Rethink Real Estate. For Good.

Development

Tracking returns.

Sometimes you have to look back to see how far you have come.

We did just that last week.

With the help of our Small Change tech team, we created a brand new landing page on our real estate crowdfunding platform called Tracking Returns. You’ll find past projects posted there, organized by performance. We plan to update these quarterly.

In a nutshell, 9 of the projects listed have gone full cycle, meaning that all initial equity invested –along with any profit – has been distributed to investors. 4 of the projects have started to make quarterly or annual disbursements, and a bunch more are poised to start soon.  

Most notably, 56% of past projects listed are led by women and/or minority teams. Now that’s making change!

Shift capital.

Brian Murray is the co-founder of Shift Capital, an impact urban real estate group driving mission-oriented capital, collaborative resources and inclusive strategies into underserved communities. Through his work at Shift, Brian is focused on finding better solutions at the intersection of society’s most difficult urban challenges – intergenerational poverty, urban revitalization, access to opportunity, and community displacement. Brian led the capital raise for SHIFT’s Neighborhood Fund and manages the deployment of over $330 million of investments throughout SHIFT’s portfolio in Philadelphia, Newark NJ, Washington DC, and Upstate New York.

Brian spent the majority of his career outside of the real estate space, starting his career at PricewaterhouseCoopers as an auditor. He moved into the technology space where he helped found two start-ups, before joining the Peace Corps and heading back to get his MBA. While in graduate school, Brian observed the growing interest in impact investing – investing with a purpose. It was at this time he made his first real estate investment and discovered the importance of socially-minded development. He hasn’t looked back since.

Brian is a graduate of The College of New Jersey and received his MBA from Yale School of Management. He is the co-founder of Arete Youth Foundation, focused on youth development in the Roma communities of Bulgaria. He has two daughters that keep him young at heart and on his toes.

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.

Eve: [00:00:43] This is my second podcast interview with Bryan Murray. But time has passed, and his business and expertise have grown. Brian came to real estate as a non real estate guy. Always interested in impact, he wanted to find a way to address poverty and real estate presented a tangible path. And so, he launched Shift Capital, an impact urban real estate group focused on mission oriented real estate strategies in underserved communities. And so, he launched Shift Capital and Impact Urban Real Estate group focused on mission oriented real estate strategies in underserved communities. Simply put at Shift, Brian works on uncovering better solutions to society’s most difficult urban challenges – intergenerational poverty, urban revitalization, and access to opportunity and community displacement. There’s a lot to unpack here, so take a few minutes and listen in.

Eve: [00:01:56] Hey, Brian, I’m really happy to have you join me today.

Brian Murray: [00:01:59] I’m super excited to be here.

Eve: [00:02:01] We are real estate developers who do things differently. That’s what your website announces really boldly. So, tell me what that means.

Brian: [00:02:10] Sure. For us, what that means is that we are focused on building equitable neighborhoods, and we are focused in doing it in untraditional ways to the typical real estate development cycle. We focus on a hyperlocal approach. We focus on scale through that hyperlocal approach, and we focus on doing it holistically and really trying to dig deeper with the community beyond just participation, but equity building as well.

Eve: [00:02:43] We’re going to unpack that a little bit later. Right? So…

Brian: [00:02:45] That’s alright.

Eve: [00:02:46] And like, how did Shift happen? What are its origins and how did it come about?

Brian: [00:02:52] Yeah. By the way, in preparing to talk to you again, I went back and I looked through all your old podcasts, and I just want to say that the amazing people that you have interviewed over the years, I’m probably going to now make your podcast a requirement for anybody that we hire just so many good friends and great people and a lot of people that I admire that I haven’t met before.

Eve: [00:03:18] It’s been an enormous learning experience for me. I’ve enjoyed, like, I’ve really enjoyed talking to people and figuring out what’s going on.

Brian: [00:03:27] Yeah, I think you’ve really unpacked so many aspects of this, quote, non-traditional part of the real estate cycle. But I think people who are focused on all aspects of it, which is amazing. Sorry. What was your question? Your question was Shift origins. Yeah.

Eve: [00:03:44] How did Shift happen?

Brian: [00:03:46] Yeah. So, I’m not a traditional real estate person. I didn’t come up through the institutional real estate world and then come into development. I came into development with a goal to make an impact on poverty. My background was a mix of entrepreneurship, nonprofit work, Peace Corps, business school, etcetera. And I knew I wanted to combine all those things in a way that was creating effective impact. And what I mean by effective impact was I was struggling with the impact that the nonprofit sector was making. I was struggling with the idea of entrepreneurially just chasing money. And I knew I didn’t have the personality for the government sector and policy. Although I’m a, you know, a huge believer that that policy really drives a lot of this change. And so, that ended up being a, you know, an investment during business school and a small real estate deal in Philadelphia. And then realizing and really connecting meet with me personally that impact of real estate in people’s lives. The physicality of it, how these things get financed, who’s benefiting from this. And you know, as you’ve talked about and we share, you know, real estate surrounds our lives. We live in it. We breathe in it, we work in it, we walk by it. And in low-income communities and communities that have been left out of investment, I think it’s even more profoundly negatively impacting. And that’s what I wanted to build. I wanted to build a company that was really digging deep into that challenge and thinking about how is what we’re doing connecting with making people’s lives better.

Eve: [00:05:38] So how do you approach that with each building project? What’s the process like from beginning to end? Can you talk about that?

Brian: [00:05:46] Well, we’ve evolved. We’ve been doing this for about 12 years. And in the beginning, I will share that, you know, I don’t think we really had this worked out. I think we made a lot of mistakes, and we were making investments without an overarching strategy, and we were making construction mistakes and other things that were challenging. But ultimately, we have evolved into really two core philosophies. One, is that we believe in investing in place. So, place-based strategies, concentrating our investments. So, it’s really not just about investing in one building. It’s about investing in a group of buildings so that we are maximizing that impact. That has shown up in our shift neighborhood fund, in our work in Philadelphia, where we’ve really gone deep in, now, three neighborhoods in Philadelphia. The other way that it has evolved for us is realizing that our work can connect the dots between other challenges in the real estate sector. So, specifically going through our own journey, and I’m a, you know, a white male, which, and carry a lot of privilege, but I found getting into the real estate sector to be the most harrowing and crazy and unbelievably risky thing that I’ve done. And I’ve been an entrepreneur my whole life,

Eve: [00:07:10] Really?

Brian: [00:07:12] It’s set up to keep people out, and we combine that with, you know, redlining and access to information and bank practices that are still happening today, to insurance practices that are now hitting our industry again in low-income communities. And there’s no wonder that there are not a lot of women-led black and brown led developers. And working in the neighborhoods that we’re working in, we knew we wanted to do something, so we created a platform and a program to focus on that as well. So, we do our own work and we also try to uplift others through partnership as well.

Eve: [00:07:49] Yeah, access to capital, really that’s what it’s all about, right?

Brian: [00:07:53] Access to capital. But not just capital. Right? So, for those of us who work in places where the numbers and the math don’t work in a traditional sense, we also have to be experts at tax credits and subsidy sources. And with all of those additional items in the capital stack, the skill set needed is exponentially more than someone who’s just doing a simple office product or what have you.

Eve: [00:08:24] Oh yeah, and I think appraisals are absolutely key as well. Early on in my career, I would have appraisers calling me just bewildered about what I was doing and not sure what comps to look at. And that’s another skill set you have to develop, I think. Yeah.

Brian: [00:08:43] It’s a combination of factors. But you know, and one of them is a spiral  effect of, you know, of groupthink that happens. Right? I think the statistic is 95% of appraisers are white, male, and in all likelihood not from the communities that they’re appraising. And as Andre Perry and many others have pointed out, you know, just a devaluation of urban black and brown neighborhoods as a result. And so, you combine that with institutional and, you know, capital staying out of those neighborhoods, afraid of being termed gentrifiers or afraid of the perception of safety. All these things combine to make real estate in the places we want to invest in much harder. And I only bring that up to say that it’s not just about access to capital. It is truly challenging on all levels. And for someone who is, wants to do good and, you know, and maybe does have some of the skill set, the team that you need to hire to be able to do a larger project, it’s an awful lot of money just to get a project off the ground. You know, you can’t make any mistakes because the numbers and the math are very difficult. And then you’re you’re not going to see a dollar yourself for maybe three, 4 or 5 years and then…

Eve: [00:10:06] Or longer.

