Rethink Real Estate. For Good.

Development

Waste to Energy.

Samuel Alemayehu is an experienced global serial entrepreneur and active angel investor. His work in the
past two decades has been guided with an obsession to empower the individual and sustain the village.
His current focus is running Frontier Resilient Capital (FRC) to incubate or invest in companies who are
developing or commercializing breakthrough technologies that empower the individual (personalized
web) and sustain the village (biomanufacturing, renewable energy, carbon capture and circular
economy).

Sam started his career in Silicon Valley as a serial entrepreneur launching two companies from his college dorm room. He first got introduced to venture capital at Venrock Associates, where he focused on consumer media investments. He then moved to Africa, founding and investing in numerous companies across the continent and in a range of industries through Cambridge Investment Group and most recently FRC. Sam incubated 4AFRI at Venrock before growing the platform in 12 African countries with over 25m customers. He then built a mobile gaming platform, LotoPhone, in 18 countries with millions of customers before exiting the startup in 2013. He also created Sen Sante in partnership with leading investment banks to help develop large health infrastructures in Africa with a mobile based universal health insurance. Sam created mobile solutions aimed at empowering the individual.

Over the next decade Sam incubated Cambridge Industries Ltd, East Africa Electric Ltd, and Contingent Technologies Inc. to accelerate the implementation of pioneering infrastructure projects in emerging cities. He set up the first locally manufactured wind study program in over two dozen sites throughout East Africa. He oversaw the planning, design and construction of the first municipal waste-to-energy facility in Africa, located in Addis Ababa, Ethiopia, as part of a pan-African sustainability city park project to industrialize the circular economy with the initial facility built at a cost of USD120m. The full project has created over 20,000 jobs and aims to employ over 250,000 before the end of 2030 in ten cities. Each facility is designed as a multi-purpose plant with numerous functions, including metal recycling, brick production, industrial steam, producing biodegradable plastic, and modern insect farming. Sam has recently invested in commercializing breakthrough technologies through projects in Uganda, Kenya, Cameroon, Nigeria, Ghana, Senegal, DRC, Somaliland, Djibouti, Botswana, Angola, Namibia, and South Africa.

Sam is an active angel investor globally and sits on the board of numerous companies as an investor. He also sits on three non-profit boards: the Ron Brown Scholars Program, KID Museum, and VC Include. Sam is a founding partner at Pitch and Flow, an innovative storytelling platform that uses the global appeal and power of hip-hop to showcase and celebrate the next generation of entrepreneurs. He is a graduate of Stanford University School of Engineering and a World Economic Forum Young Global Leader.

Read the podcast transcript here

Eve: [00:00:14] 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. 

Eve: [00:00:54] Today I’m talking with Samuel Alemayehu, born in Ethiopia and educated in the US, Samuel is a serial entrepreneur and investor focused on deploying technology as an equalizing force. “Let’s change the world to technology and products that empower the individual and sustain the village” says Samuel. Through his work with Cambridge Industries, Samuel is revolutionizing the way we think about sustainable energy and infrastructure. He built the first waste to energy plant customized for sub-Saharan Africa in Ethiopia, the Reppie Waste to Energy project. The project takes 80% of the city’s garbage and turns it into 25% of its electricity. Samuel has boundless energy and a lot to tell. So, listen in. 

Eve: [00:01:53] 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: [00:02:24] Hello, Samuel. Thanks so much for joining me today. 

Samuel Alemayehu: [00:02:28] Thank you for having me. Excited to be here. 

Eve: [00:02:30] Very excited. So, you have said “let’s change the world through technology and products that empower the individual and sustain the village”. And I’m just wondering how you’re tackling that? 

Sam: [00:02:44] Exactly. So that has been our mantra as long as I remember. And whenever you’re building any kind of product and services, it has to focus on the individual, kind of be usable. Does it improve our life? And most importantly, does it improve the community that we live in sustaining our village? And at the end of the day, this is a global village and we’re doing it one waste trash at a time and starting in emerging markets. And we have evolved to do many things right now. Um, but our focus has been how can we take something that has been a headache, a nuisance and convert it into a treasure, convert it into something of value and do it in a way that really addresses water treatment, sanitation, and most importantly, a vibrant circular economy in every city. 

Eve: [00:03:42] So this you’re referring to the Reppie waste to energy plant, I think first and foremost, right? 

Sam: [00:03:48] That’s the first facility we’ve done. 

Eve: [00:03:50] And that was, where is that located? 

Sam: [00:03:53] That is located in Addis Ababa, Ethiopia. 

Eve: [00:03:56] And that’s where you were born, right? 

Sam: [00:03:59] I was born and raised there, and I left when I was 14. 

Eve: [00:04:02] So what goes around comes around, I think. So, tell me tell me why. Why did you start this waste to energy plant? 

Sam: [00:04:12] So, a lot of people start projects or entrepreneurial endeavors for something they love. A labor of love. For me, it was a labor of hate. Hated the garbage in Addis Ababa. I, it’s just, it’s everywhere. Um, you know, you would think if you live in a wealthy neighborhood, it’s collected and taken out, out of sight, out of mind. But no, not for me. Not where I grew up. Like I remembered the garbage was everywhere. We picked around, it really annoyed you. And even in the area where it’s being dumped, it used to be the outskirts, but it’s smack in the center. It is not a modern, even, you know, landfill site, but it is something where we’re digging the ground and throwing this garbage. And it’s in a country that imports metal, that imports plastic, and we’re not recycling it, we’re not reusing it. And we’re not trying to come up with a way, want to address the health impact, the direct sanitation impact of the garbage, but also when this could be an opportunity to create something of value. And I, you know, I left Ethiopia when I was 14, did my high school in the D.C. area and then went to Stanford and then was a software engineer, did a bunch of different companies around software. So, when I came back to Ethiopia, I was like, okay, we need to do something about this and it needs to happen, and started working with those that have addressed it in Europe. But we wanted to create something unique for Africa because the waste was unique, the challenge was unique, the community was unique. 

Eve: [00:05:54] So how does the plant work? 

Sam: [00:05:58] So the first facility, because the overall concept is how do you build a facility that takes in garbage and creates value? That’s a purpose. And have minimal garbage out of it as possible? The very first facility that we built in Ethiopia, does combustion, but with a flue gas treatment, the same flue gas treatment that allows you to capture the nasty gases that would come out from burning it, because that allows you to reduce the significant amount of the waste and capture those gas through flue gas treatment as per the EU standard that allows you to be located within 100-meter radius of residential areas all over the EU. So that’s the standard that we followed. Then over time, when we’ve been implementing other projects, we started to add, hold on, for the food waste, how can we separate the food waste and what is the optimum value we could get out of food waste? And that was doing insect farming and that is taking the food waste, separating it and feeding it to black soldier flies that grow 230 times their weight within ten days. 

Eve: [00:07:06] Whoa.  

Sam: [00:07:07] And making that into chicken feed and fish feed and organic fertilizers. 

Eve: [00:07:12] Whoa. 

Sam: [00:07:13] So it becomes really, really incredible value-add. And then for the waste and then we say, ooh, what about the plastic waste? How can we separate plastic waste and recycle it in the most exciting way possible? So, we started working with scientists around the world that have been using new type of enzymes that break down the plastic, and that allows you to filter it and separate them. And then you say, what about once it has gone through the system? And if you are to use combustion and you’ve burned it, the ash that comes out, we could turn the ash into bricks. What about the metal that is in there? We use super magnets to separate out the metal. This facility in Addis right now alone is separating 3.8 million kilograms of metal every single year. 

Eve: [00:08:02] Wow! So, this plant does a lot more than one thing. 

Sam: [00:08:08] It does a lot of things within one facility. It is how do you take garbage, but how do you turn it into value? And one of those values is electricity. So, it is able to generate 185,000,000 kilowatt hours of electricity, which is the equivalent of about 20% of the household energy generated in a city of 5 million people. 

Eve: [00:08:31] Wow. 

Sam: [00:08:33] And then you have other byproducts, be it making interlocking bricks, recycling plastic, being able to create food waste and converting that into chicken feed, fish feed and other. So, currently, we’re in the process of building a new facility in Kinshasa, which is a city of 18 million people. It’s actually the largest French-speaking city in the world, double the size of Paris. 

Eve: [00:09:01] Wow. All these things I didn’t know. 

Sam: [00:09:05] You never know. And Kinshasa is this vibrant place. But we’re not using incineration and with the flue gas treatment, but instead, it’s fully entirely set up with what’s called anaerobic digesters. And we’re able to capture the gas and use the gas for energy generation as well as to replace household charcoal usage. 

Eve: [00:09:26] So what’s the… It’s a lot. So, what’s the long-term plan? I mean, how many plants, how much garbage are you tackling? I mean, how much more is there to tackle in Ethiopia? Are you seeing cleaner streets? I have lots of questions. 

