze the most profit out of each piece of property. And one of the ways to do that is to have the smaller and smaller and smaller units. Eve: [00:04:57] Yes. Heather: [00:04:58] And that only meets one segment of the market. And in addition, there's been a push to have lots of amenities, and those tend to get expensive. Dogwashing stations and roof decks with heat lamps and, and jacuzzis, and those sorts of things to create the edge for a particular property, to entice those segments of the market ... They, are targeted. So, it's, in short, called luxury housing. In some parts of the world, it would simply be called regular middle-income housing, but because it's in such stark contrast to low-income housing that is not subsidized and tends to often be poorly maintained, it appears to be very luxurious. In fact, it is barbells, different types of housing types, it's a big problem. We're not building anything, enough in between. Eve: [00:05:49] The missing middle, right? Heather: [00:05:50] Well, I'll call it the missing middle. But to be clear what I mean of the middle is a pretty darn big middle. I mean, most people between 80% to 150 ... I mean, the middle of between 30 percent of the area median income, up to 200 percent of median income, a big middle. Eve: [00:06:06] That's a very big ... Heather: [00:06:07] A big doughnut hole there. Eve: [00:06:08] Yeah. Heather: [00:06:09] Yeah. Tough to build all of that. Eve: [00:06:12] What's it going to take to correct course, I was going to say, take to correct these things, but I'm just going to say, you know, to correct course. Heather: [00:06:23] There are a myriad of things. I think the first of, to, for the zoning, to allow for higher density. And some time limit on how long projects can be held up. And conversely, some better process for stakeholders to be able to influence the outcome. Right now, there's just kind of this, you know, this rote and very legal ... process that doesn't invite much conversation or compromise. So, I, something in the zoning. We need to do something about the construction costs, and maybe the answer there is manufactured housing. I hope so, because a lot has been invested in that direction. It also would mean conceiving of projects as being a mix of unit types and income types, where we might start to see some cross-subsidy from the pretty big profit that does, actually, end up being made off of these risky projects, and cross-subsidizing some of the lower income living. Either through getting that to a housing trust fund in the city or county, or by including affordable units. Heather: [00:07:35] So, that would help ... I'd also emphasize something that our industry probably will start maturing and leaning into, which is the preservation of existing buildings that are affordable. So, where there are, especially near transit or other sorts of neighborhood amenities, there are small, medium and large properties that will likely, in the next economic downturn, be for sale. And that's a really wonderful opportunity for publicly-motivated entities, whether they're cities or nonprofit developers, to purchase them and renovate them, make them that much healthier and permanently affordable for the folks who live there now. That would help a great deal with the displacement challenges. And that sort of technique is cheaper than building new construction. We can leave the new expensive construction to the, some affordable housing developers and the so-called luxury housing developers. Eve: [00:08:36] Makes a lot of sense. Do you know of people or organizations that are taking these course corrections? I mean, we've all heard about ADUs, which is one way of mixing the market. Right? But that's only one little way. Heather: [00:08:53] Yeah. I'll mention a couple that I've worked with. One is East Bay Asian Local Development Corporation. It's a community development nonprofit developer in Oakland, California, who has been purchasing properties where people live now. These are once-dilapidated apartment buildings with 30 or 60 units. Or sometimes, in the case of one portfolio, scattered around the city, a very different, small and medium properties that they bought from existing owners, maybe they were kids who wanted to get out of the inheritance of owning ... different stories. And they've been renovating them, bringing them up to code and working carefully with the residents to help them figure out where to live for a little bit of time while the renovations are getting done. And then they end up being much more handsome properties, and less blight in the neighborhood, and appreciated much better by the tenants who know that they can stay. Eve: [00:09:53] Well, I'm sure, yeh. Heather: [00:09:54] That's one organization. There's another one called the Oakland Community Land Trust. And land trusts actually are doing this more and more. These are, tend to be smaller organizations, like, one to five staff, who tend to be buying just one little building that's maybe got a cafe on the ground floor and two units above, or a few single family houses in the neighborhood as they come available. This is something where the land remains in the holding of the nonprofit organization and the building itself gets owned by resident or commercial owner. And they've been looking for those kind of opportunities for a good while. Eve: [00:10:34] Yeah, OK, this is, it's an organic process that looks like it's going to take a while to correct course. I mean, that's in California. I don't know if it's happening anywhere else. Heather: [00:10:47] Of course ... New York is much more mature as an industry in what we would call preservation. You know, in the three P's: producing housing, preserving affordability or protecting tenants. The second 'P' is, of preservation, is a more mature technique in other parts of the country. But I think we have the potential in California to shift our industry to add this technique at a much bigger scale to our toolkit. And now is the time to do that. Eve: [00:11:18] Interesting. Heather: [00:11:19] Yeah. Eve: [00:11:20] So, what about financial institutions? You know, what sort of role are they taking? I mean, this is an especially difficult time to find financing of any kind. What are you seeing in that, aside from your own organization? Heather: [00:11:37] So, that's along the lines of things that could shift to change the outcome? Eve: [00:11:42] Yeah, I mean, along the lines of, you know, are there financial institutions that are taking a stake in this affordable housing problem and shifting more funds towards it, making it easier to borrow money for that type of project, any of the above. Heather: [00:12:00] Yeah. So, many of us are. I work at Enterprise Community Partners, and that's what we wake up and do every day, is finance policy and technical assistance. On the financial team, whether it's a nonprofit community development financial institution like ours, or others, or a bank, I think what this moment in our history has done is sort of rattle the, you said, you know, what we've got to do is take more quote unquote, risk, in projects. So, there's an, what they call underwriting, which is to figure out if the proposal of a project makes financial sense, if the borrower has the chops to carry it out. There's a safety net that's been built in so that if things that could go awry, there's a cushion. And all that is in the interest of making sure, and the various investors will eventually get their money back, and the project gets done and people get to live there. There, in the underwriting process, there are scores for risk, and in order to get a development done in a, in certain geographies, that would be quote unquote risky, or cities that are quote unquote risky. For some developers who are newer to the stage, especially new affordable housing developers, just ... naturally some scrutiny, but we could probably all relax just a bit to make sure that more projects can flow, and the dollars flow. And I'll have to say that this moment is forcing the financial industry to really look at itself and see that back to the 60s and 70s, the financial institution, through redlining and blockbusting, really made it their version of risky. It's what was quite racist and is what led to creating some of the marginalization that you see in neighborhoods today that are hot neighborhoods. So, it takes some responsibility, sort of an interesting form of reparation, to see to it that the neighborhoods get a much better chance and the people in them get a much better chance to determine their fate and develop ... Eve: [00:14:17] Right. Heather: [00:14:18] ... as they would like them to. Eve: [00:14:20] So, it's going to take some fairly major shifts in a variety of industries to really solve this problem. And then, you know, I wonder what the role of government is in all of this. I mean, zoning definitely has cramped everyone's style, but ... Heather: [00:14:37] Yeh. Government can do a lot. My perspective on government, and it's not all government, so I am going to make a .... but I'll just make a generalization. That through various tax codes, especially in California, Prop 13, we've, through those sort of ... larger policies, we've forced government, local government, to be looking for those things that would create tax bases. So ... wanting commercial private development, because that's where you get taxes in order to do the things that cities want to do, take care of parks, take care of public works, ensure safety and services, and summer camps and all that kind of good stuff. So, the cities are forced to have to find that through commercial development, and to dissuade residential development, to some degree. So, different cities have responded in their own way to that reality. But if we had a different tax code and cities were not forced into that kind of cattywampus position, they could get back to balancing the various interests, whether they be mission-oriented or private interests. Eve: [00:15:53] Interesting. Heather: [00:15:54] Yeah, so they wouldn't have to be sort of pretending to have this, putting lip service to the public good, but having, in to order to execute on that, do a lot of gymnastics, which capitalism ... Eve: [00:16:08] So, This problem really runs really deep, doesn't it? Heather: [00:16:11] Yeah, it does. We can talk at the surface level, but that's what really, let government be government, for the people and all the people, of all the, with all the interest. Eve: [00:16:22] Right. I want to shift gears a little bit and just ask you about yourself, because I noticed that you trained as an architect, like I did. And then as an urban planner. And I'm just wondering what prompted that shift? Heather: [00:16:35] Oh, well, I'd love to know your story, too. But I'll tell you mine. It's a little bit of a long story. I'll try to make it short. I wanted to be an architect since I was a little girl. I loved designing and spatial relations and 3-D things. And so we drew little floor plans for fun, starting on summer vacation, because my parents wouldn't let us watch TV. And then it just kind of grew into admiring buildings where I grew up in Philadelphia or on trips that we were lucky enough to take. I got to go to architecture school twice, because I was sure that's what I wanted to do, except that when I practiced it, interning or working in ... positions at architecture firms, it really seemed as if the architects were the last ones called ... Eve: [00:17:26] Oh yeh! Absolutely. Heather: [00:17:28] ... the early 90s and mid 90s, and I just thought, now wait a minute, I don't want to be the last one called in, you know, when you're under 30 as an architect, you tend to just be sitting at a CAD machine. So, I thought, well, this isn't the life I want. As much as I love my colleagues and the buildings, and the construction process and all that good stuff, I just love it. I mean, I'm looking from my window right now and I see five cranes in the air and I just love watching buildings get built ... Eve: [00:17:55] Yeah. Heather: [00:17:55] ... just love it. Endlessly entertaining. So, I happened to be at UC Berkeley and I walked down the hall at the College of Environmental Design from the architecture to the city planning department to sign up for a course. And it was, I think it was Women and Planning, and Betty, Professor Betty Deakin, was teaching it and she just had other women from the field – landscape architecture, architecture, industrial design, city planning – come in and ... I got really jazzed about city planning. I thought, oh, this is what I want to do, I just didn't know what to call it. Eve: [00:18:32] Yeah. Heather: [00:18:33] I wanted to make neighborhoods in cities with wonderful buildings for people, and then, ok, that's called city planning. So, it was as simple as that. Eve: [00:18:42] Yes. Heather: [00:18:42] Got to go to Berkeley for a couple more years and chase that dream. Eve: [00:18:48] And then you shifted into finance. Sort of. Heather: [00:18:51] Sort of, yes. I was lucky enough to work for UC Berkeley doing campus planning. Mostly on the urban, off-campus urban side, and then to be on some boards that were involved in things that affected social justice in cities. And was lucky enough to get to work on an initiative called the Great Community Collaborative, at, based at the San Francisco Foundation, which was a really wonderful way to work with 25 organizations and 14 funders to figure out how can we in the Bay Area make sure that there's higher density and more community benefits surrounding our transit nodes in the region. And that takes a lot of organizing and envisioning and technical stuff. And so we banded together to make that happen, and I got so excited about that. It was hard, but wonderful sorts of people, and important wins along the way. Except I got into it long enough to know that if there wasn't money for what was being planned ... Eve: [00:19:51] Yeah. Heather: [00:19:51] ... that things were not going to happen. Eve: [00:19:55] Yes. Heather: [00:19:55] It was great to make sure that the density was approved by city council, or that more affordable housing would be built in a place, or that in the building there would be a minimum number of jobs. And that's all great, except if there wasn't the financing in place to, underpinning that, there, things would be stuck. And so, I just thought I've got to learn how this works and pursued a job at Enterprise, which was the only organization that was a financial institution that I wanted to work for, because ... I shared the values and I loved all the things they did around the country, and I was incredibly fortunate to have been hired to take that job. That was the moment. And I'm still learning a lot about financing, right? Endless amounts to learn. I'm not all the way there. Eve: [00:20:47] Yes. Heather: [00:20:48] It's going to take the rest of my life to really get it. Eve: [00:20:51] Well, I always think that architects are uniquely trained to think through challenges. In architecture school we're trained to take an idea and to turn it into something, and I, in a very creative way, and I can't think of another profession where you can really quite do that. So, I love to see architects kind of littered across the landscape in different roles because I, I also think architecture schools fail our students. The students who need to understand that they have so many more options because they have such, I think, special training. Heather: [00:21:25] Yeah. Eve: [00:21:25] I actually started as an architect and then went and did a masters in urban design at Columbia, for similar reasons. I was really fascinated by cities more than iconic buildings, and I wanted to know how cities sort of worked together. And when I moved to Pittsburgh, I worked for a planning department as an urban designer, and loved that job. But I worked for an architect for a while and always felt like, you know, we were at the end of everything. There I was sitting doing stair details, whereas, you know, I really wanted to understand how you did development projects and put it together. So, I went to slightly different route and started doing my own projects, and figuring out financing and, and yeah, it is all about money. Unfortunately. Heather: [00:22:15] So, you became a developer? Eve: [00:22:16] Yeah, I became a developer. And then when, and then when the funds dried up, they sort of shifted after the Bush administration and the bank meltdown, I sat back and sort of tried to figure out what to do next and then launched Small Change, really, this real estate crowdfunding platform to fill in those pieces of financing that I think are so important to creating new ideas in the physical landscape. They're the ideas that generally are not financed. So, anyway, this is way too much about me. Heather: [00:22:56] Oh, no, it's fascinating. I love hearing how people make decisions to curl into the next ... especially when I think of younger generations as I mentor people and people call and ask, what should I do next? Which, I'm not sure how to think about this, and there's a great deal of worry people have about ... Eve: [00:23:14] Oh, there are so many things. Heather: [00:23:14] ... Yeah. Or they start off their career, and how do I get from here to there? And the truth is, everybody's career is fairly curly. Eve: [00:23:21] It is curly, yeh. Heather: [00:23:22] And you don't really know the best path from here to there. You might change your mind. Eve: [00:23:28] Yeh, and you should enjoy the journey, you know. Heather: [00:23:29] Right, us planners have to be more relaxed with improvising. I certainly am learning that. Eve: [00:23:35] Yup. Certainly, there was a period when I really worried about people looking at my resume and thinking, she can't stick to anything. You know? Heather: [00:23:44] Uh huh. Eve: [00:23:44] I think that time has passed. And I think now, you know, people are in jobs for much shorter times because there's really a much wider array array of opportunities, which I think is really fascinating. Heather: [00:23:57] Yep. Eve: [00:23:58] Thanks for sharing that. I wanted to ask you, what do we need to think about to make our cities and neighborhoods better places for everyone? Heather: [00:24:07] Oh, goodness, that's a (laughter) really big question. Eve: [00:24:11] Well, in terms of, even financing, you know, how can we make places more equitable and better places for everyone? Because we know that's, we're far, far from that, right? Heather: [00:24:21] Yeah. Well, I had the good fortune of studying in Denmark and living in Copenhagen for only six months in 1988, but I have never forgotten it. Eve: [00:24:30] Oh, lucky you. Heather: [00:24:32] Yeah. Yeah. I was supposed to go back this May, just for ... and I can't because of COVID, but absolutely in love with the Scandinavian way thinking about this. Where you've got big taxes and they carefully pour them back into the public realm, in both services and in the physical landscape. And so what we have here, it seems like we just think in terms of, maybe, you think of all the properties as being separate, and maybe there's some design codes and zoning codes that keep things what we think is harmonious, but we still think of them as separate. And the only thing that ties things together is the streets. And did you do know that about 25 percent of most urban landscapes is streets. And in suburbs, even more. Eve: [00:25:15] Oh, yeah. And they're very highly occupied by cars, instead of pedestrians. Heather: [00:25:20] Yeah. So those are the things that hold us symbolically, if you think about that, that cars and concrete and, or not concrete, asphalt is what ties all these things together. And that doesn't set the mood the right way. So, if we thought of these places as for everyone and we put much more emphasis in the public realm, that would be a really good start. But what do we want to put there? Asking the people who are there and really listening to them and learning from other places. And getting ideas and making trade-offs and so people don't think that they're going to get everything, but make conscious decisions about what they prefer. I think that would be a great way to start. In order to execute we need those public dollars. Goodness gracious, I don't even know, 10 times the scale that we have now, to, to have that. Yeah. Eve: [00:26:10] People have spoken about that. If you think about the Open Streets program ... I launched an Open Streets in Pittsburgh, and it's been wildly successful. People just love it. That is a lineal park for one day a month. It really should be a lineal park the whole time. But they flock to events like that all over the country, all over the world, and that's kind of speaking to what people want, right? Heather: [00:26:37] Yeah, well, when I took my son to Disneyland, I was fascinated at how much Disneyland had so much public space and walkability and water features and cafe-like settings. And I find it fascinating that we are, as a culture, willing to pay enormous amounts of money to have that experience as if it's an entertainment, rather than to pay enormous amounts of money into our own environment, to have that same sort of actual feeling on a daily basis ... with the Open Streets and the way that cafe culture has come back and outdoor beer gardens have come back, where you can see that there's a hunger there. I think we just haven't quite figured out how to go beyond the property line. Eve: [00:27:28] Yeah, but Copenhagen sure has. Heather: [00:27:31] Oh yeh. Eve: [00:27:31] Get easily run over by a bike there. A beautiful city. Heather: [00:27:36] I love it. Eve: [00:27:37] One other questions, what community engagement tools have you seen that have really worked? Heather: [00:27:41] Oh ... Eve: [00:27:42] You talk about really listening. Heather: [00:27:44] Yeah. So, Eve, I'm calling that into question myself and I have seen people demonstrate what's possible using apps, for stakeholders to put in their preferences, or to note where there is a click it – fix it, kind of, I see a pothole or speed bump problem or whatever, or a tree is dying ... Eve: [00:28:04] Yes. Heather: [00:28:05] ... those things seem pretty good. Heather: [00:28:08] Admittedly, my planning thesis in grad school,1997, was about how planners could engender democracy through better participation. And I had a particular angle on how that could happen, which was making sure people had the information that they need, and a forum for conversation and decision-making. I stand by that, except I don't know what the best technique is. I've been searching for that for over two decades. It is not an evening meetings ... Eve: [00:28:38] No, for sure. Heather: [00:28:38] ...in a dank community room with somebody with a mic and people sitting in cold chairs with cold food and no child care and no language translation, listening to somebody say here's, responding to a plan that's already been pretty well baked. It's not that. It's not endless council meetings that go until 1:00 in the morning. You know, there's a private organization that I've been inspired by, called SUDA it's the developer Alan Jones and Regina Davis, who are doing a really interesting project in West Oakland. And to hear how they got community feedback was really interesting because it wasn't necessarily these meetings. It was spending a good deal of time, and I mean years, in a community like West Oakland and listening to what people were saying on the streets and going to barbecues and churches and hearing what it was that was on people's minds, and forming relationships with people more in the immediate surrounds of the West Oakland BART where they're going to be doing four blocks of development. So, that they were building up a sensibility for what the community said it wanted and building the trustful relationships to then eventually present an idea, and respond to that in an iterative basis. So, something along the lines of actually really listening, and taking your time with it, and not just doing an app, but some face-to-face activity seems to be on to something. Eve: [00:30:22] Yeah, yeah. That's a lot of work for tiny developers. I think, you know, we've got to figure out something better. Heather: [00:30:29] Well, the city planners who are doing the neighborhood planning or the district planning could be doing a lot of that over time and then let the smaller developers who are filling in hear all about it, take the time to do that. Eve: [00:30:44] Yeah, I'm hoping that equity crowdfunding can play a little role too, because you know my platform, anyone over the age of 18 can invest, and I think if people can have a stake in development in their own neighborhoods, that's certainly what I learnt in Pittsburgh, that people wanted to have a stake. So, it doesn't have to be very big. It's just, meaningful. Heather: [00:31:05] Yeah. Eve: [00:31:06] And then someone else talked to me about 'power mapping,' which I thought was really interesting as well. An interesting idea to kind of understand where the power in a neighborhood lies and talking to those people, and really, I suppose, I'd want to say enlisting their help, but that, it's like almost like a pyramid, reaching everyone in the neighborhood. I thought it was really fascinating. Heather: [00:31:31] There's 'power mapping,' and there's 'em-power mapping.' Because in the power mapping we tend to want to go to the people who hold the power to make the shifts and create the influence we need. But we also have the opportunity to figure out, well, who doesn't have power who should. Eve: [00:31:47] Oh, I think all of that. Heather: [00:31:49] Yeah, yeah, it's hard to do. All of this takes a great deal of time, and in our lives when everybody's rushing to get things done. Like we all do ... Eve: [00:31:59] Yes. Heather: [00:31:59] Or rushing to sort of make sure that things are going to pencil out. It's very hard to slow down a little bit and do that, although it can really go a long way. I'm excited about the crowdfunding you're talking about. I mean, at one level, real estate always been crowdfunded, it's just bigger chunks and formal legal entities, and to have it available to the individuals. It sounds so neat and interesting, I can't wait to see it where it goes. It also seems like we don't learn about design, often, or construction, or how cities are made or all the systems that go into that, in our American school system. And so, kinda no wonder we haven't really built up a sensibility for it. And I'm thinking that maybe through crowdfunding, people will feel more connected to whatever it is that they have invested in. Eve: [00:32:46] Perhaps. It requires a lot of education, but I suppose everything does. So, what's next for you? I mean, the big project, that you can talk about or anything that's got your interest at the moment. Heather: [00:33:00] Well, I have a team of about 15 people in the Northern California office at Enterprise. We have, typically we have a San Francisco office and a Stockton office, but right now everybody's home. I am excited to have, to work with such a great team and we've organized ourselves around a couple different big principles. And so just getting to organize ourselves and be clear about that is important. And we have two things. One is strengthening community resilience, and the other is building sustainable neighborhoods. So, one is about making sure that we're sort of holding ground in neighborhoods and help people figure out how to stay where they are, if they want to stay. That's through renter protection work or preservation work, like we talked about earlier. And work in public housing, and then also in resilience, and by that I mean both community resilience in a cultural way but responding to all these disasters, the fires and earthquakes and all the stuff that is happening in California. So, it's sort of having gotten clear with the team about that's what we're about. In that body of work it's about strengthening community resilience in a myriad of different ways. And then the other part is creating these big new systems. Like, I'm really excited that my team and I had this idea that there really ought to be a regional housing entity, that the little city, the many cities just don't have the bandwidth or chops and finances to execute that they mean well to do for affordable and market rate housing. But at the regional scale it makes more sense. And so feeling very, very happy that this has been accepted by the state legislature and the governor and we're actually doing it here in this region with the Metropolitan Transportation Commission and ABAG. Eve: [00:34:46] That's fabulous. Heather: [00:34:48] Yeah, it is. And it's just a fantastic group of people who really want to see it happen. So those things are exciting for me. I also think that there's something exciting happening, in general, which is that maybe one of the silver linings of this awful pandemic that is so awful for so many people. And it's ... going to bring down potentially our whole economy. In all of that ... Eve: [00:35:16] Yes. Heather: [00:35:17] ... we might get a chance to rethink zoning and think about how, you know, you can't shelter in place if you don't have shelter. Therefore, it's in all of our self-interest to really make sure that everybody has a home. So, I'm excited that maybe this has been a real wake up call that will help my industry hurry up and figure out how to get out of our own way and make sure that people are not homeless and people have safe places for their souls to rest that they can call home. Eve: [00:35:52] Yes, I think that's a really exciting end, and I really enjoyed our conversation, and hope your work meets great success and I'll, I'll be following it. Heather: [00:36:03] Thank you, Eve. It's really nice to hear your story too. Eve: [00:36:16] That was Heather Hood. She's fully immersed in the affordable housing crisis, working to help solve it in Northern California. Heather believes that NIMBYism has failed us along with zoning, too. We need to permit higher density to fill the need, and it takes far too long to get permission to build a building. The production line needs to be sped up dramatically. Heather's also astonished that we'll spend a fortune visiting places like Disneyland, where we can enjoy walkability, but we won't spend that on the places we live in. I'm right there with her. You can find out more about Impact Real estate investing and access the show notes for today's episode at my website EvePicker.com. While you're there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Eve: [00:37:18] Thank you so much for spending your time with me today, and thank you for sharing your thoughts. We'll talk again soon. But for now, this is Eve Picker signing off to go make some change.
33 minutes | 2 months ago
Back to the Future!
