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Design

Reclaiming your Community.

April 6, 2022

Majora Carter’s career as urban revitalization strategist has spanned environment, economy, social mobility, and real estate development. Her work has won major awards in each sector, including a MacArthur ‘genius’ Grant and Peabody Award winning broadcaster.

Majora’s words — “Nobody should have to move out of their neighborhood to live in a better one” — are inscribed on the walls of the Smithsonian Museum of African American History and Culture. And her new book, called “Reclaiming Your Neighborhood”, the subject of our podcast, takes a next step in her thesis – build where you live,  talent will stay and your neighborhood will prosper.

Born and raised in the South Bronx, Majora has long-focused much of her work there, looking always to make positive change for her community, and in doing so, gained both national and international attention. She believes that talent retention may be the key to turning around low-status neighborhoods. And she’s backed that up with her Boogie Down Ground Hip-Hop coffee spot which she owns and operates with her husband in Hunts Point, around the corner from where she grew up.

Majora is also a lecturer at Princeton University’s Keller Center, serves as editor and senior producer at GROUNDTRUTH, a platform for telling stories of people building community power, and she previously served as associate director of The POINT Community Development Corporation. She founded and ran Sustainable South Bronx and co-founded Green for All.

Read the podcast transcript here

Eve Picker: [00:00:07] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo, in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website RethinkRealEstateForGood.co, or you can find them at your favorite podcast station. You’ll find lots worth listening to, I’m sure.

Eve: [00:01:01] My guest today is Majora Carter, my second interview with this powerhouse. Her career as urban revitalization strategist 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. Majora’s words are inscribed on the walls of the Smithsonian Museum of African American History and Culture: “Nobody should have to move out of their neighborhood to live in a better one.” Her new book called “Reclaiming Your Neighborhood”, the subject of our podcast, takes a next step in her thesis. Build where you live, talent will stay, and your neighborhood will prosper. Look for the book on Amazon, in bookstores or on Majora’s website. There is no way around it. If you are really interested in impact investing, this podcast is a must listen.

Eve: [00:02:19] Hello, Majora. I’m so delighted to have you back on this show.

Majora Carter: [00:02:23] Thanks for having me.

Eve: [00:02:25] It’s been a while, but you’ve just written a book called “Reclaiming Your Community,” and in it you ask how we can address the problem of persistent poverty in low status communities differently. So, I wanted to start by asking you what is a low status community and what does it mean to you?

Majora: [00:02:46] A low status community to me – the way that our company defines it is a place where inequality is assumed by both the people that are in that community and those outside looking in. And so, what that what it looks like and I think that’s easier to describe that way; It’s the kind of places where there are more environmental burdens, where there’s higher rates of poverty, lower educational attainment, the kind of places where you won’t find diverse options for food. Not many great places to invest your money or you’re charged for it, like through check cashing stores or places like that. And it’s just literally the places where inequality is just understood. And so and they look different. They can be inner cities, they could be Native American reservations, they could be the kind of former booming Rust Belt towns that only white people lived in. But the jobs are long gone.

Eve: [00:03:44] This is a really big and hard question. So why is it difficult to improve the status of a low status neighborhood?

Majora: [00:03:52] Well, like a lot of things, it comes down to who benefits from it. And because if you look at those communities, literally billions of dollars are pumped into them through the philanthropic industrial sector and as well as our government. And it looks different, but it comes in the form of whether there are subsidies to build very low-income housing and homeless shelters, whether it’s the multibillion dollar economic engine that’s our pharmaceutical industry that absolutely does profit off of lifestyle related health conditions from diabetes and obesity and heart conditions. And it’s the, you know, the fact that there’s such low educational attainment but really, we’re not investing in public education within those areas either. And so, again, so it’s always like a problem to be solved. Again, folks, there are definitely industries set up to perpetuate that and actually benefit from them, but the people in those communities are not getting any better.

Eve: [00:04:53] So how does the redevelopment industry impact this cycle?

Majora: [00:04:58] Yeah, so like I think there’s an old saying, “all relationships are about real estate” and I believe it’s true in this regard because real estate development can be used as a transformational tool if we use it that way. I mean, think about it. What we’re doing is literally redefining what constitutes what is happening in those areas. So, when you do it by creating really interesting commercial, industrial, residential development. And so, you can tweak the formula and create benefits for the people that are there or not. Right?

Eve: [00:05:32] Right.

Majora: [00:05:32] And so if we’re thinking about development as a transformational tool and if we know that sort of status quo development, which either content to concentrate poverty and everything and all the ills associated with it from low health outcomes, low educational attainment, you know, higher rates of people being incarcerated. If we know that, then what if we designed those places and developed them in ways that actually promoted the opposite?

Eve: [00:06:01] Right.

Majora: [00:06:01] And that’s when we decided to look at a tool. We literally borrowed a page from the business community that looks at if you are an employer, if you own a business and you train, you hire your staff, that’s your talent and you pour resources into them, whether it’s training or benefits or reasons for them to want to stay. You know, you’re not doing it so that your competitor will hire them away. You’re doing it so that your talent sees you as the place to be. But we don’t do that in American low status communities. We don’t treat our communities that way. And so, what we’re trying to do is apply a talent retention approach to real estate development. Like what do folks that are born and raised in those communities, the talented ones, the ones that are either academically or artistically or any kind of talent, the ones that are literally taught to measure success by how far they get away from those communities, what can we do to keep them there? And so, we ask, what are you looking for in the community that you desire? We ask community members in my hometown in the South Bronx, what’s that? In that classic kind of low status community and people of all income levels, they were looking for kind of things that made them feel good about being in their own community, whether it was good places like cafes, restaurants, great parks, places to play and work. Those are the kind of things that they wanted. And so why aren’t we building those things here in our own community? And that is when we realize that that’s the kind of real estate development we wanted to do. And we labeled it a talent retention, real estate development strategy.

Eve: [00:07:47] You talk about real estate development impacting low status neighborhoods in one of two ways, and the first is displacement gentrification, which we touched on, and the second is poverty maintenance. So, tell me about poverty maintenance.

Majora: [00:08:03] Yeah. So, poverty level economic maintenance as we’ve called it, or PLM, which really sounds gross, but because it kind of is, where again, billions pumped into these communities from government and philanthropic sources, but the economic level of the people in that community does not change. So, subsidies that go to low income, quote unquote, affordable housing developers, which is only for very low income housing and even homeless shelters, lots of money in terms of the health clinics and the multinational pharmaceutical industry that are government subsidized and actually do support lifestyle illnesses according to, whether they are diabetes, obesity. But things related to the quality of life that that happen in communities, low status communities and seeing those type of things, even community centers that are that I think are often just there’s like resources that are poured in specifically to support the bright ones in the community. And so those are the ones that measure success by how far they get away. And those type of things literally pull people outside of our own community to seek greener pastures. But again, the people that remain are usually the ones that remain in poverty. And that is the way that those communities are treated.

Eve: [00:09:31] Right.

Majora: [00:09:32] Whether it’s by the philanthropic and our government interest, it’s like we play to that in terms of like creating more low-income housing, more health clinics and opportunities to support people that are chronically suffering from lifestyle health conditions. And through that, we are not seeing the kind of transition from people who are actually creating more healthy opportunities for them, for themselves in those communities. And we’re seeing more and more money pumped into those things. And thus, we’re seeing the concentration of more and more poverty and all the things associated with it, whether it’s low educational attainment, higher rates of folks involved in the justice system, poor health outcomes, and more reasons for more people to want to leave those communities. So again, poverty level, economic maintenance, somebody is doing well, but not the people that are in those communities.

Eve: [00:10:27] So, you know, I think actually in the built environment, what you’re talking about is perpetuated by the affordable building types that we see, because you can really drive through a neighborhood and you can see you can point out affordable housing very clearly. And that, I think, is a very visible manifestation of that Poverty Maintenance or PLM, as you called it.

Majora: [00:10:49] Yeah. The architecture of poverty is, you know, you know it when you see it.

Eve: [00:10:55] Yes.

Majora: [00:10:55] It’s kind of like pornography. It’s like you know it when you see it.

Eve: [00:10:59] Yes, it’s true.

Majora: [00:11:01] Yeah, it may look different in a rural or urban or a suburban context, but everybody knows.

Eve: [00:11:07] That’s right. So, you know, you’ve already touched on this, but you write about how third spaces are key to talent retention in low status community economics. And so what is a third space?

Majora: [00:11:21] So, third spaces are these urban planning parlance for places that are neither work nor home. Right? And it’s just this third space where community can happen. And to us, community is not just a place, it’s an activity. Right? It is literally an action verb, but you do need places to do it. And so, if you don’t and so if you’re in general, if you’re in a low status community, the kind of places, the kind of third spaces that are in those communities are generally not the kind of places where people feel like they’re vibrant and they’re working to support the kind of goals and aspirations for their lives. It’s like, I think about some of the places in my neighborhood in the South Bronx where the largest places were communal real estate was either the waiting rooms at health clinics or pharmacies and also community centers where most people do not go and hang out or don’t want to be seen in. Right. Or for long anyway. And it’s just like, you know, in terms of cafes or cool places to hang out, very few. And so that’s when we realize we’re creating this this architecture or the architecture that’s here is literally creating this sort of like talent repulsion experience for people who are feeling like, I know I’ve got something good to offer because I don’t – Low status communities have never had a shortage of amazing people coming from them. Right. But I do have a problem with them staying. I mean, even America loves the Cinderella story of like somebody being born into some kind of hardscrabble community and they have to pull themselves up and then they go out and make something great of themselves. They’re coming from these communities. Why can’t we make something of ourselves here?

Eve: [00:13:13] Yeah.

Majora: [00:13:14] And that’s both the challenge, but also the joy of realizing that it’s not just this thing that this this miracle that needs to happen, it’s something that we can do because we already have the tools and the keys to our own recovery within our own communities.

Eve: [00:13:33] So, you know, I visited you in the Bronx and there’s not a lot of third places there. But you created a coffee shop, and didn’t you tell me that it was voted, what was it voted, number one?

Majora: [00:13:44] We were voted the best cafe in New York in 2021.

Eve: [00:13:49] Can you believe that? That’s awesome.

Majora: [00:13:51] Yes, I can. Yes, I absolutely can. And it’s because we but it was by time out in New York and it was because we were, and yes, we do have great specialty coffee. I’m sorry. Do you hear that.

Eve: [00:14:09] The dog? Yes.

Majora: [00:14:09] Yes, I’m sorry.

Eve: [00:14:10] Everyone will have to deal with the dog on this podcast.

Majora: [00:14:13] I know.

Eve: [00:14:14] Is my life, right?

Majora: [00:14:15] He’s like really upset because my husband just walked out and he’s like, “don’t go” anyway. I’ll Start over. But yes, we were voted best cafe in New York City in 2021 by “Time Out New York magazine.” And I like to think it wasn’t just because we’ve got great coffee and tea and an awesome local craft beer and wine and sangria, but and really awesome community vibes. But it really was the vibes part because what we did was really instil within our community that our cafe was simply a vessel in which to hold all the great hopes and dreams and aspirations of our community and then gave it a platform to show it. We absolutely took advantage of having to do much of our work outdoors because of COVID, and suddenly we became this, this wasn’t just encased within the four walls of our cafe, but we took it outside and people were doing things like open mics and even credit repair workshops and art exhibits, and basically it was just such a liberating way for people to see how beautiful their community was. And because it was literally like spilling out onto the sidewalk for everybody to see. And I feel like that is the reason why we won that award. You know, not, you know, again, we do have really good stuff there, but it was mostly that we created this this environment that allowed people to see how beautiful their community was and participate in it.

Eve: [00:15:54] So you tested this thesis out. Do you know of any people who stayed in the community because of this third place? So, what’s next? How do you – that’s a big block you’re on, by the way. And yes, that’s going to take quite a lot of work to transform into a community asset, shall we say.

Majora: [00:16:12] Yes. Well, you know, you’ve got to start somewhere. I mean, some environmentalists would say, what’s the best time to plant a tree? You know, 20 years ago. What’s the next best time? Today. And so that’s where you start. And you have to start somewhere. And by creating examples and showing them what it does do is give people that are open to it an opportunity to say, well, if they could do something, why can’t I?

Eve: [00:16:37] Yes.

Majora: [00:16:37] And that is exactly what we’ve seen, like our little cafe has, actually, because it’s just allows people to connect together. We’ve seen everything from people being able to buy homes from one another. We’ve seen people start new businesses and locate them within the community. We’ve seen people develop their own capacity to see themselves as a different person, but the same one, but being able to do it within their own community. I’ve been incredibly excited by seeing folks realize that looking around and going, Wait, there’s people like me here. Why do I feel like I need to to escape when I could build something right here? So, yes. And what’s also super exciting is that I’ve also seen folks from around the country intuitively do this. And writing this book was simply a way to help other folks see that this may be mostly my story and how I got to the point where it’s like reclaiming my community was something that I want to see everybody to do because I feel like we have to do something to sort of repair the social fabric of our country. And we should start in the places that are most impacted by some of the specious problems that whether it’s systemic racism and classism have actually created in this country, but really created low status communities that are not helping us as a as a country evolve into the greatness that it could be.

Eve: [00:18:11] So I know you’re also working on a second third space, which I’ve had the good fortune to visit.

Majora: [00:18:16] Yes.

Eve: [00:18:17] A beautiful old railway building. Tell us about that. What’s going on there? It’s not far away. It’s like less than half a block away from your coffee shop, right?

Majora: [00:18:28] My world is really small at this point. I mean, the coffee shop is literally a three-minute walk away. The other project that you’re referring to is even a minute walk away from where I live.

Eve: [00:18:41] Yes, yeah, yeah.

Majora: [00:18:43] It’s a historic rail station designed by Cass Gilbert, America’s first starchitect, as they call them, Cass Gilbert, who designed also the Woolworth Building and the US Supreme Court building. It was quite the dandy in his day in the early part of the 20th century, and so we had this beautiful aesthetic. And so, this old rail station is about 4000 square feet, and so we’re transforming it into an event hall. So, my husband James and I actually literally did the initial demolition ourselves. Fortunately, we got other people to help us to finish it up, and it’s super exciting because the idea that we can take a space and by its nature as an event hall, it’s literally being filled by other people to do all sorts of things. And so we’re hoping to see it used as an amazing music venue, which actually sort of hearkens back to literally right across the street from where the rail station is, used to be a place where vaudeville excuse me, vaudeville, you know, Latin music as well is like it was like a musical and theater place where people would come right across the we want to bring some of that back as well. You know, and it’s also really interesting for me because that rail station is the reason why my family decided to settle there. My father was from down south, a big old black man who was a Pullman porter, and he bought our house for cash because back in the 1940s, there weren’t a whole lot of banks giving money to black men for mortgages. So, he actually won 15,000 in a horse race in California, put it in a satchel, literally cash, put it in a satchel, brought it back to New York. You found an Italian family that would sell to him, and he bought it.

Eve: [00:20:38] Which, in itself, was unusual, right?

Majora: [00:20:41] Literally, yeah. And he didn’t feel comfortable staying in the house for a couple of years, so he just rented it to them because it was the neighborhood was all white, but he bought that house because there was talk that they were going to reactivate that particular rail station and that was actually his line. So he was just like, Oh. Two blocks from my house. That’s what I want!

Eve: [00:21:01] He understood the power of transit, right?

Majora: [00:21:04] Exactly. Unfortunately, they never reopened it for transit, but he did have the conductor to slow down the train so he could hop off and climb out to his house.

Eve: [00:21:12] Oh, that’s great.

Majora: [00:21:13] Yeah, so that was pretty funny.

Eve: [00:21:16] Right? So, you know, I have to go back to the words that you’re quote that’s on the walls of the Smithsonian Museum of African American History and Culture. And you said, “Nobody should have to move out of the neighborhood to live in a better one.” And it really sounds like you just got tired of waiting around for someone to fix yours.

Majora: [00:21:34] Yes. In a nutshell, it was just like, you know, I mean, it was a little deeper than that, actually, because it really did come from this place where, you know, because I was one of those kids who measured success by how far she got away. I was told from very early on that I was a smart kid and that I was going to grow up and be somebody. And of course, I believed that I was just like I was really smart. I was reading when I was three. I was like, I’m getting out of here, especially when my brother was killed. And, you know, and I did watch, you know, because of financial disinvestment. All, so many of the buildings in my neighborhood were burned down. And I watched a lot of it. And there was a there was some trauma associated, I think, with like seeing and feeling these things, experiencing these things. So, yeah, I was like, education’s going to be my ticket out. And it was until I ended up back here only because I was broke and I needed a cheap place to stay when I went to graduate school. And that’s the only reason why I came back. And it did. It felt like such a horrifying defeat to be this kid with like I had a bunch of letters behind my name. I went to good schools, and then all of a sudden, I’m like back home and mommy and daddy’s house in the South Bronx. Hard and, but what was amazing was discovering that that education and distance actually was a blessing because like that’s when I saw when the city and state were building this huge waste facility on our waterfront, and we already handled an enormous amount of it. I was like, Oh my gosh. Like, it’s because we just this is history repeating itself. We are a poor community of color, politically vulnerable, and this is what happens. And all I could think was I mean, first was shame when I understood it and I was like, oh, like I just wanted to run away. And I did. And you know what? No one blamed me. But now I see it like, literally, with like eyes completely wide open, and I wanted to do something about it. And yeah, like, I wanted nice things in my own doggone community. Absolutely. For me and for everybody else.

Eve: [00:23:51] Yes. Yeah. I don’t know what to say next because I know how hard it’s been for you. It’s an amazing it’s an amazing journey that you’ve taken. I just want to say that. So, you also talked to me about the Jumpstart program in Philly, which I actually I interviewed Ken Weinstein, who launched the program in our second podcast season. If anyone wants to listen, it’s an amazing program. Tell me about it and why you why you love it so much.

Majora: [00:24:23] Wow. Yes. So, I was actually getting an award in Philadelphia, and it was the Edward Bacon Award who was actually it is Kevin Bacon’s father. And but he was like this amazing urban planner in Philly, and everybody loved him. Yeah.

Eve: [00:24:42] Yeah, yeah.

Majora: [00:24:43] And so I was getting this award and like part of it, and it’s like a really big thing over there. And so, part of it was that I got to hang out with some, some notable people in Philly, and I was like, okay, cool. And I sat in on this roundtable with graduates from this program called Jumpstart Germantown. And they were all, almost all black folks younger than me. And they were all talking about, like, the deals that they were doing. And I was just like. What? This many in a major American city talking about real estate deals and what they’re doing and how they’re doing it. And I was amazed. And so, but Jumpstart Germantown literally was a way to get folks from communities just like mine to be more involved in residential real estate development in Philadelphia, in Germantown. And so, the way that it was done, Ken Weinstein was literally, was getting inundated with, because he’s really a nice affable guy, and folks were just like, how do you do this? And he’s just like, oh, I can tell you. And he’d give them that information, and then he realized this is too much. And then he got his friends like help, created a training that gave people just enough information so that they could actually get out on their own. And then the best thing that he did was create a fund. So, where he gave the first couple of loans to those folks to do their first few deals.

Eve: [00:26:13] I remember him saying he realized that no matter what he taught them, if they couldn’t get the financing, it was useless.