Sam: [00:09:42] We are. We have seen cleaner streets, one, in the program that we implemented in order to collect garbage better. But most importantly, the challenge has always been disposal. So, our core goal is to continuously evolve and change with advances in technology so that, how can we create the maximum value from the resource? To us, the waste is not garbage or a waste. We like to call it feedstock. So, to us it’s a raw material that comes in and we say, how can we maximize the highest amount of value from this garbage and, or from this waste, from this feedstock? And the goal is to be left with almost no waste whatsoever. Right now, we still send about 2% of the garbage back into landfills, but everything else gets to be used to different values, but within one central facility. So, in Addis, it’s a city of 5 million people, it’s processes 500,000,000kg of garbage a year. And that’s the only facility we want to add other additional facilities next to it.  

Sam: [00:10:52] We partner with others as well. And it is a facility that we’ve built in partnership with the Ethiopian government. In Kinshasa, we’re fully owning the facility and we will be processing 3,000,000,000kg of garbage a year and really creating over 35,000 jobs in collection as well as disposal and, and other projects. But there are other cities, so we have feasibility studies in Gabon. We’re also working in places like Guatemala, Honduras, Nicaragua are the three places that we’re exploring in Latin America. We have a partner we’re working with in Bangladesh. We think the technology that we’ve put together, the system and it’s allowing even other innovators and entrepreneurs to plug in, into our existing infrastructure because we have the waste, if they come up with a better way to deal with, let’s say, battery waste or another type of waste, they could easily plug into our platform and be able to service and provide a circular economy solution. 

Eve: [00:11:57] So any plan for the US? 

Sam: [00:12:01] Uh, Eve, that is a good and interesting question. We do think we have come up with even better solution that could work for the US. But the US is tough. The US, because it really is bureaucratic. You have two companies that totally dominate anything that has to do, to be done with waste. That is Waste Management and Republica. If they want it done, it will be done. If they want to block it, they will block. 

Eve: [00:12:28] And if they want to hike up prices, they hike up prices. I bet they do that. Yeah. 

Sam: [00:12:32] Look at their stock! Their stock, for the past 20 years, they’ve performed better than many companies. 

Eve: [00:12:38] Oh, yes. 

Sam: [00:12:40] It’s a multi-billion-dollar enterprise.  

Eve: [00:12:40] I fired them on my little buildings because it was so expensive. It was outrageous. And… 

Sam: [00:12:47] I mean, one of the challenges there is the US is on track to have landfill that is the size of the state of Rhode Island. Throughout the US. And this is land we’re never going to get back. This is land where, you know, it’s just continuing. And they talk about, oh, we have landed the right way or the different… But this is a permanently wasted land. If you want to re-mine it, it is really challenging. But instead of coming up with newer solutions, they’re continuously rebuilding more landfill. But all is not lost. There are some companies that are doing some exciting projects, specifically around anaerobic digesters and the recycling of plastic waste. 

Eve: [00:13:32] I’m actually, I’m a little shocked to hear that, you know, that the management of waste is actually controlled by two companies in the US. 

Sam: [00:13:42] A supermajority of it. That’s correct. 

Eve: [00:13:45] That’s kind of crazy. 

Sam: [00:13:47] Well, a lot of things in the US are either a monopoly or a quadropoly. I mean, be it… 

Eve: [00:13:53] That’s a monopoly, isn’t it? That’s… 

Sam: [00:13:56] Yeah, that’s a duopoly. You know, and you look at grain supply. You have four companies, the ABCDs, you know, Archer Daniels, Cargill, and a few others that dominate, like there’s various sectors. 

Eve: [00:14:14] But if you were to go to a particular region or a city and say, we want to try this in your city, could those monopolies stop you? 

Sam: [00:14:28] If, because it’s long-term contracts. So, when it comes to the waste collection, they have a long-term contract. 

Eve: [00:14:36] I know, I fought with them about that. That’s actually why I fired them because I refused to sign long term contracts. Interesting. 

Sam: [00:14:44] There are places where the cities, because it’s regional, you don’t need something that needs to be done fully. Vermont, New Hampshire. California has put in requirements. So, EU does a lot of innovative work because regions make a requirement saying you cannot throw to a landfill, or the amount of money we give you is not going to be as much. Like if you pay less, it will actually will lead to more innovation. Because if they pay them enough, they can just throw it in there and they don’t have to worry about monetizing it in order to be competitive. In Ethiopia, we have to come up with all these monetization schemes because we are not making that much money. Like they would make about $100 per ton of waste, on average, it really does vary in different places. So, they don’t have to worry about it, but we do because we make less than $2 per ton of waste. So, we have to come up with as many ways as possible to generate revenue from the waste, and that is recycling it, that is putting it through a circular system. 

Eve: [00:15:44] That’s innovation, right? You get complacent when you make too much money. 

Sam: [00:15:49] Necessity is the mother of innovation. 

Eve: [00:15:51] Yes, I know. That’s exactly right. The city that, what city is this first plant in? 

Sam: [00:16:00] The one that we’ve done is in Addis Ababa, Ethiopia. Okay. 

Eve: [00:16:03] So what do the people who live there think? 

Sam: [00:16:07] That’s a good question. So, as the main facility, we do have great support because one of the things, Eve, is building the very first facility of its kind in Africa. I have as much challenges, I don’t think we have enough time on the podcast of the challenges that we have faced as implementing projects. 

Eve: [00:16:26] I’d love to hear about them. 

Sam: [00:16:28] But a lot of it is artificial challenges, as bureaucracies and when governments change, you know, they make it very, very, very tough. But what it has done is it has been able to remove garbage from just piling up in landfills. Landfills take a large amount of land, usually for a city of this size, it would be around 200 hectares every 20 years, every 25 years that you have to dedicate for that. And it needs to be within close proximity of the city or it’s going to cost you quite a lot to transport that garbage. So, with the city, we have gotten incredible support, but when bureaucratic changes happen, we have to continuously provide support and program for the community. So, those are some of the challenges that we’ve faced, is bureaucracy and government changing rules on you. But right now, it is going in the right direction. We’ve gotten a whole lot of support because at the end of the day it is providing much needed electricity, significant amount of job creation, but also turning something that was, you know, a problem into a significant amount of a solution and a treasure. 

Eve: [00:17:47] How many jobs have you created? 

Sam: [00:17:50] So when it comes to waste collection, in a distributed way, it’s 11,000 jobs have been created in Addis Ababa. 11,000. And then with the waste disposal system and the ancillary works, it’s about 850 jobs. 

Eve: [00:18:05] That’s quite a lot. So how quickly do you think, you know, the others that are in planning will emerge? 

Sam: [00:18:13] We do see half of those facilities up and running. 

Eve: [00:18:17] Okay. This is amazing. I’m sort of stumped for asking questions. So, what were some of the most unusual challenges that you’ve had? So, we all know about bureaucracy and you know that rules changing. 

Sam: [00:18:31] Let me give you a couple. One was initially. So, when we started operating the facility, a lot of the waste collection that was done, we implemented a per kilogram. That’s the international standard for waste collectors. And what we realized was as soon as we implemented that system, initially it was used to be just a monthly fee. A lot of the waste collectors would fill up the weight, so the weight all of a sudden increased. Oh, and it was a bit suspicious. And within a week we had to shut down the facility because half of the waste that we’re collecting was rock and dirt that have been dug up on the ground. 

Eve: [00:19:11] So those are all the entrepreneurs out there being entrepreneurial. 

Sam: [00:19:15] You do the incentive this way. So, we had to bring them back in and create a different set of incentives that really aligned with all of us and that had a trust-based system and a support system. So that was one of them that happened with waste collection. And another one that you face is there’s a lot of misconception around waste to energy. So, the typical incinerator of the past is not good for the environment at all because anybody could start a fire. Burning waste by itself is the worst thing you could do to the waste. But a modern flue gas treatment, the flue gas treatment alone costs us about $40 million of capex. And you see them all over Europe. There are over 400 of these facilities in Europe. In Denmark, over 95% of all the waste is processed through these facilities. But what they do with the flue gas treatment is a modern facility that is able to capture what would have been emitted and convert it. And so, educating that part was quite important. But the more work that we continue to do, we even found more innovative solutions that were way more superior, both financially and environmentally, to even the combustion process that even Europe uses right now. Which is being able to separate the waste as much as possible, using enzymes to break down those wastes to their individual values, to include projects like insect farming. That allowed us to really maximize the value of every single bit of that waste. And so those were some of the innovative projects that came out from the challenge of this legacy brand that incineration had addressing that, but also really growing away from it because of a lot of the innovations that are out there. 

Eve: [00:21:18] So when you separate out the trash, how do you do that? And I’m asking because I interviewed someone in Norway who had created these robot waste pickers that were just fascinating for large objects and small ones. 