Brian: [00:10:07] Or longer. What we have experienced ourselves and, you know, I have been really pushing against this is, whether it’s banks or investors and even mission investors believing that we need to continue to stick things in the same box. So, what I mean by that is that when a project is, we’re two weeks away from closing, we’ve been working on a project for two and a half years and interest rates change. Well, you know, everybody comes back to the developer and says, okay, well, now you need to contribute your developer fee, or you need to defer your developer fee, or you need to get rid of your, the only dollars you’re ever going to have to put food on your plate. Guess what? You can’t have that either. And at that point, when someone’s been working on something for two and a half years, what are they supposed to say? They’re going to get it done. And they give up the only way that they can provide for their families. That’s just not fair.

Eve: [00:11:04] Well, I wouldn’t agree, but still. Yeah, it’s really a very difficult business, I have to say. I’m a developer and I have a portfolio thanks to my husband. I don’t know, because he supported us through all those years of waiting for something, now we have a very nice retirement fund, so it’s payback time. But I just don’t know who someone on their own can do this. They have to be getting an income. You have to be. And the problem with it is, Brian, for some reason, developers are painted as evil, money-grubbing people across the board.

Brian: [00:11:45] Yeah.

Eve: [00:11:46] Maybe some of them are, but a lot of them aren’t. So how did that happen? When you talk, you talk about, you know, giving up fees and just scraping by.

Brian: [00:11:56] When we talk about, it’s funny because I bring this full circle to the Small Change platform. And one of the incredible benefits of participating and being a part of, and we have now our second project on the platform, but one of the massive benefits is not that we’re necessarily going to get thousands of people in the community to invest, is that we are going to expose thousands of people to the community, to what happens behind the curtain. And, you know, I do believe that the evil developer has been used as a tool that has negatively impacted a lot of the neighborhoods that need good developers and good development and good investment, because it has filtered down from watching maybe 30 years of center cities getting gobbled up for dollars, and then the truly evil developers of the world who have exploited opportunities when in reality most developers you know, are not and are working within a system and just trying to put together things. This is not a business for someone to run in and make a ton of money quickly, you know, and blood, sweat, tears, you know, in 30 years, yeah, I think, you know, it’s a great business. But that’s a lot, it’s a misconception, both actually of young developers and a lot of our work is helping to demystify and make sure that people understand the risk.

Eve: [00:13:28] Yeah.

Brian: [00:13:28] Because a lot of people get into the business without understanding that they might be putting their home up. But I do think that that translates down into communities. And this you know, I think the gentrification conversation is in that, I think the fear of change is in that, but using the Small Change platform to educate people like, hey, wait a minute, you know, look behind the curtain, you know, this school project that we’re doing, you know, there is not a lot of money that we make, and there’s a lot of risks that we’re taking to get this thing done, has been really valuable. And I think we need to continue to educate communities on the positive side of inviting developers into their communities as well.

Eve: [00:14:08] There’s also the issue that investors, maybe goes back to Sesame Street. They want immediate gratification. I actually had one investor say to me, I’ve been investing in, I don’t know, something that she was getting returns every six months. You know, I’d like a short-term investment in real estate. I’d like to move into real estate. Can I get my money back in a year? And I was like, dumbfounded. A year is no time at all in the real estate world. Like, you know, you’ll have to wait a little longer. And I think that’s also an educational mountain to climb because everyone talks about portfolios, right? And yes, some people need to have a return immediately. But I think the value of real estate is that you can have something that will grow over time, in value, in time. It’s not about that immediate cash flow. But most people don’t understand that there’s a big educational gap.

Brian: [00:15:06] Yeah, and I think that’s not just individuals. I mean, I think that the other factor that I didn’t mention yet is just institutional capital. So, when we raised our first fund, we were pre opportunity zone, pre you know a lot of stuff. And we were asking investors to invest in a neighborhood that had an average median income of $22,000 but we believed in, for a variety of reasons. And you know I wanted to do a ten-year fund. And I just said, you know, this is not going to be an overnight thing. It’s going to be a long-term investment. That’s actually how we seek to be more aligned with community if we’re longer term. And, you know, my advisors at the time said, you know, the marketplace isn’t, you’re not going to raise any anything. No one does ten-year deals and funds and you’ve got to be five years. So, five years is impossible.

Eve: [00:15:59] It’s impossible. It’s impossible.

Brian: [00:16:01] So I ended up doing a seven-year fund with three one year extensions is what I was able to pull off. And then of course, the marketplace changed with the Opportunity Zone legislation, which changed mindsets to ten years. But I believe that the real work is actually with the generational investment groups, the groups that can think generationally or think at least on ten, 15, 20-year time horizons. That’s where the real value opportunity is. There’s still so much capital chasing the five-year cycle, and that is detrimental to investments in cities, which I think you have to inherently believe long term in cities. But if you do, there’s a lot of opportunity.

Eve: [00:16:50] Because the hard stuff that really provides a return, it’s just going to take a longer time.

Brian: [00:16:56] Yeah.

Eve: [00:16:57] Anyway.

Brian: [00:16:58] Yeah. So, you know, I think you combine that with, and I’ll just make one last comment on this that I think is important, especially for those out in your audience who are, you know, are talking to institutional equity and thinking about that source. The impact investing world has evolved and has really grown. You know, 12 years ago at Socap, which is the premier impact, I felt like we were the only real estate person there. And now, you know, it really is revolving around investment and community. But I have found that institutional capital still is on the 80 over 20 and 2 mold, you know, which is to simplify that down to basically 2% asset management fee and then a 20% promote over a certain equity hurdle.

Eve: [00:17:47] A promote for those who don’t know what it is, is what goes to the person who’s putting the fund together or the project together. Yeah.

Brian: [00:17:55] It’s your pod at the end of the rainbow. But obviously if your project doesn’t work out, you don’t have any of it. And so, I think in the impact space, there needs to be a reckoning on incentive structures that properly reward the amount of time and effort. Because an impact project, I mean, I’ll put it toe to toe with any, you know, equity real estate group out there, is infinitely harder than, you know. If I’m buying triple net industrial across the country, you know, I can have a team of two and do that. If I’m doing, you know, the type of projects that we do, the neighborhood investments that we do, I have to have a team of ten plus and the expertise is hard. And so we don’t get paid for that, nor do we get, you know, even, you know, the 2%. Now we have to also report on impact metrics. But guess what? We have to do all this additional work in this model that was never set up to, it was set up for a different world, honestly.

Eve: [00:18:59] Yes. Yeah. Well, tell me about a favorite project and why it’s favorite and how it met your goals.

Brian: [00:19:08] Yeah, I’m going to get to my favorite project by just talking briefly about this next gen platform that we were doing.

Eve: [00:19:16] Okay.

Brian: [00:19:16] It started with actually a group in Philadelphia, Mosaic Development Partners, where a Sharswood Ridge project that we did on Small Change that created the framework for us to create this next gen platform. And our next gen platform is a platform where we are investing in and with what we call the next generation of impact developers. And it’s the belief that we are seeking to help raise the game for developers who are trying to break into that next level of their business. And the majority, you know, with a strong emphasis on women led development groups, Black and Brown led development groups. And right now, we’re working with 11 different sponsors across the country from Rochester, Ithaca, Newark, Baltimore, D.C., Southern California.

Eve: [00:20:09] And again, for our listeners who don’t know what a sponsor is, that’s really the developer, right?