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE Eve Picker: [00:00:17] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Christopher Leinberger. Chris has had a singular career working on urban land use issues, as a strategist, teacher, developer, researcher and author. Eve: [00:00:47] Growing up in the 1960s and 70s, Chris was actively involved in community affairs and social change issues. He learned the value of connecting coursework and theory with hands-on community engagement early on. Although he first put his business degree to work in the corporate world, Chris found he wanted to run his own organization and opted to take over management, and then ownership, of Robert Charles Lesser & Company, now RCLCo. At the time, it was a one-office, real estate consulting firm in Southern California. RCLCo became one of the largest real estate advisory firms in the U.S., with four offices nationally, by 2000. Chris's new venture is a startup – Places Platform. This is a project he audaciously hopes will become "the Bloomberg of real estate and the built environment," developing tools and methodologies to measure economic, social equity and environmental conditions in cities and metropolitan areas. Be sure to go to EvePicker.com to find out more about Chris on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change. Eve: [00:02:25] So, welcome to the show, Christopher. It's really nice to have you here. Christopher Leinberger: [00:02:29] Really pleased to have a chance to chat with you. Eve: [00:02:32] I read some of your bios, and the common theme in your development work is the one you discovered when you were eight years old, the value of well-developed, walkable urban land. And I'm wondering how that theme came to take center stage in your professional life? Chris: [00:02:50] Well, it took me about 20 years to realize that that was what was driving me, from the age of eight – how we build our cities and why are certain blocks, certain places, vital and other places are not. And I didn't know that at age eight. But that's the basis of urban economics. But I thought that was just kind of a childhood fancy. And after business school, I went to work for two corporations and found out very quickly that I make a terrible employee and went to work with a small consulting firm in Beverly Hills, California, that I eventually bought three years later, Robert Charles Lesser and Company. And that, basically, was a firm that I could now explore how we build our cities and what makes certain places vital and others not so. Eve: [00:03:47] And what did you discover along the way? It must have been pretty difficult setting out on this path. Chris: [00:03:55] Well, certainly, this is back in the early 80s, and drivable suburban development was the thing in vogue. And in fact, this consulting firm, which did market studies, financial feasibility, I introduced strategic planning for both real estate companies and places, like downtowns. And I expanded the company from just a West Coast operation to a national, in fact, you know, we did a lot of work abroad, until I sold the company in 2000. It's still very active today. It's much bigger than when I was running it, back in 2000. But it was a little depressing to look at the fact that the market seemed to only want masterplanned communities and subdivisions and, you know, strip malls. And that's what we were doing in the 80s. The market studies and the financial feasibility were all about, you know, this drivable suburban stuff that we in this country invented. But then towards the end of the 80s, it really kind of started with a project I did in Downtown Chattanooga, which was a strategy for Downtown Chattanooga, the first downtown strategy I've ever done. And we pulled this strategy together with the city, with the place manager, River Valley Partners, and the county and the banking community and all sorts of ... and the great civic sector, just a remarkable civic sector. And we put together a strategy. 14 points to it. And within three years, 13 of the 14 were done. Eve: [00:05:37] Wow. Chris: [00:05:37] And it was off to the races. And so, I've stayed in, I've stayed involved with Downtown Chattanooga for the last 30 years. It's just been a remarkable turnaround. So, there I found that, good lord, people actually may want this walkable, urban stuff that, that really was so attractive to me when I was eight. Eve: [00:05:55] Right. Yeah, I think I always dreamed about living above a coffee shop in a downtown. Chris: [00:06:04] I always dreamed of living on a penthouse of a 1920s apartment building, you know, condo, co-op, whatever, and having a deck all around you and having the cage elevator take you up to it, and so ... Eve: [00:06:21] Fabulous. Chris: [00:06:22] Anyway, I got the cage elevator. The building I live in, it's five stories on Mass Ave, and it has the oldest elevator in town, which is a cage elevator that comes right up to our floor. Eve: [00:06:35] How about the deck all around? No? Chris: [00:06:38] No, didn't get that. The 'deck all around' is just about to become about 108 solar panels. Eve: [00:06:45] Oh wow, and I got the coffee shop after about 20 years of trying so ... Just an aside, I'm especially in awe of your advisory role in Walk Score, which is a tool that I use every day, apparently with four million other people. So, that's an amazing tool that's emerged out of your interest, as well. Chris: [00:07:06] Yes, I was on the initial board of Walk Score before, and then, of course, it was bought by Redfin, so that board went away. But I have loved the folks at Walk Score. I still use them, you know, in my research at Brookings and George Washington University. And now, in my next phase of life with Places Platform, which is my startup, that is basically Sim City for real, and Walk Score is foundational to that. Eve: [00:07:37] So, I use it. I developed a Change Index for my crowdfunding platform, Small Change, and I use it to identify, you know, where projects are that walk in the door are located, like every day. It's a fabulous tool. Chris: [00:07:51] It's remarkable. And the other thing that a number of us have found is that in walkable urban places, Walk Score above 60 yields tremendous value enhancement. You know, here in D.C., on the for-sale residential side, one Walk Score point above 60 yields about a 10-dollar-per-square-foot increase in value of a house or a condo. Eve: [00:08:22] That's pretty amazing. Chris: [00:08:22] That's huge. Places Platform just did our beta test in Grand Rapids, Michigan. So, this is a Midwestern town, small Midwestern town, not exactly a bi-coastal sort of place. And in the office market, one Walk Score point increases office valuations by a buck a square foot. Eve: [00:08:44] Wow. Chris: [00:08:45] And that's, again, for a town that an office sells for 180 to 200 bucks per square foot, one Walk Score point equals a one percent increase in valuation. That's pretty significant. Eve: [00:08:58] So, I'm proud to say my Walk Score is, I think, 99. Chris: [00:09:01] Wow, well that's impressive. My Walk Score's 92. I live within about four blocks of Dupont Circle. Eve: [00:09:11] I live downtown in Pittsburgh, so you really, no, that's pretty simple. Chris: [00:09:14] Yes, it's great. Eve: [00:09:16] You know, I first became aware of your work when, when I was struggling with a capital stack for a little catalytic development project. And I heard about the Albuquerque project and 'patient money,' and those of us who do this sort of development know that it's very difficult to get traditional financing to accomplish groundbreaking projects. And I just love you to talk a little bit about how you approached that when you started that project, and, in general. Chris: [00:09:45] It starts with an understanding that there is no such thing as new ideas. As you may have also seen or heard, my favorite urban movie is "Back to the Future," and it's the most important urban movie ever made that is popular because it shows the two ways of building: drivable sub-urban and walkable urban, in three different time periods. The 1950s, which was really a reflection of the early 20th century, 1985 when the movie came out, which showed how we completely disinvested in our downtowns and all the energy, and all the money, shifted to regional malls and business parks, and, of course, subdivisions. And then the near distant future, that again this 1980s view of the near distant future, which showed downtowns coming back. And the suburbs going into decline, and who'd have thunk that ... Eve: [00:10:46] Yeh. Chris: [00:10:46] ... in the 1980s. Well, that near distant future was 2015. So, these writers of the movie nailed it, and none of us in the 1980s were thinking that the cities were going to come back that quickly and that well. So, you look at how we used to finance, and much of the money in the capital stack... You know, the capital stack is going to be comprised of two basic categories – equity, you know, cash at risk, and debt, money you get from banks at very cheap interest rates. So, by definition, the equity is the risk capital and it goes in first and comes out last. And with a 'Back to the Future' financing approach, that, you've got to have 40, 50, 60 percent of your capital stack being equity, and most of that being 'patient equity.' It's not looking for an internal rate of return of 25 percent. It's going to be put in. It's going to get paid back when the project matures. You know, don't bother measuring it. Just recognize that it's there for the mid- and long-term. And if you realize that, in walkable urban real estate, you can make a bloody fortune. But you just can't make it in three to five years. Eve: [00:12:18] But we have pretty impatient investors right now who want to make that sort of return quickly. Two years. Chris: [00:12:25] Oh, yeah, oh yeah. Eve: [00:12:26] That's frustrating for me with my platform, because, you know, some ... these projects that I think are so important for the future have a very hard time getting equity. Chris: [00:12:41] So, you have to be creative, of course, and most the important thing to be creative about is making sure that the land invested in your deal is invested patiently. So, the best example... I'm in partnership with Robert Davis in my development company. Now, we're both, at this point, limited partners with our development company, which is called Arcadia Land Company, based in Center City, Philadelphia. But Robert's best known for the project, Seaside, on the panhandle of Florida. And it's the first New Urbanist project. And Robert got 80 acres from his grandfather as his inheritance on what was then known as the Redneck Riviera. This is where the country boys from Alabama would go down to the beach and drink. And Robert looked at this as a patient equity investment, and slowly but surely came up with a great urban plan, and slowly invested in the infrastructure, block by block. And he sold his first one eighth of an acre lot for ten thousand dollars. He sold his last one eighth of an acre lot for two million dollars ... Eve: [00:14:02] Oh wow. Chris: [00:14:02] ... 25 years later. Eve: [00:14:04] Wow. Chris: [00:14:04] And he still owns Downtown Seaside. It's worth a bloody fortune, with condo prices at 1,500 bucks a square foot. That's what the ancients knew how to do. And that's what the Grosvenors in London knew how to do 400 years ago. They were just, you know, farmers that happened to own this farm that became the West End of London. And they never sold the land. They just had long-term leases, and became one of the top 20 wealthiest families on the planet because they invested long-term. So, we have lots of examples, just not that many currently, as we have this 'get rich quick' mentality Eve: [00:14:49] We really do, don't we? Interesting. What's your favorite project that you've worked on? Chris: [00:14:56] My second project. I was still running and owning Robert Charles Lesser and Company and got hired by a Seattle family to redevelop a shipyard in Kirkland, Washington, right on Lake Washington, right across Lake Washington from Downtown Seattle. They built Liberty ships there during the Second World War. And this family also happened to own the Seattle Seahawks at the time, and they had their practice field there. And so, they asked me to figure out what to do with it. And we came up with this pretty, at that point, wacky idea of high density, mixed use, walkable urban – a new marina, office, hotel, retail around a plaza, rental apartments, condos, and from day one, decked parking, highly expensive to build, so we could get the kind of density that we needed. And the east side of the Seattle metro area, at that point, you did not charge for parking. So, this was an incredible investment with zero return as far as the parking goes. And everybody, you know, Urban Land looked at it and said, you're crazy. And I mean, even the office brokers who have no skin in the game, said this is crazy. And we came up with this set of recommendations. And the family, the Skinner family, old mine family up in Seattle, said to me, great idea! Now can you build it? And I said, holy smokes, I'm a consultant. What, do you want me to do something? So for about two years, I was the fee developer and it came out of the ground, it just ... to this day, it gets the highest office rents and rental apartment rents in the northwest of the U.S.. Because of its high density, walkable, urban nature. Eve: [00:16:57] Wow. And you were hooked, right? Chris: [00:17:00] Oh, yeah, I saw the power of it. It was just really impressive. And, you know, this is your ultimate doing well while doing good. And you can feel really proud of Carillon Point, which is what it's called ... because it's a long-term keeper. And I asked the family, so, you know, why do you want to do something that's, that's so unconventional from the finance point of view? And they said, well, we've been around Seattle for 100 years. Our family's going to be around for at least another 100 years. We're building with 100 year perspective. Eve: [00:17:30] Wow. So, then what led you to launch Places Platform? Chris: [00:17:35] This is kind of a culmination of all the work I've done, going back to age eight. You know, I mentioned earlier, it's the Sim City for real estate and place management and city management. It also could be viewed as the Bloomberg of real estate. Michael Bloomberg, with his original company that made him worth 40, 50 billion dollars, basically created a data set, a database of all the stock and bond markets back in the 70s and 80s, that ... and so on one screen in front of you, or actually two or three screens, you could understand anything about any stock or bond that was being traded on public markets worldwide. And that was a huge step forward. Well, real estate is worth about twice as much as all the publicly traded assets in this country, of all the publicly traded companies. And we are not yet at that point, but we have 100 percent database of all the real estate, we're real close, and that's what Places Platform is creating. Working with Walk Score, working with Co-Star, working with Zillow and Collateral Analytics, and a variety of other databases that are in their silos, we're bringing them all together. And we're looking at it from an economic performance point of view ... meaning we can do gross regional product, GRP, at the place level, at the city level. At this point, we can't get GRP below the metro level, at least officially, you know, throughout the country. But Places can take it down and tell you what the GRP is of Downtown D.C.. We look at the net fiscal impact, how much does the city net at the place level? How much does Downtown D.C. make for the city of the District of Columbia? The revenues coming in from property taxes and income taxes and sales taxes and all the rest, minus the cost of services, the net fiscal impact. And these walkable urban places almost always make the bulk of the money for a city to pay for public schools, and to pay for welfare and other social benefits. And then, of course, we look at the real estate valuations for all the real estate. Chris: [00:20:05] We also have three other metrics. One is social equity. What does it mean for somebody who is a low-income household? We also look at it from a public health point of view, and particularly with COVID. And the fourth one that we have not yet developed is, of course, environmental. So, what Places Platform is trying to do is to have a quadruple bottom line. To analyze public policy, infrastructure investment, major real estate development, and understand and quantify what the economic, social equity, public health and environmental, you know, hopefully benefits, are from those investments. Eve: [00:20:47] Is your hope that this information will propel cities towards the right sort of development? Chris: [00:20:57] That's it. I've come to realize in my career that there's either a downward spiral for cities or an upward spiral. And the 80s and into the 90s was the downward spiral. No matter what you did, no matter what federal program, whether it be UDAG grants or Model Cities or you name it, redevelopment, there was a downward spiral that no matter what you did, no matter how much money you spent, it would not change the downward spiral. Well, we're now in this upward spiral, with, you know, the market share gains for walkable, urban development is just through the roof, and the price premiums are two, three, four times the price per square foot of drivable suburban places. So, we have this upward spiral. And I have found that the upward spiral, if you have correct public policy, can both give you economic returns and social equity returns and public health returns and environmental returns. And this will be a measurement tool to make sure you are achieving all four of those returns. You do not have to sacrifice social equity for these economic returns. Eve: [00:22:15] So, then I have to ask the dreaded question, do you think that COVID-19 is more than a blip on that upward spiral? Chris: [00:22:25] To be flip? It is just a speed bump, it is just a blip that, you know, a year or two from now we'll look back and just say, that was kind of a weird couple of years. But having said that, I'm not saying that a lot of changes are being sped up. Changes that were in place ... Eve: [00:22:46] Compressed. Yep. Yep. Chris: [00:22:48] The head of global research for Cushman and Wakefield asked me a couple of months ago to work with them to help figure out what's the 'future of office' in the U.S.. And so we're in the middle of that work right now, and certainly there's going to be an impact, particularly on the office market. There's going to be, in my mind, it's pretty clear, that there's going to be a repricing, i.e., a reduction in value of offices. It's going to affect different metro areas differently, and we're going to be looking at it, looking at the 30 largest metros to figure out what the impact will be in each of those 30 metros. But, like with every crisis, there's opportunity, and the opportunity, if we see a repricing and a reduction in occupancy in the office space as more people work from home, and, you know, it's not going to be 100 percent work from home. We know that. But it will be more than what we had, which is about 11 percent in 2018, according to the census, worked from home during the most recent week that that survey was conducted. It'll be higher than 11 percent. Eve: [00:24:07] Yeh, yeh. Chris: [00:24:07] So, those offices will experience a lot of pain. And the other thing is, that then allows that office space, which is in remarkably great locations, particularly the walkable urban space, to be recycled, probably as residential. Eve: [00:24:28] Yeah. Chris: [00:24:28] We are short anywhere from seven to 12 million housing units in this country. That we've not allowed the real estate development community to build. We have mandated that they could not build them. And that has created this horrendous affordable housing and homeless situation. And so a lot of those office spaces, as well as a lot of the hotels, are going to become assets that we can convert into housing in great walkable urban locations. Eve: [00:25:03] Right, right. Aside from that are there any other current trends in real estate that you believe are most important for the future of cities? Chris: [00:25:12] Yeah. We collectively in real estate and the built environment, you know, urbanists, in general, we really need to address, forcefully, the need to 'up-zone.' Up-zone land, and in particular, in cores and corridors. The cores are walkable urban places, both in center cities, but in particular the urbanizing suburbs. Probably 50 percent of new walkable urban development will be in urbanizing suburbs. Metro D.C. is leading the way, not just in this country, but worldwide in the urbanization of the suburbs in Arlington and, you know, downtown Bethesda, Silver Spring, Reston Town Center, National Landing, National Harbor. But it's a massive up-zoning battle ... Eve: [00:26:07] Yeh. Chris: [00:26:07] ... fought by NIMBYs. NIMBYs are the most pernicious force in urbanism right now, and I am quite ashamed of my generation, I'm a baby-boomer, that are leading the NIMBY charge and it's the most selfish movement ever. And they're basically saying, you can't come here. And if I stop you from coming here, my house is worth more. And it's all in the land. So, we need to flood the market with more up-zoned, walkable urban land. But it's only going to be a small percentage of total metro land. Here in D.C. only two percent of the metro area is walkable urban. That's it. Two percent. And that's where all the action is. Eve: [00:26:55] You know, you're probably familiar with this, but over the last 10 years or so, I visit Melbourne, Australia regularly, and they up-zoned their key commercial corridors in the way you're describing. And it's been really interesting to watch it. Are you familiar with that? Chris: [00:27:10] Very much so. I've been to Melbourne quite a bit. Eve: [00:27:13] Yeh, yeh. Chris: [00:27:13] You may have run into Mike Day, who's the leading urban planner in Australia, who's based there, and he has an urban planning firm that is the largest in the country. And he and I have been working together, particularly in Melbourne and Sydney. Yeh, they really need to up-zone. I mean, they obviously, you know ... Eve: [00:27:32] Oh yeh, Melbourne is sprawling badly. Chris: [00:27:34] Oh, god, it is horrendous. And the same with Sydney. But, you know, their downtowns are among the top five on the planet. Eve: [00:27:43] Yeah, they're fabulous. Chris: [00:27:44] When you get out of the downtowns, and it's just suburban hell. Eve: [00:27:47] Not all of it. Like Melbourne has a really great train network and a wonderful bike network that really connects some of the neighborhoods around downtown, really, pretty well, which is, you know, one good thing. Chris: [00:28:01] Well, the downtown and the downtown adjacent places are tremendous in Melbourne, as you know better than I, you know, the region of Melbourne is comprised of, like in the U.S., many, many, many jurisdictions. And so the center city is one jurisdiction, downtown and downtown adjacent. So, then all those suburban jurisdictions just don't get it ... Eve: [00:28:27] Yeh. Chris: [00:28:27] ...and they are beginning to get it. A lot of efforts going into it. So, I have no doubt that they're moving in the right direction. Eve: [00:28:35] Well, a city like Melbourne, too, I think it's one of the fastest growing metros ... It's certainly the fastest growing in Australia, and ... Chris: [00:28:42] And it's such a lovely place. It is just ... Eve: [00:28:44] It's a lovely place. Chris: [00:28:45] Charming as can be. Remarkable people. Eve: [00:28:49] Ok, then, do you think equity crowdfunding can play a role in building communities for everyone? We're talking about social equity and how people can get a stake in their own community. Chris: [00:29:02] I think it's a critically important trend. And again, it's 'Back to the Future.' This is how we used to build the great real estate. I always used to wonder back in the 80s when I was really trying to noodle through how did the ancients of the late 19th, early 20th century build these buildings that were so well built? They were over-engineered. They were architecturally significant. They were built for the ages as opposed to the junk that we were putting up in the 80s and 90s that were, you know, just slam bang, thank you, ma'am. Throw them up. Assume that in 10, 12 years they're going to become a slum, and you didn't care because you got your money out. And it was because of crowd funding. And it was local folks coming together to build, in particular, you see this with hotels that, every city needed a glamour hotel that would show off the best of that city. And all the business folks would come together and put in money to build this hotel, to demonstrate that this city has come of age. And those hotels are with us today as the grand, marvelous anchors of our downtowns. Every city throughout the country has one. But the same thing applies to much of the commercial real estate, that a lot of small investors came along and dropped in the equivalent of a thousand dollars and they owned a little piece of their community. And that did a lot of things. One is they would economically benefit from the vitality. They would walk past it and they could say to their friends, I own that building. Point of pride. That's the great thing about real estate, is that, you know, unlike software development, which is viper ... just vaporware, you can point to a stick and brick building and say, I own that. Great pride, great emotional return. And it also gives you a reason to care about and patronize your hometown. It's the ultimate doing well while doing good. Eve: [00:31:10] Yeah, I think you've described exactly why I started a crowdfunding platform. In Pittsburgh, you know, in the neighborhood I lived in for a long time, some of my neighbors would just band together to buy a vacant house to make sure that it wouldn't fall into a slumlord's hands. And, you know, that was exactly in that era. And I was, I was pretty impressed with that. I thought it was pretty fabulous. Chris: [00:31:36] Yeh, yeh, I've seen that kind of thing happen throughout the country. Chattanooga, again, my favorite small town, has an organization called Chattanooga Neighborhood Enterprises that has redeveloped low-income neighborhoods surrounding downtown with zero, zero displacement. Eve: [00:31:56] Wow. Chris: [00:31:56] And it's just remarkable. You know, there's so many great examples out there now, over the last 20, 30 years. Eve: [00:32:04] Well, I've really, really enjoyed talking to you. And I can't wait to see how your new venture evolves. Thank you very much for joining me. Chris: [00:32:11] It's been very good to catch up with you. Eve: [00:32:13] Thank you. Bye. Chris: [00:32:13] Bye. Bye. Eve: [00:32:26] That was Chris Leinberger. His fascination with cities started at a very early age and evolved into an astounding career working on urban land issues as a strategist, teacher, developer, researcher and author. He built an enormous advisory company and then moved on to focus on development as a co-founder of the Arcadia Land Company, a progressive New Urbanist development company for which he is still a managing partner. I hope you enjoyed listening to this interview as much as I enjoyed recording it. You can find out more about impact real estate investing and access to the show notes for today's episode at my website, EvePicker.com. While you're there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Eve: [00:33:20] Thank you so much for spending your time with me today. And thank you, Chris, for sharing your thoughts. We'll talk again soon. But for now, this is Eve Picker signing off to go make some change.
29 minutes | 2 months ago
Jumpstarting a community.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:10] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:17] My guest today is Ken Weinstein, the CEO of Philly Office Retail, ordinary by name only. Ken has built his company into one that serves the neighborhood it invests in, always tackling underutilized and blighted properties and turning them back to good use. But that's not quite enough for Ken. He launched a boot camp for wannabe developers in his neighborhood, called Jumpstart Germantown. To date, he has trained 850 of them, and a half a dozen other neighborhoods have started their own program using his open source program information. Still not satisfied, Ken has also launched a loan program and lends to developers that cannot get bank financing. He's a powerhouse. Listen in. Eve: [00:01:10] Be sure to go to EvePicker.com to find out more about Ken on the show notes page for this episode, and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change. Eve: [00:01:35] Welcome to the show, Ken. I'm really eager to talk to you. Ken Weinstein: [00:01:38] Thank you, Eve. Eve: [00:01:38] You are a very prolific developer by the sounds of it and also a prolific entrepreneur, I really want to hear about everything you're working on. Maybe we could start with your real estate projects. I'm wondering what led you to tackle the very challenging work of restoring vacant and blighted properties? Ken: [00:01:57] Yeah, it's been a passion of mine for over 30 years now and I started part time for first 15, 17 years, of my real estate career. And for the first 10 years, I started exclusively in renovating vacant residential properties for the first, you know, mostly single family duplexes, triplexes, and then about 20 years ago switched over to renovating vacant commercial properties, which is what we still do today. But my passion over the years has been blight removal. I grew up in the suburbs of New York City and North Jersey, and we didn't have blight. So, when I moved to Philadelphia, which is a community I very much love, I couldn't understand why and how there was blighted properties and I set out to do something about that. Eve: [00:02:53] Oh, that's interesting, that's kind of the way I see it. I grew up in a pretty suburban area as well, and we didn't have blight, so moving to Pittsburgh was pretty much the same experience of you moving to Philly, I think. Ken: [00:03:06] Sounds about right. Yeah, I came here in the late 80s and have not left. Eve: [00:03:11] You know, what's your key development focus now and what neighborhoods you focus on? Ken: [00:03:16] Well, over time, like a lot of developers, our projects got larger and larger. So, you know, we used to do train stations and storefronts and small mixed-use projects. Now we've moved on to schools and churches and former factory buildings. We find that we now have the expertise, of course, to get those things done. But it also takes the same amount of time to buy and renovate a storefront, a vacant storefront, as it does a larger, either former office building or factory building. So, we've tended to go towards the larger projects. We focus almost entirely on what I call 'middle neighborhoods,' not your most struggling neighborhoods that are hard to rent at the end of the day after you renovate, and also not the hottest neighborhoods. In Philadelphia that means everything sort of surrounding Center City. Those areas have already been largely gentrified; there's less need for us to come in and try to maintain and improve the community in which we're working. So, we're focusing on those middle neighborhoods, which are probably about 50 percent of Philadelphia. Eve: [00:04:36] Wow. OK. Tell us about a favorite project that you've worked on and what it looks like. Ken: [00:04:41] Yeah, there are so many. Hard to pick just one, but a couple of years ago, there's probably been a few years ago now, we took a vacant St. Peter's Church campus in Upper Germantown, which is a neighborhood that I've particularly focused on. And it's about a one and a half acre campus, a total of four buildings, three of them historic, from the late 1800s. Historically designated properties, so there was a lot of requirements on what we could and couldn't do to the property. But it had been sitting vacant for about 10 years. Two of the buildings in particular were very close to coming down on their own. So, it was very tired and risky project. We purchased it for less than $500,000, put about six million construction dollars into the project, saved these four wonderful historic structures, and we did a long term lease with a Waldorf school ... Eve: [00:05:49] Oh, nice. Ken: [00:05:50] ... which continues to occupy the property five years later. So, it's a classic win-win-win strategy that we've used over time to save this property that otherwise would have gone under if we hadn't bought the property. Eve: [00:06:07] Yeah, yeah. So, what's the most important thing you strive to accomplish with every project you do? Ken: [00:06:14] You know, like I said, my passion is blight removal, so, you know, to me it's relatively easy to buy a vacant piece of land and do new construction. It's more difficult and more needed to renovate and do adaptive reuse on an existing building. So, that's what we try to focus on. But more than anything, we try to do, you know, what's now a common term, PPP - People, Profit, Planet - also sometimes referred to as Triple Bottom Line investing, and try to create, just like the Waldorf example, a win-win-win for the developer, the community and the tenant. And I'm not going to tell you all of our projects benefit all three, but most of them do. And that's what we strive for. The developer should make a reasonable profit and cover overhead. Otherwise, we're not going to get commercial loans to do our projects. The community should see jobs, should see a better quality of life, should see blight removal. The tax base should be increased to pay for services for the city. There should be amenities involved, you know, people in the neighborhood should enjoy whatever tenant is coming into the property. You can't just improve the property, you also have to improve the neighborhood at the same time. And then, lastly, and what a lot of developers, I think, miss, is the tenant also needs to benefit from the project. There needs to be reasonable rent. We are unique in that we offer a 100 percent fit out for a lot of tenants so that startup tenants, in particular, can come into our properties. We help our tenants with initial marketing. And we also help to place them in the right spot, you know. Just because someone comes to us and says, I'm a startup restaurant, can you find me a location? We're going to put them in a location that we think makes sense because we know and understand the community. Eve: [00:08:20] Great. So, what's the biggest challenge you've had? Ken: [00:08:24] Over time, that changes sometimes or very often, the biggest challenge is finding tenants in the past that has held us up a lot. Currently, I would say, a challenge is construction. Construction costs are going up ... Eve: [00:08:40] Yeh. Ken: [00:08:40] ... Hard to find experienced carpenters, in particular. So, it's held us back. You know, that we have tenants that are waiting for their properties to be fit out and we need to make that happen more quickly. Another challenge right now is, you know, during the pandemic, is financing. Eve: [00:08:59] Yeh. Ken: [00:08:59] Financing seems to be fairly easy for multifamily housing, but most of our projects are commercial in nature ... Eve: [00:09:08] Yeh. Ken: [00:09:08] ... and financing is not so easy. I am fully confident that will come out of this and financing for commercial will be a lot easier a year from now. But until then, we're going to have to fight and get a little more creative. Eve: [00:09:22] Yeah, I've been hearing the same thing from many people. That's really interesting. So, now I'd like to dive into the other things you do because all of that doesn't seem to be enough for you, in that ... Ken: [00:09:35] Never enough (laughter). Eve: [00:09:35] No, no, I wonder when you sleep (laughter). So, in 2015, you started a really fascinating program called Jumpstart. I'd like you to tell me a little bit about it and why you developed it. Ken: [00:09:52] They are very excited about this project. And, you know, like a lot of projects, you see a need and you respond to that need and you don't know if it's going to make it or fall on its face. And, so here is a project that we started that just excelled and took off beyond my wildest dream. It's called the Jumpstart Germantown, and now Jumpstart Philly. But what we set out to do is train, network, mentor and loan money to a new group of real estate developers that have had trouble breaking into the industry. We started this, like you said, in 2015, and it really came out of a lot of people knocking on my door and emailing me and calling me, and saying, "Hey, I love what you do. Can you show me how to do it, too?" And of course, we all love to pay it forward, so, we say yes and we sit down with people for an hour at a time, and ... but at the end of the day, I just felt like I was their cheerleader. "Hey, here's how I got started. You can do it, too. Good luck. Stay in touch." I wasn't helping anybody get started in real estate development. So, what we did, I started to say 'no' to those requests and instead put together a 12-hour curriculum that I can take people through, hand them off to a mentor after they graduate from our program, and then loan them money to get started with their first, second, third project. Because we all know that traditional banks don't like to lend to newbie developers without a lot of experience. So, it's just been incredibly successful. We have graduated 850 people so far through our ... Eve: [00:11:37] Wow. Ken: [00:11:38] ... Jumpstart Germantown program. We have lent them over twenty million dollars ... Eve: [00:11:43] Oh wow. Ken: [00:11:44] ... for 200 projects. And then, it's been so successful, and we've made all of our resources and our workbook and other materials 'open source,' that other neighborhoods have picked up on this model and have run with it. So, there's now six other Jumpstart programs in Philadelphia that other people run and there are Jumpstart programs in Norristown, Pennsylvania, and Wilmington, Delaware, that will be starting this fall. Eve: [00:12:15] Wow. Ken: [00:12:15] So, we're just really excited that people see the value in this model. And we have changed a lot of lives and removed a lot of blight from the communities in which we serve. Eve: [00:12:26] So 850 people, who are they and why do they want to become developers? Ken: [00:12:32] That's a good question. You got to be a little crazy ... Eve: [00:12:34] Yeh, you really do. Ken: [00:12:34] ... to become a developer. Eve: [00:12:37] Yes. Ken: [00:12:37] And part of what we talk about in the beginning of the training program is what is real estate development and who is best apt to do it? You know, what traits are needed to be a successful real estate developer? And one of the things we talk about, or one of the things we focus on, is risk. Because that's what is true of every real estate developer. If you're not willing to take risk, if you're not willing to take the last 20,0000 dollars you have in your bank account and put it into a project, you probably should not be a real estate developer. And that's OK. No judgment. Real estate development is not made for everybody, but it does attract a certain group of people. And once people get a taste for it, it's addictive. You know, people keep going with projects ... Eve: [00:13:22] That's for sure. Ken: [00:13:24] Yeah. Some people have done, gone through Jumpstart and they were intending on doing one project and they liked it so much, they're now going to do one a year. Or we've had dozens of people who have quit their day jobs and gone into real estate full-time. Eve: [00:13:39] Oh wow. Ken: [00:13:39] But there's no one group of people for Jumpstart. When I first started it, I thought, oh, you know, it'll be young people, the next generation. Turns out it's everybody. It's contractors who retired who want to benefit from the fruits of their labors. It's realtors who know how to source properties, but don't know the other six steps of real estate development. So, it's just a variety of people. But one thing has been really wonderful is that more than 85 percent of our graduates have been women or people of color who are traditionally left out of the real estate development process. Eve: [00:14:22] That's fantastic. Ken: [00:14:23] So, it's great that, just organically, that we've been able to attract that group of people. Eve: [00:14:29] That's really pretty fabulous. So if you can hammer one thing into new or an old developer's head aside from risk, what would that be? Ken: [00:14:40] It's knowing what you're doing, willingness to take risk, but a lot of what we also cover ... You know, there's a lot of get rich quick kind of schemes out there, and people that show you how to flip properties quickly. The reason why our Jumpstart program is different, and something that I say to everyone who wants to be a real estate developer, is keep the community in mind when you are developing properties. There's a lot of developers out there, as you know, to get started, they put their head down, and they literally walk to and from their properties as quickly as possible. They park right in front of their property so they don't have to interact with neighbors or talk to people. No. We're teaching you park a block down from your project when you visit your project. You go door-to-door, initially, when you start your project, introduce yourself, tell people what you're doing, why you're doing it. Interact with the community. Don't be like that elected official that waits till it's election time to go door-to-door and ask for people's support and vote. No. Introduce yourself to the community, get to know the community so that when you do go through zoning or you need support from a community member, they already know you, they already trust you. And definitely, as I said earlier, think about the impact that you're having on the community as you develop. Because you can't just do it in order to make a profit. You really need to do it in order to improve the community in which you're investing. And then you'll invest and benefit much more in the future. Eve: [00:16:29] Yeah, that's a great thought. Great advice. Ken: [00:16:32] Thank you. Eve: [00:16:33] So, are there current trends in real estate development that you think are the most important for the future of our cities? Ken: [00:16:41] Yeah, it's ... interesting, obviously, with the pandemic trend is an interesting topic right now. Because there's trends, I think, that will exist for the next year that will not be long-term trends. There's a lot of people suggesting that everyone needs larger houses and people are going to move to the burbs because of the pandemic. I think that's all short-term. I think, and what I'm hearing is that long-term, the cities are still going to be the place that people want to be, that people will return to public transit, that people will want to live and work within walking distance of a train station. So, those are the things that we're still focusing on. Again, they may not be true for the next year during the pandemic, but they are certainly trends that had started a few years ago that I believe will continue, and developers should pay attention to that. Eve: [00:17:41] So, stay the course, right. Ken: [00:17:43] Stay the course. Exactly. Eve: [00:17:45] Yeah, I feel pretty much the same way. But I think at the moment people are so scared of the unknown that it's difficult to predict the next year. Ken: [00:17:54] Right. Eve: [00:17:55] So, your whole life is wrapped up in what really is impact real estate development. Do you think there's a best approach towards impact real estate development and investment? Is there something that we could be doing better? People talk a lot about impact goals, but I really wonder how many people actually follow through. Ken: [00:18:15] Yeah. And it's hard because banks in particular push you or force you to think about the financial bottom line. Eve: [00:18:25] Yes. Ken: [00:18:25] And if you're a caring person, you want to think about something larger than that. So, you really have to buck the trend in order to continue to think about the community. Is there any one way to do impactful real estate? No. I'm the last person to say you got to do exactly what I'm doing if you want to be impactful. No. There's a lot of ways to be impactful. We are all sort of watching each other and learning from each other. And we all know who are the impactful developers within a community. We can learn from each other, but there are lots of different ways of being impactful, and it really depends on what your goals are, what your niche is, and what resources you have. So, some of us have more funding than others. So, I know that you're very involved in crowdfunding, which is awesome. And if you have less dollars, you need to focus more on crowdfunding, which certainly has its benefits. Eve: [00:19:27] Yeah, I really wonder when we reach a tipping point, because it's really still so many buildings going up that do not benefit communities. Ken: [00:19:35] Right. Eve: [00:19:35] I mean, the large majority of them, I think, developers like you are still few and far between. And I'd love to be able to imagine 10 years from now it'll tip the other way, but I'm probably too hopeful. Ken: [00:19:50] Well, that is, you know, I didn't say it, but that really is one of the goals of the Jumpstart program, is by showing newbie developers how to be impactful, how to care about the community while developing, up front, we're hoping to turn that trend. I would agree. Right now, most developers are not focusing on how to be impactful. But I am hopeful that if we can train newbie developers and aspiring developers in a better way, that will change five or 10 years from now. Eve: [00:20:26] Yeah, it's almost like you need a Restart program ... Ken: [00:20:31] Yes. Eve: [00:20:31] ... for the old developers. Ken: [00:20:32] Yes. Well, funny you mention that because we are starting up a what we're calling Jumpstart 2.0, which is taking developers that have done 10 or more residential properties and helping them through a 21-hour program, graduate to commercial real estate, which is a specialized niche, as you know. Eve: [00:20:55] Interesting. Ken: [00:20:56] So, yes, in some ways it is a reset because we're going to show them how to be impactful in commercial neighbourhoods. Eve: [00:21:04] Well, that's great. How do you think we can build better cities and neighborhoods for everyone, aside from all the work you're doing? I mean, I think you're pointing towards a way to do it, but is there anything else we're missing? Ken: [00:21:17] Yeah, there's a multitude of answers to your question, of course. Part of it which we're starting is training, mentoring, networking and funding for women and people of color, in particular, so we can diversify the network of real estate developers. But part of it is that government needs to step in, not in an obstructive way, but in a way that's relatively easy, to help keep tenants in their apartments and houses so they don't get displaced when neighborhoods become hot. Better loan programs for homeowners, so, again, that they can buy and stay in the neighborhood of their choice. Government needs to help us make sure that neighborhoods don't get gentrified while we're improving neighborhoods. So, it's not just up to the developers to get it done. Eve: [00:22:15] Yeah, I always think about people on a fixed income, when a neighborhood gentrifies, and they own a property and they're forced out. That really is within government's purview, to change the way that property taxes are implemented. Ken: [00:22:29] Yeah, that's absolutely right. Although I do focus more on the tenant because tenants are much more quickly and immediately ... Eve: [00:22:39] Displaced, yeh. Ken: [00:22:39] ... displaced. Exactly. Eve: [00:22:41] Yeah. Yeah yeah. Ken: [00:22:42] Homeowners are much more slowly displaced. Eve: [00:22:46] Yes. That's a really difficult problem. Ken: [00:22:49] And then again, it's up to the developers or government. But we should not be encouraging what I call 'urban renewal,' you know, the knocking down of a whole bunch of properties in order to build new. We should be focusing on the reuse of properties, in particular, the adaptive reuse. Eve: [00:23:09] Right, right. Right. And then, you know, you mentioned crowdfunding. Do you think, you know, I have noticed over the last few months a real uptick in developers reaching out to us. And I've heard them say that banks have basically shut down. And yet we need creative new solutions right now more than ever. I mean, how do we deal with that? Banks are really retreating and we need these projects. Can crowdfunding really play a role? Ken: [00:23:39] Yeah, absolutely, and I have not used crowdfunding yet, but I am, like I said, the developers watch each other. So, I'm watching Philadelphia projects done by Mosaic Partners ... Eve: [00:23:53] Oh yeh. Ken: [00:23:53] ... Leslie Smallwood and Greg Reeves, who speak highly of you, and you know how they've been able to use it. But again, I want to, I do want to make clear that I think the financing issue right now and the lack of banks wanting to finance is short-term. Right. And as soon as we move out of this pandemic, those funds will keep flowing again. Eve: [00:24:15] It hasn't been short term for projects that make a change, like, let's talk about a first time investment in a neighborhood after 10 or 15 years. That's the sort of project the bank has been veering away from for the last decade, at least, if not longer, because they want to see an appraisal, they want to make sure the project is going to cash flow. If it's something new and innovative, they're not comfortable there. Ken: [00:24:40] Right. Eve: [00:24:40] That's been the case for a long time. Ken: [00:24:44] Yeah, right now, we're in a totally different world, to be honest. It has totally clamped down. So, that's why I'm distinguishing now versus a few years ago. There has absolutely, banks don't want to use the word redlining, but we all know that illegal redlining continues, even though it is officially, on the books, illegal. But we do catch banks and insurance companies that veer away from middle and struggling neighborhoods when they shouldn't be. Eve: [00:25:17] Yeah. Ken: [00:25:17] And to me, more of how they do it, and the crime is that they veer away from aspiring developers and newbie developers ... Eve: [00:25:28] Yeh. Ken: [00:25:28] ... who are focusing on these middle and struggling neighborhoods. So, they're blaming it on lack of experience when many of us know that the real reason why they're rejecting it is where the property is located. So ... Eve: [00:25:44] Yeah, yeah. Ken: [00:25:46] ... it's absolutely a problem. But crowdfunding, as you said, is one way to break through that and to raise equity for projects that are otherwise not being funded. Eve: [00:25:58] Or maybe your Jumpstart loan program, which sounds amazing. Ken: [00:26:01] Yeah, it is very much geared towards providing those loans that the banks won't do. If someone can be bankable and can get their own loan, please go out and do it. Eve: [00:26:13] Yeah, yeah, exactly. Ken: [00:26:15] We're not looking to do every loan because we have limited resources. But if you are unable to get a loan because you lack experience, or because your credit is not good enough, or you are developing in a neighborhood that's not attractive to banks, then absolutely, we want to fund those projects. Eve: [00:26:37] Yeah, yeah. So, what's next for you, besides all of this? Ken: [00:26:42] You never know. I think our projects continue to get larger and larger. We're looking at a 150,000 square foot school building right now that we plan to renovate into multifamily housing. But I think Jumpstart also continues to grow, both in Philadelphia and around the country. We've heard from folks in Tulsa, Oklahoma, Milwaukee, Chicago, you know, probably a dozen other cities that are interested in starting a Jumpstart program. So, I think it's a matter of time before this idea goes national and really helps a lot of urban neighborhoods. So, it's sort of, the sky's the limit. Eve: [00:27:31] Yeah, well, I love it. And you may be hearing from someone in Pittsburgh soon. So ... Ken: [00:27:35] Awesome! That would be great. Eve: [00:27:37] Thank you. I've really enjoyed talking to you and thank you very much for sharing all of this with us. Ken: [00:27:42] Great. Thank you, Eve. It's nice to be on your podcast. Appreciate it. Eve: [00:27:54] That was Ken Weinstein. He's a developer and he's a teacher, too. He's trained 850 everyday people on how to develop their own properties. They live in his neighborhood and more often than not, they are Black or women. And he's lending them money too. "We can train and mentor aspiring developers all day, says Ken, "but if you can't loan the money, they're not going to get very far." You can find out more about impact real estate investing and access the show notes for today's episode at my website EvePicker.com. While you're there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Thank you so much for spending your time with me today. Eve: [00:28:54] And thank you, Ken, for sharing your thoughts. We'll talk again soon. But for now, this is Eve Picker signing off to go make some change.