Sam: [00:21:35] So, we use humans and kind of separation systems because we need to employ. You could use robots, we have systems, we can employ robots as well. But in Africa we need as much of the jobs as we could get. We provide safe environments and usually we do it three ways. One is to separate them at source as much as possible. Two, once they have arrived on site conveyor belts and to be able to separate them. The first facility that we did is bulk, so we didn’t need to do the separation and the separation is done using super magnets or other parts at the end, but earlier is using as much of human power as possible. But when it comes to, for example, metal, we use super magnets. For non-ferrous metals we use eddy current technologies. With plastic, once we have plastic waste, we actually have, you’ll like this. So global plastic recycling in the world is abysmal. It’s 8/10% maximum. A lot of the waste makes it to landfills and waste disposal sites. The reason that Europe and US have a higher calorific value, meaning its ability to generate energy is higher, is mainly because of the amount of plastic and paper that makes it to those waste to energy facilities as well as disposal facilities. A huge number. Because it doesn’t get recycled and it’s a shame that it doesn’t get recycled. It makes it to waterways as well. It’s a detriment for different things. So, what we have done is we take out plastic waste separately together and then all of the plastic, we don’t separate the plastics. We introduce an enzyme. This is a technology that was developed in University of Texas Austin and a team out of University of Nottingham. And this enzyme that they have breaks down the plastics to its individual components and then we’re able to use a specialized membranes that allow us to filter the different chemical compounds of the plastic individually, separately. And you can maximize the recycling process to up to 80/85%.  

Eve: [00:23:49] Wow.That’s a big difference. 

Sam: [00:23:51] And something, once it’s scaled, could be a game-changer. 

Eve: [00:23:54] Yes. So you must have a lot of scientists and software engineers and other people involved in this project. 

Sam: [00:24:03] We do. We work with scientists both as subject matter experts that advise us, but also in our team. We’ve also been early adopters for a lot of scientists that are working in the waste sector, because one of the advantages of emerging markets compared to Europe or US, usually is, when you want something to be adopted in the US, you go head-on into legacy companies that are usually well capitalized and very powerful. So very hard to change it. Or as a legacy infrastructure that is already a sunken cost that somebody will lose money to adopt a new technology. So there quite a lot of hesitation. But for us in an emerging market, that infrastructure hasn’t been built yet. So, when somebody comes up and say, I have the solution, it’s new. It’s like, we raise our hands quickly and say we will adopt. Can we work? So, we have been early adopters to a lot of this technologies that allows us to start working with them to even invest in them. So, when they come back into Europe, US, we’ve had an opportunity to really have a seat and be a player in a lot of these emerging technologies. 

Eve: [00:25:17] It’s really fascinating. It makes me want to go to Africa. 

Sam: [00:25:21] You’re welcome. We would love to host you. 

Eve: [00:25:25] So, yeah, it’s very difficult when you’re up against a system, right? And you’ve probably seen that in your other work as a VC because, you know, I’m the 1.9% that you would invest in, a female, right? And then if I were black, I’d be the 1%, right? And that’s just, you know, that’s a system that’s very difficult to break through to. There’s so many of them. 

Sam: [00:25:52] Oh, absolutely. Yeah. 

Eve: [00:25:54] And zoning, like in my world, in real estate, you know, zoning has really shaped the physical landscape in the US and not always, sometimes in a good way, sometimes in a very bad way. Right now, it’s a detriment to really building new affordable housing quickly. But breaking through it, there’s so many layers, there’s so much to go up against so I totally get it. But you’ve also been, you’re also part of something called the Power Africa Initiative, which was set forth by the Obama administration to work on large-scale wind farms in Africa. Can you tell us about that? 

Sam: [00:26:30] Yeah, so the Power Africa Initiative was something, as you said, that the Obama administration spearheaded, and it’s to support and assist renewable energy adoption throughout the continent of Africa. So, our collaboration with them is in the support of wind farms in a place called Aysha, and different parts of Ethiopia. But we’ve also worked with them in putting up wind mass to select and identify the best wind locations. So wind is one of those renewable energy technologies where location matters, just like real estate, location, location, location. And if you have the right type of location, the investment return on it, as well as its impact, its ability to generate electricity, you can go to a site where it’s generating maybe 15% of the time effectively, or you could have some of the sites that we’ve worked with in Aysha and another site called Lake Turkana in Kenya, on the border of Kenya and Ethiopia, they have plant factors as much as 65 to 70%. 

Eve: [00:27:38] Interesting. 

Sam: [00:27:38] That means for the same one wind farm that you have in there, it is operating and generating electricity at full capacity for 65% of the time. 

Eve: [00:27:48] That’s amazing.  

Sam: [00:27:50] That’s a significant amount of return. So, it’s identifying those sites where what we’ve worked on and what we have realized is, you know, especially with climate change and climate adaption, it has to be incorporated with where humans are located. Where are the load zones, how can we get them, how can we help them with energy transition? How can we use waste problem as a means of addressing the environment problem? Because one of the things is, you know, the same way you could emit a significant amount of carbon dioxide through gas fired power plants or, you know, diesel fired power plants, you also generate a significant amount of greenhouse gases in a landfill. Landfills around the world are responsible for that. So, the way we looked at it was energy transition, circular economy, they’re all very similar in addressing climate change. And if you are to do it where the development is happening, so that when energy, when new housing is built, you plug in. Hey, it needs to have a waste solution. If you have a good waste solution, if you have a reliable energy source, then the quality of living in those new housing projects becomes very attractive. So, we work with developers very closely to make sure that we are their partners, both for recycling and circular economy waste management as well as renewable energy supply. 

Eve: [00:29:17] I was going to ask you how could your model be improved? But it sounds to me like you’re thinking about that every moment. 

Sam: [00:29:24] No, because you can always improve. You know, Eve, the one thing that just heartens me right now, given all of the challenges that are out there, is advances in science and technology. Everybody’s talking about AI, ChatGPT, but what AI has done to plastic recycling, to the way we’ve been able to create a lot of these enzymes is because of AI. The ability to simulate the right type of wind locations, steady multiple sites at the same time. So, a lot of technological advances have made it very, very attractive to start addressing things. So, what we do is, we always have our ears, so as you alluded, my day job now, I’m still on the board and a majority owner of Cambridge, is in a new VC fund called C1 Ventures. Our work is, how do you continuously find, identify and collaborate with entrepreneurs and scientists that come from different environments? Because a lot of solutions, as you said, women get less than 2% of the global VC funding, minorities because… But at the end of the day, female entrepreneurs have performed better than any other entrepreneur out there. But if we want to find a solution, so how do we use the technologies? How do we bring individuals from different fields and put them in the right location, connect them with implementation projects, connect them with the right services? And if you could do that, innovative solutions are going to come up. Some of them, they use technology, some of them they’re going to innovate socially, business model innovation. But you need the diversity of thoughts. You need the diversity of experience. 

Eve: [00:31:14] Yeah, I agree. So, tell me what’s going on with real estate in Africa? 

Sam: [00:31:20] I am glad you asked that. Let me give you two stats to just show how real estate is extremely important in Africa and very dynamic. One is, for the next 15 years, the top ten fastest growing cities in the world are all in Africa. 

Eve: [00:31:37] Oh, interesting.

Sam: [00:31:39] We have…  

Eve: [00:31:40] Except for Melbourne, Australia. 

Sam: [00:31:43] Well, no, as a city it doesn’t even come close. 

Eve: [00:31:46] Oh, I think it ranks, it’s really. No, I read somewhere it was the second fastest growing city in the world, so I’m not sure… 

Sam: [00:31:52] For the next 15 years – I’ll share with you the UN study. 

Eve: [00:31:55] Okay. 

Sam: [00:31:56] Exactly. And I want everybody to take a look at that. But it is, it’s incredible. 

Eve: [00:32:02] It’s exploding. 

Sam: [00:32:04] It’s a young population, but a lot of the cities have the infrastructure and the housing. So, for example, take Addis Ababa. It is, it has the infrastructure and the housing made for 500,000 people. But it’s a city of 5 million. It is growing at a much faster pace than the city was ever designed for because we’re talking about Ethiopia as a country in 1990 had a population of 42 million. Right now, we’re a population of 120 million. 

Eve: [00:32:33] Wow. 

Sam: [00:32:34] So, a much, much faster growth where infrastructure hasn’t kept up. So, there’s a huge demand for housing. And the more housing you just patch in, that is a strain on the infrastructure because the infrastructure needs to also be designed for that. So, you have an opportunity to build smart cities, to build self-sufficient communities. You’re starting to see innovative solutions that are trying to adapt local building materials instead of importing building materials or using traditionally Western building materials and steel or cement. There are modern mud houses that are incredibly beautiful and well designed for insulation, in country. You will see adoption for modular construction. You’re starting to see, and we have supported and funded a project, for example, in Nigeria, a project called Butterfly Island. 

Eve: [00:33:33] I’ve talked to him, yeah. 