Majora: [00:26:18] Exactly.

Eve: [00:26:19] And they couldn’t get the financing.

Majora: [00:26:20] No, no, no.

Eve: [00:26:22] What a guy. Yeah.

Majora: [00:26:24] So I was just like. Wait. What? And I totally flipped out and actually decided, I mean, I literally went to Philly for the next four weeks to just to take that class. And I’d love at some point to be able to start a project like that here in New York. And I actually encourage everybody to consider it in other places, too. But again, what we saw there was an incredible example. It wasn’t like a non-profit kind of like, “Oh, we’re here to help the poor people.” It was more like, “Nah, we’re going to help you compete” in this capitalist system that we’re in so that you can actually reclaim your own doggone community. And I was blown away.

Eve: [00:27:05] Pretty fabulous. And he’s franchised it, right? So, there have been a number of different neighborhoods and cities that are now have jumpstart programs.

Majora: [00:27:13] Yes, quite a few at this point.

Eve: [00:27:15] If I weren’t so busy, I would start one.

Majora: [00:27:17] I know.

Eve: [00:27:18] Pretty it’s pretty fabulous. But requires a little bit of resources. I want to ask one other big question and that is what does meaningful community engagement look like, especially when it comes to redevelopment of an area? What should it look like?

Majora: [00:27:37] Yeah. For us, meaningful community engagement means that it’s actually driven, at least in part, by listening to what the community’s hopes and dreams and aspirations actually are. And by no means assuming that you know what they are before you start. Because if you do, basically what we’ll do is what we see the non-profit industrial complex and even our government telling us what needs to happen in those communities. And that’s the same kind of status quo development that actually concentrates poverty. And what we did, we literally created surveys and did focus groups, and we even had an advisory board built from very informal leaders within our community that allow folks to give them reasons to think about. Yeah, what does it look like? What does a great community look like for me? And they were really specific about what those things were, and we knew it because they would talk about the things that they would leave the community to experience. And when we realized like honestly, where somebody’s hardest is, where they spend their money, and if you weren’t spending it in your community, what were you spending it on? And could we actually create the same kind of experience in our community that make people that just to give people a second look. And it has been hard because there’s such low expectations applied to low status communities and after a while people even internalize them. And that’s why it’s difficult to do that, which is why I’m so glad that I’ve actually gotten there’s company now. I mean, being the first one in to do something as crazy as like a really high-end specialty coffee shop in a place that hasn’t had anything like that in decades. It was exhausting. But at the same time.

Eve: [00:29:35] You got a lot of pushback early on from the neighbors, right?

Majora: [00:29:38] I got some pushback. I didn’t get a lot. What I got was they were very loud, but I think it was basically rooted in fear.

Eve: [00:29:46] I agree. I was going to say the same thing. I think change is very difficult for most people. And.

Majora: [00:29:52] Yeah.

Eve: [00:29:53] And they’re worried about being left out, you know, and, and they usually are left out, let’s be honest about it. So, you know, that was really why I asked that question. Like, how do we make people feel like part of something?

Majora: [00:30:08] Right, and their people are left out because the folks that are doing most of the development never had any intention of letting them in in the first place. I mean, if you think about the kind of development that happens in poverty level economic maintenance, I mean, there isn’t a place for most of the people in our community to even participate at all. I mean, there’s this thing, like, oh, we do community engagement and outreach, which means you get people together for some kind of little visioning thing and some ridiculous highly paid consultant gets like post-its up on a wall. And then you say, you did it. What did you do? I mean, it’s just like this is ridiculous. The kind of development that happens in low status communities was never intended to include people from those communities, except as recipients of like whatever they’re putting out, which we know concentrates poverty, and everything associated with it.

Eve: [00:31:04] Or gentrified it. Right. But either way, they’re left out. Yeah.

Majora: [00:31:09] Yeah, totally. And so, they know that. And that’s why I’ve been advocating as much as I can and also literally putting myself in that role of developer because I’m like, I’m already trying to create more opportunities for folks like we’ve done revenue shares for the cafe. We, we set it up so that people from our community can actively use it in a way that meets their goals and dreams and aspirations. I do that and I’m not a non-profit of not like I do that on my own. We’re absolutely looking to develop more opportunities for crowdfunding investment projects, for people within our community, for the other projects that we’re doing, because we want them to feel like they actually have an investment in their own community. And the only way to do that –

Eve: [00:32:01] I’ll help you bring them to Small Change. That’d be so cool, I’ll be waiting.

Majora: [00:32:02] I’m pretty, I would love that. I would love that. So, it is different when people do the development from our own communities because we are sensitive to what we haven’t had and what we do need and what our dreams are, because we bothered to ask and I’ve also experienced it, you know, I was that little girl who was just like, there’s nothing in this neighborhood. And it makes me feel like I’ve got a stain attached to me because of the way people think about my community. And, and I don’t want that on anybody. Like, I also don’t want them to feel like they’ve got to leave in order to believe that that they’re of any value.

Eve: [00:32:48] Awesome. So final question. If you were to change one thing about real estate development in the US to make better cities for everyone, what would that be? Maybe that’s unfair, you can say two or three.

Majora: [00:33:04] Yes, I’m going to say a few things. I’m sure. So, oh, gosh. If I could change the way real estate development happens in order to support more people doing it. I mean, I’m not exactly sure how to do this, but I know that the cost of doing it just literally is physically doing it is just so high. And I just wish that the cost of construction could go down. Don’t ask me how to do that.

Eve: [00:33:30] Oh God, yeah, everyone I think wishes that.

Majora: [00:33:33] But it’s just insane. And then sort of like the barriers to entry I wish would be a lot more equitable. I mean, I remember my very first deal where and it was just to do a small rehab know our mortgage broker literally made me write a letter because she looked at me, looked at my community and literally said, you know, I have a story in the book. She was like. Why did you want another house? Or another property? You already have one. And I was like, do?

Eve: [00:34:09] Because this is called wealth creation. This is called Building My Future, right?

Majora: [00:34:14] Yes. And but she, to her, it was just like, why would a black woman want to do that? Especially from a neighborhood like that. And so, she made me write a letter to the underwriters explaining to them that I was a fine, upstanding individual. That does nice things for her community. And I was like, I know she doesn’t ask any white men about this, but you know what? I wrote the letter. So, this was me. And I had great credit, property in mind, a willing seller, a free development loan, already pre-approved. I mean, it was just like and that’s a small example. You know, I hear about them all the time, you know, access to capital, how hard it can be.

Eve: [00:34:58] Yeah. So do I, I think the access to capital is completely inequitable.

Majora: [00:35:02] Yeah, exactly. And those are the main two things. But also, I think the other one is making sure that people in low status communities see themselves as rightful developers of their own community. Because that is one of the hardest things where I think even some of the challengers that I get is more like, who do you think you are? And these are people from communities like mine within the social justice industrial complex who are just like, “You shouldn’t do that.” And it’s just like, why should that? It does like because again, such low expectations of folks in our communities like here, I’m being challenged because I’m actually saying, no, I can do better than what’s actually happening here. Yeah. And I get it coming and going sometimes. But there are more people who see the value of it and who are actually thinking about how they can do it themselves.

Eve: [00:35:59] Well, thank you, Marjora. I love you to death. And I think this is fantastic. And I can’t wait to visit again.

Majora: [00:36:08] I know.

Eve: [00:36:09] Hang out in that coffee shop.

Majora: [00:36:11] Yes. Yes. Oh, my gosh. It’s so super exciting. And wait till you see the rail station within the next few weeks. We’re getting it ready for a pretty big event. Ted X the Bronx is

Eve: [00:36:25] Fabulous!

Majora: [00:36:26] Doing their event there. Yeah,

Eve: [00:36:27] That’s really fabulous.

Majora: [00:36:29] You know, we’re phasing it in.

Eve: [00:36:31] I have to come back again soon.

Majora: [00:36:33] You’re going to love it.

Eve: [00:36:34] Cool. Okay. Bye.

Majora: [00:36:35] Thank you. All right. Take care. Bye bye.

Eve: [00:36:44] That was Majora Carter. I’m repeating myself, but I’m still 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. 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 a goal. Now that is putting your money where your mouth is.

Eve: [00:37:27] You can find out more about this episode or others you might have missed on the show notes page at our website RethinkRealEstateForGood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music, and thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Image courtesy of Majora Carter

Repairing the urban environment.

March 2, 2022

As a university student, Tracy Gabriel blended city planning with international affairs. As a Fulbright Scholar she studied in Damascus. She built a career in planning and development in New York and Washington D.C. that led her, in 2018, to the leadership role for the National Landing BID in Arlington, Virginia, being billed as the state’s ”largest walkable neighborhood” (which even if true may. in fact, be a tad misleading). Formerly known as the Crystal City BID, under her tenure which coincided with the Amazon HQ2 project, the service district increased by over 70%, incorporating portions of Pentagon City and Potomac Yard-Arlington.

Previously, Tracy spent six years across the river as associate director at the D.C. Office of Planning focusing on community revitalization, sustainability, economic development and design. This included the redevelopment of federal assets such as Walter Reed and St. Elizabeth’s Hospitals, as well as working plans for neighborhoods in transition such as Southwest, Mid-City East and Adams Morgan. She also was involved in sustainability projects like the EcoDistrict model and Sustainable DC, and served as citywide lead for Anacostia Waterfront’s planning and development coordination. Before D.C. Tracy worked at the New York City Economic Development Corporation, which handled notable design-rich projects like Cornell-Technion Applied Science Campus at Roosevelt Island and Hunter’s Point South on the Long Island City Waterfront. She is a native New Yorker.

Crystal City has a fascinating, sometimes contentious development history. The riverfront runs essentially south to north starting with Crystal City (and Reagan National airport), the Pentagon complex, Arlington Cemetery, and the office tower skyline of Rosslyn. This entire metro area is surrounded and divided by a chaotic spaghetti of thruways for suburban commuters. Crystal City (technically a neighborhood) was originally planned around the car commuters in the 1970s, using ‘superblocks’ and pedestrian tunnels. And so, today, much of the current planning has been working towards corrective development. Tracy has worked on both sides of the Potomac, and probably understands their relationship better than most. Additionally, now that Amazon started putting down roots in Northern Virginia, with property values that are probably skyrocketing, it should make for an interesting conversation.

Read the podcast transcript here

Eve Picker: [00:00:09] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo, in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website RethinkRealEstateForGood.co, or you can find them at your favorite podcast station. You’ll find lots worth listening to, I’m sure.

Eve: [00:01:07] Tracey Gabriel works at Repairing Urban Environments. She’s president and executive director of the National Landing BID. There she puts her experience as urbanist, planner and place maker to work, leading the makeover of Virginia’s largest downtown with over $8 billion in private investment in the pipeline. Crystal City was designed with the best of intentions and the best of planning principles in the 1970s. It’s a car-centric place spotted with pedestrian tunnels and underground malls. It’s Tracy’s job to turn this inward-looking place into an outward looking one. Walkable, livable and vibrant at street level is the goal. It’s quite a tall order. For a woman who is committed to addressing complex urban challenges and building great neighborhoods, this is the ultimate role.

Eve: [00:02:06] If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast and go to RethinkRealEstateForGood.co, where you can subscribe to be the first to hear about my podcasts and blog posts.

Eve: [00:02:34] Hello, Tracy, I’m really excited to hear about your work today.

Tracy: [00:02:39] Eve I’m so happy to be here.

Eve: [00:02:41] So a really big question, how do you transform a very large neighborhood built for the car with underground pathways into a paradigm for 21st century urban centers?

Tracy: [00:02:53] Well, that is our grand challenge. So if you aren’t familiar with it, we’re talking about the National Landing area, which is comprised of Pentagon City, Crystal City and Potomac Yard in Arlington, Virginia, just minutes from downtown D.C., Washington, D.C. And you know, this area came to fruition during the sixties and seventies with a very, you know, auto centric sensibility. We had actually like urban density, drivable density, but the sensibility was one of inverted or introverted buildings, mega blocks, retaining walls, just a hostile environment.

Eve: [00:03:44] And this. And I read underground retail, too, so…

Tracy: [00:03:47] Oh underground, exactly. It’s again that introverted nature of the buildings. And we know today that it’s so critical for our urban centers that we actually are competing on place and the experience of place. And so much of that is about walkability. It’s about street level activity. It’s about engaging storefronts. It’s about interesting businesses that create authenticity and the identity of place. As we’re looking at sustainability, it’s also about green and bringing nature into our urban environments. It’s about having every mode of access and getting around. So we are trying to right now in the National Landing area is take that sixties and seventies paradigm and turn it on its head. And actually, our goal is to become the most connected downtown in the country. It’s very ambitious.

Eve: [00:04:51] It’s a pretty big goal, yeah.

Tracy: [00:04:52] It is a big goal. How do you do it, you ask the question? You do it through very good planning. First off, I think as someone who comes from an urban planning background, I’ve appreciated how much our local jurisdiction has focused on planning and important inflection points, including a plan just approved this past weekend and the idea of actually planning for growth. And through that growth and development, making those on-the-ground changes to our urban infrastructure that really have a people-centered transformation at its heart. So whether that’s block-by-block buildings that now have activated retail and storefronts, it’s reclaiming streets for multiple modes and for people. It’s about extroverts eating our buildings, even repositioning, you know, our existing portfolio buildings and making them have the kind of urban sensibilities that we have today. And of course, it’s investment in new infrastructure. Parks connected to place and then actual transportation options that are really about next generation mobility.

Eve: [00:06:03] I love the idea of going from introvert to extrovert for a city. That’s a great way to describe it. But like, let’s start talking first about the actual National Landing BID. What is that and why was it formed?

Tracy: [00:06:17] The National Landing BID was formed back in 2006 as the Crystal City Business Improvement District, and it was really in response to base realignment and closure and the shrinking of the federal sector locally. BIDs are often, come in at the moment where an area needs extra place management

Eve: [00:06:37] And BID stands for Business Improvement District, right?

Tracy: [00:06:39] Yes. And just to tell what a business improvement district is, it’s a public private partnership financed by property owners to focus on the vibrancy and vitality of a central business district or downtown. And the focus has typically been around clean and safe and business attraction. And I think what’s different for, I think the National Landing BID, is that we are really focused on being place makers, storytellers, ideas generators and community builders

Eve: [00:07:15] Who are the major players in a BID. I mean, I know we have a BID locally here in Pittsburgh, and I know they exist everywhere, and they all function a little differently. So, what was the idea behind this particular BID and who pushed it forward?

Tracy: [00:07:30] Yes. So, we expanded three years ago and then became the National Landing BID. We increased our geography to reflect the entire downtown. But it came on the heels of the announcement of Amazon…

[00:07:43] Oh, okay.

[00:07:45] …locating its HQ2 in our area, which, you know, in truth it was a long-standing goal of our area to expand the BID to reflect our entire downtown, and I think with the advent of Amazon coming to the area and the opportunity to actually unify our district is really an essential moment to see the importance of a BID in managing change and growth in the area and being, having a local steward for our business owners and our property owners.

Eve: [00:08:21] It sounds like this might be one of the largest BIDs in the country.

Tracy: [00:08:25] In terms of budget, we’re at just about five million dollars, which is probably mid-sized, but I think what we have going for us in terms of biggest is, I think the biggest transformation underway. We have eight billion dollars in private sector investment, of which many people have read about the $2.5 Billion that Amazon is bringing to the area. We are a downtown that is comparable in scale to downtown Oakland or downtown Austin. We’re set to be a downtown Miami soon and we’ll continue to grow from there. So, I think it’s the notable component of our downtown is just how much change is underway in terms of the pipeline of investment and the emphasis on innovation and the repairing of the urban experience is what is a distinguishing feature of our area.

Eve: [00:09:28] So when you repair the urban experience and there’s this focus on transformation, what does that look like for residents or for workers or for retail activities?

Tracy: [00:09:40] Yes, repairing the urban fabric is all about, I think, stitching together our area more seamlessly. I think what we know is that walkability is increasingly important, as is having spaces for surprise and delight and respite in an urban environment. We know that during the pandemic, how important that is. So, the kind of ease of getting around, the ability to have everything that you need in one district to be able to access the small businesses that you love to shop, to eat locally. So that’s all part of the transformation. It’s really about a live work balance. I think one of the things we also know is that, you know, monolithic places don’t feel great. And I think building a place in terms of the urban repair, it’s about balancing the mix of uses and ensuring that workers and residents and live work is and embodied abundance.

Eve: [00:10:43] So just tell us in detail what have been the residential and workplace transformations. What’s been built so far, what’s been accomplished to date and what’s still being planned? It’s probably a really long list.

Tracy: [00:10:56] One of the things we’re seeing and, as we speak, I am looking at several cranes right across the street from me. And what we’re seeing is sort of a block-by-block transformation now. Some are, you know, rehabbing of existing buildings to again go back to our first metaphor of extroverted buildings, we’re seeing, you know, retail that was once internalized being brought to the street front. Bringing more green on a block-by-block basis. Just recently, we reclaimed the front door to our neighborhood or metro system, made that into really a park experience as people came out, come out of our metro. And so, we are building lots of new housing. So we already have 26,000 residents. But each new building in the past 10 years has added to mostly our residential staff, and we have about 7,000 more units already approved and set to be constructed. So, we’ll be actually the fastest-growing residential neighborhood in the Washington, DC area.

Eve: [00:12:04] And what about like from a zoning point of view? Have you made any changes? I ask this question because I was really impressed by a neighborhood in Australia a few years back where they had just left industrial and retail and residential sort of all mixed up, and it was an incredibly vibrant place. It was, you know, really the sort of, a very enticing idea to live in a place like that rather than segregated into like, you know, a neighborhood.

Tracy: [00:12:34] Absolutely. So, I mentioned that good planning has been at the heart of the faith in a blueprint for sustainable growth, for yielding the kind of environments we want to live in. And one example of that is the fact that in the plans, there has been incredible intentionality in retaining a 50/50 balance between office and housing. And in some ways, I think the Arlington County, our local jurisdiction was ahead of its time because what we’re discovering now is that office markets that are just office are feeling very under loved at the moment.

Eve: [00:13:18] The pain? Yeah,

Tracy: [00:13:20] In pain.

Eve: [00:13:21] Absolutely.

Tracy: [00:13:22] And there’s cascading effects where retail can’t survive in that environment. So, the fortunate thing that we have here is that we plan for that balance and we actually have a 1:1 ratio by presence between jobs and housing. And we’re going to continue that with all the growth and development. We’ll continue to have that 1:1 ratio, that ideal balance between jobs and housing. And why is that important? It means that our streets are going to have people on them, no matter what the back to office environment or the new work experience for everyone is, that we will have a vibrant, very characteristically urban place and we’ll be able to sustain the small businesses that again are the lifeblood of how people experience and identify with places on the ground, street level activity.

Eve: [00:14:13] I imagine that you are also able to reduce the amount of parking and the number of cars being used when you have that sort of relationship, right?