Brian: [00:20:14] A development partner. So instead of, you know, in our world, a lot of times developers have to look for allocators. So, people who are allocating capital and we’re trying to come up alongside as a practitioner, as a developer ourselves and recognize that it’s not just about the money, it’s also about, you know, providing and buttressing, you know, development groups who are, you know, on their growth path that might not have exposure to new market tax credits, for example. And we’re able to help lean in on that on a particular deal. So, through this platform, about two and a half years ago, we were approached by a Latino owned housing group in Philadelphia called Voyage Investments. And Voyage was started by two gentlemen, Alex Robles and Juan Saenz, who went to undergrad together. Alex, both, you know, incredibly incredible pedigrees. Alex, many years in the real estate space and went to Wharton from the neighborhood of Kensington, where our offices are. Juan, you know, deep institutional finance experience. And they went off to start their own business. And I’d known them and, you know, we would talk every once in a while, and, you know, I’d relay some advice. And they went maybe two plus years trying to put deals together and make things work. And of course, this was, you know, ’18, ’19, ’20 and the marketplace was very hot and it was very difficult.

Eve: [00:21:52] I’ve got to add, I’ve worked with Alex. He’s got to be one of the smartest, most responsive thinkers I’ve ever worked with. Really super impressive.

Brian: [00:22:02] Yeah, they’re both impressive. They’re both incredible. But, you know, in this space, you need more than that. You need a little bit of luck. You need the right people to help you out and they were just losing out on deals. And at the time, I had needed support, I needed help. And so, I approached them in the conversation and said, you know, would you guys be interested in embedding yourself within Shift for a couple of years? We’ll, you know, I’ve come from the venture world or had experience in the venture world where they have these entrepreneurs and residents at the VCs. And I hadn’t seen that happen in real estate. And I said, would you guys be a developer in residence? And, you know, let’s do a three-year program and you guys come on and for the first year, you’ll spend, you know, a lot of time on our projects. And over the course of a three-year period, we’ll JV together and we’ll look for opportunities to to help you guys out. But the goal is at the end of three years that you guys are back out on your own. But now, you know, you’ve got a track record, you’ve got relationships that we help build up, etcetera. So, Alex and Juan have been on our team for two years. We’ve done a project in West Philadelphia, which was a housing preservation a deal. And then we found a deal locally in Kensington, which was a 40,000 square foot warehouse space. Alex is from Kensington. This is right around the street from our offices. And we said, hey, how about we partner on this one together? So, we partnered up with Voyage and we had this warehouse and we said, and we actually at the time had a tenant who was going to take the whole thing.

Brian: [00:23:49] The tenant was a ceramic company that was part of our ecosystem. So we are, one of our bases of philosophy is really investing in the creative economy. I know you’ve had, you know, my good friend Lindsay Scannapieco on recently. And, you know, we share a lot of similarities in terms of things that we’ve done in the Philadelphia area. But one of our companies was a ceramic building business that was growing out of its space. And so we partnered up with them to buy this building. This was going to be their future home. They were going to grow into it, and we bought it together. We started moving down that pathway. And the construction cost to build out their space was more than they anticipated, and so they decided they wanted to back out of the deal. They wanted to stay as partners in the deal, but they no longer wanted that to be their future home. So maybe about 3 or 4 months later, we ended up getting approached by a school, a school called Big Picture El Centro, which is a opportunity youth school in Philadelphia for those you know, and this is education for me as well, an opportunity youth school that’s focused on youth who are struggling in the traditional system, and this provides them an alternative pathway to graduation by focusing on skill set education, on putting these kids into businesses earlier in apprenticeship programs across the spectrum, from culinary to trades, etcetera.

Brian: [00:25:28] And they were looking for a permanent home in Kensington and their timeline was really tight. They were they could only move in half of the building at first, but they did want to go into the whole building. And so, Alex, Juan and the Shift team, we put our hats on, we put together that lease and we are building the future home of El Centro. And for me, it’s probably one of the more rewarding projects that we’ve ever done. It checks all the boxes of impact for me. You know, we’re, I think, making a healthy return for the risk, but not an egregious return for, to make sure that we are providing the most economical space we can for the school. We are building a high-quality school. You know, I say that because, you know, Philadelphia is marred with a education licensing system that is really problematic for building good schools. The charter school system is on a five-year program, and the and schools are really not able to pay a whole lot. And that combination means that the private sector is not really able to step in very often and build higher quality schools. But we feel we’ve been able to thread the needle on this one. And so, the plan is for them to move in in January. We’re about 60% through the construction. We are partnering with Small Change on this project to provide opportunities for people in the neighborhood. And again, going back to this importance of education and involvement and access, you know, we couldn’t be more thrilled to be bringing this project on there as well.

Eve: [00:27:22] But just about the finances, you’re actually raising quite a lot of money through on Small Change. So, what’s the financing been like for you on this project? Because it’s an odd start construction and try and figure out the financing as you go strategy, right?

Brian: [00:27:38] Yeah. This is one, you know, I’ll look back and say, you know, man, this was this was a tough one. We knew the school needed to move fast. We knew they didn’t have a lot of options, and they were getting a lot of pressure from the district to move to Kensington. And so, we pulled the trigger, and I’ll say this, we actually started construction, you know, earmuffs here, before we got the lease signed. Just to give you a sense of…

Eve: [00:28:12] I’ve done that.

[00:28:13] How much we’ve leaned into this. By the way, no one do this. Do not do this. But, you know, we had a lot of confidence that, you know, we were going to get the lease done. You know, we had built a very strong, very, you know, relationship with the board, with the leadership team. And we knew that the pressure was on for them. And so, we wanted to, you know, we really wanted to get them in earlier. But you know, construction, you know, has pushed us to moving them in in January. But to close on a project, to sign a lease where, you know, not all of the equity and the debt is together is certainly a terrifying place to be. We’re in a much stronger place now. We do have and we’re closing on our construction debt, about $3.9 million of construction debt, maybe as early as next week, which, we’re in October right now. We are raising 2.4 million, and we’ve put in $800,000 ourselves. We’ve also bridged a lot of this construction during this time. And we are seeking both accredited and non-accredited. So, we’re doing a side-by-side raise. And, you know, we’re out there talking to a lot of groups right now on the accredited side. But, you know, and meeting with community groups on the non-accredited, you know, looking to raise awareness.

Eve: [00:29:36] I have a question about that. How do the community groups respond to this. It’s an unusual opportunity for them, right?

Brian: [00:29:45] Uh, it’s been fantastic, and I will say that, you know, the Voyage team, especially Alex as a native person from Kensington, you know, has really been on the front end of this, has been excited to be able to talk about this. And, you know, I would say that a lot of this is really it’s a very soft sell, right? I mean, we’re using this as an opportunity to educate as much as possible in addition to saying, hey, this opportunity is here, but not, you know, but be realistic in terms of what where people are.

Eve: [00:30:18] It’s more about like, this is your neighborhood.

Brian: [00:30:22] That’s right.

Eve: [00:30:22] This is the value it’s going to add to your neighborhood, there’s value here besides a return you might get on the dollars you invest. And that’s actually a lot to think about, I think.

Brian: [00:30:33] Yeah. And, you know, I think this neighborhood, for those unfamiliar, Kensington was on the Republican national debate stage as the, you know, worst place in America. You know, we were the center of the opioid crisis. You know, we are dealing with $1 billion drug trade, you know, just blocks away from here. This community is resilient. You know, it’s a big second-generation Latino community. It’s a very mixed community. Old generation, new generation, lots of kids. And, you know, to take a building that has been vacant for 25 years and to put it into productive use like this positively, and for them to be able to see how and, you know, pull back the curtain and allow them to see that happen, you know, is just very rewarding for us.

Eve: [00:31:28] I have to ask; how did you end up in Kensington and why the worst neighborhood in America?