Sam: [00:33:35] Yeah, a small city where they’re building really exciting communities of, a community of 100,000, a community of 50,000. But anybody that is working on modern building technologies, brand new way of building, building materials, they need to go to Africa. We have more cement factories, more building material factories being built every day. You have companies like, Brimstone Energy that have reinvented the way we make cement. So, Brimstone is, has designed, and this is a couple of scientists from Caltech, that have taken instead of having limestone, because when you want to make Portland cement, limestone is your raw material. Limestone, you heat it up, it automatically generates calcium oxide, which is what you need for, Portland cement, but also carbon dioxide. But they replaced it with calcium silicate, which is black rocks. And they’re are 200 times more abundant than limestone. But when you process calcium silicate, you’re able to produce Portland cement and silica, but in a carbon negative process. 

Eve: [00:34:46] Interesting. 

Sam: [00:34:46] We’re starting to see more of those type of cement facilities that are entirely reimagining, again, the same identical Portland cement, but reimagining the way it’s made. They will get adoption in Africa. The housing demand in Africa is high. Every government, every government that is going through an election, the one thing that they’re asked, the one thing that they keep on promising, is affordable housing, affordable housing, affordable housing. Jobs and affordable housing are the bottlenecks but they could also be an innovative linchpin for some of the most exciting business models, some of the most exciting building materials companies to come up and build housing the right way. 

Eve: [00:35:29] So, for a real estate entrepreneur like myself, I love seeing new things. I’ve never been to Africa. I’ve traveled all over the world, but not Africa. What would be the first place you’d suggest I go? I love cities. 

Sam: [00:35:41] I’m biased, of course I’d like you to go to Ethiopia first. Ethiopia, Addis Ababa and explore what Addis Ababa has done. I mean, this is an open invitation. We would love for you to also go to Kigali. They’ve done a really good job of being a welcoming environment, specifically for housing entrepreneurs. You get tax benefit, tax holidays like ten, 15 years, tax holidays. Gabon is another really exciting place, Senegal. And we could share information around, kind of, the governments that are being quite open to attract investment, to attract entrepreneurs to come and build their creative solutions. I’ll be remiss not to mention, for example, what Habitat for Humanity is doing, Jonathan’s leadership there with innovative platforms to attract and bring in building technology innovators together and accelerate them, but also collaborate with them to build. So, it’s an incredible place. Africa is very, very beautiful and welcoming, and we would love for you to come there. 

Eve: [00:36:52] Well, it’s risen to the top of my list after this conversation. 

Sam: [00:36:56] We need, yeah, we need to get you out there quickly. 

Eve: [00:37:00] So I’m going to go back to your background. You were born in Ethiopia and you emigrated to the US. I watched the little video clip when you were accepted to, I don’t know how many universities just four years after you arrived. That was pretty amazing. So, what took you from that early beginning to where you are today and the path you’ve chosen in your life? 

Sam: [00:37:24] Oh, that’s a really good question. You know, one thing I would say is, for me personally I have been the beneficiary of the generosity of strangers. I have asked for help. It’s just all of us need luck. My story would not have been possible if I had stayed just in Ethiopia. The American opportunity was incredible. But even my opportunity in the US would not have been possible if it wasn’t for individuals that are just asked and that have transformed my life. So let me give you just a couple of examples. One was, so when we came to the US, my dad used to be minister, uh, head of transportation in Ethiopia, and he was a prisoner there as well, a political prisoner and came here and was driving a taxi in DC. 

Eve: [00:38:17] Oh. 

Sam: [00:38:18] And he was also a Parliament member. From being a Parliament member and as minister to being a taxi driver. But but one thing he wanted for us is to get a good education. He was like, I’ll do my work and my mom as well. When my mom was a teacher in Ethiopia, became a parking attendant. But when he was driving his taxis one day and this was like six months after we have arrived, this was in 2000, I was 13 turning 14 in 2000. And a passenger in his taxi, a random white guy, was having a conversation with him. And and my dad was like, I want my kids to go to the best schools. He didn’t even know which one was the best schools. And this guy said oh, that’s wonderful, like, does he like engineering? And he was like, yes, yes, yes, he does. And he was like, oh, I read in my alma mater at MIT, there’s this Ethiopian kid that did his undergrad at MIT. Now he’s about to do his PhD. His name is Solomon Assefa. You should reach out to him. And my Dad writes the name, comes home to me. He’s like, you need to call this guy. So, I went to the MIT database, found his name, send him a random email saying, oh, you don’t know me, just arrived in the US but would love to go to this place called MIT. 

Sam: [00:39:31] I wasn’t even sure. And guess what? 24 hours later I get this two-page, like detailed, what became my blueprint of like, good thing. If you’re very serious, this is what you need to do. Take the most challenging classes. These are the various things that you need to do – da, da, da, da, da. Boom, printed it, put it on my wall, and that was my blueprint. And the fast forward, four years later or three and a half years later, I was fortunate enough, and there are so many others, my teachers at my high school and others I said, I want to do this, can you help me? Boom, they were there. After school. Then, became valedictorian of my school and got accepted to all of the top schools and then I reached out to him saying, you don’t remember me, but three and a half years ago, you really changed my life. You told me it was possible and that I could do it. I followed that blueprint. It worked, and I’m about to come for an admit weekend at MIT, would love to meet you. Then the guy goes oh, my God, [inaudible] I’m so glad. So, we met and we’ve been kind of really good friends ever since. And he’s… 

Eve: [00:40:40] That’s wonderful. 

Sam: [00:40:41] Yeah. My partner in our venture fund now, again, the generosity. Going out there and asking. He had, for the projects that I did when I was at Stanford. Nobel Prize winner Dagga Shroff, who won the Nobel Prize in 1992 for Superfluidity of Helium, became my partner in a project that we did where we helped kids. In East Palo Alto, learn science and technology by transforming golf carts. 

Eve: [00:41:08] Right. 

Sam [00:41:09] And so a lot of time the key thing is going out there and asking has been has been the thing for me and giving back. 

Eve: [00:41:16] Do you think that generosity is unique to America.  

Sam: [00:41:21] From strangers? No, it’s not. But America, the opportunity merged with the generosity to help. Unlocks incredible opportunities. 

Eve: [00:41:31] But speaking to you, Samuel, I’m sure they got a lot out of it, too. It wasn’t just generosity. So, but… 

Sam: [00:41:39] But for most of them, it came out with no currying favor, or looking ahead. Yes, they really wanted to help. And yes, like, we became great friends and we’ve invested together and we’ve done stuff. And, you know, a good mentorship is rewarding for the mentor as well as the mentee, the sponsor. And we all need to do that out there. But in the US, the opportunity, taking advantage of those really generous connections and supports have been very, very helpful for me. 

Eve: [00:42:14] A couple more questions. What’s the entrepreneurial space like in Africa? 

Sam [00:42:18] Again, another really good question and want to be careful in how I answer it because everybody, like a majority of Africans, are entrepreneurs by necessity. Every subsistence farmer is an entrepreneur, that owns his own little land. You go to the city, be it the shoeshine boy or others, they’re all entrepreneurs. There’s a difference between entrepreneurial by necessity, because there are a lot of them that will tell you, I won’t trade that for a steady job and for a predictable way that could support my family. But it’s built that entrepreneurial spirit. It’s about survival. Life is challenging in many parts, but there is ingenuity.  

Sam: [00:43:02] Incredible ingenuity, sadly, is not met with resources. So they are not able to scale up what they could do. But recently you’ve also seen entrepreneurial spirits flourishing in the tech sector, in the mobile sector. Where, you know, the best mobile money project came out of Africa with M-Pesa out of Kenya. You have a lot of innovative solutions from farm tech, agritech and insurance tech that are just flourishing all over the continent. And it makes the continent have a very dynamic path, and it’s entrepreneurship that will take it to the next level. But what it lacks is the resources, funding, mentorship from other businesses. There’s angel investment and risk capital from those that have done it. It’s not there as much. It’s still family and friends, and it’s very, very challenging expecting somebody to be able to do that. 

Eve: [00:44:03] Yes, it is. 

Sam: [00:44:03] Structures need to be in place, but that, it’s there. It’s the entrepreneurial and it’s a young, young continent. More than 50% of Ethiopians are under the age of 15. 

Eve: [00:44:16] That’s really interesting because, you know, necessity is the mother of invention. I grew up in Australia when it was, I think, much more entrepreneurial, now Australia has become very wealthy. It’s an amazing place, absolutely gorgeous. But I think with wealth comes complacency and less entrepreneurship. And that’s, there’s this is wonderful sort of balance, right, you’ve got to get to to keep new things happening, I think. 

Sam: [00:44:45] No, you’re absolutely right because I mean, take the US, you have places like Silicon Valley and Austin and parts of pockets of the US that have been quite entrepreneurial in the tech sector. But we need entrepreneurship everywhere. We need, and you’re right, like, it does breed complacency and we’re starting to see climate change is really putting a bit of a fire on many people. You know, scientists that would have been comfortable working in a big company are very much demanding to go out there, and they’re quitting to start their own companies. 

