Rethink Real Estate. For Good.

Creative economy

Bridging the Gap.

“Even after retiring from the NFL, Seattle Seahawks players keep finding ways to give back to their community. Former offensive tackle Garry Gilliam and defensive tackle Jordan Hill, who have played football together for most of their lives, are uniting once again to create change in their hometown of Harrisburg, PA.” writes Samantha Sunseri for Yahoo Sports.

When Garry Gilliam retired from football, it was just the end of his first career. As a graduate with multiple degrees from Milton Hershey School and Penn State University, and with a thirst for knowledge and a passion to give back to his community, he launched a second career –  as founder and CEO of The Bridge. Not content with coaching youth football, his former colleague and good friend Jordan Hill also jumped on board as chief community officer.

With the Bridge they are building a ‘for-purpose’ real estate development company with the intention of acquiring unused properties such as malls, schools and warehouses and transforming them into inner-city mixed-use ‘eco villages’. Their focus is on cooperation, collaboration, and community. Sustainability will be achieved by residents being able to work, eat, learn, live, and play all in the same location. The first eco-village, in the former Bishop McDevitt High School, broke ground in late 2020 and they hope to open it to the public in 2022. The project will include affordable housing and spaces for entrepreneurs, entertainment, specialized learning and trade programs. Year-round food production is planned, using no-soil agricultural techniques such as hydroponics and aeroponics. 

The Bridge wants to address some of the challenges which many communities face and which have created systems of oppression for many Black Americans. They want to “span the tide…. that exists between the rich and the poor, the informed and the untaught, the entrepreneur and the everyday citizen.”

Listen to my interview with Garry Gilliam or read the original article here.

Images courtesy of The Bridge

The Bridge.

Garry Gilliam may be best known for playing in the National Football League, first for the Seattle Seahawks, then the San Francisco 49ers, but today he has a second career as an impact real estate developer. Originally from Harrisburg, at age eight Garry was sent to the Milton Hersey School, a private philanthropic boarding school for orphans and low income children based in nearby Hershey, PA, where he excelled. That model of community is one part of the inspiration for The Bridge, a new real estate development company that is working to acquire old properties like schools, malls, and warehouses, in order to turn them into sustainable communities in the inner city. Each project will be planned as self-contained, mixed-use “Eco-Villages” with housing, commercial/retail space, co-working, urban agriculture, innovation/education center and entertainment. A place to “work, eat, live, learn and play.”

The Bridge came about as a joint effort with Garry’s friends, both from Penn State and the Hershey School, to give back to their hometown community. Their first project began when they leased the Bishop McDevitt Building in Harrisburg, in 2019, to create co-working, maker and event spaces, and this summer they finished their initial fundraising. The complete rehabilitation will include about 50 units of sustainable, zero-energy housing, commercial areas and indoor urban agriculture. The Bridge also hopes to acquire five to 30 acres in Harrisburg for sustainable Eco-Village campuses that can produce healthy fresh food, clean water and renewable energy.

After starting in Harrisburg, the partners then hope to expand to other cities, going into low-income neighborhoods and turning to other athletes and influencers of color to invest in and lead each project. So … watch this space!

Insights and Inspirations

  • Just watch Garry talk about The Bridge. Seriously.
  • Garry wants to invest $1.5B over the next 20 years into 20 different cities with The Bridge.
  • Harrisburg is ripe for impactful development with historical issues that many cities face, including redlining, neighborhoods that are food deserts, and general lack of resources for many school districts.
  • The goal with The Bridge is to find a model that works not just in his hometown, but everywhere.

Information and Links

  • Garry wants to highlight three amazing people: Milton Hershey, Nipsey Hussle and Charles Mully. You can read a little about each of them here.
  • And he gives a shoutout to a book by spiritual teacher David Deida, The Way of the Superior Man.
Read the podcast transcript here

Eve Picker: [00:00:05] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing.

Eve: [00:00:11] My guest today is Gary Gilliam. Gary is perhaps best known for his starring role in football. He entered the NFL in 2014 after signing with the Seattle Seahawks, a superstar climax to a very long journey, which we talk about in the podcast. But today’s focus, The Bridge, came about as a joint effort with friends to give back to their hometown, Harrisburg. There they will take an obsolete school building, the Bishop McDevitt Building and repurpose it for 21st century needs. It will become an eco-village with about 50 units of sustainable, zero energy, housing, commercial uses and indoor urban agriculture. Their broader goal is to acquire five to 30 acres for sustainable eco-village campuses that will produce healthy, fresh food, clean water and renewable energy. Gary doesn’t plan to stop there. Over the next 10 years, he hopes to invest one point five billion dollars (1.5) in 20 different cities. He’ll turn to other athletes and influences of color to invest in and lead each project.

Eve: [00:01:35] Be sure to go to Evepicker.com to find out more about Gary on the show notes page for this episode and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change.

Eve: [00:01:59] All right, Gary, thanks so much for joining me on this show.

Gary Gilliam: [00:02:08] Yeah, thanks for having me.

Eve: [00:02:09] So I’m very excited to talk to you. Someone shared your really wonderful video, What is The Bridge Eco-village, with me. And there’s really there’s so much passion and love in that video. I really just wanted to hear more about the project.

Gary: [00:02:26] Yeah. Yeah, definitely. That video specifically was featuring our pilot location in Harrisburg, Pennsylvania. So, The Bridge Eco-village is a for-purpose real estate development company. The model that is also in that video is our B model in which we acquire old schools, malls, warehouses and convert them into eco-villages. And to us, an eco-village is essentially a mixed use development that has spaces for you to work, eat, live, learn and play. So that workspace, co-working spaces, maker-space, an area for entrepreneurs to come for incubation acceleration, what have you, that each branch is actually urban agriculture, the growing food with aeroponics and hydroponics, or growing food without soil, which allows us to grow food year round and also control the environment so we get bigger and higher yields and actually higher nutritional value as well. So that’s where we live is housing, affordable housing as well as luxury housing. It’s important for everybody to be together. That LERN Branch is actually our non-profit, which is Empower at the Bridge Foundation, which is a heavy focus into financial literacy, teaching people how to repair their credit. Also a heavy focus into job training, mostly like contractual work, so plumbing, electrician work, things like that, and then also sustainable business practices and research and development.

Gary: [00:03:51] Then within that play branch, the last branch is entertainment. So that’s providing a space for people to have zip lines and batting cages, electric go-carts, virtual reality areas. So providing entertainment spaces to the local community. So The Bridge Eco-village, essentially a community center or village aspect, mixed use development. The eco aspect actually comes from the way that we are building mostly through our ITW branch, but for the entire building itself. So solar panels not just looking to be net zero, but striving to be net positive in our energy. We have water collection which doubles with how efficient our water usage is within our farming aspect. We actually save ninety five percent more water than what traditional farmers do. And then within our our waste and our carbon, we actually have a bio waste food digester. We can bring in fresh food waste from outside sources, convert that into nutrients and also more energy. So not just, you know, closing the energy loop, the waste loop, the water loop, carbon loop, so building things sustainably and our build environment. But to us, it’s not just about the word sustainable. It’s really about kind of playing chess and thinking ahead and making things that are built to last. So for us, sustainability really means longevity, which is why we’re looking to convert these older good bone schools and malls and do something great with them.

Eve: [00:05:12] You have my head spinning. Any any one of these things is a pretty significant business to start. And for those who are listening, I mean, you’ve you’ve moved a career from professional football to basically community visionary. And so let’s step back a bit. I mean, how did that transformation happen and where did the seed of the idea for The Bridge begin?

Gary: [00:05:38] Way back, actually. So when I was eight years old, I actually was enrolled into a private boarding school for orphans. I’m not an orphan, so I’ll give a little bit of history about the school itself. So Milton Hershey School, founded by Hershey’s Chocolate, the great chocolate chairman Milton Hershey, not only was he into chocolate, but he also founded this school back in 1909 for little white orphan boys. It was called the Hershey Industrial School for Boys. And that’s what the school was up to the 60’s when black males were admitted, to the 70’s and 80’s females were admitted. And by the time that I went in late 90s, it was no longer just for orphans. But your family had to be below the poverty line, single parent homes, still your orphans, foster kids, the like. And what the school does is it provides a fully cost free education. You live on campus, cost free your clothes, your food, everything, and then they double it up. And when you graduate from the high school, whatever college you get accepted to, they provide you with a pretty significant scholarship, anywhere from eighty thousand to one hundred thousand dollars to go toward that education.

Eve: [00:06:47] Wow.

Gary: [00:06:48] So, that’s really the true inspiration of the work, eat, live, learn, play model. One the school, but but on a bigger scale, the town itself. So there was nothing in that farm town of Hershey wasn’t being called Hershey until Milton Hershey himself went there and established this town. Now there’s a four theme park, stadiums, theaters, obviously the entire school just it’s now a one stop shop for everything that he provided for his workers. But now it’s an entertainment space for everybody. So, that work, eat, live, learn, play model definitely comes from the town. And then also on a microcosm of the school itself, providing all the opportunities and resources that the kids needed that would have never gotten those opportunities or resources before.

