In college, Paul Rabinovitch planted almost a million trees. Seeing the clear-cut land in which he was working sparked a desire to center his work around creating change. His career path displays a multitude of avenues towards making an impact – from brownfields redevelopment, to building sanctuaries and parks with the Nature Conservancy, to working as an impact investor in real estate.
Now Paul serves as the Head of Real Estate Investments at New Island Capital, a family office that centers its work around impact. New Island Capital was one of the first investment firms with a focus on impact.Now impact investing has come into the mainstream with more firms and family offices looking to bring positive change with their investments every day. New Island brands itself as being 100% for profit and 100% mission driven. The office prioritizes long term investments that bring meaningful social and environmental change at the same time as maintaining profit and competitive returns. They invest in various sectors including clean technology, health care, renewable energy and of course, real estate. Real estate investments are made in markets where the residents are supportive of sustainable assets, as well as those in need of social equity and workforce housing.
Paul sees real estate as an opportunity to benefit people’s lives in a tangible way. There is longevity in real estate – buildings impact residents’ lives for decades, even centuries – which emphasizes the importance of adaptable, restorative, and regenerative development. In his varied work with both conservation and real estate, Paul has witnessed the organic growth of places. That is his goal – to build change that benefits people and the planet.
Read the podcast transcript here
Eve Picker: [00:00:08] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo, in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website RethinkRealEstateForGood.co, or you can find them at your favorite podcast station. You’ll find lots worth listening to, I’m sure.
Eve: [00:00:57] Early in his career, Paul Rabinovitch worked as a tree planter in the reforestation industry, personally planting over 800,000 trees in Canada, where he grew up. That set the stage for the career he pursued. First as the executive director at the Nature Conservancy in Arlington and then as founder of TerraCycle Investments, a socially conscious real estate firm. His mother is a real estate developer, and Paul followed her lead, weaving in the social responsibility that so interests him to his real estate career. Now, Paul heads up real estate investment at New Island Capital, one of the largest family offices in the country, and one of the first to focus on impact investment before such a thing really existed. New Island invests in commercial scale, growing companies providing private credit, private equity and project finance. They also invest in farms, forests and of course, real estate. At New Island, Paul gets to invest in real estate with social impact at scale. You’ll want to hear more.
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Eve: [00:02:37] Hi, Paul. It’s really great to have you on my show today.
Paul Rabinovitch: [00:02:40] It’s great to be here. Thanks for inviting me, Eve.
Eve: [00:02:42] So I wanted to ask you about New Island Capital, where you work, and the company defines itself as both 100% for profit and 100% mission driven. And I wanted to just ask what that means.
Paul: [00:02:57] Sure. That’s a great question. New Island Capital was formed a couple of decades ago almost, and it was formed on the premise that we can invest towards triple bottom line returns where profits do not exclude creating environmental or social benefits. And really, the company was formed around that thesis that we can do both and there are meaningful opportunities for us to invest in things that make a profit that would be equal to what you would make in a conventional or traditional type of investment, but also drive really great social results. And that’s what our company is all about. We are 100% what’s called now impact investors. Back then it was double or triple bottom line investing. And we invest in real estate, and in businesses, companies as well as being active lenders across a lot of different spaces, ranging from health care to real estate to health and wellness and renewable energy, clean tech, a lot of different sectors.
Eve: [00:04:11] So you mentioned returns. And I’m wondering like, do you do you get as good returns as regular non-impact investment? Is that really possible?
Paul: [00:04:23] Yes, it is Eve. And I’d say there’s one important distinction to keep in mind, which is that we are long term investors, and sometimes we call that being patient capital. And so, our usual investment horizon is ten or fifteen years, and we do that intentionally as long term investors. One reason is because we invest on behalf of the family office. So, we’re investing for multiple generations, and we can think longer term. That’s one reason. The other reason is that we invest a lot of capital upfront in some of those social benefits. And an example I would use would be solar panels. So, we would invest in putting solar panels on the building right up front. And we know it would take seven or eight years before we’re at a break even on that investment. But then every year after that, it’s accretive to our bottom line. So, when we compare ourselves to other investors, we compare it on a ten- or fifteen-year horizon. And then we’re very competitive because by then, by the tenth or twelfth or fifteenth year, some of those upfront investments are beginning to bear fruit, so to speak. And we are outperforming what people are doing on the shorter-term horizons that that are more in vogue these days.