Sam: [00:45:29] So I think we want innovation to happen in every sector. You know, sadly a lot of Internet based or software-based innovation limits itself in a few sectors, but we want to transform the way cement is made. We want to transform the way steel is made. Agriculture has been stuck. It’s a 10,000-year-old technology. If Jesus is to come back, we still make things exactly the same way, our protein and carbohydrates. But there are better ways and we’re starting to see them and we’re starting to see this extremely unprecedented excitement to reinvent the way we do things. 

Eve: [00:46:04] So one more question for you, and I’ll leave you alone. What keeps you enjoying it? What keeps you up at night? 

Sam: [00:46:12] So, well, the main one is am I being a good dad? So, I’ve got three kids. Dad, that has been the biggest job, the biggest project I’ve ever undertaken. 

Eve: [00:46:23] It’s A very big job, yeah. 

Sam: [00:46:24] That keeps me up at night. The other one is, you know, I kind of, I’ve been extremely fortunate in my life to have traveled a lot to really call the US and Africa and even parts of Europe, my home and at the end of the day, we are a global citizen. But at the end of the day, a lot of innovations and advances, there’s a lot of waste in certain places, but shortage in many other places and there’s this disconnect and you feel hopeless. It’s like, how do we connect it? Because it’s just even food production there’s excess here in the US and Europe and there’s shortage in many parts of the world, but there’s enough that is already being made. 

Sam: [00:47:11] How do we create that equality and equitable sharing and innovation and growing together, but connecting and shrinking our village to this global village of the human tribe. It’s something that we all, you know, aspire to see. Sometimes you get, you’re very proud that things are going in the right direction, and at times you’re really depressed because we’re really separating even further. 

Eve: [00:47:39] Yeah, it’s not really a global economy yet, is it? No. Well, this has been absolutely delightful. Thank you very much for joining me. I’ve thoroughly enjoyed myself. 

Sam: [00:47:48] Thanks for having me. 

Eve: [00:47:50] I can’t wait to hear more. 

Sam: [00:47:52] Absolutely. We’ll be looking forward. Thank you so much. 

Eve: [00:48:06] I hope you enjoyed today’s guest and our deep dive. You can find out more about this episode or others you might have missed on the show notes page at RethinkRealEstateforGood.co. There’s lots to listen to there. Please support this podcast and all the great work my guests do by sharing it with others, posting about it on social media, or leaving a rating and a review. To catch all the latest from me, you can follow me on LinkedIn. Even better, if you’re ready to dabble in some impact investing, head on over to smallchange.co where I spend most of my time. A special thanks to David Allardice for his excellent editing of this podcast and original music. And a big 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 Samuel Alemayehu

Great streets.

I live on a not so great street. It’s a shame because it could be really great!

My side of the street is filled with small storefronts, bars and restaurants. There is lots to see from the sidewalk and there are lots of places to stop along the way. The other side of the street is filled with a monolithic building that has no retail (or other) activity at all. And the next block down is no better since it’s filled with a parking garage.  

No amount of street furniture, trees or landscaping will solve this fundamental problem. No-one wants to walk on the other side because it is boring and painfully empty. You’d be a solo pedestrian and no-one wants to be that. Even worse, the street is wide and inhospitable. There is no canopied median strip and there are no bike lanes. Crossing is not a leisurely stroll. It’s a hurried dash from one side to the other.

Really great streets are hard to find. Both sides must entice you to zig zag from one end to the other, making sure you haven’t missed any delectable place to stop along the way. Some of my favorites include Campbell’s Parade in Sydney, Australia with Bondi Beach and it’s bronzed surfers on one side and endless places to eat on the other; Istiklal Avenue in Istanbul, jammed with pedestrians, lined with stunning architecture and full of things to do day and night; and Flinders Lane in Melbourne. It’s just a tiny alley, but stuffed full of exciting shops and restaurants. I can never get enough of it.

What’s your favorite street?

Parking minimums gone!

The pandemic shone new light on the value of urban land. Climate change has also prompted some serious thought to the role of the car in the urban landscape.

In Montreal a parking lot has become a children’s playground. In Winnipeg several have become popular beer gardens. In Toronto, a 100-unit apartment building is replacing a downtown parking lot. 

We are witnessing the gradual dismantling of the idea that more parking is better.

There is some local pushback, because change can be hard to understand at first. But the trend is accelerating. After all, is a parking lot the highest and best use in a dense urban neighborhood?  Surely not! 

Now both Canadian and US cities are eliminating parking minimums completely. These minimums force developers to include parking based on anything but rigorous standards.  And they are expensive.  

The removal of parking minimums holds great promise. Some outcomes I expect to see?  Better quality affordable housing. Pedestrian-friendly streets.  Lots more outside dining. Long-vacant urban lots finally redeveloped. 

Here’s the article that got us so excited.  Want to read more like this?  Follow Eve on Linkedin.

Foot traffic ahead.

Christopher Leinberger has had a singular career embedded in urban land use issues – as a strategist, teacher, developer, researcher and author. Recently retired from academia, he most recently taught at George Washington University as the Charles Bendit Distinguished Scholar & Research Professor and chair of the Center for Real Estate and Urban Analysis. His new venture is a startup, Places Platform, developing tools and methodologies to measure economic, social equity and environmental conditions in cities and metropolitan areas.

Growing up in the 1960s and 70s, Chris learned early the value of connecting coursework and theory with hands-on community engagement. Although he first put his business degree to work in the corporate world, Chris found he wanted to run his own organization and opted to take over management of Robert Charles Lesser & Co (now RCLCo), a one-office real estate consulting firm in Southern California, first as executive vice president, then as an owner and managing director. By 2000, RCLCo had become one of the largest real estate advisory firms in the U.S., with four offices nationally. Chris then moved to work as a developer full-time, co-founding the Arcadia Land Company, for which he is still a managing partner.

From 2005-18, Chris served as a fellow at Brookings’ Metropolitan Policy Program researching, writing and speaking on issues of walkable urbanism and metropolitan governance. He also helped found LOCUS (Responsible Real Estate Developers and Investors), serving as president from 2008-16, to help push political advocacy at the federal and regional level for a walkable urban future. In addition to George Washington University, Chris has taught at the University of Michigan, University of New Mexico and Harvard Graduate School of Design. He is the author of two books, Strategic Planning for Real Estate Development Companies (1994) and The Option of Urbanism, Investing in a New American Dream (2008).

Key findings from  Foot Traffic Ahead 2023 include:

  1. To paraphrase Mark Twain, the reports of the death of walkable urban cities and towns are exaggerated.  Walkable urban places still have substantial price (rental rates and sale price) premiums over drivable sub-urban areas as of the end of 2021, the trough of the pandemic. The premiums are 35-45% for office, retail, rental housing and for-sale housing. In FTA 2019 the price premiums were 40-50%…so down by 5 percentage points but still substantial. Plus, all 35 metros saw their walkable urban places gain market share at 2.8 times their 2017 market share…which means drivable sub-urban places lost market share. 
  2. We know for the first time ever that in the top 35 metros, only 1.2% of the metro land mass was walkable urban…in almost all of the other 98.8% of land, walkable urbanism is illegal, due to zoning and NIMBY opposition.  We need to increase the walkable urban land to 6-8% of metro land use, so as to drive down land prices to make it more affordable.  Our research shows that the bulk of the reason for the affordable housing and homelessness crisis is extraordinary land costs, which is created by the obsolete zoning and NIMBY opposition to housing production, especially walkable urban housing.
  3. This tiny sliver of land, 1.2% of the top 35 metros, generates nearly 20% of US GDP!  This sliver of land is even smaller when you realize that it is 0.07 of 1% of all US land, which produces such a large share of US GDP.  Plus, 7% of the US population live in this tiny amount of land.
  4. Past research shows that walkable urban places almost always generate a net fiscal impact for local government, while most drivable sub-urban places have to be subsidized, even high end subdivisions need subsidy.  Building more walkable urbanism is the best way to keep local government fiscally healthy.  Arlington, VA is a national model for this since they have 10% of their land mass built out as walkable urban.  This walkable urban land has created huge financial support for their nationally outstanding schools, in spite of the fact that Arlington has a large immigrant community with 80 languages spoken in their public schools.
  5. The 8 highest ranked walkable urban metros are Metro NYC, Boston, Washington, DC, Seattle, Portland, San Francisco, Chicago and Los Angeles.  Metro LA may be surprising to readers…it is due to their investment in rail transit ($180 billion, by far the most in the country) but also the urbanization of the suburbs (Pasadena, Glendale, Santa Monica, Long Beach, etc.).  However, they did not fare as well in social equity ranking.
  6. On social equity, we demonstrated that highly ranked Metro NYC and Washington, DC rank very high…showing you can “do well while doing good.”  However, rising walkable urban LA is also dead last in social equity…lack of high density zoning around their new rail stations which continues to crush the dreams of low and moderate income households for affordable, transit-served housing. 
Read the podcast transcript here

Eve Picker: [00:00:10] 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. And speaking of building better, I’m very excited to share that my company, Small Change, is now raising capital through a community round that is open to the public. Small Change is a leading equity crowdfunding platform for impact investment in real estate. For as little as $250, anyone 18 and over can invest in Small Change, helping to fuel our growth as we disrupt the old boys club of capital that routinely ignores so many qualified people and projects. Please visit wefunder.com/smallchange to review the full details of our raise and to make an investment if you can. And remember, investing is risky. Don’t invest more than you can afford to lose.