Eve: [00:07:29] I bet Hershey would love to hear this story, right?

Gary: [00:07:32] Yeah, yeah.

Eve: [00:07:33] That’s a great seed to plant. So then you went on to have a professional career in football and I suppose came back to your hometown, right? That’s Harrisburg.

Gary: [00:07:45] Yeah, yeah, yeah. Yep. So I got a full ride scholarship to play at Penn State where I went and played for Joe Paterno and Bill O’Brien. While there, I triple majored in business, advertising and psychology. So made sure that with that full ride I maximize it and got some pieces of paper to my name. So then after that I went to the NFL. I went undrafted actually to the Seattle Seahawks. Earned a starting spot there and played there for three years and ended up getting two new contracts actually with the Forty Niners. And that’s who I most recently played with and now I’m a free agent. I’m taking this year off to stay away from the virus and decided to, you know,  develop The Bridge. A few business plans had already been developed for The Bridge. So you kind of put them together. So, yeah, I went to the NFL, played for a few different teams, and now I’m doing some real estate development. And like you stated, you know, community development.

Eve: [00:08:38] Yes, it’s a lot of fun, isn’t it?

Gary: [00:08:40] Absolutely.

Eve: [00:08:41] Yeah. Where are you starting? Like, physically? What are the buildings like? And you have a first project, I think, in Harrisburg. What does it look like?

Gary: [00:08:50] Yeah. Yeah. So that specific property was built in 1930. It’s an old Catholic school. The Catholic school was there until 2014, so it’s been empty since then. It’s actually the fallout shelter for the city. So it’s got great bones. It’s actually really, really good shape on the inside. A few areas need some work, got to put a sprinkler system in and repair parts of the roof. That’s part of the biggest expense, aside from obviously the renovations that we plan on doing. But, yeah, that the building in terms of the areas, though, that The Bridge itself targets, there are three main requirements. First and foremost, the town or the city or the area is a food desert or within close proximity to a food desert.

Eve: [00:09:37] Um Hm.

Gary: [00:09:37] Our main objective is to convert food deserts into food oases. Food security and food localization are extremely important, not just in the health of individuals, but also in finances and keeping the dollar circulating within your community. So first and foremost, food deserts. Second, we’re targeting places that have home owner occupied rates lower than 45 percent. And then we’re also the third requirement is the local school district there is ranked in the bottom half of the state. So those three things, Venn diagramed out the middle area right there is where The Bridge wants to be. Normally areas that most developers don’t want to go into. Lots of distressed properties, you know, areas that don’t have people that have a lot of disposable income. Those are the exact people that we’re targeting. We’re pitching or constructing this model to really combat systematic oppression. Those things that I just labeled create systematic oppression and keeps whoever lives in those areas down. You don’t have resources there. You don’t have opportunities to get yourself out of those situations. So that’s right where we want to be.

Eve: [00:10:40] Ok, so this first building sounds like a gut rehab. I think I saw pictures of it. It’s pretty gorgeous on your video and it looks pretty big. How big is it and what are you planning to actually build inside that space? And you adding new buildings like I’m an architect. I want to know how the physical structure, what you’re planning.

Gary: [00:11:01] So it’s one hundred and twenty thousand square feet.

Eve: [00:11:05] Oh, that’s pretty big. Yeah.

Gary: [00:11:06] Sitting on eight and a half acres. And it’s currently there’s a ground floor, first floor and a second floor. We plan on building another floor on top, at least one floor. We’re still deciding if we’re going to go a bit higher within that top floor is going to be housing. As of now, we’ve got about 50 units. And that’s a mix of affordable housing as well as luxury housing. As I stated. In the ground floor is actually where our maker-space, music studio, a digital media lab, that’s where those those areas are. So kind of the co-working space.

Eve: [00:11:41] Incubator space.

Gary: [00:11:41] Some co-working offices up on the first floor, as well as some more housing. The gym, there’s a gym. The gym will remain the gym. There’s a nice stage in there and some built-in bleachers. So we’ll refurbish that and people will be able to use that for TED talks and what have you. We’re not going to put a gym floor back into it, but you will be able to do some physical activities in there, pull up curtains, sectioned off the area, use it for different events and what have you. There’ll be a new building actually built connected to the gym, which will house our adventure arcade. So the zip lines, the batting cages, the trampolines and what have you. So that’ll be new build as well as our farm. Which is looking to be anywhere from sixty thousand to seventy thousand square feet, but going vertical. So about six stories high, so only taken up about a third of an acre, but being able to produce the same amount of food that 13 acres does in a traditional farming sense.

Eve: [00:12:34] It sounds like your plans are pretty fleshed out. Like, how far along are you in the development process?

Gary: [00:12:39] Yeah, the conceptual phase is done. We’re getting our land development plan together. We haven’t gotten our full construction drawings together yet. We’re still locking in a few of our different anchor tenants, some of the local entities that want to be a part of our mission and really help the demographic that we’re trying to help too. So we’re making sure we lock in the right anchor tenants there and get their spaces developed the way that they like them. And as of now, we’re raising money. And luckily, being in the NFL, I got to be our main investor. But we’re in the process of opening up to bring more investors in so we can obviously bring this fully to fruition. We just had our groundbreaking actually on November 19 and looking to start construction in the spring.

Eve: [00:13:21] Oh, wow. So you’re really pretty far along.

Gary: [00:13:23] Yeah. Yeah. So we’re we’re moving along, moving, moving, moving right along. We acquired the building last November, so we took the last year to really do a lot of our planning stuff. You know, Covid slowed a few things down.

Eve: [00:13:36] Really slowed things down.

Gary: [00:13:38] Yeah. But allowed us to still meet virtually and get some of our things done.

Eve: [00:13:43] Right.

Gary: [00:13:43] But now we’re obviously entering the next phase and taking it from paper to dirt and steel. It’s going to be paramount that we get there. And so being in March, April, May it will look a little bit better.

Eve: [00:13:53] Yes, hopefully. So what do the locals think?

Gary: [00:13:56] Oh, we’ve got, oh man, tremendous community support. So, what we do, like so The Bridge Eco-village, work, eat, live, learn, play. Right. That’s that’s the model. But the specific amenities within each of those branches is determined by what the community there needs. Right. So, okay yeah, we want a co-working space, if that’s what you guys want, or we want an area like a maker-space. Like, what do you guys want within a maker-space. What do you need. What have you not had access to. You know, so we actually hold a bunch of community panels before we even put together our plan. So that’s what a lot of the last year was too, is getting in touch with local community, local neighborhoods, figuring out what the specific things people want, need, what’s lacking, obviously talking to not just the community, but also to politicians and getting their support. You know, because obviously within the fundraising aspect, there’s a public private partnership. So being able to have their support as we pursue some of those public funds was was very important, you know, and they’re all behind it. Everybody’s super behind, you know, what we’re doing. It’s not like this is some like, you know, come to Jesus thing. This is like, all right, look, we have an old school here, a building that’s been sitting here as a community. We have an opportunity now to put together a plan to really develop this thing as something that we could use and need. And not only that, but then actually create a showcase to show what other communities can do in their places and in their cities with their old buildings.

Eve: [00:15:18] You talked about public private partnerships. Does that include financing partnerships?

Gary: [00:15:23] Yeah, absolutely.

Eve: [00:15:24] So affordable housing dollars or historic tax credits?

Gary: [00:15:29] Yep.

Eve: [00:15:29] Like, how do you bring the capital stuff together? I know these projects are very difficult.

Gary: [00:15:34] Yeah, yeah. No, so a lot. So there’s different grants, obviously, like you mentioned, tax credits, historical tax credits. We actually have a meeting set up with the expert, for historical tax credits. The way we designed our plan, we know we’re not being super intrusive and knocking down a ton of different walls. So, we are  anticipating…

Eve: [00:15:52] Yes, they don’t like that, do they?

Gary: [00:15:57] No, they don’t. That’s the kind of the public side, the private side, a lot of different athletes and entertainers. Right. So. As an athlete, most of us have different, like I’ll speak specifically to the NFL and football. We have our own football camps and we go back home. Right. So, it never really sat well with me, you know, just like, ah man, first of all, the chances of making it to the NFL are very, very, very low. And even if you do make it to the NFL, the chances of you keeping a lot of your money is very, very low. Eighty eight percent of NFL players are bankrupt within just two years of playing.

Eve: [00:16:29] Oh, that’s shocking.

Gary: [00:16:30] Eighty eight percent. Yeah.

Eve: [00:16:32] Why is that?

Gary: [00:16:33] That’s financial literacy and really understanding, you know, just making bad investments. I think you’ve got to have a certain image, spending the money in the wrong places, purchasing liberty.

Eve: [00:16:44] You grow up poor and then you have all this money. And because no one’s ever really taught you how to manage it, it’s too much.