34 minutes | 2 months ago
From here to there.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:13] Hi there, thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:20] My guest today is Katie Faulkner, an architect with a 25-year career. She has traveled a long and winding road to find answers to the design issues she cares about - that design and architecture should be accessible to everyone, regardless of budget, and that all projects should have a net positive outcome. Starting with a master's in architecture degree from Harvard, she added in an MBA and a stint with Kattera diving into the technological aspects of mass timber construction. Her work has earned her many awards. You will want to listen in. Eve: [00:00:20] Be sure to go to evepicker.com to find out more about Katie on the show notes page for this episode and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change. Eve: [00:01:29] Good morning, Katie, I'm really excited to talk to you today. Katie Faulkner: [00:01:32] Good morning, Eve. Thanks so much for having me. Eve: [00:01:34] Yeah. So last week I was absolutely spellbound by the fabulous presentation you gave to our lovely Women's Design Collaborative on the four ways in which COVID will forever affect design. And that presentation, for our listeners, is posted on the Small Change blog roll if they want to take a look. But I wanted to ask you, what inspired you to research and prepare that presentation? Katie: [00:02:00] Sure. So, Rebecca Martinez and I did this together. Rebecca is located in L.A. and I'm in Boston. And both of us have lost our jobs during this COVID pandemic so we've had some time to really focus in on member advancement for the Women's Development Collaborative. And that's been great for me because it has opened up a world of development that I've long wanted to participate in, but actually as a designer and architect, haven't done a lot of directly. So, Rebecca and I were brainstorming with Libby, who, you know, is our leader for WDC. And we had been talking about an open letter and a video that Sheryl Durst, who's the CEO of IIDA, had put out there on the future of design. And she made some pretty bold predictions and so Rebecca and I started debating some of them, and that was really fun. Katie: [00:02:50] We noticed that designers have been prognosticating since March. Some of the prophecies have seemed kind of silly. Some have been extremely elegant. All have called into question the way we go about our lives, how we interact with our fellow human beings, what we consider to be dangerous, what we consider to be fair, how we support one another. And we found that a lot of the changes that we were seeing had been things that had already been in motion before the pandemic. And what we were witnessing was some kind of acceleration. So, I think you've had some of the guests on your show in the past. Even before this you've had MASS Design on. They came out early with some restaurant guidelines and some health care standards. Other firms have done the same. The magazine Architizer, the online magazine, had all these articles of sort of X ways that COVID will change Y, you know, how housing will change, how office will change. And then, of course, I always like to give the last word to The New Yorker, which had this article on how the coronavirus will reshape architecture. So, Rebecca and I kind of sat down and we thought about it from our perspective on the West Coast and the East Coast, what were we seeing? Eve: [00:03:55] And so, what did you find? Maybe the question should be: what are like the most ground-breaking things that you found, the most interesting things you found? Katie: [00:04:03] We were all over the map because we felt, like, that we could base our one-hour presentation on so many topics that we found interesting, even if we just looked at how she saw L.A. and how I saw Boston. But given where we were in our careers, given that we were really trying to work with women and women in development, we decided to divide the presentation into four areas. Into work, into home, into the ground floor of what I'll call mixed use development and then in terms of how we were seeing changes on the street. And so that's how we started, and we began to pull together some studies that maybe had already been underway pre-pandemic but were now really being looked at. People like Heinz Development and CBRE were making some predictions about office. And we were seeing other architects kind of talk about the home. One of the things I think we zeroed in on immediately were how changes of work, our preferences in work. We did a poll of our own group, of our WDC membership, and I think you were there. Not one person in that group felt, like, that they would be going back to the office full-time even after a vaccine. I think that was the most startling discovery we made as we were pulling the presentation together. Eve: [00:05:23] Interesting. Moving forward in your work, how are you going to act on what you found? Katie: [00:05:30] Well, interesting. I mean, personally, as I'm launching a firm myself, it's really given me pause to think about what to invest in. In a normal situation, I would have run right out and subleased some office space as I have a number of friends and colleagues who have small offices who have been great about offering me desk space and resources. But I haven't needed it because so many of my colleagues and the people I'm collaborating with are not going back to the office. They have families, they've got reasons to stay home. So, I don't think I'll do that immediately. I've spent more time investing in my home office. I've spent more time investing in my technology platforms and learning new tools so that I can produce work by myself or produce work with a series of collaborators. So, it's a little bit of a different model. Again, the technology platforms, I think, were things that we were already all using, but we've really accelerated our investment in ways that we might not have seen before. Eve: [00:06:33] Yeah, and I think in the same way we've seen acceleration of businesses that were maybe dying. It's almost like a compacted 10 years, isn't it, during this pandemic of things that have changed? Katie: [00:06:46] Yeah, another thing that surprised us quite a bit was retail. I don't think anybody is surprised that retail is being challenged during this time, because I think we've been watching, over the last decade, retail try to adjust to online competition. But I do think that what we found in a McKinsey report was that, it's thought that we're pushing 10 years early in the acceleration of consumer penetration on digital platforms. And by that, I think they mean that there has been this gradual movement to people doing a lot of business online, even things like their health care, more than just ordering groceries or products, actual real penetration to digital platforms. So suddenly, in three months, we've moved 10 years forward. Katie: [00:07:36] So what does that mean for our own mixed-use development? I mean, you and I have talked about this before, that in housing developments, there's going to be this assumption that there's an activated street, right? That there's a ground floor that's dynamic. Well, if that's not going to be retail, if that's not necessarily going to be small business, what's it going to be? So that, I think, caused Rebecca and I to really take a deeper dive into things like omnichannel retail and what does that look like? Who's likely to take ground floor? Or maybe things like ground floor housing, maybe? What does that look like? So, that's interesting. And of course, not everybody is in a highly populated urban area, but I think that still does cause to call into question kind of ground floor housing models. So that was a bit of a discovery for us. Eve: [00:08:23] And what do you think is going to happen with offices on the whole? I mean, we hear people want to go back to office. They want to go back to work. They don't like working in isolation, but also isolation might be a little bit safer and cheaper and all of those things. Katie: [00:08:40] Yeah, that was confusing. I think for me, I'm still on the fence on how that's going to go. If you look at CBRE or a recent article that I read about Heinz, people in commercial are predicting a decrease in overall office demand for sure. But it seems like they're predicting, kind of, a small decrease that I've read as low as two percent. And the reason they say that is because they think that there'll be an overall demand for more space in your office. Maybe offices aren't going to bring the whole group downtown, but when they do, people will want 15 percent more space than they had. I don't know about that. I mean, it isn't that I don't believe people want more space, but the open office was already kind of well underway. That kind of studio model that architects and designers have been used to was really taking over all kinds of office sectors. But that being said, I don't know that everybody, I'm going to go back to that informal poll that we took just with our own group, I think most of my colleagues don't think that they'll go back every day. That maybe they'll check into their office hub once a week, but they won't be showing up every day. Now, that begins to call into question things like the nine to five schedule, right? So many of us work in different time zones and we have colleagues that work maybe overseas. Why limit our work to nine to five? If I've got parents or children or other pressures, I can get just as much done, but maybe I'm restricted by school hours, et cetera. So now we're thinking like, whoa, what about the weekend? Katie: [00:10:20] It's a really interesting question to begin to think about how we structure our workday. If we don't have to be in that physical office space, that the Headquarters becomes more of a network and less of a physical space to be, I'm not so sure. I mean, we've listened to other people talk about this kind of glut of office space going into the housing market. So maybe two problems get solved at once. I mean, it's all very fascinating. I don't know that the data is there yet, but it certainly gives one pause in terms of how we think about how we're going to structure our work life balance. Eve: [00:10:54] You know, I couldn't really answer that poll because the question for me would have been, were you going to the office 9 to 5? I mean, I lived two floors above my office, and so my schedule was already sometimes at home, sometimes at the office. And that's going to continue. And I've been using Zoom for years. So, for me, it's really not much of a shift. Katie: [00:11:17] I have the same issue. I had been practicing with a firm that I co-founded for almost 11 years, and then I'd taken a job with a West Coast construction company with the understanding that I'd move out there when my youngest son graduated from high school. So, from the time I started that job, I was completely remote. I'd go to Seattle a week a month, but otherwise completely Zoom-focused. Because of their West Coast time zone, I'd also adjusted my schedule to match theirs. So, I was already quite comfortable with that as a way of working and it really gave me a sense that people could work almost anywhere as long as they could find the time to come together. So, I think what you're pointing out is something that was already happening. I mean, the real reasons why we're not going to the physical office anymore, but I'm not so sure that we actually have to go back, at least in the way that we did. I think people will feel safe eventually when there's a vaccine, but there'll be other reasons why we'll call into question, I mean, why would I battle traffic? Why would I kind of expend that carbon footprint to drive in if I live out of the city? It begins to not make a whole lot of sense. Eve: [00:12:24] Yeah, yeah. You're an architect and you obviously care about design very much. And I just wanted to understand why it's important to you and why you think, I believe you think, it should be important to everyone? Katie: [00:12:36] Oh, that's, yeah, so I have been practicing since the late 90s and almost since the beginning have had a real fascination with prefabrication in construction and the ability for construction to be much more efficient in a way that had a much lower carbon footprint. This was, I think, back before, I think even then we all knew that we had a real responsibility to the climate but maybe the climate as a crisis wasn't screaming at the top of our agenda the way it is now. I think we've always, as architects, had a Hippocratic Oath to do no harm. And as time has gone on, it's been clear that we, as an industry and construction, actually contribute to a good deal of the carbon emissions globally. So even though we, I think, have always been trained to make the world a better place, and I really do fundamentally believe in the power of design to do so, as we've matured as designers, as I think data has been made more available to us, we realize that we've been as much of the problem as any other industry, if not more so. Katie: [00:13:48] And I think that we cannot alone, as designers, make a change. But if we begin to look at the way we deliver projects, if we begin to look at the materials that we use and the way that we work as industry, developers, manufacturers, we could do a great deal better in in reducing carbon footprints to the point where our buildings would have not only a zero carbon footprint, but actually would have the ability to be productive. And we've seen people do that. What's been the challenge is that it's expensive. It's not for everybody. I think as I've gotten to what I think is probably the sort of, you know, final yards of my career, the sort of next 20 years, it's so important to me that the work that I do be moving us all in a positive direction. And I know that most of my colleagues feel the same way. We're all looking at issues of storm surge. We're all looking at issues of climate. We're all looking at the responsibility of making the world a more sustainable, a more fair and inclusive place. And I'm definitely not alone in that. I think designers kind of bring that passion. I hope so anyway. Eve: [00:15:00] But I think you've gone a little bit further because you worked with, for Katerra, right? Katie: [00:15:05] I did. Eve: [00:15:05] On timber housing solutions. Katie: [00:15:09] That's right. Eve: [00:15:10] What is mass timber construction? Katie: [00:15:13] Oh, well, I'm happy to talk about that. So, in 2011, I launched a firm with a couple of partners called NAADAA. One of them is the designer, who's fairly well known, Nader Tehrani. And that practice was really focused on design excellence, but design excellence with a really profound engagement with the materials of construction and how construction, kind of the means and methods of construction. So, we were very interested in mass timber when people started talking about that. And it has been a common material in Europe for decades. There are housing, there are examples of schools. Europeans, Austrians, Germany in particular, have done a magnificent job in turning that into an affordable and sustainable way to do all kinds of construction. The US has been behind that, meaning lagging, in that our zoning codes, our building codes did not necessarily make it easy for us to use the material. It's also not been cost effective. What it is, is mass timber incorporates everything from cross-laminated timber, which is a series of what we'll call lam stock, general old two by four construction, glued up into layers and then layered upon layers so that it becomes a pretty robust material that can compete with concrete. Katie: [00:16:31] It's also glulam which is very typical. Lots of people have been using glulam for years, which is again another glued-up means of using just regular timber stock into something that has a lot more resilience, both structurally and with fire protection. If done well, mass timber can be very sustainable and work very well with forestry management and actually help bring industry to parts of the country that have not necessarily had productive forest for a long time but have a lot of timber. There's a whole wealth of research that's being done by the Carbon Leadership Institute or the Carbon Leadership Forum. There are companies like Katerra that have been founded on bringing cross-laminated timber into the mainstream of construction. [00:17:20] It can be done as a hybrid. It can be done with steel, it can be done with concrete, and even then, still very much lowers the carbon footprint. It isn't just the material itself, but it's the ability to do a lot of the fabrication offsite. So, when it comes on site it can get erected relatively quickly. We at NADAAA put together and successfully delivered the first mass timber student residence for Rhode Island School of Design in Providence. That is a hybrid. It's not completely mass timber and by that, I mean the structure itself is steel, meaning the columns are steel, but the slabs are cross laminated timber. So, you can leave those exposed with certain construction types so you get beautiful ceilings and you can really appreciate the natural wood. Goes up very fast, has much less dust and waste than concrete. It's a wonderful material and we could do a very deep dive on that in this podcast. I know we've talked about the WDC doing something on it. There's no shortage of information on it. It's a really fascinating material and I think the challenge now is to find ways to bring it into the market so that everybody can access it, so that it really can be cost effective for housing, for schools, for all kinds of typologies that really need not only carbon with a low footprint, but with a cost price point that that makes it accessible to everybody. Eve: [00:18:44] You know, I was interviewing an architect in Amsterdam, Superlofts. Katie: [00:18:49] Oh, yes. Eve: [00:18:50] In my podcast. And he also brought up another aspect of mass timber that I thought was really fascinating from a design point of view. He was designing communities where he expected people to want to change their spaces, you know, add maybe another unit or subtract a room over time. And mass timber gives you the ability to break through and change the space that someone occupies much more easily than other materials, which I thought was really interesting. Katie: [00:19:21] You know, we talked a little, we've talked a little bit about this, that, again, just getting back to this discussion of acceleration, pre-COVID if we were talking about housing, I would have said the biggest challenges to housing in the next decades are social justice, the delivery method, and then, of course, climate. I mean, those three things could be put to just about any construction type. But that social justice component it's exactly that. That way that we could deliver housing to people that would give them the flexibility to grow so that maybe when you're just starting out, it's just a small household. Maybe it grows to have a family or have a multigenerational component where parents move in or people stay. Katie Faulkner: [00:20:05] And you're completely right, mass timber allows for that because it's this, kind of, terrific almost plug and play kind of construction that you can have the slabs put in place would have structural integrity themselves and have a pretty decent span. And you can kind of leave it as a shell and then outfit it as time goes on with either a timber construction or a hybrid construction of something that's more of a lighter frame. And it is exactly that. It's extremely flexible. So, you can build this kind of grid system that's quite elegant, that allows itself to be a studio, a one bedroom, a two bedroom, a three bedroom. It can be townhouses. So, we're not yet doing a lot of that here and again, I think that the barrier is market driven. It's that it's not yet cost competitive with other construction types. But I think that that's coming. I think you're going to see that in housing, this ability for people to get a housing unit, a housing type, and then grow into it. So, your Amsterdam architect is spot on and I think the U.S. will catch up. Eve: [00:21:10] Yeah, cool. Shifting gears, do you think architecture offers the same opportunities for women as men? Katie: [00:21:19] I do. I'm very optimistic about architecture, where I'm less optimistic is architecture within the integrated delivery process. So, I really, as an architect coming up, feel that I had a lot of opportunity to grow. I had a lot of support, even though I would often find myself the only woman at the table. When we would get on the job site, as soon as the project would leave the office and expand into the what really is, I guess if I could back up, what really is a project has a great deal more than architecture. Architecture has the ability to bring some vision and really help clients see the potential of their project. But you can never do that without engineers, without the funds, whether that be developer funds or client funds, and certainly without contractors. The world of construction is not necessarily as supportive of women as architecture has been. Architecture is by no means without problem. But I think that if you look at where we are, there are a lot of women in leadership positions and more all the time. I have a lot of role models in architecture who have been women who I've looked up to, both well-known and not. But as soon as we leave the office and we go into that world of project delivery, whether it be development or construction, it's discouraging. Katie: [00:22:54] I think that I've wanted, my leaving NADAAA was difficult to do because I loved it. I love architecture but I really wanted to make an impact and I thought the best way, I think the best way to do that, is to somehow move a little bit more directly into construction and development. That has been extraordinarily difficult as a middle-aged woman or frankly, as a woman at all. That is challenging. And I'm frustrated. I think that women in development, there aren't very many, you and I have talked about this before. If we really want to look at women run projects, there are great examples where a lot of the leaders are women. But if you dig deep, they're often backed by firms that are led by men. I'm not saying that that's a bad thing. There are plenty of very enlightened men. But for women to have these opportunities, I just think that the barriers are huge. We often don't even really know about development. And when we get there, I don't know. there's just, this topic is so rich, but the short answer is, is it's a challenge for sure. Eve: [00:24:03] You know, for quite a long period of time I think that was the only female developer in Pittsburgh, which was a little startling to me. Katie: [00:24:11] That doesn't surprise me at all. I mean, that's frankly, before I even knew about WDC, I had researched you and had seen a project on Small Change and gotten really excited about you as a woman developer. I mean, I've contacted women developers all over the country just to meet them, just to kind of find out more, to see how I can get started. Fortunately, I mean, what I will say is that when you do meet people in development who are women or who want to see women succeed, there are a lot of tremendous resources for us. Finding those, though, is difficult. And kind of finding the capital and the wherewithal to start a project, as you know, is challenging. Eve: [00:24:54] Yes, but don't give up because it's a lot of fun. Katie: [00:24:57] Well, I'm trying, I do, I'm very optimistic and I'm extremely grateful for WDC and for our members because there's a lot of support there. Eve: [00:25:05] Yeah, it's great. Well, I'm going to shift gears again and ask you, I think I know the answer, do you think socially responsible real estate is necessary in today's development landscape? Essential, not necessary? Katie: [00:25:19] Oh, I think it's essential. It really is. I mean, I don't think that where we are today with our issues of equity and diversity and inclusiveness, I don't think that's any accident. I think that the tragedies that brought it to the forefront, that brought people out to the street, that was just something that was waiting to happen. There have been so many challenges to housing, to work, to various industries. I just cannot see that the social challenges and the environmental challenges that we have are not inextricably linked, that when we build anything, we have to look at the neighborhood that it goes in, the group that it is meant to serve. You cannot come into an area as a developer or an architect or a constructor without having the very people that the project is meant to serve at the table. And you cannot but think about the impact of the building on the neighborhood and the neighborhoods of the neighborhood, it's just not a question anymore. Katie: [00:26:26] You know, you put something up and the hope is that you make the place better than it was, that you're giving people opportunities that they didn't have. We talk about kind of a scorecard, right.? And sort of, how do we look at a project? There's the environmental component, there's a jobs component, there's an inclusiveness component. There's just such a complex, three-dimensional web. We cannot not do that, no matter what it is that we're building - a factory, a distribution center - it's long past time. And I think that as developers, as architects, as builders, we can only do so much. We're going to have to take a really good look at our land-use restrictions, at our zoning requirements, at the building codes. There's going to be a lot of work. But I think that the louder the conversation is, the more people that are standing up and saying, hey, wait a minute, I think this is an extraordinary time. I think in many ways we will look back at 2020 as being a year of sea change, a real pivotal year. Eve: [00:27:29] No, I agree with that. But I think probably my biggest frustration is still finance and... Katie: [00:27:35] So true. Eve: [00:27:35] You know, what's happened in the last month, it's a very odd phenomenon. Over a period of four months, things were pretty quiet as people grappled with their own situations around the pandemic and whether or not to move forward with their projects. But now, all of a sudden, everyone's gotten very busy. And I had a conversation with a developer yesterday who is doing a really interesting, worthwhile little project, not so little, actually, and wants to raise money for it. And the proportion of money he wants to raise is actually pretty high. So, my first question is always, can you get a bank loan? Because bank financing is the cheapest money you're going to get. You should always look for a bank loan before you look for equity. And he said no. The banks here have stopped lending, there's nowhere for me to go. So, we're in this time of change, right? And we need to be thinking about the new next things and the way we're going to live. And our financial institutions seem to be shutting down. That's big. Katie: [00:28:47] That is big. Eve: [00:28:48] They were already not amenable to new ideas because money is lent based on performance of projects just like it before. So, if you're doing something new, it becomes very difficult to finance something. And we need new now, right? Katie: [00:29:04] Yeah, I second that. I find that the most frustrating part, well, one of the most frustrating parts about trying to launch new businesses, there is a lot of lip service to supporting new businesses, small businesses, women-run businesses. There aren't a lot of financial resources there. And you're right, the first place I would go would be a bank. But if you haven't done a project before, if you don't have a track record as a developer, even pre-COVID, you're just not going to get that loan. So, I don't know how to solve that problem. I mean, I think that, again, there's all kinds of places that I can go to offer me training, to offer me, kind of, coaching but where to get the money? Difficult. Very difficult. Eve: [00:29:54] Very difficult. So, at Small Change we try to do a little bit of that, but it's a really big problem to solve. As big as zoning and everything else. Now, I feel really depressed. Katie: [00:30:05] But you shouldn't because I actually think that you have stood as an example of what's possible. I mean, you know, all of these things that crowdfunding brings opportunity to people who a) might not have had access, even just to the equity, but b) wouldn't have the wherewithal to know how to do it. So even though I think it's challenging and we're looking at, we have ambitions maybe to do bigger projects, the fact that you have allowed a group of people who might not have even had access to it, the notion to better understand how to get a project developed, that's huge. And if those rules change, I mean, that's really something. Eve: [00:30:44] Yeah. Yeah. Well, final question. What's next for you? Well, you're in the next, right? Katie: [00:30:51] I think so. I mean, I'm really trying to make lemonade. I, again, I was, it was a little bit of a, well is very much an unplanned shift. I had joined Katerra, which was a big change. I mean, I've been an architect in conventional practice for, I like to say over twenty-five years, because as we get to 30 years, that's starting to sound kind of ridiculously old, but it's been a long time. So, the notion of moving to a construction company was a really big change and for a number of reasons that didn't work out. So, I'm trying to go back to kind of what my ambitions always were, were to do an impactful, sustainable, socially responsible architecture and development. I think that architecture as an art can only go so far. And to really be impactful, I'm going to have to enter the world of development and that's new to me. So, I've spent most of the last four months trying to learn more about development, trying to partner with others who are small enough to want to kind of take on a collaboration. It's very, very challenging in Boston. But to begin to maybe look outside the well-developed metropolitan areas to some other Opportunity Zones that are well served by public transit. It's been a learning curve for sure, but I'm optimistic. It's also an incredibly exciting time. I think people are motivated. As you said, we need a new new. That being said, it's a bit of a, it's a bit of a cliff that I'm trying to scale. So, let's check back in a few months. But I'm hopeful that we'll see some progress. Eve: [00:32:27] We should try and do a project together. And if there are any, anyone else out there that wants to join us, that would be amazing. Katie: [00:32:33] It would. Eve: [00:32:34] My big dream is, sorry gentlemen, but an all-woman-run development project would be just amazing. Katie: [00:32:45] It would, it would. I think we have a shared ambition there and I believe, I believe we're going to see it. I'm going say in 2021. So, let's cross our fingers. Eve: [00:32:53] I hope so. Well, thank you very much for joining me. I really enjoyed the conversation. Katie: [00:32:58] Oh, thanks for your interest. It was a pleasure. Eve: [00:33:07] That was Katie Faulkner. Many architects stay within the confines of prescribed architectural roles. Katie has really stretched herself and now she wants to stretch herself more. She sees real estate development as the ultimate way to take control of the physical landscape. And I'm right there with her. Let's hope she succeeds and brings her wealth of knowledge and compassion to the real estate development world. Eve: [00:33:42] You can find out more about impact real estate investing and access the show notes for today's episode at my website, evepicker.com. While you're there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Eve: [00:33:59] Thank you so much for spending your time with me today and thank you Katie for sharing your thoughts. We'll talk again soon but for now, this is Eve Picker signing off to go make some change.