Tracy: [00:14:22] Absolutely. You can reduce that, and you want there to be walkable trips to do most of what we have. The other benefit we have locally is that we are investing in the larger-scale transformation of transportation assets. So how do you make it super easy for anyone who lives here or works here to get anywhere else in the region? And so, there’s been a lot of investment in big infrastructure in terms of how we are going to connect people to where they want to live or work, but also then focusing very locally on the micro mobility, the human-scaled streets. How do you get the last mile that you need to get in? And I think, yes, we are overbuilt in terms of parking. Again, we came of age at a time where it was very auto centric, and we have lots of empty garages. So much so that we annually have a bike race in our garages on the three lower floors that that are not used. On weekdays. So, it just shows you we know that we are overbuilt and we actually, only I think 20 percent of our trips are single occupancy vehicles. So, we are extremely transit oriented in how people go to and from our area. And I think the way people want to live is to be able to take some individualized, maybe a scooter, maybe their bike or maybe walking to this and we can offer, our goal is to be able to offer seamless ways to do any of that.

Eve: [00:15:55] Interesting. So, what’s going to happen to all those empty garages? Are they going to be torn down, converted into lofts? Like, what’s the goal?

Tracy: [00:16:03] Very interesting, because if you, look, there’s so much complexity, because one of the things that we have going on here is that we have a lot of concentrated ownership and that’s historically, and it’s changed hands, but the portfolio has stayed largely intact, which means you have multiple buildings sitting on large parking garages. So very complex urban infrastructure when you don’t have the garages just tied to one building, but you have the fortunate circumstance that with large-scale property owners, they can make investments that are transformative because they see the value, the entire portfolio. So, what the future of our underground is that you mentioned before, the underground retail, what the future of our garages are, I think are yet to be seen. But I think what we know is that we need more of the street-oriented retail and less of the parking garages and more multimodal options. And I think having what we have is an asset, but we don’t need, we don’t need more.

Eve: [00:17:08] Right, right. Interesting. So, I have to ask, who decides on how to rebuild this place? Is this a top-down project or is the community involved?

Tracy: [00:17:18] We have one of the most engaged local communities. I’m so impressed. As an urban planner myself, my history and work experience has been largely in community-based planning, so I’ve always been on the public side of the planning equation doing that engagement. And the thing that strikes me locally is just how engaged. As I mentioned, we have a number of plans that were community-based plans, but we’ve even had the community go further to create their own plans around livability and joint visions beyond, even. So, you have a lot of bottom up planning, and we’re seeing how that has dovetailed into the plans for the county. Ideas like green ribbons going through our neighborhoods, green networks tying together our places have, came up from the community and have made it to our plans. And of course, during the development review process, it is a case study in community conversation over the scale and the benefits of development. So, I think one of the unique things with that level of engagement and involvement and the amount of planning and what is pretty exceptional in this area is just how much commensurate investment in parks and transportation and great design is able to be achieved, which could mean that growth actually can equal greater liveability, which isn’t always the case. And I think so much of that is because of the robust dialogue about how you balance development with the needs of who’s living here.

Eve: [00:19:03] Interesting. So, what does the demographic look like there?

Tracy: [00:19:07] In our downtown area, we have about 26,000 residents, and like much of Arlington County, we probably skew pretty heavily in a Millennial demographic. So, a lot of folks in early to mid-career. And, but we have the full gamut. We have a lot of people who have naturally occurring retirement communities here as well. People who moved here at the outset and then, from a diversity perspective is something that the BID has been really passionate about, is making sure that we retain the diversity that we do have. We are in a very diverse region. Washington, D.C. is a metro area, is a minority majority region, and that is a quintessential component of what great cities are, is having great diversity. And we’re very interested in not just retaining but also growing, making this an inclusive place that is really for everyone. And as you know, I think affordability always is the greatest challenge for ensuring that we retain the diversity that we do.

Eve: [00:20:19] That was going to be my next question. How is affordable housing part of this mix?

Tracy: [00:20:23] I think one of the things that we know is that the perils of growth and development are really what it does. It can potentially do to an already existing affordable housing crisis. I think we have two parallel things happening. One is just growing the inventory of housing generally, as a release valve. So, we I mentioned we have a lot of units in production and it is a hope that that helps to deliver on the demand that exists. Additionally, unfortunately, we started off here with a baseline that there wasn’t very many committed affordable housing units, but that has been a joint focus of the county, of our property owners, of Amazon, to up the focus on affordable housing. And that’s incrementally on a project-by-project basis on what they can deliver in terms of affordable housing, either on site or through funding for affordable housing. And then there were game-changer investments. We had the fortunate circumstance of being Amazon’s housing equity fund, which is a $2 billion fund. Their very first initial investment was in a property that’s just a block from their current campus and that, through the Washington Housing Conservancy, turned an existing housing development into what will be long-term affordable housing, especially workforce housing, over time. So those kinds of investments, where that’s to the scale of like 800 units and another, potentially another 800 units that go with infill development around it. You have 1600 units that are within, or will be, within a block from a major job centre. I think it’s that combination of policy of incremental steps towards affordable housing. And then, we’re fortunate to have this, kind of the game-changer, large-scale investments that really change the conversation and change the metrics that we could accomplish.

Eve: [00:22:40] Yeah, I suppose that’s always the worry. Like if you the more gorgeous you make it place, the more unaffordable the housing becomes, and 800 units just seems to kind of scratch the surface. It’s a problem…

Tracy: [00:22:52] Oh, absolutely.

Eve: [00:22:53] Every country is having. So yeah, I don’t know how you solve it.

Tracy: [00:22:58] Yeah. The other issue that exists broadly in the housing market is just that predominantly in our market, it’s almost all rental. And that’s a product of the fact that we mostly have REITs here and other things and just historically what has been built. And so, opportunities for kind of multifamily condos and home ownership hasn’t been in abundance and in terms of zoning, I think tackling some of the single family areas to see what other missing middle housing can get developed is also in a joint effort.

Eve: [00:23:35] I think D.C.’s had a pretty transitory population to right, which is kind of pushed it towards more rental than ownership. What I understand, I don’t know. So, tell me the really big things that you’re excited about for the next five years and maybe even the next 10 years.

Tracy: [00:23:52] I’m excited on multiple fronts, but I mentioned before I’m excited about a people-oriented transformation. We actually, as a BID, have tried to be the spokesperson for that transformation, and we have a People Before Cars campaign. But People Before Cars Coalition, bringing together transit advocates to really elevate the conversation. And we have four billion dollars in transportation projects in our area. Four billion. So astounding number. That includes Big Rail that can seamlessly connect our region, transformation of our airport, which is actually adjacent to our district, and one of those projects that we’re talking about is a big idea that the BID spawned and that was, that’s a pedestrian or multimodal connection to the airport, from the airport to our main street, which will be a five+ minute walk.

Eve: [00:24:55] Wow.

Tracy: [00:24:56] And is currently in the planning and will be in the design phase going forward. So, things like that, where we will go from maybe a hidden edge city to the only downtown in the country where you can walk a comfortable and attractive walk to an airport in five minutes?

Eve: [00:25:15] Wow, that’s pretty significant.

Tracy: [00:25:19] Yeah.

Eve: [00:25:20] Are all those funds, federal dollars? Where do the funds come from, the four billion dollars?

Tracy: [00:25:25] It’s a mix, right? So, some of it is state and federal on the big rail projects. Some of it is state on our rail multimodal facilities and other ones are the complete streets projects and the kind of human scale work is being done by our county. So, it is a rich tapestry of transportation funding sources, but also we have public private partnerships to execute new metro station entrances and the like. So many players and, which is why we had put together a report called Mobility Next because there are so many different actors doing different projects, they just see the complete picture. You could understand the scale of the impact of those investments. And you know, quite honestly, from the standpoint of the BID, the thing I’m excited about is to be one of those ideas champions and be able to kind of push the envelope on what it can mean to have people-oriented infrastructure. So, we’re quite excited about that. I personally am excited to see, hopefully in the next five to 10 years in our role as a steward, is to hope that we can have shared benefits of all this development. I think we are a case study in urban development and urban transformations, given the pace and scale of what we’re experiencing and how we do it and how well we do, will be a measure and hopefully a model for how this can get done. And so we’ve been very focused at the BID and amongst our stakeholders having conversations around everything from racial equity to how do we build an inclusive community and, so I’m hopeful that we see advances there. And I think on the horizon, I think that we could have a real innovation district, a hub of activity between Amazon and we have the Virginia Tech Innovation Campus to the South. So, we’re really kind of interested in seeing what a living lab of innovation might be in our area.

Eve: [00:27:28] So I mean, what I love about this is that I think the powers that be understand that this is a really long-term hold on investment, but eventually there’ll be a return, right? And it’s not going to be in a year, but it’s going to be worthwhile because it’s a pretty big investment to make. That’s me thinking like a developer.

Tracy: [00:27:47] Yes. No, absolutely. And it’s precisely that. It’s that being able to think about the future and the impact and what the benefits can be and the return on investment.

Eve: [00:28:01] I’m going to just move to you now. You’ve always been a planner. And what led you to this career?

Tracy: [00:28:08] I would say planning is somewhat in my blood. I’m a born and raised New Yorker. I was raised in Manhattan, lived on the twenty first floor of an apartment building, a rent stabilized unit that my parents still live in, but, you know, I probably spent a lot of maybe too much time dreaming, staring out my window at the cityscape and being kind of a voracious observer of city life. So, it builds a compassion for cities in terms of their form, function, energy, but also I think cities are the top expression of community living and so I really also am interested in community and urban policy. And so what is the well-being of city dwellers? It’s also been kind of front of mind, but I think that foundation and that passion was born out of my experience as being.

Eve: [00:29:14] It sounds like you’re living your dream.

Tracy: [00:29:16] Yes, it is. It is a dream role.

Eve: [00:29:20] Yes. So where did you work before taking on this particular project?

Tracy: [00:29:25] It’s funny that I feel like taking on growth and change or being able to talk about and have conversations and convene around managing change, around, you know, discussing what is a best community outcome for an area that has been part of, I think, a through line in my career because I realize that if we’re going to have a sustainable future, growth is not optional in certain places, that is if you have a great infrastructure then we need to build around it. So many of the places in my career have been in a state of growth or re-envisioning. And so, before this role, I was focused on neighbourhood planning for all of Washington D.C. So, a community based planning role, really trying to think at the start of what equity driven planning might be and design-forward planning. So was talking to, you know, doing all the work throughout the neighborhoods and in D.C., it was a time of, I think, demographic shifts and lots of development. And so, I think that community conversation and upping the bar for engagement and just doing more to outreach to people and have a conversation was a big part of my role in development. And prior to that, I worked at the New York City Economic Development Corporation. And again, I think that was kind of an era of take it or leave it. A lot of mega-project thinking, but some of those around big ideas for affordable housing. So, I worked on the Queens portfolio, a central business district projects and on projects like Hunter’s Point South, which again, a combination of affordable housing and parks. And how do you create growth in existing neighborhoods.

Eve: [00:31:29] I just want to ask one final question. A project like this makes me wonder or a goal like this makes me wonder what went wrong in the first place. You know, and it makes me wonder, you know, what’s being built today that we’ll have to fix in 20 or 30 years? And I’m sure you’ve thought about that. I think about that a lot when I see projects emerge in the urban landscape. Some are pretty horrifying. I mean, how can we ensure, or can we ensure that the places we build today will work for many years to come?

Tracy: [00:32:04] Yeah, I think it’s a great question. How do you future proof? And I don’t, I mean, and how can you identify your blind spots in the moment? I often ask that question to my myself. And I even think that right now, urban planning lacks a paradigm to to work through some of this because I think the mantra of community engagement has always been the central component of that. And the idea of revitalization. But right now, we’re in an era where we need to know what that next thing is. It’s really about equity and planning, about inclusion, about growth, about really attacking, systemically the affordable housing crisis. I think that planning is lacking that toolbox to really tackle that. So, I think we know some of the places where we have blind spots like, as you mentioned the affordability that we’re achieving, it’s a drop in the bucket for what the overarching need is. Having a focus that’s predominantly on rental doesn’t have the diversity of options that you would want. And then of course, I think we’re already living this now, is like thinking about street level activity is so important. But you can’t have ground level activity everywhere because it kind of erodes the ability to be able to attract it and not every place can sustain it. So, making sure that when we think about how important that is to us that we’re actually more targeted about where that goes and it doesn’t have to be everywhere. I think there’s a growing understanding of that. But I think there will always be misses and then we’ll have vacant storefronts and trouble. And of course, future proofing the future of office is something I think we’re all trying to muddle through and discern what the changes and workforce and kind of what is the permanency of COVID-related shifts in behavior and what will that mean for the future of office going forward?

Eve: [00:34:20] I really appreciate what you’re doing, and I especially appreciate it because I worked for a planning department for a while, and I think you are probably an extrovert, which is why you’re able to drag this place from introvert to extrovert. I’m an introvert, and I found it very difficult managing community engagement. I mean, you haven’t talked about that much, but that is a really tough part of the job because people are so scared of change. You’re in the role of having to convince them, right?

Tracy: [00:34:47] Yeah. You know, I think that one of the things that is a little bit different here and there’s an incredible appetite for community engagement and conversation. We might have meetings like nearly every night, even virtually in this virtual context.

Eve: [00:35:02] Oh, wow.

Tracy: [00:35:03] Right. I think that the thing that is very heartening is just how much alignment there is in terms of what people want as goals and outcomes and where that aligns between the community and the business community and then the county’s planners. There’s so much alignment about what is good for residents and community is actually good for business. So, retail parks, great transportation, walkability, vibrancy, these are all things that, affordability. We want to live in richly textured places and those are actually the places that perform well. So, I feel like the alignment that exists between having the same goals of what, some of what success means, it’s so critical.

Eve: [00:35:56] So it makes your job a little bit easier. Well, thank you very much. I’ve really enjoyed the conversation and the next time I’m down in D.C., I’m going to be heading over to Crystal City and all the other places and checking it out. It sounds amazing.

Tracy: [00:36:10] Well, we’d love to have you. So, thanks so much.

Eve: [00:36:13] Thank you. That was Tracy Gabriel. Tracy loves cities. She’s had a remarkable career as an urbanist, planner and place maker, committed to addressing complex urban challenges and building great neighborhoods. Now she’s turning her passion towards the remaking of Virginia’s largest downtown. We can’t wait to see the final outcome.

Eve: [00:36:53] You can find out more about this episode or others you might have missed on the show notes page at our website RethinkRealEstateForGood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music, and thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Image courtesy of Tracy Gabriel, National Landing

Beyond the Vagabond.

January 12, 2022

With a career path that has taken her from bond trading on Wall Street to developing properties along some of Miami’s trendiest streets, Avra Jain has earned a reputation for identifying the next it neighborhood. The recipient of three Sundance Film Awards for the documentary Dark Days, this industrial engineering graduate from Purdue University develops projects based around two of her favorite pursuits: art and architecture.

While living in New York City, real estate became a “hobby,” starting with her apartment, which turned into two, and then more. In the 1990’s she was pursuing real estate full time, taking on a 100,000 square foot warehouse in North Tribeca for luxury condo development. By 1999, she had moved full-time to Miami and was buying, selling and renovating properties along the Biscayne Boulevard corridor near Downtown Miami.

The Vagabond Hotel (2013) is considered Avra’s keystone restoration project in MiMo (Miami Modern historic district) and the namesake of the development company Vagabond Consulting Group, she co-founded with her partner, Dalia Lagoa. The Vagabond’s historic designation was set in 2003, and the 45-room conversion from dilapidated motel to designer hotel set the tone for the whole neighborhood.

While Avra works on very large scale projects, her passion lies squarely with the personal project portfolio she is building – the conversion of abandoned and historic motels into re-imagined affordable housing communities.  She’s leveraging her past success to tackle both the restoration of significant architecture and the making of affordable housing in a very unique way.

Some of Avra’s most recent recognitions include: Urban Environment Leaders “2014 Orchid Award for Historic Revitalization”, Greater Miami Chamber of Commerce R.E.A.L. “2015 Winner of Developer Commercial Category”, the Women’s Chamber of Commerce “15th Thelma Gibson Award of Excellence”, the AIA Miami “Developer of the Year 2016”, and the “2017 Community Catalyst Award”, amongst others.  Avra serves on the Miami Foundation Board, Dade Heritage Trust, Locust Projects, and University of Miami’s Master of Real Estate Development + Urbanism Advisory Boards. 

Insights and Inspirations

  • “In the end, our society will be defined not only by what we create, but by what we refuse to destroy.” John Sawhill.
  • You’ve got to get past the working girl on the corner, says Avra.
  • All real estate development work should start from the story.

Information and Links

  • Vagabond owner Avra Jain takes Miami back to the future.
  • About rebuilding Biscayne Boulevard.
  • Back in 2012 the Vagabond restoration was still an idea.
Read the podcast transcript here

Eve Picker: [00:00:08] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website RethinkRealEstateforGood.co, or you can find them at your favorite podcast station. You’ll find lots worth listening to, I’m sure.

Eve Picker: [00:00:57] I’m bringing back one of my favorite interviews with Avra Jain, a wildly creative (and successful) Miami developer. Avra and her Vagabond Group have built projects that range from converting a 100,000-square foot warehouse to luxury loft condominiums in New York’s Tribeca neighborhood. But the one that put her on the map, and the one I love the most is the remake of The Vagabond, a down and out mid-century motel on Biscayne Boulevard into a hip and desirable Hotel. Today, Avra’s passion lies squarely with the personal project portfolio she is building – the conversion of abandoned and historic motels into re-imagined affordable housing communities. I love her approach and so will you!

Eve: [00:01:58] If you’d like to join me in my quest to rethink real estate there are two simple things you can do. Share this podcast. And go to rethinkrealestateforgood.co where you can subscribe to be the first to hear about my podcasts, blog posts and other goodies.

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

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

Eve: [00:02:28] Very nice to be here, yeah. I love this quote from your website, which says, “We operate from the perspective as storytellers, allowing history to take center stage and create a genuine sense of place”. And I would really love you to tell us a little about what that means.

Avra: [00:02:46] Well, that really has come from the work that we’ve done. We, kind of, we got there. We, I’d like to think there were people that actually, sort of, do it and then rather than talk about it. So, I can say that that actually, actually came from the work that we’re doing. My team is three architects, one of which was, has a master’s in historic preservation. And so, when we start a project, or we do a project, the first thing that we do is that we study the history of the community, of the buildings themselves, architecturally, culturally. And so, we always sort of start from the story. And if there isn’t a story, we don’t do the project.

Eve: [00:03:36] Oh, interesting.

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

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

Avra: [00:03:52] You know, it varies. So, in Miami there’s a section of, there’s a historic strip from the 1950s and 60s called MiMo which stands for Miami mid-century modern. So, there’s a boulevard, Biscayne Boulevard, which used to be US1. So, if you were driving down post-World War Two in your 57 Chevy and you were going to Miami, the Magic City, you would have driven on US1 or Biscayne Boulevard. And there is a section that had these old 50s and 60s motels and, you know, with a big neon signs, and so, we came up here, one of the projects, larger projects that we did, that we’re known for is the preservation work. When we renovated the Vagabond Motel to Vagabond Boutique Hotel. And that was the tipping point for the historic boulevard. So, we bought about 10. The neighborhood at the time was all drugs and prostitution. And, you know, it had been a neighborhood that you would’ve just driven right through with, you know, the shades down next to the baby seat, you know, but there were some spectacular, you know, vintage mid-century architecture, which I know you’re an architect so you can appreciate.