Gary: [00:16:51] Yeah. Yeah. Kind of like, you know, when people win the lottery. Most of them end up same thing, either broke or dead, unfortunately.

Eve: [00:16:58] What a shame. Okay.

Gary: [00:17:00] So, aside from that, which is also an issue, instead of going home and preaching about or having the kids come in and go to these football camps, and them thinking, oh, I want to make it to the NFL and be just like Gary Gilliam, you know, if there’s a kid that that has the potential, by all means, do it. It’s also great for the physical aspect and getting the kids out of the house to do things. But let’s think a little more deeply with it. Let’s let’s really go back and talk about real estate, business, agriculture, leveraging credit. Let’s talk about those things. You can create a lot more millionaires that way than we do with athletics, right? That same drive and tenacity and execution ability that we have in athletics, we can mirror that in the business world, too. So let’s be the face of that. You know, athletes, let’s be the ones that are going back home now and using the money that we’ve gained to then, one, create opportunities for other people to gain money, but also be helping a ton of people. And most of them like it and and they want to get on board. And what The Bridge is, is it’s a model. So it’s not just in Harrisburg. We’ve got a target to hit a bunch of other cities over the next few years. So this thing is about scalability. It’s about impact. Like I stated in the very beginning, it’s a for purpose real estate development company. So really about impacting individual’s lives. But it’s also structured and made in a way that you can make a lot of money with and has a great return too.

Eve: [00:18:20] So then what will success look like to you in five or 10 years, say?

Gary: [00:18:26] Yeah, I think success will go back to our three requirements. If that area is no longer a food desert. If the home ownership are higher than forty five percent, significantly higher. And if the school district in that area is then ranked in the top half of the state, then that’s when we know we were successful. And that ripple will be able to be measured. That’s quantifiable. We’ll be able to see that with numbers. And you kind of wonder, OK, well, how does the school district, how does homeownership rates, how does that food desert, how does that relate to the bridge? Well, the school district is directly correlated to homeownership rates and values, which in our LERN branch were heavy on financial literacy, getting people into homes, using FHA loans to get their home owner occupied, taking care of properties, property values go up, more funding to our school districts. Right, these things are linked. So if we’re doing, we’re supposed to do with each bridge location and that means the area surrounding us, none of those things are now issues and we’ll see how far that ripple goes. Which will then allow us to overlap, if need be, other bridge locations so we can start to cover the areas that still have those issues.

Eve: [00:19:32] Those are really great and pragmatic metrics. I think it’ll work really well.

Gary: [00:19:38] Thank you.

Eve: [00:19:38] I have to ask, what’s the biggest challenge you’ve had with this project? Maybe you haven’t had any.

Gary: [00:19:44] The biggest challenge personally would be asking people for money. It’s kind of an odd thing personally, for me to do so, you know, getting over that hump and just kind of like, yeah, you know, this is this is kind of, you know, what we’re doing. And everyone’s always like, well, how can I get involved? It’s like, well, we need capital. That’s that’s that’s a big thing. You know, we’ve kind of assembled The Avengers. If you’ve got expertise, right, in architectural stuff or engineering or marketing or whatever else it is, like, this is obviously something that would be in a lot of different cities and teams are needed in each of those cities to run these living buildings, if you will. So, yeah. So teams and capital.

Eve: [00:20:22] Ok, and what’s your what’s your really big, hairy, audacious goal? You said you wanted to be in a few other cities in a few years. What’s, what does this look like in in 10 years from now, do you think?

Gary: [00:20:33] Oh, yeah. Oh, yeah. We’re looking to raise. You want big hairy. Okay.

Eve: [00:20:38] Yeah, Big hairy.

Gary: [00:20:39] Ok, here we go. One point five billion dollars. We want to pump that into 20 different cities over 10 years.

Eve: [00:20:50] Okay.

Gary: [00:20:50] One point five billion dollars to be deployed into 20 different cities over 10 years.

Eve: [00:20:56] That is a lot.

Gary: [00:20:59] Yeah, Big. Hairy. All that.

Eve: [00:21:01] Yeah, this is really great. Well, I’m really excited to see what what happens. I would love to be at your groundbreaking. Who knows if we’ll be through this pandemic by then. I hope I hope it’s over soon. But it really it sounds like a fantastic project. And I want to tell everyone, if they haven’t seen your video, they should go look at it because it’s a pretty wonderful description of what you’re trying to do. I really enjoyed it.

Gary: [00:21:28] Thank you.

Eve: [00:21:29] It’s been really nice talking to you.

Gary: [00:21:31] You as well. Thanks for having me.

Eve: [00:21:43] That was Gary Gilliam. Football star would probably be enough for most people. It’s not enough for Gary, who planned to leverage his extensive and influential network to do some good. To do a lot of good. The community he grew up in, Harrisburg, Pennsylvania, is poor and segregated. Gary says it is the epitome of systematic oppression, redlining, food desert, lack of resources for the school district. It’s all here. And it’s been that way since I was young. He wants to find a real solution for those real points of pain, not just in Harrisburg, but all over the world. 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, Gary, 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 Garry Gilliam, The Bridge.

Rethink Real Estate.

What happens when three friends and kindred spirits start dedicating their Saturday mornings to the pursuit of more equitable development and democratized finance?

For years, Dutch MacDonald, architect and technologist, Josh McManus, entrepreneur and place-maker, and Eve Picker, urban designer and developer, have been rooting each other on in their respective pursuits. And then the pandemic happened. We traded in time spent on trains and planes for weekly meetings. Over the last year our discussions have led to an emerging consensus regarding the acute need to rethink real estate for the future. 

In our respective worlds we have encountered developers, companies, foundations and family offices all looking for counsel. Not an esoteric brand of futurism, but on-the-ground real experience, and solutions to the diverse problems facing anyone who wants to create buildings and places that work for everyone. 

And so, Small Change Advisors was born. We’ve an eye on reimagining the way that spaces and places work. And we have a wealth of collective experience amongst us. Just listen in to Josh and Eve in this first of a series of ongoing conversations, and you’ll get the picture.

Insights and Inspirations

  • There is a radical transformation of real estate going on right before our eyes, and in a system that hasn’t changed much since this country’s inception.
  • We’ve watched the broker model in insurance and the mortgage industry being displaced. Real estate may be next in line.
  • The ‘dollars and square foot, for many years at a time’ model for commercial real estate needs to be reimagined.
  • We have to stop looking at buildings as ‘warehouses for humans’ and see them as ‘machines for the maximization of human potential.’
  • Real estate is a tool for transformation, able to stitch places and communities and cities together.
  • We need a broader toolkit of options to expand the lessee/landlord relationship, including a democratization of real estate that can let owners, renters and communities (literally) invest in where they live and work.

Information and Links

Read the podcast transcript here

Eve Picker: [00:00:19] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. What happens when three friends and kindred spirits start dedicating their Saturday mornings to the pursuit of more equitable development and democratized finance? Well, a lot.

Eve: [00:00:44] For years, Dutch MacDonald, architect and technologist, Josh McManus, entrepreneur and placemaker, have been rooting each other, and me, on in their respective pursuits. And then the pandemic happened. We substituted planes and trains with weekly meetings, and over time a picture emerged that there’s an acute need regarding how to tackle real estate in the future. Developers, companies, foundations and family offices are all looking for counsel. Not the esoteric, academic brand of futurism, but real talk, real experience and real solutions to the problems facing people working to build places that work for everyone. And so, Small Change Advisors was born. We’ve an eye on reimagining the way that spaces and places work. And we have a wealth of collective experience amongst us. Just listen in to Josh and I and you’ll get the picture. Be sure to go to EvePicker.com to find out more about our Saturday morning adventure, and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change.

Eve: [00:02:16] Hey, Josh, thanks so much for joining me today.

Josh McManus: [00:02:19] Hi Eve. Happy to be here.

Eve: [00:02:21] So, you and I talk a lot on Saturday mornings with our friend, Dutch MacDonald.

Josh: [00:02:26] That we do.

Eve: [00:02:27] We started doing that like maybe mid-last year? And what brought us there, why did we decide to do that?

Josh: [00:02:35] I think it was a unique combination of our ongoing realization that we all come to, a very similar set of shared beliefs, but from very different experiences and angles. And, you know, to give away your time on Saturday morning when you have a lot of other things that you could be working on, I think there has to be a lot of serendipity and symbiosis. And we seem to have found that amongst the group, that time always flies by.

Eve: [00:03:05] Yeah, I mean, I remember thinking I’ve known you for quite a long time now, right? Through CEOs for Cities and after that. So, you and I have had a lot of commonalities in the way we think about cities and do things. And Dutch, Dutch was the architect for my real estate portfolio, and then moved on to a slightly different world, business strategy and digital placemaking, I suppose. I don’t know, I have always thought that together the three of us can be better than alone.

Josh: [00:03:37] Yeah, yeah, I totally agree. I think the more, and it’s probably been, I don’t know, 15, 20 years since you and I first crossed paths?

Eve: [00:03:47] Yeh, probably.

