Beyond the Vagabond.

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 Picker: [00:00:57] I’m bringing back one of my favorite interviews with Avra Jain, a wildly creative (and successful) Miami developer. Avra and her 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. But the one that put her on the map, and the one I love the most is the remake of The Vagabond, a down and out mid-century motel on Biscayne Boulevard into a hip and desirable Hotel. Today, Avra’s passion lies squarely with the personal project portfolio she is building – the conversion of abandoned and historic motels into re-imagined affordable housing communities. I love her approach and so will you!

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Eve: [00:02:23] Hi Avra. Thank you so much for being on my show.

Avra Jain: [00:02:27] Thanks so much.

Eve: [00:02:28] 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: [00:02:46] 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: [00:03:36] Oh, interesting.

Avra: [00:03:37] Yeah, so we actually, so that quote really came from how we really operate. So that’s a real reflection of the work.

Eve: [00:03:48] So what sort of stories do you look for?

Avra: [00:03:52] 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: [00:05:17] Yeah, I know. I took a look on your website. They are stunning.

Avra: [00:05:21] 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: [00:07:20] What gave you the courage to do that? And what sort of resistance did you feel for these projects?

Avra: [00:07:28] 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: [00:07:40] I suppose I meant from the point of view of, because opening is easy. But what about the financing? I mean, how easy….

Avra: [00:07:47] 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: [00:07:58] Yeah, I’m sure.

Avra: [00:08:00] 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: [00:09:32] Right. I’m very familiar with them. Yeah.

Avra: [00:09:34] 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: [00:10:24] Wow.

[00:10:25] 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: [00:10:43] Interesting.

[00:10:44] 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: [00:11:16] 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: [00:11:29] 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: [00:11:47] 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: [00:11:57] 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’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: [00:13:00] 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: [00:13:36] Yes.

[00:13:37] 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: [00:13:48] That’s exactly what you need, yeah.

Avra: [00:13:49] 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: [00:14:58] Oh yeah, yeah, yeah, yeah. I sign my whole life away.

Avra: [00:15:02] 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: [00:15:52] Yes. So, what would you tell other women who want to be real estate developers?

Avra: [00:15:57] 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: [00:16:07] 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: [00:16:34] 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: [00:17:24] 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: [00:17:40] 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: [00:18:25] 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: [00:18:45] 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: [00:19:11] Yes.

[00:19:11] 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.

[00:19:59] 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: [00:21:03] Ok. So, you right alongside equity investors who risk their money, then.

Avra: [00:21:09] 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: [00:21:52] So, tell me a little bit more about the 50s motels that you’re converting to affordable housing?

Avra: [00:21:58] 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…

[00:23:28] No, that’s right.

[00:23:29] 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: [00:23:57] Quickly, right? Quickly is the idea because you’d need the money to keep going.

Avra: [00:24:00] Well, six to 10 weeks.

Eve: [00:24:03] Yes, I’ve been there.

Avra: [00:24:05] 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.

[00:24:16] Yeah. So, it costs a lot of money in time because you’re,

[00:24:19] 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: [00:25:15] 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: [00:25:22] 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: [00:26:02] No, you can’t.

Avra: [00:26:03] 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: [00:26:12] 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: [00:26:22] 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: [00:28:04] Right.

Avra: [00:28:05] 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: [00:30:00] She almost lost her child because of the housing, the quality of the housing she was living in.

Eve: [00:30:06] That’s pretty shocking.

Avra: [00:30:09] 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: [00:31:16] 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: [00:32:03] To renovate it.

Avra: [00:32:05] 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: [00:32:35] Wow.

[00:32:36] 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: [00:34:48] 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: [00:34:58] Yes, so that I can afford to do the passion projects.

Eve: [00:35:02] Yes, that’s the bread and butter work, right?

Avra: [00:35:05] 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: [00:38:36] 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: [00:38:47] 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: [00:38:58] Yes, I’m with you.

Avra: [00:38:59] 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: [00:40:45] 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: [00:40:58] 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: [00:42:07] Yes, I agree.

Avra: [00:42:09] 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: [00:42:56] Keeping, yeah, yeah.

Avra: [00:42:57] 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: [00:44:37] Yeah, I think you’re right.

Avra: [00:44:38] 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: [00:44:51] Yeah. So, one last question for you. And that is, what’s your big hairy goal?

Avra: [00:44:59] Gosh, you know, I guess just, you know, I’m living it every day. You know,

Eve: [00:45:06] 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: [00:46:16] 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: [00:46:26] Here’s a question for you. So how, in your platform, can you help developers like me?

Eve: [00:46:33] 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: [00:47:47] Wow. No, no subscription agreement.

[00:47:50] 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: [00:48:38] 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: [00:49:00] Right, a development corporation, yeah.

Avra: [00:49:02] 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: [00:49:24] Right, but they can bring grants to the table that you can’t as a for-profit developer, right?

Avra: [00:49:31] 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: [00:49:53] Well, that’s right.

Avra: [00:49:54] 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: [00:50:37] 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: [00:50:54] 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: [00:51:57] Well, it can be. I just think people aren’t quite there yet.

Avra: [00:52:00] Well, let’s do it.

Eve: [00:52:01] 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: [00:52:38] 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: [00:52:51] 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: [00:53:34] 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: [00:53:57] Yes, absolutely.

Avra: [00:53:59] 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: [00:54:10] Yeah. That’s very important.

[00:54:12] 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: [00:55:26] 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: [00:55:44] 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: [00:55:56] 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: [00:56:04] I will.

Avra: [00:56:04] Share some stories.

Eve: [00:56:05] Thank you. Absolutely.

Eve: [00:56:10] 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.