Jumpstarting a community.

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.