Josh: [00:03:48] But the further I go into this work, there’s a very small set of people that I call, you know, at the Ph.D. Level that have been on the, sort of, the front lines of placemaking, community change, this sort of transformational development. And so, it gets harder and harder to find friends that you can have the right conversations with. And so, there’s a certain solace in finding folks that you can talk about any of these problems and issues and opportunities with. But then each of us come at it, you know, you guys have a, very technical training. I have business training. Dutch has been doing a lot of work and consulting in the digital world. And so, I think there’s a lot of magic that’s happened, is collapsing our insights together and turning them into shared action.

Eve: [00:04:35] So, we each have a special superpowers, and I think that’s what’s always fascinated me. And also the thought of working with people who, as you said, think the same way, love the same things, are passionate about cities, want to make a difference. All of those things. It’s hard to find people who really want to do that.

Josh: [00:04:54] Yeah.

Eve: [00:04:55] Anyway, so I’m going to ask you, what’s the one thing you believe about real estate right now that others don’t seem to believe in, yet?

Josh: [00:05:04] I think that we are seeing the radical transformation of real estate right before our eyes and that we should be surprised and amazed by that because it’s a system that hasn’t changed pretty much in the United States since our inception. And the thing that I believe about real estate that I don’t know that others have completely come to terms with yet, is that I don’t think the business model is going to hold. I don’t think that the dollars and square foot, for many years at a time for commercial real estate, is going to be the way that business is done even a dozen years from now. I think there’s going to be a radical imagination of the monetization for commercial spaces. And I think that we’re getting a first look at it through the work of Small Change, and also through some of the work that I’m doing in these post-industrial cities.

Eve: [00:06:02] When you talk about that … are you talking about ‘demand pricing’? Explain a little more.

Josh: [00:06:07] Yeah, I think either brokers with a much broader toolset, or a displacement of the broker, which has happened in the insurance and the mortgage industry, and the toolset then becomes much bigger. So, I mean, demand pricing and pricing, that’s also got the arbitrage for the amount of time that you want the space for. So, right now, it’s really hard for potential tenants to find short-term lease offerings. But, you know, We Work, despite its failure, or despite its setbacks, started to chart that territory. And then you’re seeing a number of other providers following those footsteps. But not just demand pricing. You’re seeing unique revenue share models, a lot of retail, and food and beverage, is shifting much more to revenue share. Food halls are driving a lot of innovation around revenue models where risk and costs are shared by different entities. And so, I just see, you know, the ways that you can and use commercial space turning from a singular, ‘it’s about dollars, square feet and years,’ into a much more broad and varied menu of offerings that are priced accordingly, that are staffed accordingly, and that are, frankly, much more mutually beneficial to both the landlord on the lessee.

Eve: [00:07:29] That’s a really exciting concept. I have to tell you, I was thinking about that 15 years ago when I developed two buildings which had unusually small commercial spaces. Like little studios and spaces that range from about 400 square feet to under 2000 square feet. And I couldn’t find a broker who wanted to take on leasing them. And the reason was, because the broker model is based on commission. And that broker model, really, I don’t want to say it forces greed because that’s a bad way to put it. I mean, people need to put food on their table. So so brokers, right? But it forces them to really pursue the bigger deals because that’s how they get paid. And so, all the little ones get left behind. And yet they’re the ones that are really important for building, you know, the next business, a creative and diverse economy. And I ended up marketing all of those spaces myself for that reason. But it is a very broken system. Very broken.

Josh: [00:08:32] Yeah, well …we’re seeing the radical disruption and displacement … so AirBnB, you know displaced a whole set of brokers. You used to go to the beach and you dealt with a real estate firm that was set up to do short-term rentals. And now AirBnB is …

Eve: [00:08:50] That’s right.

Josh: [00:08:50] Vacasa and others. Yeah. And same thing if you look at under Warren Buffett’s holdings at Berkshire Hathaway, a Geico, like, you know, just used to have your neighborhood insurance man, and you don’t right now. You go direct when you’re going with Geico. I was at Quicken Loans as part of my work with Rock Ventures. That’s a 50 state sales-side operation. So, they’re competing against banks who have brick and mortar locations in neighborhoods, and they have this sustained competitive advantage, in that they don’t have that brick and mortar and they don’t have that whole traditional brokerage model. So, I don’t see any reason why it won’t happen in commercial real estate. You know, it’s in the process of arriving right now.

Eve: [00:09:31] Yeah, at the moment, really, Craigslist is the only option.

Josh: [00:09:35] Yeah, yeah …

Eve: [00:09:36] For those little spaces …

Josh: [00:09:37] … and that’s a sketchy option.

Eve: [00:09:39] It’s a sketchy option. It’s difficult.

Josh: [00:09:41] But I, I think it’ll change quickly.

Eve: [00:09:43] Yeah, that’s exciting. What’s your biggest pet peeve in real estate? Aside from this one?

Josh: [00:09:51] Well, this one is a major pet peeve of mine. There’s a philosophical one that I don’t know if you and I have talked about before, which is, I think that all too often we look at buildings as warehouses for humans instead of as machines for the maximisation of human potential. And what I mean by that is, a lot of folks, when you were doing commoditized-type work, if it was piecework or sales work or light manufacturing, which is, where can we find some space that has basic amenities so that people can do their work inside of them. Now that we’ve moved to a much more knowledge work-based economy, you have to ask yourself, how do I help the people that are inside of those, which are our most valuable asset, be their most productive selves? And so, I still walk into too many spaces and I feel like they’re trying to compete on the warehousing front. So, how many people can we warehouse in here for how many dollars and how many square feet?

Eve: [00:10:49] Right.

Josh: [00:10:49] And they’re not thinking about this is a machine for maximisation of human potential. So, what happens in the public realm? The quality of the food and bev, the quality of the shared spaces, the shared amenities? I always say in the real estate project I work on, you can’t austerity your way to prosperity. And so, I’m constantly peeved when I find people that are trying to do that.

Eve: [00:11:12] Interesting.

Josh: [00:11:14] What about for you, Eve?

Eve: [00:11:15] I’ve got a couple of pet peeves. One is banking. You know, I really and I’m not sure it’s the fault of banks, but I really believe that banks are squashing creative real estate innovation in the way that they lend. Because in order to get a bank loan, you need to get an appraisal. And in order to get an appraisal, there need to be a couple of, like, kind projects. So, this means that some new idea or a first of its kind project in a neighborhood is not going to get traditional bank financing. And I think that’s really holding back remaking places in a meaningful way. I think it’s a really big problem. The second pet peeve I have, I think, is zoning. Same issue. I have a little cottage in this wonderful little place that was, really, a fisherman’s village. It’s a miniature little thing. And sometime in the 19 .. probably in the 1960s or 70s, some wanting the zoning department thought it was a really good idea to overlay a completely suburban zoning rule over that funky little neighborhood. Everything that was there is grandfathered in, but everything that’s being built now looks completely different. It looks suburban with side yards and backyard setbacks that really are a completely suburban model. And I think that’s a horrible shame. But, you know, I think contextual zoning is critical to keep places intact and characterful and interesting and to really maintain the culture of them. But on the other hand, rewriting zoning codes, not zoning law, is immensely expensive. And I really don’t know the answer to that. I mean, small municipalities simply aren’t going to be able to afford to address that. They’re just not.

Josh: [00:13:15] Yeah, yeah. I see a regular friction with this, especially in post-industrial cities that have draconian old zoning laws, and they also don’t have the municipal finance to even start thinking about how they decrease these barriers. There’s an exciting piece of these pink zones or innovation zones, or they’re sort of peeling back zoning temporarily to see what happens. And I hope that that leads to some mass scale changes. But it seems to me in general, you know, when a lot of this was laid out, you know, heavy industry was big and dirty and that’s not even the case anymore. And so, all of the things that were being accounted for and attempted to be prevented, not to mention the things that were attempted to be prevented that were terribly racist classist or something else -ist, but I don’t think it’s the looming threat that it was when a lot of this came about. So, I’m hopeful that some of these innovation programs will chip away at it.

Eve: [00:14:14] Yeah, things like that have happened recently, like zoning overlay districts in the entire state of Oregon and California to permit accessory dwelling units. They’re really good. Planners need to just go for it a little bit more.

Josh: [00:14:29] So you have this incredibly rich experience where you’ve worked on a lot of projects. And I’m curious to know of all these projects that you’ve worked on, and you’ve taken on some of the hardest to figure out buildings in some of the most needed urban places of all of them that you’ve ever done. Like what’s your favorite project and why?