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

Avra: [00:05:21] Yeah. So well, these were buildings that were up for demolition. And they were in disrepair, you know, SWAT teams were coming in once a month to empty them out because of, you know, drugs and things that would go on. And so, we knew that in order to, and this was a neighborhood that used to be Main Street, Biscayne Boulevard used to be Main Street. If you couldn’t afford to stay at the Eden Roc or the Fountain Blue, you would’ve stayed at the Vagabond. Same architect that did the very famous Delanoe Hotel on Miami Beach. So, we knew what it once was. So, it was about, you know, bringing it back. There are other times when we actually, you know, neighborhoods, right, where we go into warehouse districts and create neighborhoods. This was a neighborhood that was so all we do was bring it back. And there was actually some really affluent neighborhoods nearby and surrounding neighborhoods that were also original from the 1930s and 40s. So, it was really a beautiful project to do both architecturally and for what it did for the community. The thesis was, if we bought enough of these motels that were 20 dollars an hour, you know, sixty dollars a night. The hotel that we bought next to Vagabond, in the lobby the sign said: “no refunds after five minutes”. And it originally said ten minutes and they whited it out. That was the neighborhood and so we bought six of these old motels. A couple of them were abandoned and the rest of them we shut down. What happened was we thought is, if you shut down where people were actually doing these bad things, could the neighborhood find itself again? And it did.

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

Avra: [00:07:28] Oh, no resistance. Oh, my gosh. The city was like, the mayor, you know, we when we opened the Vagabond, we had nine hundred people. Everybody, all the arts, everybody. It was like a really big deal. This was, you know…

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

Avra: [00:07:47] Oh yeah, yeah, yeah. I was going to say, we had no community resistance. In fact, people continually thank us all the time. But the resistance, yeah, sure financing, couldn’t get any.

Eve: [00:07:58] Yeah, I’m sure.

Avra: [00:08:00] Yeah, no, I mean you know, you’ve done this enough times, Eve. So in fact even my traditional real estate investors, I had done a lot of adapted use in New York City and other places and a lot of my investors which go all the way back, you know, twenty five years to New York City, even some of them were like, ah, you’ve done a lot of crazy things, but they just could not get past the working girl on the corner. They couldn’t get past it. They could not see the architecture. They could not see, they couldn’t see the history, they just couldn’t see it. They couldn’t believe that it would come back. And so, a lot of, in this particular case, a lot of the money for that particular project was myself and my partners, you know, my spouse. I mean, we put up, I’d say 40, 50 percent of the money. So, it was really a cash project. But we found some very clever financing opportunities, financial opportunities. So, we did, I did my homework. I always tell people, you know, part of real estate is doing your homework. Understanding zoning, understanding the community and doing the outreach. Understanding building codes, a lot of homework. Well, I’d done my homework and I knew that there had been an ordinance set up in 2010, where you could sell development rights for historic properties. So, you know, in New York City, we knew that we could do this. We call them transferable development rights.

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

Avra: [00:09:34] So in Miami, for this particular strip, because it was historic, they down zoned it, meaning they limited, they did a height restriction of 35 feet. They took away buildable rights for the property owners. In exchange for doing that, they offered the property owners the ability to sell those development rights. So, floor area ratio, you know how much you could build. And then later they adopted a policy that also allowed you to sell the density. Like how many apartments you could build. The number of doors we call it, right? So, I was able to arbitrage that and the value of the transferable development rights for the Vagabond was three million dollars.

Eve: [00:10:24] Wow.

[00:10:25] And the purpose of those development rights and the ability to sell them is also to incentivize property owners to preserve and invest in the historic preservation of the property. So, you can sell those rights, but you have to reinvest them into the property and meet historic guidelines.

Eve: [00:10:43] Interesting.

[00:10:44] Yeah, it’s not a little project. Actually, I think that, you know, in order to get historic preservation to work, you really have to give people incentives because it’s very expensive. For those of us who build, doing historic preservation it’s more expensive. It would’ve been cheaper for me to knock the building down and build it again than it was to actually preserve the existing Vagabond. So, they have to give you incentives otherwise… there’s a reason why developers let those buildings go into disrepair and

Eve: [00:11:16] because they’re expensive, yeah. Historic tax credits help as well. I don’t have Florida has a state credit as well, but I’ve used those in the past and they certainly help to fill the gap, that’s for sure.

Avra: [00:11:29] Yes. We qualified. We nationally designated the Vagabond Hotel. We met those standards and got the federal tax credit. So, we got 20 percent of our investment into the property. Yeah, every state’s different. Every state’s different. Every municipality is different.

Eve: [00:11:47] This really took creative financing and the, since then, you said you bought six of them and how did the financing change one you opened the Vagabond Hotel?

Avra: [00:11:57] Well, once we opened the Vagabond, sold the development rights, we were able to, get banks to give us some financing. But most of the projects we did, we did cash. We did cash and we financed after. It was just still, even now it’s easy, you know, but I took rents, rents on the Biscayne Boulevard for twenty, twenty-five dollars. The Starbucks leases from me for 70 dollars, triple net. So, now it’s very easy to get financing. And the Boulevard has a lot of cachet, but it’s very difficult, yeah. I mean, this is actually why I started Small Change because, you know, banks almost squash the creativity out of what needs to happen, the creativity and innovation out of what needs to happen in cities, because you can’t, they want to only finance what’s been done before. So, how do you tackle a place like this if you can’t get financing and you don’t have the cash?

Avra: [00:13:00] Yes, it’s almost, I would say, it’s almost impossible. So, you know, you rely on friends and family. A lot of it’s your check book. But that’s also the opportunity. Those are the properties that are also undervalued, right? The property that trade that are most expensive, are really a function of financing. You know, Multifamily trades at a tight cap rate because that is the darling with the lenders. Banks really, and part of it is the regulations, banks have to fund based on cashflow, income from properties. The regulations almost mandate it.

Eve: [00:13:36] Yes.

[00:13:37] So, lending on land or lending on an abandoned building and for adaptive reuse, which is unfortunate because in a lot of the underserved communities you need.

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

Avra: [00:13:49] And what you lose because these are buildings that need a lot of work. Of course, they’re not income producing, nobody should be living in them. And some people do live in properties like that and shouldn’t be there. So, you know, the banking industry does not set up to be helpful. You know, what has happened, short of being able to fund yourself or have enough track record to to attract funding, is that there’s a, sort of a hybrid lending space now. Used to be you could only get bank financing or a bridge loan or, you know, hard money loan you call it, right? 13, 14 percent which makes projects also unfeasible. You just, you give away all your profits in interest costs. But there’s hybrid money out there now, that is more flexible, and you can get, you know, between six and nine percent depending on the project and you’re, and the sponsorship. We’ve been able to get hybrid money for projects like this. And it’s really because of our track record. And it’s all personal guarantees, right? I have to sign personally on everything.

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

Avra: [00:15:02] Until the projects completed. You know, it’s very hard for people to get into this business from the developer’s side. You know, I have three architects that work for me and they didn’t want to be in a firm, just, as you guys would call being a cad monkey. I think, you know where you’re just drawing all day, right? And so, they wanted to be developers. And so, they came and worked with me. And they’re learning development really is about money. So, when you think about what does it take to be a developer? We’re not licensed. Architects are licensed, builders are licensed, right? Your electrician’s licensed. Even the real estate agents are licensed. Developers are not licensed. You can call yourself a developer as long as you have a check book.

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

Avra: [00:15:57] You have to love it. Well, first of all I’d ask, what does developer mean to you? So, if I asked you Eve, define developer, what, how would you define it?

Eve: [00:16:07] Well, for me, it’s all about the buildings. I’m very passionate about buildings and places and using architecture to make better places. So being a developer for me is the opportunity to really make some significant change through the money that I invest, or I put together to make buildings better.

Avra: [00:16:34] And then there’s a lot of people that would like to do that, right? So how do they do that? Right? And there’s, I think there’s a lot of people with vision and, so, you need the money, right? And then you have to be able to execute. And so, a lot of what goes right or wrong is in the execution. So, you know, you have the vision, but it’s the, now is the execution. You know, how well do you budget, the quality of the work, the team that you can assemble. And you know the surprises, right. You know, we say we’re in the problem-solving business, really, especially with more adaptive reuse or historic preservation. You have no idea where you’re buying. You know, we’ve gotten pretty good at it now and I can tell you every time it’s different.

Eve: [00:17:24] Oh, yeah, it’s a challenge. But that’s the fun of it. But listen, why? You know, you’re a female developer, I’m a female developer. There are very few of us. Why is that? Because, you know, women are very good at team building.

Avra: [00:17:40] Well, I think a lot of women are doing it. They just don’t have the title, right? So, in my particular case, I’m the founder and, you know, I know I run the company, but a lot of women are doing it. They’re just not, I think the front person. Interesting. You do your work, you’re the front person. You’re doing it but the women that work for me, they all work, you know, I give, I empower them, they all have their own projects within, within the Vagabond Group. They all run their own jobs, they do the architecture, they do the expediting, you know, of course, all under. And they’ve been with me long enough. They know at first, you know, tightly under my watch and now, you know, call me if you need me.

Eve: [00:18:25] But still, that’s a little bit different because they don’t have access to their own money. And that’s, I think, you know, as you said, the deciding factor. So, where I live there’s very few women who kind of can plan their own destiny as real estate developers. I actually don’t know of anyone else at the moment. So,

Avra: [00:18:45] It’s money, so that’s it. You’ve really defined it. But I will say there’s a couple of other things. So, you know, because people have asked me Avra, why, you know, why aren’t there more? Well, one is money. And a lot of that money comes with track record. You know, I wouldn’t give a first-time person, developer money. I mean, you know, you really have to have experience in order to gain that. So, when I first did my first projects, it was mostly my money.

Eve: [00:19:11] Yes.

[00:19:11] You don’t want to lose somebody else’s money while you’re learning, right? So, there’s a learning curve here and so, as you learn and you’d have track record, you can get sponsorship, but you really have to have that, you know, especially in what we do, right? So, what you and I do, we find these. It’s easy buying a multi-family, lipsticking it up, creating value. OK that’s one thing. But to actually go in and create place, that’s different. And that requires mostly cash investments. The returns usually reflect the risk, they always do. I mean, I don’t, you, know people, you know, people go “I get two times two times my money”. And people are happy getting two times their money in four to five years.

[00:19:59] I can tell you that isn’t, that would never be a deal on my desk. If I don’t think I’m making four to five times equity, in five years, I don’t do the deal, which is why I’m able to get sponsorship. So, part of it is discipline. You know, there’s a lot of projects I’d like to do, but I look at them and go, you know, I just can’t I can’t pencil it. And then, those projects that I can’t pencil, which is like affordable housing, I just do myself and I’m OK. But those don’t make money. I’m OK that they may or may not make money because I’m doing those for different reasons. Those are for social reasons. But when I’m doing deals where I’m taking in investment money, you know, the returns for the type of deals that we do, at least the perceived returns need to be much higher. But I do that for myself. I mean, a lot of this is my own money and I treat everybody’s money if it’s my own money. I also don’t take fees. I’m not a fee developer, so I get paid based on success. So, I don’t, I don’t take fees.

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

Avra: [00:21:09] Right alongside. So, I don’t make a penny until you make money. And I think that’s part of what, the other way that I’ve been able to raise money. Now, not everybody can do that. That’s not realistic for a lot of people. But I’ve been able to do that because I set myself up for that. I saved enough money. I don’t want to get paid, which is why I’ve been able to get, you know, the investment I get. Because people want to know that your interests are aligned and there are a lot of developers out there, they’re really in the fee business. They’re just, they’re in the fee business period. And I don’t think that that makes us aligned.

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

Avra: [00:21:58] Yes, we I did one, we did one in Little Haiti, not too far from the Vagabond. So, if you couldn’t afford to stay at the Eden or at the Vagabond, if you couldn’t afford to stay the at the Vagabond, you would have stayed at Superior, Superior Motel and Apartments, which is west, further west and 1950s. It’s a more modest property. You know, in some of the more modest neighborhoods then historic properties are more modest, but it doesn’t mean they’re less important. And I bought the building to do affordable housing. The person that runs affordable housing for the county, Mr. Lu, he would say, he actually stalked me into doing this. He wanted to put a new face to affordable housing in the projects that were being done. So, I started by giving him suggestions on what I would do and how I would go about it and then he said, then he just asked me to do something and I did. I can tell you that it was a horrible experience. Working under the administrative aspects of affordable housing. You know, they wanted to give me a small sur-tax loan. That was a half a million dollars sur-tax loan. And then by the time they were ready to give me the loan, I said, I don’t even want it. It’ll be the most expensive money I’ve ever gotten because I’ve spent fifty thousand dollars in administrative costs to get a 500,000-dollar loan, right. There was like a 10 percent cost. You know, every draw request was like the size of a Bible. I said, you know…

[00:23:28] No, that’s right.

[00:23:29] I said, Mr Lu, I can do the work, but I can’t handle the administrative aspect of this. I wouldn’t get a draw for, you know, a draw request. I don’t know how sophisticated everybody is on the podcast so I’ll try to be a little more descriptive, but, every time you build a building and it’s time to, and you have a loan, you do the work, you turn in your invoices, so to speak, and you’re supposed to get reimbursed. Well,

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

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

Eve: [00:24:03] Yes, I’ve been there.

Avra: [00:24:05] Which means that in you know, that if a guy doesn’t get paid for six weeks or would anyway, if you weren’t getting paid six weeks after you’ve done a job, you’d leave the job site.

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

[00:24:19] So I ended up floating the entire job, meaning I paid everybody myself and then getting reimbursed, you know, six, twelve weeks later. And again, that’s not feasible for most people. And that’s why affordable housing doesn’t work. And that’s why, when you drive around and you see these, sort of half-completed buildings, is because you have to have the means in order to get through those projects. And I ended up, I probably have a half a million dollars of my own money in the project making zero return. So, because the cost to do it right versus the rents that you should charge. It doesn’t mean, I can charge higher rents but truly affordable rents, you cannot build affordable housing in Miami. If you gave me a piece of dirt and said Avra, build affordable housing at 80 percent of the averaged income, I would tell you I couldn’t do it.

Eve: [00:25:15] You can’t do it anywhere, actually. You can’t do it anywhere in the world, I don’t think. So, oh, maybe some places, but it’s a standard problem, yeah.

Avra: [00:25:22] Right, so it has to be subsidized, so you have to get grants. So, the reason why we were able to do historic preservation was because of the, you know, the entitlement programs to sell entitlements. That allowed us to grant ourselves some moneys to do these, what I called public benefit projects, historic preservation of the benefit. And you’re saving time, you’re saving moments in time, right. And then, same thing with affordable housing. You cannot do affordable housing without subsidies and grants. It’s impossible. So, those are instances. And people think, oh, well you can get financing for it or people will do impact investing on these things.

Eve: [00:26:02] No, you can’t.

Avra: [00:26:03] A bank doesn’t lend to the same criteria where there’s a public benefit or not. It’s not to say they don’t want to, but they can’t.

Eve: [00:26:12] Yeah, so non-profits become very important in this equation. It’s very difficult. How successful has that motel been and have you built other ones that are affordable? Do you have a waiting list?

Eve: [00:26:22] Oh yeah. Well that project, it’s called, it was a motel and efficiency apartments. So, there’s all apartments, most of them efficiency apartments. Very successful, 100 percent occupied. When you can charge a…And we were able to lease to more high risk candidates, you know, maybe people who’ve a felony in their past, you know, not a violent crime or something, but we’re able to lease to people and not take security deposits. And a lot of, you know, our employees, one of the reasons why we started, we did, we started to do some affordable housing. When we opened the motel, or the hotel, Vagabond Hotel, because we realized our staff were taking two or three buses to get to work, and they were single Mums. So, we actually started subsidizing housing for our employees, early on. We bought an apartment building close by and then we realized that obviously this was not just a Vagabond issue. This is a national, well certainly a local and certainly a national issue. So that started our efforts in affordable housing, was sort of subsidizing for existing employees. And then, when we did the other ones, we’re very conscious about trying to fill the void. We can do that because it’s a personal investment. We’re not a large institution doing affordable housing we’ve seen. This is not a money maker. I think there’s a way to do it where you could get, you know, you can you know, people go, well can you do impact investing and get a five or six percent return? We can, because I don’t take developer fees.

Eve: [00:28:04] Right.

Avra: [00:28:05] And we self-perform a lot of the work. So, I’m able to do that. So, on the project I did after this, I took in two small investors who wanted to participate in impact investing. So, we did one in Little Haiti and then we did their next projects in Overtown. Forty-four units in Overtown. And we’re in the process of renovating that. Also, a 1950s, late 50s, so it’s a combination of preservation and affordable housing, which we think is important. You know affordable housing is not bricks and mortar, it’s about people and the qualities of their life and how they feel about themselves. We say we’re really in the self-esteem business. You know, how does a single mother feel in their house? The stress level, you know, knowing if her kids are in a healthy environment or not in a healthy environment. The projects we’re just in the process of doing, we finished two of five buildings so far, we keep everybody on-site and we rotate them. So, nobody leaves the property, they’re not relocated. So, people are not, their lives are not disrupted. They stay where the kids go to school, where they went to school. Their friends are still their friends. They go to the same church, you know. So, we think it’s important when you do affordable housing to keep communities intact. That’s one of our prerequisites. Even when we did the property in Little Haiti, we did two units at a time and rotated people. So, they did not have to move. So, in the building we just finished one of the, in one of the buildings was a single mom and her child was having a lot of health issues and DCF was going to take the child away because they didn’t think that the mother was giving the child the asthma medication and everything, because the child was suffering. And the minute we moved her from the apartment that she was in to one of the new apartments, the child was fine.

Eve: [00:28:59] Wow.

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

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

Avra: [00:30:09] It’s shocking. It’s unacceptable. I mean, so, most of the buildings that we, so all these buildings that we bought in Overtown, I mean, they should be condemned buildings. I mean, I’m surprised people didn’t, well apparently, they had. Some people had fallen from the second floor into the first floor. I mean, the people live in those conditions because they can’t afford higher rent and they don’t want to move. You know, these tend to be closer to core locations, right? They’re older buildings, closer to where they work, it’s where their communities are and they don’t want the landlords to fix up the apartments because if they do, they know they have to raise the rent and then they might get kicked out. So, people choose to live in these really, you know, sub-human conditions because they can’t afford the rent if it was renovated. So, in that particular project, we teamed up with the CRH, the Community Redevelopment Agency in the area, and because they had seen our work in Little Haiti, they had asked us to do a similar project in Overtown.

Avra: [00:31:16] And my, my response was, no. I said, it doesn’t work. I go, it doesn’t work. I can’t afford to subsidize all these projects. So, I said, you know, I told them what they needed to do. One, they had to remove all the administrative. No good developer would operate under those administrative restrictions. And two, I said you’re going to have to pay for it. And if you want the rents truly affordable, you’re going to have to pay for all of it. Because if you want a seven-hundred-dollar rent, I need to be in that unit for seventy thousand dollars. And by the way, it costs eighty-two-thousand dollars to buy the apartment. And it’s going to cost you another fifty-thousand-dollars a unit.

