Community

Revitalization strategist to barista.

November 13, 2019

“Nobody should have to move out of their neighborhood to live in a better one.”

Majora Carter is an American urban revitalization strategist and broadcast producer/host from the South Bronx in New York. Her career has spanned environment, economy, social mobility, and real estate development. Her work has won major awards in each sector including a MacArthur ‘genius’ Grant, a Peabody Award, the Rudy Bruner Award Silver Medal, nine honorary doctorates, and accolades from various professional groups too many to mention here.

The quote, on the walls of the Smithsonian Museum of African American History and Culture, is attributed to Majora. In fact, that’s just the opposite of what Majora was taught to do as a young woman growing up in the South Bronx. She believed, as she was taught to believe along with many others, that her only hope was to get out and abandon her neighborhood.

But she defied the norm and moved back to the very street she grew up on, bringing back with her what she had learned through her corporate consulting work. Her take on real estate and economic development is based on this understanding – that talent retention is key to building better neighborhoods.

Majora believes in talent retention. By placing higher quality third space enterprises for social gathering (cafes, bars and restaurants) ahead of the typical market curve, she believes that talented successful people who would ordinarily migrate out will stay, and keep their spending, reinvestment acumen and day to day example where they grew up. In a stagnant neighborhood , their only option is to flee, leaving communities in a constant talent deficit situation, that (again) makes the place a bargain for those who see value.

Majora is uncompromising about her mission. She lives and works in Hunts Point in the South Bronx, one of America’s lowest status communities just two blocks from the house she grew up in. And she is undaunted by taking new and necessary steps. When it became clear that no coffee shop operator wanted to operate out of her space in the neighborhood, she created her own business to achieve her goal. She’s committed to further developing the neighborhood where she lives and has her sights set on the conversion of a vacant building into a food hall. She lives in a brownstone, two blocks from the one she grew up in.

So listen. You must.

Insights and Inspirations

Majora uses the term “low-status” to describe communities where the schools are worse, where there are more environmental burdens, where the air is more polluted, where there are fewer and less well-maintained parks and trees and where the local population’s health statistics are worse. While philanthropy and elected officials acknowledge these endless disparities, they do little to change them except to use them as campaign tools to get elected, raise money and congratulate themselves.
South Bronx is one of the lowest-status neighborhoods in the country.
Talent retention is key to stopping the typical, stagnant economic cycle of low-status communities.
Billions go into low-status communities every year, but with little impact. You need to mix it up to lift a neighborhood up.
Mixed income and mixed use are key to building stronger communities.

Information and Links

See Majora’s unabridged bio here.
This is Majora’s coffee shop, the Boogie Down Grind Cafe, which was featured in Edible Bronx.
Read about the Self-Gentrification Salon.

Read the podcast transcript here

Eve Picker: Hey, everyone, this is Eve Picker, and if you listen to this podcast series, you’re going to learn how to make some change.

Eve Picker: Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Majora Carter, and, wow, you won’t want to miss this. It’s hard to know where to begin describing Majora, who is, quite simply put, a powerhouse. Described as an urban revitalization strategist, her career has spanned environment, economy, social mobility, and real estate development, and her work has won major awards in each sector, including a MacArthur Genius Grant, a Peabody Award, the Rudy Bruner Award – Silver Medal, and nine honorary doctorates amongst many, many more.

Eve Picker: Majora is quoted on the walls of the Smithsonian Museum of African-American History and Culture as saying, “Nobody should have to move out of their neighborhood to live in a better one.” There is no way around it; if you are really interested in impact investing, this podcast is a must-listen. Be sure to go to EvePicker.com to find out more about Majora 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 Picker: Good morning, Majora. I’m so delighted that you’re on the show with me.

Majora Carter: Good morning. Thanks for having me.

Eve Picker: I was reading a little background on you, and the thing that stood out to me is this quote, “Nobody should have to move out of their neighborhood to live in a better one.” These are your words, and they can be found on the walls of the Smithsonian Museum of African-American History and Culture. I just wonder how these words play into your work?

Majora Carter: Oh, those words are- were actually not my words, but they’ve certainly been attributed to me. They were the words of a woman who worked with me – Marta Rodriguez – as a organizer, when I ran Sustainable South Bronx, and it really embodied exactly what we were trying to do at the time, when I was running a small environmental and economic development organization – which is this is our community. How are we not creating the kind of community of our dreams here? It really continues on, as we’re thinking about real estate development, and how do you use real estate development to truly transform your community into something that you can age into, and stay there, because you feel as though everything that you need and want is actually part of it?

Eve Picker: Yeah. So, you’re working- are you still working mostly in the South Bronx?

Majora Carter: No, I work nationally. I certainly do have some projects that I’d love to get off the ground, here in the South Bronx, and some that we’re working on, but we actually work nationally, as well. We’ve got a really amazing real estate development project, a mixed-income housing, mixed-use development, going on out in Mapleton-Fall Creek, Indianapolis, which I’m absolutely delighted about. There’ll be about 50 units of home ownership; another 150 units of mixed-income housing, and about 50,000 square feet specifically for light manufacturing, commercial, and cultural space. We’re delighted to be the developer on it.

Eve Picker: Wow. You weren’t a developer when you started out, right?

Majora Carter: Oh, no! Although, interestingly enough, I’ve been developing a lot longer than I actually gave myself credit for. I was a card-carrying member of the non-profit industrial complex, and moved out of my neighborhood, or left my neighborhood for college, and didn’t really want to come back, because it’s really like America’s low-status community – one of America’s low-status communities.

Majora Carter: I want to just articulate what I mean by ‘low-status.’ We don’t generally use ‘disadvantaged,’ or ‘low-income’ to describe the communities that we want to work in most; but low-status are the kind of communities where there are more liquor stores, and corner stores than there are opportunities for good, affordable, different, diverse options for food. You’ll find, instead of banks, or credit unions, you’ll find payday-loan places, and check-cashing stores. You’ll find the kind of places where there’s an enormous amount of very highly subsidized affordable housing, and very little economic range between.

Majora Carter: Essentially, in those areas, inequality is assumed, both inside, and outside the community. These are the places where, if you’re a bright, talented kid, you are taught to measure your success by how far you get away from those communities. We don’t have a way to think about retaining talent in those neighborhoods.

Majora Carter: When I was growing up in the South Bronx, I was one of those bright kids who was definitely told, “You’re going to grow up and be somebody,” which meant you get out of the neighborhood. I embraced it hook, line, and sinker. Only when I came back to the neighborhood and realized that the way our communities were being used via real estate – in particular, for us, it was environmental burdens that just kept getting heaped upon us – I also started realizing that we could use real estate as a way to transform our communities to benefit us.

Majora Carter: I first started in park development, and riverfront restoration, green jobs, training, and placement, and literally just moved into real estate development, when I realized that … It seemed to me like a very natural trajectory to go at scale, in terms of creating the kind of community that you really felt you didn’t have to move out of, in order to live in a better one.

Majora Carter: My first development project was literally squatting a building across the street from the house that my parents lived in, and I was born and raised in. It was a crazy story because it kind of technically had been in my family for decades at that point. The woman who owned it died 20 years before I decided to move in, and no one in her family wanted the house.

Eve Picker: Wow.

Majora Carter: Yeah, so it was like I’d move back in, and I’m like, “I want to set some roots down.” What did I do? I moved in there, took over all the bills, the taxes, and everything. That’s when predatory speculators obtained a fraudulent deed for my house, just as I was in the process of trying to purchase it and finding – getting title. It was a crazy, crazy story.

Majora Carter: There I was, acting as an owner/landlord for years, at that point, and it was a wonderful, just crazy opportunity to realize that, no, I am actually developing this space. and preserving affordable housing in my own community, and generating wealth for myself, because it’s like, look, we’re losing that. I wasn’t thinking about the wealth gap or anything like that, I just needed a place to live. I wanted the people who were living in my building to continue to have a place to live. But I was a developer back then, and I’m a developer now.

Eve Picker: Right. That’s really interesting to me, because I’ve been lots of places lately where ‘developer’ is just a bad word.

Majora Carter: It still is. Oh, my gosh, yeah-

Eve Picker: Yeah, I know. It’s getting worse, I think. Not just still … The question is, I mean, we know that just like there’s good doctors and there’s bad doctors-

Majora Carter: Exactly.

Eve Picker: -there’s good developers and there’s bad developers. But the narrative is really all developers are bad.