Eve: [00:14:50] This is like picking your favorite child. It’s very difficult to do. Oh, favourites, that’s really hard. So, They all have the pros and cons. But I would say … I think the most challenging for me were the most fun. I don’t know if I would call them my favorite, but that tiny house that I built in Garfield, 250 square feet of it, was the most challenging project I ever took on, by far. And it was challenging because it challenged zoning codes, building codes, financing. I mean, there were things I discovered along the way that we just never anticipated. I couldn’t get an appraisal for it because it was the first tiny house on a foundation in the tristate region. Therefore, I crowdfunded the debt, because I was not going to get a bank loan. It was extremely challenging, and I enjoy that. It’s solving an enormous puzzle and along the way you discover the pieces of it that you really need to address. I think I’m a design snob. I love great design and I love wonderful and beautiful buildings and places. But for me, I think the projects I’m proudest of are the ones that just didn’t look like they would ever work. And I, I got them to work through sheer tenacity. Many of my projects have design features that people point out, which really are not design features. I live in a loft with a polished concrete floor because we couldn’t afford to cover it with anything, you know. Three of the walls are concrete block for the same reason. Dutch helped me with these projects. So, he was an integral part of this. We used the raw materials that we knew we couldn’t get away from, to turn them into design features because that’s what the budget dictated. So, I don’t know if I have a favorite, but I think that’s my favorite part of building is really making something wonderful happen with the resources you have. Does that make sense?

Josh: [00:16:58] Yeah, absolutely. And that willingness to let the problem dictate the solution, in some ways flies in the face of probably some of the real estate advice you’ve been given along the way.

Eve: [00:17:11] Oh, yeah, that encapsulates it really well. That’s what I really enjoy.

Josh: [00:17:16] So, what other real estate advice have you been given, or have heard other people giving, that you don’t agree with? Because I love this contrarian line of thought.

Eve: [00:17:25] Real estate advice that I’ve discarded. I think probably the biggest one, and this may be a problem for me is that I fall in love with the buildings I buy. I really, I really love architecture and I love buildings. And so I become passionately entwined in my projects, which, you know, every big developer tells you never to do, you know? Be ready to walk away from a project if it doesn’t work. That is really hard for me. I can’t walk away. I spend a lot of time kind of pressing the challenge, trying to make it work. So, I think that’s probably the biggest advice I’ve ignored. Don’t become passionately involved in the buildings you choose to develop. For me, it matters. If I’m going to spend time on redeveloping a property, or building a new one, or maintaining it afterwards, managing it. I’ve got to love it. I really don’t want to be doing that, you know, with a Microtel in a suburb. That would be painful for me.

Josh: [00:18:28] Sure. Yeah. That relates to the piece of advice that I’ve been given that I just, sort of, fundamentally reject, which is that, you know, often times I’m working with large organizations, you know, companies, sometimes entire communities, sometimes foundations, sometimes family offices, and there’s still people who come to me and say, well, you have to understand that within that, real estate is a unique discipline. The buildings work differently and only developers understand how buildings work. And for me, again, a building is a machine for the maximization of human potential.

Eve: [00:19:04] I think that’s right.

Josh: [00:19:06] And so, if I’m advising a company to say, well, let’s not worry about what the lease is on this space, if you have 20 million dollars of payroll sitting in this building and the building could make those people 10 percent more productive, that will eclipse whatever the dollars in square foot price was at the bottom of the development deal.

Eve: [00:19:29] Right. It’s about change making, right?

Josh: [00:19:32] Real estate is a tool for transformation. Yep. It is not a warehouse for human beings. It is a tool for transformation. And if you look at what companies and communities and foundations and family offices are willing to spend on other tools for transformation, to then walk up to real estate and say, well, we should use the 300 year old model about competitive, you know, commodity prices per square feet. I think that’s just patently ridiculous.

Eve: [00:20:00] Well, you know, I think I bring that same thinking to small change the crowdfunding platform. I venture to say I’d be a lot further along with that business if I were willing to raise funds for any old project that came along. But I’m not. I’ve made it harder for myself, but also much more gratifying by insisting that Small Change is going to help transform places. And so, the projects we raise funds for really need to be making some change in some way, in the place they’re in. I really hope that takes hold. I believe there are lots of people who think about it, but it’s certainly not as many, and there’s not as many big dollars invested as your everyday, you know, development that you see pop up everywhere that all look the same over and over again. There’s far more money in those than these challenging little enterprises, right?

Josh: [00:20:59] Yeah. Yeah. Well, this might be leading the witness a little bit, but I’m curious, based upon that, if you had a magic wand and you could change anything about the development industry, overall, what is it that you would change? I’m sure it relates somehow to the projects that are getting done.

Eve: [00:21:18] Yeah, I mean, I think it goes back to the real estate industry. I think the zoning and financing are the key pieces for me. I wish there were a pool of funds, a bank, a group of banks that would support creative, ground-up projects that really offer the opportunity to stitch places and communities and cities together, and I wish they weren’t so much money being spent on the wrong type of projects in suburban places where you have to drive to them, which causes further pollution, where they really don’t face the street, that don’t add anything to the community there … as you said, warehouses for people. So, that’s what I would like to see change. How about you? What’s your magic wand? What would you like to see?

Josh: [00:22:11] For me on the magic wand, I feel like there is just a missing toolbox that fits between the landlord and the lessee. And so right now there’s a very traditional leasing model that sits between most landlords and lessees. And there’s about dollars and square feet and years. And I would create a much broader toolkit of options that says no matter what you need right now, here is a tool that might be able to help you as the entrepreneur and also benefit the landlord. And so, part of my background is working in creating entrepreneurial ecosystems. And so, I’ve worked with so many small businesses of so many sizes and stages of development, I know that most of them do one of two things. They either sign up for the wrong space and that becomes a particular detriment to them, or they avoid getting space for far too long. And that stunts their growth. And it’s because they’re terrified of, you know, they just got started five weeks ago and they’re asked to sign a five year lease and they don’t know what business is going to be like in, you know, five months, much less five years.

Eve: [00:23:26] Yes, I know.

Josh: [00:23:27] So, creating a much broader toolkit that allows you to nurture an ecosystem of tenants through the maximization of their potential. And I believe that tenants will pay for the arbitrage, like they’ll pay for you to direct them. And we’ve seen this with the We Works and Industrious’ of the world. They’re realizing, like, people will pay for optionality and therefore the landlord can be made whole, and sometimes above whole. But I’m super excited for that toolkit. If I had the magic wand then I would accelerate that toolkit to where there was a whole suite of services available to every potential lessee from every landlord. And then it wouldn’t be necessarily cumbersome or it wouldn’t be, like, finding a unicorn when you’re in a city trying to get a business off the ground.

Eve: [00:24:19] But then, you know, you’d have to work with me on my magic wand, because as the landlord, when I go to the bank with the building and I want to refinance it, the first thing they look at is the length of the lease. The leases that we have on the building. And so, if I have a building providing optionality and I’ve been in this position, even if I have a history with that bank and have never missed a payment, they probably won’t come to the table with a loan. This is why I think, you know, some of these boring things like banking are really critical. So, if we were to develop that toolkit, I’d be right there looking for banks that would support it.

Josh: [00:24:57] I think the toolkit requires a new capital class, and that’s the conundrum of it.

Eve: [00:25:02] That’s right.

Josh: [00:25:03] But if we can make that clear, I actually do believe that there are capital providers that would be interested in that capital class. If you look at the impact funders that want to see the stagnation of small business development in the United States offset, this would be one of the ways to do that. Because you could better incubate small businesses if they had the appropriate arrangements and services in order to grow.

Eve: [00:25:29] Yeah, I think it’s right. I think you just they’re all so intertwined. It’s not a small problem.

Josh: [00:25:36] No.

Eve: [00:25:37] But I have to ask you, like, we’re forming this company, Small Change Advisors, the three of us together. What roles would you love to be involved in as a Small Change Advisor? How do you think we can help people?

Josh: [00:25:50] Yeah, well, I guess we kind of buried the lede from the audio side of things, which is we’ve been working together on Saturday mornings and we finally got to a point where we were like, hey, enough people are asking for these services that we’ve got to do something about it.

Eve: [00:26:04] That’s right.

Josh: [00:26:05] So, we said, OK, well, the easiest thing to do is extend off from the Small Change platform and all the success that you’ve already created there, and the deals that you’ve helped people get done, and form Small Change Advisors. Because we are seeing these companies, these communities, these foundations and these family offices that are trying to figure this out. So, my life mission is to strengthen the humanity immune system. And what I mean by that is I believe the more people that are equipped and empowered to be agents of change, the better off the world will be. And I don’t just mean individual people organizing in their neighborhoods. That’s important. But I think that companies, communities, like entire communities, again these these family offices, these foundations can be equipped to be agents of change. And so what I hope we can do with Small Change Advisors is accelerate the amount of people that are thinking about real estate in these ways that you and I have been looking at it for the last 10, 15, 20 years, the same way that Dutch looks at it, which is, as a tool for transformation for communities, you know, as a great benefit both to the organizations that are doing them, but also to the communities that surround them. And as a overarchingly source of abundance for, you know, a lot of post-industrial places that we work in that have forgotten what abundance looks like.

Eve: [00:27:33] So what is a dream project? Look like them? Like an example of one?