Eve: [00:32:03] To renovate it.

Avra: [00:32:05] So if you want me to do it, and I’m not going to wait, I’m not going to take draws, you’re going to have to give me five hundred thousand dollars every time I start a building. Because I’m not going to, I’m not going to chase you down. I’ll do open book. Open book, come anytime you want, knock yourself out. But I can’t do the work and meet all the typical requirements. And so, they, they said Avra, yes. Do it.

Eve: [00:32:35] Wow.

[00:32:36] It went all the way to Commission. Commissioners voted on it and I did the project. So, they basically bought down the rents and people are living in two- and three-bedroom apartments, beautiful two- and three-bedroom apartments. When I say beautiful, you’re an architect. You know, I floated the walls. I did resilient channels for the wall boards for sound.  Wool between. Everything’s copper piping. We don’t, you know, rebuilt from the inside out. If you’d walked in, you would have fallen through to the studs, to the studs on the floor and you would have seen the roof two ceilings up. So totally rebuilt, you know, with all the right quality materials. No, everything mold-resistant, every, you know, impact glass safety, all those things. So, people are living in really beautiful apartments. And, so think about what that’s like. For them. For them, they’re people, right? The pride, how their kids feel to come home, to work, the family gatherings. Remember it’s, we don’t build buildings. You build buildings, but it’s really the quality of the experience in the building. It’s how people feel. Otherwise, buildings can be nice to look at, right? Right? What are they really? I mean, building to me, they’re made of organic materials, I mean, buildings live. And as builders and developers, we have to, you know, we feel that, we think about that. You know, so lots of times I get a building and it just doesn’t feel right. It doesn’t have the life. And our job is, that when we do these projects, these adaptive reuse and historic preservation projects, whether it’s for, you know, an adaptive reuse or for affordable housing, you have to think of it as how do people live? How are people going to feel when they’re there, when they’re inside? And that’s, you know, sort of, that’s sort of how we operate.

Eve: [00:34:48] That’s how it drives you. So, these products, I know we’ve talked about them a lot, and they’re clearly your passion projects. You also work on very, very big projects.

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

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

Avra: [00:35:05] So and those, you know, are more traditional, you know, I do. By the way, they’re very good local community banks here that I work with in… we’re very fortunate during Covid and everything that, you know, my friends that had the large banks, you know, had a lot of trouble getting, having to work with them and work with their tenants. But the community banks in Miami really stepped up and were the first to say, you know, what can we do? How can we help? So, I’ve good local banking relations, banks that have lent to me for 20, 25 years that support, you know, that support my projects. Even if they’re slightly out of the box they, again track record, they support the project. So, I’m able to do, I’m getting ready to do a large adaptive reuse project towards 50,000 square feet of adaptive reuse in a warehouse district. There might have been a day where I wouldn’t get financing, but I will get financing for that, 50 percent loan to cost, and then I’ll have the capital stack of my own investors. Then, you know, on some bigger projects, I’m getting ready to do a project on the Miami River. That’s a big project to earn, it’s a new build. Two hundred fifty-nine apartments,200,000 square feet of office and retail. It’ll be almost 180-million-dollar project with 120-million-dollar loan. I’M partnering with a very large developer, Property Market Group, PMG, they build really well. I’m really excited to have a chance to work with them, there are developers that you respect and then there’s the other developers that you would really like to work with, and this is one of them. And they’re both. And so, they build beautifully. So, they, we’re teaming up. They’re going to do the residential portion and I’m going to keep the office and retail. You know, without them, they’re providing that completion guarantee. I mean, I wouldn’t have, I wouldn’t have the balance sheet. We’re talking financing here, right? I wouldn’t have the balance sheet to guarantee a 120-million-dollar construction loan. So, you know, so that’s very limiting to do big projects. Problem. You know, I don’t do, one reason why I don’t do a lot of big projects is because of the financing. It’s just by the time we bring in the capital stack and everything, you know, and then when you do that, you lose, you give up a lot of control over the integrity of the project. People start value engineering everything out of the project. And so, you know, the vision gets lost and all-of-a-sudden it’s work and it’s not fun. You know, it’s one reason why I don’t do a lot of large projects. So, whereas on the smaller projects, we can keep control. So, you know, so, yes, I am doing a large project because it’s a spectacular site with a spectacular vision. But I don’t do that as often. The risks are high and the loss, I think more than anything, is the loss of, you know, the vision. I mean when you do big, big projects. You know, what I always say you have to have two things when you, when you partner with people. You have to have the same vision, but you also have the same have the same values. Some people can have the same vision but then if they don’t the same values, it is not the same. So, lots of times that happens when you do these, sort of, bigger projects.

Eve: [00:38:36] Yeah. You know, I’ve always stuck with smaller projects for much the same reason. Because I can finish them the way I think they should be finished and no one’s egging me on to do something different.

Avra: [00:38:47] Everyone wants you to cut corners. Hey, it’s already sold. Hey, it’s already leased. You know, then, who cares, you know, it’s a, if it’s a 10-year paint or a fifteen-year paint? Well I care.

Eve: [00:38:58] Yes, I’m with you.

Avra: [00:38:59] Those decisions that get made, you know, again, the more people that are involved. For developers that have cut those corners, it’s short-sighted because then, why do they come and lease my building instead of their building? Because people can feel the difference. They can feel the difference in quality. So, you know, it’s interesting right now in this market and during Covid, and people are consolidating and deciding which offices to keep or which ones not to keep or which neighborhoods to be in or not be in. And I can tell you I have two very large tenants that had offices across the city, and they chose to consolidate. And both of them chose to be in my buildings and give up other spaces. And it really is because of the quality of our buildings, the uniqueness of our buildings. It speaks to their brand. And this was a time when spending the money and having your building be special, having there be a story to the building and the neighborhood that is in mattered. Because lots of times you can’t spreadsheet this stuff. Anybody in finance and in the financing world wants, you know, a spreadsheet, right? Well, let’s do a spreadsheet, right? You can’t spreadsheet the quality of a space. You can’t spreadsheet cool and placemaking. There’s no spreadsheeting that. But when there’s stress in the market and you see how people move and what they choose to keep and where they live or work, how, where rents are more stable or whatever, you see the performance. But when I’m doing a spreadsheet and presenting it to a bank, there’s no way to quantify that.

Eve: [00:40:45] Yeah. Just shifting gears a little bit, are there any current trends in real estate development, especially around the pandemic, that you think are most important for the future of our cities?

Avra: [00:40:58] Well, we’re staying the course. I mean, our mindfulness, our thoughtfulness, it hasn’t changed. If it’s before the pandemics, during the pandemic, or the after-pandemic. So, we’ve always practiced sustainability. Even in our new building, everybody’s talking about these new air filtration systems and water systems. We had already designed that into our building before Covid. So, you know, it was like we were already there. We already felt like the wellness trend was, we already got on that bus a while ago. Now the tenants are going to be asking about it and insisting on it. We were already on that bandwagon by. My team is architects and so we are always looking at what’s new, what’s cutting edge and hopefully somewhat cost affordable so we’ve already, we’re adopting a lot of those. So, I think those things will become more mainstream now. Good. And maybe that will even make them more cost effective. So, we haven’t changed. Again, our mindset has always been, you know, we need to adapt to reusing. You use existing buildings. I mean that’s the ultimate in sustainability, right?

Eve: [00:42:07] Yes, I agree.

Avra: [00:42:09] It’s like fruit shopping, right? The most, the best thing, people don’t realize how many CO2s go into building a building. And you knock it down, you spend more CO2s and then you rebuild it and spend more CO2s. There is a really great study out there, and I don’t know if you’ve read it, on green building. And it was put out actually by the historic preservation community but if you were to take a building and knock it down, build it back, using green, let’s say green technology, all the new Green Technologies, Sustainability, LEED certified, whatever, it would take you 80 years to make up for the damage done. 80 years to make up for the fact that you knocked down a building. So, we think, you know, so we are all about keeping existing building,

Eve: [00:42:56] Keeping, yeah, yeah.

Avra: [00:42:57] Absolutely. And it’s interesting. We, and we do it, you know, we don’t stop and think, oh, my God, we’re saving the environment, right? But we know that it’s important to the sustainability story. But we also know that it’s important to the cultural story, to the story of community and social resiliency. When people talk about resiliency, but they talk about it like, you know, well, how high is your sea wall, or whatever. Resiliency, by definition, is your ability to bounce back. It does not say how high is your seawall, it’s your ability to bounce back. And that is a social, that is a social response, not a building response, not a civilian engineering response. So, we think that focus, that part of social resiliency is part of keeping community. And part of keeping community is to try to save and do adaptive reuse with existing buildings. Again, we’re back to why we build our business around this story. We think without the story we, it doesn’t, it isn’t going to get us where, we won’t be interested. And it’s got to be a story that, when you do projects that have a story, people want to be a part of it. People want to be a part of it. People want to work on it. People want to help build it. And then people want to live in it and people want to do their business in it. You know, I think builders, developers underestimate the market.

Eve: [00:44:37] Yeah, I think you’re right.

Avra: [00:44:38] I think they underestimated them. They know the difference. And they know how it feels. And if they have a choice to spend a dollar here or a dollar there, they’re going to spend it where it also feels good.

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

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

Eve: [00:45:06] That’s a great answer.

Avra: [00:44:07] Yeah, I just, you know, we just keep doing what we’re doing, and I think, you know, we talk about, you know, always wanting to learn, right? And knowledge is empowering, but it doesn’t give you power unless you use it. So we are, you know, we’re always learning, always curious. We’re always helpful to other developers. Very transparent. We open source. So, if you go on, I think you’ve been on, our website. If you go onto VagabondGroupConsulting.com and you hit open source, we open sourced our affordable housing project. You get all the money we spent, all the inspections, all the time, all the materials, everything. The things that went well, the things that didn’t go well. I think that one of the goals would be to hopefully encourage more developers and especially people in the public benefits space. Anybody’d be taking public dollars for sure, to open source their projects so more people can learn and so that more, more thoughtful developers can hopefully…

Eve: [00:46:16] That’s a great idea. I’m definitely taking a look. And I’m super jealous of all of fabulous 50s motels that you’re renovating. It’s a fabulous…

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

Eve: [00:46:33] Well, if you want to start raising money from a broader group of people, from the community, that’s really what investment crowdfunding is about. And I see there’s a, how can I say this? I landed in Pittsburgh unexpectedly and one of the really big things I learned here is that people really want to be involved with their community and making it better with their city. It doesn’t really matter where you go, people are very connected to the place they live in. And I was working with dollars that dried up in the late 2000s and started thinking about crowdfunding to replace them. You know, also working with banks that became more and more skittish and wanted to do less and less innovative project lending. And so, all of that kind of led me to investment crowdfunding, which really lets the crowd decide. So, you could, very soon you’ll be able to raise, there’s actually upgrades to the rule under way, but very soon an issuer, a developer, would be able to raise up to five million dollars a year from anyone over the age of 18.

Avra: [00:47:47] Wow. No, no subscription agreement.

[00:47:50] No, no, there’s subscription agreements, but we handle all of that electronically online. So, if you go to a funding portal like Small Change, we are registered with the SEC and members of FINRA and it’s a very heavily regulated rule. We kind of manage all that. And you basically create a disclosure package which we help you create, register it with the SEC and then everything else is handled electronically as people invest. So, I think the most meaningful thing for me is that if you want to bring along people in your community, you normally don’t have a chance to invest and create wealth based on what’s happening in their own community. This is a way to do that.

Avra: [00:48:38] So, I think it’s a great idea. I actually went on your webpage and I thought about it. So, in in the affordable housing project that we did in Overtown, we actually, one of the partners, because we were getting large grants, they asked, they basically assigned us a local CDC, a community.

Eve: [00:49:00] Right, a development corporation, yeah.

Avra: [00:49:02] Yeah, to be part of the ownership. And it was Mount Zion, which was actually the oldest church in Miami, I think. They’re a part-owner, you know, less than 10 percent so the lender has no issues. And I was neglecting again, it was more control thing, it wasn’t a money thing because we’re not making money. Right, so.

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

Avra: [00:49:31] But the reason why I don’t put myself in a non-for-profit space is because I know, I see a lot of the people, in non-for-profit space and it’s not non-for-profit, OK? It’s actually, I call it, so, I’m in the no-profit space. So, I’m like, so I won’t put on a non-for-profit space because everybody pays themselves salaries and things. We don’t pay. We don’t pay ourselves.

Eve: [00:49:53] Well, that’s right.

Avra: [00:49:54] So the CDC came in and they’ve been great because they helped, you know, that was the thing. I said, well, as long as everybody understands nobody’s getting paid, I’m happy to have a community organization. And I said, so they have ownership, so certainly down the line this, you know, we have a 30-year covenant and down the line there will be some value there. But I thought that it would have been great if, even instead of the CDC or in addition to the CDC, what if everybody in the community, so I get a grant from this CRA. What if every family that lived in that community all got a piece of the project? Instead of this CDC?

Eve: [00:50:37] Yeah, I’ve thought about this a lot. I’ve actually thought that, you know, in a poor community, wouldn’t it be fantastic if there were even a foundation that matched investments made, or to increase the value to people who invest, you know, maybe even 100 dollars?

Avra: [00:50:54] Yes. So anyway, we got a three-million-dollar grant, just so you know. But I mean the three-million-dollar grant, and you’ll see and, you’ll like to see the math in our open source, the three-million-dollar grant will save the residents eight million dollars in rental cost over the 30 years. So, that’s a huge benefit to the tenants with subsidized rents but if everybody in the community was given, let’s say, a thousand-dollar ownership, assigned a thousand-dollar ownership, right? I mean, as long as I don’t have to deal with, you know, a thousand investors, you know, I’m happy to have them own a piece of the project. You know, as long as me as a developer I can do what I do, you know? So, any time there’s a grant made into a project, why isn’t that grant, which is community dollars, community dollars, taxpayer dollars, why not have that grant be a crowdfund investment?

Eve: [00:51:57] Well, it can be. I just think people aren’t quite there yet.

Avra: [00:52:00] Well, let’s do it.

Eve: [00:52:01] Yeah. I’d love to do it. I’ve thought about raising a pot of funds for a community, for example, where someone, maybe you partner with a community development financial institution or a community bank, and someone manages the money, but it’s programmatically distributed in the community as well. So now you have, maybe not just your project improving the community, but you’re benefiting other people directly. Let’s just say you’re below a certain income and you need your roof replaced, you can get a loan for zero percent.

Avra: [00:52:38] Miami does a lot of that. I have to say, there is a lot of things we do. America Build does that. We have these twenty-thousand-dollar grants. If people know where to look that is made available.

Eve: [00:52:51] I know. But I’m thinking really community specific, you know. You pick a community that you’re working and you, kind of, really try to build it up and make sure that people who are not wealthy in that community come along for the ride when developers do make investments and the community is improved. So, I mean, it could happen in any number of ways but, you know, we all think about what happens to people who are left behind, right? So, there’s something there. I’m not exactly sure what it looks like precisely, but I have tools in my toolkit, these SEC regulations that I understand very well that could be deployed in that manner. Absolutely.

Avra: [00:53:34] Yeah. I think there’s something there and I think, so, you know, we should talk about that Eve because I’d like to explore that. I think that, I think there’s the political will to do it in Miami. I think there’s enough. Again, you know, the thing is, is if we do one, right, we do one project and it works, it becomes the model.

Eve: [00:53:57] Yes, absolutely.

Avra: [00:53:59] So our study, the one that we did for Vagabond Group Consulting, that open source, has become sort of a case study. You know, I get calls from all over the country. People.

Eve: [00:54:10] Yeah. That’s very important.

[00:54:12] You know, and that’s what we need to solve some of these problems we need the transparency. We need to have conversations like you and I are having. And we all need to share and figure out best practices. We need to find a solution and it’s in the developer’s best interest that we find these solutions. I try to challenge some of my big developer friends and say, listen, guys, we need to be part of the solution here. This is really our, becomes our problem. You don’t think it becomes your problem, but it does, because if the restaurant in your building, even if you don’t want to do it for all the right reasons, you know, you should understand how it affects you, because if the restaurant in your building can’t find employees because there’s no place for them to live, you know, they’re having that problem on Miami Beach and they’re having trouble hiring people because nobody can afford to live on Miami Beach. So that affects your ability to rent your space. I mean, you know, so I tried to encourage that, show them even financially why this is in their best interest. That we all, we all don’t do well unless we all do well, right? So, how do we incentivize developers to do that? There needs to be policies in place for that as well.

Avra: [00:55:26] In Miami, we have something where we, where developers can write a check. Like you’re building a building and you write a check towards public benefits. Well, you know, make the developer build the affordable, do the public benefit. You know, sometimes writing a check is easier than doing the work.

Eve: [00:55:44] Yeah, no, I agree. Well, this has been absolutely fascinating and I’m going to be in touch soon. But we should wrap up and I really enjoyed talking to you, Avra.

Avra: [00:55:56] Yeah, this has been fun. I look forward to seeing your work. So, you have to send me some of your some of your work.

Eve: [00:56:04] I will.

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

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

Eve: [00:56:10] You can find out more about this episode or others you might have missed on the show notes page at our website RethinkRealEstateForGood.co There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Image courtesy of Avra Jain

Sustainable, affordable and beautiful.

December 15, 2021

“If you want to build something that is both affordable and sustainable,” says Jeremy McLeod, “every project manager in Melbourne will tell you you can’t do it.”

Jeremy is the founding Director of Breathe Architecture, a world class architecture firm in Melbourne, Australia, delivering fabulous projects to its clients. They have built a reputation for delivering high quality design and sustainable Architecture for all scale projects in Melbourne, Australia. But Jeremy isn’t resting on his laurels. He really cares about the ever widening gap between those who have wealth and those who do not. 

And so 13 years ago he embarked on a journey to deliver sustainability and affordability in one housing model. His first project, the Commons, was met with huge success. Now with a waiting list of over 8,000 buyers (no marketing, no realtors) he intends his Nightingale project to be an open source housing model led by Architects.  

Breathe approached this challenge through reductionism. They discovered that what people actually want is really good and meaningful housing with space, light, outlook and plants — not marble countertops, 3 bathrooms and shag carpet. They have achieved affordability and sustainability through reductionism.  If you don’t need it, take it out.

Melbourne is growing at a rapid rate, and housing is an expensive commodity there. The city has Jeremy to thank for starting a movement that will yield affordable and sustainable urban housing with his stunning and thoughtfully executed projects.

Insights and Inspirations

  • Just a few years ago Jeremy started with an idea to build high quality affordable housing in Melbourne, an expensive city where this was unheard of. Now he can’t build fast enough. Nightingale has a waiting list of over 8,000 people.
  • Jeremy has combined sustainability with affordability through a process of reduction. If you don’t need it, take it out.
  • I was lucky enough to tour Nightingale l, an exquisite building located adjacent to a railway station and bikeway that both lead into Melbourne’s central business district. The garage is full of bikes. No cars here.
  • Preference is given in the balloting process (the process established for the equitable purchase of units) to essential service workers, such as nurses or fire-fighters, key community contributors, individuals with disabilities, Aboriginals or Torres Strait Islanders.