Majora Carter: Right [cross talk] and there’s no space in it for those of us who are trying to use development for what it actually could be, which is a truly transformative way to support communities that we love. We really think about how do you use it as a tool, specifically, to support the visions and the values that we have, which is that [inaudible] and no one should have to move out of their neighborhood to live in a better one. You should have opportunities to live, work, and play, in wonderful ways, in ways that match your income, but there’s all sorts of opportunities for you to engage in a beautiful community that actually does not require money, but builds community, and through [cross talk]

Majora Carter: Why is it that, in low-status areas – whether it’s an inner-city community, like the South Bronx, or a Native American reservation, or a former coal-mining town that has no real jobs anymore, where it was all white – why do we think of those, of developing in those places, where it’s only two kinds of development, where it’s either the poor folks that are there are either bought it; generally bought out, or displaced by people with higher incomes – that typical gentrification kind of phenomena – or its poverty-level economic maintenance, which is still real estate development, wherein there’s [cross talk]

Majora Carter: The whole idea is that why are there only two kinds of development that happen in low-status communities? Why can’t we use it as a way to increase economic diversity, and to build wealth creation, and just make it so that people love their neighborhoods, as opposed to feeling like they’ve got to move out of them in order to live a little bit better? I accept that challenge, and I really believe that that’s what I’m doing. So, yeah, as a developer, and as a black woman developer, whose working in this really interesting way, where I absolutely … There is no way I would ever build an exclusively affordable-housing complex for the lowest-

Eve Picker: I’m glad you said that.

Majora Carter: Never, never! I’ve been, in some circles within the non-profit industrial complex, demonized for that, because I should be doing the kind of things, where it’s like [cross talk] for the people. I’m like, poor communities concentrate- low-status communities concentrate poverty and all of the issues that are associated with it – low health outcomes, poor educational attainment, higher rates of being involved in the justice system, or being touched by it in some way, and your family … Obviously, higher rates of unemployment, and poverty, and just creating a sense of lack of hope within those communities.

Majora Carter: Why would I want to build more of that?

Eve Picker: Yeah.

Majora Carter: Unless, of course, you’re getting big developer fees, and you really don’t care about the communities that you’re working in, which is why I understand why most people hate developers so much.

Eve Picker: Be sure to go to EvePicker.com and sign up for my free educational newsletter about impact real estate investing. You’ll be among the first to hear about new projects you can invest in. That’s EvePicker.com. Thanks so much.

Eve Picker: Yeah, no, I get it, too. But I’m really fascinated by what you’re saying, and I totally agree with it. I’ve watched, for years, in Pittsburgh, the affordable housing product sort of live in neighborhoods that all start looking the same – this cookie-cutter affordable-housing product. It doesn’t … While, definitely, people need decent places to live, and it accomplishes that, it doesn’t change the nature of what’s happening in those neighborhoods. The moment you kind of push that edge of that, that’s when … I don’t know, how do you stop speculators? It’s something I think about a lot.

Majora Carter: We [cross talk] try to and are still trying a number of things. One of them is to continue talking about the approach that we’ve taken with our own real estate development and actually putting our own money where our mouth is. So, as developers, we did spend a lot of time within our own community just really understanding what are some of the hopes, and dreams, and aspirations, and, of course, needs within the community.

Majora Carter: We did hundreds and hundreds of surveys; realized that what people in a neighborhood, like the South Bronx, which is one of the poorest parts of the country within congressional districts, are the kind of the same things that anybody in a middle-class community wants. They want great places to work, with housing that- quality housing that matches their income. They want places where they could afford to buy new things that they need. They want lifestyle infrastructure, like cafes, and coffee shops, and bars, and things of that nature. They want those kind of things so they can feel a sense of value that is inherent within their own community. That goes back to that …

Majora Carter: What happens within low-status communities a lot … Because, of course, real estate developers, they take the kind of 20-, 30-year long-term view of what’s happening, in terms of how communities are going, to plan; whereas, in our communities, we’re taught that there’s no real value in them. So, it’s easy, I think, for them, if your family owned a home during a time of severe financial disinvestment in America, like the way that my family … My dad bought the house I was born and raised in the 1940s. By the time the ’60s, and the ’70s rolled around, there was so much white flight and disinvestment within the community, and arson, because landlords were torching the buildings there, because there was no financial investment coming in, so the most they could do is get insurance money.

Majora Carter: It was a really bad kind of space. That kind of lingering understanding – this is what our community is … Of course, you own property. It’s going to have an impact on you, and you’re going to feel like … The second you can move, you’re going to get out. Predatory speculators understand that. They’re counting on us not knowing the value of our own home. I can’t tell you how many little notes I get under my door, or they found my cell phone … They’re telling me they can buy my house for cash, and close within a week. This is a common occurrence.

Eve Picker: Wow.

Majora Carter: For folks that don’t understand what they have, guess what? They’re going to be like, “You want to pay me what for this crap that I’m living in right now?” So, they end up selling, actually, generally for less than what the house is worth, because they just don’t know. Then the predatory speculator makes out really well.

Majora Carter: Since there isn’t a whole lot, from what I’ve seen, within the non-profit industrial complex and communities like this, that’s actually going to support homeowners within a community; which I think home homeownership is actually often – especially in areas where there’s a rental unit in them – there’s very little support to support those folks, like there’s [cross talk] non-profits or government. They’re like, “Oh, we’re going to focus on the poorest people in those communities,” and anybody else, it’s like sucks to be them, because it’s almost like they’re invisible.

Majora Carter: What we’ve actually been doing on our own is trying to identify what are … First of all, some of the homeowners, and just letting them know, “You’re sitting on your family’s legacy. You should be using this to help create wealth and retain it within your own family. Or, if you want to sell, at least understand what you got so that you’re not being reamed for it.”

Majora Carter: The other thing is we’ve actually hosted things like small zero-percent-interest loan workshops, and low-interest-loan workshops and you specifically – on our own dime – just so that folks have an understanding of what that is. On another level, and I think funny, because this is, again, on my own time, because we don’t have funding to do this; it’s just that we saw that it was a need … We’re really hoping that we are going to be able to convince somebody or other to develop some kind of a fund that supports low-income homeowners in low-status communities.

Majora Carter: You know there’s that cooling-off period, if you change and get insurance, or you buy a house, or whatever, and you’ve got a little bit of time where you’ve got to prove that this is what you want? Wouldn’t that be kind of great that before any kind of real estate transaction goes down in a neighborhood like this, that there’s actually folks just making sure that folks understand what their options are?

Eve Picker: That would be great. What would the fund ideally do?

Majora Carter: It would, number one, support folks to actually be in that role, to play that kind of adviser role to the folks to let them know what their options are. But also, people may need … We find that some folks are selling their homes [cross talk]

Eve Picker: -could not repair the roof.

Majora Carter: Yeah!

Eve Picker: I know, I know.

Majora Carter: One little thing, and it’s just like [cross talk]

Eve Picker: So, a neighborhood fund- a neighborhood fund for people who really need help to keep them in their homes. I thought Philadelphia was doing a program like that.

Majora Carter: It is … New York is definitely not; New York City, at least [cross talk]

Eve Picker: Yeah.

Majora Carter: -sad how little they think about it-

Eve Picker: I think there are ways to do a fund like that. Do you think there are people in the neighborhood that would contribute to a fund like that, themselves, in their own neighborhood?

Majora Carter: I’m not sure about that. I think it’s something that, frankly, should be a part of city government. I really do, because I feel like they’ve just- they watch the tax rolls in communities like ours, and it does fall along racial lines, as well. Nobody pays attention in poorer communities of color to supporting the homeownership right here. It’s not in our government. There are non-profits; there are a few nonprofits that work on- none in the area that I’m in, actually, which is why we’ve been posting those type of meetings and bringing those resources in. It’s really challenging.

Majora Carter: Another thing that we’re working on and is literally building our own projects to prove this talent-retention strategy that we have. It’s like if you build the kind of community that makes people feel like they don’t have to move out of it, in order to live in a better one … But you’ve got to build it. One of the things that we saw in all of our research, in the market research that we did here, was that people were leaving the community across income levels; not because they thought the neighborhood was dangerous or anything like that.

Majora Carter: It was because it was- there was no real lifestyle infrastructure here. There was no place to get a drink, if you’re an adult, that wasn’t a topless bar; there wasn’t a coffee shop, or a bookstore, anything like that. Even the kind of cute stores that people want to go to, or a place to get dinner. There’s plenty of greasy spoon places, and, of course, fast-food chains, et cetera, but nothing that actually spelled quality in any real way, and no attractive third spaces that made people want to stick around, like a coffee shop with Wi-Fi.

Majora Carter: We actually were able to acquire the lease on two very inexpensive leases on the main street in our community. It was just a wonderful deal that we got, long term. So, we were just like, “This is great.” We looked, actually, for a coffee-shop operator for years-

Eve Picker: For years?

Majora Carter: Oh, yeah, literally. We had that lease for a while [cross talk] and basically, it was clear, because it looked like the market here wouldn’t appreciate anything like this, even though we knew that our data proved otherwise, because we knew people were leaving the community to experience things like that-

Eve Picker: I know what happened. You started it yourself, right?

Majora Carter: Exactly. I was never planning to be a barista [cross talk]

Eve Picker: Well, there’s not many developers who’ve done that in areas where no one sees the market potential, because our financial institutions – I sound a little bit like a broken record, because there’s lots of reasons to say this – financial institutions, really, they’re crushing the innovation of the cities-

Majora Carter: Exactly.