32 minutes | 2 months ago
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:10] Hi there. Thanks, so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:18] My guest today is Patrice Frey, the president and CEO of the National Main Street Center. Through the Center, Patrice and her team offer programs and guidance on placemaking, local entrepreneurship, facade improvements, crowdfunding and green habs, all in service of revitalizing commercial main streets in both big cities and small towns alike. Their network is very big with eighteen hundred members. If you want to hear why main streets matter, listen into our conversation. Eve: [00:01:04] Be sure to go to evepicker.com to find out more about Patrice on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change. Eve: [00:01:35] Good morning, Patrice. I'm really looking forward to our conversation today. Patrice Frey: [00:01:39] Hi, Eve. Thanks for having me. I'm looking forward to it. Eve: [00:01:42] Good. You have a pretty big job. The National Main Street Center now has eighteen hundred members. Is that right? Patrice: [00:01:50] It is, yeah. Eighteen hundred members all across the country. Every state in the union, I think, except maybe saving Hawaii. Eve: [00:01:59] Ok. That's pretty big. How has it grown under your watch? You've been there since 2013, is that right? Patrice: [00:02:09] Yeah, I have. We launched as a subsidiary of the National Trust in 2013. Before then, we had been a program embedded at the National Trust for Historic Preservation and we have been very fortunate to see a strong membership growth in the last, in the last seven years or so. You know, those 18 hundred members are located all across the country. It's a really good mix of rural programs and more mid-sized and then quite a bit of representation in some larger cities as well. When we took over in 2013, the team had a real focus on reaching out to folks that had been members in the past and maybe they had lapsed. And we've also just put a tremendous focus on developing new content and new resources that have helped to, I think, attract people, attract people to the organization. Yeah. So, it's been really gratifying. We're so proud to have such a large and strong membership. Eve: [00:03:10] So I have to ask, I suppose the main question is why Main Streets? Patrice: [00:03:16] Well, great question. You know, Main Street is important, I think, in at least two ways. The first is they truly are in the heart of a community and people tend to feel about their town, the way they feel about their downtown, which is to say you've got a healthy, vibrant, thriving downtown. I think that's a real sense of pride, provides a real sense of pride and helps shape the identity, a positive identity for a community. And the reverse is true as well, where if you look at downtown and there's nothing happening, I think that can help sort of create a sense of distress and incredibly challenged. So, psychologically, we know main streets are extraordinarily important. They're really important for the quality of life factor, you know, providing restaurants, dynamic shopping experiences, all of that good stuff. But we also know that they're key to economic competitiveness, right? Because as the economy, we've seen these seismic changes in the economy in the last 10, 20 years, we know that people are more mobile and they're often picking where they live and then choosing a job. And that means for those employers, for local leaders, it's extraordinarily important that there are high quality places in those communities and downtowns have those qualities in abundance. Eve: [00:04:40] So that's what's going to be my next question. Why is it important to save them? So, one reason is that it offers an option for people. But what if they didn't have that option? Why is it really important to save main streets? Patrice: [00:04:54] A couple of reasons come to mind. The first is that often if you're looking in some of our more stressed areas, cross country, whether that's in rural or urban areas, other than the people, that commercial quarter is often the single greatest asset that that community has, right? It tends to be affordable, stay flexible, it's adaptable, it's walkable and we know more and more people are really appreciating the benefits of walkability. So, it really is an approach to asset based economic development that leverages what you already have. The other thing is main streets, particularly those, you know, those truly that were built like before the 1950s, you have just such a beautiful sense of character. They really reflect the local culture. They were built in a human scale. They're super, and I've already talked about adaptability, but that is extremely important, 5the fact that you can adapt these places, you know, you can do like light manufacturing, you can do a restaurant, you can do standard office. You can, you know, turn upstairs into apartments or condos. So, it's important and for many communities, this is the single biggest asset they've got. Eve: [00:06:13] Yeah, I always find when I go to a small town or borough with a charming main street, I feel very comfortable with the scale. It's kind of very easy to relate to, which is a bit of a relief sometimes, I think. Patrice: [00:06:28] It is, it is. And it's so funny because, you know, with Covid I've been spending a lot of time at home and I have a four-year-old son and we had checked out a book from the library on Roman design, Roman construction. And it's just, you know, looking at the sketches was just reminded that, you know, this is an urban form that has existed for millennia. And I think it's existed for a reason. It's certainly existed for purposes of transacting commerce, but it's also been a place that people go to connect with each other. And I think Covid is making us realize how much we appreciate having places to go. Eve: [00:07:09] Yeah, and how much we miss it, right? Patrice: [00:07:11] Yeah. Eve: [00:07:12] So a hard question. How do we bring equity to small towns? This is the other pandemic, right? Patrice: [00:07:21] Yeah, no, no, no. And yes, equally as concerning, if not more so. I think the first thing is acknowledging the problem for what it is and speaking openly about it. You know, in many communities, there is a legacy of African Americans being excluded that dates back to Jim Crow where African Americans were really only allowed downtown on certain days, during certain times to complete their shopping. So, I think some of it is really just acknowledging that in many ways main streets were, just have extraordinary histories of exclusion. And my own thinking is you only fix that by a truly intensive community engagement process where you are committed to reaching audiences and meeting members that you haven't had traditionally part of downtown and then programming in a way in which those communities, particularly African-American community, feels supported. We, at the Center, do a lot of work on entrepreneurial ecosystems, and we're taking a fresh look at that in terms of really understanding and helping communities embed within their work practices that really create for more diverse representation downtown. Eve: [00:08:53] Yeah, I think exciting time about this moment is everyone I am talking to is really thinking about this issue very constructively. And I'm not sure that's ever happened before. It's going to be really wonderful to see, you know, what a year of thinking brings, right? Patrice: [00:09:11] Yeah, it will. And I think now we've got to do the work, right? It's getting past the talking and acknowledging that, yeah, that we have a problem. And, you know, we're certainly, I personally am really committed to it, and then the organization, Main Street America, are very committed to it as well. You know, I think we're going to have more tools and resources, support our communities in this conversation in the coming months and I would also say, you know, we're eager to intensively engage in places where they're ready to have this conversation and, you know, they want to make some changes. Eve: [00:09:50] Yeah. Yeah. What are the primary activities of the Main Street Center? How do you help communities? Patrice: [00:09:57] So, we're the leading national revitalization organization nationally. So that means we can provide training, technical assistance, grants, networking opportunities. All of that good stuff. But we're probably best known for something called the Main Street approach, or the four point approach, which is a revitalization strategy that's been used now by about 2000 communities to help them really identify their values, identify their vision for downtown, and then program in a way to really make that happen. It's a very comprehensive approach. A lot of times what we see in economic development is, you know, kind of the one-shot wonder where you build the stadium, or you build the museum or a baseball park, and expect that that will automatically transform an area. That is very rarely the case. Instead, what we know makes a big change, big differences, is small steps, incremental change over time in a way that really takes into consideration the design of the place, economic vitality, the strategies, how you're, what kind of place you're actually trying to create and how you are attractor helping those businesses. And of course, promoting it, marketing, marketing it, all that good stuff. Eve: [00:11:19] Right now, what communities have you been working on? Patrice: [00:11:24] Well, we do a lot of work in communities. Up until Covid, right? Eve: [00:11:28] Yes. Yeah, yeah. Patrice: [00:11:29] We have our field services team that I think was in 200 communities... Eve: [00:11:35] You know, Covid19, I'm just astonished at the trickle-down effect. Every time I talk to someone there's another impact I haven't thought about. Patrice: [00:11:45] Yeah, yeah. So, our field services typically visits, will visit at least 200 communities a year. And we have transitioned a lot of those services online. But particularly when you're talking about place, it's really tough work to do. Place and relationship building. It's really tough to do. Eve: [00:12:11] Impossible remotely, right? Patrice: [00:12:13] I won't say it's all impossible. I will say a lot of it is extremely difficult. Yeah. Eve: [00:12:19] Yeah. I mean, you can only go so far. Patrice: [00:12:22] Yeah. Exactly. So, you know, it's hard for me to pick a place where we're doing work, but, we're in so many places, but Ohio, we're doing some really exciting work there in a few of the heavily coal-impacted areas in terms of supporting the development of entrepreneurial ecosystems in that place. And I would say that work is almost certainly shifting off, because of Covid, to be focused on recovery as well. Eve: [00:12:54] I suppose the question is, you know, how are you shifting your thinking because of this pandemic? Patrice: [00:13:01] Well, yeah. So, I actually have great hope for main streets on the other side of all of this. I think the reason I'm so hopeful is because I think they, you know, like we talked about, they're so adaptable. And even though I think we're going to see the marketplace change a little bit, I think the space to sort of inherently, you know, we can do it, right Eve? Eve: [00:13:33] Well, you know, I think main streets have a future because I think there are going to be a lot of people who want the calm, peace and space in places that have small main streets. Unfortunately, I think we're going to go through a period of time where downtowns in larger cities might be scary for some people. And that could be to the advantage of smaller communities. Patrice: [00:13:59] Well, I think that's right. And I think we are also seeing where so many of our big cities were reaching peak unaffordability. Eve: [00:14:07] Oh, yeah, there that too. Patrice: [00:14:09] Yeah, that combined with the dynamic of, you know, people wanting a little bit more space and realizing that they can work from anywhere. I do think that bodes well for rural towns. I just feel like Americans have reconnected with the value of walkability in recent years. And, you know, I think that persists on the other side of this as well. Even though the economic impacts are going to be severe, we're going to have vacancies, storefront vacancies that we're, you know, going to be challenged by, overall, I think, we come out for the better. Eve: [00:14:44] Yeah. So, storefront vacancies were happening before the pandemic, right? Because retail was really shifting dramatically. Patrice: [00:14:52] Yeah. Because we're so massively overbuilt in terms of commercial space especially. Eve: [00:14:57] And I think because retail activities have changed so much in the last few years. Patrice: [00:15:02] Absolutely. Eve: [00:15:02] So, what does that mean for main streets? I mean, hasn't it changed so much in small places? I mean, I like having my groceries delivered from Whole Foods or Costco or somewhere, but I don't know if that's possible in a small town, so... Patrice: [00:15:17] Yeah, yeah. From what I've seen, probably not. I guess maybe there have been some changes. Maybe there will be some changes. We are seeing where, particularly larger retailer vacancies, were really starting to be a problem. My impression is that those tended to be in places, maybe central business district downtown, the malls, the lifestyle centers, et cetera. But I don't tend to see those national retailers concentrated quite so heavily on our main streets, at least in the type of communities that we're working with. So, I'm a little bit, you know, less concerned about that dynamic there, because we were seeing, people were really being extraordinarily creative in creating an experience at customers. And whether that was a restaurant or retail. Yeah. And so, again, I think, you know, none of the fundamentals have changed. And so, I see that continuing on the other side. Eve: [00:16:18] Yeah. So, it's maybe a shift towards slightly different retail types. Which is kind of exciting to think about. Patrice: [00:16:26] Yes, it is, it is. I mean, I don't know about you, but I, I am sick of like trying to online shop for clothes. Eve: [00:16:34] Oh, I hate it. Patrice: [00:16:36] I want somewhere I can look at them, you know, like touch them, feel them, like, you know that sort of human want, you know. I think that it's real and doesn't go away. Eve: [00:16:48] So, I'd love to hear about, like, an accomplishment you're really proud of or a project that you thought sort of exemplified what you do at the Main Street Center, something that's, that you love. Patrice: [00:17:01] Yeah. Well, I love that you ask that question, thank you. We are working on an advocacy campaign right now to ask for congressional support for, I mean through organizations, and so, I have been so heartened and just thrilled to see the way that our network has really rallied behind this cause. Unfortunately, state and local Main Street Programs are in peril. We know fiscal budgets, which are a big source of funding for these programs, are badly endangered. And so, we have been rallying and approaching Congress about what sounds like a large number to me, but I'm told is actually a small number. We've been rallying around a 100 million dollar ask to ensure that we can sustain these main street programs when small businesses need them most. You know, these Main Street Programs, the leaders of these programs are the folks on the ground who are helping the small businesses with their PPP application or they're directing them to local community foundations for grants or making sure they understand what might be available through the state. They're also sometimes in the room negotiating with landlords for rent forgiveness or forbearance. In this moment, what I'm most excited about, most proud of, is the way that folks have rallied to Main Street's defence. And I'm pleased that Congress seems to be listening. We have a long way to go yet, but I'm feeling good about it. Eve: [00:18:44] Awesome, that sounds fantastic. So, I'm just shifting a little bit to you. What's your background and how did you, what led you to this role? Patrice: [00:18:54] Well, it was a meandering path. So Eve: [00:18:57] They're always the good ones. Patrice: [00:19:00] Well, you know, some people, some people know. Like my husband, you know, knew in third grade what he wanted to do and he's doing it today. So, I, to make a long story short, I ended up at Brookings Institution. That was the Center on Urban and Metropolitan Policy at that point. And right after, soon after college, because I just love cities and, you know, I was sort of leaning towards the idea of a planning degree. And then I ended up on a tour in downtown Tacoma, Washington, with my dad. And, you know, we had this tour guide. Michael Sullivan, very well known locally, who captured my ardent attention. He just took us down, through downtown, telling the stories of the buildings. And I thought, OK, well, this is what I want to do. So, from there I, because I had really been interested in policy and really interested in architecture, and so I figured, OK, this is preservation is really a melding of those two things. So, from there, I took my time, but I ended up in grad school at Penn for preservation in the Design School. And I did my thesis actually on the greening of older historic buildings and ended up at the National Trust working as their research director. And then it's it was a lot, I had so much fun in that job working on sustainability and older buildings. And then Main Street came along and I thought, well, you know, there are a lot of parallels between, a lot of threads, between sustainability and main streets. And so, I threw my name in the hat and here I am. Eve: [00:20:50] That's fabulous. So, you get to run this really pretty unique organization. Patrice: [00:20:56] I love it. Eve: [00:20:57] And spend time on main streets. Patrice: [00:20:59] When times are normal, I get to see some of the most beautiful, most special places that I think people often never see. So, I am really grateful for that. Eve: [00:21:11] So what's one of the most beautiful, most special places you've seen? Patrice: [00:21:17] So, a couple come to mind immediately. One is Emporia, Kansas. And I wouldn't say it's like beautiful in the way that, you know, you might think about a landscape or something. But it's a city of, I think it's twenty-five thousand, it's near nothing, right, which is to say, I think Kansas City is a good two and a half, three hours away. And they have done such an extraordinary job of nurturing entrepreneurship there and have had just like success story after success story. I want to say that the Main Street Program has helped to support something like 70 or 80 new business starts there. They will allow good stuff with housing downtown. Just extraordinarily dynamic leadership. Great community. Yeah, just, just... Eve: [00:22:11] In an unexpected place, right? Patrice: [00:22:13] Yeah. Yeah. And then, you know, the other thing that I realize is, well the other, to one of the other key lessons I've learned, it's from place called Edenton, North Carolina, and it's an absolutely charming downtown. But sometimes with the preservation lens you can look at a place and say like, "oh, that facade isn't", you know, "that facade isn't quite right", "those windows...", etc., etc.. And there's a lot of what I would describe as imperfect preservation there, but I say that with no judgment. The thing I realized is, you know, it's really not about the way it looks, it's about what's happening at 2:00 p.m. on a Tuesday afternoon, which is: Is this vibrant? Are people using this space? Are they getting what they need? And, you know, Edenton is absolutely just incredible. Eve: [00:23:06] Oh, I'm going to have to put them on my bucket list. Patrice: [00:23:08] Yeah, it is right on the water. It's a beautiful, beautiful place. I'm probably getting my history wrong, but I think it was very briefly the capital of North Carolina. Eve: [00:23:18] Fabulous. So, do you think socially responsible real estate is necessary in today's development landscape? Patrice: [00:23:26] I think it's absolutely essential. I'm pleased to see that, you know, there is a bit more attention on it than perhaps in the past. My two big concerns when it comes to real estate are, well really three, building in a way that truly supports the community, is in line with the community's vision. The second is building with time in mind. Meaning, I think so much of what gets constructed today is just utter crap. Eve: [00:23:57] Oh, yeah, I agree. Patrice: [00:23:58] And it will, it will not stand the stand the test of time either design wise or, you know, the fundamentals, the physical structures are so poorly constructed. And then the third thing that is, again, just kind of how I look at the world, is the reuse factor. You know, I tend to really gravitate to projects, you know appreciate projects, that are making use of an old building in some form or some fashion because they, the research I did early on in my career regarding the carbon impacts associated with new construction, was kind of formative in my thinking about this. I mean, there are just massive, massive impacts associated with constructing new buildings and tearing down old ones. And it's just critically important that we're giving that our full attention as we're designing these places. Eve: [00:24:52] Yeah, and, you know, I've done a lot of reuse projects and I find people really love the idea that they're living in or occupying something that has a history. So, it's a shame to eradicate it. It's useful today. Patrice: [00:25:09] Yeah. And Eve, you are a hero, a true champion among the development community for the work you've done on. Eve: [00:25:19] Oh, thank you. Patrice: [00:25:19] Yeah, and reuse. I think you're right. I mean, I do think there's an element of the human psyche that finds it very important to connect to elements of the past. And that's what building reuse allows us to do. I mean, unfortunately, so much of what is being constructed today, you know, has so little value that, yeah, it's hard to imagine 50 years from now that people are going to be fighting to save those places. Eve: [00:25:46] Yes. Yep. Shifting gears again, what community engagement tools have you seen that have worked best? I know you talked about going further with them in the future, but I'm just wondering what works? Patrice: [00:26:02] Yeah. So, I mean, there's certainly the you hold a meeting and you see who shows up and you create the space for them to, for everyone to have a voice and to talk. And that's very important. But there are two engagement tools in particular that we've had some success within recent years. One are surveys. I mean, obviously, that's a little bit different and limited because you're not having a dynamic conversation with someone. But that can be extraordinarily helpful in reaching a larger community group about and engaging them in terms of how they want to see their downtown evolve. And the second, and this is really important, is going to where they are, right? So, which is to say, if you have groups that just tend to not engage downtown and yet, you know, there's a festival happening or there's some sort of gathering, churches, what have you. That can be a great place to go and engage directly, you know, hand somebody a survey and talk to them at the same time. That's been extraordinarily valuable. Eve: [00:27:04] Oh, interesting. And then I have to ask this question. Do you think equity crowdfunding can play a role in building main streets? I'm hoping the answer is yes. Patrice: [00:27:15] Money? Absolutely. Absolutely. And I think that crowdfunding, is probably the most exciting thing I've seen come along and real estate, I'd say full stop. Precisely because I think it creates a foundation for better community engagement, literally community buy-in. Eve: [00:27:35] Yes. Yeah, that's the important bit. Yeah. Patrice: [00:27:37] Yeah. And that is, you know, that's what it's all about. Eve: [00:27:42] Yeah, so they get to vote with their dollars. I mean, they also get to see the upside. Patrice: [00:27:49] They do. They do. Yeah. Eve: [00:27:51] Yeah. That's what I love about it. So final question, what's next for the Center and what's next for you if you're looking five years ahead, like what are the big goals? Patrice: [00:28:03] Oh boy, I can answer the one for the Center pretty easily. Eve: [00:28:07] Well, the 100 million for sure, right. That's a really big goal. Patrice: [00:28:10] After we get our 100 million and I go on vacation...I will not go on vacation. In terms of what's next for the Center it is a renewed focus on diversity, equity and inclusion. You know, we've recently been doing some strategic planning that we've completely, I think, rethought our strategic plan to be aligned with goals of enhancing equity on main streets. I don't want to be Pollyanna-ish about this and say, you know, we're going to be able to snap our fingers and massive changes overnight but I do think we're going to focus on creating tools and partnerships that will really support communities who want to have this conversation, are committed to creating a more diverse representation downtown. So, you're going to see more resources come from the Center focused on the diversity issue. You know, the five-year question, Eve, is a really hard one because I'm spending all the time with Main Street. So, every year sort of presents a new challenge and you never know what's coming down the road for you. I hope that, you know, five years from now, we've got double the membership and that we honestly have really engaged on the diversity issue in a really meaningful way. Eve: [00:29:38] Yeah, I think that's a good goal. And I hope there's quite a few more main streets with less vacant storefronts. Patrice: [00:29:45] That's a good hope as well. Eve: [00:29:48] Well, thank you very much for talking to me today. And I'm really looking forward to seeing what else, what else happens. Patrice: [00:29:54] Thanks Eve, great to talk to you as well. Eve: [00:30:08] That was Patrice Frey, the president and CEO of The National Main Street Center. Patrice impressed on me the importance of main streets. These commercial corridors are often the single biggest asset that a neighborhood or small town has. They are the center of commercial activity, often full of well-built, historic buildings, and they are the heart of their community. It's important that they thrive. It's important that they are saved and reused in ways that befit the way we live today. Eve: [00:30:47] You can find out more about impact real estate investing and access the show notes for today's episode at my website, evepicker.com. While you're there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Eve: [00:31:04] Thank you so much for spending your time with me today. And thank you, Patrice, for sharing your thoughts with me. We'll talk again soon but for now, this is Eve Picker signing off to go make some change.
29 minutes | 3 months ago
Cities are networks.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:07] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:13] My guest today is Bruce Katz, co-founder of New Localism Advisors. Over the last 25 years, Bruce has established himself as one of the foremost policy experts working on urban and metro areas. He founded the Metro Policy Program at the Brookings Institution and is credited with reshaping and revitalizing several cities in the U.S. More recently, he co-wrote several books shifting his thinking to how cities can thrive in the age of populism, what he calls the new localism. Eve: [00:00:52] Be sure to go to evepicker.com to find out more about Bruce on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change. Eve: [00:01:13] Hello, Bruce. I'm so pleased you could join me today. Bruce Katz: [00:01:16] Well, thanks for having me. [00:01:18] Yeah, it's really a pleasure. So, I would really love to talk about your current work and what you call the new localism. And first, I just wanted to know what that means. Bruce: [00:01:29] Well, I think the new localism is the way we solve problems in the world today. Cities are networks of public, private, civic, community institutions, intermediaries. They're not governments. And I think the kinds of challenges we have today require multidisciplinary and multi-sectoral solutions. And so, cities have become the places where you can do that. Whether it's around transportation or housing or small business or any number of other significant challenges we have today. Eve: [00:02:10] How do you see this trend emerging? Bruce: [00:02:12] Well, I think it's been emerging for quite some time. In the United States it's emerged partly to fill the vacuum left by a dysfunctional and erratic federal government. In many states, also, which have ceased to function in any effective and efficient manner. I mean, obviously, you've seen this play out during the Covid crisis in the United States. So, I think what has happened is governments at the higher levels, quote unquote, of our societies have become hijacked by partisanship and have been divided by ideological polarization. And so, the only place where pragmatism and problem solving is the order of the day is the local, is the city level or county or metropolitan level, because that's where you have different stakeholders who come together to collaborate to compete and collaborate to solve problems. So I think this is partly as a response to the growing partisanship in the United States and around the world, and partly just because 21st century solutions, which are enormously complex, require multi-sectoral horizontal solutions rather than one agency, one bureaucracy, which is more the way government is organized, resolving the issue. Eve: [00:03:38] So, yeah, I'm not sure whether I find that comforting or scary. So, if the federal government is letting us down, we have to rely on each other locally that could be really good in a way that that could really promote innovation and entrepreneurism that's probably impossible at the federal government level. Bruce: [00:03:59] Well, I think for, you know, the mid 20th century is when we saw national governments balloon up in the United States. It happened in the aftermath of the Second World War. And there's a purpose with national governments. They play a very important role around the safety net, around, obviously, universal health care and, you know, other essential supports for families. They obviously, the defence role they play around the military and so forth. I mean, there are certain things that a national government does that local networks can't do, and they should do that job well. But they are not the full sum of a nation, you know, and the United States is a federal republic with enormous amount of power and capacity and resources distributed and decentralized. And so, really what the new localism is about is about harnessing and leveraging all this incredible, innovative power that we have in our country to solve problems and push forward. And the national government can be a platform for that and be a participant in it. But we shouldn't be looking to that level to solve issues that, at the end of the day, require so much local interaction and local networks. Eve: [00:05:33] That makes a lot of sense. So, I mean, what does this mean pragmatically then, for cities and metropolitan areas, at least in the way they are organized and might reorganize themselves moving forward? Bruce: [00:05:48] Well, first is recognition that cities are not governments and metropolitan areas are not government, so you shouldn't be thinking the way we think about government. When we think about government, we say, well, what's the Department of Transportation going to do? Or what's the Department of Housing going to do? Very bureaucratic, very vertical, very hierarchical. Cities are networks so we should be thinking about, if we're going to solve our congestion problem or solve our housing affordability problem or grow Black- and brown-owned business. What's the network way of doing that? How do we knit together different kinds of sectors, different ways of thinking, different sources of capital? It's more likely that those solutions that are horizontal rather than vertical will be more sustained over time. Bruce: [00:06:37] So, you know, thinking through network governance, right? Not just who do we elect to be mayor or county executive, which is very important, but really, how does universities and health care systems and corporations and entrepreneurs and the public sector philanthropies, how do these work together around solving specific concrete, tangible solutions or problems? I mean, what I'm trying to basically put forward with the new localism, which I co-wrote with a close friend of mine, Jeremy Nowak, is a completely different way of thinking about how we solve problems in the 21st century. And it's to get away from 20th century thinking about government and silos and compartments as a way to do that. Eve: [00:07:29] So, you know, I have I have a couple of questions around that and one is what brought you to this thinking? Bruce: [00:07:36] Well, I spent my professional career moving from the federal level to the local level. I was chief of staff at HUD, the federal Department of Housing and Urban Development in the United States. I was chief of staff, staff director of a U.S. Senate subcommittee on Housing and Urban Affairs. So, I, I spent 10 years in the federal government working on issues of importance to cities but coming at it from a top down perspective. Then I left to start a city think tank at the Brookings Institution in Washington, D.C., and really spent the next two decades working with cities all over the U.S. and around the world and beginning to work out a different theory around bottom-up nation building, essentially. Bruce: [00:08:24] And so I've traveled a pretty long circle here of starting at the federal level, wanting to work on cities, but then really trying to work with cities and think through different mechanisms, different approaches and fundamentally different, more transformational outcomes that we're trying to achieve. So, you know, we're in an odd moment now because of these multiple pandemics that we're facing in the United States and beyond. The health pandemic, the race pandemic. But at the end of the day, I think success will occur ultimately when communities, cities, counties, metropolitan areas are able to operate in this in a very radically different way than they’ve operated in the past. Eve: [00:09:13] Interesting. So, you know, are there some cities that have emerged that are shining examples of this new power shift or new localism? Bruce: [00:09:24] I think many cities actually have, and the crises that we're going through have forced more collaboration across multiple sectors. In the book, The New Localism, we wrote a lot about Pittsburgh, which is sort of an informal network of philanthropies, universities, hospitals, corporations, government, community, to sort of lift Pittsburgh from the depths of a industrial collapse, which happened back in the late 1970s. Pittsburgh today is seen as that incredible vanguard of the innovative economy, partly because of..... Eve: [00:10:04] I have to, I have to say full disclosure. You're not just saying that because I'm in Pittsburgh, right? Bruce: [00:10:10] No, not at all. I didn't even know you were, but. Eve: [00:10:12] I'm in Pittsburgh, so I've seen that transformation firsthand. It was pretty interesting and mind blowing to watch. But please, please go on. Bruce: [00:10:24] Pittsburgh was a normal older industrial city in the United States. It would have been left for dead. I mean, most were, right? I mean, the comeback of Pittsburgh is because of local leaders understanding their distinctive advantages, investing in them for decades without any significant returns. And now, as the economy restructures and we move to the next generation of technologies, Pittsburgh has the ability not just to be a competitive city, but to be an inclusive city. So, Pittsburgh has an informal network that has been operating for decades. Indianapolis, which we also talk about has a more formal structure where the corporations and the universities and the philanthropies came together and set up an entity called the Central Indiana Corporate Partnership to literally help steward the economy for several decades. And what distinguishes Pittsburgh and Indianapolis is the ability to think long term. The US is a very short-term culture. Someone once said to me their idea of planning was lunch. We have a culture that looks at, you know, the corporations look at quarterly returns. You know, people watch stock market gyrations on a daily basis. The key here is to think in these 20, 25, 40-year cycles, just that's how long it takes to really restructure economies and to have them have full inclusive effect. Eve: [00:12:01] That's really interesting. So, you know, I've actually seen that myself as I invested in properties in Pittsburgh maybe two decades ago. And now the city is, I don't know if I would say booming, but it's certainly in a very different place. But, you know, one of the things that we haven't done well here in Pittsburgh and I'm sure is probably mimicked in other places, is the race issue where I think Black people have been left behind for a whole multitude of reasons. And, you know, the affordable housing which affects every city certainly becomes worse when a city gains more value. So, are local leaders really thinking about that well enough in advance? Bruce: [00:12:48] Well, I think this is a, you know, this is an interesting thing about the United States and the other story we tell of the new localism is around Copenhagen. And how Copenhagen was able to move from an older industrial city where manufacturing collapsed to really one of the wealthiest cities of the world in a 30-year cycle. They did that because they established a public asset corporation that was able to use the land and the buildings that were owned by the public sector to basically grow a very different kind of economy and then to generate revenues as the economy grew so that they were able to reinvest in infrastructure. So, there was a public benefit to growth. In the US, the benefit to growth only accrues to the private sector, right? In Northern Europe, in Germany and the Netherlands and in Denmark and the Nordics there is a public benefit. The public has a piece of the pie, so to speak. So, as the pie grows, you're able to generate revenues that can benefit a much broader segment of the population. Eve: [00:14:00] That's interesting. Yeah, the other place I've been watching with interest is Australia, because I've been gone from there for a long time, but they really lack an affordable housing policy and they're.... it's a very wealthy country. And from what I've seen, they've done a very poor job of transferring any of that wealth for public benefit. So, I don't think the US is the only place with this issue. Don't know if I'm right, but that's my guess. Bruce: [00:14:31] Well, I think it's, again, I think of the US. The US as quite odd because in the United States we tend to localize education policy and to some extent, nationalize housing policy. The rest of the world operates in a completely different way. They tend to natutionalize education policy and localize housing policy, right? So, the reason why Hamburg and Copenhagen and Stockholm are able to grow very robust economies but continually invest in affordable housing is because it's localized in these places. They're not looking to their national governments to somehow solve the housing problem. They're basically baking in affordability in the way they grow. And so, a lot of what really applies to cities is to think at a system level but to also think at a global level, because somewhere in the world there's a city that's cracking the code on whatever the issue that bedevils you. And that means that there's just a very broad sort of pool of cities to draw from. Eve: [00:15:42] Yeah, interesting. Do you know of any cities in the US cracking the affordable housing code, so to speak? Bruce: [00:15:50] I think they're mostly sort of at the edges of the affordable housing problem because I think it'll take a radical systemic change. I mean, I think it'll take what essentially is more of a German or Danish model and applying it here. We're doing bits of that, but we're not doing it at the scale they're doing it. So, I think we haven't quite broken out of our own failed system to tell you the truth. You know, on the other hand, you know, the Germans and the Danes and others could learn a lot from our innovation ecosystem, right? The US is hard wired around technological innovation and the rest of the world, you know, some parts of the world are obviously very competitive with us, but we have basically built the very unique U.S. innovation ecosystem. Built, by the way, on federal research and development like at Carnegie Mellon or Pitt, or etc. But we're quite good at that and we're quite terrible at these other things. Eve: [00:17:00] Yeah. So, and then, how do you think this pandemic, the health pandemic, might change the trajectory for these rising cities, the cities that are actually doing a good job of new localism? Bruce: [00:17:15] Well, personally, it just depends how long this going to go on for? Eve: [00:17:20] A yeah, we know it's going to go for a little while, right? Bruce: [00:17:22] I'm very concerned as we keep cycling through this. So this is a moment where you really do need the national government to step in and sort of catch everyone if they fall, catch people through unemployment insurance, catch small businesses through capital that's fit to purpose, catch local and county and state governments because of the loss of fiscal revenue. This is the role the federal government, right? This is why we have a federal government. They play this role during natural disasters like hurricanes or floods. Well, this is a hurricane happening everywhere, for an uncertain period of time. And what we really don't have at the national level at this stage, curbing the spread of the virus or responding to its economic effects, is any kind of functional, predictable, reliable partner. It's just partisanship. We're know nothing-ism, you know, on steroids. So, I am worried that the aftermath of this pandemic is going to be with us for a long period of time because of the centrally federal malpractice. Other countries have already come out of the pandemic like the Nordics, and they were smarter about how they supported their workers, their companies and their cities during the entire process. So, I'm very worried about the decade long effect of the corona virus. And on top of it now, we have civil unrest following the death, the murder of George Floyd and we need systems change in the US. And that's the only way that we're going to accelerate any kind of inclusive growth recovery. And it's going to require some real soul searching about why the economic performance and prosperity we had pre-covid was not shared by large segments of our population. So, there's no return to normal here. And normal was not getting us the kind of outcomes we wanted in the first place. Eve: [00:19:39] Yeah, exactly. No more is not getting us the outcomes. You know, the question I have is how, there's so many answers to this, how do you make cities more equitable places for everyone? Because they are inequitable in a thousand and one ways. And yeah, I could see that networks of people are perhaps the only way to solve it. I don't know. It's a very big problem. Bruce: [00:20:05] Well, we do take what we're good at. We're very good at innovation in the US. It's partly because we have an ecosystem in every major city. Take Pittsburgh, we have advanced research. We have the companies. We have start-ups and scale-ups. We have capital to commercialize research, you know, with angel loans, seed money, series A's, Series B, we have incubators we have accelerators. We have an ecosystem. If you move that over to, how do we grow Black-owned business or Latino-owned business or even women-owned businesses. There frankly is no ecosystem. Eve: [00:20:40] No, there's no ecosystem. Bruce: [00:20:41] We have a, we have sets of goals. Sometimes we have set asides, but we don't really have this deep infrastructure, intermediaries and different kinds of capital that fit the purpose. So, I think that's what has to happen. We should take what we're good at and begin to apply it more broadly. We're never going to be the Danes or the Germans or the Israelis or someone else. I mean, we need to take what is exceptionally American, this network of sectors that tend to come together and collaborate to compete globally, we need to build on that because that is what makes us highly distinctive in the world. Eve: [00:21:24] Yeah. On a slightly different track. Do you think there are any current trends in real estate development that are important to the future of cities? Keeping in mind the pandemic as well, I think about this a lot. And, you know, I own real estate with restaurant tenants, and we talk about whether they will survive or not and what it's going to look like. Bruce: [00:21:49] Well, to some extent, what you're describing is that a lot of landlords in the US are really small business, so... Eve: [00:21:56] Oh yeah, they are. Absolutely. Bruce: [00:21:57] So, there's a domino effect to this crisis as we just shut down the economy. The first that were affected were the face-to-face businesses like restaurants and bars and hair salons. But all of those businesses are ecosystems unto themselves. They have lenders, they have landlords, they have suppliers, they have workers, they have customers. So, this whole crisis has exposed the intricacy and the complexity of our economies. I've been working on this idea about a new kind of intermediary that we're calling regenerators, you know, in our main streets, where many of our face serving businesses are co-located and concentrated. And over the course of the next several years, I think what we need to do is have entities that can refill vacant buildings quickly, maybe pop-ups that can provide master leases. So that we don't see a collapse in the real estate sector, essentially looking for an intermediary that can stabilize important cadres and business districts and main streets in our cities until we really begin to see businessman come back to where it needs to be. So, I think part of the issue here is just the need for different kinds of business models. If we think that every small business is going to snap back by itself, I think we're delusional. I think we need more collaborative, cooperative models, particularly around retail and particularly around these business districts in which a lot of enterprises co-locate. And real estate's a big part of that. Eve: [00:23:47] Yeah, it is. Bruce: [00:23:47] Another cost of the equation. Eve: [00:23:50] Yeah, definitely. I am also very worried. But I'm pretty sure we're going to get through it one way or another. So, what what's your hope for cities and metros maybe in the next five or 10 years? Bruce: [00:24:06] You know the imperative, I think at this point, is that cities and metros begin to grow in very different ways, right? The kind of growth that we had in the US pre-crises was not sustainable and was not inclusive. I mean, the US was not making the kind of transition to a carbon neutral future that needs to be made. Copenhagen is, Stockholm is. But our cities were not. At the same time our cities were not really growing income or wealth for large portions of their populations due to a whole complex set of reasons, some deeply rooted in our history. So, we need a different growth model in the US. And there's a lot of commitment to, quote unquote, inclusive growth and quote unquote, sustainable growth. But those are slippery terms. They're vague terms. So my hope in the next year or so is that U.S. cities and metropolitan areas commit to some audacious goals for the next decade and then use this period to sort of back cast the kind of more ambitious initiatives and system change that's necessary so that they can achieve those goals. And if the federal government can be a partner, fantastic, they should be. If states can be partners, great. But the vision for what our future should look like should be essentially designed locally. Eve: [00:25:46] Oh, I can't wait to see that. Bruce: [00:25:47] These are systems or communities with radically different pasts and different priorities, and they should, so, every major city in Metro of the US should be going through this kind of process. Eve: [00:26:01] It's an exciting thought. And so, final question, what's next for you? You said you're very busy. Bruce: [00:26:09] I've been spending a lot of time thinking about this question about, and, you know, first of all, looking at the current set of data that we have in the US around Black-owned business, brown-owned business, and trying to think through what would be a step change. You know, only two percent of employer firms in the US are owned by Blacks today. They're 14 percent of our population. There's a whole set of reasons around that. So, the question is, if over the next decade we were going to double that share or triple that share and also have Black-owned businesses participate in sectors of the economy which tends to pay higher wages, have higher benefits, higher revenues. What would that take? And I think that's the kind of system building that I'm really interested in working on, perhaps with the next administration, should that come to pass in this election, but also really growing from the local level on up. So, intensely focused on building what I call community wealth in the US as a antidote to the kind of deep racial and ethnic disparities on income, health and wealth we have today. Eve: [00:27:31] Well, I, I really can't wait to see what comes of it and I really appreciate the time you've taken today. Thank you so much. Bruce: [00:27:38] No, thanks for having me. I really appreciate the. Eve: [00:28:00] That was Bruce Katz. Bruce thinks we should stop thinking about cities as governments and instead think of them as networks. The question is, how can we knit together lasting solutions to improve our cities from a network of leaders, both public and private? Transforming our cities requires long term thinking. It will take a 20 to 40-year cycle. But Bruce believes this is an imperative. We need a different model in the U.S. for growth so that it is sustainable and inclusive. Eve: [00:28:40] You can find out more about impact real estate investing and access the show notes for today's episode at my website EvePicker.com. While you're there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Eve: [00:28:58] Thank you so much for spending your time with me today. And thank you, Bruce, for sharing your thoughts. We'll talk again soon. But for now, this is Eve Picker signing off to go make some change.