Brian: [00:31:35] Well, a little bit happenstance, but Kensington was the workshop of the world for the textile business at the turn of the century. And so, it has two really incredible things going for it from a real estate perspective. One, it’s on public transportation. There’s only two subway lines in Philadelphia. And so, we had a long-term belief that Philadelphia was going to turn from a car city into a public transportation city. So, everything we purchased within a five minute walk to a subway station when we got involved in the neighborhood. Two, as a result of being the workshop of the world, there’s a lot of larger real estate and older buildings that we could adaptively reuse, and we could purchase at a low basis at the time. And that low basis for those interested in impact, I cannot emphasize enough how important low basis is to doing the work of impact. It gives you flexibility that if you buy in, you know, later, you don’t have as much flexibility without a lot of subsidy. And so those two, three things really were what brought us to Kensington. You know, the reason for it being a challenge neighborhood is very complicated. It is just north of some of the hottest neighborhoods in the country with Fishtown and Lower Kensington. But this neighborhood has been ring-fenced by the city, and drug trade has been allowed to happen. And that has, you know, and again, I don’t want to get too deep into the politics of it, but I would say, you know, it is largely so that it doesn’t spread to other neighborhoods in Philadelphia. This neighborhood has pretty much been sacrificed, in my opinion. It’s an incredible tragedy but within that tragedy is this incredible story of a phoenix rising that, you know, we’re proud to be a part of and proud to work through with the community that’s there, that’s, you know, continuing to want to live there and want to see this neighborhood come back.

Eve: [00:33:53] I’m going to shift a little bit because that’s a pretty incredible story. But I just want to know, how big is your portfolio now? And do you have an end goal in mind? And are you working anywhere other than Philadelphia?

Brian: [00:34:05] Yeah. So, our Philadelphia portfolio is probably about 1,000,000ft². We have a number of projects in development right now. Outside of Philadelphia is through our next gen platform. This is where we are working in Rochester, Ithaca, Newark, Baltimore, DC. Our portfolio as a whole is probably about 3 to 4,000,000ft² which, you know, is, that’s pretty remarkable to say that out loud now that I think about it. But it’s largely been through sharing, partnering, joint venturing in a way that feels, you know, very appropriate. We’re about 30 people, so we’re vertically integrated within the Philadelphia marketplace. And we’d like to lend ourselves into other marketplaces where needed. I would say that, you know, we’ve been at the forefront of thinking long term. How do you create mixed income communities? So, from the day we started our work, we were thinking about our exit strategy. We helped put together the first neighborhood trust in the country, which is the Kensington Corridor Trust. I know you’ve had David Kemper and Trust Neighborhoods, which is a corollary group that started about the same time. Adriana Abizadeh, who leads the Kensington Corridor Trust, should absolutely be a someone you interview.

Eve: [00:35:46] Oh, send me the information. I was just writing this down.

Brian: [00:35:50] So the Kensington Corridor Trust, and I can’t speak for them. I got kicked off the board, which is a wonderful feeling. But they own probably a couple of blocks now in the Kensington neighborhood. They’ve been buying their own real estate on behalf of a mission for the community, and that mission is to preserve affordable workspaces on the corridor. And that model, I’m excited to say, is now starting to spread across the country. And so, we are constantly thinking about exit, you know, how do you preserve in advance? I’m a big believer that while I think the LIHTC, the low-income housing tax credit tool, is probably one of the greatest tools ever created at the same time, it’s a reactionary tool. And the mindset should be when we have that low basis of real estate in a lot of places, now’s the time to think about preservation. We need to think about preservation on a 20- 30-year scale. And we need more tools. We need more financing groups. We need philanthropy. We need investors to think more strategically about how do we think about capital long term. You know, if you told an investor they could make, you know, 8% returns over a 30-year period, you know, that’s a great return.

Eve: [00:37:12] It’s a great return.

Brian: [00:37:13] Unfortunately, when you have short term investors who are oh, I need 15, 20% returns on a five year schedule, and then you compound that, compound that over 30 years, you’re at a much different place. And that is a detriment to neighborhoods and cities. And it’s a problem we have to solve.

Eve: [00:37:33] Yeah, I agree, and I think that impact investors I’ve talked to have been an enormous disappointment to me, because I think that that longevity is definitely part of the equation. But what I get is what’s your exit strategy and how soon? They’ll talk about impact and then it’s what’s your exit strategy and how soon? And I just want to build the best platform I can that will serve the most people.

Brian: [00:38:00] I am, I’m gonna give you a little…

Eve: [00:38:01] I don’t know what, I don’t…

Brian: [00:38:02] And I have been in the doldrums with you. I have seen the slow march forward and, you know, having been there when the only investing impact investors were doing was, was in CDFIs and affordable housing, to this, you know, a place-based mindset. I believe that although it’s taking a lot more time, that we are seeing more and more investors getting that message. And I do think it’s these podcasts, Eve. I think it’s, you know, the cadre, the community that’s gotten created over the last ten years of people saying these things. And I believe it, I really believe it needs to come from family offices in particular, who have the ability to think long term as opposed to the, you know, the black rocks of the world, so to speak, getting into impact investing is not where it’s going to come from. It’s going to come from the next generation of families who, there’s a big transition of wealth. And if you look at things like the Durst Organization, right? I mean, they invest generationally. And I do think that more and more families are going to start getting this message and understanding that they can be part of the solution. It’s already happening. We’re having some conversations, and I feel like the message is getting through, even though you know, it’s not fast enough and it’s not enough yet. I mean, certainly not enough. Yeah.

Eve: [00:39:31] It’s not fast enough. No, I mean, we have thousands of users as well who must have an interest in impact because that’s all we offer investment in, right, So but it’s still, it’s not enough. It’s not enough. When you compare it to the hundreds of thousands who are investing on platforms in ways that have absolutely no impact. They just, yeah. Depressing. Okay. So, last question. What’s been your biggest challenge and biggest disappointment?

Brian: [00:40:03] Um.

Eve: [00:40:04] Maybe that’s not an uplifting question to end on, but I’ll ask you that and then.

Brian: [00:40:09] No, that’s okay. I mean, yeah, I think it’s the right question when we’re talking about development, because there isn’t a day that is not challenging that we go through. You know, sometimes I feel like I’m, you know, whether it’s whack-a-mole or whatever, the right metaphor, whack-a-mole, or you’re plugging the dyke over here, and then a leak happens over here.

Eve: [00:40:32] Oh yeah.

Brian: [00:40:33] And, you know, one of the challenges is keeping positive through that and recognizing that the small incremental movements forward are going to be part of the big movements later. You know, it’s been very difficult to grow the team that we’ve grown. We’ve taken a lot of risks. My team has dealt with a lot of stress. You know, we’ve gone through periods and, you know, where payroll is an issue. And I’ve you know, I’ve had during Covid asked the team to not take payroll for, you know, more than a month to just help us get through and try to keep everybody together, you know. I have a goal, maybe one day in life to write, you know, the developer confidential book that needs to be written based off of the Kitchen Confidential book that Anthony Bourdain wrote. But, you know, there is so much behind the scenes that’s challenging. I would just say, you know, keeping people positive in the wake of what feels like insurmountable challenges and push-back and, you know, is definitely our biggest challenge.

Eve: [00:41:50] So I’m going to ask you if it’s so challenging, why do you do it?

Brian: [00:41:54] Oh, why do we do it?

Eve: [00:41:56] What’s the reward? Why do we do it.

Brian: [00:42:00] It Depends on what day you ask me that question. You know, some days I’ll say, well, if I knew then what I know now. But most days I really feel that real estate is the most impactful and important thing to combat the challenges and the ills of today’s world. Whether that’s the idea that real estate spaces can bring people together, whether it’s about financing and how do we bring positive dollars into low-income communities and bridge an equity gap, wealth building. I mean, it touches so many things that for me, you know, that I can wake up every day and say, we’re, you know, we’re doing something positive for society, and that’s why we do it. Yes. I love the building and I love the physicality side of it, and that is important. But I would say arguably the people side of buildings is probably more, is the most important for us.

Eve: [00:43:12] Well, thank you very much for joining me. And I can’t wait to see what you do next. This current project is fabulous, so I’ll be watching.