Eve Picker: They’re really just financing cookie-cutter projects, so the moment you do something different … I mean, I get it. They have regulators, but shouldn’t someone step up?

Majora Carter: Yes! Yes! You know what? What was wonderful is that, in our example … We decided to open- we first started- it was a joint venture with a really amazing coffee shop and roaster downtown. They’d never had a Bronx presence, and was kind of interested in the idea, called Birch Coffee. So, we partnered with them for almost a year. First, it took six months just to understand the business. Then, we actually opened in the latter half of the year. We learned everything from them about how to actually operate a coffee shop, and bringing people in, all that stuff. It was amazing. It really was their guidance [inaudible] I am so grateful.

Majora Carter: But it was sort of clear that the market up here was a little different than this very high-end big coffee shop downtown, where there’d be no flavors, or whipped cream, and syrups, and people … That’s what, frankly, people wanted up here. We also wanted to provide healthy options, as well, but we had- in order to stay in business, we actually had to respond to the market. So, we actually [cross talk]

Eve Picker: They wanted over-the-top luxury, right?

Majora Carter: Yes, and it’s just like no. I know expertly steamed milk is beautiful, on its own, but, look, if somebody wants whipped cream on top of it, I’m going to give it to them.

Eve Picker: Yes!

Majora Carter: Oh, it was just [cross talk]

Eve Picker: That’s a Viennese, right? [cross talk]

Majora Carter: -we should start calling it that now. You’re totally right.

Eve Picker: Yeah, and they’re all over the … Call it a Viennese.

Majora Carter: What was so interesting is that it … It also gave us an opportunity to stick our own swagger on it, quite frankly-

Eve Picker: Right.

Majora Carter: -because, after all, this is the South Bronx. It is the birthplace of hip hop. We are all about innovation. We were like, we need this cafe to pay homage to that. We literally ended up moving it to a larger space, and then we actually hired a two hip hop historians to actually help us curate the actual wallpaper, which is literally the early days of hip hop, mostly [broad] space. We just built this … It’s like an homage to graffiti, and it’s just beautiful.

Majora Carter: We use it as this tremendous third space for open mikes, and art shows. It’s just really this beautiful community gathering spot. It did take us a while to get to that point at a place where we won’t be losing money soon, which is awesome. But what was fascinating about it was the fact that, early on, we literally ran out of money to do it, because we were not anticipating … First-time coffee shop owners not knowing anything [cross talk] One of the members of the advisory board that we had that was literally giving us intel about how to do our projects better, actually, they volunteered to invest- her family volunteered to invest in our project-

Eve Picker: Isn’t that great?

Majora Carter: It was just like … What was amazing was that we didn’t talk about it. We socialize a lot of things, and it’s a small community, but what was interesting is that the way people found out that another family in the community had invested in this business was just like, “Wait, we can do that?” I’ll never forget some of the conversations we’ve had about it. It was just so beautiful that it was … Because people just did not realize that this was like within their grasp.

Eve Picker: Yeah.

Majora Carter: For our next project, we acquired [cross talk]

Eve Picker: I think you should- I think you should be the spokesperson for Small Change [cross talk] that’s really what my hope is for it, that people can invest in the way big investors can invest and they can get the same return. Because, you know, hey, it’s money, right? Why should they get less than someone else? Anyway, I’m sorry to interrupt you-

Majora Carter: -powerful place.

Eve Picker: Very powerful.

Majora Carter: -just to even know that you can add value. Literally, you are adding the value to make this project grow. It is really amazing. Our next project, we acquired a rail station, a former rail station, that was designed by the same architect that did the Woolworth Building, and the U.S. Supreme Court building – his name’s Cass Gilbert. Of course, I’m sure you know who that is. I owned a little piece of Cass Gilbert, like Woo-Hoo!, Which just makes me very happy. It really does! It’s only about 4,000 square feet. Our goal is to transform that into a restaurant incubator, or a food hub for local chefs, because we’ve … Interestingly enough, the Bronx has some tremendous culinary talent that comes out [cross talk]

Eve Picker: I’m sure it does, yeah.

Majora Carter: There’s this one group called Ghetto Gastros. It is four young men from the Bronx; [cross talk] one of them I mentored 20 years ago, which I’m so proud of. Now, they’re like these ridiculous caterers that are flown all over the world to do their version … Haute couture is- I think that’s a fashion term. That’s not a food term. It’s like nouvelle cuisine, except they put their spin on it, because they’re these wonderful boys from the hood, but they’re all trained chefs. It’s unbelievable what they do, and it’s just extraordinary. Ghetto Gastro – you look it up [cross talk] There are folks like that literally come from our communities, but then kind of parachute out, because there aren’t many opportunities for them to open up businesses here. I’m like, how cool would it be if we had this restaurant [cross talk]

Eve Picker: Yeah, that’d be awesome. You know, we have an incubator like that in Pittsburgh that’s done very well. I think they’ve got three stations, and they have like rotating startups in there.

Majora Carter: Because the restaurant incubatees, all they do, they cook … In our version, we would manage the bar and the dining area, and each one of the restaurateurs, either three or four, depending on what we can fit, is literally what … They would, instead of rent, we would get a gross percentage of sales [cross talk]

Eve Picker: Right, right, right, right.

Majora Carter: -they get a chance to really hone their craft-

Eve Picker: Right.

Majora Carter: -and at least focus on building their market, but the-

Eve Picker: What’s the holdup? Why can’t you get that off the ground?

Majora Carter: We’re in a neighborhood that’s not … You can read lots of real estate development articles about the South Bronx, and how it’s like the next … It’s like the next extension of Manhattan, and it’s booming, and there’s a lot of market rate development going on, and a lot of commercial things happening in it. But that’s the part of the South Bronx where that’s happening. There are other parts of the South Bronx, which is where I’m in, and born, and raised, and still live, that’s the part that’s sort of being reserved for poverty level economic maintenance [cross talk] Yep.

Majora Carter: There is one big project that’s coming up here that’s about … Basically, it’s another low-income-housing project. It’s so crystal clear that all that’s happening is they’re trying to concentrate more and more poverty here. I think that’s one of the reasons why it’s kind of like, “Well, that’s what happens here, so we can’t really think about investing in it.” Also, it seems like it might be considered a smaller- like almost too small a project for some folks, as well, because-

Eve Picker: How many square feet is that?

Majora Carter: It’s only 4,000 square feet.

Eve Picker: Oh, that’s big enough.

Majora Carter: That’s about- with all the added … We actually, interestingly enough, discovered a basement [cross talk] found the other room up top. It was- we discovered another basement [cross talk]

Eve Picker: That could be the speakeasy [cross talk]

Majora Carter: You know that to redevelop a 5,000-square-foot space, it’s almost as … The brain damage is about the same as a 50,000-square-foot space, but the returns are much higher for the 50,000-square-foot space. So, I think that’s also part of it, as well.

Eve Picker: Yes, but the return on this would be phenomenal for that neighborhood [cross talk]

Majora Carter: Oh, absolutely.

Eve Picker: -the triple-bottom-line return that really we’re talking about here. I don’t know. I think there would be people who would invest. I really do. It’s really an amazing story. I want to come see the building, and I want to eat with Ghetto Gastro, and-

Majora Carter: I know! Oh, my gosh, who knows where they are right now? [cross talk]

Eve Picker: -because the neighborhood sounds amazing, and I want to cry when I hear about more and more affordable housing being built.

Majora Carter: I know, I know, and it’s just like … I know whenever I say that, I have to preface it with, “Please don’t think that Majora Carter hates poor people,” because I think that’s the way that folks immediately go, like, “Oh, she doesn’t want any more affordable housing.” I want- Actually, I do want more affordable housing. I want affordable housing for a range of incomes, because we know that economic diversity needs economic stability and community stability. Whereas, the concentration of poverty is exactly opposite that.

Majora Carter: But again, if we’ve been led to believe that this is all that happens in low-status communities, we start to believe it, and then feel the only option is to leave, if we have an opportunity to do so. Who does that benefit? It benefits the predatory speculators and the government programs, who take advantage of the fact that there are really poor people in our communities that probably have lifestyle-related illnesses, low educational attainment, or who’ll probably be within the justice system. They make money for somebody; not for the people that are here. It just seems like such a tragically obvious thing that we see happening over, and over, and over again, and since we’re led to believe that there’s no real value in our communities, we internalize it.

Eve Picker: Yes. A lot of this is about educating community, right?

Majora Carter: Yeah.

Eve Picker: What community-engagement tools do you think work best?

Majora Carter: Honestly, opening our coffee shop [cross talk] having a presence, and being there has been so transformative. My husband and I both work there [inaudible] and work out of it a lot. We’ve met … I thought I knew a lot of people in my own neighborhood, but I have met so many more, as a result of having that space, opening it up in a way that is just- it’s not a community center that people feel like they’ve got to tip-toe in, or have a problem to be in. No, this is a place of joy, and access.