Eve: [00:05:41] Interesting. So, I’m going to go back to New Island Capital. Why does it exist?
Paul: [00:05:48] New Island Capital really exists because it was the experience of our family office that started us who was really interested in investing in alignment with their core values and their beliefs. And they had been shown a number of ESG screened kind of investment opportunities to invest their wealth in alignment with their values. And really their drive was not so much how do I do less bad in the world? Their drive was, how do I do more good in the world? And there weren’t at that time, this is going back a couple of decades, a whole lot of opportunities to invest with that kind of an idea. And so, our firm was born out of that idea. Now there’s a lot more impact investing firms that are out in the marketplace. It’s been really a pretty rapid rise of impact investing as a practice, which I think is really encouraging and exciting.
Eve: [00:06:47] So what’s your role at New Island Capital?
Paul: [00:06:51] So my role here in New Capital is I’m the Head of Real Estate, and responsible for all real estate investments for the company, as well as part of the senior leadership team in the investment committee and overseeing all the investments across all the various specialties that we have here.
Eve: [00:07:11] And I’d love to know, first of all, how you find triple bottom line impact real estate investment opportunities. And a second part to that is what percentage of the opportunities do you look out really kind of meet your goals, and what are some of the examples of the types of investments that New Island has made?
Paul: [00:07:32] Well, let’s talk about how do we source opportunities first, and you know, our approach to sourcing opportunities, projects where we want to deploy capital into is sort of the reverse of many other capital allocators that are in the market. And what I mean by that is that many other capital allocators, family offices or pension funds or what have you go through a sort of a research driven approach to say, well, where is the best market in the United States or in Europe or wherever they’re working? And where do we want to invest? They may pick an area like, let’s say, Pittsburgh, just out of the blue or some other wonderful city like that. And then they go look for a good sponsor that is an expert in developing in Pittsburgh or whatever geography they’re working in. We’re the reverse because we are 100% impact oriented. The bottom-line returns, the impact outcome is just as important as the financial outcome, and not all sponsors are the same. They’re not all equal because we need one, a partner who we believe, and trust is in alignment with our goals. So, our process is go find the best impact developers in the country and then underwrite them and the market that they work in. So, we come at it backwards. We go sponsor first, who are the best sponsors, what are their markets? And if those two circles intersect and we like the developer sponsor and we like the market, then we have a place that we can really have a conversation around.
Eve: [00:09:08] So I’m wondering if that’s the way you look at it. Are the markets that you generally end up in not the hottest markets in the country?
Paul: [00:09:16] It’s an interesting question. Not necessarily. No, I wouldn’t say that, Eve. I would say that the markets that we are ending up in right now are some of the fastest growing, most progressive markets in the country. And the reason I say that is one of the themes that we work in is sustainability and building net zero energy, operating buildings, low carbon buildings, buildings that perform at the highest levels of resource efficiency, water and energy efficiency and all those sorts of things. And so, if you’re going to build a building like that, you need to have a market that accepts it and might be willing to pay a little bit more in rent or might be really attracted to a building product that’s like that. So, we tend to be in markets where there’s a more progressive market tenant base that would be attracted to those kind of assets. So, we’re in markets like Seattle, Boulder, Colorado, and we’re not in markets that are less interested in those kinds of products. So, sustainability is a good example. And then, we also do a lot of work in social equity and workforce housing. And so, we’re also in some markets where workforce housing is in short supply and so, and high demand. And so, we work in those areas as well and some of those markets are really terrific as well.