Brian: [00:43:22] Well, you’re, I mean this, you’re a gem to this whole world and this movement. And, you know, I’m just so happy to see how much you’ve grown and how much you’ve built this thing and think I’m just really excited to be back on the podcast. So, thanks for having me again.

Eve: [00:43:39] Thank you.

Eve: [00:43:46] 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 Brian Murray

Wall Street capital.

Joel Miller serves as CEO of Wall Street Capital Partners (Advisors), a Real Estate Syndication firm based out of Atlanta GA,  specializing in sourcing and arranging debt and equity for acquisitions, development and recapitalization of Commercial Real Estate. The firm also invests its own acquisition and development projects as a GP investor. Current pipeline includes over 1,100 of Multifamily units primarily in Atlanta and the mid – Atlantic region. Joel has also been responsible for the intrinsic planning of site development for the execution of conservation strategies. He formerly served as head of Private Equity Fund Management & Investor relations related to Real Estate tax mitigation strategies for Cambridge Capital Partners (CCP). A boutique international investment bank focused on tax mitigation, capital markets, conservation easement strategies, and management advisory services. CCP was built on a platform of delivering tax efficiency with global business solutions. CCP’s clients include numerous banks, investors, and Fortune 500 companies throughout the Americas and Europe.

Joel began his career in New York City at U.S. Trust Co., After strengthening his acumen under some of Wall Street’s most influential financial strategists, he founded what would become Wall Street Capital Funding. Under the tutelage of Prudential Securities executives, at 28, he became one of the youngest CEO mortgage bankers in the history of the United States. The firm was ranked as one of the Top 10 Most Dependable Mortgage Companies in the SE. He has served as strategic adviser to one of the nation’s top ten wholesale mortgage banks and has served as a consultant on financial institution mergers. He has served as an adjunct Professor of Economics at the Clayton State University – Management School of Business. In late 2008, he received the privilege of being a tertiary adviser to President Barack Obama’s Transition Team on the topics of housing and the economy related to the residential Real Estate crisis of 2008. The Atlanta Business Journal named Joel one of the Top 40 under 40. He was also the host and producer of the “Mortgage Minute” and “The Joel Miller Show” on Business Radio 1160 AM The CFO, as well as a regular contributor to CNBC.

Currently, Joel also produces and hosts the Morning’s w/ Joel Commercial Real Estate Podcast which interviews and highlights the achievements of minorities in the CRE space. He also teaches the Capital Markets class for Project REAP. This fulfilled a commitment he made to stay accessible and to open his “Rolodex” to expose and encourage the next generation of CRE minorities to opportunities in the CRE space.

Read the podcast transcript here

Eve Picker: [00:00:03] 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: [00:00:37] From Wall Street to mortgage banking to real estate developer, Joel Miller has focused his career with clarity and purpose. And now he’s taking it one step further by raising money for his next real estate project through crowdfunding. Joel wants to bring others up behind him. He wants to give others the opportunities he’s been given, and one small way to do that is to provide an opportunity for everyone to invest in his latest project. Early on in his career, Joel realized that his goal to lead an organization might not happen if he waited for an opportunity. So he made his own. He started his own company, Wall Street Capital Partners, specializing in sourcing and arranging debt and equity for acquisitions and development of real estate. And of course, over time, he started to build his own real estate portfolio. I enjoyed every moment of this conversation and so will you. Please listen in to hear more.

Eve: [00:01:56] Hi, Joel. I’m really delighted to have you join me today.

Joel Miller: [00:02:00] Hey, how are you, Eve? Good to be here. I’m happy to be here.

Eve: [00:02:04] Very good. So, I wanted to ask you about your journey from Wall Street to Wall Street Capital Partners. What led you to launch your own company?

Joel: [00:02:14] Well, you know, it’s very funny that you would ask that question because that was the thing that was running around in my mind when I was a young guy back on Wall Street, and I had this really ambitious dream of how I was going to be this top executive and do this and do that. And one thing I realized once I got to Wall Street was that there were other guys that were already ahead of me that were 20, 30 years older than me, and they were still trying to climb that ladder to get to where I wanted to be. And I didn’t want to wait 20 to 30 to 40 years to get there. And these guys were basically willing to kick me down the ladder to make sure I don’t pass them on the way up. So, I just simply had to decide, was I going to continue to play the Wall Street game? Or would I look for other opportunities where I might be able to shortcut that if I had the willingness to work very hard and the due diligence and the determination in order to make it happen. So that’s the short version for you older folks out there, the Reader’s Digest version of, you know, how this all came about.

Eve: [00:03:18] And when did you launch your company? And…

Joel: [00:03:21] Well, we actually started, believe it or not, in the early 90s. So this was some time ago, and we’ve had reiterations of the firm as we’ve grown as a company, adapted our focus over time. And, but that’s really when we got started back in those days.

Eve: [00:03:36] And I know you’re in Atlanta. So, you went from New York City to Atlanta. Why that move?

Joel: [00:03:44] Well, it’s very interesting you mentioned that. At the time I viewed Atlanta as New York 70 years ago. And what I mean by that is, if you look at New York City and you roll the carpet back 70 years, it was a new city, not necessarily new, but there was a lot of people coming into the city and creating what it is today. A lot of immigration, a lot of people coming in from the outside. And it opened up the opportunity for a lot of people that may not have been major players years ago to now be major players in the marketplace because there were no major players. Everybody was kind of trying to get their footing. And so, Atlanta back at that time was kind of the same type of place. This was before the Olympics. There were a lot of people migrating down there. It was wide open, and there was a lot of opportunity to really make your impression on the city without trying to, you know, knock off a lot of the older, established players that were there, like you saw in New York back at that time. So, it was an opportunity. It’s almost like, why did people decide to go west many years ago?

Eve: [00:04:50] That’s what I was thinking, like the gold rush.

Joel: [00:04:52] It was the same type of thing, yeah.

Eve: [00:04:53] How has that played out in Atlanta, do you think?

Joel: [00:04:57] Well, you know, I always ask that question, you know, where would I be today if I was still up in New York? So, I don’t know. But I think it’s worked out well. You know, one thing that’s good about Atlanta is you don’t have a lot of the, just the stresses of living. You know, New York is a very intense, compact city with people all over you. You know, everywhere you go, you walk right out to your building, there’s people all over the street. And, you know, to be in a more relaxed environment gives you more time, I think, to mentally kind of focus on what you’re trying to achieve. So, it’s worked out well for me. You know, I exchange the back yard of buildings and concrete to one of deer and trees.

Eve: [00:05:37] Nice! That’s nice. So tell me what services like Wall Street Capital Partner provides.

Joel: [00:05:44] Yeah. So, our core business over the years has been financing real estate, you know, so we’re the firm that many individuals come to in order to acquire real estate, refinance real estate, develop real estate, rehab real estate. We’re involved in that space. And as you can imagine, over time of making, you know, quite a few of our clients very wealthy, you know, we turned around and we said, you know, it’s time for us to step over to the other side of the table. So, years ago, we started investing in our own deals. And also, we decided to bring capital and resources to developers that maybe had deficiencies in their capital stack. Maybe they didn’t have experience, maybe they didn’t have all the capital, maybe they didn’t have the knowhow, maybe they didn’t understand the numbers, you know? So, we brought all that skill set to the table. And as a result of doing that, you know, we became equity players in other people’s deals and then started working on our own projects as well.

Eve: [00:06:45] So how big is your own portfolio now?

Joel: [00:06:49] Well our portfolio. I don’t really want to quote numbers here on online, but we’ve got quite a few projects that we’re more than happy to share with any investors that might be interested in investing in our projects.

Eve: [00:07:01] Okay. Fair enough. And are your projects primarily residential or commercial, for sale or for rent? What do you focus on?

Joel: [00:07:10] Yeah. So, our primary investments are, they might be for rent properties but we’re developing them for sale. You know now some of our acquisitions like in Atlanta, for an example, we’re looking at keeping those properties in the portfolio. Our development projects in the D.C. market we’re looking to sell. So, it really just depends on the market strategy, depending on where the property sits, as to what we plan to do with it. So, it’s kind of…

Eve: [00:07:41] Well that leads me to ask, you know, where are your buildings located? Where are these investments? Not just Atlanta, by the sounds of it.