Majora Carter: I’ll give you an example of how I knew that we were really something that our community appreciated, because, again, the idea … I mentioned before that some folks within the social justice industrial complex totally demonized me and think that I’m bringing in developers to kick out poor people. Some of the stuff is just insane, and they won’t acknowledge that I’m actually a developer. It’s like, no, no, no, I’m the developer. I want to be called a developer … I have my own ideas. I don’t want to talk to these guys.

Majora Carter: We were hosting a workshop for small business owners in the community, as well as homeowners to get access to capital for zero-percent-interest loans and low-interest loans and also figure out other ways … There was going to be a presentation on how to make your building- add additional units on top of your building, to see if this is something even you could do. We were protested. We had 40 people inside the space waiting to hear more about these zero-percent-interest loans and how do you make your actual building work for you, and there were like 10-15 people outside yelling about how I was destroying the neighborhoods with bringing a coffee shop there.

Eve Picker: Really?

Majora Carter: Yeah, and I have to tell you, I was … The signs were huge. They were saying, “Majora Carter destroys the South Bronx one coffee at a time.” That I’m a community destroyer. It was just like, “Some of you people know me … You could’ve just literally knocked on my door and said, ‘Can we talk?'” But they wouldn’t do that. But I have to say, after that, I’m like, “Oh, my God, my whole neighborhood is seeing people yelling, with my name on a sign, talking about how evil I am.

Eve Picker: Yeah.

Majora Carter: I was just like, “We might have to close this stupid coffee shop. I mean, who’s going to want to come?” The next day, we had the best day ever-

Eve Picker: Oh, that’s really great.

Majora Carter: The best day ever. We had people coming in, one after another. It was like, “You know what? I’ve actually never even been here before, but I saw that, and I thought that was stupid. I’m going to buy a cup of coffee just to support you.” I was just like [cross talk]

Eve Picker: That’s really lovely. That’s really lovely. Yes, yes, it is. Many people just fear change, right?

Majora Carter: Yes, and I get it, and I understand … That’s like to your point, it is we fear what we don’t know, but if we don’t actually look at … Because real estate developers … You know that Bishop Desmond Tutu quote? A knife’s a knife. You could either use it to cut a hole in somebody or to cut a slice of bread and feed it to your child … It’s a tool. We can use it for horrible things, or we could use it for great stuff, but it is what it is. But how we use it, and unless we are empowering ourselves and other folks who are actually looking at places that actually have that triple bottom line and going, “That’s valuable. Maybe I won’t make the kind of returns …” because I’m sure … My rail station, one of the reasons why it’s also empty is because I’ve been very choosy. I am not going to open it up to another health clinic, or a tax-prep place that’s [cross talk]

Eve Picker: Yeah, yeah, yeah …

Majora Carter: We’ve said no to folks like that.

Eve Picker: Yeah.

Majora Carter: No. So, yeah-

Eve Picker: So have I, so you’re making me feel stronger.

Majora Carter: Good, good. No, I don’t mind at all; at all.

Eve Picker: I said no to a tax-prep space. I couldn’t bring myself to sign the lease. I just couldn’t do it.

Majora Carter: They have so much money, and they don’t even have to be open. It’s really crazy.

Eve Picker: No, they don’t have to be open. That’s the really bad thing. What a horrible thing to do in a neighborhood, just have a place that’s open for three months and then a shuttered storefront [cross talk] Anyway, now we’ve said what we think … Just like there’s been a wave of green-washing in this country, but I feel like there’s a wave of good-washing. People are talking about impact investing.

Majora Carter: I hope so.

Eve Picker: But when I hear you, I really wonder if they’re really impact investing.

Majora Carter: Nope.

Eve Picker: What do you think the future holds for impact investing? What do we have to do to change that?

Majora Carter: I am actually hopeful about some of the smaller-scale investment platforms that are out there, and just crowdfunding, in general, for real estate. I’m still learning about it. I do feel like our communities and our country, as a whole, is really only going to be changed when we start seeing each other in ways that we want to support. Look, I’m a woman of faith, so I think I actually really do believe that we can create a kind of heaven on earth, if we were really good at it, but I also think that- I am hopeful that … People are really tired of the expecting the status quo, because, by all accounts … I’ve got great vision. I have no balance sheet, so I don’t look good to anybody, and I get that, but I have a track record of getting things done, and-

Eve Picker: No, you don’t look good to very traditional financial [cross talk]

Majora Carter: No, I look miserable.

Eve Picker: You look great to other people, so that’s-

Majora Carter: Yes, and those are the people that I’m hoping will go, “Oh, wait …” But in order to continue to do that great work, she needs something that’s a little bit different than what she was getting before.” That’s what I’m hoping. Because I do- I also love the idea of people really taking ownership. I think that’s been one of the reasons why our low-status communities in America feel so disjointed and so destabilized is because we don’t have a way to really keep and retain roots in those areas where there’s access to capital, or predatory speculation. It’s all up in there, just [cross talk]

Eve Picker: But it’s really hard to get a neighborhood to focus, when has more than its fair share of single parents and people with two or three jobs.

Majora Carter: Those are the people that want more, and you know what? Believe me, and not to pooh-pooh it at all, yes, there are those who are not going to get out of their heads at all, but then there’s those are just like, “You know what? Why can’t I have it?” There’s always a critical mass of folks who are just literally waiting for something to do, like, frankly, the folks who saw me being bullied with this protest and who were just like, “No, wait … I see that. I know what I can do.” You may think that just buying a cup of coffee, a specialty cup of coffee, might not be an act of rebellion or resistance, but I absolutely looked at it like it was.

Eve Picker: Yeah, I think you’re right.

Majora Carter: I think there’s more of that that’s just waiting for a reason to be there, to actually stand up and be counted, and maybe even count a little bit of their own dollars to say, “You know what? Yeah, I believe in it. I believe in it so much that I’m going to invest in it.”

Eve Picker: So that’s what we’ve got to make happen at the train station, right?

Majora Carter: Yes [cross talk]

Eve Picker: I’m going to ask three sign-off questions that I ask of everyone, because I think I’ve taken up enough of your time. I could keep talking to you all day long.

Majora Carter: I know. I love it [cross talk]

Eve Picker: I think I know the answer to this, but we may as well reiterate – what’s the key factor that makes a real estate project impactful to you?

Majora Carter: Mixed-income housing, mixed-use … Well, the actual specifics – mixed income housing and mixed-use economic developments. But I think the real vision is talent retention in low-status communities.

Eve Picker: Then, do you think that crowdfunding might … I mean, you touched on crowdfunding. Do you think it might benefit impact real estate developers in more ways than just raising money?

Majora Carter: Would it impact real estate developers?

Eve Picker: Well, or neighborhoods or any [cross talk]

Majora Carter: -no, I think that you couple the idea of putting your cash into something that you believe in that is actually going to support your community creates a level of ownership that, you can’t buy that; you just can’t. It sets up a foundation and roots in ways that I think a lot of folks wouldn’t know what else to deal with.

Eve Picker: I think that’s right. Then, this is a really hard one – if you were going to change one thing to make real estate development better in the U.S., what would it be?

Majora Carter: Just one?

Eve Picker: Blow up all the Walmarts … I’m just joking …

Majora Carter: You know what? Honestly, I really would go back to … It’s very practical. Creating a fund and education platform specifically for people in low-status communities to either retain their properties or purchase them.

Eve Picker: Like a land bank.

Majora Carter: Mm-hmm. It’s not necessarily a community land trust, although that could certainly be a byproduct or a result of it, absolutely. But I think, ultimately, right now, we just have to stop the bleeding. I just think about my own neighborhood, whereas, I think within the past 10 years, our local homeownership rate has gone down from like 20 percent down to less than seven.

Eve Picker: Oh, why? Why did that happen?

Majora Carter: Because predatory speculators [cross talk]

Eve Picker: -foreclosures …

Majora Carter: Yeah.

Eve Picker: That’s really bad.

Majora Carter: Yep, exactly.

Eve Picker: Well, on that sad note, I’m going to say [cross talk] I’m going to say thank you very much for talking to me. I thoroughly enjoyed it-

Majora Carter: Thank you. Right back at you.

Eve Picker: -and I really hope we’ll continue talking.

Majora Carter: Cool. I hope so. Yes.

Eve Picker: That was Majora Carter. I’m in awe. Majora is uncompromising about her mission. She lives and works in Hunts Point in the South Bronx, one of America’s lowest-status communities, just two blocks from the house she grew up in. Majora is undaunted by taking new and necessary steps. When it became clear that no coffee shop operator wanted to operate out of her space in the neighborhood, she created a own business to achieve her goal. She’s committed to further developing the neighborhood where she lives and has now set her sights on the conversion of a former railway station into a food hub. She lives in a brownstone, two blocks from the one she grew up in. Now that is putting your money where your mouth is.