29 minutes | 3 months ago
Building virtual communities.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:11] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:18] My guest today is Michael Lee of BLDG BLOX a civic technology company dedicated to empowering neighborhood stakeholdership. Their goal is to help shape better, more resilient and inclusive cities. In this podcast, we're diving into Michael's current primary focus, an online platform called BLDG. It's a platform for neighborhood collaboration and it's picking up steam. So, listen in to learn more. Eve: [00:00:57] Be sure to go to evepicker.com to find out more about Michael on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change. Eve: [00:01:21] Hello, Michael, I'm excited to have you here today. Michael Lee: [00:01:25] Hi Eve, thanks for having me on. I'm very excited to be here. Eve: [00:01:26] It's a pleasure. So, you’re a wayward architect, much like me, and you've built a very cool app, which I'd like you to tell me a little bit about. Michael: [00:01:36] Absolutely. So, you mentioned the background in architecture. Just a little back story. I was trained as an architect. I moved towards public art and cultural consulting. And back in 2016, my co-founder introduced me to a lot of developments that were happening in the blockchain space. And so blockchain can be very complicated with cryptocurrency and things like that but for the sake our app and this conversation, essentially, we were looking at decentralized technologies. Ways that we could create and distribute more value, track it and, with our background in architecture and urban design, we saw an opportunity for that to impact the way we do real estate, the way we deal with communities and community growth. And so, we created a company called BLDG BLOX and for the past few years we've been developing this app. We just launched it at the beginning of this year before everything happened with covid. It's called the BLDG app, it's live and the app is a online bulletin board to manage projects with your community. So, these are real estate projects, these are coworking spaces, mutual aid groups, non-profits. Any organization or new initiative that is looking to build alongside, build consensus, build value with the communities that are involved. Eve: [00:02:53] Okay. So, you use blockchain and do you use other technologies on this app? I'd love to know a little bit more about the technology. Michael: [00:03:02] Sure. It's a web application, so you don't have to download anything. You go to bldg.app, BLDG app and it's all online. Similar to how you use Kickstarter, Instagram. So the front end is fairly user friendly, you can use Google or Facebook to log in and on the back end we're starting to implement and integrate everything that goes on in the app. Typically with a lot of social media apps, web applications, you don't really know where the data is going and what's being tracked. On ours we are starting to link it to the blockchain. So, all the activity is very transparent. And our goal is to be able to make all that data transparent, compile it in a way that other organizations, whether it's, it can be investors as well, can start to see how a project, in this case a real estate project, is acting, what kind of value it's distributing, how people engage it and start to value, again, in this case, social impacts in a way that can be measured more dynamically. So, we're starting to use this transparent ledger system as a way to create a new foundation for impact. That's kind of the way we're seeing it. Eve: [00:04:12] How interesting. And who will have access to that ledger and all that information? Michael: [00:04:17] When the blockchain information becomes live, when all these transactions become live, anyone can see the information. And on the application, itself, when those metrics are up, we'll have a much more user-friendly UI for people to understand: OK, this project is involving this amount of people this is not a value transferred, these are the number of community members involved in a project. This information will all be tracked holistically in the app as people use it, and we'll present it to different project owners, so they know how much impact. however they define impact, is going into the project. Eve: [00:04:55] Well, that's really interesting. So, I'm going to change some of the questions I was going to ask you. I was going to ask you, how is this different than other social media apps like Facebook or perhaps Nextdoor or Meetup? But, you know, the data collection that you're doing is pretty radically different than any of those, right? Michael: [00:05:16] Right. That's generally the ethos of a lot of people who work with this new technology, with blockchain. And what you see with a lot of applications is you don't really know what data is being collected and how it's being used. We generally know that it's monetized privately with adverts and things like that. We want to be able to open up, democratize, the power of data and open it up so that people can use it in all different ways. In this case, and this is really the long term vision of this first app and other functionalities or apps that we produce under the umbrella of BLDG and BLDG BLOX, is that we can start to track data dynamically and then use that for, for example, driving certain people to invest in certain projects or to decide which projects they think are really impactful for their community and be involved in those. Data can be used in a lot of different ways that I think we just haven't gotten to that point yet. And this new infrastructure really motivates us to expand and explore those possibilities of data and make more informed decisions, more empowering decisions. Eve: [00:06:24] I did play around with the app a little bit, and I see when you go to some of the communities, they have sort of slightly different functions. So, when you create a new page, what are your options? How do you set up a community? What sort of communities can you set up? Michael: [00:06:40] So you can log onto the app right now and create a project page. It's fairly straightforward, takes about a minute or two to create one. And then the idea is you would send that page just like an Instagram page to anybody that you think is part of the community or wants to be part of that community. They can sign up and join right away and then everybody involved can start to post questions or polls or ideas or different things that they want to offer. There's different tags for events, for polls, for ideation. And the idea, again, is to allow anyone to bring to the table whatever they want to and start discussions or start voting or start to see if they can gather the resources, they need to push that particular project forward. And so we're already starting to see projects that are more university-based or socially-based with mutual aid groups, especially now during Covid under the quarantine, and the projects are fairly diverse and everyone is on there basically to try to pool resources, help one another and make decisions together. And that's really what the app is geared towards. Eve: [00:07:48] Interesting. So, could you use this as a community engagement tool if you're a real estate developer? Michael: [00:07:55] That's definitely the goal. We've already started to work with co-working spaces where the owner of the coworking space is the real estate developer or the one that developed it. And the idea, and our thesis here, and we want to get deeper with the real estate industry and with prop tech and people that are looking at more of these impactful ways to do real estate, is integrate this application with their development process and allow, and we're starting to see real estate firms do this more and more, allow people who are maybe the tenants of the building or people who live nearby where the community board that is involved with the decision making of that building to be involved and help make further decisions, help maintain the project, help gain equity in the project, whatever that might be in both financial and non-financial ways, and generally nurture this idea of community buying and stakeholdership with the people that are involved, which I generally believe, my thesis behind all of this is that the more people that are involved, the more doors that are open for a community to have buy-in and participate, the more successful a real estate project will be in the long term. And so that's really our ethos when it comes to how this impacts the real estate sector. Eve: [00:09:11] You know, I have Small Change, which is a crowdfunding platform. And because we are members of FINRA and use a crowdfunding regulation that permits anyone to invest, we're highly regulated and we can't really host discussions on our website. So, what sort of page would you create for Small Change that might help people educate themselves and talk to other people? What would that look like? Michael: [00:09:38] So, Small Change is a great example because you can look at it as an organization that houses projects under it. And so, with Small Change itself, you can use the page to interact with the people who are crowdfunding on the page, host more evergreen information. So, tutorials or tips that will help anyone that wants to engage with Small Change. And then, on a secondary level, all of the projects, because presumably any project that is crowdfunding on your platform wants to have meaningful impact not just in this crowdfunding process, but also likely once the project is erected and live, and people are occupying it. They want to make sure that their project lives on in an impactful way and impactful stakeholders are part of it and it continues to have that kind of general consequence with the neighborhood that it's being built in. And so, each one of the projects could have its own page and then people can continue to support the project financially and non-financially, which is a big emphasis on our platform. If certain projects need help with physical aspects of the building, with the architectural design, with the construction documents, that's one thing they can solicit, and members could offer. If they need help with programming or maintenance or they need help with integration with local organizations and institutions to be involved in their project. That's the type of, sort of playground, as some of our users have put it, that these types of projects could create so that their constituents can come together and contribute things that typically have been very difficult to contribute in the past beyond the financial aspect. And we're already working with some crowdfunding platforms to see if we can expand the initial financial support that has been opened up to a larger audience and then see if they can continue, that audience can continue to support those projects in non-financial ways as well, with their expertise, with their network, with their in kind donations and categories like that. Eve: [00:11:34] Interesting. You know, there's always sort of a push pull with real estate developers who are, that's kind of an evil would at the moment isn't it, developer? How they communicate with the community. It can be very difficult and there can be a lot of friction so it sounds like this might help bond some relationships. Michael: [00:11:57] That's precisely what we want to hit on. We understand the friction there. I myself, I go to community board meetings and I see, I live in Bushwick and Backstein, New York City and Brooklyn and there's development happening all the time. And when you go to these meetings with developers and the community, it's very palpable, the tension there. And our approach to this and our understanding is, because there isn't a good way for communities to collaborate with developers, for that communication to actually scale and take place, the resulting situation is one of great tension and opposition. And we're seeing that. We're seeing a rise in NIMBYism, a rising neighborhood opposition. Just last year, we had the whole fiasco around Amazon's HQ2, in Long Island City. And so, we're looking at projects like this. And we see that not just at the highest, at the very top with Amazon, Google, Facebook, where their campuses have been consistently opposed, but also at a much smaller scale. So, with mixed use housing in New York, that's a big point of tension. And there's always this negotiation, which tends to be very tense, tends to be not so good-willed, or at least get to that point. Eve: [00:13:10] Right, very confrontational. Michael: [00:13:12] Very confrontational. And we want to transform that environment. And I really believe that if we had the right tools, that environment would be different. And if we can transform that environment to one where people feel like their voice is being heard, they're participating in it, we can turn it into a from a lose-lose situation, into a win-win. Because currently there's so much risk on the side of real estate developers because they understand that, with all these tools of social media and the way communities are mobilizing, it's very easy to oppose projects. And on the other side, communities are struggling with the idea because they want to see meaningful and impactful development, but because they're not able to come to the table with developers in a meaningful way, those tend to become very risky for them and it's easier to oppose. And so, it's currently a very lose-lose situation. But if we can insert the kind of right tools and the ways for people to communicate, we're hoping we can flip that on its head. Eve: [00:14:05] Have you thought at all about, and this is a really difficult question so I apologize in advance, but have you thought at all about communities that poorer, have less investment, may not have access to computers and, you know, an online app and how this would fit into those communities, how you would make it accessible? Michael: [00:14:27] That is definitely a difficult challenge that we're struggling with on an ongoing way. And part of our answer, at this point, goes into design of the app. So, we didn't want to have a downloadable mobile app. We think that creates another point of friction. It's just a website you go into, you can sign in with any email. And so, we definitely want to make it technologically as accessible as possible. The other way that we're trying to get over that is working very closely with the organizations that sign up for the app. And so, presumably anybody that creates a project page, there're a real person or real organization. They have a physical presence wherever they are, and their projects are mostly physical. So, spaces and buildings and such. And so, we constantly communicate with them to make sure that we can bring in even constituents that don't use a computer or device very often. We can bring in their input, we can have a way to capture that data, that advice, those comments, different ways that people who aren't on the computer all the time can contribute. And so, this is a way that we're dealing with the issue. But we definitely see that as an ongoing hurdle. We want every demographic to be involved. This is even more sensitive in places that people don't have access to those resources. And this is what makes the Covid19 situation so unfortunate. Before everything happened, we were constantly holding workshops, we were showing people how it was done, we were pairing people who do use the computer fairly often with people who weren't, trying to make this engagement as digital as it was physical. And now we're trying to adapt to the situation and make sure that even, you know, if you aren't as technologically fluent or don't have access to those resources, your information and your voice can make its way to the application. That's definitely a very sensitive and difficult point and we're always working on that. Eve: [00:16:18] Unfortunately, that pandemic has disenfranchised those communities even further. It's really pretty sad. So, tell me again how you arrived at this app. Your background, you're an architect. You've gone to a pretty unusual route. Michael: [00:16:36] We have gone an unusual route. And the one thing we've always interested in is the process. Even when I was studying architecture and practicing architecture, the process in which buildings were designed and created seemed very linear, depending on what was being created. It didn't take into account the community that was being impacted the most. And this, of course, is a common theme in real estate as well. And so, the concern is how do we bring as many people into the process as possible? And when we looked at the current tools, at the time around 2015 and 16, we just came to the conclusion that no matter what you did with things like Facebook pages, or on Slack, it's very difficult to scale decision making, engagement, to exchange resources and distribute resources. And that's how we came to this idea of creating a new digital tool. And again, we were lucky because it timed well with the emergence of blockchain and decentralized technologies to explore this. And if you look at the blockchain sector, we see a lot of people with real estate backgrounds actually exploring this as well. So, you have groups like Elevated Returns and HARBOR, RealBlocks. These are real estate firms that are introducing ideas of fractionalized, equity. And starting to use real estate equity more like corporate stocks of shares, making them more liquid accessible. And my ultimate goal is to introduce this idea of sweat equity into the real estate market and any general organizational market. And that's kind of how we got to this idea of the application and starting off with one that brings communities and organizations together. Eve: [00:18:22] Interesting. So what other projects are you thinking about? You said this is one of, you know, one of a number. Michael: [00:18:30] Well, so, we want to start, and we are starting with the BLDG app as the first step. And within the app and around the app we want to create more functions and more components. For example, right now on the app you can create a project page and start to engage with the community, distribute responsibility, you can see what backgrounds your community members have, whether they're an engineer or a marketing person and so forth, and start to bring those resources together to try to drive and motivate those project further. We're going to implement more of that blockchain data system that I just explained and have it so that other companies, other investors, can look at these projects and make decisions on their own behalf based on this data and what's going on. And whether that's in another app or in this one, we want to continue to grow out more functions where people have more opportunity to engage in their local real estate projects, to contribute to them, to help make decisions and then eventually get to the point where people can earn sweat equity in those real estate projects based on their contributions to those projects, not just the financial contributions, but also, like you see in start-ups or in general any corporation, people can earn equity based on their commitment or how long they've been there or their general value to that company. We want to get to that point. And so, we are constantly going to expand on the tools that real estate companies that investors that community stakeholders can use to determine that value for any given local project. Eve: [00:20:04] Interesting. So, then I have to ask you, what's the big, hairy, audacious goal for this app? Like, where would you like it to be in five years or in 10 years? Michael: [00:20:13] In five or 10 years I would like it to be a place where new products are born or existing ones are continued and everyone involved is, quote unquote, rewarded for their contributions. That's the type of economy that myself and my team are really working towards, that no matter how small scale the project, no matter how new or no matter how big and burdensome, like a large mixed-use project for example, people's contributions allow them a level of equity or a level of buy-in to those projects. And people who are involved are constantly discovering new opportunities as they commit themselves to those projects. Because we all understand, to a certain degree, that the success of a real estate project is based on so many multi valuable factors. The environments, the general safety of it, the vibrancy, the culture that's there, the diverse community that's there and we want to be able to quantify that value in a way that's constantly evolving and anyone that helps contribute to those forms of value are rewarded with something that allows it to have buy-in to those projects. Eve: [00:21:22] So has that happened yet at all, in any form? Michael: [00:21:26] To my knowledge, we have not seen that happen financially in the real estate sector. There are social impact, real estate firms that are experimenting with, for example, reduced rent based on if you help maintain the property that you own. We're seeing different kinds of economic deals being put into place that are trying to incentivize people who actually have equity to maintain it and they can get some value back with its reduced rent or other opportunities like that. I would like to see that pushed and evolved even further where, you know, you're the doorman that lives in your building, or maybe the person who, the tenant that has a educational business in your building, these people can continue and are incentivized to contribute and earn an actual financial stake in the project in the long term. We understand that these are the types of people and programs and activities that give a building or a city the value that it has. And we should be able to recursively reward the people who are actively contributing to that value, not just see it as a mutually exclusive thing that happens within our buildings. Eve: [00:22:34] Yeah, yeah. Interesting. So final question for you. What's next for you? You sound super busy and I know what it's like working on something like this, it's all consuming. Covid19 has shifted things a bit, so what's next? Michael: [00:22:50] So definitely. Bringing up Covid19, you know, we are all struggling with this transition to a more remote environment. And I think, like you mentioned before, the disenfranchised communities are suffering even more now. They don't have access to all of these tools. That's another reason why we wanted to create this space. We didn't want to create another just hammer or tool for the digital environment we wanted to place where people can bring their Zoom conversations together or they are resource sharing on Google Drive to one place. Our goal for the near future is just to help these communities, one by one, transition to the site, make use of all the tools and try to get their community together, because this is a time when communities are kind of just being torn apart naturally because we are physically distinct from each other and distanced. We want to help rebuild this community, or these communities, by transitioning them to these online tools. We're very excited and very hopeful. We're already getting a lot of feedback from people saying that, you know, the current tools are very unscalable. There are 10 or 20 different tools that they have to manage all at once. And it's very difficult to scale on that promise to their constituents that they'll stay involved, that they'll keep them involved in their process. Eve: [00:24:04] Very difficult. Very difficult. Michael: [00:24:07] Right. And we want to be able to push a bit of that momentum and help support these communities. Anyone that signs up to the site organically, we reach out to and we say, hey, can we help? You know, tell us about your organization, what are the challenges you're struggling with? Is there any way we can help any features you think we could implement? Because the app is constantly evolving. And we're also constantly reaching out to organizations that we think we can help. We're seeing everywhere, you know, people who are less active on Facebook or their own websites and media channels because we know that internally they're struggling with how to transition into this new environment, especially now. And we are constantly trying to outreach to them and say, look, we know you're struggling. We know you need different kinds of support and these tools were doing OK when you were meeting in person or working in person but now that we've transitioned, it's very difficult to keep things in order and keep everyone involved. So, at this point, we just really want to help as many organizations as possible transition and make use of the resources available. And we want to be one of those stable resources. Eve: [00:25:15] Well, I think it's a terrific idea and I'm going to start by suggesting it to a couple of developers who raised funds on Small Change and are perpetually struggling with how to relay progress to the investors. So, I think it would be a great way to create a little community of investors. So that's a starting point for us and you and I will be talking more about how it might work for Small Change, I'm sure. Michael: [00:25:39] Absolutely. That would be fantastic. I mean, anyone that's raised on Small Change or is hearing this and thinks that this might be interesting, social impacts, real estate investing is, is definitely interesting because when I speak to a lot of real estate developers, they are all interested in this idea or already committed to this idea. And yet it's difficult to find places where you can communicate with other like-minded people, share those resources and in terms of impact real estate investing, we definitely want to help foster that type of conversation and that resource sharing. Eve: [00:26:11] Maybe that's the first page to start? Michael: [00:26:13] It might be. That might very well be. Eve: [00:26:15] Something around this podcast page. And I just did a retrospective for the year and in the first year I recorded forty-nine podcasts, which is probably why I'm so tired. Michael: [00:26:27] Well you're doing something incredible for the community and we definitely want to build on that momentum. I mean, there's so much experience and lessons to be had. Eve: [00:26:37] That's what I was going to say. The people I interviewed are, each and every one of them, a rock star doing their own thing. And that's a that's a lot of experience, too, corral. It's really interesting. So, I'll definitely be in touch. And thank you very much for taking the time to talk to me today. Michael: [00:26:53] Thank you Eve. Thank you for having me on. Eve: [00:26:59] That was Michael Lee of BLDG BLOX, a civic technology company dedicated to empowering neighborhood stakeholdership. His online platform bldg.app is currently in its beta phase. Michael's goal is to help civic organizations, communities and companies build community and scale decision making. The app is designed to support community building in a myriad of ways. It can be a tool for organized public engagement for new projects, it can support initiatives with campaigns that mobilize their communities or local causes, or it can even serve as a shared workspace. I'm excited to see it unfold. Eve: [00:27:45] You can find out more about impact real estate investing and access to the show notes for today's episode at my website evepicker.com While you're there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Eve: [00:28:04] Thank you so much for spending your time with me today. And thank you, Michael, for sharing your thoughts. We'll talk again soon. But for now, this is Eve Picker signing off to go make some change.