Joel: [00:07:48] Yeah, not just Atlanta. Right now, we’re focused on acquisitions in Atlanta. We have other assets in New Orleans right now, and we have development projects that we’re working on up in the DC metro area.

Eve: [00:08:02] Okay. So, you’re in Atlanta. What’s the biggest need in real estate in Atlanta right now? What’s the biggest challenge?

Joel: [00:08:14] Uh, you know, that’s a multifaceted question. You know, it’s amazing because when I first got down here, it was rare to find a property that was, that cost $1 million to buy. You know, now it’s very common to find million-dollar homes. And yes, this is many years later, but just like many other markets, the cost of housing is an issue, especially in the urban core. The periphery of the city has got expensive as well. So, the demand for quality housing, even in those areas is a need. We have a issue with office space where there’s a lot of it available right now and what is that going to become? So that’s a need that has to be addressed. And you know traffic’s a big thing down here in Atlanta. Most people aren’t aware of that, but it is. And as a result, you know, many people want to live in urban core so that they don’t have to commute from outside the city. So affordable housing is something that’s needed as well. So I would say all of the issues associated with a major city is an issue here. One deficiency that Atlanta does have, though, is the mass transit is not as extensive as in New York or Washington, D.C. It’s more like a Los Angeles or Dallas or, you know, a city like that. And as a result, that presents its own challenges.

Eve: [00:09:35] So commute times can be long if you can’t live close in.

Joel: [00:09:39] Yeah.

Eve: [00:09:40] Okay. So, what’s your favorite success story? What’s a favorite project and why?

Joel: [00:09:50] Well, I think one of the favorite projects is one that we did in unison with a client of ours. They’ve kind of been the person. I don’t want to tell you how they get their real estate deals, because that’s kind of their secret sauce.

Eve: [00:10:04] It’s like their secret sauce.

Joel: [00:10:06] Yeah, so don’t want to disclose that.

Eve: [00:10:07] I know so many people who say that. I have to tell you.

Joel: [00:10:11] I know a lot of secret sauce out there, right? But, you know, this was a situation where the property was it was office. It was roughly about 30% occupied. It was in an area where, area wasn’t bad, but the property could have been doing a lot better, and everyone just kind of turned their nose up to it. It had an absentee owner from California, but it was down here in Atlanta in a very good market. And, you know, we got together and put together a strategy in unison with one of our clients to take over this property. It was about 400,000ft².

Eve: [00:10:49] Oh, that’s big.

Joel: [00:10:50] Yeah, and convert it to a very, very profitable office environment, right now. Even with offices beat up as it is and that sector being decimated as it is, this property is running north of 90% occupancy. Actually, last I checked it was 100% occupancy and it’s doing quite well. So that’s a huge success story and we would love to do that for more clients, especially minorities that are looking to get into commercial real estate. We started off with this particular client when they were buying. I think the first deal we did for them was, it was like a little dinky office building for like $147,000, you know? And now their portfolio is, I mean, eight figures, you know, high eight figures.

Eve: [00:11:37] Wow.

Joel: [00:11:38] So it’s, uh, it’s something that can be done, you know, in a short period of time. This particular client actually used to be a substitute schoolteacher of all things. So, it can be done. It can be done if you get the right team with you to work with you. And hopefully, you know, we view ourselves as that right team to help you get to the next level.

Eve: [00:11:58] So let’s talk about the King Henry. It’s a name I love, and that’s one of your current projects. And, full disclosure, you are listing this as an offering to raise funds on Small Change, my real estate crowdfunding platform. But it’s a really fascinating project. So where is it located and what is it?

Joel: [00:12:19] Yeah, absolutely. So this particular project is in Alexandria, Virginia. It is at the intersection of, well it’s sort of the King Henry corridor. I’ll just mention that if you know where that is. That’s the main artery that runs through Alexandria. It runs from the metro station at the Alexandria stop, all the way to the waterfront, where you could actually catch the water taxi to Washington, D.C., right to downtown. And it’s a tremendous location that I got excited about, just simply because of all of the traffic and the vibrance of the city. You know, one thing that’s very unique about Alexandria, and I know you have some other questions for me on it, but one thing that I really like about it is it’s one of those few areas in the country where you have a lot of mom-and-pop shops. You know, you’re not going to walk down the street, and there’s a Walmart on every corner and a Target and a this and a that. Nothing wrong with those guys. So let me, they might want to sponsor us one day, so let me not throw them under the bus. But the idea of being able to support local businesses, the local coffee shop, the local bakery, the local, you know, jazz club, you know, all these things is available in Alexandria, Virginia, where you can really feel a part of the community. And with the cobblestone streets and everything, it’s just a wonderful area. Specifically, what we’re doing there, we’re replacing surface parking that is there currently with structured parking. We’re using an automated mechanical parking system, which will take roughly 40 spots and turn it into 140.

Eve: [00:13:56] Isn’t that insane?

Joel: [00:13:57] I know, it’s impossible.

Eve: [00:13:57] I love that, I love that.

Joel: [00:13:59] Yeah, it looks impossible, but we’ve got it all structured and built out in the architectural drawings. And we’re also putting up 50 units of multifamily housing with retail on the ground floor.

Eve: [00:14:12] So all of that replaces how many surface parking spaces right now?

Joel: [00:14:17] Yeah, roughly about 40 spots.

Eve: [00:14:19] Total.

Eve: [00:14:20] Yeah.

Eve: [00:14:21] On all the. That’s crazy.

Joel: [00:14:23] Yeah, it is crazy.

Eve: [00:14:24] Not the highest and best use. Right.

Joel: [00:14:27] Yeah. Well, that’s the point. The city realized that this wasn’t the highest and best use for that space, and that you certainly can increase the tax base by doing what we proposed. And they’ve signed off on it. And, you know, it’s a permit ready site. We’re doing it.

Eve: [00:14:42] So, how does this compare to your other past projects? Is this unusual or standard?

Joel: [00:14:51] No. Well, you know, it’s unusual from the standpoint that, you know, generally you have, you know, 150, 200, 300, 400 projects. The one that we’re working on in a city very close to that is actually 600 units, you know, and that’s a skyscraper. So, you know, generally we do get involved in much larger projects. This one I really like because of the barriers to entry. You know, you’re not going to have everybody building a similar product right next to you because it’s [inaudible].

Eve: [00:15:24] It’s very unique

Joel: [00:15:25] Yeah, it’s very unique. It’s a historic city. And you can’t just go in there and tear stuff down, which is why we’re having to do it where surface parking is, right? Where something was already torn down.

Eve: [00:15:34] Interesting.

Joel: [00:15:35] Yeah.

Eve: [00:15:35] And so what’s the total development cost for that project?

Joel: [00:15:39] Approximately total development cost is roughly $42 million.

Eve: [00:15:43] And what does the financing look like for a project like that? Roughly.

Joel: [00:15:48] Yeah, roughly, we’ll do 60% of that debt. We will raise the rest in equity, which will be roughly about $16 million. And then we’re cutting off a slice of that for participation by some smaller investors that may want to get involved. Usually projects like this, it’s all people with deep pockets that get involved, and they make all the returns and all the money. And, you know, the average working-class person is generally relegated to getting in real estate by means of doing fix and flips, you know, and trying their hand at that. And they’ll, you’re never going to get to where you want to be just doing little small fix and flips. You can do okay, but you’re not going to get to that million, multi-million-dollar threshold. But participating in much bigger deals you can eventually get there. So, you know we think this is a great opportunity.

Eve: [00:16:39] So that opportunity is listed on our platform smallchange.co if anyone is interested. But I’m just wondering why, I mean this is probably a little bit more work for you than just going out and raising the money from one institutional investor, right? So, why?