Eve Picker: You can find out more about impact real estate investing and access the show notes for today’s episode at my website, EvePicker.com. While you’re there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Thank you so much for spending your time with me today, and thank you, Majora, for sharing your thoughts. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Image courtesy of Majora Carter Group

Crushing urban innovation.

November 8, 2019

Institutional lenders have their place when it comes to commercial real estate finance. They are the primary source of loans for real estate projects and they offer a wide array of business and development-oriented services as well, all of which are definitely needed. But traditional lenders are not particularly well-suited to solving development challenges in a rapidly changing world. Large financial institutions are not nimble. They will follow, rather than lead with, change. The mess we find ourselves in today is unfortunately in large part due to the dominance of large and traditional financial institutions in the funding of the housing market.

Cookie cutter projects

If you’ve spent any time at all in the urban cores of cities like New York, Los Angeles, Seattle or Chicago, you must have noticed that new construction seems to all look the same. The same residential projects. The same commercial projects. These days larger real estate projects tend to have a floor of businesses and shops with some parking added in, topped with lots of condos or apartments. Often these projects are marketed to high-middle or upper-income tenants, and often they are built with millennials in mind with lots of studio and one-bedroom units. And these developments are a primary reason that displacement is occurring. They are homogenous, catering to one type of tenant or buyer, in a particular income range, with a particular lifestyle. Often, they are funded by the same institutional lenders, like Wells Fargo, Key Bank, and Capital One Financial, amongst others.

Large financial institutions seem to prize predictability and stable returns over all else. The welfare of local residents and the improvement of the community don’t seem to be part of the underwriting equation. There is a desire for simplicity and scalability above all, hence the same projects are appearing in cities from Portland to St. Paul, despite massive differences in the needs of each respective city or community. Housing is not and cannot be a “one size fits all” product. The root cause of many of the ills in the housing market stem from this attitude of “build, and they will come” rather than using community needs and input to craft positive housing solutions.

Scalability is perhaps the biggest reason why lenders won’t support smaller, market-specific projects. Plans to build 20 or 30 units on a small, reclaimed industrial lot in the heart of the city are less attractive than monoculture mixed-use developments that can be replicated quickly and present little risk in terms of construction or the ability to lease to tenants or sell to homeowners. These smaller projects can often be built to maximize their social, environmental, and economic impact. By using non-traditional lots, developers can save on land costs and may also save on lengthy neighborhood review processes, which are common with larger-scale developments. Despite the obvious benefits offered by small-scale development, it can be hard to fund them.

Small investors. Big returns

As institutional investors cannot or will not adapt to unique or non-traditional models, developers and investors must leverage alternative sources of funding for progressive and innovative projects. When traditional lenders choose not to fund a project, look to your own community for development capital!

Raising capital through community-based means allows developers to offer similar returns on investment to smaller, local investors, who may have a personal stake in the success or failure of the project. Rather than the returns flowing out of the community to a large financial institution, that money stays within the area, giving residents and other stakeholders a direct financial interest in their community.

A diverse investment portfolio is a healthy investment portfolio. The same can be said of housing and commercial space. Modern mixed-use, cookie-cutter developments detract from the charm, sustainability, and longevity of a neighborhood. Rather than becoming a fixture of a community, as a unique building or development might, these podium developments re-shape the communities they are built in and drive out long-term residents. We need developers who are willing to take chances on non-traditional projects and want to push urban innovation in our cities to make them better places for everyone. If we crush them, we’ll all be a little poorer, culturally, financially, and socially.

Image from pxhere, C00

Closing loopholes for better neighborhoods.

October 25, 2019

Unfortunately, loopholes are far too easy to find in the real estate development industry. They are hiding in plain sight in lots of places. Taxation, zoning, affordable housing programs or even government incentives jointly provide an abundance of loopholes and unscrupulous developers will find a way to take advantage of them. For many years, unethical, or at the very least short-sighted development has been the norm. Now, with the rise of sustainable and socially conscious development, a new generation of investors and developers are shedding the profit-driven dogma of the past to work towards a more ethical real estate industry. This includes creating more livable and equitable housing which can generate returns similar to traditional, profit-driven development projects.

The worst outcome

Perhaps the worst outcome of unethical real estate development is displacement. Projects initially pitched to provide a rebirth and revitalization for underserved neighborhoods can instead, sometimes unwittingly, lead towards gentrification, in turn driving long-term residents from their communities and homes.

Many areas slated for “urban renewal” in the past were primarily filled with single-family homes while the neighborhood itself was zoned for both single-family and multifamily properties. This provided a particularly attractive opportunity to profit-driven developers since the density of the neighborhood could be increased with apartments and condominiums many of which were out of the price range of current residents. This in turn led to a great deal of residential turnover in these communities and an acceleration of the harms associated with that turnover.

Community pushback

After years of such unchecked development, many communities- and aligned developers and investors- have started to push back. More appropriate zoning, sustainable and energy efficient housing, community cohesion, walkability, bike-ability and equality, amongst others, have moved to the forefront of the conversation. Often these conversations have been led by local organizations dedicated to preserving neighborhood character and ensuring positive growth in housing and commercial enterprises. Now, single-minded profit-driven real estate development is being supplanted by a collaborative approach- with local stakeholders and community-minded real estate professionals, developers and investors all talking to each other to plan for the best community outcomes.

Mix it up

Bigger or more of the same is not always better if your goal is to create diverse and livable communities. Studies have shown that mixed-income neighborhoods thrive compared to monoculture neighborhoods primarily comprised of a single social or economic class. Many of the worst examples of suburban sprawl or overzealous urban luxury development prioritize high-income, white-collar workers and families at the expense of others who may not be as socioeconomically well-off.

These monoculture neighborhoods can be islands that residents commute to and from, only serving a small and elite sub-set of our country’s demographic. And let’s not forget what these isolated communities spawn – environmental and health issues related to commuting, lack of walkability and lack of long-term sustainability. These neighborhoods also degrade over time from A to B and C Class housing, and residents are left with vast tracts of homes, with little commercial or social activity within the bounds of their neighborhood.

Smaller steps

A focus on developing smaller projects, such as micro/economical single-family homes, duplexes, or apartment buildings can avoid many of the headaches and harms that come with large-scale, homogenous development. Rather than knocking down existing affordable housing, or dominating an area with mega-structures, developers can work to maximize usable real estate and land (even non-traditional, unique and oddly shaped lots) while largely preserving the character and makeup of the neighborhood. These smaller projects can be much easier to finance for developers, as capital investment costs will be lower. And investors can benefit from the diversification value of multiple small projects as opposed to a single large project.

We can’t change the mistakes of the past, but we can work to ensure they are not repeated. Housing affects every facet of our society, from employment opportunities to the environment, to social and economic justice within a neighborhood. While legislative and community-based solutions are absolutely necessary to weed out bad actors and unethical development, pro-social developers and investors can also make a contribution to a future with carefully planned communities and neighborhoods.

Image, Riverview Terrace, courtesy of Small Change .

Greenfields are boring.

October 23, 2019

Adrian G. Washington is the founder and CEO of Neighborhood Development Company (NDC). Their mission is to develop exciting residential and commercial properties that cultivate vibrant communities. What does that mean? And how does a developer do that?

Well, that’s what Adrian and I talk about so listen in.

Adrian has over 30 years of experience in urban real estate development, construction and management. He founded NDC in 1999 and has served as President since then — except for a two year leave of absence from 2005 – 2007 when he left to lead the Anacostia Waterfront Corporation (AWC), the entity charged with leading a $10 billion, 20-year initiative to revitalize Washington, DC’s Anacostia Waterfront and surrounding communities. NDC has developed over 1,000,000 square feet of real estate, focusing on emerging urban neighborhoods while respecting the rich diversity of their existing fabric.

Adrian grew up in the city’s Anacostia neighborhood and is a lifelong resident of DC. He received his B.S. in Economics and Political Science from Stanford University and his M.B.A. in Marketing and Finance from the Harvard Business School. And he has received numerous individual awards reflecting his leadership in the development industry.

Insights and Inspirations

Why develop a green field when you can redevelop an existing neighborhood and help it to thrive?
See the people who are living there. They embody the neighborhood.
Mix it up. Build affordable housing right next to luxury housing.
Work with small businesses out of the community. They can become valuable tenants, not just for the developer but they bring value to the community as well.
There’s lots of opportunity in Opportunity Zones.

Information and Links

Adrian is excited to see NDC’s Benning Market built. It’s a food hall in River Terrace North East, and many of it’s investors came through a Small Change offering.
NDC supports DC Greens, a local non-profit dedicated to food justice and health equity in Washington, DC.
The project that Adrian is most proud of is the Residences of Georgia Avenue. This block buster project increased affordable housing options and healthy food options in a neighborhood considered a food desert.

Read the podcast transcript here

Eve Picker: Hey, everyone, this is Eve Picker. If you listen to this podcast series, you’re going to learn how to make some change.