Eve: [00:01:45] Is the city dead? Christopher Leinberger doesn’t think so. He recently co-authored a report called “Foot Traffic Ahead 2023” that loudly proclaims the city is not dead. Post-pandemic price premiums and increased market share dominate walkable urban places. These findings may cement walkable places as the wave of the future. They point to us moving toward a more connected, environmentally sustainable way of life. Christopher has a storied career in real estate policy and development. His most recent project, Places Platform, is an information services company that tells you what location, location, location is actually worth. You’ll find a more detailed bio and report highlights on Rethinkrealestateforgood.co. Listen in to learn more. 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: [00:03:08] It’s nice to have you back, Christopher.

Christopher Leinberger: [00:03:11] Glad to be here.

Eve: [00:03:12] So, the common theme in your development work is the one you discovered when, I remember you said this, you were eight years old. The value of well-developed, walkable, urban land. And how did that walkable theme just come to take such center stage in your professional life?

Christopher: [00:03:33] Well, at first it didn’t. When I was first running, Robert Charles Lesser and Company, the largest real estate consulting firm in the country. And this is back in the bad old 1980s. And all that we were doing was drivable suburban master planned communities and stuff that I really didn’t like. But I just said, hey, the market wants it, got to give it to them. But then by the late 80s, early 90s, I remembered my growing up in Philadelphia and, you know, a lovely place Rittenhouse Square is and other great walkable urban places. And how come we weren’t building these places again? And then the market in the 90s began to accept walkable urbanism. I explain it that the pendulum went from only wanting drivable suburban, moving over to demanding walkable urban once again. So, I was thrilled that the market came around to where I would like it to go.

Eve: [00:04:39] I even remember that Urban was a not a good word to describe it.

Christopher: [00:04:44] That’s really true. I did a cover story for The Atlantic calling; How Business is Changing America. It directly led to the book Edge Cities that Joel Garreau wrote. You know, Edge City was basically this article, two, three years later in book form. And the managing editor of The Atlantic, I was calling them urban villages then. And he said, don’t use urban. That means it’s depressing, it’s never going to get fixed. It means it’s heavily minority. Nobody wants to talk about that. Well, we’re back to urbanism is cool.

Eve: [00:05:23] Urbanism is very cool. So, but why is walkable so important?

Christopher: [00:05:29] Well, transportation drives development. And for the last 10,000 years, we’ve been building cities. The transportation system or systems you have dictates what you build. So, with drivable sub-urban, it’s all cars and trucks. There’s no other option. With walkable urban, you can get to these places by cars and trucks or by freight rail or by transit, by bus, by bicycle, by walking there. But once you’re there, everything you need is within walking distance. And it just changes your life. It’s just a fundamentally different lifestyle. As anybody who has experienced both ways of building the built environment, because that’s all there are. There are just two, drivable suburban, walkable urban. Within each of those, there’s a whole spectrum of different ways of building. But they’re two fundamentally different ways of using the 42% of our wealth that we put into real estate.

Eve: [00:06:34] And I suppose it’s become much more important as climate change has become much more dominant because we want to find ways to leave our cars at home. Right?

Christopher: [00:06:43] Exactly. Everybody understands that walkable urban is crucial to the environmental efforts that we must undertake. What they don’t understand is that it’s the number one thing to do as far as addressing climate change. It’s number one.

Eve: [00:06:59] Oh, that’s interesting. So, you’ve now launched Places Platform, which I think I heard you say you hope will become the Bloomberg of real estate and the built environment. And tell me about that. What do you hope to accomplish with Places Platform?

Christopher: [00:07:14] We hope that this will be a decision-making engine for anybody, making a decision about how to invest or reinvest that 42% of a country’s wealth. It’s the largest asset class in the economy, and it’s all of our real estate, it’s all of our infrastructure. And it is critical to our economy. And right now, we don’t have a way to intelligently make decisions based upon the mixed-use nature of this world. We have silos in for sale residential, a silo in rental apartments, a silo in retail. Places Platform looks at all real estate product types and allows you to understand at the place level, at the dirt level, on up, where should you be making investments? Where should you be disinvesting? And what does it mean for social equity? And what does it mean for the financial health of our local jurisdictions? All of these questions are vaguely understood by the participants. We hope to give them a tool on their desktop to make these decisions in real time. It could even be used in a public meeting saying, what if we double the density of a place? What if we put in not rail transit but bus rapid transit? What will that do to the economics? What will that do to the net fiscal impact for that jurisdiction? Will it make the local government money? So, that’s what we hope to do.

Eve: [00:09:00] So, how far have you come in building the platform?

Christopher: [00:09:03] We have the 35 metros that we have all the real estate data for sale, housing, office, retail, industrial. We are moving it very rapidly to 100, the largest 100. And within a year we’ll have the entire country. So that, you know, we’ve been doing a lot of work in Grand Rapids, and we help them understand what the value of their downtown is, but also what are you subsidizing or making money as a city for these different places? And the surprising thing was that one of the downtown districts was the most socially equitable, had the most affordable housing. Also, quite vital. It was a, you know, a hip place, they had their food hall there and they had their arena there. But it was where most of the homeless services were as well, and homeless housing. That place, which was about 200 acres in size, was making scads of, tens of millions of dollars per year net profit to the city. Meanwhile, comparable places that were high income, you know, primarily white housing districts were being subsidized. The city didn’t know that. They had no idea. They just assumed that the high-end housing districts were making the money. No, they were losing money.

Eve: [00:10:36] And the further out they are, the more suburban they are, the more resources the city has to put into sewer systems and roads and everything that, the infrastructure that serves them, right.

Christopher: [00:10:49] There are 16 infrastructure categories and all of them, you know, there’s sewer, water, roads, police, parks, all of them are cheaper in higher density places. And they are 10 to 20 times more expensive on the per house basis for drivable suburban sprawl. It’s hugely more expensive.

Eve: [00:11:15] So, you studied 35 US metro areas. The 35 that you’ve got all the information for in a recent report I saw called Foot Traffic Ahead, and I wanted to talk about your findings, which was really focused on walkable areas. So, you know, how much of the total landmass of the US is actually walkable, or of those 35 US metro areas?

Christopher: [00:11:42] That was one of the remarkable things that we found for the first time. 1.2% of those 35 metros, 1.2% of their land mass is walkable urban. That’s it. Not much at all.

Eve: [00:11:59] Interesting.

Christopher: [00:11:59] And so, the other 98.8% by definition are drivable suburban. And by the way, it is, in almost all of that 98% of their land mass, it is illegal through zoning to build walkable urban there. So, we have basically ghettoized walkable urban in this very small amount of land. But the amazing thing is, is that 7% of the country’s population live in that 1.2% of those top 35 lands and nearly 20% of the gross domestic product of the country is created in that 1.2% of that land.

Eve: [00:12:41] So, density is a good thing, right?

Christopher: [00:12:43] Very good thing every which way. Density is a very good thing.

Eve: [00:12:46] So, that land, mass and walkability, how does that impact our housing crisis?

Christopher: [00:12:52] It impacts it because walkable urban land and places Being so restricted to that 1.2%, It’s an artificial constraint. As a result, the housing and the office and the retail Is much more expensive. 40 to 45% on a price per square foot basis, more expensive than drivable suburban. And that is primarily due to how much we’re paying for the land in that 1.2%, that the land prices have gone through the roof. It’s just crazy. We have no shortage of land in this country. And yet we’ve artificially constrained walkable urbanism to this 1.2%. And it’s driven up the land prices, it’s made it more unaffordable.

Eve: [00:13:48] So, we need to take the edges of these walkable areas and pull them out and make them bigger, bigger, bigger, right?

Christopher: [00:13:55] Exactly. But, you know, we don’t need to convert single family land into walkable urban. Now with single family land, we should, the only thing we need to do there is make it legal to build granny flats if the owner of the single-family house would do it. That’s not legal either in the vast majority of our single-family zoning.

Eve: [00:14:19] Right.

Christopher: [00:14:20] But we need to take that 1.2% and increase it to 6 to 8%, so we flood the market with land that will drive down the cost of housing.

Eve: [00:14:32] If the single-family housing on the edges of this walkable land, isn’t there some value in saying, okay, the single-family zoning exists today, but in the future we want to have more density on these sites as they become available?

Christopher: [00:14:49] I guess I figure, I’m a pragmatic kind of guy. And if we can solve the housing crisis by increasing the land mass that’s walkable urban from 1.2% to 6% and not take on the millions of people that are very happy in their single-family home. You know why lift that.