Josh: [00:27:38] Yeah. So, I’m super lucky in that I get to work on a couple of dream projects right now. And the one that’s public facing that I get to help out with is Ford Motor Company’s work on Michigan Central and Detroit. And Michigan Central is a development that’s anchored by Michigan Central Station, which is the Beaux Arts station that’s been abandoned for about 30 years that is designed by the same folks who designed Grand Central Station in New York. And Ford is turning that into a mobility innovation district and a place of discovery for the future of mobility. And so, working to support a company and a community like Detroit, a neighborhood like Corktown, and to think about how you create new products and services, how you create jobs for a community, how you create a place that’s more dynamic and attractive, like that’s the sort of dream project. And so, I got to work in Downtown Detroit on similar stuff. I was at Rock Ventures and we worked on the acquisition and the transformation of over 10 million square feet. But that sort of size and scale is what I’m super fascinated with, because I’m seeing non-traditional actors in the real estate world intervene and say we’re going to make our places better. We have to, it’s table stakes for retaining and attracting the best employees. And it’s also the right thing to do for the communities that we call home. And so, those are sort of dream projects that I get to work on now. I’m interested in that same question for you as well. And then I’ve got another question behind that.

Eve: [00:29:19] I’ve got a variety of dream projects. One of my big dream projects is that someone approaches Small Change who gets that it is a tool for them, to really remake an entire place. That they can raise a bunch of small raises with people from the neighborhood investing in a variety of buildings, maybe even, you know, your project in Michigan. You know, you open the door for neighborhood investors in each project that is built. But you can also do much larger raises and let much larger investors in as well. So, that over time the people who live there can enjoy the increased value of that asset. I would love someone to come along with something that scale and sort of realize the potential of how we can help to generate wealth over a long period of time. I’d also love to create a Small Change fund. So far we’ve been working on individual project basis, but there are some securities tools out there, Regulation A in particular, that I think could really be used to create a large fund which lets everyone over the age of 18 invest, and really puts our theories to work on where investments should be made, where they’re not being made right now, to sort of build community. I think those are probably my two top picks. I have like little dream projects for real estate as well. But we won’t talk about those.

Josh: [00:30:51] Yeah, yeah. Those are super exciting and I think we’re lucky to be working on the projects we already are. And I can see these new things on the horizon. Beyond those projects they inform a larger, more audacious goal. And so much of what has attracted me to spend the time with you and Dutch every Saturday morning, and to want to be a part of Small Change, and that’s a broader democratization. So, you referenced it that there and community participation. But could you talk a little bit more about that big audacious goal, what you’d like to see for real estate and investment overall? If we could fly back down in 100 years and look at the world, how would it be different because Small Change has been around?

Eve: [00:31:38] Well, I mean, Small Change is sort of tackling, we’re right at the beginning of tackling the democratization of investment. And until these new securities laws were written in 2016, regulation crowdfunding, unaccredited investors could, or non-accredited investors could not invest. Investment in real estate was only for the elite, for the three percent that have a minimum net worth of one million dollars without their primary residence, or 200,000 dollars a year in income. And even then, that elite would have to know someone in the real estate business to be able to invest. So, the places where money was coming from was altogether very limited. And what I learned in my work in Pittsburgh is that people have a palpable need, a desire, to be part of improving their city and they look for ways to do that. I mean, this is one of the key things I learnt in Pittsburgh. It’s extremely powerful. And I really believe that giving them an opportunity to invest at some small level is the right thing to do. In the long run, it will benefit the city and make it a stronger, more tightly-knit place. Does that make sense?

Josh: [00:33:00] Yes, absolutely.

Eve: [00:33:03] That’s one, what the hopes are, that somehow Small Change can become a community banking system of sorts and fill in where financial institutions just don’t want to go right now. Or can’t go right now, for whatever reason. It’s a big, hairy, audacious goal.

Josh: [00:33:21] Yeh, and it’s also such a beautiful dream. And so I’m grateful to you for inviting Dutch and I into the fold. I’m super excited about us forming Small Change Advisors. And I do know from my days in fundraising that you don’t get anything that you don’t ask for. So, I guess as we sort of wrap up this first session, and I made a bunch of notes. It feels like we’ve got a lot more things to talk about. We should say to the folks that are listening, if you are a company, a community, a foundation or a family office, and you’re trying to figure out a project that aligns with this dream of democratizing real estate finance and building better places through these progressive real estate projects, we’d love to talk to you. And also, if you are somebody that has built a tool, created a solution that you think may help along this goal, too, or you’re interested in what we’re going to do as a team, as Small Change Advisors reach out to us as well. Because this is a mission that about a lot more than a traditional company would have. And so we’re going to need all the help we can get along the way.

Eve: [00:34:29] And I would say a final thing is if you have something that you’d like us to talk about, let us know. We plan a couple of conversations like this, and one of you out there may have an idea that hadn’t occurred to us. So, please be in touch.

Josh: [00:34:44] Yeah. Yeah. So, on the horizon, space as a product versus space as a service, continuously variable financing, monetizing public amenities, and the specifics of involving the crowd in the finance stack are all things that are on my notes for additional discussion. So, again, thank you for the invitation to talk.

Eve: [00:35:07] Oh, thank you very much. I’m looking forward to the next one.

Josh: [00:35:10] Thank you.

Eve: [00:35:25] 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 Josh and I today. There’ll be more to come soon. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change.

Images courtesy of For Purpose and Small Change Advisors.

Place.

Main streets everywhere, in urban metros and small towns alike, are the lifeblood of community. What makes them so important?  

Economy

Small businesses thrive on main streets, and small businesses are the backbone of our economy. In this way a main street can be a local employment center that reflects the prosperity of a community. It can offer the convenience of local shopping and services and it can also be the center of civic life – a place for forums and for public events. A healthy main street can also protect property values in surrounding neighborhoods. Unfortunately, because of the severe economic impact of the coronavirus pandemic, many storefront businesses have closed resulting in vacancies on main streets, a new and unexpected challenge. But unlike big box stores, businesses that tend to be less nimble and less entrepreneurial, small businesses are proving themselves to be extraordinarily imaginative in creating new customer experiences as the pandemic unfolds. They may yet prove that main streets can be quite resilient

History

The main street as an urban form has existed for millennia as a place where people make commercial transactions and a place to meet and connect. Usually it is a community’s historic core, a place of shared memory. Those historic buildings on main streets not only lend character but are a reminder of who we were and how the past has shaped us. Extraordinary historical events, including the exclusion of African Americans during the Jim Crow era, occurred on main streets.

Quality of life

Main streets are a place where people come together to gather, shop, do business, eat, play, define common purpose, bridge differences and participate in civic life. They are dynamic hubs that reflect the unique qualities of their surrounding area. A healthy, vibrant, thriving area provides a sense of pride and helps shape a positive identity for a community whereas a main street where nothing happens or where buildings are vacant can create a sense of distress. The coronavirus pandemic has shown us how much we appreciate having places to go. It has also highlighted the importance of walkability as a way to stay safe and healthy. At the same time, as work habits change, people often choose where to live before finding a job or choose where to live and then tele-commute. This makes it all the more important that main streets thrive as communities continue to change and grown with them.

Patrice Frey sees main streets as entrepreneurial eco-systems, often the single biggest asset that a neighborhood or small town has. Without bold action, she’s afraid that the livability and character of our local neighbourhoods and the vibrancy of our cities are at risk. As the president and CEO of the National Main Street Center, she is fully focussed on offering programs and guidance on placemaking, local entrepreneurship, facade improvements, crowdfunding and green rehabs to the Center’s network of approximately 1,800 members, all in service of revitalizing commercial main streets in both big cities and small.

Listen to my interview with Patrice to learn more.

Elkin, NC Downtown by G Keith Hall, CC BY-3.0

Everything old is new again.

Daniel Dus lives and breathes solar. After college, he moved into real estate, got an MBA and then leapt head first into the energy industry. Today, Daniel heads the North American Renewables division for Adani, an Indian multinational group that has one of the largest solar portfolios, globally.

But his heart is equally someplace else –  in the Berkshires. That’s where he grew up and that is where he is planning his next act. The Berkshires, in western Massachusetts, a vacation and cultural destination, has an amazing inventory of luxury estates dating from the 1800s up to the early 1900s. But many of them now stand dramatically underutilized. Daniel and his team at Shared Estates want to develop these estates for the shared economy, bringing them within reach of the middle class. Plus, they will make all the projects carbon-neutral, through sustainable practices and carbon offsets.

Previously, Daniel worked for Dynamic Energy (with a focus on greenfield development, community solar and shared renewables), Safari Energy, and Martifer Solar (where he was responsible for over 1,200 solar clients under leases, power purchase agreements, community solar projects). He also helped found Solairo Energy, working on turnkey solar and wind generation projects. He is a certified solar designer, and holds over 50 certificates in energy hedging, grid infrastructure and emerging energy technologies.