Eve: [00:10:44] Oh, that’s interesting. And so, what are some examples of the types of investments that New Island has made?
Paul: [00:10:51] As I was saying earlier, we’re really interested in accelerating and supporting a transition to a low carbon economy. And so, we work in investing in buildings that have the lowest carbon footprint that you could design towards. So, there’s a couple of projects that we have that are CLT Cross Laminated Timber construction. That construction type is about 50% lower embodied carbon than a steel and concrete building, for example. So, those, we think that’s sort of the future of where we want to, if we want to try to become a low carbon and we want to try to combat global climate change, that’s the kind of buildings that we need to be building. And so, we invest in buildings like that. We also invest in buildings that have high solar or renewable energy components to them. And so, they’re in sunnier places. We’re investing in a project in Huntsville, Alabama, that will be net zero energy from solar contributions. We also invest in the workforce housing, as I was saying, and trying to figure out how we can create without government subsidies, housing that is affordable to what used to be called the middle class, the population that is usually comprised of schoolteachers and firemen, policemen, the essential economy of our society who are having a harder and harder time finding places to live in that don’t burden them for, the housing cost does not burden their family budget. So, our goal is to try to develop properties where a middle-income, middle-class family can afford to live without spending more than 30% of their budget for that housing.
Eve: [00:12:36] And without spending 2 hours commuting to their job, right?
Paul: [00:12:40] Correct.
Eve: [00:12:41] Is that really horrible issue.
Paul: [00:12:43] Yeah, that is part of the issue.
Eve: [00:12:47] Go ahead.
Paul: [00:12:48] Well, the last part of it, which I also think is an interesting part of our work and because we are long term holders of real estate, as I was saying earlier, where we’re holding assets for ten plus years, we also think about how can we layer on additional impact to a project over time, maybe we can’t afford it when we build it to put on solar hot water, but we could put that in in year three. Maybe we identify that the area that we, that our building is going up in is a food desert and really needs to have an organic co-op on the ground floor and we can put that in, or is a banking desert and needs to have like a co-op or a community bank on the ground floor. So, we think long and hard about how do we improve the communities in which we’re investing, and that is a tangible impact that we measure. And then the last part is who are our partners, and can we diversify our partners so that they’re representative of our society, that we have women developers, we have developers of color, we have all the developers who are trying to emerge into the field. So that’s another part of our impact as well. That is part of what we’re trying to create.
Eve: [00:14:11] So going back to family office operations, which impact operations were pretty rare, as you said, 20 years ago, but tremendous private wealth is consolidated around the world and family offices. How much wealth do they hold?
Paul: [00:14:28] It’s in the trillions, Eve, but I don’t know specifically. Family offices to be candid about, I’m not necessarily tracking, I happen to work within, for a family office, but I don’t necessarily track the sector. But you’re right, they’ve been growing rapidly. But there’s also not necessarily like a registration or a way of tracking how much money is actually managed there or, it’s a little bit I don’t want to say shadowy, but it’s a little bit you know, it’s not something that is out in the open where everyone knows the number of family offices and how much wealth do they have under management. It’s a little hard to track.
Eve: [00:15:08] One of the articles I was reading is that why some people with wealth have tended towards family offices because they have a little more leeway in what they can do with their funds than, for example, a hedge fund or a venture capital fund or something like that.
Paul: [00:15:28] Yeah, that’s true. And, you know, it could be to the best. You know, the story that I told you about New Island Capital is around a family who has wealth that wanted to do more good work with their capital and their wealth. And so, I think that there are many family offices. I know there are, because I speak to them frequently about cooperating on projects that have similar ideas. And I think there’s a lot of encouragement to be had from the next generation of family wealth. Perhaps the founders may not hold some of the same values, but this next generation that’s upcoming is from everything that I read and everything that I hear is very desirous of seeing a world that works better for the environment and for social justice and for other issues and equity. So, there’s more and more family offices that are looking at the same way that we are.