Information and Links

  • Watch Jeremy’s TedX talk here.
  • Nightingale Village will soon be under construction. The Village is a collection of six neighboring buildings, each designed by a different award-winning architect using the social, environmental and financial sustainability principles of the Nightingale model.
  • Read about Nightingale Housing.
  • Take a look at The Commons.
Read the podcast transcript here

Eve Picker: [00:00:06] Thanks so much for joining me today for the latest episode of Rethink Real Estate. For Good. Today I’m going back to a favorite interview from Season 1. My guest was Jeremy McLeod, founding director of Breathe Architecture in Melbourne, Australia. This is one I just haven’t been able to forget.

Eve: [00:00:33] “Every project manager in Melbourne will tell you that you can’t build something that is both affordable and sustainable,” says Jeremy. No wasn’t an option for Jeremy so he embarked on a journey to define sustainability through reductionism. And along the way he discovered that what people actually want is really good and meaningful housing with space, light, outlook and plants — not marble countertops, 3 bathrooms and shag carpet. With a waiting list of over 8,000 people for his projects, he can’t be wrong. Take a little time and listen to Jeremy. You won’t regret it.

Eve: [00:01:18] If you’d like to join me in my quest to rethink real estate there are two simple things you can do. Share this podcast.  And go to rethinkrealestateforgood.co where you can subscribe to be the first to hear about my podcasts, blog posts and other goodies.

Eve: [00:01:43] So hi, Jeremy. It’s really lovely to finally meet you.

Jeremy McLeod: [00:01:48] Yeah, I did think we were doing this interview over Zoom so I was surprised to see you in my office in Australia. Thanks for coming.

Eve: [00:01:54] Oh, you thought it was by Zoom. I told you it was local. It’s really fun to be recording in your beautiful building and actually see it because I’ve really wanted to do that for a long time. So you’re an architect and you’ve taken your fabulous education and you’re working on a new housing model for Melbourne, Australia, where we’re recording today. And I wanted to talk about what’s kind of driven you to think about that, to develop a better housing model and what even that means.

Jeremy: [00:02:24] It’s not hard to build a better housing model in Australia. It’s because our housing system is broken. I mean, the interesting thing about Australia is that we’re the richest country per capita in the world, yet we have one of the highest greenhouse gas emissions per capita in the world. But importantly, we have over, at the last census, we have over one hundred and sixteen thousand homeless people here. So for an incredibly wealthy country with lots of opportunity, there’s incredible inequity here. And that inequity is growing. In countries, you know, Scandinavian countries or Austria or Germany or anywhere in Europe, basically, there’s an affordable housing requirement. In London there’s inclusionary zoning which requires you to put in 20 percent affordable housing. In New York there’s inclusionary zoning, but in Australia there is no inclusionary zoning, which means that the private housing developers can build whatever they want without including any affordable housing.

Eve: [00:03:26] So, not held accountable for the economy at all.

Jeremy: [00:03:28] No, absolutely not. And so in that instance, then you would assume it’s the responsibility of the state to provide housing for its people. But in the 1980s, state governments around the country started divesting their responsibility for housing and people through a public housing system and started giving it to smaller, not-for-profit organizations, church-based or faith-based organizations or community housing providers to provide housing. And they started selling down their assets and importantly, stopped building housing. And so what we’ve seen is a steady growth of homelessness at the same time as a steady growth in wealth in this country. As an architect. I mean, before I was an architect, I studied environmental design. So I understand, you know, inherently the issues around climate change. I’ve looked at the issues around the last IPCC report which says that, you know, if we’re not careful, we’re going to find 2 billion refugees globally, a billion coming out of Africa and a billion coming out of Asia. Where do you think those people are going to be? And we also understand that people at the edges are the people that suffer the most in times of climate change. So, I mean, I think that climate change and homelessness and housing are all intrinsically linked and that we need to resolve both those issues simultaneously. And we need to resolve those issues very rapidly. The state doesn’t… has divested their responsibility. and the private sector obviously is interested in returning profit to their shareholders, not in delivering kind of, you know, on corporate responsibility goals that, you know, may or may not exist within their boardrooms. So the idea for us was that we would build a model, a prototype basically to encourage private developers to change the way that they worked. And our contention was that you can build housing that simultaneously builds community that is sustainable and that is affordable and it returns some fair and reasonable return back to investors.

Eve: [00:05:43] You thought this was an important role for you as an architect? Because it’s an unusual role for an architect.

Jeremy: [00:05:52] Yeah. Look, I mean, of course, my first love is architecture. I would love to just design great buildings all day, every day. I would love to build great housing. But as an architect yourself, you would understand that to make a great project, you need three things. You need a great architect, you need a great builder, you need a great client. And so if we’re trying to build great housing projects in Melbourne, it was, you know, let’s assume for a moment that Breathe Architecture was a great architect. I can find a great builder, but I couldn’t find a great client. So for us to be able to deliver on the projects that we needed to, I felt that the only way was to become our own client.

Eve: [00:06:34] That makes sense.

Jeremy: [00:06:36] Yeah. And to basically build a system that could be replicated, that was kind of the birth of Nightingale.

Eve: [00:06:43] Right. I watched your TedX talk, which I thought was really interesting. And you said that there’s a population explosion going on here, which I know, but I think I didn’t realize it was quite so rapid. But how many people in Melbourne today?

Jeremy: [00:06:56] So there’s five million at the moment. We’re going towards 8 million by 2050. It’s essentially a hundred thousand Melbournians every year for the next 30.

Eve: [00:07:05] I think it’s one of the fastest growing cities in the world, right?

Jeremy: [00:07:08] Yeah. So interestingly, we’ve always been smaller than Sydney. We’ve always been the little sister to Sydney and we’re now about to outstrip Sydney in terms of population.

Eve: [00:07:16] Yeah, I can feel it every time I come and visit. You talked in that TedX talk about urban compression versus urban sprawl, which I thought was a really great way of describing what’s available and what’s probably true in most of the United States as well. The idea being that urban compression is like warehousing people in really dense, maybe warehousing isn’t a way to say it, but building very dense, high-rise housing products in inner cities versus urban sprawl, which is building, you know, the American/Australian dream of a house on a lot. Right? And not much in between yet. So what’s in between look like?

Jeremy: [00:07:58] Well, I mean, the interesting thing here is it’s all about politics, right. So, in the centre of our city, it’s all old commercial land. It was a commercial centre. So it’s easy to build one hundred and eight story towers there to warehouse people, so to say, because no one objects to that, because everyone sees that if someone builds a 108 stories there, then I can then build my old shop to 108 stories and I’ll get that value uplift. So it’s a great capital gain. And the city, in the middle ring suburbs, so in all the places really close to infrastructure, schools, hospitals, work, public transport, those areas there are all held by the city’s wealthiest population. They’re well-moneyed, they’re well resourced  and they’ve got a very, very loud political voice. And they say very clearly to the state planning minister and to the state politicians that they don’t want any increase in density around them. But like San Francisco, instead, they’ve got no issue with density per se, just not in my backyard.

Eve: [00:09:12] Yes. NIMBY, right?

Jeremy: [00:09:14] So that’s right. So they’re the NIMBYs. So, instead what happens is that if you’re a first time buyer in Australia, if you could possibly afford to be a first time buyer here, you can’t afford to buy a house in the middle ring suburbs close to work, close to hospitals, close to schools.

Eve: [00:09:30] Yeah, you’re very far away.

Jeremy: [00:09:32] You end up very far away. So in Sydney, I saw a graph recently where if you’re a nurse and you work in a hospital and you’re a first home buyer, you’re an hour and a half away from the nearest hospital that you are working in.

Eve: [00:09:44] Wow.

Jeremy: [00:09:37] That’s three hours every day. Yeah.

Eve: [00:09:40] So in effect, those people are really the ones that need to be closer to the city and need to be, have access to public transit.

Jeremy: [00:09:48] Absolutely.

Eve: [00:09:49] And of all of those things to make, to make their lives work.

Jeremy: [00:09:52] Well, to make the city work for all the well-moneyed people as well, you know. Yeah. So the city works because of those people. And so, and the other issue that we’ve got in Melbourne is this incredible sprawl issue where currently we have built over 40 percent of our farming land. So we’ve got 60 percent of our farming land left, but our population is growing at unprecedented rates. At the same time, we’ve got pressure where China is coming in and buying our farming resources. So they’re buying, you know, beef, dairy, big farmland, so I worry about food security for, you know, for Australians in the future when there’s 1.5 billion Chinese and 600 million middle class Chinese, you know, in a time when food security becomes a big issue all of our food will be being exported.

Eve: [00:10:49] Wow.

Jeremy: [00:10:49] So I see that as this incredible, this madness of us building over all of our good farming land.

Eve: [00:10:56] And then the other piece of it is, I think you and I agree on this, that many new buildings are built as a financial commodity. And really, they’re really about making money not about making place better, which is really disturbing to me because I think you can take the same money and build, you know, add to a city in a really meaningful way or not, right? So…

Jeremy: [00:11:20] Yeah, looking at examples, like there’s a suburb in Sydney called Ultimo and over 90 % of Ultimo has been bought by investors. So essentially a lot of our apartments, and in Melbourne, in

Eve: [00:11:36] And is that, like, little single-family houses or…

Jeremy: [00:11:38] No, so it’s all apartments. So the whole, nearly all …

Eve: [00:11:41] So it’s a bit of a ghost town then? Or is it just all rental?

Jeremy: [00:11:44] Well, a lot of it is rental. You know, until very recently, there were no foreign ownership maximums on how much of an apartment or, or how much of a building you could sell to foreign owners. So we were. we had Australian developers selling 100 percent of their buildings to offshore waiting lists in Kuala Lumpur or Shanghai. We would find that, you know, whole buildings are owned by offshore investors that have never been to the city or have never seen the actual apartments. They bought it off a spreadsheet through, through an investment vehicle. And of course, when you get a city built on a spreadsheet, it becomes a pretty, pretty sad outcome.

Eve: [00:12:24] Right. So your journey started in 2007 when you bought the piece of land where you’re sitting on right now, right?

Jeremy: [00:12:35] Yeah.

Eve: [00:12:35] And, so where did you begin?

Jeremy: [00:12:38] Well, so maybe  I’ll go back to 1972 when I was born. So, so my parents were a couple of hippies. When I was about eleven, my dad took me to old Parliament House to lobby the government then about public housing in a suburb called Footscray in Melbourne. So then I go on study sustainability, environmental design, and then I go on to be an architect where my focus is on studying housing. I then work for a big firm, and when I’m working in that big firm, I end up working on, you know, 88 story towers, which just, you know,.

Eve: [00:13:18] And the toilet details, right?

Jeremy: [00:13:19] Yeah. Yeah, lots of toilet details, lots of stairs, correct. But it was the last building that I worked on in that big practice, I was working on the carpark for six weeks.

Eve: [00:13:29] Oh, that’s really crushing.

Jeremy: [00:13:30] And I thought that that was crushing and I didn’t think it was a good use of my time or, it wasn’t that I was interested in, you know, housing cars. What a meaningless act. So I start Breathe Architecture in 2001. When I started Breathe Architecture, the simple idea was that every room would have a window so the occupants could breathe.

Jeremy: [00:13:53] So in 2007, as an architect working in the city, we’d been working for a bunch of property developers. It was, it was disappointing. We resigned a couple of commissions, we got fired from a couple of commissions because we wouldn’t back down on certain things like, you know, we wouldn’t take the solar panels off the roof. We wouldn’t take the,.. yeah, yeah, we wouldn’t take the solar hot water out of the  building. We wanted to make sure that we got winter sun into the building, you know, like. really simple things that we wouldn’t back down on.

Jeremy: [00:14:29] So after that, we decided that we would partner with some other architects and we would try and embark on building a prototype building. So there were six of us. Six architects. We all came together, we bought this site. It was originally called Nightingale back in 2007, and it took us until 2013 to finish it. So it took us six years. In the middle of it, thanks to sub-prime issues in the United States, the financial crisis washed across the shores to Australia. By the time I needed finance to build this…the idea was that it would be a zero carbon building. A building that focused on sustainability and community and affordability. By the time I needed to get money for that, it was after the financial crisis had actually, bit into Australia as well, and we lost our funding to build it. And so then…

Eve: [00:15:22] Why did you lose the funding, is it because banks just got more conservative? Or..

Jeremy: [00:15:28] Yeah, banks just got more conservative.

Eve: [00:15:30] So the same reasons I saw in the States.

Jeremy: [00:15:33] Yeah, and look, I actually don’t blame the bank. I think that leading up to the global financial crisis, you know, it was too easy to get money. So as a group of six architects, you know, we were about to borrow seven point one million dollars, you know, on a kind of prototype project that hadn’t been built before. So I can understand why the bank was nervous by the time, you know, we got into, you know, 2010, 2011.

Jeremy: [00:16:01] We went and met with a whole different raft of impact investors. We met a group called Small Giants and Small Giants bought the project off us. They renamed the project from Nightingale to the Commons because their marketing team thought that was a good idea. I can, I can live with it, but you know, what’s in, what’s in a name. But anyway, the Commons then ended up being delivered and in 2014, it won the National Award for Sustainability, the National Award for Housing. And it became, you know, kind of a destination for people to come and look at. And so in the following year, we opened the building up for tours. We took every property developer in the city through. We took Melbourne residents through. And we talked a lot about, you know, the importance of change in our housing model. And then the idea was, off the back of that, that we would influence change in the marketplace.

Eve: [00:17:01] Well, that was one of my questions here. Has your work influenced the status quo?

Jeremy: [00:17:06] Well, the interesting thing was that when we, when we completed the Commons and it won all those awards, and it got lots of media and lots of people were interested, the answer to that is no. It was seen as an exception to the rule. And so, the idea was that the pilot project or the prototype project would influence change, but it was seen as an outlier.

Eve: [00:17:26] Interesting. And like just breaking up a bit. So what is different about the Commons, this building?

Jeremy: [00:17:32] So the Commons, I think that if you want to build something that’s affordable and sustainable simultaneously, every project manager says that you can’t do that. Every project manager will tell you that sustainability is more expensive and so to build sustainability means that you can’t build it affordably. And so instead, Bonnie Herring, who was the project architect of Breathe who led this project, her whole approach was one of sustainability through reductionism. So she constantly interrogated the idea is, if we don’t need it, take it out. Ask people, what are the things they actually need not what they want from some real estate glossy brochure.

Eve: [00:18:14] What they think they need because everyone else has it right.

Jeremy: [00:18:17] Yeah, but when we when we started talking to people, the interesting thing was that what people actually wanted was space, light, outlook, plants, you know, natural materials. No one wanted marble bench tops, you know, a thousand down lights, white shag-pile carpet, a swimming pool, three bathrooms, you know, what people actually wanted, we were finding, was just kind of really good meaningful housing. So our approach on The Commons was, yes, sustainability through reductionism. If I step you through that, you’ll see that it makes total sense. So the first thing is, we took the basement car parking out. And why is that important? So, for a seven million dollar building, the basement car park was gonna cost seven hundred and fifty thousand dollars. So by taking that out, we reduced the build cost by over 10 per cent. But importantly, we just, we didn’t just reduce the price of all the apartments by $30000 each. We also took some of that money and put it into making the rooftop garden, you know, really incredible. Where you would have ordinarily had a driveway coming in off the street and a ramp up and then a ramp down to get into that driveway and a roller door to close that driveway off to get down to the basement carpark, instead, Instead of having that there, we put in a wine shop where the driveway and the ramp would have been.

Jeremy: [00:19:42] And then we sold the wine shop for four hundred and twenty five thousand dollars. We then took the revenue from the wine shop and we used it to increase all of our glazing to get the best possible double glazing that money could buy in the country at the time. We pumped up all of the insulation on our walls. So we made all of our walls fatter. we got better insulation in them. So we used that money to improve the thermal envelope of the building. Then, that then made the apartments perform…so we’ve got the star rating system here, so you need kind of, you need a minimum of five stars or an average of six stars to be able to get a building permit here. And instead, we set the minimum at seven and a half stars here. The panacea is 10 stars means you don’t require any energy for heating or cooling, which would be incredible. But we’ll make it to seven and a half stars out there. More modelling told us that the building could operate within a thermal comfort range of between 19 and 27 degrees. And the interesting thing is that that’s kind of the European thermal comfort range of the Germans deemed that to be.

Eve: [00:20:47] So that’s all Celsius right now. Got it. That’s about …oh I can’t do that in my head right now. We’ll figure it out later.our Yeah, I’ll let you do the calculations. You’ll figure it out later.

Jeremy: [00:20:57] But but basically, the Australian thermal comfort range, you know, is generally been seen to be in between 19 and 22 degrees.

Jeremy: [00:21:08] So by stretching it out from nineteen to twenty seven, the German comfort range, all of a sudden we found that we didn’t need to put air conditioning in. When we take air conditioning out, we save another 5 percent out of the building costs throughout the building and obviously drastically reduce the operational costs and operational energy required in the building. Normally every two bedroom apartment in Melbourne at that time was being designed with two bathrooms. So a primary bathroom and then an en suite to the master bedroom. Instead we took out all of the en suites, so we had one bathroom in each apartment. We kept them at the same size. So the apartments, by taking out the really energy intensive detail-heavy bathrooms, we saved about $10,000 out of the cost of each of the apartments and all the living rooms got seven square meters bigger, which is 70 square feet. We took out all of all of the individual laundries out of each of the apartments and instead put one beautiful laundry on the rooftop, which overlooks an incredible rooftop garden.

Eve: [00:22:14] And I assume you could save money on all the stacks. Correct. And the space in the unit. Correct. So everyone’s. Exactly right. And the cost of all these appliances. Exactly. Seventy costs.

Jeremy: [00:22:28] Exactly. You get it. You get it. So you do that over and over again. We have one shared Internet connection. So we bring fibre into the building and we share that Internet throughout the building. So we pay for it at one point and then we use bulk buying to share that. It gets really, really cheap, really, really fast internet in a city where the Internet here is expensive.

Eve: [00:22:47] That’s smart. That’s a very good idea generally to buy it as a retailer.

Jeremy: [00:22:50] It’s expensive and it’s poor quality here. And we do the same thing with the power through an embedded network.

Eve: [00:22:57] So it’s this constant that you’re a very pragmatic approach. It’s really pragmatic, pragmatic to chisel away what’s really necessary in a building and and really make it work. Yeah. And think about it.

Jeremy: [00:23:10] You know, what can you share? It’s all about sharing and using, you know, bulk buying and trying to get maximum utilization. So you know what? Our laundry, for example, is six washing machines, which could use a lot more than having, you know, 24 washing machines that get used in a very infrequently.

Eve: [00:23:28] I think a lot of people might find that concept difficult, but I suppose you don’t need to find a lot for one building do you.

Jeremy: [00:23:38] Well, I mean, initially when we started when we finished this project and we started work on Nightingale 1 and I’ll tell you why we started Nightingale 1, there were eleven people that had written to us to say, if you’re going to build another building, like The Commons, can you please let us know. And so we put those eleven people on a waiting list. That waiting list through Nightingale housing is eight and a half thousand people.