Insights and Inspirations

  • Luxury estates like this can really only be fully utilized in the shared economy. And they are by no means only in New England. Hint. Hint.
  • These unique projects can only be done affordably in rural areas, and these are communities in growing need of economic support.
  • Banks do not want to lend in rural areas.
  • Every one of their properties contributes a percent of income to a local nonprofit, further benefiting the community.
  • Why not make it (or any project) carbon-neutral?

Information and Links

  • Daniel and his team are crowdfunding equity for their next shared estate, The Freeman Berkshires, at Small Change. And anyone over the age of 18 can invest. Check it out!
  • Vote Solar is a national advocacy group working on solar energy issues at the local level.
  • Daniel renovated The Playhouse, originally built by George Westinghouse, and the first place in the world powered by AC electricity. Now it’s the number one estate to stay in on VBRO.
Read the podcast transcript here

Eve Picker: [00:00:11] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Daniel Dus. While Daniel has forged a career taking him to the top of the solar industry class, his heart is someplace else, in the Berkshires. That’s where he grew up and that’s where he’s planning his next act. The Berkshires, Massachusetts, is rich with travel destinations and has an amazing inventory of luxury estates dating back to the 1800s. As industry collapsed, so did the use of these estates. Many of them stand dramatically underutilized today. And that’s where Daniel and his team come in. You’ll want to hear how Daniel is planning to reposition these estates for the sharing economy. Be sure to go to EvePicker.com, to find out more about Daniel on the show notes page for this episode. And be sure to sign up for my newsletter, so you can access information about impact real estate investing, and get the latest news about the exciting projects on my crowdfunding platform, Small Change.

Eve: [00:01:42] Hello, Daniel. Thanks so much for joining me today.

Daniel Dus: [00:01:44] Thank you, Eve. Great to be here.

Eve: [00:01:46] So, your career has been in the solar industry, and I would love to start by just hearing what you’ve accomplished in your career.

Daniel: [00:01:56] Yes. 15 years in solar now. I’ve had the pleasure of helping create and build some of the largest solar companies and projects in the solar space, in the United States, over the last 15 years. Currently, with a company, when I joined, had just completed its first solar project, and it’s recently ranked the largest solar company in the world with 15.4 Gigawatts of operating and contracted projects.

Eve: [00:02:25] Oh, wow.

Daniel: [00:02:26] So, seeing growth like that in the space, which is really focused on carbon, SOx and NOx, emissions reductions, is really, really been exciting – to see the industry go from almost nothing 15 years ago, to now solar is number one in energy in terms of new, installed capacity year over year. So, just that transition, rapid transition, has been exciting to be a part of.

Eve: [00:02:52] Yeah, I’ll say. So, what’s your background? How did you get into the solar industry?

Daniel: [00:02:58] Actually came into solar out of a focus on real estate. I spent a few years developing real estate along the East Coast U.S., and that’s where I was exposed to the trades, financially structuring projects, and ended up selling those assets, but it, this was right in the middle of the financial crisis. Nothing really made sense. Went back to get an MBA and launched my first solar company out of the Drexel business incubator, so … and the rest, as they say, is history.

Eve: [00:03:30] Oh, very good. So, that brings us back to where you are today. Because I’ve gotten to know you for an entirely different reason. And that’s your new company that you’re starting up, called Shared Estates. So, why the name Shared Estates? Tell me a little bit about that.

Daniel: [00:03:45] We fell upon it as an exemplification of our primary objective, or one of our primary objectives, which is to bring these beautiful, historic, storied estates that in the past have primarily been in the hands of the wealthiest U.S. families, and bring those into the reach of the middle class. In many cases, our properties will cost less per person than a standard hotel room would, but with significantly different benefits and amenities. So, we really want the community to enjoy these spaces, use these spaces. One of the really fun things about the business is seeing families and friends create memories in these spaces. So, it’s a major driver for us.

Eve: [00:04:30] Basically, buying and repurposing enormous luxury estates, and sharing them in the shared economy.

Daniel: [00:04:39] Yeah, that’s exactly right. And our geographic focus offers quite a few of these properties. The Berkshires of western Massachusetts, also known as inland Newport, often, was developed in the 1800-1900s. Many of the wealthiest families built these estates there. They called them ‘country cottages,’ but these are often multi-100 acre, often over 10,000 square foot properties. And there’s not as much of a market for these properties as single family, second or third homes today as there was then. And they often end up being very underutilized. I mean, talk about an underutilized asset. Often, they may be used a couple of weeks a year, a few weeks a year, by these families. And so, we’re taking those estates and we’re putting them into the shared economy where they can be much, much more accessible both to the local community, as well as to the tourist economy there.

Eve: [00:05:35] That’s really interesting. How did you come up, upon this idea? Like, it’s an unusual take on a real estate company.

Daniel: [00:05:41] It’s a good question. I wish that I could say that I analyzed the market, that I did a bunch of market data research and saw that large group, short-term rentals was a rapidly growing subset of the short-term vacation rental market, and the broader tourism market. But that’s not the case. I fell into it entirely. I was living in Manhattan and purchased a property in the Berkshires, which is where I was born and raised, and originally was going to use it for weekends, myself, and went through a deep rehabilitation process, and ended up taking a job in Philadelphia, so moved a little too far away to really use it for myself. And I put it on HomeAway VRBO, originally at, I think, $350 per night. And I figured if it rented 20, 25 percent of the time that it would cover its own mortgage and that would be a win. Well, it booked so much in the first 72 hours that I had to raise the price multiple times, and it now books for well over a $1000 dollars a night, and books 65, 70 percent occupancy. So, it’s just such a phenomenal project that it really opened my eyes through the process of developing and listing the property to this underserved market, right? There are very few, if any, large-format, short-term rentals in urban areas, because if they existed they’d be exceedingly expensive. But, in rural America, there are a lot of these properties that are beautiful and really underutilized today. So, it, really fell into it.

Eve: [00:07:18] Was that first property the Playhouse?

Daniel: [00:07:20] Yeah, that’s right. So, the Playhouse is a great example. It was originally built by George Westinghouse in the late 1800s. It was the first place in the world ever powered by AC electricity. He built an AC microgrid there to test what was really the theory of Tesla and the products being developed by Westinghouse and Stanley. So, we know that President McKinley, Tesla, Stanley, Lord Kelvin all visited the property. Westinghouse in the late 1800s had an electric boat; he had an electric car he drove around the property. It was really a leading point of innovation at the time. And this particular structure was called the Playhouse because he built it as a gymnasium, basically, for his children. 7000 square feet. He had a bowling alley in the building …

Eve: [00:08:13] Wow.

Daniel: [00:08:13] … and he later converted it into a theater space, for when his kids were getting older, and entertained there. So, it’s a beautiful open floor plan building …

Eve: [00:08:25] Yeh, I’ve seen photos of it. It’s stunning. It’s beautiful.

Daniel: [00:08:27] Yeah. And it was, when we took it, our architect told us that it was structurally failed. It was literally ready to fall over, and required a lot of structural work to maintain the open floor plan and to make it structurally sound. But in the process, we created a space that has really resonated with folks, where they can bring groups of families, family and friends, and enjoy each other and celebrate each other – weddings, anniversaries, birthday parties and other small gatherings like that.

Eve: [00:08:56] I think you told me that it was ranked number one, or is ranked number one place to stay.

Daniel: [00:09:03] That’s right. Yep. It, on YVRBO, it quickly shot up to the most-booked, most-reviewed property out of over 500 properties listed in the county on VRBO.

Eve: [00:09:13] That’s amazing. That’s a great story.

Daniel: [00:09:16] It was. It was. You know, I love the space. I love the property. It means a lot to me and I love that folks get to make memories there.

Eve: [00:09:26] So, how does this fit in with your solar background?

Daniel: [00:09:32] Yeah, it’s a, it’s a good question and one I get often. Solar development, financing and construction is very similar to real estate development, financing and structuring. You’re talking about zoning approvals, you’re talking about geotechnical studies. If you’re doing any ground work, you’re talking about structuring projects for financing, financial modeling. You’re talking about construction and ownership and operation and optimization of assets. It’s all exactly the same in both industries. It just is that the asset itself is slightly different, but a lot of overlap there. I’m a Stanford-certified project manager, Villanova-certified Six Sigma, and that’s because developing processes for execution of these projects is really at the core of these businesses. So, I think there’s just a ton of overlap.

Eve: [00:10:24] Yeah, but I suppose I’m also wondering, what of your love for the energy industry are you going to bring to these properties, because they weren’t built that way?

Daniel: [00:10:34] Yup. That’s exactly right. And Shared Estates is also, to a large extent, a conduit for investment in a carbon neutral and sustainable asset. That’s, all of our properties will be carbon neutral, offset by either on-site or off-site renewable energy projects, which we’re very excited about. And so, we will bring that attribute to all of our properties.

Eve: [00:11:02] And I think probably some other features that I’ve heard about, but we’ll go into that later. So, In the Berkshires, which you seem to be focusing on, how many underutilized estates are there?