Eve: [00:16:25] So yeah, we generally seem to be experiencing the mainstreaming of impact investing. And I’m wondering, you’ve been in this world for a while and how much has it changed over the last decade?
Paul: [00:16:39] Well, you know, that’s very interesting. It has changed a lot is the short answer to it. And I think that has changed, you can measure it and think about it in a lot of different ways. One way is how much money is there that’s in the sector and that has certainly grown. How many other companies are there? It’s been a long time since I started in this work, since I had other colleagues that I can talk to. Now there’s a lot, and there’s conferences and there’s more and more people who are doing this kind of work and thinking about it. And I think even though you didn’t ask me about this, particularly as a lot of the work that family offices have done to invent and think about impact investing has now kind of evolutionarily moved up the ladder into institutions. So now, you know, Goldman Sachs, Nuveen, any of the major banks and financial institutions you can think of, as well as many life insurance companies and pensions have impact investing shops. Larger capital providers are also sort of following the trend and building out that sort of, that strength and that practice, which I think is really encouraging.
Eve: [00:17:54] It is. And I was just going to say, like when you did your degree, it was probably unusual. But now I hear about more and more impact investing programs and students emerging who want to work in that world, right?
Paul: [00:18:09] Yeah, absolutely. I’m ancient, so there was no such thing as this when I was in school. But you’re right, now it’s being taught at school. You know, like on this podcast, I’ve been asked to speak to students and tell them about what I do for a living and why it could be a good career choice for them. I just did that for a group of students at University of Colorado, Boulder and they were, they were fascinating and fascinated. And I thought it was great.
Eve: [00:18:41] That’s really cool. So, I have to ask, there are clearly areas that are receiving a lot of attention from impact investors, but do you feel like there are some big holes that still need to be plugged? Some areas that really need help?
Paul: [00:19:00] The leading component of impact investing would be the environment sustainability. And I would say that that is by far the, the bigger appetite that I see people investing towards. You know, that could cross a lot of different areas, it could be clean tech, it could be green buildings, it could be sustainable food and our food supply chain. So, if you think about it as ESG, there’s a lot of “E” that people invest into. And I think it may also be that that is the part of impact investing world that may be the easiest to track and has the longest, it’s got the greatest longevity. We’ve been talking about it for 20, 30 years, and so it’s finally got some traction. That would be sort of the top of the list. I would say the second most emergent that I’ve noticed has been social equity and diversity, mostly driven out of the racial unrest that we saw over the last few years and just a great drive together with opportunity zones in some way to create greater economic opportunities for diverse populations, and populations that have been overlooked for decades and decades, or have lost the opportunity to create wealth for themselves through institutional racism and other institutional barriers to advancement. So that, I would say, would be the second largest. Your third question is, are there areas that are not being addressed?
Eve: [00:20:42] Those two actually encompass a lot, don’t they?
Paul: [00:20:46] Yeah. You know, the one area that I think I’m really interested in and our family has been talking a lot about and which I think is really interesting, is community ownership and different ways in which, and your, Small Change is a part of the solution to that is how do people invest in real estate or invest in their own communities? How do they make, how do you build up your community around you and also profit from it and create wealth? And how does that work in our society? I think that’s an area that has, there’s a lot of people thinking about it and not a ton of examples. Your Small Change is one example, but there’s also ideas about neighborhood rights. There’s examples about community land trusts. There are other examples that are out there of different ideas about how do we structure these kinds of opportunities.
Eve: [00:21:40] So, I think for me the big difference is that the environment is and the issues that environment are really mainstream now. Everyone knows they can, they understand, even if they don’t want to do it, that they can have a small part in making a difference whether they recycle or put a solar panel on their roof or, you know, whatever small step they can take, it’s really at the level now that everyone can grasp. Right. But I think that creating equity for people is not something that most people can grasp and not something that most people understand how they can help. Does that make sense?