Eve: [00:15:15] Why rock the boat? Yeah, yeah, yeah. I get it, I get it.

Christopher: [00:15:16] When you can just focus on a much smaller piece of land.

Eve: [00:15:19] But then, where is that land? How do you find that land?

Christopher: [00:15:21] Oh, there’s plenty of land. There’s plenty of land. Oh, Lord. Keep in mind, I live in Metro DC, which is about 6 million people. And Metro Paris is literally twice the size. So, they have 12 million people. However, Metro Washington occupies four times the land of metro Paris.

Eve: [00:15:45] Right.

Christopher: [00:15:46] So, we’re built at one eighth the density of Paris. And nobody feels sorry for people who have to live in Paris. So, there’s plenty of land. There’s plenty of land. Some of the best ones. And they’ve just made this possible out in California. They’ve upzoned strip retail. And made it so that at the state level they pushed this down to the local governments that you must convert your strip retail into by right zoning that allows for high density residential on top of retail.

Eve: [00:16:22] That makes a lot of sense. So, in other words, zoning can really be like a primary driver for releasing this land and permitting more density where the land already exists. Right. That makes a lot of sense.

Christopher: [00:16:36] Exactly. And it’s going to increase the fiscal health of our cities. It’s going to increase the amount of housing in our metropolitan areas, which will help address homelessness and the housing crisis as far as just sheer affordability. It’ll be, as I said, it’s a number one thing we can do to address climate change. And the thing is, is that the single-family housing around that strip retail, right now, many times that strip retail is dead or dying. And when you create walkable urban places, it increases the quality of life and therefore the price of those homes. Because rather than walking to a strip mall, you could walk to a vital, a walkable, vital place and you’re going to increase your quality of life. We call this the halo impact of walkable urbanism. We have found that single family housing within walking distance of walkable urbanism have a 40 to 80% price premium over a comparable house. That’s not within walking distance of great urbanism.

Eve: [00:17:52] Interesting. So, the price premium, is that likely to go down if walkable areas increase in size?

Christopher: [00:18:00] I hope so. I hope that we can satisfy the market and then do what real estate developers always do. They overbuild the market, hence tanking the price during a downturn.

Eve: [00:18:14] Yeah. Okay. So, right now, what’s the highest ranked walkable city? And you have a group of eight of them, I think.

Christopher: [00:18:21] So, as you would expect, it’s always been New York. This is the fifth time we’ve done this survey and Metro New York is always at the top. Now, major caveat about New York. A, their walkable urbanism is pretty much confined to the city and pretty much confined to Manhattan Island. Everybody goes to New York; they go to Manhattan. Manhattan is 0.3 of 1% of metropolitan New York’s land mass. So, it’s tiny. But everybody has this image of New York based upon that 0.3 of 1%. The rest of metro New York is built at much lower density than metropolitan Los Angeles, much lower density.

Eve: [00:19:09] That’s interesting.

Christopher: [00:19:10] And they have very little of what’s the development trend of the future, which is the urbanization of the suburbs. Yes, they have Jersey City and White Plains and Stamford and Princeton, but they don’t have it like here in Metro DC, where there’s 30 walkable urban places in the suburbs and growing because that’s where most of the people live. Most of them live in the suburbs and they want walkable urbanism, but they don’t necessarily want to move into the center city.

Eve: [00:19:44] So, who else is at the top of the list and who’s at the bottom?

Christopher: [00:19:48] So, it’s New York and then Boston, Washington, Seattle, Portland, San Francisco, Chicago, and the eighth highest in this highest rank is the only real surprise, and that’s Los Angeles. I used to live in Southern California. And the thing about Southern California that most people don’t know, is that it was built around a very extensive rail transit system back in the early 20th century. By 1945, Los Angeles had the longest rail transit system in the world.

Eve: [00:20:27] Wow.

Christopher: [00:20:28] And by 1962, they ripped it out. And what they’re doing today, they’ve taxed themselves $180 billion. This is primarily local generated funds to put that system back in. There are about 60% there. So, they’re rising in the rank because they’ve invested in.

Eve: [00:20:49] They’re paying attention. Yeah.

Christopher: [00:20:51] With one exception. We also rank these 35 metros based upon their social equity. What does it mean if you’re a moderate to low-income household? Is this a good place to live? And Los Angeles ranked dead last 35 out of 35. And as best we can understand, the reason for that is zoning and NIMBY opposition to building housing. They build all these rail transit stations and then they forgot to upzone to allow the, you know, the industrial locations and the single-family locations around the stations to upzone to build high density so people can walk to the train station.

Eve: [00:21:38] It’s a perfect example of walkability being exclusive, right, for the very wealthy. What a shame. It’s the reverse of what should be happening. You assign three rankings for the cities, the 35 metro areas that you looked at, foot traffic, social equity and future momentum. And I wanted to understand how you arrived at those three rankings and exactly what they mean.

Christopher: [00:22:05] Sure. So, the foot traffic ahead ranking is what percent of your real estate inventory, office, retail, multifamily rental, for sale housing, those were the four that we looked at. What percent of that total inventory, those tens of millions of square feet of space that is in your metropolitan area, what percent is walkable urban and what percent is drivable suburban? And so, those with the highest percentage walkable urban will rank highest, and those that have very little walkable urban, you know, just a few percentage points of their total inventory will rank at the bottom. And those include Phoenix and Orlando and San Antonio and Las Vegas. These places that are absolutely built around the car. And if you want to participate in society in Las Vegas or San Antonio or Orlando, you must, it’s mandated, from on high, you must own a fleet of cars for your family, your household, to participate in society. So, that’s the ranking for foot traffic ahead index.

Eve: [00:23:22] And what about social equity, the second ranking?

Christopher: [00:23:24] So, social equity is an index. So, there’s three different components that go into it. And the most important one is how much does a moderate-income household say, 80% of the area median income. What percent of that household income is spent on housing, the number one category of household spending, and on transportation. And why that’s important is the transportation is the number two household spending category. And so, it really revolves around where do you live and are you forced to rely upon cars?

Eve: [00:24:15] Right.

Christopher: [00:24:15] The average American household spends about 18% of their household income on transportation. If you live in a walkable urban place, you spend 9%, half of that on transportation because you have transit and biking and walking. You can drop cars out of your household. Maybe you only have one, maybe you don’t have any. A low-income drivable suburban household has to spend 25% of their household income on transportation.

Eve: [00:24:43] And I assume it goes up the further out from the city they are and.

Christopher: [00:24:48] Exactly.

Eve: [00:24:48] You know, the more affordable housing now is being pushed further and further out. So, it’s just making the problem worse and worse, right?

Christopher: [00:24:55] Exactly. Basically, our affordable housing strategy in this country has been drive until you qualify. So, just go and drive another ten, 20 miles and you’ll find cheap enough land and cheap enough housing that you’ll be able to afford it. However, you’ll never see your kids and you’re polluting the planet and your public health goes down because we know there’s a causal connection between how much you drive and obesity.

Eve: [00:25:23] Yes. Okay, and then the third one, future momentum, which sounds the most interesting to me. What does that mean? What is future momentum?

Christopher: [00:25:33] The main issue with future momentum? There’s a few different factors, but the main factor is how fast is walkable urbanism’s market share growing? And so, think of this as EVs, you know, electric vehicles. EVs in this country, and I don’t know the exact number right now, but roughly there are 5% of the total fleet is EV. But 10% of new car sales are EVs.

Eve: [00:26:07] So, it’s growing.

Christopher: [00:26:08] So, they’re growing twice as fast as their market share. Same thing is happening with walkable urbanism. All 35 metros, the walkable urban is gaining market share at a rapid rate, almost three times faster than their base market that we looked at in 2017. So, the growth from 2017 to the end of 2021 growing at 2.8 times faster than their market share in 2017. And those metro areas that have high future momentum are ones that have very high market share changes, what we call market share shifts. So, Atlanta, the market share shift is four times faster. You had mentioned Pittsburgh.

Eve: [00:27:02] Well, yeah, Pittsburgh is an interesting example. That’s my hometown. So, fared well in foot traffic and the ninth spot, and then very well in social equity at the sixth spot. And then awfully in future momentum, 33rd, not a lot better than.

Christopher: [00:27:19] No. And that’s because their market share is not growing. That’s one of the lowest market share growths in the country.

Eve: [00:27:27] That’s horrible.

Christopher: [00:27:28] I know it’s a shame because you’ve got great housing stock. Pittsburgh’s been around for years, and they’ve got great, walkable urban. Basically, there’s a cutoff in this country. At about 1940, housing stock built before 1940, almost all of it was walkable urban and that’s where the biggest boom, that’s where all the gentrification is going, is homes that were built prior to 1940 that went downhill economically in the late 20th century. And now young people just say, wow, we got to live in these. My wife and I have five kids between us, all five of them, they’re all married. They all own their own homes. 4 of 5 of them are in pre-1940, housing, tiny lots walkable urban when they were built, and then all the retail went away in the late 20th century, and now all the retail is coming back. So, they have a place to walk to get a quart of milk to go to a restaurant, right.