39 minutes | 3 months ago
No guilt. Just action.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:15] Hi there, thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:22] My guest today is Cynthia Muller. She's the director of Mission Driven Investment at the W.K. Kellogg Foundation. Cynthia doesn't see herself as a leader, but she is. She's been described as a thought leader of the impact investing ecosystem and a trailblazer in the field. Cynthia has been at Kellogg since 2016, first serving as a program officer with their mission driven investment division, then as its director. There she is wholly focused on their core mission to deploy investments that help to dismantle the root causes of racial inequity. She's taking action. Eve: [00:01:18] Be sure to go to evepicker.com to find out more about Cynthia on the show notes page for this episode and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change. Eve: [00:01:41] Hi, Cynthia. I'm just really delighted to have this opportunity to talk to you. Cynthia Muller: [00:01:47] Me too, Eve. It's been great, it's great to connect and I've been a huge fan of the podcast and I'm really excited for our conversation today. Eve: [00:01:54] Oh, that's lovely to hear. OK, so I like having fans. So tell me, just to set the scene, what's your background and how did you become a leader in impact investing? Cynthia: [00:02:11] I honestly, I didn't set out, by any reason, I certainly don't think of myself as one now. I'm really just a practitioner and I have the fortune to work for the W.K. Kellogg Foundation, where I lead our Mission Driven Investment program, which is about 13 years old, focused on impact investment. We do both MTRIs, our mission really did invest in market rate investments, as well as concessionary investments known at the foundation as program-related investment. And it's a small 450 million but it's really exciting because that pool has really been a tool for us at the foundation to learn how do we invest with a more equitable lend? How do we invest understanding that not only are we achieving a financial return, but we are also targeting demonstratable, tangible social impact? Cynthia Muller: [00:03:02] And so, 13 years ago when our board approved this, they also declared us an anti-racist organization. In that same year in 2007, our predecessor, previous president of our foundation, as well as board members who are currently and of the past, had, knew that there were opportunities for us to think about how do we use tools differently, how do we think about systems differently? And so, 13 years later, it's all culminating now this intersection between understand that there would be systems that people operate in and even though these systems are built for everyone, they don't work for everyone. And I think what I'm heartened, despite this is a terribly difficult time to see what all of the loss of life, as well as the challenges that many folks are facing, and in particular, the poor Black, native and other marginalized groups that were already systematically left behind who now, yet have a double whammy to try and catch up. Cynthia: [00:04:08] But that is also an incredible opportunity for groups that we fund and that we partner with. These are groups that are in communities. These are groups that, through their advocacy, lived experience and continued representation of the communities, know exactly what tools, what resources they need in order to build the community that will work truly for everyone. So, I'm so excited about that, this work and about the ways in which we can think about these systems, right? Because we're in such a period of inflection. We, in philanthropy, you know, obviously we, like a lot of other industries, are going through our own reckoning and how we navigate the non-profit sector and social impact and even how we navigate being complicit in some of these practices of white supremacy in these systems. So, for me, it's really helping to figure out how to use these tools to unlock and really help to support our folks in developing resources, tools and funds, models that truly could be resonant and sustainable for communities in the long term. Eve: [00:05:12] I read somewhere that you said, you talked about approaching racial equity, not with guilt, but with an impact lens, which I love. I think that's a really meaningful shift in understanding for me, I suppose. And I wanted to start talking about, like, this is a really huge subject we all know but I'm in the little real estate industry section of it and I wanted to start talking about, you know, how the real estate industry fails people of color and what you think are some of the key things going wrong. Cynthia: [00:05:47] Sure. And, I want to couch my remarks carefully, because, again to the point, I don't want to guilt, you know, folks in these conversations. These conversations are really to help illuminate, right? Illuminate how people actually experience working in these systems. And I think, in real estate industry in particular, I think is interesting, obviously built off our understanding of what it means to own land. Our, I should say, Western understanding of what it means to own land. And that's derived from obviously the theft of land from Native Americans several hundred years ago. Cynthia: [00:06:25] And so, the start was there. The start with our fundamental understanding of what it means to land. And so, when you have a society that has been built on taking land from folks already there and then re-giving it out, well of course you're going to have flaws in the system several hundreds of years later because it perpetuates this idea of who owns the land and who has the right to decide on it. But that's not to say that for 2020, I think in the ways that real estate has left Black communities behind, I think it's similar to how the finance industry or even the entertainment industry has left Black communities behind. They leverage the work, the creativity of folks in use of their land. And it really started with slavery, with the renaming of the 40 acres and a mule. And so, folks who had nothing coming out of reconstruction where they were promised this land and they had it for a couple of years before it was unfortunately taken back and given to other folks, and in that case, those who have resources. And so, I think compound that over generations. Right? Every time there was an opportunity for black and brown people to build an asset, to build wealth, unfortunately and systematically, it was taken away through, either through force like we saw in, you know, in many examples that we've been learning about, but we also learned through other means, through legal means, right? Cynthia: [00:07:53] And for me in my own journey, in understanding how these systems work, and even myself being complicit and working in organizations that didn't know, or to understand how, you know, we continue to perpetuate this divide through our financing structures, through how we even underwrite our deals, who we consider deal-worthy, even by zip code. And so I think all of that's to say that we all operate in this environment of a real estate where we understand who owns things based on who it's passed down to, the legal structures, but as we have learned through great reporting like The Atlantic and The New York Times and others, there have been generations of folks who've been losing their land. And one of the greatest examples right now is the great Black land theft. There's a great, great piece in ProPublica on just that. Basically, the systematic theft of Black land that's been left to families through generations. And unfortunately, the families that they gifted this land are unable to, for a variety of reasons, maybe they don't have the assets to find a lawyer or understand how to reach the appropriate folks to document ownership. And so, this creates more vulnerability and predatory behavior by others who see it as an opportunity. [00:09:11] And so, I think that's all to say that's how the system works. We see how the money comes in. We see who is getting financed, how these big real estate funds are able to amass all this property through systematic purchasing. And we see how this plays out in local communities where there are a handful of individuals or families that own the real estate, right? And so, unfortunately, for folks who, like myself, my father was in Vietnam, came back from the war, settled in Alaska and worked as a civilian on the Air Force base for many years and was ultimately able to buy his own property. But that was after a lot of handwringing. He had to jump through a lot of different hoops, thinking about financing in different ways because traditional banks were going to put him through extra steps that he wasn't willing to go through. So, every time we talk about creating wealth for people, that's great. But it's not that everybody has the same access and opportunity to create that wealth. I think that's, quite frankly, how real estate fails black and brown communities. That lack of recognition is very much obviously focused on the bottom line and that exchange of the assets and who owns and how much revenue we can glean from it but we never systematically just sit down and think about who actually is benefiting from this and who is it benefiting from this? Eve: [00:10:37] I mean, that's just a huge problem. And, you know, and the predatory behavior is continuing today in different ways. So, it isn't like it's stopped. So, what would it take to correct this? We're talking about banks that won't lend to certain groups of people. We're talking about people who go into poor neighborhoods and purchase homes for less than market value. We're talk
13 minutes | 5 months ago
A year of podcasts.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:12] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Today marks the first anniversary of this podcast, something I am immensely proud of. [00:00:36] A year ago, I didn’t know that our audience would grow as it has. In fact, a year ago I wasn’t sure we would have an audience at all. And I certainly never imagined that I would have the opportunity to talk with so many extraordinary individuals, leaders and movers in their respective fields, all doing remarkable things. When we started the podcast, I thought we would focus on real estate and the impact it makes. But I’ve discovered that “real estate” is a very broad industry. I’ve found a horde of people working in fascinating niches around this one big central theme – the built environment we all occupy. [00:01:26] These people work in city planning, on affordable housing, in impact investing, on mobility issues, in fintech, as architects, on sustainable development, on community capital, on equity in communities and in many other niches, pushing the boundaries of the built environment to be better for everyone. The range of work that is being accomplished, is quite frankly, astounding. [00:01:59] I learned how big, visionary thinkers make cities better. Like Josh MacManus in How to leave places better than you find them. He’s spent quite a lot of time rebuilding downtown Detroit. Or Tom Murphy, past mayor of Pittsburgh, who showed incredible fortitude in shepherding Pittsburgh from abandoned to reinvented in How to transform a city. And most recently, Avra Jain, who tells us all to look past the working girl on the corner in Beyond the Vagabond. When she looked she saw the future of Biscayne Boulevard. [00:02:45] Other guests have reminded me of the power of zoning, architecture and design starting with Liz Faletta in By right, by design. Her in depth research on the impact of zoning on housing in Los Angeles provides unexpected insight. In Atlanta, Eric Kronberg convinced me yet again of the importance of salvaging architecture in The zoning whisperer. Christine Mondor reinforces the idea that architects can influence the future of cities in The power of design. And Lorenzo Perez’s creativity as a real estate developer in Phoenix caught me off guard in Real estate artist. His approach to transforming ugly desert architecture into beautiful community spaces is wildly creative. [00:03:44] Let’s not forget the housing crisis. Lots of my guests are all in looking for big solutions. John Perfitt and Jason Neville are tackling homeless housing in Los Angeles by re-introducing iconic architecture, in Hungry for disruption; Molly McCabe describes the unusual approach of the Lotus Campaign in Capital is just a tool. Jonathan Tate takes an architect’s approach by focusing on the value of odd lots and the houses you can build on them in Lead by example. Scott Choppin is tackling multi-generational workforce housing in The contrarian developer, an important niche that has gone unnoticed by other housing developers. [00:04:31] Matt Hoffman is focusing instead on how technology might solve the crisis in 7.4 million short. Rebecca Foster, in San Francisco, is busy saving existing affordable housing through financial tools on Accelerating affordable housing. Brian Gaudio has a modular housing solution in Scaling up. And Thibault Manekin (T-bo) of Seawall Development is focusing on specific communities, affordability and astounding preservation efforts in Choose your own rent. [00:05:22] Across the Pacific Ocean, Australian architect Jeremy McCleod has figured out how to deliver Sustainable, affordable and beautiful housing in a market that most people can’t afford. Fellow Australian, Kris Daff, is tackling the same problem in a different way. He’s Assembling communities and offering them a path to home ownership. And across the Atlantic Ocean Marc Koehler is turning the architectural design process upside down by first curating communities and then designing a building around them in his Superlofts project. It’s super fantastic! [00:06:08] Community development and social equity have moved into the foreground this year, and I expect will even more so next. Brian Murray is Embedded in community in Philadelphia, working on projects that provide equitable opportunity for everyone. Josh Lavrinc has spent his career squarely focused on Advancing community development, through capital raising and real estate development Emerick Paul Patterson is busy experimenting with inclusionary community tactics in New York. Listen to his love of diversity in Delicious Urban Soup. [00:06:47] In West Virginia, Brandon Dennison is experimenting as only an entrepreneur can, on how to end generational poverty in A bold experiment in coal country. John Folan, who heads a department of architecture, wants to make sure that the next generation of architects understand the meaning of equity. For John, Equity is the thread. Majora Carter has gone from Revitalization strategist to barista in her efforts to bring equity to the South Bronx, one of the poorest zip codes in the country, and where she lives. “Nobody should have to move out of their neighborhood to live in a better one,” says Majora. Sadie McKeown, in Political will and community, has seen firsthand the influence of good and steady political leadership in building better communities. [00:07:43] Justin Garrett Moore has a day job ensuring the quality of public space in New York City. But on the weekends, he’s knee-deep in redeveloping the community he grew up in. Hear what he’s up against as a black man in Black, white and red(lining). Adam Sgrenci is showing communities how they can control their own destinies, andn educating developers on how to Co-create. Adrian Washington has been developing in Opportunity Zones before they were a thing. He decided a long time ago that Greenfields are boring. And Katie Swenson is the quintessential community architect. Home is the most important community development concept for her. [00:08:43] For insights into economic development and financial inclusion hear Kimber Lanning who is Striving for justice in Arizona or Brian Beckon explain how to raise community capital in Share the wealth. Jorge Newbery is using Fintech to keep people in their homes. He’s saved 10,000 and counting, while Ommeed Sathe sees Big Change in his role at Prudential, helping them to build a billion-dollar impact fund. Lance Chimka who leads an Economic Development Department believes their role should always be First in. Towards growth. Christina Marsh has given herself over to the remaking of Erie in Of service. In Erie. Melissa Koide is researching and advancing ideas on financial inclusion. With Fintech. And Lyneir Richardson, wants to help 1,000 urban entrepreneurs grow their business. [00:09:55] I’ve learned about mobility in cities, and how it touches real estate and equity, from Karina Ricks, who heads a newly energized Department of Mobility, and from Gabe Klein, a mobility rock star, who convinced me that the future of mobility will be enhanced by data in Mobility is pretty pedestrian. Harriet Tregoning is taking on a leadership role with NUMO, the New Urban Mobility Alliance, and explains why in The reluctant planner. And let’s not forget Donald Shoup, parking czar, who believes that parking is over-rated and under-compensated in Parking not required. [00:10:38] Others think about investment in ways I never imagined. Janine Firpo is on a personal journey to ensure that every dollar she invests does good. Listen to her explain why in She’s all in. Laura Callanan is squarely focused on Connecting impact and creativity. And Mark Roderick, a crowdfunding attorney, explains how the Securities and Exchange commissions are opening the doors for Democratizing investment. And why its a huge step forward; [00:11:12] For innovation in the building industry listen to Jennifer Castenson, who surely has her finger on the pulse of new trends, in Living the Jetson life; Or maybe you want to learn about blockchain? Listen to Sandy Selman explain how it might be applied to real estate in Digital twins; and if you are ready to embrace sustainability and saving our planet in the most wholistic way, Sandy Wiggins may just be the one to listen to in Let’s change our mindset. And if you think we need to get back to a former time, listen to Jim Kumon of the Incremental Development Alliance talk about The lost art of small-scale development. He’s teaching small-scale developers how to get back there all over the country. [00:12:01] Phew. That’s a lot of podcasts. I’ve enjoyed every interview with every person. I’m in awe of them all. But it’s time to take some time off to rest, enjoy the weather and just step back from the extraordinary last few months that has rearranged all of our lives. We’ll be back refreshed in September with many more amazing people for you to listen to and me to learn from. Thank you so much for joining me. Now go forth, invest a little in your community and make some change!
57 minutes | 5 months ago
Beyond the Vagabond.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:15] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve Picker: [00:00:21] My guest today is Avra Jain, co-founder of the Vagabond Group. With a career path that has taken her from bond trading on Wall Street to developing properties along some of Miami's trendiest streets, Avra has earned a reputation for identifying the next IT neighborhood. Her remake of The Vagabond Hotel on Biscayne Boulevard in the historic MiMo District of Miami changed the course of that neighborhood forever. Eve: [00:00:58] Be sure to go to evepicker.com to find out more about Avra on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change. Eve: [00:01:23] Hi Avra. Thank you so much for being on my show. Avra Jain: [00:01:27] Thanks so much. Eve: [00:01:28] Very nice to be here, yeah. I love this quote from your website, which says, "We operate from the perspective as storytellers, allowing history to take center stage and create a genuine sense of place". And I would really love you to tell us a little about what that means. Avra: [00:01:46] Well, that really has come from the work that we've done. We, kind of, we got there. We, I'd like to think there were people that actually, sort of, do it and then rather than talk about it. So, I can say that that actually, actually came from the work that we're doing. My team is three architects, one of which was, has a master’s in historic preservation. And so, when we start a project, or we do a project, the first thing that we do is that we study the history of the community, of the buildings themselves, architecturally, culturally. And so, we always sort of start from the story. And if there isn't a story, we don't do the project. Eve: [00:02:36] Oh, interesting. Avra: [00:02:37] Yeah, so we actually, so that quote really came from how we really operate. So that's a real reflection of the work. Eve: [00:02:48] So what sort of stories do you look for? Avra: [00:02:52] You know, it varies. So, in Miami there's a section of, there's a historic strip from the 1950s and 60s called MiMo which stands for Miami mid-century modern. So, there's a boulevard, Biscayne Boulevard, which used to be US1. So, if you were driving down post-World War Two in your 57 Chevy and you were going to Miami, the Magic City, you would have driven on US1 or Biscayne Boulevard. And there is a section that had these old 50s and 60s motels and, you know, with a big neon signs, and so, we came up here, one of the projects, larger projects that we did, that we're known for is the preservation work. When we renovated the Vagabond Motel to Vagabond Boutique Hotel. And that was the tipping point for the historic boulevard. So, we bought about 10. The neighborhood at the time was all drugs and prostitution. And, you know, it had been a neighborhood that you would've just driven right through with, you know, the shades down next to the baby seat, you know, but there were some spectacular, you know, vintage mid-century architecture, which I know you're an architect so you can appreciate. Eve: [00:04:17] Yeah, I know. I took a look on your website. They are stunning. Avra: [00:04:21] Yeah. So well, these were buildings that were up for demolition. And they were in disrepair, you know, SWAT teams were coming in once a month to empty them out because of, you know, drugs and things that would go on. And so, we knew that in order to, and this was a neighborhood that used to be Main Street, Biscayne Boulevard used to be Main Street. If you couldn't afford to stay at the Eden Roc or the Fountain Blue, you would've stayed at the Vagabond. Same architect that did the very famous Delanoe Hotel on Miami Beach. So, we knew what it once was. So, it was about, you know, bringing it back. There are other times when we actually, you know, neighborhoods, right, where we go into warehouse districts and create neighborhoods. This was a neighborhood that was so all we do was bring it back. And there was actually some really affluent neighborhoods nearby and surrounding neighborhoods that were also original from the 1930s and 40s. So, it was really a beautiful project to do both architecturally and for what it did for the community. The thesis was, if we bought enough of these motels that were 20 dollars an hour, you know, sixty dollars a night. The hotel that we bought next to Vagabond, in the lobby the sign said: "no refunds after five minutes". And it originally said ten minutes and they whited it out. That was the neighborhood and so we bought six of these old motels. A couple of them were abandoned and the rest of them we shut down. What happened was we thought is, if you shut down where people were actually doing these bad things, could the neighborhood find itself again? And it did. Eve: [00:06:20] What gave you the courage to do that? And what sort of resistance did you feel for these projects? Avra: [00:06:28] Oh, no resistance. Oh, my gosh. The city was like, the mayor, you know, we when we opened the Vagabond, we had nine hundred people. Everybody, all the arts, everybody. It was like a really big deal. This was, you know... Eve: [00:06:40] I suppose I meant from the point of view of, because opening is easy. But what about the financing? I mean, how easy.... Avra: [00:06:47] Oh yeah, yeah, yeah. I was going to say, we had no community resistance. In fact, people continually thank us all the time. But the resistance, yeah, sure financing, couldn't get any. Eve: [00:06:58] Yeah, I'm sure. Avra: [00:07:00] Yeah, no, I mean you know, you've done this enough times, Eve. So in fact even my traditional real estate investors, I had done a lot of adapted use in New York City and other places and a lot of my investors which go all the way back, you know, twenty five years to New York City, even some of them were like, ah, you've done a lot of crazy things, but they just could not get past the working girl on the corner. They couldn't get past it. They could not see the architecture. They could not see, they couldn't see the history, they just couldn't see it. They couldn't believe that it would come back. And so, a lot of, in this particular case, a lot of the money for that particular project was myself and my partners, you know, my spouse. I mean, we put up, I'd say 40, 50 percent of the money. So, it was really a cash project. But we found some very clever financing opportunities, financial opportunities. So, we did, I did my homework. I always tell people, you know, part of real estate is doing your homework. Understanding zoning, understanding the community and doing the outreach. Understanding building codes, a lot of homework. Well, I'd done my homework and I knew that there had been an ordinance set up in 2010, where you could sell development rights for historic properties. So, you know, in New York City, we knew that we could do this. We call them transferable development rights. Eve: [00:08:32] Right. I'm very familiar with them. Yeah. Avra: [00:08:34] So in Miami, for this particular strip, because it was historic, they down zoned it, meaning they limited, they did a height restriction of 35 feet. They took away buildable rights for the property owners. In exchange for doing that, they offered the property owners the ability to sell those development rights. So, floor area ratio, you know how much you could build. And then later they adopted a policy that also allowed you to sell the density. Like how many apartments you could build. The number of doors we call it, right? So, I was able to arbitrage that and the value of the transferable development rights for the Vagabond was three million dollars. Eve: [00:09:24] Wow. [00:09:25] And the purpose of those development rights and the ability to sell them is also to incentivize property owners to preserve and invest in the historic preservation of the property. So, you can sell those rights, but you have to reinvest them into the property and meet historic guidelines. Eve: [00:09:43] Interesting. [00:09:44] Yeah, it's not a little project. Actually, I think that, you know, in order to get historic preservation to work, you really have to give people incentives because it's very expensive. For those of us who build, doing historic preservation it's more expensive. It would've been cheaper for me to knock the building down and build it again than it was to actually preserve the existing Vagabond. So, they have to give you incentives otherwise... there's a reason why developers let those buildings go into disrepair and Eve: [00:10:16] because they're expensive, yeah. Historic tax credits help as well. I don't have Florida has a state credit as well, but I've used those in the past and they certainly help to fill the gap, that's for sure. Avra: [00:10:29] Yes. We qualified. We nationally designated the Vagabond Hotel. We met those standards and got the federal tax credit. So, we got 20 percent of our investment into the property. Yeah, every state's different. Every state's different. Every municipality is different. Eve: [00:10:47] This really took creative financing and the, since then, you said you bought six of them and how did the financing change one you opened the Vagabond Hotel? Avra: [00:10:57] Well, once we opened the Vagabond, sold the development rights, we were able to, get banks to give us some financing. But most of the projects we did, we did cash. We did cash and we financed after. It was just still, even now it's easy, you know, but I took rents, rents on the Biscayne Boulevard for twenty, twenty-five dollars. The Starbucks leases from me for 70 dollars, triple net. So, now it's very easy to get financing. And the Boulevard has a lot of cachet, but it Avra: [00:10:57] It's very difficult, yeah. I mean, this is actually why I started Small Change because, you know, banks almost squash the creativity out of what needs to happen, the creativity and innovation out of what needs to happen in cities, because you can't, they want to only finance what's been done before. So, how do you tackle a place like this if you can't get financing and you don't have the cash? Avra: [00:12:00] Yes, it's almost, I would say, it's almost impossible. So, you know, you rely on friends and family. A lot of it's your check book. But that's also the opportunity. Those are the properties that are also undervalued, right? The property that trade that are most expensive, are really a function of financing. You know, Multifamily trades at a tight cap rate because that is the darling with the lenders. Banks really, and part of it is the regulations, banks have to fund based on cashflow, income from properties. The regulations almost mandate it. Eve: [00:12:36] Yes. [00:12:37] So, lending on land or lending on an abandoned building and for adaptive reuse, which is unfortunate because in a lot of the underserved communities you need. Eve: [00:12:48] That's exactly what you need, yeah. Avra: [00:12:49] And what you lose because these are buildings that need a lot of work. Of course, they're not income producing, nobody should be living in them. And some people do live in properties like that and shouldn't be there. So, you know, the banking industry does not set up to be helpful. You know, what has happened, short of being able to fund yourself or have enough track record to to attract funding, is that there's a, sort of a hybrid lending space now. Used to be you could only get bank financing or a bridge loan or, you know, hard money loan you call it, right? 13, 14 percent which makes projects also unfeasible. You just, you give away all your profits in interest costs. But there's hybrid money out there now, that is more flexible, and you can get, you know, between six and nine percent depending on the project and you’re, and the sponsorship. We've been able to get hybrid money for projects like this. And it's really because of our track record. And it's all personal guarantees, right? I have to sign personally on everything. Eve: [00:13:58] Oh yeah, yeah, yeah, yeah. I sign my whole life away. Avra: [00:14:02] Until the projects completed. You know, it's very hard for people to get into this business from the developer's side. You know, I have three architects that work for me and they didn't want to be in a firm, just, as you guys would call being a cad monkey. I think, you know where you're just drawing all day, right? And so, they wanted to be developers. And so, they came and worked with me. And they're learning development really is about money. So, when you think about what does it take to be a developer? We're not licensed. Architects are licensed, builders are licensed, right? Your electrician's licensed. Even the real estate agents are licensed. Developers are not licensed. You can call yourself a developer as long as you have a check book. Eve: [00:14:52] Yes. So, what would you tell other women who want to be real estate developers? Avra: [00:14:57] You have to love it. Well, first of all I'd ask, what does developer mean to you? So, if I asked you Eve, define developer, what, how would you define it? Eve: [00:15:07] Well, for me, it's all about the buildings. I'm very passionate about buildings and places and using architecture to make better places. So being a developer for me is the opportunity to really make some significant change through the money that I invest, or I put together to make buildings better. Avra: [00:15:34] And then there's a lot of people that would like to do that, right? So how do they do that? Right? And there's, I think there's a lot of people with vision and, so, you need the money, right? And then you have to be able to execute. And so, a lot of what goes right or wrong is in the execution. So, you know, you have the vision, but it's the, now is the execution. You know, how well do you budget, the quality of the work, the team that you can assemble. And you know the surprises, right. You know, we say we're in the problem-solving business, really, especially with more adaptive reuse or historic preservation. You have no idea where you're buying. You know, we've gotten pretty good at it now and I can tell you every time it's different. Eve: [00:16:24] Oh, yeah, it's a challenge. But that's the fun of it. But listen, why? You know, you're a female developer, I'm a female developer. There are very few of us. Why is that? Because, you know, women are very good at team building. Avra: [00:16:40] Well, I think a lot of women are doing it. They just don't have the title, right? So, in my particular case, I'm the founder and, you know, I know I run the company, but a lot of women are doing it. They're just not, I think the front person. Interesting. You do your work, you're the front person. You're doing it but the women that work for me, they all work, you know, I give, I empower them, they all have their own projects within, within the Vagabond Group. They all run their own jobs, they do the architecture, they do the expediting, you know, of course, all under. And they've been with me long enough. They know at first, you know, tightly under my watch and now, you know, call me if you need me. Eve: [00:17:25] But still, that's a little bit different because they don't have access to their own money. And that's, I think, you know, as you said, the deciding factor. So, where I live there's very few women who kind of can plan their own destiny as real estate developers. I actually don't know of anyone else at the moment. So, Avra: [00:17:45] It's money, so that's it. You've really defined it. But I will say there's a couple of other things. So, you know, because people have asked me Avra, why, you know, why aren't there more? Well, one is money. And a lot of that money comes with track record. You know, I wouldn't give a first-time person, developer money. I mean, you know, you really have to have experience in order to gain that. So, when I first did my first projects, it was mostly my money. Eve: [00:18:11] Yes. [00:18:11] You don't want to lose somebody else's money while you're learning, right? So, there's a learning curve here and so, as you learn and you'd have track record, you can get sponsorship, but you really have to have that, you know, especially in what we do, right? So, what you and I do, we find these. It's easy buying a multi-family, lipsticking it up, creating value. OK that's one thing. But to actually go in and create place, that's different. And that requires mostly cash investments. The returns usually reflect the risk, they always do. I mean, I don't, you, know people, you know, people go "I get two times two times my money". And people are happy getting two times their money in four to five years. [00:18:59] I can tell you that isn't, that would never be a deal on my desk. If I don't think I'm making four to five times equity, in five years, I don't do the deal, which is why I'm able to get sponsorship. So, part of it is discipline. You know, there's a lot of projects I'd like to do, but I look at them and go, you know, I just can't I can't pencil it. And then, those projects that I can't pencil, which is like affordable housing, I just do myself and I'm OK. But those don't make money. I'm OK that they may or may not make money because I'm doing those for different reasons. Those are for social reasons. But when I'm doing deals where I'm taking in investment money, you know, the returns for the type of deals that we do, at least the perceived returns need to be much higher. But I do that for myself. I mean, a lot of this is my own money and I treat everybody's money if it's my own money. I also don't take fees. I'm not a fee developer, so I get paid based on success. So, I don't, I don't take fees. Eve: [00:20:03] Ok. So, you right alongside equity investors who risk their money, then. Avra: [00:20:09] Right alongside. So, I don't make a penny until you make money. And I think that's part of what, the other way that I've been able to raise money. Now, not everybody can do that. That's not realistic for a lot of people. But I've been able to do that because I set myself up for that. I saved enough money. I don't want to get paid, which is why I've been able to get, you know, the investment I get. Because people want to know that your interests are aligned and there are a lot of developers out there, they're really in the fee business. They're just, they're in the fee business period. And I don't think that that makes us aligned. Eve: [00:20:52] So, tell me a little bit more about the 50s motels that you're converting to affordable housing? Avra: [00:20:58] Yes, we I did one, we did one in Little Haiti, not too far from the Vagabond. So, if you couldn't afford to stay at the Eden or at the Vagabond, if you couldn't afford to stay the at the Vagabond, you would have stayed at Superior, Superior Motel and Apartments, which is west, further west and 1950s. It's a more modest property. You know, in some of the more modest neighborhoods then historic properties are more modest, but it doesn't mean they're less important. And I bought the building to do affordable housing. The person that runs affordable housing for the county, Mr. Lu, he would say, he actually stalked me into doing this. He wanted to put a new face to affordable housing in the projects that were being done. So, I started by giving him suggestions on what I would do and how I would go about it and then he said, then he just asked me to do something and I did. I can tell you that it was a horrible experience. Working under the administrative aspects of affordable housing. You know, they wanted to give me a small sur-tax loan. That was a half a million dollars sur-tax loan. And then by the time they were ready to give me the loan, I said, I don't even want it. It'll be the most expensive money I've ever gotten because I've spent fifty thousand dollars in administrative costs to get a 500,000-dollar loan, right. There was like a 10 percent cost. You know, every draw request was like the size of a Bible. I said, you know... [00:22:28] No, that's right. [00:22:29] I said, Mr Lu, I can do the work, but I can't handle the administrative aspect of this. I wouldn't get a draw for, you know, a draw request. I don't know how sophisticated everybody is on the podcast so I'll try to be a little more descriptive, but, every time you build a building and it's time to, and you have a loan, you do the work, you turn in your invoices, so to speak, and you're supposed to get reimbursed. Well, Eve: [00:22:57] Quickly, right? Quickly is the idea because you'd need the money to keep going. Avra: [00:23:00] Well, six to 10 weeks. Eve: [00:23:03] Yes, I've been there. Avra: [00:23:05] Which means that in you know, that if a guy doesn't get paid for six weeks or would anyway, if you weren't getting paid six weeks after you've done a job, you'd leave the job site. [00:23:16] Yeah. So, it costs a lot of money in time because you're, [00:23:19] So I ended up floating the entire job, meaning I paid everybody myself and then getting reimbursed, you know, six, twelve weeks later. And again, that's not feasible for most people. And that's why affordable housing doesn't work. And that's why, when you drive around and you see these, sort of half-completed buildings, is because you have to have the means in order to get through those projects. And I ended up, I probably have a half a million dollars of my own money in the project making zero return. So, because the cost to do it right versus the rents that you should charge. It doesn't mean, I can charge higher rents but truly affordable rents, you cannot build affordable housing in Miami. If you gave me a piece of dirt and said Avra, build affordable housing at 80 percent of the averaged income, I would tell you I couldn't do it. Eve: [00:24:15] You can't do it anywhere, actually. You can't do it anywhere in the world, I don't think. So, oh, maybe some places, but it's a standard problem, yeah. Avra: [00:24:22] Right, so it has to be subsidized, so you have to get grants. So, the reason why we were able to do historic preservation was because of the, you know, the entitlement programs to sell entitlements. That allowed us to grant ourselves some moneys to do these, what I called public benefit projects, historic preservation of the benefit. And you're saving time, you're saving moments in time, right. And then, same thing with affordable housing. You cannot do affordable housing without subsidies and grants. It's impossible. So, those are instances. And people think, oh, well you can get financing for it or people will do impact investing on these things. Eve: [00:25:02] No, you can't. Avra: [00:25:03] A bank doesn't lend to the same criteria where there's a public benefit or not. It's not to say they don't want to, but they can't. Eve: [00:25:12] Yeah, so non-profits become very important in this equation. It's very difficult. How successful has that motel been and have you built other ones that are affordable? Do you have a waiting list? Eve: [00:25:22] Oh yeah. Well that project, it's called, it was a motel and efficiency apartments. So, there's all apartments, most of them efficiency apartments. Very successful, 100 percent occupied. When you can charge a...And we were able to lease to more high risk candidates, you know, maybe people who've a felony in their past, you know, not a violent crime or something, but we're able to lease to people and not take security deposits. And a lot of, you know, our employees, one of the reasons why we started, we did, we started to do some affordable housing. When we opened the motel, or the hotel, Vagabond Hotel, because we realized our staff were taking two or three buses to get to work, and they were single Mums. So, we actually started subsidizing housing for our employees, early on. We bought an apartment building close by and then we realized that obviously this was not just a Vagabond issue. This is a national, well certainly a local and certainly a national issue. So that started our efforts