Paul: [00:22:18] I think it does, yeah. We’re tactile people and it’s very tangible when you see a solar panel on a roof or rain barrel or something like that, you you get it. Some of the other things that you mentioned are kind of more a little bit more conceptual. They’re not as tactile.
Eve: [00:22:37] Yes. Yeah. So, I want to go back to your background, which is really interesting Paul. What led you from planting trees, which is where you started, I think, to directing impact investments in real estate?
Paul: [00:22:50] So, yes, you’re right. I started planting trees when I was in college. I’m Canadian and one of the best ways for Canadian students to make money for their beer budget for the next year is to go north and plant trees. The Canadian government set up this regulation that any tree that’s cut in Canada has to be replaced at the cost of the timber company. So, they hire these legions of undergrads to come and plant trees. And I’m proud to say that over my lifetime I planted a million trees.
Eve: [00:23:25] Oh, wow.
Paul: [00:23:27] I can breathe easy, I suppose. I’ve created my own oxygen budget. But, you know, part of that experience was if you’re going to be a tree planter, you’re going to be sent to an area that was clear cut and you’re going to have to reforest it. And so, it just really impacted me at that young age to be in these clear cuts all summer long and seeing moose wandering around lost and birds and what, where the forests go. And it would be hectares and hectares of just nothing. And it was, it changed my mind about what I wanted to do. And I had the good fortune of being raised by an architect mother who taught me the business of real estate. And I sort of put those two things together and said, well, I can use what my mom has taught me about real estate and start building green buildings and recycling land. And so, I started off as a Brownfields redeveloper, and learned the business of green building. And then along the way, I also learned about low-income housing tax credit projects and historic tax credit projects and have done all those kinds of projects over the course of my career, mostly in cities, almost entirely in cities. For one part of my career, I also took about a 9 to 10 year hiatus to go join the Nature Conservancy and use my real estate skills to help the Nature Conservancy build more nature sanctuaries and parks. And so, that’s been my career as an impact real estate developer, a conservationist, and now an impact investor.
Eve: [00:25:06] It makes a lot of sense. So, a couple of final questions. What do you like best about the work you do?
Paul: [00:25:14] The way I look at the world is real estate is this opportunity where you can really have a beneficial influence on people’s lives in a very tangible way, whether it’s where they live or where they work, they are spending the majority of their time there, they’re raising their families there. They’re experiencing these places that are being built every day. And so, the process of thinking about that and how these assets that are long term assets they could stand for 40, 50, 6000 years can be adaptable and restorative and maybe even regenerative, I think is a fascinating question and a really worthy place to work. But for me, that’s really gratifying work. It’s hard. There’s not easy solutions. There’s a lot of trade-offs. But if I’m going to work somewhere, working somewhere where I can benefit people and planet is just super gratifying to me. And if I get to make money along the way, too, that is awesome.
Eve: [00:26:19] That’s the triple bottom line, right?
Paul: [00:26:21] Yeah. And I also, you know, I really enjoy watching the organic growth of places. Most of the projects that I’ve done in my career have been in places that are distressed in some ways or have some environmental contamination. They’ve been derelict, things like that. And to watch them come back to life and then spur other life, it’s sort of like seeds being cast from a from a tree and then new sprouts coming up. I find that super gratifying and exciting.
Eve: [00:26:51] Well, thank you very much for talking to me today. I really enjoyed it and I hope I get to hear more about what you’re doing.
Paul: [00:26:58] Absolutely. This was a ton of fun. Thank you, Eve, I appreciate being on.
Eve: [00:27:06] Paul holds an enviable position as the director of real estate investment at New Island Capital, one of the largest family offices in the country. Here he has the opportunity to focus on impact investment in impact at scale into farms, forests and of course, real estate.
Eve: [00:27:33] You can find out more about this episode or others you might have missed on the show notes page at our website RethinkRealEstateForGood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music, and thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.
Image courtesy of Paul Rabinovitch