Joel: [00:16:58] Yeah, well, you know, you asked the reason why. And just to give you a little background, you know, I have teenage boys and obviously I want them to come up and hopefully be in the industry and learn the commercial side of it from day one and grow and become major players in the space as opposed to just becoming maybe just a realtor with a real estate license, selling single family homes or, you know, doing fix and flips their whole life. So, in addition to that, I also teach the capital markets class for some institutions. One is called REAP, the project REAP program, where individuals that are looking to get into commercial real estate can actually participate and learn the business from people that are already in the business and learn how they can participate in deals. So, long story short Eve, I have a passion about helping those that are behind me because there’s people in front of me that have helped me get to where I am today. I have mentors, right? So why wouldn’t I pay that forward and help the next generation of folks coming along to be able to get in deals? Yeah, also, you know, growing up in New York City, I’ve seen how people seem to never get out of the rut.

Joel: [00:18:13] You know, when I was a kid, I thought the only way I could get to the next level was, everybody in the neighborhood it was either drugs or sports. That was the only way you were going to get a get out, you know, and get to that next level. And so, the idea of of being able to get other people into these deals at this level where they can say, yes, I was an investor in a $42 million deal, opens the door for them to do much bigger deals and become the part of the investor pool in much bigger things and much bigger opportunities. And it even exposes them if they want to do some bigger stuff on their own down the road. So, I think it’s great just to open up the door and let, at least let a slice of that $16 million go to some smaller investors so that they can participate and be part of the action. And it’s a passion that I have. I’ve been doing it for free, you know, even on my podcast and doing these shows and everything else, you know, it’s just a passion that I have to give back. And I think this is another way I can do it.

Eve: [00:19:14] So just dialing back a little bit, what are some of the challenges you’ve been confronted with personally as a Black man in real estate, which we know is a, really a white man’s industry still, very much so.

Joel: [00:19:29] Yeah. I mean, realistically, I can’t give you hard facts, but I do know that Blacks represent about 3% of the commercial real estate space across the board, 3%. But they make up 16% of the population. So, you kind of wonder why is that dichotomy there where you have so little that are in these type of deals? You know, and it’s mainly a white male dominated business, as you know. So, one of the challenges has always been access to capital for minorities. It’s a really, really big thing. My business partner on this deal has developed over 14,000 apartment units. So, you know, his experience obviously goes a long way toward getting this thing done. But just being a minority in the space, you know, people tend to gravitate toward folks that they have some type of camaraderie or some type of relationship to. And if you’re never used to seeing a minority do deals like this, it’s almost like, well, are they for real? Because I’ve never seen this before. Can they really pull this off, do they have the smarts? Remember, it wasn’t too long ago where it was said that Blacks weren’t smart enough to be a professional football coach or be the quarterback of a professional football team. That was in my lifespan. So, you know, those are the challenges and they’re not written down anywhere. But, you know, the fact that it’s a 3% penetrated industry, you know, I mean, kind of tells the tale of the tape. That doesn’t mean that there’s not a whole bunch of other people that would like to be players in commercial real estate. They just haven’t had the chance. And it always boils down to access to capital, 99% of the time, because they don’t have a daddy or somebody else that might be able to walk them into a into a bank or into an investment firm to get that capital.

Eve: [00:21:24] So what advice would you give to someone starting out a career in commercial real estate who has, who’s not a white man?

Joel: [00:21:38] Yeah, well.

Eve: [00:21:38] Anyone who, you know is from an underrepresented background or yeah, even a female, because I think the numbers look about the same for women. It’s pretty bad, yeah.

Joel: [00:21:50] Yeah. Yeah, exactly. And, you know, I want to be clear also that I’m not beating up on white males. And I want to say that because if it wasn’t for white men, the civil rights movement wouldn’t have got as far as it did. You wouldn’t even have HBCUs in Black or southern parts of the country if it wasn’t for white men that got behind trying to help these initiatives go forward. So, you know, again, it’s not a race of people, it’s just the way the numbers shake out. Right?

Eve: [00:22:24] It’s who has, I suppose, who has control right now. And we have to figure out how to shift that a little bit, right? That’s what we’re trying to do here.

Joel: [00:22:33] Exactly. Exactly. So, and even as I mentioned, my partner on this deal is a white male. So, you know, I’m certainly not beating up on white men. But I will say this when you ask about how does that change? I would say one of the things is to get involved in a deal like this one. The reason why is because then you can put on your resume of deals that you’ve invested in, hey, I was one of the investors in a $42 million deal. You know, that goes on your resume and, you know, participate at that level. Also, getting in with other individuals that have, you know, been involved in commercial real estate and deals like that. And part of it is just getting out there and meeting key folks that are in the space. You know, as I mentioned briefly, we have a podcast that doesn’t compete with you Eve, but it’s more so.

Eve: [00:23:22] I’m sure it does.

Joel: [00:23:24] No, no, it doesn’t. Because we’re not raising, you know, we’re not doing anything there, but we are introducing folks to others that have been highly successful in commercial real estate, and they can learn from them as to what they did in order to be so successful in commercial real estate. So, I would say exposure, you know, and then there’s trade organizations that are out there like, you know, A-REP and REAP and some of the others where you can get involved and meet the people that are making inroads in commercial real estate. So those are the things I would say. But getting a deal, I mean, because once you’re in the deal, then you can start reviewing the deal from the inside out and really learning this business.

Eve: [00:24:04] Yeah, yeah. There’s also a lot of meetups and clubs now. More and more of them are merging, which I think are a great way to start learning because it’s a lot to learn. And also, actually ULI, Urban Land Institute, can be a great source of information. So, lots out there. But what are you proudest of?

Joel: [00:24:24] What am I proudest of?

Eve: [00:24:26] In your career, not just your boys.

Joel: [00:24:31] Yeah, everybody says what they’re proudest of is, you know, being a great dad. Right? All that stuff aside, I mean, if you’re acting professionally. You know, Eve, it’s hard for me to answer that because I’m always focused on the future. I’m not focused on the past. So, while I’m happy about the things that I’ve accomplished and, you know, even being involved in the deal sizes that we’re talking about is, you know, something that often just the 1% of the population in commercial real estate get to participate in. So, I’m very happy and I’m proud about that, to even be having this conversation. So, I think that would be the answer to your question. But for me, I still got a lot of few things that I want to do before they write my obituary.

Eve: [00:25:18] Well, what is that? What’s your big hairy audacious goal?

Joel: [00:25:22] You know, I want to get these, these deals done. And we’re looking to grow our portfolio. We’re looking to have a balanced portfolio between acquisitions, where we’re providing affordable housing and, you know, blended housing in a lot of different areas. And we also are looking to develop projects in other key markets around the country. So that’s really our focus. And you know, with your help, Eve, I think we’ll get there.

Eve: [00:25:51] That would be wonderful. Okay. It’s been a pleasure talking to you. And everyone, take a look at smallchange.co. It’s an interesting project and I just love the automated parking. By the way, where was that developed? Where is that company from that’s providing the automated parking solution?

Joel: [00:26:12] You know, that’s a good question. I don’t know where they’re headquartered, so I can’t answer that. But if you go to smallchange.co, you will be able to get information on the project. You’ll be able to watch a video that actually shows you exactly how it works, and it will give you the information on the company so you can do your research on them there if you want to as well. And you’ll also get a chance to see where these products are already operating in other parts of the country.

Eve: [00:26:36] Well, thank you so much for joining me today. It’s been a pleasure.

Joel: [00:26:40] Thank you Eve, certainly appreciate being here and happy to come back in any other time you want me.

Eve: [00:26:51] 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 Joel Miller

Joyous disruption.

A former banker turned Oklahoma City developer, Jonathan Dodson is passionate about creating value through new partnerships and projects.

Jonathan’s financial background, paired with his experience as one of the initial members of the ULI Oklahoma, fostered an interest in urban neighborhoods and re-development initiatives. He co-founded Pivot in 2014 — his creative vision and constant encouragement allow him to approach challenging projects from a different angle. Jonathan leads the Pivot team, navigating tough conversations and decisions to create the best outcomes for his teammates, partners, and tenants.