Jeremy: [00:24:03] So apparently there is eight and a half thousand people in Melbourne that would be happy to have a cheaper apartment with a bigger living room, with a beautiful shared rooftop laundry ,with one bathroom, with no individual or private car parking, but with a free car-share membership to, you know, 20 cars parked within a 400 meter radius.

Eve: [00:24:29] And to be fair, in a beautifully designed building.

Jeremy: [00:24:33] Thank you.

Eve: [00:24:35] I’ll sign up for the waiting list!

Jeremy: [00:24:38] I think the great thing about, you know, being your own client is that you can definitely make sure that the architecture is what it should be.

Jeremy: [00:24:49] So I actually for people listening in, the thing that’s also very incredible here is The Commons. This building sits right on a railway line. You can see there you can see the station. Out of the windows. So it’s really it’s really a transit oriented development as well, which really makes it much easier not to have a car.

Jeremy: [00:25:08] Yeah, absolutely. So there’s that train station right next door or the bike path right next door or the 503 bus and then the tramline.

Eve: [00:25:16] And the garage packed full of bikes.

Jeremy: [00:25:18] Yeah. So we do have the highest ratio of bikes to apartments in the country. Yeah, but the interesting thing about that is that we just looked at what were the bike ratios used in the Netherlands and then we used those and brought that over here. So it’s not none of this is rocket science, at least, you know. How’s it been done?

Jeremy: [00:25:36] So you have investors in this project and how did they do?

[00:25:42] So in the Commons there were six architects and all of us and we all invested. So Tamara and I, my partner and I, yeah, we literally bet the house on it. And so, yeah, out of the Commons, we did at the end of the project when Small Giants, we bought the site, we redesigned the site, we got the D.A. approval, we got the price in place. Then we had to sell the project at Small Giants. They sold they bought the project back off us. And at that point we had bought the site for five hundred and forty five thousand and we sold it back to them for two million dollars.

Eve: [00:26:23] How did they do then?

Jeremy: [00:26:27] Eventually, they never actually disclosed to me how they did, but they built and entire brand off the back of The Commons.

Eve: [00:26:35] There you go!

Jeremy: [00:26:36] But interestingly, everything sold in The Commons. The project was delivered on time and on budget. And you know.

Eve: [00:26:43] And did it sell quickly?

Jeremy: [00:26:45] Yes. And that kind of thing else was.

Eve: [00:26:48] Yeah, that’s probably keeping in a project like this, because having a couple of vacant units if your profit and a building like this.

Jeremy: [00:26:54] Yeah. That didn’t happen here.

Eve: [00:26:57] That’s fantastic. So then, you know, the triple bottom line here actually made a financial return as well. That’s a pretty strong argument for doing the right thing. Yeah. How hard is it to find investors who really care about the triple bottom line?

Jeremy: [00:27:16] Well, so maybe let me let me just come back to the move from The Commons to Nightingale 1. Or why we started Nightingale Housing. Do you want to hear?

Eve: [00:27:25] Oh, yeah, absolutely.

Jeremy: [00:27:26] So this idea that that the Commons would drive change by being a prototype building. And I said before that it kind of failed because it was seen as the exception, not the rule. What we decided to do after that first, you know, with that wait list of eleven people was to, if if the market wouldn’t change, then we would drive change in the market and we would continue to build buildings until such a time as the market actually came to us, you know, until we didn’t need to exist any longer. So we established Nightingale Housing. We got some corporate sponsorship. We got a government grant. We got a grant from the National Australia Bank. So we built a really small team of about three of us and we embarked on Nightingale One.

Eve: [00:28:15] And that’s a non-profit driven.

Jeremy: [00:28:18] Yes. So Nightingale One was still delivered. And the way that we wrote that feasibility study was that we capped the return at 15 per cent per annum and then we capped that return at a three year project timeline. So essentially it was a gross return of forty-five per cent over three years. So there was a lot of pressure on us to deliver that for our investors to deliver it within the three year time window.

Jeremy: [00:28:42] So – to get to get – we tried to do that at 10 per cent per annum. And when we tried to raise impact investment to build a carbon neutral building. So when we tried to raise equity,  I spoke to probably 60 architects in the city because I wanted architects to invest in it. I wanted architects to own it. I want to share the IP with architects that would take it and scale the idea. I met with architect after architect for about, you know, six weeks and we ended up getting 27 investors all putting in $100,000 each. A lot of people with not a lot of money borrowed against their homes to invest money in. And when we first said we want to return 10 per cent per annum, ur first investor said that wasn’t enough. It wasn’t it didn’t match the risk versus return matrix for them. And so they wanted fifteen percent return. So we ended up taking all the equity. In Nightingale One it was about a 10 million dollar project and we raised $2.7 billion in equity with a capped return of 15 percent per annum. Going forward from that …

Eve: [00:29:49] Did you return the 15 percent?

Jeremy: [00:29:52] Yeah, absolutely. We returned. And so the way that we that our model worked was that we have a construction contingency in the project, and so after we returned all the money to the shareholder, exactly as we said in our prospectus at the end of the project, the money left over from that contingency, instead of taking that as developer, which a developer would normally keep that as [crane?]. We then gave that back to the residents. So the residents that had balloted into the building, because by that time there was more demand than there was supply after the success of the comments. So we had to run a public ballot where the mayor drew the names for the apartments out of a hard hat. And those residents, those lucky residents at the end of the project, their apartments were about $90,000 under market. And when we finished the project, we gave the building a check for $109,000 dollars back.

Eve: [00:30:43] Wow. And just to be clear, because in the US apartments are usually, well, this is this is all for sale. At this point. Right. Yes. Which is really what the market is in Melbourne.

Jeremy: [00:30:53] Yeah, absolutely. It’s all you know, it’s all for sale. Everything’s for sale.

Eve: [00:31:00] Which is in itself an interesting discussion. That’s really amazing. So now now that was the first project. What’s happening next?

Jeremy: [00:31:08] Well, so after the completion of Nightingale One, and then we did Nightingale Two which is just completed and Nightingale Brunswick East, which is just completed.

Eve: [00:31:18] How many units did you build?

Jeremy: [00:31:19] So Nightingale One. So the Commons is 24 apartments, Nightingale One is 20 apartments, Nightingale Two is 20 apartments, Nightingale Brunswick East is a hybrid with a property developer. So that’s 38 Nightingale apartments and about 25 straight to market apartments.

Eve: [00:31:37] So that’s a real mixed income project.

Jeremy: [00:31:39] Yeah. Yeah. And that’s interesting. It’s interesting. The developer was so good. They funded the whole project. They agreed to run everything transparently with us. So it’s you know, so Nightingale’s principles are that it has to be minimum seven and a half stars, has to be carbon neutral and operations can’t have natural gas pumped into it, has to have, you know, all those Nightingale principles. And we’ve got to lock up. We also have a restrictive caveat which says that if we’re selling and owning an apartment to you and we’re capping the maximum sale price that we’re selling to you based on a maximum return to investors, then you can’t sell it tomorrow and make a massive profit.

Eve: [00:32:19] And so you want to keep it affordable.

Jeremy: [00:32:21] Yeah, absolutely. And so this developer, Lucent, agreed to do all of those things. They handled all the delivery side. And the benefit the upside for them was that they were trying to sell apartments in a street where someone else was about to sell 700 apartments. Someone else was selling 60 apartments. There was about a thousand apartments on the market. They broke their building in half, did half Nightingale half straight to market. We said that we would do that only if the entire project, including their straight to market apartments, were carbon neutral in operations and met the minimum seven and a half star requirement. They agreed to do that. The Nightingale apartments went to ballot. They balloted in one day. So they sold all of 38 apartments in one day.

Eve: [00:33:04] That’s astounding.

Jeremy: [00:33:05] Which then got them the sales target that they needed to get financial closure from the bank to cover the debt, which meant that they could then demolish the building, start their basement construction, which gave them a massive program jump on all the other buildings. They then opened their straight to market sales. And some of the people that it missed out on the Nightingale ballot went and bought there because they could afford to. But also, they were interested in the sustainability idea of carbon neutrality and the idea of community. And then it gave them a kind of a massive differentiator in the market. And so when no one else was selling anything in that street, they sold their 25 apartments in three weeks, which was unheard of.

Eve: [00:33:50] I don’t know what balloting is. Can you explain that to me?

Jeremy: [00:33:53] Sure. So ordinarily, the way that a straight to market developer would sell their properties by employing a real estate agent. The real estate agent generally charges a fee of about 2.25% percent. So there’s two different ways you can sell in Australia. But if you if you employ a real estate agent here, they’ll charge you 2 per cent of the gross revenue of the project, so if  the project is a 10 million dollar project, they’ll charge you $200,000 for the 20 million dollar project, they’ll charge you $400,000.

Eve: [00:34:22] Because they’re going to sell all units for that.

Jeremy: [00:34:25] That’s right. They are going to sell all the units for that. If you historically had trouble selling, you would go to financial advisors in inverted commas, who are meant to be independent and they could sell your apartments to people looking for investment advice and they might charge six or seven percent. Okay. I think they’re trying to outlaw that at the moment. Because they’re their commission obviously makes it difficult, the rate of their commission is so high, it makes difficult for them to make independent advice about what to buy into or what not to. But Nightingale’s says no real estate agents, no sales, no marketing. Instead, it has a series of information nights, it talks to all the purchasers and it provides information, fearless information, warts and all, about the great things about the project and the not so great things about it.

Jeremy: [00:35:17] So for The Commons, for Nightingale One, we talk about all the great things, but we also say that it’s right next to the train line. So the great thing about that is that it’s really close. But it also means that train runs 24 hours on a Friday and Saturday night. And if you got your window open, you know you can. You’re going to hear it. You know, that’s a very, very it’s a place of urban flux, and that where you see all the single story warehouses now, you’ll be a construction site for the next five years. So we talk about all those things openly.

Eve: [00:35:43] So how do you find those people, though? How did they find you?

Jeremy: [00:35:46] I don’t know. So so, look, we don’t have you know, we don’t have a marketing team. We had some political trouble on Nightingale One where we got a planning permit. The developer next door took us to the appeals court here based on the fact that they didn’t want us to sell apartments that were 20 percent bigger, 20 percent cheaper and 120 percent better than theirs, because I think that they thought that it might provide a market problem for them. They took us to the appeals court and they were well funded by the developer. And we weren’t particularly well-funded. And they had a good legal team. And then they had our permits stripped from us. So they got our permit taken off us.

Jeremy: [00:36:33] Well, it’s a very, very strange planning system here where  individuals can veto a local government decision. It’s very interesting. So we then had to lodge a new  planning application from scratch for Nightingale One.

Jeremy: [00:36:53] But the interesting thing was that when Nightingale One lost the local planning permit at that at the appeals tribunal, the local media, particularly the liberal media, got very, very bent out of shape about a project that was trying to deliver carbon neutral housing affordably, particularly trying to house millennials and first time buyers that had just been totally priced out of the market. And they got really bent out of shape that that the one thing that that project was defeated on at the appeals court was on car parking. So basically the whole fight was that we didn’t provide any car parking. How our whole contention was that it sat on top of a train station next to a place where people were unlikely to have cars. Well, over 30 percent of them didn’t have a license. Thirty percent of them didn’t have cars. And the last 40 percent had filled out statics saying that they would either get rid of their cars when they moved into the building or that they would garage them in surrounding buildings that have masses of basement carbon that is under utilized. Well, the biggest thing that happened for us was that it totally changed the landscape for us in terms of everyone suddenly had heard of Nightingale, heard about this.

Eve: [00:38:03] That bad thing was great marketing.

Jeremy: [00:38:05] Yeah. The bad thing that nearly broke me emotionally, like Breathe architecture was nearly broken the day after that. We couldn’t believe what had happened in the 21st century in this city, given its incredible problems with climate change and kind of housing justice. And anyway, what we found was that beyond that, after that, our waiting list, like the week after that, our waiting list had jumped from 125 people to over 400 people.

Jeremy: [00:38:34] So people had read it in the mainstream. Wow. So you’re wonderful. You’re absolutely right. I think that was the start at which people actually started to hear about us.

Eve: [00:38:42] So because we’re running out of time. But I really want to know what’s next.

Jeremy: [00:38:47] Mm hmm. Good question. So off the back of all of the Nightingales we’ve done, what we found was that Nightingale One opposite the Commons, they’re both really great strong communities. But what we’ve found is that there’s that they’ve actually started to work together as an organism. So the residents of The Commons and the residents of Nightingale One have worked together to lobby the council, to close the street at the front. So in two years time, the street will be closed and they’re going to pull up the asphalt and replace it with grass and turf.

Eve: [00:39:18] Well, it’s wonderful. And so you’ve started to see really build a community here.

Jeremy: [00:39:22] Yes. And they and importantly, what else we’ve seen is with those two buildings in close proximity to each other, they’ve started to engage with other residents around. So it’s not just individual communities, but everyone within that street now and across the railway lines and around the corner are all now kind of engaging in street parties, garage sale days, you know, Christmas parties or just talking to each other as they go past. There’s no more anonymity. And so the big thing for us was how do we kind of learn from that? And so we bought seven sites to Street south of the Commons. And that’s what’s called Nightingale Village. So that’s there was gonna be seven buildings by seven architects, all carbon neutral communities, no individually owned cars, a car share hub for 15 share cars, a consolidated bike park with 450 bikes. But importantly, no cars allowed on the streets. So on the streets above, again, pulling up the asphalt, replacing it with grass, trees, street furniture and making it a place for pedestrians and cyclists. That’s fabulous. Yeah. And so then, you know, at that scale, it jumped from a 10 million dollar project to one hundred million dollar project. We had a superannuation company, HESTA work with an organization called Social Ventures Australia, an impact investor, and they put in 20 million dollars worth of equity into that project. And then we’ve had a big bank here, National Australia Bank essentially build a two billion dollar housing innovation fund to step into the gap that our federal government and state governments have left to. Yeah. And so the debt will be funded out of that National Australia Bank housing fund. So it’s been incredible getting institutional finance coming in to make that happen. And then within that, obviously, we understand and that we’re part of the gentrification problem. And so we’ve been looking at this idea of inclusionary zoning and why can it work in London and why doesn’t it work here or why isn’t it called for here? And basically, the property council here, lobbies our planning minister, not to put inclusionary zoning. They say that we won’t be able to afford it, that it will make..

Eve: [00:41:32] But who does the Property Council represent.

Jeremy: [00:41:36] Property developers. And so. And so we’ve decided at Nightingale Housing to now make sure that every project we do has 20 percent affordable housing in it, whether there’s inclusionary zoning or not. And so what we’re intending at Nightingale Village, we’re now putting in 20 percent affordable housing. And so within that, we want to prove to the planning minister and to the government that you can put in affordable housing, that you can salt and pepper it through your developments, that it can be done well and it can be done elegantly and it can be done equitably. And if we can do it, there’s no reason why a well-managed, publicly listed housing company or development company can’t do it. So, yeah, look, the big push for us is now to actually make sure that we don’t just we just try and get better with every project. We try and think through what are the other issues that need to be done and then we’ll deal with it.

Eve: [00:42:35] OK. So I have a couple of really quick questions for you. What trends in real estate development architecture do you see emerging that you think are important for the future?

Jeremy: [00:42:47] Yeah. Yeah. So, look, I mean, we’re not plumbing natural gas and all of our buildings are carbon neutral in operation. So it has to be powered by 100 per cent certified green power, 100 percent renewables. So that’s the measure that we use in Australia before we started Nightingale, every property developer told me that was impossible because people liked gas to cook on their woks, you know, to have a wok burner in their apartments and that they would never go without gas. Since Nightingale One has been complete, there are now five zero gas buildings within a one kilometre radius of Nightingale One. Quite interesting. So we’ve shifted the bar on this idea of can I operate without gas? Are my purchasers interested in carbon neutrality and around here? Absolutely.

Eve: [00:43:37] And of course, if you don’t have gas you don’t need to run gas lines and that is another savings.

Jeremy: [00:43:41] Correct. In the building. Correct. No gas made a room. No gas particularly. Right. Right. Yeah.

Eve: [00:43:46] Wrap up question here. So where do you think the future real estate impact investing lies? Because you’ve been dealing with those impact investors from day one?

Jeremy: [00:43:56] Yeah. It’s a really good question. I think that and I’m very, very interested in your model, because I think that peer to peer lending is going to be really interesting about people being able to invest in projects with meaning. We see that the people of Melbourne who funded the early equity projects in Nightingale, they did it not so much for the return, but because they cared about what was happening to our city, what was happening.

Eve: [00:44:25] That’s why I built small change, because I think the people in the cities they’re in and they just want to be part of making it better.

Jeremy: [00:44:33] Yeah, I agree. Totally. And so it’s incredible to see Melbournians investing in projects and people with not a lot of money, but literally, you know, borrowing against their own home to help make this happen, because they’re not just interested in making the city more livable place, but they’re also interested in and they care about the future generations and what’s happening to Millennials being locked out of the housing market and wondering what’s going to happen for them in housing security in the future, so I don’t think that’s going to put a lot of pressure on institutional funds. We’ve got a lot of superannuation money in Australia.

Eve: [00:45:11] So do you think the interest requirement of 15 per cent is going to grow?

Jeremy: [00:45:15] Well, the interesting thing is, since the village. That’s the last time we paid those rates. Oh, very good. So since then, we’ve got two new projects on line and the offers are becoming back in. And now, you know, 13 per cent and 11 per cent because, you know, by the time we finished the village that’s 14 projects. And with a wait list of eight and a half thousand people, the single biggest risk in a project is sales and settlement. Right.

Eve: [00:45:39] There’s not much risk. Right. Right. So I’ve really enjoyed the conversation. Thank you very, very much. Yeah, there’s lots more and want to know, but it’s pretty fabulous what you’re doing. Thank you.

Eve: [00:46:19] That was Jeremy McLeod of Breathe Architecture and the Nightingale project.  He’s designing and building the real deal – Sustainable, affordable, and gorgeous too.

Eve: [00:46:16] You can find out more about this episode or others you might have missed on the show notes page at our website, rethinkrealestateforgood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music, and thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Image courtesy of Jeremy McLeod

Homage to Sutro Baths.

September 15, 2021

Anne Nickel Cannady was born and raised in Minnesota but has lived an international life. Over the past 20 years she has worked in brand strategy, culture, innovation and immersive experience design with start-ups and leading brands including Starbucks, Avalon Bay, Choice Hotels, Royal Caribbean, and Honda to name just a few. And she’s lived all over the world in London, Cape Town, Detroit, New York, and now San Francisco.

After leaving college in North Carolina, Ann dove into a marketing and HR career in London working with a variety of organizations. Her skillset expanded into workplace culture. By 2010 she was working in the U.S., first at the consultancy Kantar, then as an independent consultant. She joined the PayPal community for six years, becoming Head of Culture, followed by her most recent job as Head of Employee Experience at Fastly.

Now Anne is challenging herself with a project called Alchemy Springs that brings all her skills to play … and more. The plan is ambitious – a social community bath house. The building is ambitious – the transformation of an historic warehouse into a biophilic wonderland. The location is ambitious – a neighborhood on the cusp of gentrification. And the financing is ambitious – she’s raising funds through an equity crowdfunding raise in order to let anyone over the age of 18 invest.

We can’t wait to see how it turns out. 