Eve Picker: Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Adrian Washington. Adrian is the founder and CEO of Neighborhood Development Company, a Washington, D.C. real estate company focused on rebuilding vibrant communities through their work. Adrian fell in love with this type of development work and decided to make a career out of it, much to the good fortune of the neighborhood he works in. For Adrian, greenfields are boring. Nothing gives him greater pleasure than digging into a forgotten and neglected site and turning it into a neighborhood asset. I’ve had the good fortune of working with Adrian at Small Change, helping to raise funds for some of these projects.

Eve Picker: Be sure to go to EvePicker.com to find out more about Adrian on the Shownotes 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 Picker: Good morning, Adrian. Thank you very much for joining me.

Adrian Washington: Thank you, Eve. It’s a pleasure to be here.

Eve Picker: So you have a real estate company called Neighborhood Development Company, and we’ve been lucky enough at Small Change to help you raise funds for one of your projects. Your company is in Washington, D.C. I’m just wondering if you’d like to tell us how long you’ve had Neighborhood Development Company, or NDC, and have you lived in D.C. all of your life?

Adrian Washington: I’m a native Washingtonian. I’ve lived here most of my life. I went away and went to school down in California; lived out there for a while; lived in Boston, but, essentially, I’ve been in D.C. all of my professional … I grew up here, and I’ve lived here all my professional life. I’ve been involved in real estate, altogether now, going on over 30 years and formed Neighborhood Development Company a little over 20 years ago, back in 1999.

Eve Picker: That’s quite a stretch. NDC’s mission, in your words, is to develop exciting residential and commercial properties that cultivate vibrant communities. What does it mean to you to cultivate vibrant communities? How does a developer do that?

Adrian Washington: We’ve always operated in urban areas of primarily Washington, D.C. and really always neighborhoods that were emerging; that were maybe down and out at one time or were starting to turn around. What we found in these neighborhoods is that we don’t look at them just from a brick-and-mortar perspective. We see the people that are living there now. They want their neighborhoods improved, but they don’t want to be displaced. They want shops and things that serve them, but don’t serve just outsiders. They welcome newcomers, but they want to feel those newcomers respect the place that [inaudible]. We see our role as balancing those things of making a neighborhood better for people who are living there, attracting new residents who want to be part of those communities, attracting businesses that want to be part of those communities, but not to displace people and not to alter the fundamental character. As developers, I think it takes like a real balancing act that we work with on a day-to-day basis.

Eve Picker: I do think it is a real balancing act. How do you fend off displacement?

Adrian Washington: We do it in, I guess, a number of ways that I think are unique in some developers in that we do both very high-end market-rate developments, but we also do affordable housing. We do affordable housing in a number of ways. We do it in traditional ways that more traditional developers do it, using government subsidy and the many programs involved. We also do it in more creative ways. For instance, we’ve worked in the past with failing cooperatives, where a group of tenants own their building collectively, and it’s just not working out, either because of bad management, or whatever. We team with them to provide our services with them but do it in a way that allows them to stay in their homes. That’s one way we do it.

Adrian Washington: Another way we do it is we really, in our commercial work, really like to work with entrepreneurs. Your typical developer may want that credit tenant. They want that CVS, or that Walgreens, or someone national. We really- we don’t go that way. We go in the opposite direction. For instance, in one of our developments, we have a salsa teacher, and she was doing lessons- it was a nice young couple. They were doing lessons out of their basement in the neighborhood.

Adrian Washington: They were so successful, they wanted to have their first studio. They came to us, and we had a space in one of our buildings, so we worked with them on the design; we worked with them on getting government grants to help them build out. We helped them with the construction. We gave them a favorable lease that started out low, and it allowed them to develop the business.

Adrian Washington: It was just a great neighborhood success story, where they stayed in the neighborhood. They had a service that appealed to both the newcomers and people who were in the neighborhood. They successfully grew their business. They’re now opening a second location. I think it’s really about creativity; using the skills we have as developers and businesspeople and connecting with people who have hopes and dreams – maybe not the same skills – and working out win-win solutions.

Eve Picker: That’s a really lovely story. Other developers might say that’s taking a risk with a little startup business that you don’t necessarily need to take. You could go get a credit tenant. So, why do you take that risk?

Adrian Washington: Well, I think a couple of reasons. It is kind of, on paper, riskier. Although we see with all the changes in the retail economy, yeah, you could have some business like a Blockbuster – going back in time, when everyone thought it was really successful, and now it’s out of business [cross talk]

Eve Picker: Yeah, that’s true.

Adrian Washington: Or even something like a McDonald’s, where everyone thought McDonald’s used to be the gold standard. Even now, you see some of those stores shutting. There’s not ‘no risk’ in a credit tenant, but I agree that there’s more hand-holding; there’s more involvement. You’ve got to pick your entrepreneurs carefully. You’ve got to help nurture them. Typically, they’re people who are great enthusiasts about what they know – if it’s salsa dancing or handmade pottery – but they don’t know about marketing; they don’t know about financing. You’ve got to work with them more.

Adrian Washington: We just find that more rewarding. It’s just fun. It’s creative. We feel like we’re helping people. We feel that we’re seeing eye to eye, because even though we’ve been in business 20 years, we’re still thinking of ourselves as an entrepreneur. The neighborhoods love it, so I think it makes us more popular in the neighborhoods. We’ve found that the success rate that we’ve had with these businesses is really pretty high and that the occasional failure that comes along, we just kind of build that into our pro forma. We’ve found that we were able to replace people who don’t like it with other people. All in all, we just find it’s more socially rewarding, it’s financially fine, and it’s just a lot more fun.

Eve Picker: It adds to the economy of the neighborhood you’re in, which is really lovely. Developers do lots of different sorts of things, and I’m wondering how you ended up here. How did you …? There must have been a path that took you towards this type of development.

Adrian Washington: Eve, I think it’s like a lot of things in life. I don’t know, maybe there are people who have these- design these great plans at age 12 and follow them through. I really didn’t. I went to undergrad; I went and got an MBA. I worked for a national consulting firm, and I thought that was my path, but I really hated it. At the meantime, I had bought a house in an emerging neighborhood and fell in love with that culture. I think I was really ahead of my time. I saw the appeal of walkable, livable neighborhoods. I saw the appeal of eclectic neighborhoods that had different types of architecture, that had different types of people, different races, different income groups, that was close to urban centers. I just thought that was great. I loved being in that neighborhood. I loved the change that I saw was going on. I loved the physical aspect.

Adrian Washington: Back when I was younger, I did everything. I did carpentry; I did plumbing [inaudible]. I just loved that whole environment. I think I was always an entrepreneur at heart … I was going to a day job that I hated, and I had this hobby that I loved, so I said, “Well, why don’t I see if I can turn this hobby into a business?” That was 30 years ago. It hasn’t been a straight line. There were struggles; there were failures; there were just dumb-ass things that I did that didn’t work out, but I always came back the next day and tried to do it better, and I’m really glad I did.

Eve Picker: That’s a great reason why. It’s pretty wonderful to be able to be doing something that you really love and that adds to communities everywhere. So, I’m going to move on now to a project that I know you’re working on, called 1100 Eastern Avenue, which is one of your latest projects. We’re fortunate enough, at Small Change, that we’re going to be helping you to raise a little money for this project. I wanted to talk a little bit about it. Can you just tell us a little about what the project is, how big it is, the uses, where it is?

Adrian Washington: Well, sure, Eve. I’m really excited, and our whole team’s excited about 1100 Eastern. It’s really a project that embodies our beliefs, and uses all of our skill sets, and is just very exciting. It’s a mixed-use projects. Ground floor is a retail component; not that large, about 4,000 square feet. I think one of the great things about it is that there were … The site is sort of a rundown former- like a strip shopping center. A couple of the tenants there were folks that, frankly, the neighborhood was happy to see leave. It was a liquor store and an old carry-out. Not to knock those people, but they weren’t really what the community wanted.

Adrian Washington: There were a couple of tenants the community really did like. It was a barbershop that had been there for really a couple of generations. The current owner’s father had founded it back 35 years ago. She was still running it, and it was really a neighborhood institution. Then there was a daycare center. One of the things that we’re doing is allowing those people to come back to the new development in brand-new facilities. We’re even able to offer them, starting out, kind of with our philosophy, at the same rents they were paying, which were far below market. It’ll allow them to build up the market over a number of years, so we’re very excited about that.

Adrian Washington: Now, on the floors above it, there are five stories above it. These will contain 65 units of mixed-income housing. There’s housing for very low-income people, who were formerly homeless, who will be able to get wraparound services to allow them to transition to a more normal life. Then there are other units that will be for people of moderate incomes; people anywhere from – these are technical terms – but from 40 percent to 65 percent of the area median income. These range from what we would call pretty subsidized housing to more workforce housing, so we’ll have a range of people there.