Daniel: [00:11:14] There are a surprising number of them. Again, it was over the span of over 100 years of this economy developing and building, but also had an industrial heyday, itself. General Electric had a major presence there, thousands of jobs. So, there are dozens and dozens and dozens of these estates, in varying states. Some of them are really in rough shape, frankly. These historic properties really need dramatic investment to help bring them up into today’s standards, with IT infrastructure, you know, sometimes structural upgrades, definitely bringing back their former glory and beauty. So, everything from landscaping to paint, new fixtures, etc, is all really critical for these properties. And we try to do that and maintain historic elements of them, as well. So, at the Playhouse, for example, we retained the original Westinghouse lighting fixtures from the 1890s.

Eve: [00:12:14] Oh, lovely.

Daniel: [00:12:14] And so, we do our best to keep the historic elements of the properties. But there are a remarkable number of these in the Berkshires. And frankly, nationally, there are a lot of large, rural farmhouses that are not in their heyday today that could use deep renovations, and other properties that really are, I think, historic to America and deserve to be rehabilitated and brought into the shared economy, which in my opinion, is one of the best possible uses for them.

Eve: [00:12:45] If I want to rent one of your estates how will it compare to holding a gathering in a traditional local venue like a hotel, just price-wise.

Daniel: [00:12:55] In my opinion, this is the core to our ultimate success. The macroeconomics of our properties versus the alternative. There’s kind of no comparison in my mind. Our properties will often be less per person than a standard hotel room would be, but our properties will have … in the next project we’re doing, we’ll have 40 acres of private space, it’ll have a dedicated pond, docks. It’ll have a five-acre vineyard, greenhouses, multiple living spaces, multiple dining rooms, multiple quiet spaces, an office, library. All for your own private use with yourself, your friends and your family. You just have to get a group of family and friends to travel with you. But, in terms of the amenities, there’s just no comparison. These are the most luxurious possible properties. And with the right group of friends and family, on a per person basis, they could be less than a holiday.

Eve: [00:13:52] That’s amazing.

Daniel: [00:13:54] Yes.

Eve: [00:13:54] So, this is really the shared economy in a very different way.

Daniel: [00:13:58] That’s right.

Eve: [00:13:59] So, you have the Playhouse under your belt. You said, you mentioned the next property. You want to tell us a little bit about that one?

Daniel: [00:14:06] Sure. Yeah. We are calling it the Freeman Berkshires. So the Freeman is currently an 11,300 square foot brick mansion on about 40 acres, with a private pond, tennis court. We are going to deeply renovate, rehabilitate this property, new fixtures, new paint, add some square footage, hopefully.  We’re going to install a 500 square foot English-style greenhouse and extensive gardens, five acres of vineyard, and in-ground pool, and really bring this into 2020. Modern IT infrastructure. Games rooms and a virtual gaming room, so that there’s something for all generations. The name, the Freeman Berkshires comes from a local woman, Elizabeth Freeman. She was the first African-American slave to sue and win her freedom under the Massachusetts constitution. And she was abused at the hands of her, quote unquote, Master’s wife. And so, the property will be a tribute to her. We’ll be installing a sculpture garden by local artists in tribute to Elizabeth and her story. And we’ll be donating a percent of profits to the Elizabeth Freeman Center, a local nonprofit that’s been operating since the 1970s, serving battered and abused victims of assault and sexual assault. And so, we’re very excited, and that local nonprofit engagement is part of every property that we’ve done and will do. The Playhouse contributed to St. Jude’s, Sierra Club and the local Humane Society on a recurring basis. So, we’re very excited about the Freeman Center contract and we’ll be closing imminently here in the next weeks. And so, we can’t wait to get started on it.

Eve: [00:15:54] So, tell me a little bit about financing. I mean, I have been hearing over the last few months the difficulty that people are having financing anything unusual in the real estate market. And this is definitely unusual.

Daniel: [00:16:08] Yeah. And in fact, our biggest challenge, Eve, is that these are rural projects. They’re all in rural America. And what I didn’t realize before going to the market the first time, a couple of years ago, for commercial financing in rural America is that many banks will simply not finance projects in rural United States. They’re very focused on urban areas, suburban areas. Commercial lenders like to invest in New York, Manhattan, Philadelphia. They basically red-line rural America, and in places like the Berkshires that really need economic development, that’s a real problem.

Eve: [00:16:47] Did they just come out and say we don’t lend in rural America.

Daniel: [00:16:52] Yeah. I have had dozen of lenders simply say, you know, we do not invest in rural properties. Which …

Eve: [00:17:00] Wow.

Daniel: [00:17:00] It’s kind of like red-lining. Right? I mean, I can’t think of any other …

Eve: [00:17:06] Yes.

Daniel: [00:17:06] … comparison. So, it was pretty shocking, frankly. The local banks are fantastic and supportive, but they often have relatively modest caps on the amount of capital that they can contribute. And so, the value of Small Change really shines here in its ability to help bring capital into places like this, and frankly, to offer the ability of the local community to invest. As you know, traditionally, only accredited investors can invest in GP/LP-type structures like ours, and that’s highly limiting, you know. The local community is not, on average, worth a million or more dollars, but they’re the ones that, they deal with the tourist economy every day, they often work in the tourist economy, and so, they should be able to benefit from that economic activity.

Eve: [00:17:53] So how are you financing this project if you don’t have the bank? How do you do it?

Daniel: [00:17:57] Yeah, this project is particularly unique. We’ve obtained seller financing for a large portion of the acquisition cost, actually 95 percent of the acquisition cost, allowing us to focus our equity on the rehabilitation and upgrade of the property and aesthetic improvements. And we will be conducting a Small Change raise. So, we’re excited.

Eve: [00:18:20] Yes, we’re excited, too. So, but how long did it take you to negotiate the seller financing? That’s not an easy thing to accomplish.

Daniel: [00:18:28] It was almost a year, Eve.

Eve: [00:18:29] Wow.

Daniel: [00:18:29] Of what it was about 11 months of back and forth, and educating the seller on us, what we’ve done, what we plan to do …

Eve: [00:18:38] Wow.

Daniel: [00:18:38] … and ultimately reached a deal that we’re really happy with and I think they’re happy with, too.

Eve: [00:18:43] So, tenacious must be your middle name.

Daniel: [00:18:47] You have to keep that deals, right …

Eve: [00:18:49] Yeh, yeh, yeh.

Daniel: [00:18:49] … that’s the nature of development.

Eve: [00:18:51] So, final question for you. What’s your big, hairy, audacious goal? Where are you going with all of this?

Daniel: [00:18:58] For Shared Estates, specifically, I’m born and raised in the Berkshires. I love the Berkshires. I drove by these properties when I was a kid and fell in love with them. And the Berkshires is a really special place. The Boston Symphony Orchestra summers there at Tanglewood, has the oldest and longest performing dance center in the country, Jacob’s Pillow. It has one of the largest standing Shakespearean companies in the world, frankly. And these beautiful bucolic views. It’s just a phenomenal and special place. And I really want Shared Estates to contribute to the local economy, through taxes, through the nonprofit contributions we’ll be making, hopefully through investments by the local community in the business. I want the business to be ‘by and for’ the local community. And I want it to contribute, honestly, millions and millions of dollars of benefit, both direct and indirect, to local businesses. Every one of our properties supports local businesses. We champion and celebrate local businesses. We have local gift baskets and literature, and we really try to get folks who sometimes travel … they used to travel from Europe, now generally in New York and Boston, as those families are traveling more domestically. And we’ve seen a dramatic uptick, frankly, in our activity in rentals.

Eve: [00:20:19] Oh, that’s interesting, yeh.

Daniel: [00:20:19] But we really want this to be a massive engine of growth for the local economy, and to be a benefit to the local organizations there. I mean, that’s, that’s really our goal.

Eve: [00:20:30] That’s a pretty fabulous goal. And I hope you’re incredibly successful. So, thank you very much for joining me today.

Daniel: [00:20:37] Thank you, Eve. It’s been a pleasure.

Eve: [00:20:38] I hope I get to visit sometime.

Daniel: [00:20:40] Absolutely. Us, too.

Eve: [00:20:41] Ok, bye.

Daniel: [00:20:55] Bye.

Eve: [00:20:55] That was Daniel Dus. He’s planning a comeback for the many underutilized luxury estates in the Berkshires. Daniel and his team plan to reposition them for the sharing economy. Not only will they be available for middle class families to enjoy, they’ll be carbon neutral renovations, making them the ultimate recycling projects. And he’s taking the democratization of these estates one step further by offering the opportunity to invest to anyone over the age of 18. These estates won’t just be owned by the wealthy any longer.Eve: [00:21:42] You can find out more about impact real estate investing and access the show notes for today’s episode at my website, EvePicker.com. While you’re there, sign up for my newsletter to find out more about how to make money in real estate, while building better cities. Thank you so much for spending your time with me today. And thank you, Daniel, for sharing your thoughts. We’ll talk again soon. But for now, this is Eve Picker, signing off to go make some change

Image courtesy of Daniel Dus