in affordable housing, was sort of subsidizing for existing employees. And then, when we did the other ones, we're very conscious about trying to fill the void. We can do that because it's a personal investment. We're not a large institution doing affordable housing we've seen. This is not a money maker. I think there's a way to do it where you could get, you know, you can you know, people go, well can you do impact investing and get a five or six percent return? We can, because I don't take developer fees. Eve: [00:27:04] Right. Avra: [00:27:05] And we self-perform a lot of the work. So, I'm able to do that. So, on the project I did after this, I took in two small investors who wanted to participate in impact investing. So, we did one in Little Haiti and then we did their next projects in Overtown. Forty-four units in Overtown. And we're in the process of renovating that. Also, a 1950s, late 50s, so it's a combination of preservation and affordable housing, which we think is important. You know affordable housing is not bricks and mortar, it's about people and the qualities of their life and how they feel about themselves. We say we're really in the self-esteem business. You know, how does a single mother feel in their house? The stress level, you know, knowing if her kids are in a healthy environment or not in a healthy environment. The projects we're just in the process of doing, we finished two of five buildings so far, we keep everybody on-site and we rotate them. So, nobody leaves the property, they're not relocated. So, people are not, their lives are not disrupted. They stay where the kids go to school, where they went to school. Their friends are still their friends. They go to the same church, you know. So, we think it's important when you do affordable housing to keep communities intact. That's one of our prerequisites. Even when we did the property in Little Haiti, we did two units at a time and rotated people. So, they did not have to move. So, in the building we just finished one of the, in one of the buildings was a single mom and her child was having a lot of health issues and DCF was going to take the child away because they didn't think that the mother was giving the child the asthma medication and everything, because the child was suffering. And the minute we moved her from the apartment that she was in to one of the new apartments, the child was fine. Eve: [00:28:59] Wow. Avra: [00:29:00] She almost lost her child because of the housing, the quality of the housing she was living in. Eve: [00:29:06] That's pretty shocking. Avra: [00:29:09] It's shocking. It's unacceptable. I mean, so, most of the buildings that we, so all these buildings that we bought in Overtown, I mean, they should be condemned buildings. I mean, I'm surprised people didn't, well apparently, they had. Some people had fallen from the second floor into the first floor. I mean, the people live in those conditions because they can't afford higher rent and they don't want to move. You know, these tend to be closer to core locations, right? They're older buildings, closer to where they work, it's where their communities are and they don't want the landlords to fix up the apartments because if they do, they know they have to raise the rent and then they might get kicked out. So, people choose to live in these really, you know, sub-human conditions because they can't afford the rent if it was renovated. So, in that particular project, we teamed up with the CRH, the Community Redevelopment Agency in the area, and because they had seen our work in Little Haiti, they had asked us to do a similar project in Overtown. Avra: [00:30:16] And my, my response was, no. I said, it doesn't work. I go, it doesn't work. I can't afford to subsidize all these projects. So, I said, you know, I told them what they needed to do. One, they had to remove all the administrative. No good developer would operate under those administrative restrictions. And two, I said you're going to have to pay for it. And if you want the rents truly affordable, you're going to have to pay for all of it. Because if you want a seven-hundred-dollar rent, I need to be in that unit for seventy thousand dollars. And by the way, it costs eighty-two-thousand dollars to buy the apartment. And it's going to cost you another fifty-thousand-dollars a unit. Eve: [00:31:03] To renovate it. Avra: [00:31:05] So if you want me to do it, and I'm not going to wait, I'm not going to take draws, you're going to have to give me five hundred thousand dollars every time I start a building. Because I'm not going to, I'm not going to chase you down. I'll do open book. Open book, come anytime you want, knock yourself out. But I can't do the work and meet all the typical requirements. And so, they, they said Avra, yes. Do it. Eve: [00:31:35] Wow. [00:31:36] It went all the way to Commission. Commissioners voted on it and I did the project. So, they basically bought down the rents and people are living in two- and three-bedroom apartments, beautiful two- and three-bedroom apartments. When I say beautiful, you're an architect. You know, I floated the walls. I did resilient channels for the wall boards for sound. Wool between. Everything's copper piping. We don't, you know, rebuilt from the inside out. If you'd walked in, you would have fallen through to the studs, to the studs on the floor and you would have seen the roof two ceilings up. So totally rebuilt, you know, with all the right quality materials. No, everything mold-resistant, every, you know, impact glass safety, all those things. So, people are living in really beautiful apartments. And, so think about what that's like. For them. For them, they're people, right? The pride, how their kids feel to come home, to work, the family gatherings. Remember it's, we don't build buildings. You build buildings, but it's really the quality of the experience in the building. It's how people feel. Otherwise, buildings can be nice to look at, right? Right? What are they really? I mean, building to me, they're made of organic materials, I mean, buildings live. And as builders and developers, we have to, you know, we feel that, we think about that. You know, so lots of times I get a building and it just doesn't feel right. It doesn't have the life. And our job is, that when we do these projects, these adaptive reuse and historic preservation projects, whether it's for, you know, an adaptive reuse or for affordable housing, you have to think of it as how do people live? How are people going to feel when they're there, when they're inside? And that’s, you know, sort of, that’s sort of how we operate. Eve: [00:33:48] That's how it drives you. So, these products, I know we've talked about them a lot, and they're clearly your passion projects. You also work on very, very big projects. Avra: [00:33:58] Yes, so that I can afford to do the passion projects. Eve: [00:34:02] Yes, that's the bread and butter work, right? Avra: [00:34:05] So and those, you know, are more traditional, you know, I do. By the way, they're very good local community banks here that I work with in... we're very fortunate during Covid and everything that, you know, my friends that had the large banks, you know, had a lot of trouble getting, having to work with them and work with their tenants. But the community banks in Miami really stepped up and were the first to say, you know, what can we do? How can we help? So, I've good local banking relations, banks that have lent to me for 20, 25 years that support, you know, that support my projects. Even if they're slightly out of the box they, again track record, they support the project. So, I'm able to do, I'm getting ready to do a large adaptive reuse project towards 50,000 square feet of adaptive reuse in a warehouse district. There might have been a day where I wouldn't get financing, but I will get financing for that, 50 percent loan to cost, and then I'll have the capital stack of my own investors. Then, you know, on some bigger projects, I'm getting ready to do a project on the Miami River. That's a big project to earn, it's a new build. Two hundred fifty-nine apartments,200,000 square feet of office and retail. It'll be almost 180-million-dollar project with 120-million-dollar loan. I'M partnering with a very large developer, Property Market Group, PMG, they build really well. I'm really excited to have a chance to work with them, there are developers that you respect and then there's the other developers that you would really like to work with, and this is one of them. And they're both. And so, they build beautifully. So, they, we're teaming up. They're going to do the residential portion and I'm going to keep the office and retail. You know, without them, they're providing that completion guarantee. I mean, I wouldn't have, I wouldn't have the balance sheet. We're talking financing here, right? I wouldn't have the balance sheet to guarantee a 120-million-dollar construction loan. So, you know, so that's very limiting to do big projects. Problem. You know, I don't do, one reason why I don't do a lot of big projects is because of the financing. It's just by the time we bring in the capital stack and everything, you know, and then when you do that, you lose, you give up a lot of control over the integrity of the project. People start value engineering everything out of the project. And so, you know, the vision gets lost and all-of-a-sudden it's work and it's not fun. You know, it's one reason why I don't do a lot of large projects. So, whereas on the smaller projects, we can keep control. So, you know, so, yes, I am doing a large project because it's a spectacular site with a spectacular vision. But I don't do that as often. The risks are high and the loss, I think more than anything, is the loss of, you know, the vision. I mean when you do big, big projects. You know, what I always say you have to have two things when you, when you partner with people. You have to have the same vision, but you also have the same have the same values. Some people can have the same vision but then if they don't the same values, it is not the same. So, lots of times that happens when you do these, sort of, bigger projects. Eve: [00:37:36] Yeah. You know, I've always stuck with smaller projects for much the same reason. Because I can finish them the way I think they should be finished and no one's egging me on to do something different. Avra: [00:37:47] Everyone wants you to cut corners. Hey, it's already sold. Hey, it's already leased. You know, then, who cares, you know, it's a, if it's a 10-year paint or a fifteen-year paint? Well I care. Eve: [00:37:58] Yes, I'm with you. Avra: [00:37:59] Those decisions that get made, you know, again, the more people that are involved. For developers that have cut those corners, it's short-sighted because then, why do they come and lease my building instead of their building? Because people can feel the difference. They can feel the difference in quality. So, you know, it's interesting right now in this market and during Covid, and people are consolidating and deciding which offices to keep or which ones not to keep or which neighborhoods to be in or not be in. And I can tell you I have two very large tenants that had offices across the city, and they chose to consolidate. And both of them chose to be in my buildings and give up other spaces. And it really is because of the quality of our buildings, the uniqueness of our buildings. It speaks to their brand. And this was a time when spending the money and having your building be special, having there be a story to the building and the neighborhood that is in mattered. Because lots of times you can't spreadsheet this stuff. Anybody in finance and in the financing world wants, you know, a spreadsheet, right? Well, let's do a spreadsheet, right? You can't spreadsheet the quality of a space. You can't spreadsheet cool and placemaking. There's no spreadsheeting that. But when there's stress in the market and you see how people move and what they choose to keep and where they live or work, how, where rents are more stable or whatever, you see the performance. But when I'm doing a spreadsheet and presenting it to a bank, there's no way to quantify that. Eve: [00:39:45] Yeah. Just shifting gears a little bit, are there any current trends in real estate development, especially around the pandemic, that you think are most important for the future of our cities? Avra: [00:39:58] Well, we're staying the course. I mean, our mindfulness, our thoughtfulness, it hasn't changed. If it's before the pandemics, during the pandemic, or the after-pandemic. So, we've always practiced sustainability. Even in our new building, everybody's talking about these new air filtration systems and water systems. We had already designed that into our building before Covid. So, you know, it was like we were already there. We already felt like the wellness trend was, we already got on that bus a while ago. Now the tenants are going to be asking about it and insisting on it. We were already on that bandwagon by. My team is architects and so we are always looking at what's new, what's cutting edge and hopefully somewhat cost affordable so we've already, we're adopting a lot of those. So, I think those things will become more mainstream now. Good. And maybe that will even make them more cost effective. So, we haven't changed. Again, our mindset has always been, you know, we need to adapt to reusing. You use existing buildings. I mean that's the ultimate in sustainability, right? Eve: [00:41:07] Yes, I agree. Avra: [00:41:09] It's like fruit shopping, right? The most, the best thing, people don't realize how many CO2s go into building a building. And you knock it down, you spend more CO2s and then you rebuild it and spend more CO2s. There is a really great study out there, and I don't know if you've read it, on green building. And it was put out actually by the historic preservation community but if you were to take a building and knock it down, build it back, using green, let's say green technology, all the new Green Technologies, Sustainability, LEED certified, whatever, it would take you 80 years to make up for the damage done. 80 years to make up for the fact that you knocked down a building. So, we think, you know, so we are all about keeping existing building, Eve: [00:41:56] Keeping, yeah, yeah. Avra: [00:41:57] Absolutely. And it's interesting. We, and we do it, you know, we don't stop and think, oh, my God, we're saving the environment, right? But we know that it's important to the sustainability story. But we also know that it's important to the cultural story, to the story of community and social resiliency. When people talk about resiliency, but they talk about it like, you know, well, how high is your sea wall, or whatever. Resiliency, by definition, is your ability to bounce back. It does not say how high is your seawall, it's your ability to bounce back. And that is a social, that is a social response, not a building response, not a civilian engineering response. So, we think that focus, that part of social resiliency is part of keeping community. And part of keeping community is to try to save and do adaptive reuse with existing buildings. Again, we're back to why we build our business around this story. We think without the story we, it doesn't, it isn't going to get us where, we won't be interested. And it's got to be a story that, when you do projects that have a story, people want to be a part of it. People want to be a part of it. People want to work on it. People want to help build it. And then people want to live in it and people want to do their business in it. You know, I think builders, developers underestimate the market. Eve: [00:43:37] Yeah, I think you're right. Avra: [00:43:38] I think they underestimated them. They know the difference. And they know how it feels. And if they have a choice to spend a dollar here or a dollar there, they're going to spend it where it also feels good. Eve: [00:43:51] Yeah. So, one last question for you. And that is, what's your big hairy goal? Avra: [00:43:59] Gosh, you know, I guess just, you know, I'm living it every day. You know, Eve: [00:44:06] That's a great answer. Avra: [00:44:07] Yeah, I just, you know, we just keep doing what we're doing, and I think, you know, we talk about, you know, always wanting to learn, right? And knowledge is empowering, but it doesn't give you power unless you use it. So we are, you know, we're always learning, always curious. We're always helpful to other developers. Very transparent. We open source. So, if you go on, I think you've been on, our website. If you go onto VagabondGroupConsulting.com and you hit open source, we open sourced our affordable housing project. You get all the money we spent, all the inspections, all the time, all the materials, everything. The things that went well, the things that didn't go well. I think that one of the goals would be to hopefully encourage more developers and especially people in the public benefits space. Anybody'd be taking public dollars for sure, to open source their projects so more people can learn and so that more, more thoughtful developers can hopefully... Eve: [00:45:16] That's a great idea. I'm definitely taking a look. And I'm super jealous of all of fabulous 50s motels that you're renovating. It's a fabulous... Avra: [00:45:26] Here's a question for you. So how, in your platform, can you help developers like me? Eve: [00:45:33] Well, if you want to start raising money from a broader group of people, from the community, that's really what investment crowdfunding is about. And I see there's a, how can I say this? I landed in Pittsburgh unexpectedly and one of the really big things I learned here is that people really want to be involved with their community and making it better with their city. It doesn't really matter where you go, people are very connected to the place they live in. And I was working with dollars that dried up in the late 2000s and started thinking about crowdfunding to replace them. You know, also working with banks that became more and more skittish and wanted to do less and less innovative project lending. And so, all of that kind of led me to investment crowdfunding, which really lets the crowd decide. So, you could, very soon you'll be able to raise, there's actually upgrades to the rule under way, but very soon an issuer, a developer, would be able to raise up to five million dollars a year from anyone over the age of 18. Avra: [00:46:47] Wow. No, no subscription agreement. [00:46:50] No, no, there's subscription agreements, but we handle all of that electronically online. So, if you go to a funding portal like Small Change, we are registered with the SEC and members of FINRA and it's a very heavily regulated rule. We kind of manage all that. And you basically create a disclosure package which we help you create, register it with the SEC and then everything else is handled electronically as people invest. So, I think the most meaningful thing for me is that if you want to bring along people in your community, you normally don't have a chance to invest and create wealth based on what's happening in their own community. This is a way to do that. Avra: [00:47:38] So, I think it's a great idea. I actually went on your webpage and I thought about it. So, in in the affordable housing project that we did in Overtown, we actually, one of the partners, because we were getting large grants, they asked, they basically assigned us a local CDC, a community. Eve: [00:48:00] Right, a development corporation, yeah. Avra: [00:48:02] Yeah, to be part of the ownership. And it was Mount Zion, which was actually the oldest church in Miami, I think. They're a part-owner, you know, less than 10 percent so the lender has no issues. And I was neglecting again, it was more control thing, it wasn't a money thing because we're not making money. Right, so. Eve: [00:48:24] Right, but they can bring grants to the table that you can't as a for-profit developer, right? Avra: [00:48:31] But the reason why I don't put myself in a non-for-profit space is because I know, I see a lot of the people, in non-for-profit space and it's not non-for-profit, OK? It's actually, I call it, so, I'm in the no-profit space. So, I'm like, so I won't put on a non-for-profit space because everybody pays themselves salaries and things. We don't pay. We don't pay ourselves. Eve: [00:48:53] Well, that's right. Avra: [00:48:54] So the CDC came in and they've been great because they helped, you know, that was the thing. I said, well, as long as everybody understands nobody's getting paid, I'm happy to have a community organization. And I said, so they have ownership, so certainly down the line this, you know, we have a 30-year covenant and down the line there will be some value there. But I thought that it would have been great if, even instead of the CDC or in addition to the CDC, what if everybody in the community, so I get a grant from this CRA. What if every family that lived in that community all got a piece of the project? Instead of this CDC? Eve: [00:49:37] Yeah, I've thought about this a lot. I've actually thought that, you know, in a poor community, wouldn't it be fantastic if there were even a foundation that matched investments made, or to increase the value to people who invest, you know, maybe even 100 dollars? Avra: [00:49:54] Yes. So anyway, we got a three-million-dollar grant, just so you know. But I mean the three-million-dollar grant, and you'll see and, you'll like to see the math in our open source, the three-million-dollar grant will save the residents eight million dollars in rental cost over the 30 years. So, that's a huge benefit to the tenants with subsidized rents but if everybody in the community was given, let's say, a thousand-dollar ownership, assigned a thousand-dollar ownership, right? I mean, as long as I don't have to deal with, you know, a thousand investors, you know, I'm happy to have them own a piece of the project. You know, as long as me as a developer I can do what I do, you know? So, any time there's a grant made into a project, why isn't that grant, which is community dollars, community dollars, taxpayer dollars, why not have that grant be a crowdfund investment? Eve: [00:50:57] Well, it can be. I just think people aren't quite there yet. Avra: [00:51:00] Well, let's do it. Eve: [00:51:01] Yeah. I'd love to do it. I've thought about raising a pot of funds for a community, for example, where someone, maybe you partner with a community development financial institution or a community bank, and someone manages the money, but it's programmatically distributed in the community as well. So now you have, maybe not just your project improving the community, but you're benefiting other people directly. Let's just say you're below a certain income and you need your roof replaced, you can get a loan for zero percent. Avra: [00:51:38] Miami does a lot of that. I have to say, there is a lot of things we do. America Build does that. We have these twenty-thousand-dollar grants. If people know where to look that is made available. Eve: [00:51:51] I know. But I'm thinking really community specific, you know. You pick a community that you're working and you, kind of, really try to build it up and make sure that people who are not wealthy in that community come along for the ride when developers do make investments and the community is improved. So, I mean, it could happen in any number of ways but, you know, we all think about what happens to people who are left behind, right? So, there's something there. I'm not exactly sure what it looks like precisely, but I have tools in my toolkit, these SEC regulations that I understand very well that could be deployed in that manner. Absolutely. Avra: [00:52:34] Yeah. I think there's something there and I think, so, you know, we should talk about that Eve because I'd like to explore that. I think that, I think there's the political will to do it in Miami. I think there's enough. Again, you know, the thing is, is if we do one, right, we do one project and it works, it becomes the model. Eve: [00:52:57] Yes, absolutely. Avra: [00:52:59] So our study, the one that we did for Vagabond Group Consulting, that open source, has become sort of a case study. You know, I get calls from all over the country. People. Eve: [00:53:10] Yeah. That's very important. [00:53:12] You know, and that's what we need to solve some of these problems we need the transparency. We need to have conversations like you and I are having. And we all need to share and figure out best practices. We need to find a solution and it's in the developer's best interest that we find these solutions. I try to challenge some of my big developer friends and say, listen, guys, we need to be part of the solution here. This is really our, becomes our problem. You don't think it becomes your problem, but it does, because if the restaurant in your building, even if you don't want to do it for all the right reasons, you know, you should understand how it affects you, because if the restaurant in your building can't find employees because there's no place for them to live, you know, they're having that problem on Miami Beach and they're having trouble hiring people because nobody can afford to live on Miami Beach. So that affects your ability to rent your space. I mean, you know, so I tried to encourage that, show them even financially why this is in their best interest. That we all, we all don't do well unless we all do well, right? So, how do we incentivize developers to do that? There needs to be policies in place for that as well. Avra: [00:54:26] In Miami, we have something where we, where developers can write a check. Like you're building a building and you write a check towards public benefits. Well, you know, make the developer build the affordable, do the public benefit. You know, sometimes writing a check is easier than doing the work. Eve: [00:54:44] Yeah, no, I agree. Well, this has been absolutely fascinating and I'm going to be in touch soon. But we should wrap up and I really enjoyed talking to you, Avra. Avra: [00:54:56] Yeah, this has been fun. I look forward to seeing your work. So, you have to send me some of your some of your work. Eve: [00:55:04] I will. Avra: [00:55:04] Share some stories. Eve: [00:55:05] Thank you. Absolutely. Eve: [00:55:13] That was Avra Jain, a wildly creative Miami developer. Avra and the Vagabond Group have built projects that range from converting a 100,000 square foot warehouse, to luxury loft condominiums in New York's Tribeca neighborhood, to the remake of The Vagabond from motel to hotel on Biscayne Boulevard. But Avra's passion lies squarely with the personal project portfolio she's building. The conversion of abandoned and historic motels into reimagined, affordable housing communities. She's leveraging her past success to tackle both the restoration of significant architecture and the making of affordable housing in a very unique way. Eve: [00:55:59] You can find out more about impact real estate investing and access the show notes for today's episode at my website evepicker.com. While you're there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Eve: [00:56:16] Thank you so much for spending your time with me today. And thank you, Avra, for sharing your thoughts. We'll talk again, too but for now, this is Eve Picker signing off to go make some change.
40 minutes | 5 months ago
Choose your own rent.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:13] Hi there, thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:19] My guest today is Thibault (Tee-bo) Manekin, the founder and CEO of Seawall Development. Seawall is rolling out the red carpet for teachers. They are building high quality, affordable housing, which in itself is a big task. Layer that with the inclusionary design process they employ and the fact that they are creating this housing by restoring large and stunning vacant buildings and seawall is altogether fantastic. Eve: [00:00:55] Be sure to go to evepicker.com to find out more about Thibault on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change. Eve: [00:01:15] Hi Thibault, I'm really excited to talk to you today. Thibault Manekin: [00:01:20] Hi Eve, I'm excited to talk to you, too. Thank you for having us. Eve: [00:01:23] It's a pleasure. So, you started your company by building quality, affordable housing for teachers, and that's a really targeted mission and I'm wondering what led you to this work? Thibault : [00:01:36] Yes, I probably have to go back a little further than that. When I first graduated from college at around 21 years old, I helped, with two buddies, we started an international non-profit organization called Playing for Peace. It's called PeacePlayers Today. And the idea is that we would go to war-torn countries and we would use sports to get kids from two sides of a conflict, meet each other, finding common ground and eventually becoming friends. So, we raised about eight thousand dollars and was enough to get on a plane to Durban, South Africa, at the time, where we were going to try to get, use sports to get black kids and white kids post-apartheid meeting each other, finding common ground, becoming friends. And it had an amazing run with that organization, really grew it to be quite international. We had a program in Northern Ireland with Protestant and the Catholic kids, Cypress, the Middle East, with Israeli and Palestinian kids. Thibault : [00:02:36] So in all of my travels with PeacePlayers, one of the reoccurring things that I continued to notice was that real estate had done more to tear us apart than bring us together, especially with my experience in South Africa, seeing what the apartheid government had done with townships and informal settlements. And then, as I would make trips back to my home city of Baltimore, seeing the negative effects of redlining. So I came back, I think it was around 2006 and I asked my dad, who's a hero of mine, to go out to dinner and I pitched this idea of starting a company, a real estate company, but with the idea of really reimagining the real estate industry all together so that everything that we did used buildings and the built environment to empower communities, unite our cities and help to launch really powerful ideas. You know, I had seen the impact of reimagining the sports industry to bring people together, especially young people, and I wanted to do more with it. And if real estate was indeed the most powerful connected industry on the planet, then truly reimagined, there'd be the opportunity to bring people together in ways that possibly hadn't been done before. Thibault : [00:03:53] So, we launched this company. And, you know, we had an amazing dinner conversation around what we were going to focus on first. And my dad did spend a long time in real estate but was really passionate around education. And he had done a ton of listening to all of these new teachers and first year teachers that were showing up to Baltimore, maybe for the first time, and were having a really tough time figuring out the city. Figuring out where to live, figuring out who to live with, figuring out their classes and jumping into arguably what's the hardest profession on the planet, educating the future generation. He basically was like, there's a great opportunity to continue to listen to this community of educators and provide them what they're asking for, which at the time was collaborative, affordable, well located, funky housing that would take the mystery for them out of where to live, provide them the ability to live some place special with like-minded people, which hopefully, over time, would translate to them agreeing to stay in the classroom for longer, falling in love with education, falling in love with our city of Baltimore, and maybe even making a permanent investment in buying their own home once they had a better lay of the land and been able to save some money as a result of staying in one of our projects. Eve: [00:05:20] So, basically really supporting the pool of teachers who serve our city and, our cities, and really can't afford to live in them anymore. Thibault : [00:05:29] That was the idea behind it. And we coupled it with a similar thread that we'd been listening to, which was that there were all of these non-profits focused on kids and education and supporting the school system. Programs like Teach for America and Playworks and Wide-angle Youth Media and Baltimore Urban Debate League. They were spread out in dozens of buildings all over Baltimore all essentially doing the same kind of work around kids but with no ability to really deeply collaborate. And so, these non-profits who focused on kids and education and come to us and said it would be amazing if we could all be located under one roof, if we could share resources and have free conference rooms and training facilities that we don't need all of the time but that we need throughout the day at different times. And so, our first project ended up becoming called the Center for Educational Excellence. We've always looked for a cooler name than that but that's the one that's kind of stuck. And it was a adaptive reuse of one hundred thousand square foot collapsing old factory building that got turned into about 40 apartments for teachers and thirty thousand square feet of collaborative office space for the non-profits underpinning the success of the school system. Eve: [00:06:43] That's a pretty big project to tackle for a first project. Thibault : [00:06:46] It was funny. Yeah, we look back on it and, you know, when we first started the company, which is called Seawall, we weren't sure if it was ever going to make it. And we had kind of said that we would, you know we'd been listening to teachers for so long, we'd probably buy a little four-unit row home and converted it into four apartments for teachers and that would be the first thing that we would do, which would probably cost four or five hundred thousand dollars. And our first project ended up costing 20 million dollars and we had no business taking on a project of that scale. And, you know, we can get into the movement that came as a result of it and what really propelled us forward. But that was, yes, that was our first project. Eve: [00:07:31] How do you involve teachers in the process of creating these buildings? You've done three now, right? Three for teachers, is that correct? Thibault : [00:07:39] We have, we have. So, everything that we've ever done has been built inside out. And what we mean by that is that we start with the end users, the people that are going to be living and working in our buildings. It's important for us that they have a sense of pride, of authorship and ownership in what's getting created. So, we start out by deeply listening to those people that are going to be occupying our spaces. And we let them drive the direction and the program of the space. We don't ever pretend to have any of the answers. Our job's to be quietly behind the scenes, asking the questions that held their thinking forward in a way that results in a finished product that makes them really proud and allows them to be more successful in whatever it is that they're doing. Thibault : [00:08:29] So in the case of the teachers, we assembled a group of, a focus group of about 10. We walked them through the collapsing building as we first bought it. They worked with our design team over the course of twelve months to design every square inch of their apartments. We let them pick their own amenities they needed like a resource center in the building that had access to copiers and laminating machines and staplers and hole punchers, so that they could plan their lessons within the building and not have to run out to Kinko's in the middle of the night. We did the same thing with our non-profits. We let our teachers choose their own rents based on the salaries that they had and what felt like an affordable rent for them to be paying. And we really spent a ton of time with both the teachers and the non-profits from day one, letting them design what is their building. Thibault : [00:09:19] I want to add something to that, because there are two other levels that we really focus on. As important as the teachers are, and whoever the end user is for any specific project we're working on, equally as important is the community that we're working with that. At the end of the day, they're the ones that have been staring at these dilapidated, collapsing old buildings and it's critical that they have a seat at the table in helping to shape what those new buildings are going to get turned into. Thibault : [00:09:50] One of the things that developers are famous for, kind of going into a community and telling the community what they're going to get, and we take the complete opposite approach. In the case of the first teacher housing project, we went to our first neighborhood association meeting, introduced ourselves and explained that a bunch of teachers and non-profits had this idea of creating the first Center for Educatio
41 minutes | 5 months ago
Parking not required.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:00] Hi there, thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:06] My guest today is Donald Shoup. Dr. Shoup is a distinguished research professor with a focus on economics in the Department of Urban Planning at UCLA. He began studying parking as a key link between transportation and land use with important consequences for cities, the economy and the environment. His book, The High Cost of Free Parking, turned an otherwise academic topic into a significant policy issue. A second book, Parking in the City showed that parking reforms can improve urban metro areas, both economically and environmentally. Eve: [00:00:47] Be sure to go to evepicker.com to find out more about Donald Shoup on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change. Eve: [00:01:08] Hello, Donald. I'm really delighted that you've been able to join me today. Donald Shoup: [00:01:13] Well, thanks for inviting me to Dallas. Eve: [00:01:15] Yes. You've spent your career deeply immersed in parking and land economic issues, both of which are really hot button subjects right now. So, I'm wondering, first of all, how did you get interested in the economics of parking and why? Donald: [00:01:33] Well, like everybody in parking, I think I backed in. Nobody wants to grow up to be in the parking business. They say, well, I was doing my PEC Dissertation in economics. I was working on land economics. So, I came to it from that angle looking at development and the value of land. And later on, I noticed that the market is the single biggest user of land of American citizens, the curb parking and the off-street parking. But it had almost no interest from any academic or even a lot of other professionals of the parking industry. But they were looking at it from the view of land economics. So, I had the field to myself for a long time. Donald: [00:02:29] Universities always strongly advocate equality and equity, but they are very rigidly hierarchical in their own operations. Everybody has different titles like Chancellor or the Vice Chancellor or the Deans and the Professors, and the Associate and Assistant Professors and lecturers and even the students, you know, the seniors and juniors and sophomores and freshmen. So, I think it's not just that we're hierarchal, but the things we study are also hierarchical, like international affairs are very important and national affairs are too. But state affairs are very, a big step down and local affairs are parochial. And then I think the lowest status topic, you know, even in local government would be parking. So, I was a bottom feeder for about 30 years, but there was a lot of food at the bar. And that's, that's how I got into parking. It was so easy to discover new things that nobody, well not many people, have been paying attention. But now there's almost a feeding frenzy. A lot of people are getting to study, at least among academics, or just studying parking and its effects. I think that's what you're interested in, not parking itself but how it affects the real estate of the city and the economy. Eve: [00:03:58] Yes, and housing, right? So, you said it takes up a lot of land in American cities. How much land does parking take up on average? Donald: [00:04:08] Well, nobody knows. It's highly regulated but the, no city, except San Francisco, has any census of parking that... You couldn't go to your city council or city planning department and say, how much parking is there in Dallas? They don't know. Although they regulate it very heavily on every site, there's no aggregate number that applies to all cities. But people who have looked at it in various ways think that, oh, maybe about 30 percent of the land is used for parking. Eve: [00:04:48] Which is a lot of land. One of the statistics I read was that New York City, which has really high housing costs, actually is the eighth most affordable city out of 20 because the land is used really economically and there's less parking. The two certainly go hand in hand, don't they? Donald: [00:05:10] Well, New York is a very special case, but most cities are like it. Several, the Department of Urban Planning's estimated there are about three billion on-the-street parking spaces in New York and nobody knows how many off-street parking spaces. But of those three million... Eve: [00:05:29] That's a lot. Donald: [00:05:29] …on-street spaces, only three percent have parking meters. So, 97 percent of all the car parking in Manhattan, in all of New York City, is free to the driver. So, of course, a terrific competition for it and it's a nightmare trying to find a parking space in Manhattan because it's free and lots of other people want it. So, there's an incredible amount of cruising around, hunting for parking. Seinfeld often talked about it. I think one time in an episode, George is coming to Jerry's apartment and Elaine is in the drivers, is in the passenger seat, and they can't find a parking space. And she said, well, let's park underground at the building. And he said, no, I never pay for parking. Paying for parking is like going to a prostitute. Why should I pay if, when I apply myself, maybe I can get it for free? Donald: [00:06:31] So, I think that we've all been trying to get it for free for as long as we've had cars. And everybody wants to park free through to you and me, but we have twisted our cities is totally out of shape and real estate development totally out of shape with parking requirements that ensure that every new development has to have plenty of parking. So that won't overcrowd the free curb parking. So, I think that I've seen studies. I think, yes, the Department of Commerce did one study saying that: What is the biggest impediment to real estate development? Is it property taxes? Is it leverage issues? And almost everybody says it was required parking. Eve: [00:07:17] Yeah. And have you seen a shift at all, over time in the last decade or two, the attitude towards parking? Donald: [00:07:25] Oh, I think so. I've recommended three basic things. One is to charge the right price for curb parking, which is the lowest price that cities can charge and still have one or two open spaces vacant. So, nobody can say there's a shortage of parking because everywhere they go, they'll see one or two open spaces. But like real estate that's valuable, it won't be free. And then to make this politically popular, because drivers don't want to pay, is that the cities dedicate the meter revenue to pay added public services on the metered streets. You know, fix the sidewalks, plant street trees, clean the sidewalks, extra, well I shouldn't say police patrol right now, but, extra security. And some say to give free Wi-Fi to everybody on the block that has market-priced curb parking. So that people can see the benefits of charging for parking. Instead of having the money disappear into the general fund. So that's one policy to charge the right price and the second is to spend the revenue on added public services. And then the third one is to remove off-street parking requirements. Donald: [00:08:39] And you've seen, all three of these happening in various cities. Houston just recently increased the share of the city that has no parking requirements. Houston is famous for having no zoning, but it has very elaborate parking requirements, just like any other city. Except for downtown, that they recently increased the area of Houston that doesn't have any parking requirements. And some cities have removed parking requirements entirely. San Francisco removed all its parking, off-street parking requirements, and Buffalo did, Hartford and London and Mexico City. It's spreading. I think that I and other peoples have preached the gospel that parking requirements do a lot of damage, that they raise the price of housing, they increase traffic congestion, they increase air pollution, they even contribute to global warming. Donald: [00:09:43] So, I've never heard anybody, planners say: no, minimum parking requirements do not have these effects. The opponents of parking requirements are proving with study after study saying how it reduces the available land for development because so much of the space has to go for required parking. And it does increase housing prices at, and the prices of everything, because the cost of parking is hidden in the prices of everything else. Parking requirements make parking better, but they make everything else worse. And, as I said, I've never heard any urban planner say: no, parking requirements do not have these bad effects. I don't think you could find any professional in the planning industry or development industry who would say: no, parking requirements do not have these effects. Donald: [00:10:39] So, I think some cities have begun to remove their off-street parking requirements. Others have begun charging, you know, what I call the right price or demand-based price, based on the demand for this scarce land. And they're spending it all on the, spending the revenue in the immediate district. So, I think all these three things are happening. So, I think the future of parking's here is just not evenly spread. Eve: [00:11:08] Right. So, you know, Covid19, the pandemic, has probably accelerated a bit of this thinking. I've been watching news about cities like Milan in Italy, grabbing street back for pedestrians before they're fully occupied by cars again. And I'm wondering if you believe any of that will sort of help accelerate a move towards less parking, more purposeful use of valuable land. Donald: [00:11:40] I'm sure it will. Covid19 has opened our eyes to a lot of thing