Adrian Washington: We’re also very proud of what we’re doing is that we’re giving a really big mix of unit types. Typically, in any kind of new construction development, you’re seeing just people were just building one- and two-bedrooms, or studios. What we’re able to do in this building is to provide one-bedrooms, two-bedrooms, three-bedrooms, even a few four-bedroom apartments. It really will serve a number of different types of people in the neighborhood – seniors, people with families, people with kids. It’s just a great project that will really help everyone in the neighborhood, so we’re very proud and excited about it.

Eve Picker: That sounds really, really wonderful. The four-bedroom units are so unusual nowadays, and extended families are important, so that’s pretty great. I understand it’s also an Opportunity Zone, which is, as we all know, a very hot topic right now. How will that impact the development?

Adrian Washington: Opportunity Zones are exactly what you said, Eve; it’s a very hot topic. People are still figuring it out. I think that, unfortunately, early on, a lot of the Opportunity Zone benefits are going to people who are creating projects that would have been created anyway. We’re very proud that we feel this project will fit in what the Opportunity Zone true mission is, which is to bring capital to underserved neighborhoods – as I said, our commercial businesses, our neighborhood-serving businesses that were going to be displaced and that people in the community wanted to stay.

Adrian Washington: What we’re doing is we’re using Opportunity Zone benefits to attract capital to help keep these businesses in. So, I think that’s important. But, also, I think one of the key things I feel that Opportunity Zones is that the projects have to make sense, even if they weren’t in Opportunity Zones. We are a business that prides itself on not just being do-gooders, but being solid businesspeople, so we’ve underwritten the project carefully. We understand the costs, and the risks, and all of the factors. We think this is a project that works, even if it wasn’t in an Opportunity Zone. But we’re very happy to allow people who are investors who want to get a good return on their money, but also to have a meaningful social impact, to have all that, plus the tax benefits of the Opportunity Zone.

Eve Picker: For listeners who don’t really understand Opportunity Zone funds, because they are very complicated … Took me a long time to understand. The fund, in this case, is actually the project. It’s just the entity that the project is using as a legal entity, the LLC, that will become a fund, right? If people invest-

Adrian Washington: Yes, that’s right.

Eve Picker: It’s a 100-percent Opportunity Zone fund because it’s just a single-use fund, just one project. So, if people invest in it, they’re investing actually into the project itself, not into a fund that then serves a whole series of projects. They can take a really close look at the underwriting and see if they like it. I would agree with you, at the moment, the Opportunity Zone fund benefits are kind of gravy. I have yet to see a project that is moving forward simply because of those benefits. They don’t seem to be enough to make a project happen, right?

Adrian Washington: Exactly. We’ve used that approach, not just in Opportunity Zones, but with our other investor- projects. What we found over the years is that people- they want to know what they’re investing in, both from a business standpoint … They want to kick the tires, see if they believe in the construction costs, and the neighborhood statistics, and the tenants that are being there. They want to understand that. They also want to understand the story behind it. What’s going into the neighborhood? How will my investment benefit [inaudible] neighborhood? They really want to touch, and feel, and see that. We’ve had a lot of success over the years in doing that. This project really works in the same manner, where people can really learn about it, learn about us, learn about the neighborhood, learn about the businesses, and say, “Yeah, I want to put my money here. I believe in it as a financial investment. I also believe in it, in terms of its social [mesh].

Eve Picker: I think what I’m most excited about for Small Change is the fact that we’re helping you raise money for this Opportunity Zone fund. We may very well be the first Opportunity Zone fund offering investments- very small investments to everyone over the age of 18, not just accredited investors. I think many of the funds that we see around the country have really big minimum investment amounts of $100,000 or $200,000, or $500,000. This is going to be much smaller for everyday people, which personally I find very exciting. It’s yet another way to make it accessible to your investors in your neighborhood, right, Adrian?

Adrian Washington: Right, and we’re excited, too. Eve, as you know, and the audience may not know, is that you guys raised money for us on another project, our Benning Market project – a neighborhood called River Terrace. It was a nice way to raise money, but I think more importantly, it helped build support and build involvement in the project. I have people in that neighborhood who told me, “Yeah, I saw … I’m an investor in your project, and …” [cross talk]

Eve Picker: That’s great. That’s really great, yeah.

Adrian Washington: -“… and I saw it because I lived down the street and I wanted to be a part of it. I just thought it was cool that you allowed us to participate in that.” I think it really does build more of a sense of community; it builds more of a sense of involvement; it invokes transparency, because, frankly, I think that, in these days, developers are viewed with a lot of distrust. I think that by allowing community members to invest at investment levels that they can afford really helps to break down those walls, and do that, and helps to increase visibility. We were really happy with the results we had with you on our first investment, which is literally breaking ground in a couple weeks, and we are very excited to work with you again on the Eastern Avenue Project.

Eve Picker: That’s great. You’re going to have to send me updates on the first one, because we’ll post them for our other investors. People like to see [cross talk].

Adrian Washington: We’ll send you groundbreaking pictures. How about that?

Eve Picker: That’d be fantastic, yeah. Talking about this little piece of community engagement – crowdfunding – community engagement has to play a big role in your projects. I’m wondering how you handle that. That can be tricky sometimes.

Adrian Washington: It can be tricky. Like I said, there’s just a lot of distrust around development, and in our political climate, I think there’s just [riding] distrust in everything, so I don’t take it personally. I think the key is you’ve got to be out there early and often. We’re working a different project, in a different part of the city, and we’re a couple years away from groundbreaking; really a year away from an actual serious design and engagement, but we’re already out there in the community, asking people what they want, telling them about ourselves, letting them see some of our other projects.

Adrian Washington: You’re never going to please 100 percent of the people in any community. What I’ve found over years is that what you can do is the best you can do, which is to be accessible, be transparent, to listen, to be honest. Sometimes, people want something, you’re like, “Yeah, we can do that.” Other times, people want something, and I’ve seen a lot of developers be vague and sort of say, “Oh, well, maybe we’ll look at that.” I try to be honest; I try to say that, “Sir, ma’am, we just can’t do that, and here’s the reason why. I know you won’t be happy about that,” but I think it’s more important to be honest than it is to try to gloss over a problem.

Adrian Washington: It really takes a lot of work. It’s changed over the years. 20 years ago, we didn’t have to do nearly this level of community involvement. I think, particularly in underserved neighborhoods, that people were happy that you were just there and building something; pretty much, you didn’t have to do more than that. Nowadays, it’s different. People realize that their neighborhoods are an asset, and that people want to develop there, and they are demanding to be heard and respected. If you’re not there, you don’t hear them, you don’t respect them, you’re gonna suffer for it.

Eve Picker: Yeah, I think that’s right. Moving on to more global themes, here, I’m just wondering what you think we all need to do to make our cities and neighborhoods better places for everyone, so that no one gets left out.

Adrian Washington: That’s a big question-

Eve Picker: It is a big question.

Adrian Washington: -I don’t know if we can solve that all in one podcast. I’ll focus on our roles as developers. Clearly, there is a need for more housing in our cities. There’s a need for housing that serves all different income levels and all different family types. It’s not the ’50s anymore. It’s not just mom and dad, and 2.3 kids, and a picket fence. There are all types of households.

Adrian Washington: The development process has gotten tougher. Besides the community involvement piece, the environmental and sustainability requirements are much higher, the zoning is trickier. It’s hard work. I think our job is to use the skills that we’ve developed over the years to work in partnership with communities, to let them see how they can help us, and, in turn, using our skills to help them work on win-win solutions; involve government, because, obviously, they’re important, and have patience, but have perseverance. Development is tough.

Adrian Washington: I think that to be successful, you’ve got to have a long-term view. You can’t feel like you’ve got to make a killing on every project. You’ve got to look at your entire body of work, so at the end of the day, at the end of your career that you’ve made a fair return on your investment, your time, and your risk, but you’ve also contributed to society. I think it’s possible, if you have those things in mind. Honestly, it’s more rewarding and it’s more successful, if you do it that way.

Eve Picker: Clearly, you think socially responsible real estate is necessary in today’s development world, and that’s the way you manage your business, but I’m wondering, are there enough developers out there thinking about impact and thinking in the way that you’re thinking? If not, how might we improve that? I still see a lot of greenfield developments that, quite frankly, shock me in this day and age; that that sort of work continues. I still see banks wanting to finance those models over and over again, because it’s easy to think about them. I’m wondering how we shift to a [kinder] development world.

Adrian Washington: I think it certainly is growing. I agree with you completely. I drive around, particularly when I’m not in D.C., and I see so many greenfield developments. Just to me, personally, it’s just kind of boring. I didn’t get into this just to make a ton of money. Like I said, I want to be fairly compensated for what I do, but it’s more about that.

Adrian Washington: To answer your question, I think I see more and more of it. I think, particularly the younger generation … I’m older. I’m not a millennial. I guess I’m a young baby boomer. But, particularly in the generation behind me, I see people who want to do that, and not just in real estate development, but in other fields in life. They want to do more than just do a job and make money. They want to make a meaningful impact on the world. They want to have that reward, which helps them feel better.