Eve: [00:28:29] Pittsburgh also has a great walkable downtown. It’s really amazing.

Christopher: [00:28:32] Yes, it is.

Eve: [00:28:33] But what does a place like Pittsburgh do to change that outcome?

Christopher: [00:28:38] A lot of this is going to be well, obviously, we talked about zoning that you’ve got to get the zoning right. You have to make the right thing easy. I’m also a developer. I’m not active with my development company. I started this firm about 20 years ago, but I’m now just a limited partner, and this firm was involved with a conversion of 120-acre golf course to a high density, walkable urban place. Over the years, this golf course got surrounded by freeways. And it’s a half mile from the King of Prussia mall, which is the largest mall on the East Coast. It took us 12 years to get zoning approval, which included a trip to the state Supreme Court. And it became the largest zoning overturn decision in the history of the country. And we kept on writing checks for 12 years with no assurance. And today, after ten years of building it out, we’re 70% built out. It is the downtown. It’s the social center of this part of Montgomery County. People love it. It’s where they go for date nights. It’s where they take their kids for all their birthdays because of all the water fountains and all that stuff.

Eve: [00:29:58] But you know, who has the tenacity to do that?

Christopher: [00:30:01] Or stupidity. We had the stupidity.

Eve: [00:30:04] I think the tenacity. I think that’s pretty remarkable. But yeah, hindsight is pretty easy, right? I bet everyone there is saying, oh, this is wonderful and forgetting the real pain of getting there.

Christopher: [00:30:16] So, that’s number one. But then number two is engaging in place management and place strategic planning. Recognize that each of these places, I liken the place level as the fifth level of governance in our society. We have federal, state, regional, city and then place. And these places that are walkable urban must have a strategy and they must be managed on a day in, day out basis. Tends to take the form of Main Street organizations, could be business or community improvement districts. A lot of private sector developers are just doing it themselves. Boston Properties does this a lot with their major projects like Reston Town Center, and somebody’s got to be in charge and managing 24/7. The safety, the cleanliness, the festivals, the economic development, manage the parking, engage in new economic development strategies, all sorts of things that a mayor would be doing for a city needs to be done at the place level as well.

Eve: [00:31:27] So, then what’s the biggest surprise in all of this research for you?

Christopher: [00:31:31] Well, the biggest surprise was how small the land mass was. We knew it was small, but not 1.2%. I obviously made a apples-to-oranges comparison here with that 1.2% of the land in these 35 metros generates nearly 20% of the country’s GDP. If you took that land and showed what percent of the US land is it? It’s under 0.1 of 1% of US land.

Eve: [00:32:02] Wow.

Christopher: [00:32:02] Generates 20% of the GDP. We didn’t know that.

Eve: [00:32:07] I suppose, in summary, what do you think it will take to move the needle to a higher percentage of workable land?

Christopher: [00:32:14] Well, one thing that’s going to drive even the most resistant person or government official or developer, is that many of our local jurisdictions are in deep trouble fiscally. That, number one, they probably have a pension plan for their workers that is dramatically underfunded. And they’re going to have to increase taxes to pay off the promises they’ve made to their police and fire and to their civil servants because there’s just no money in these pension plans. That’s number one. Number two, though, is their infrastructure, particularly the drivable suburban infrastructure, has been in place for the last 30, 40, 50 years. That’s their effective life. You have to go in and repair them, replace them, and it’s going to cost more to replace them in real dollar terms than to build them in the first place. Because you’re using them while you repair them?

Eve: [00:33:23] Yes.

Christopher: [00:33:24] With roads, you have to, you know, you have to do the work at night and on weekends because you have to keep the road open during rush hour. Yes. And at nights and weekends, you pay two and three times the cost of labor.

Eve: [00:33:40] And you get a lot of complaints.

Christopher: [00:33:42] A lot of complaints. So, our jurisdictions can’t afford their current drivable suburban approach to life. They just can’t afford it. And we have done enough fiscal impact studies, and also our partner in the Smart Growth America has done many, many fiscal impact studies that demonstrate that walkable urban land generates ten to 20 times the positive fiscal impact on cities that drivable suburban generates.

Eve: [00:34:19] So, just to wrap up, what’s next for you? Do you have another report you’re working on?

Christopher: [00:34:26] Yes, working on digging further into the foot traffic ahead study. One of the things that we found out is that the pandemic was a bump in the road for walkable urbanism, that the premiums went down about five percentage points. So, it’s roughly now 40 to 45%, depending on which product, housing or office. And it used to be 45 to 50%. So, that bump in the road, we’ve been isolating it, and the bulk of that decrease in price premiums was due to our downtowns. Not downtown adjacent places, not urban commercial places, not urban university places, not suburban town centers, not the redevelopment of suburban malls. There’s many types of walkable urban place. Most people do think downtown as walkable urban. That’s where the problem is, in our downtowns. And the reason for that is that our downtowns got addicted to office space. Basically, there’s a theory in finance called the portfolio theory that in other words, don’t put all your eggs in one basket. And our cities put all their fiscal future in the office basket. And now downtown offices got crushed in the pandemic. And they’re going to be, continue to be crushed as these office leases roll over because these are five and ten year leases and they’re coming due and people will leave or take much less space. So, we are all obviously focusing on how can we redevelop again, our downtowns. And the obvious example or the obvious direction is to convert offices to residential. Very important that that be done, but it’s going to be very painful.

Eve: [00:36:29] So, that’s happening in Pittsburgh already. There’s already quite a few announcements for building conversions, which has been really interesting to watch. I live downtown, so it’s becoming a bigger neighborhood pretty rapidly.

Christopher: [00:36:42] That’s the important thing. One of the things we learned during this pandemic is that the downtown adjacent places that grew rapidly over the last 20 years. You know, the downtown adjacent places that surround a downtown have been doing so well. Their portfolio profile is, you know, 30, 40% office, 40, 50% residential, 10% support retail, maybe 15% retail, and then some civic functions, stadiums or museums. They have a much more stable portfolio. And they did very well, in fact, better than they did before, because many of the office workers working downtown stayed home.

Eve: [00:37:32] Yeah.

Christopher: [00:37:33] And they went to the restaurants at lunch.

Eve: [00:37:37] Yes.

Christopher: [00:37:37] They just hung around in their downtown adjacent places. So, these downtown adjacent places did better during the pandemic.

Eve: [00:37:43] Yeah, I would believe that.

Christopher: [00:37:43] Downtown has to learn from the downtown adjacent places as to balancing their portfolio.

Eve: [00:37:49] Well, thank you very much. Thanks for joining me. And I can’t wait to see the next report. I love the work you’re doing, and this is really important work, I think.

Christopher: [00:37:58] Great. Thank you, Eve. Okay. Good to see you.

Eve: [00:38:00] Okay. Thank you very much.

Christopher: [00:38:02] Okay, bye bye.

Eve: [00:38:10] I hope you enjoyed today’s guest and our deep dive. You can find out more about this episode or others you might have missed on the show notes page at RethinkRealEstateforGood.co. There’s lots to listen to there. You can support this podcast by sharing it with others, posting about it on social media or leaving a rating and review. To catch all the latest from me you can follow me on LinkedIn. Even better, if you’re ready to dabble in some impact investing yourself head on over to wefunder.com/smallchange where you can invest directly in Small Change and our mission to democratize capital formation to create impact in commercial real estate development. A special thanks to David Allardice for his excellent editing of this podcast and original music, and a big 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 Christopher Leinberger

The power of Fintech.

Technology is the bomb. But when you set technology loose on the problems of the world, that’s when things really start clicking.

The Fintech Times agrees with me. This month they are focused on fintech companies that meld diversity and inclusion into their financial services. My interview with them kicked off their investigation.

I’ve faced “plenty of challenges” around the notion of achieving inclusion, but financing opportunities tops the list. This struggle served as the catalyst that launched my equity crowdfunding platform, SmallChange(dot)co, which is squarely focused on including everyone.

Capital is an old boys club. The members of that club invest where they feel most comfortable. And In real estate this means that capital (lots of it) flows into the same neighborhoods, for the same kinds of projects, often being developed by the same few people. Over and over again.

  • Women, and people of color get left out.
  • Smaller projects that need less than $10 million in equity get left out.
  • Opportunities to kickstart local economic growth are ignored
  • Rich areas get richer, poor areas get poorer.

I’ve built the first (and perhaps only) crowdfunding platform fully focused on impact in real estate. On Small Change anyone can invest directly into real estate projects for as little as $250 (as long as they are 18). And developers can raise up to $5 million for their projects every year, directly from the crowd.

We’re focused on democratizing capital formation for real estate projects, offering investment opportunities to everyone with the potential for real impact and real returns.

Read the Fintech Times report here.

Image courtesy of The Fintech Times