Insights and Inspirations

  • Biophilic design incorporates natural lighting, ventilation and landscape features in order to create more productive and healthy spaces.
  • Anne envisions Alchemy Springs as a modern urban oasis. Winding ‘riverbaths’ and lush surroundings will define it. Blazing steam saunas, frigid cold plunges, a starscape moon bath, an outdoor sun bath, greenhouse and gardens will be built for all to enjoy.
  • Anne is based in the Bay Area. But it feels as if she could live anywhere.
Read the podcast transcript here

Eve Picker: [00:00:09] Hi there. Thanks for joining me on Rethink Real Estate. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad. Rich or poor. Beautiful or not. In this show, I’m interviewing the disruptors. Those creative thinkers and doers that are shrugging off the status quo, in order to build better for everyone. When I’m not hosting this show, I’m running my real estate crowdfunding platform, SmallChange.co, where you’ll find impact real estate investment opportunities open to everyone. Or you can learn more about me and catch up on some podcasts at my website, rethinkrealestateforgood.co.

Eve: [00:01:11] Today I’m talking with Anne Nickel Cannady. Anne was born and raised in Minnesota, but she’s lived an international life. Over the past 20 years, she has worked in brand strategy, culture, innovation, and immersive experience design with startups and leading brands, including Starbucks, AvalonBay, Choice Hotels, Royal Caribbean and Honda, to name just a few. She’s lived all over the world – in London, Cape Town, Detroit, New York, and now San Francisco. Anne is challenging herself with a project that brings all her skills to play and more. The plan is ambitious – a social community bathhouse. She plans to transform an historic warehouse into a biophilic wonderland. The location is ambitious – a neighborhood on the cusp of gentrification. And the financing is ambitious – she’s raising funds through crowdfunding on my funding platform, Small Change. You’ll want to hear more.

Eve: [00:02:19] If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast or go to patreon.com/rethinkrealestate to support this podcast. For the price of a cup of coffee.

Eve: [00:02:41] Hi, Anne, I’m just really pleased to have you with me today.

Anne Nickel Cannady: [00:02:45] Thanks, Eve. It’s great to be here.

Eve: [00:02:47] You’ve had some really interesting titles like Head of Culture at PayPal and head of Employee Experience at Fastly. But now you’ve moved on to a very different project. And I’d really love you to tell us about Alchemy Springs.

Anne: [00:03:01] Sure. It’s interesting because while I’ve held a lot of different roles, they sort of have all come together for all the skills that I needed to bring this new sort of project to life. But Alchemy Springs came about because in San Francisco, there was a huge community built around some of the hot springs that were, you know, within a couple of hours outside of the city, and one, in particular, burned down in a wildfire several years back. And everyone really missed that community, a community that would gather and be up there. You could, you know, spend the night. There was all these events. And at the same time, we started seeing this rise and this kind of model of these urban bathhouses popping up across the country, so there was one called the Schvitz in Detroit, there’s one, Banya 5, in Seattle. And, all of these really started to bring this community together. You know, for example, I was shocked to learn that, you know, members of the one in Seattle would go four to five days a week. And this whole community was even extended beyond the bathhouse into their local community as a sort of a friendship circle and mentorship circle. So, we looked around at San Francisco, and while we do have a number of spas and sort of bathhouse spas, none of them were quite hitting the mark.

Anne: [00:04:26] There was only one real communal one where you could be social. Most spas, where you really went to kind of check out on your own, not just sort of connect with people. And the one social one that there was, a sort of Russian style banya, it’s a little bit more like a sort of a glorified locker room experience, right? And, you know, maybe wasn’t designed with the guest experience in mind. And so, we really saw this opportunity. And on top of that, San Francisco has this rich history in Sutro Baths. And we met with SF Heritage, who introduced us to the gentleman who wrote one of the famous books on Sutro Baths. And we wanted to learn what the story was behind it, why the mayor at the time wanted to build this grand structure. It was sort of 1894, and it was huge. It was right out over the waters. And at the time, it was quite innovative. He built these almost like little windows, hatches, that would open and close to allow the waters to come in…

Eve: [00:05:37] Oh beautiful, yeah.

Anne: [00:05:37] Yeah. And then he would heat them to different temperatures and all this. And he was inspired by sort of the grand European bathhouses, right? And back then, people were working six days a week and they only had one day off. So, he wanted to find a way that people could socialize with friends or family, but also do something restorative because they only had one day off. And, you know, hydrothermal bathing and all the properties of that, the health properties, he decided to build Sutro Baths. And it really was a place for everybody. So, everyone could have access to this grand experience. And he had gardens, and there was places for, you know, the police and fire department to meet. And it really was a

Eve: [00:06:19] Community gathering place. Yeah.

Anne: [00:06:21] Yeah. A very iconic piece of San Francisco history. So, all of those ingredients together, we thought, this is it. You know, we’ve got to build this in San Francisco. And when the pandemic hit, it only became more important than ever to reconnect the city, which has lost a lot of people, we’ve gotten a lot of new people coming in, but we miss our community. So, it’s kind of perfect timing.

Eve: [00:06:45] Well, what happened to the Sutro Baths?

Anne: [00:06:48] The Sutro Baths actually, there was one point in time it ended up being converted into an ice rink, of all things.

Eve: [00:06:55] Interesting.

Anne: [00:06:57] Yeah. And then it burned down. Gosh, I want to say in the maybe 50s. Yeah, 50s, or early 60s. It burned down. And so now, today, out near Land’s End in San Francisco, there’s these beautiful ruins. I mean, it’s kind of an iconic, you know, tourist destination now right on the cliff side where you can go when you can see a lot of the old cement structures of the different pools.

Eve: [00:07:28] Oh, wow.

Anne: [00:07:28] So it’s, yeah, pretty amazing.

Eve: [00:07:28] You know where I grew up in Australia and they always had rock pools in the ocean, like on the ocean’s edge. Sort of reminds me of the sutro baths but a little bit less grand. They were fabulous places to go and bathe, really fabulous. So, like, where’s your sutro baths? Where’s Alchemy Springs going to be located?

Anne: [00:07:49] Yeah. So, Alchemy Springs is in a neighborhood, kind of the blending of two different neighborhoods. Technically, it’s lower Nob Hill area or sort of upper Tenderloin, right? So they call this neighborhood the Tendernob in San Francisco. And it’s a great up and coming area, right? You know, I think below the Tenderloin has really gone through somewhat of a gentrification. You know, the neighborhood can be a little bit rough, but it’s also been an opportunity for a lot of hospitality, sort of, restaurants and retail to come in. So, a lot of the coolest new bars and restaurants are sort of popping up around there. And then Nob Hill is a great more slightly more higher end neighborhood, tons of residentials, new developments, and then some hotels as well. And it’s about 10- to 15-minute walk west of Union Square, which is obviously sort of the tourist capital for San Francisco with all the hotels

Eve: [00:08:48] And what does the building look like that you’ve chosen?

Anne: [00:08:52] The building’s beautiful. It took us a while to find a building. We looked at so many different buildings, but this one is a 1919 masonry warehouse. A beautiful brick, gorgeous thick wood timber beams. It’s kind of two and a half stories. So, there’s a ground floor and then sort of the mezzanine above which we’re actually going to be raising the roof to create a sort of proper second floor there. And then there’s this basement level, which right now is sort of being used as a parking garage. But we’ll do some excavation and sort of turn that into the baths floor. But the thing that’s super exciting is that it has a 2500 square foot parking lot out back. So our concept has been able to translate into sort of an indoor outdoor flow in this space and being inspired by nature, which Alchemy Springs is, we can bring a lot of those elements, you know, both indoors and outdoors. So, we’re super excited.

Eve: [00:09:50] I’ve seen some renderings of this. It looks pretty fabulous. But maybe you could describe like what the building will contain or what you’re hoping it’ll contain when you, when it’s complete.

Anne: [00:10:00] Sure. I’ll walk you through the guest experience. It’s probably the best. So, from the street level, on Post Street, you’ll see a small retail boutique and there’ll be an entrance into the bathhouse. It’s going to be quite an inspiring grand entrance in that there’s a sort of giant living wall and double storey ceilings right as you walk in, A beautiful sort of rock carved desk area to sit with your friends or family that you’re waiting to go to the baths with. And you’ll check in. And then in the middle of this building is this gorgeous atrium that runs all three levels, with giant skylights at the top that just bring tons of natural light in. And there’s also tons of natural light from the back of this warehouse building. There’s beautiful, most of the walls are windows in the back, so tons of natural light. You’ll get your towel and your, you know, your robe and your slippers, and you’ll walk on either side of this atrium back to the locker rooms. And in addition to male and female, we also have gender neutral locker room and changing room. That was really important to us.

Anne: [00:11:01] So you’ll change and go downstairs to the bath floor. So, you can overlook the baths through the atrium from that locker room floor. But on the baths floor, we’ve got a series of different thermal pools at different temperatures that sort of wind along a path as if it was a river sort of built into these different platforms for accessibility and A.D.A. But we’ll have, on one end is what we’re calling the moon pool, which is going to be, sort of, you know, body temperature, sort of mild in temperature waters with a higher salt content, so it won’t quite be a flotation tank, but you will feel a little more buoyant in those waters, with a sort of domed ceiling above it that drops down a bit with lights and stars. And then lights in the pool as well with some sound. And then around this, the moon pool, and this is one of my favorite things that Lundberg Design, our Architect, has designed. We have a rain shower curtain. So, it almost creates a cave-like experience around the moon pool.

Eve: [00:12:14] Oh, fabulous!

Anne: [00:12:14] Yeah, I’m excited for that one. And then we have a mineral pool, which will be, kind of, mimicking the natural hot springs healing waters with all the minerals, which, you know, are very good for you. We’ll have then a sun pool, which is our warm pool. It’s not the hottest, but it’s warm. The sun pool, and that will be directly across from the cold plunge, which is kind of on this, you know, bath house circuit. You always want to move between the different contrasts of, you know, warm to cold or hot to cold. And then outside, we have a massage pool, which will be a lot of different water jets, maybe some different textures inside, rocks and things that you can sit on to sort of get that massage and that’ll be outdoors in a greenhouse. So that’s the pool part. We also have thermal rooms. So, we have a Himalayan salt cave. Think of it like a Finnish style dry sauna, but with Himalayan salt bricks and a kind of a salt nebulizer that brings amazing detoxification qualities. And then we have a snow shower. So, when you step outside of the hot salt cave, you can take a shower of snow to cool off before you get back in the bath. And then we also have an herbal infusion steam room, which we’ll do with different herbs that have, you know, different healing properties at different times of the day. So, waking up, relaxing,

Eve: [00:13:45] It sounds fabulous, so I want to move to like the financing. And when do you expect to open the doors?

Anne: [00:13:52] We expect the process from closing the capital to opening doors to take about three years. And so right now, we’re looking at probably September of 2024.

Eve: [00:14:03] And how long has it taken you to get to this point?

Anne: [00:14:07] Oh, gosh, there’s been a lot of stops and starts. It’s taken probably just shy of three years.

Eve: [00:14:17] So this is like a five-year project from inception to opening the doors. It’s a long time.

Anne: [00:14:23] Yeah, I think it’s taken many twists and turns. It started as something small. But as we looked into the business model for bathhouses, it made sense for us to actually do something on a bigger scale. Doing something on a bigger scale allows you to have both, sort of, drop ins for not non-members will say or tourists or anyone that wants to come in, but also have enough capacity to cater for members, because building that membership base in the community was really important to us and the bathhouses that exist today, they can’t really do memberships because their capacity is so small and you wouldn’t want members showing up and not being able to get in.

Eve: [00:15:07] Oh, well, I’m going to come back to that. But I do have to ask, so how much is this going to cost to build?

Anne: [00:15:14] Yeah. So right now, the total project cost is about 20 million. And the last sort of six months has been a pretty heavy and detailed due diligence process. My developer, Michael Jarne, has been an absolute gift to the team. He’s got a lot of experience in this. And there’s always that trade off of, how much do you spend upfront to minimize the risk. And, you know, he’s more on the side of, you know, this is a big project and, you know, somewhat unknown concepts in cities. So, we’ve taken the route of, hey let’s spend more and make sure we’re really clear on what this is going to take financially. And, also, you know, that we can do this concept in this space with the city. So, we’re feeling good about that.

Eve: [00:16:05] And then usual concept equals probably no bank interested? Is that right?

Anne: [00:16:13] I think the banks, you know, typically will want to see operating income, right? So, we’ve reached out to some lenders. We have a fantastic relationship with a bank here in San Francisco, does a lot of real estate stuff, and we’ve tested the waters for them of when in our sort of timeline, we might be able to to leverage that. And now most likely, that would be after we open doors. Right now, it looks like a very sort of good net operating income. And so, we would likely be able to get a loan off of that, you know, within the first few years.

Eve: [00:16:49] So, full disclosure, you’ve listed this project on Small Change as a crowdfunding raise for the first phase of it. So, that’s a pretty bold move in amongst all of this. Lots of bold moves here.

Anne: [00:17:06] Yeah, I mean, it felt right. You know, the essence of the Alchemy brand is positive transformation. And that ties back to this idea of alchemy, right? And, you know, we want our space to be a place where people feel transformed, right? But that’s also important to us as a company for our employees, right? We want this to to have improved people’s lives, right? So, there’s things we have, like we’re paying more than minimum wage and giving health care benefits to people that work, you know, I think it’s 30 hours a week, not 40. But the other side of that is that we want to make sure we’re positively transforming the community that we’re in. And so, for us, part of that was allowing San Francisco, or anyone, to own a piece of Alchemy. If it’s for the community, why should the community not benefit from us being here.

Eve: [00:18:07] I love that idea. So, I’m also going to ask you about, this is sort of an edge neighborhood, right? Between a pretty rough one, slightly rough, I don’t know, changing, and one that’s more established. And I’m just wondering how you’re planning to include that community in this space. And, you know, how that will work. I mean, if you’re really going to emulate that mayor’s desire to have a place for community, how does it look there?

Anne: [00:18:38] Yeah, there’s a few things that we’re exploring. And obviously, you know, it’s early days – we’re three years out. But there’s a couple of things. So, built in, right now, we have some sort of basic community programming of offering up our space before we open. So, our opening hours are 10:00 a.m. to 10 p.m. But there is an opportunity to give our back gardens. You know, we’ve got a sort of a Zen meditation garden and a back dining patio. We could absolutely offer that up to the community to host free events. We have a round-up at purchase, which we want to partner with local community groups and give guests the option to sort of round-up and donate to some groups that align with our sort of mission and vision and values. And then the third thing, which, it’s early days but I’m quite excited to pursue this opportunity, is almost sort of kitty corner to us. At the intersection of Post and Hyde, is at-risk Youth Navigation Center that’s just being developed. It was just rented by the city for 20 years. And when I learned about this, I spoke with one of our advisors, who’s the president of the San Francisco Chamber of Commerce and he said, you know, these centers have more bark than bite. And usually, neighbors are afraid that they’re coming into their neighborhood. But a big light bulb went off for me, that this was, actually, an incredible opportunity for us to partner with a group like that and provide job training, apprenticeships, you know, training these these at-risk youth in service industries. So, I’m incredibly excited to pursue that. And I think we could be a sort of model business citizen for how we embrace and support those centers popping up in our neighborhoods.

Eve: [00:20:32] Yeah, I’m sure you’re going to find lots of other opportunities too as you move along. You’ve barely started, right? What about some of the challenges you’ve been confronted with? You said lots of twists and turns. I think finding a building sounded like a really big challenge,

Anne: [00:20:47] Having been new to this, a few years ago, you know, there’s always this chicken or egg scenario you run into, which is, you can’t raise money without the space and you can’t get the space without the money. So, it’s this dance of timing and, you know, unfortunately, we’ve just missed out on some spaces when some of the, you know, initial capital couldn’t come through. So that was certainly one. And then another one was obviously Covid. There was a lot of initial sort of knee-jerk reaction to anything in hospitality and, you know, bath houses. And, you know, is that safe and clean? And, you know, from that standpoint we’re really lucky in that, you know, all of these spas and bath houses have had to convert a lot of their amenities and their procedures around hygiene to now meet new standards. Well, we can design from the beginning, so in a way, we’re three years out, right? So, you know, knock on wood, hopefully we’ll be out of this by then. So that was another major twist and turn. And then the other one on a on a personal level, which, you know, has deep meaning for me in this project, is a dedication to my mother who passed. And she passed away two years ago now, and she passed from cancer. It was her fourth one. She beat three different stage one cancers prior to that across ten years. But from her first cancer onwards, when she’d find out, she would go to Esalin, this beautiful retreat center in Big Sur, and she really found her acceptance and peace in nature. And that was absolutely a huge inspiration for Alchemy Springs and this sort of element of bringing nature indoors. And so, I promised her that she would have her own little heart shaped rock in our gardens and it would be one of her resting places for her ashes. So there has been nothing insurmountable. I have had the most incredible determination to make this happen in her honor so, from a personal standpoint, that was another setback. But also, what has super-charged me to bring this to life.

Eve: [00:23:07] I’m sure she’d be super proud of you.

Anne: [00:23:09] Yeah.

Eve: [00:23:10] So Alchemy Springs is a big new beginning for you. Right? But what’s your big hairy, audacious goal?

Anne: [00:23:18] Wow, what’s my big, hairy, audacious goal? I mean, I would love for Alchemy Springs to just be the first flagship location of a bunch of Alchemys across the country and to use this brand and these spaces as one of many ways to bring the community together around social bathing. So, there’s, you know, different communities out there for the spa industry and sort of the business end, but there are people across the country that are really into this ritual and little micro communities, you know, in all these cities, but we’re not all coming together as one. And so, another grand vision of ours is to pull this community together, you know, online and kind of connect the global bathing community across the U.S., maybe even internationally, so.

Eve: [00:24:14] That’s a pretty big goal.

Anne: [00:24:16] Yeah.

Eve: [00:24:18] Well, my goal is to come out there in three years and try it. So, that’s my goal.

Anne: [00:24:22] I know, I keep saying, phew, with this ride, I’m going to need it at the end of it. So,

[00:24:28] Yes, that’s right

[00:24:28] …selfish reasons. I’m going to need a spa at the end of this.

Eve: [00:24:33] Well, thanks so much, Anne. It sounds like a fantastic project. I can’t wait to see how it turns out.

Anne: [00:24:40] Thank you. We’re really excited and we’re thrilled to be raising money on Small Change. And I just can’t wait to see how it goes.

Eve: [00:24:48] Me, too. Bye.

Anne: [00:24:50] Bye. Thank you.

Eve: [00:24:56] That was Anne Nickel Cannady. Anne is challenging herself with a project that brings all her skills to play and more. The plan is ambitious – a social community bathhouse. The building is ambitious – the transformation of an historic warehouse into a biophilic wonderland. The location is ambitious – a neighborhood on the cusp of gentrification. And the financing is ambitious – she’s raising funds through crowdfunding on my funding platform, SmallChange.co. I can’t wait to see how it turns out.

Eve: [00:25:40] You can find out more about this episode or others you might have missed on the show notes page at rethinkrealestateforgood.co, or you can support us at patreon.com/rethinkrealestate for the price of a cup of coffee. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change.

Image courtesy of Anne Nickel Cannady

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