Adrian Washington: Also, what I’ve found in my business, is it helps to attract and retain young employees. They don’t want to just build some cookie-cutter, 200-unit apartment building in a greenfield, just like everybody else. They want to do projects that are creative, that involve different financing sources, that touch people’s lives, that take challenges [cross talk] and from a business standpoint. I think it’s a movement that is slow in coming, but I clearly see it’s building, and I think it’ll be more and more.

Eve Picker: Yeah, I think you’re probably right that it’s gradually building. Do you see any current trends in real estate that you’re fascinated by or you think are going to make a difference moving forward?

Adrian Washington: Yeah, I see … Clearly, the trend for co-living and coworking is the big trend. WeWork is obviously the big kind of corporate behemoth example of that, but there are a lot of other smaller, more entrepreneurial types of interests. I’ve see coworking spaces designed around women, or women with kids that have daycare centers, or people with social causes, like a nonprofit type of thing. I see that as a big trend.

Adrian Washington: I see co-living. I think that where people, either because of monetary reasons, or because of social reasons, don’t want that house by themselves, but want an opportunity where they can either live with roommates or live in a more communal environment, where things like kitchens and things are shared, and where there’s a social network in place that typically people who are new to an area- it’s a way for them to connect. I see a real sort of striving for more connectedness, as our world, in a way, becomes less connected. I think there are great opportunities to expand on that model. I’ve seen some very successful ones here in Washington, D.C., so it’s something I’m keeping my eye on.

Eve Picker: Yeah, I think a lot of people are. I’m going to ask you three signoff questions that I ask everyone. The first one is what is the key factor that makes a real estate project impactful to you?

Adrian Washington: I’d say the key factor is that it meets the needs of the community that it’s in. The only way you get that is to get out, and talk to the people there, and understand what they want. Some communities, they want more affordable housing. Some people, they want less. Some people want retail that’s a particular type; other people might want a retail that’s missing, like, say, a Fresh Grocer, which is like an example of another project that we did. We put in a Fresh Grocer where it’d been a food desert. It really involves talking to the community, understanding what they want, and then using your skills to develop- to deliver it.

Eve Picker: When it comes to crowdfunding, do you think there are other things that can help you as a developer, not just involving investors, but how might crowdfunding benefit your project, as a whole?

Adrian Washington: I think crowdfunding benefits us in a number of ways. The couple that most come to mind – and I [inaudible] an example earlier for one of our projects – is many people in the neighborhood become investors in the projects. They’re invested not just financially, but they’re invested emotionally. They tell their friends; they frequent there more often. I think the crowdfunding helps allow, particularly, local residents to be involved.

Adrian Washington: I think the second way that that’s really helped us and helped the project is that it’s a real brand builder. Eve, when we did the project with you guys, we got so many press kits about the project. We were [cross talk].

Eve Picker: That’s fabulous. That’s really fabulous.

Adrian Washington: I was interviewed a couple of times at the local news station, I was interviewed by national publications. People that I would- said “Hey, I heard about your project. What’s crowdfunding like, and how do you like it? It just really enhanced our company’s visibility, our project’s visibility; it was a real brand enhancer, and it’s something that I did not expect and something I was very pleased with.

Eve Picker: I’m grateful to hear that. That’s wonderful. Then, this is a really big one – if there were one thing that you could change about real estate development in the U.S. to make it better, what would that be?

Adrian Washington: I think that the thing that I would really change is not so much government policies. I understand the need for regulation around safety, and sustainability, and community impact, but I would change more the attitude of the people in government who do those. I think there is too much of a – particularly in inspections – ‘gotcha’ mentality, where, instead of working with us, and understanding that we’re doing the best we can … Yes, maybe this one particular light switch was two inches too high or too low-

Eve Picker: Oh …

Adrian Washington: Not just a ‘gotcha’ mentality, not just, “Okay, you messed up on that. Fix it, and we’ll come back when we’re ready and tell you whether you missed anything else,” more a partnership for governments to understand that we’re good guys. We’re doing the best we can; that we want a safe project, a sustainable project, and to work more cooperatively with us, and help us succeed as partners, and not to be adversaries.

Eve Picker: That’s a great way to end this interview. So, Adrian, thank you very much for your time. I really enjoyed talking with you, and I’m sure we’re going to be talking again.

Adrian Washington: Great, Eve. Thanks for having me.

Eve Picker: That was Adrian Washington. Adrian is not afraid of a challenge. His company focuses on challenging sites in challenging neighborhoods, always making sure that neighborhood folks are involved and that their neighborhood is improved by the final project. I love that Adrian finds greenfields boring. I love that he sees the people in a neighborhood first, and I love that he nurtures local businesses, bringing even more value to the projects he develops.

Eve Picker: You can find out more about impact real estate investing and access the Shownotes 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. Thanks so much for spending your time with me today, and thank you, Adrian, for sharing your thoughts with me. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Image courtesy of Neighborhood Development Company

Bite-sized investments.

October 21, 2019

Equity crowdfunding is changing the real estate development landscape. Importantly, beyond raising equity, crowdfunding can help build support within communities that may otherwise hold neutral or even hostile feelings towards the building of a new real estate project. Micro-investments via crowdfunding platforms give community residents and stakeholders the opportunity to participate in and take ownership of the development. And this means that everyone will have an interest in its success.

Developing in underserved neighborhoods is not easy

Since Franklin D. Roosevelt kicked off the New Deal Programs in 1933, federal, state and local governments have tried to find ways in which to deliver high-quality housing to all Americans, not just the privileged few. But while the numerous programs created that support housing have helped over the years, they have not solved the problem. Government-developed housing projects, low-income housing tax credits (LIHTC) and Opportunity Zones have not stemmed the tide of housing insecurity.

Many in the private sector only develop in these under-served communities due to the existence of such programs. This is due to the fact that risk-adjusted returns in many major metros are substantially lower than the return on investment an investor can anticipate from middle to high-end housing, like luxury condos or single-family homes. Making the numbers work is hard enough, and when slim margins are combined with vociferous opposition to a project, it can be hard to convince investors to get behind projects in the places that need them most.

Crowdfunding as a signal

Developers have a bad rap in communities. After years of dealing with bad-faith actors, and after suffering from the effects of gentrification and “revitalization” efforts, many in the communities that need housing the most are not inclined to work with them any longer. It is critical to send the right signals to community members in order to break through years of mistrust. One way is through crowdfunding. Instead of new projects only benefitting developers or investors, crowdfunding can allow those residents to have a direct financial interest in the success of the project.

Bite-size investments and the local community

The vast majority of real estate crowdfunding platforms require that users be accredited investors. In other words, they must be one of the 3% that have net worth of over one-million dollars or a salary of at least $200,000 per year. In 2016, in an effort to democratize investment, the Securities and Exchange Commission released Regulation Crowdfunding, a rule that permits anyone over the age of 18 to invest. Now there are some emerging crowdfunding platforms that employ this rule, like Small Change.

Most socially conscious real estate development projects take place in economically disadvantaged areas, as these are the neighborhoods that need the most help. If development projects are completed without concern for locals, they can end up hurting the people that the impact-investment was supposed to benefit.

Most residents in these areas probably can’t meet the $200k yearly income or one-million dollars net worth requirement for accredited investment. Small-dollar investment crowdfunding platforms allow developers to invite residents of the community they are building in to invest, and share returns with them, rather than faceless investors that live anywhere from San Francisco to Tokyo. Not to mention that crowdfunding provides developers more access to capital from sources other than traditional lenders.

Closing the gap

We all know that private developers cannot solve the housing crisis entirely on their own. There need to be significant structural and regulatory changes made in order to provide substantial decreases in housing insecurity, particularly in the very high cost of living areas on the coasts. However, private developers can make a dent in the housing affordability gap through projects that use local communities as a resource, rather than viewing them as an obstacle to be overcome.

Small-dollar crowdfunding offers real estate developers a way to turn a group of potentially opposed stakeholders into firm allies with a direct financial interest in the project, in addition to their interest as residents of the local community. With so many obstacles to overcome when creating sustainable low and mixed-income housing, developers need all the help they can get. It’s a win win.

Image courtesy of Small Change

« Previous Page

Revitalization strategist to barista.

Insights and Inspirations

Information and Links

Crushing urban innovation.

Cookie cutter projects

Small investors. Big returns

Closing loopholes for better neighborhoods.

The worst outcome

Community pushback

Mix it up

Smaller steps

Greenfields are boring.

Insights and Inspirations

Information and Links

Bite-sized investments.

Developing in underserved neighborhoods is not easy

Crowdfunding as a signal

Bite-size investments and the local community

Closing the gap

Recent

Search

Categories

Community

Insights and Inspirations

Information and Links

Cookie cutter projects

Small investors. Big returns

The worst outcome

Community pushback

Mix it up

Smaller steps

Insights and Inspirations

Information and Links

Developing in underserved neighborhoods is not easy

Crowdfunding as a signal

Bite-size investments and the local community

Closing the gap

Footer

Recent

Search

Categories