36 minutes | 5 months ago
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:06] Hi there, thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:12] My guest today is Kris Daff, a fellow Australian. Kris is a developer with two companies. The first, Make Ventures, is a more traditional development company focused on urban infill. It's the second, Assemble, that Kris is wildly passionate about, and that passion is wildly contagious. With Assemble Kris is building uniquely personal, affordable housing products and solving the very many problems that low to moderate income earners are confronted with when looking for a stable, permanent housing solution in Australia. And Kris plans to do that at scale. Eve: [00:00:54] Be sure to go to evepicker.com to find out more about Kris on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change. Eve: [00:01:21] Hello, Kris, thanks so much for joining me today. Kris: [00:01:24] Hi Eve, thanks so much for having me. Looking forward to having a chat. Eve: [00:01:27] Nice to hear a similar accent. Anyway, so you're a real estate developer and you have two companies Make Ventures and Assemble, which are both great names, by the way, and I'm wondering why you have those two companies and what each is focused on. [00:01:46] Sure. So, I'll start with Make, and Make's a very traditional real estate development and investment company. I established Make about five or six years ago to focus on the acquisition of real estate for large scale urban renewal projects in Melbourne. And we were successful in that pursuit of those projects and they've sort of been the longer-term planning processes. And one of the things that came out of all of that was we ended up with a sort of forward pipeline of a lot of housing for that business, you know, sort of several thousand apartments across multiple locations. Kris: [00:02:24] And one of the things that I'd sort of worked out for myself, personally, is I've become very disenfranchised with the traditional delivery mechanism of housing in this country, which is, housing which is delivered via an off-the-plan sales approach. So, and, so the typical approach is, you would go and set up a display suite, sales suite, appoint a real estate agent to come and do a whole bunch of marketing and spend a whole bunch of money on all of that and you'd get investors and essentially some owner occupiers and, sort of, whoever would turn up and pay a 10 percent down-payment and then sign a contract, would sort of have a, get a right to buy an apartment off you at the point at which the building was finished. Kris: [00:03:11] And it was a very impersonal relationship between a developer and their clients, which then not the residents, because typically you would have all the investors, typically you'd have a real estate agent managing that transaction for you. And I could sort see, you know, that that sort of writing was on the wall a bit with that model. And I think that model will still be an important model moving forward in this country but it was obvious to me that with the emergence of our superannuation investment industry, so the fourth largest pension fund market in the world, so, a huge volume of capital available from those sources, that institutionally owned housing as we would typically see it in mainland Europe, North America and some other geographies internationally, would emerge as a very important asset class in Australia where it hadn't really existed previously. And I think there's a few reasons for that, is, one that, sort of, hadn't needed to exist because whilst off-the-plan hadn't been perfect as a delivery mechanism, it had done a reasonable job of keeping up the supply of housing this country needed. Kris: [00:04:20] So what I then embarked on was a, sort of, international sort of approach, research thesis on saying how does housing get delivered internationally, and housing that's of large scale but owned in one line then offered for, sort of, long term secure rental for residents for whom ownership may be difficult, what does that look like internationally? And I think the sort of lessons for me is, from North America I took commercial models and taxation settings and some other things that I think that market is super sophisticated in, and from Europe I took, and particularly locations in mainland Europe and particularly places like Netherlands and others, I took an approach to the development of long tenure housing, the development of community in that setting and, you know, the sort of housing co-operative type approach and the sort of self-curation of community by residents. There's been, a sort, big lesson from that geography. So, all that got me to a point at which I understood the sort of secret sauce, if you like, to what is the approach to the management of large scale institutional housing projects, was really the key to their success and providing an infrastructure within a project in a future neighborhood to let your residents have a very good, productive, sort of wholesome life there. Kris: [00:05:47] So, we basically acquired Assemble which was an existing development business that was doing a very good job of community occupant-centric type projects and transitioned that business and its approach to the development of contemporary and engaged neighborhoods to be our multi-family housing platform so, or will-to-rent platform, as we call it here. And now, you know, Assemble's really the face of everything that we're sort of doing and Assemble will be, sort of, partner, the housing partner for all our clients and future residents moving forward. So, it's really exciting. [00:06:27] So, we only do very low, low, and middle-income housing. So, we don't do what I, sort of, call juiced-up multi-family, like I've, sort of, seen in New York. So, we don’t have a pools and gyms and indoor driving ranges and saunas, and we don't have someone that will do the dry cleaning for you and put it back in the closet upstairs and all that sort of embellished life. I don't believe in any of that, which is I guess, more that reference back to the, sort of, a more sort of simple life. The people get a much deeper level of support in one of our buildings than they will in a traditional Owners Corporation type arrangements. Eve: [00:07:02] You know, what I've learned about Australia is that it's really a for-sale market and most developers build housing products for sale, and yet they're so expensive. I don't know how someone gets into that market when they're a civil servant or they can't afford, as you said, that sort of embellished lifestyle. Kris: [00:07:24] Yeah, they can't. And I guess the systemic problem that comes with that. There are some better value options around but traditionally that's been found in the far reaches of outer suburban Melbourne, which is a sort of systemic problem with our housing market where you've got the people that can least afford to be located 40 kilometres from the CBD or place of work, at a hospital or whatever else, all the people that make our city run get dislocated to these areas and they need to have two motor cars and, you know, they've got to have access to public transport and don't get to see their families as often. So, [00:07:59] That's a very American problem, too. Definitely. [00:08:02] Yeah, yeah. So, we sort of researched again, so, home ownership, given how expensive housing is in Australia for some people it's just going to be very difficult, if not impossible. What we started researching then is saying: well, if you can provide ten-year certainty, so long-tenure housing, across the spectrum of incomes, how would that make people feel about their housing future? Because one of the things that we identified is the thing that people really crave in Australia is, and need is, sort of longer-tenure housing options. [00:08:40] And the issue that a lot of Australians are facing who are likely to be long-term renters is that they are stuck in a year-to-year leasing cycle and the fact that they're only getting twelve months lease at any one time doesn't allow them to put down roots in a location in the same way that you would if you were in a position to be able to purchase a property. And that lack of, sort of, tenure certainty results in significant levels of housing anxiety. So, people are just nervous about what their housing future looks like. And the extension of that is just, well, if you're stuck in a year-to-year leasing situation and the landlord's got the potential to just sell the property or kick you out so they can move their kids in or whatever, who are at university age, for example, might be a good example. So, how does that make you, sort of, feel about your housing future? What's your propensity to really engage in that neighborhood, in that community? Are you as likely to volunteer or join the local gardening group or, you know, do you get nervous about this warming relationship with your neighbours and other people in the community for the fear that your landlord might kick you out at the end of the year and you've got to move three suburbs over? So, what's the point? So, how do you get your children into school and make sure they don't have to move schools halfway through their primary school education, for example? All those things together create a lot of nervousness in our housing market for people that are struggling to access ownership place. Kris: [00:10:10] What we've done is, Assemble's delivering multiple options to the lower/middle income Australians one of which is we give people a five-year lease and then the option to purchase their property at the conclusion of that lease. They'r
35 minutes | 6 months ago
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:16] Hi there, thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:23] My guest today is Adam Sgrenci, the founder of the Center for Infrastructure and Society. As a start-up Center's work has evolved over the last year into an organization focused primarily on human capital. While affordable housing is still at the top of the list, instead of just helping to build more affordable housing, Adam leads conversations on how to build human capital. Conversations that encourage communities to plan their own destinies through co-design, co-creation, co-production and co-ownership. Eve: [00:01:10] Be sure to go to evepicker.com to find out more about Adam on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change. Eve: [00:01:42] Hello, Adam. Thanks so much for joining me today. Adam Sgrenci: [00:01:45] Thanks, Eve. It's a pleasure to be here with you. Eve: [00:01:48] Oh, good. So, I was sniffing around on your website. I saw the following statement: We design and launch large scale housing projects that address the global housing shortage. And that's the mission statement on the home page of your organization, Center for Infrastructure and Society. And I was wondering if you could just tell us a little about that mission statement. Adam: [00:02:13] I'd love to. And of course, it's going to come with a caveat, because in the world that we live in today, things move fast, and things continue to evolve. And so, for us, I might even add a, an updated version of that, which is still similar. So, what we're sort of, kind of rebranding ourselves right now and saying that we're essentially regenerative design and development organization, which means something similar. We accelerate the positive impact on local economy, local society and local environment through regenerative housing projects. Eve: [00:02:56] OK, so slightly different, pretty much the same idea, though, still housing, right? Adam: [00:03:01] Right, absolutely. It's housing and just to be clear, you know, housing is a part of a large eco system of infrastructure. That's where that the broader approach is starting to take shape. But, you know, as we as we talk today, I'll be glad to share, you know, how we learned and how we've grown. Eve: [00:03:19] Tell me a little bit about the Center for Infrastructure and Society. I think it's a pretty new organization by the sound of it. Adam: [00:03:26] Absolutely. Yeah, I know the sound is resonating well because as we continue to grow, we, you know, we start to learn more about all the opportunity that's out there in the housing space. And this is something that I believe Small Change understands very well. This path essentially started for me 10, 15 years ago as a young carpenter coming up, building homes, as a contractor, then as a project manager. You know, you start to see some of the vulnerabilities that exist from the housing development real estate sector. And for me, one of the biggest things that was sort of a glaring vulnerability was the focus on human capital investment. Adam: [00:04:08] So, I'm talking about workforce development. So, this has a direct relationship with skilled labor shortage and the global housing crisis. And so, my ascent here into trying to roll out with, which ultimately became the Center for Infrastructure and Society, was the need to bring this understanding of construction, of infrastructure and development to this place of, of empowerment. Those were sort of the two worlds throughout my career that I was always interested in. And so, that ultimately led me to creating a new organization that initially started by guiding mass housing builders in underbuilt environments on the things that, and by the way I'm am based in Silicon Valley, so here in Silicon Valley, it's very common to hear conversations about you know workflow and KPI and, you know, career trajectory. Eve: [00:05:09] Sure. Adam: [00:05:10] So, where does that, yeah, and where does that sit and how is that situated within the context of the typical trades-person or the overall real estate space? That was the initial foray that that Center for Infrastructure and Society took into the world. Eve: [00:05:27] Maybe you can explain a project that you're currently working on. Adam: [00:05:31] Sure, love to. For example, back in October, I took a series of trips. I was in Nigeria and I was in India and all I was really doing was taking that consultancy approach to working with builders to kind of help analyze training in the workforce and how all of these things can sort of be brought in-house. Well, we've seen the rise of the con tech in the prop tech companies over the last, say, five or six years especially, in the real estate space. And so, what they were sharing with the world was, look, we can vertically integrate all of this. Design, engineering, but everything down to manufacturing the product. So my kind of approach was to work with some people that I knew that were already working in mass housing in some of these places and start to inquire about what it is that they're looking for and what the, you know, where are the vulnerabilities that they've identified to their own growth. And to solving their own local housing crisis. And so what that evolved into was digging in to KPIs and workflow and how you might be able to bring manufacturing in-house to vertically integrate, similar to some of the larger companies in the world. Adam: [00:06:55] We actually started to take a step back and look at, like, what we call in regeneration, you know, the whole ecosystem. So, right now in Nigeria, for example, we're working with a mass housing builder to help them, who already has some of these technologies in-house, so they're not stick building or they're not building with block, they are actually already using panel systems, which is great. So, they're manufacturing that, so they've reduced some aspects of that supply chain. Though we are recognizing that one of the things that development tends to ignore, at least conventional development and I know in many of your projects, you guys do this as well, and it's the partnerships with local community. It's co-designing with people who are actually going to live in these places so that when the project is over, at least when it's installed, now there's a foundation for perhaps social enterprise for those folks that are living in the new community. There is, you know, maintenance programs to keep these projects standing strong and looking great. So, that's one project that we're doing in Nigeria. It's advising a mass housing builder to... Eve: [00:08:10] The co-designing thing. you know, I was at a co-creation conference last week and have to admit I found a pretty overwhelming because, you know, there's a lot of people involved who had everything from absolutely no skill, no understanding of the real estate space to people who've had quite a lot of experience. That's really difficult community engagement to do. Adam: [00:08:37] Absolutely. Eve: [00:08:37] So, when you're in a place like Nigeria with a company that maybe wants to introduce co-designing, is what I thought I heard you say, how do you go about doing that? Adam: [00:08:48] That's a great question. Ultimately, for us, it comes down to having a model and a framework for the discussion because that helps guide everyone into at least a direction. We start out with workshops and you know, where you might consider a town hall as an opportunity to explore relationships in the community, town halls tend to be a kind of space that is just as, let's say, conflict ridden as the typical fragmentation of our, of our industry, where everyone's sort of protecting their own idea. And so, with a model in place, we've got a four-part model. And so, it's broken down into benefit capital, regenerative technology, community engagement and strategic partnership. And so, we sort of give some context and background and we kind of set the stage for the conversation. If it's initial conversation versus, even if it's you know, we've been doing this now for two weeks or three weeks with a specific group, we're at least all coming from a similar perspective and that helps keep us focused on what you very astutely observed, that it's actually quite overwhelming. We're talking about an ecosystem, right? Who's in the ecosystem? It's governments and it's corporations and it's labor unions and it's non-profit organizations. And yeah, to your point, very correct. Eve: [00:10:23] So you have a structure that you've thought through that can sort of help guide people and companies to some sort of commonality, by the sound of it. Adam: [00:10:33] Absolutely. That has helped us at least get us to a point where we're all able to, you know, align on next steps. Eve: [00:10:43] Right, interesting. That's a pretty difficult job you're tackling there. Adam: [00:10:49] Yeah, hence the sort of rethinking of how we work. You know it happened in Nigeria, honestly, when I was interviewing and, you know, just doing assessments and talking to different builders and, you know, the reason that I had traveled there was because there was an interest for this vertically integrated approach to running businesses and having business models that didn't depend on too many suppliers, and, especially in other parts of the world, or even it happens here in the US, there's always an opportunity for details to get lost and things to happen on development projects. Eve: [00:11:28] That's for sure. Adam: [00:11:29] And so, what we realized early on was, our clients didn't only want the advisory, but the
28 minutes | 6 months ago
Of service. In Erie.
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:13] Hi there, thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:20] My guest today is Christina Marsh, chief community and economic development officer at Erie Insurance. Erie insurance has played an unusually large role in their community. In her role, Christina has helped to create a community development corporation, an equity fund that is now at 27 million dollars and has also been involved in the purchase and development planning for four blocks of Erie's lovely downtown. Christina, first and foremost, sees her role at Erie Insurance as one of service to the community they are located in. Eve: [00:01:02] Be sure to go to evepicker.com to find out more about Christina on the show notes page for this episode and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change. Eve: [00:01:26] Hello, Christina. Thank you so much for joining me today. Christina Marsh: [00:01:29] Hi Eve, thank you. Thanks for having me. Eve: [00:01:32] I've heard and wondered about Erie Insurance and the company's role in economic development in a boom that's really underway in Erie and I wondered who's behind it? Is that you? Christina: [00:01:46] There's many of us actually behind it. And what I can say about Erie Insurance, I've actually worked with Erie Insurance for over 25 years now, and just a couple of weeks ago we celebrated our 905th year anniversary as an organization. Our founder, H.O. Hirt, always instilled in our core values and belief system in being, above all, in service and not just service to our agents and our customers and employee to employee, but certainly to the communities that were a part of. Erie is our namesake and our hometown and has been for 95 years so we have a very strong historian, civic leader, community advocate in our chairman of the board, Mr Tom Hagen, who's certainly behind a lot of the visionary efforts that are happening here in Erie and certainly on behalf of Erie Insurance. And our CEO, Tim NeCastro, this is his hometown. He became our CEO a few years back as all of this new energy, this renaissance, was beginning. So really, the timing was right for Erie Insurance to come in and take a bit of a leadership role. We are now the largest employer in Erie County and the only Fortune 500 company that's headquartered here so we take that responsibility very seriously. Eve: [00:03:10] And so what's, what's your role at Erie Insurance? Christina: [00:03:14] So, I am the community and economic development officer and when Tim came into the role as CEO, he and I had worked together over the years in all different capacities, even at Ernst & Young before we both joined the Erie Insurance many years ago. And he invited me in to help with all that was happening in the community. We do a lot of convening and coordinating, not just of our time, but of our resources with others so this way, as community leaders, are collaborating like never before, on public and private sector sides, that we're also able to multiply the impact of all the investments that we're making as well. Eve: [00:03:54] Wow. So, just tell me a little bit about Erie. Actually, I've been there. I know a little bit about it, but not a lot. Anyone is listening may not have been there. Christina: [00:04:02] Sure. You know, Erie, Pennsylvania, is the fourth largest city up in this north-western corner of Pennsylvania. We are the only port here in Pennsylvania with a beautiful lake and bay-front, which is one of our greatest assets that we're leveraging. We've had quite a bit of investment, private investment, over the past several years, Erie Insurance being one. We are located right in the core, downtown. We have over 40 acres there. There's a beautiful public square right in the core that we consider the beating heart of the region. It's called Perry Square. It's been beautified, lots of investment has been made there as well. So, it's really centered on a strong core. We have two health systems that are strong, Allegheny Health and UPMC. UPMC is anchored right downtown as well with Erie Insurance, as well as Gannon University on the west side of the square. So, we have three strong anchors in our downtown. So, we have four universities and one of the largest medical schools, LECOM, here in Erie as well. Christina: [00:05:08] So we have many rich assets, a mayor who took office in early 2018 that has a strong vision for Erie being a community of choice. So, he's leading that effort with a strong balance of embracing the diverse cultures that are here. We have, in the city, we have about 20 percent that are new Americans, those that have resettled here. So, we're embracing those communities that are, you know, starting their own rich cultural aspects, as well as ensuring that we create and continue to build upon a strong and healthy and vibrant downtown and bay-front. We do have a lot of rich assets and things to do here in the community that's very generous and a lot of grit to it. We've certainly seen some of the decline, though, as many Rust Belt communities have over the years. We've lost, you know, 40,000 people in the city of Erie over the past six decades for various reasons and so some of the infrastructure over the past few decades has certainly declined. And we are working now to really reinvest in that infrastructure, whether it be our public schools or our streets or buildings that have really cool and unique architecture. Eve: [00:06:30] So it's a pretty typical Rust Belt story. Loss of jobs, loss of people, loss of tax base and declining infrastructure as a result. Christina: [00:06:40] Absolutely. Eve: [00:06:41] You didn't mention one of my very favorite assets in Erie, and that is Presque Isle, which has to be one of the most beautiful state parks I've ever been to, one of my favorite places. Christina: [00:06:51] You're right, it is. I think sometimes, you know, I'm not from Erie originally, I grew up in Long Island and when I had family and friends come and visit, then we go to Presque Isle or look out over the lake there. They don't imagine it to be as beautiful as it is. Of course, you know, it's a free public park, which is also amazing. Eve: [00:07:11] Yeah, it is amazing. Christina: [00:07:12] And the traffic isn't nearly what it is on the Long Island beaches so it's a great surprise and certainly, yes, a beautiful asset. Eve: [00:07:21] It is. I've enjoyed it for many, many years. I think the state parks in Pennsylvania are altogether gorgeous, but that has to be the most beautiful. What's a typical project that you might become involved in, in Erie? Christina: [00:07:34] The first one that we took a leadership role on was the creation of the Erie Downtown Development Corp. We had eight community leaders in late 2017. They really took the Erie Refocused plan to heart. We had a comprehensive plan at that time that the community had built together with a consultant, Charles Buki. There was something called a Metro 100 at our Jefferson Educational Society, it's a think tank here in Erie. And our CEO was there, Tim NeCastro. Afterwards, he spoke to Buki and said, you know, here's six hundred million dollars of, you know, work ahead of Erie and this comprehensive plan for the city, where do you even begin? And Buki recommended, of course, starting in an area of strength, which is our core downtown, and build out from there and stay focused. He also suggested that that group take a look at 3CDC in Cincinnati. And so, there was a small contingent called the Cincinnati 8 of our business and community leaders, our Erie Community Foundation leader's been a strong partner in this, and off they went to Cincinnati to talk with Steve Leeper, who I believe you would know from Pittsburgh days. Eve: [00:08:53] Yeah, I do and there is the Tom Murphy connection, right? Christina: [00:08:58] Exactly. Steve Leeper's been very generous with his time and resources so that we could accelerate creating a similar model here in Erie. Definitely a different scale and a different starting place from where Steve was at that time. That's where, for the first year and a half, Eve, that's where myself and my team spent most of our time in helping to bring leaders around the table, create the model for the Erie Downtown Development Corp., a non-profit, and then really began raising funds to help fill gaps, particularly in these early days as we patiently await the building and the return of the market. You know, we raised over 27 million dollars. We knew that we needed collaboration, Erie Insurance could not do this alone. We needed the support and buy-in from the community. We really needed to create new hope for Erie. Our mindsets, we're still very down on ourselves. We had a lot of national press that was really taking advantage of the Rust Belt story in the negative sense and we really wanted to turn that around to create hope and optimism for our community and change the mindset around to: it's not only okay to love Erie, we do love Erie and we're ready to do something about it, and do something about it for everyone for generations to come. And that's really a lot of what we did in those early years. Eve: [00:10:20] So the Downtown Development Corp., if I'm correct, actually has purchased a block, maybe a block of property, to do a rather large development in the core of downtown, is that correct? Christina: [00:10:32] That's right, Eve. Actually, there is a block, it's right on North Park Row. So, Perry Square that I referred to earlier, that is right on Perry Square. But they've also purchased properties in, actually, a four-block square in that downtown corridor right on our main thoroughfare of State
31 minutes | 6 months ago
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:17] Hi there, thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:24] My guest today is Katie Swenson. Katie joined MASS Design in 2020 as a senior principal after having worked for many years on affordable housing with enterprise community partners. There she was, a vice president of Design and Sustainability. Her role at MASS, a design practice that embraces issues of economic and social equity, is to help them to define Mass Version 2.0. Eve: [00:01:06] Katie's career has spanned both arts and design, from comparative literature to modern dance. When she finally decided to attend graduate school, she chose architecture as her discipline. And that's when the magic really started to happen. "It allowed me to become a community-based architect," she says, "one who brings ideas to the local level and works with the city and community to make things happen." Eve: [00:01:37] Be sure to go to evepicker.com to find out more about Katie on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change. Eve: [00:02:00] So hello, Katie. Thank you so much for spending some time with me today. Katie Swenson: [00:02:04] So glad to be here. Thank you, Eve. Eve: [00:02:07] I'm really fascinated. You've built a career around this question: How do we create an equitable, sustainable, affordable city? And I'm just wondering how you would answer that very big question. Katie: [00:02:20] Yes. Thank you for that question. How do we create an equitable, affordable, sustainable city and communities, I would say, as well. Eve: [00:02:30] Yes. Katie: [00:02:30] You know, my work has taken me into communities mostly across the United States, both large cities and small cities, rural communities and tribal communities. And I think at the base of everything that we've been trying to do is to understand how people can create lives for themselves and their families that give them the opportunity to become and be the people that they want to be, to live lives with purpose and dignity and have the resources and abilities to contribute to the world at large and to their families. So I think that has to happen and in all kinds of environments, certainly so much of the focus of both the sort of economic engines as well as a lot of the environmental work has been around densifying cities and creating cities as urban centers where so much of our work and life can happen. But I think it's also important to understand the broad spectrum of communities that we have throughout the United States and understand that we need to address critical issues around housing and jobs and health and education resources for everybody in the country. Eve: [00:04:01] Basically, one one size does not fit all, right? Katie: [00:04:04] You know, America is much more diverse, I think, than we necessarily give it credit. I've had the incredible opportunity over the last dozen years to really travel quite a lot throughout the United States. And last year, I partnered with a photographer named Harry Connolly and the two of us have been working on a book that we called 'Design with Love at Home in America'. And we went and revisited 10 of the communities where we've been working in partnership for many years with local community development corporations. And the experience kind of re-revealed for me how diverse America really is, from border communities to very rural tribal communities. We worked in geographic diverse locations from the Mississippi Delta through Yakima, Washington, which is sort of the breadbasket of America for produce and fruit production, through inner cities in Baltimore and elsewhere. So, I think one size does not fit all in some ways and in other ways, of course, there are so many common themes that unite best efforts throughout the country. Eve: [00:05:33] Yes, I think about one size does not fit all, I immediately think about, you know, the very typical residential project that developers will build, which really seems to be one size for all. And what you're describing is something very much more diverse. Katie: [00:05:53] Yeah, I think that communities need to grow to reflect themselves. That's the essence of place-based attitude towards building MASS Design. We have talked too often about the provenence of a building. You think of, let's say, wine that comes from a certain region and is grown from a certain type of soil. And buildings and communities also have the opportunity to be grown from their place and to be designed, really, in concert with the values and ambitions and aesthetics and goals of the people who both are responsible for creating them and then will live and grow their own communities. So, yes, I think it's really important to understand that diversity is not an abstract goal, but is the result of, sort of, expression of an environment and that of people and community values that create something that's unique and individual to a place. Eve: [00:07:09] Yeah, I love that thought that a building has a provenance. I think that's great. So, the question of the architect's role within community has sort of continued to grow and change in recent years, but I don't think it's fully formed yet. And how would you like to see that role continue to evolve? Katie: [00:07:28] You know, through our work with the Enterprise Rose Fellowship program, we've learned a lot about a role that an architect can play in local communities. So, just to give a little bit of context, I worked for almost 15 years at Enterprise Community Partners. Back in 2001 to 2004 I participated in a program called the Enterprise Rose Fellowship Program and as an aspiring architect, I was partnered with a community-based development corporation. And the goal was to bring an architect or designer on to the development team of a community development group. The Community Development Group could use the resources of a dedicated designer, and the designer would be able to learn the ins and outs of not only affordable housing development, but also community engagement processes and the regulatory processes that contribute to the creation for affordable housing. So, over these past nearly 20 years, Enterprise has partnered 85 Rose Fellows with community-based groups, and it's been an incredible privilege to be able to witness the growth that has happened through these partnerships. Each one has looked very different. In all cases, there are definitely some sort of underlying values. The architects who are attracted to this work and who succeed at it are generally very humble people who approach the work with the desire to uplift, first and foremost, the goals of the community, but also have to be able to be both brave enough and resourceful to bring the best resources from the architectural and design communities to sort of bear in the local work. So, it's been wonderful to watch these relationships and partnerships grow over time, and each one has resulted in very different kinds of outcomes. Eve: [00:09:49] Do you want to give me some examples? What should a community architect be thinking about that's perhaps different than a rock star architect might be thinking about? Katie: [00:09:58] Absolutely, I'd be happy to share a few examples. I think I would start back in the early days, maybe in 2001, when David Flores was partnered with a community group in San Ysidro, California, called Casa Familiar. A local non-profit that is now about 50 years old and has been working as a kind of community organizer in San Ysidro for many years, helping families navigate life on both sides of the border and provide affordable housing and other community development resources in San Ysidro. And David Flores was a member of my class of fellows, so we both started work in 2001. At the beginning, David started building what he called Casitas, small houses along some of the alleys in the historic part of San Ysidro. But I think he quickly started to realize what the larger challenges that families were facing at the border, including, of course, the border itself. And as the San Ysidro land port of entry has expanded and increased its, I guess, militarization of the border process for crossing, it also took up more space and land space in the community, more energy and also, because of the long wait times to cross the border, was creating environmental effects from stalled vehicles. So David, not only has been working as the design director at Casa Familiar, he was there for almost 20 years working to oversee the development of affordable housing in the neighborhood, but he also joined, for a time, he led the Planning Commission efforts and he got involved in the design and planning of the border control station so that it would be more receptive and welcoming to pedestrians and people crossing each way. And he got involved in environmental studies and testing air quality in the region. Katie: [00:12:16] So I think that architects and designers like David show that an architect's job is not only on distinct projects, that, absolutely he's been involved in helping to realize some very beautiful pieces of architecture including a project which just opened recently that Teddy Cruz and Fonna Forman designed for Casa Familiar, a longtime project in development. But that these building blocks of housing and libraries and parks also need to be knitted together into a larger point of view and larger ability to help a community, as a whole, feel supported and able to grow a family's life and capabilities in some of the most stressful, you know, environments that we have here in the country. Eve: [00:13:16] That's a lovely story. So, I'd really love to hear about how you came to be such a powerful advo
Terms of Service
© Stitcher 2020