When he is not developing, Jonathan can be found running, hiking, or hanging out with his wife and four kids.

Read the podcast transcript here

Eve Picker: [00:00:11] 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: [00:00:43] Joyous disruption. This is Jonathan Dodson’s goal with each and every real estate project he develops. Jonathan pivoted from an early career as a banker to real estate developer, aptly calling the firm he co-founded, Pivot Projects. He had developed an interest in urban neighborhoods and redevelopment initiatives, and when given an opportunity to co-partner on a project, he grabbed it. Now he leads the Pivot Team, navigating tough conversations and decisions to create the best outcomes for his teammates, partners and tenants. And for Jonathan, the best outcomes are not traditional ones. I enjoyed every moment of this conversation, and so will you.

Eve: [00:01:35] Hi Jonathan. I’m really delighted to have you join me today.

Jonathan Dodson: [00:01:38] Thanks for letting me be on. I’m honored and excited. So…

Eve: [00:01:42] Good. So, on your website it says, ‘We work alongside communities addressing their unique context to create collaborative developments.’ How does a banker become interested in building community like this? Can you tell me about your journey?

Jonathan: [00:01:59] Yeah, there’s several seminal moments for me, but the first one started in 2006, the winter I had just become a loan officer, and I went to an event that was held, it was the inaugural ULI Oklahoma event, and there was a young guy who had kind of started the whole thing and he was actually getting ready to leave to go to MIT and he kicked it off. And his dad was the former mayor of Oklahoma City. And I asked if I could get coffee with him. And he recommended just a bevy of books on urbanism and development and so, as I read those and I got into lending, I was actually drawn towards trying to figure out how can I lend to people who are doing these kind of things. So, when the housing crash happened in ’08 and ’09, what I found as a lender was that all of the stuff within the urban core held up remarkably well within Oklahoma City market. And so that furthered, kind of, an interest of saying there’s stuff going on here that seems to be a little bit more resilient to some of the market constraints that are happening. And so really, I stuck with that and in 2013, I left a bank that I had been at for 7 or 8 years and went to go to another bank that I thought I would be at for a while.

Jonathan: [00:03:21] And long story short, my boss told my assistant if she wanted to keep her job, she needed to have sex with him. And I was in the room where it happened and so, long story short, they gave her, like, four weeks to find a new job. They didn’t fire him, and I put my two week notice in and left. That’s why I left banking was really, you know, kind of this super gross thing that happens that I happened to overhear and reported up and they didn’t respond the right way. And so, I liquidated everything I had. So, 401Ks, pulled that out of the market Roth. 401K, pulled that out of the market and ended up selling my car. And so, I had four kids and rode my bike all over town. Started off sitting at a coffee shop and really just started figuring out what can I do to actually make money. And so, I realized that I knew how to help people find debt, and I knew how to connect people with capital. And so that was kind of…

Eve: [00:04:28] Which is a hugely important skill, right?

Jonathan: [00:04:32] It is. It is. And especially when you’re doing incremental development and finding tenants that aren’t national credit tenants or local tenants. So that’s going against you. You typically don’t have a big pocketbook, so you’re having to be creative on the capital stack and that’s going against you. So being able to find money both from the bank side and equity was helpful. And so really, I started scrambling doing that for other developers and it was on my 34th birthday that my current business partner and one of the co-founders as well, David Wanser, he left my birthday, came back and said, Hey, I got this 30,000-square-foot theater that is completely vacant under contract. Would you be an equal partner with me and go try to redevelop it? And so that was the genesis of Pivot, was really coming out of an act of generosity by him. He could have taken way more ownership in the deal. He could have done a lot of things. But he grounded our company in a sense of generosity and equality. And so that really was what started Pivot in 2014.

Eve: [00:05:35] Wow. So, you know, I had a similar experience to you in 2010 when everyone was saying the sky is falling in. I only had urban properties and I barely felt it. It was really, it was very interesting.

Jonathan: [00:05:48] That’s interesting.

Eve: [00:05:49] Yeah. So, did you fall in love with real estate development then?

Jonathan: [00:05:55] Yeah. You know, I think one of the things that, the thing, there’s several things that I like about real estate development, but one of the things that I’ve said before is real estate developers are really only creating covers to books, and so anyone will pick up a book because of the cover, right? But people read the book because of the story. And so, the idea that as a developer, I got to partner with the city’s best storytellers and actually have them, you know, basically be able to facilitate a space where they could tell the stories of both our past and our future and who we’re becoming as a city to me became such a fun thing to do. And so whether it was trying to transform the city through food and beverage or through music or through thinking through areas that have been forgotten or working alongside communities that have been speaking, but no one’s been listening to them and being able to advocate. Those were things, I didn’t have another role that I could do that would allow me to be able to touch those kind of stories and those kind of things.

Eve: [00:06:53] So it sounds like Oklahoma City is a really important part of this story, too.

Jonathan: [00:07:00] Yeah, there’s this, uh, this old, saint from, like, fourth century. And he said, even if your mother is a whore, you love her. And I think about Oklahoma City because living in Oklahoma City, you see all the flaws. Our city was half of it was in Mexico at one point. We were founded, the city was, the state was formed overnight with the land run. We had minorities who formed it. We had females who were starting towns in the Panhandle, and we’ve forgotten a lot of our history, right? And we’ve become a place that isn’t as welcoming as it should be. So, you see flaws like that, and it’s easy to get mad and upset. But she still is, you know, in a sense, my mother. And so, like, I love her, and I see the opportunity for change, and I see the goodness in people that are here. And so there is a sense of. I love this city and all of its flaws and all of the things. It’s still a city that I want to be a part of and be a part of its story.

Eve: [00:08:02] So you founded Pivot Project after that first project or with the first project.

Jonathan: [00:08:07] Yeah, it was kind of there was one other partner that was involved from day one, and we really just liked working together and our idea was that we were going to chase asset appreciation and cash flow for the 20-year look ahead, right? We weren’t going to go build, fill and flip or be merchant developers. And so really after the Tower Theatre formed, it was, or we built that out, which became basically 3 or 4 restaurants and office space and then a thousand-capacity music venue, um, we realized, man, we all kind of think about the city the same way. Let’s actually do this more often and do it together as a team.

Eve: [00:08:44] What is Pivot Project’s mission and vision? Like, what keeps you focused?

Jonathan: [00:08:49] You know, I think there’s this idea of human flourishing and human flourishing can mean a lot of things, but it’s this idea of allowing all of the different touch points that we have to allow for human flourishing. So, we view, we create one way to say, well, how do you create value? We create value through our financing and the way we put together the deal, right? We create value through our tenanting and the people we partner with. We self-tenant 95% of our space. And then through the property management side, we create value. But what we realized was that in order for us to do those things, we needed to allow for flourishing to occur for not just our tenants, but our investors, the community that sits around the development, the stakeholders at large. And so that forced us, one of our values is joyous disruption. And so, what we mean by that is that typically when someone gets really passionate about something or gets excited about making a change, they use shame and guilt as a methodology to get people to line up right. And we’ve been in, whether work environments or we see city officials do it or whatever, but, you know, you try to shame someone into reacting and that’s not it’s not human to do that, and it’s not healthy to do that. But that’s a tool. The other is paternalism. And so, we see that primarily when groups that have power or access to wealth, they’ll go into communities and say, Hey, you guys are really lucky to have us. Come under our wing and let us take care of you, right? And that paternalism is really not healthy. And we’ve all been in situations where someone has tried to, they think they’re helping you, but your skin’s crawling, right?

Eve: [00:10:38] So from the president down, right?

Jonathan: [00:10:40] Yes. Yeah, absolutely right. And so, what most people are, if someone becomes passionate, it’s like they’re giving one round of shame and guilt or one round of paternalism. And what we’ve said is we have all tried those different things at different times in our lives. We know that none of them work, and we know that we hate them when they’re used on us. And so we said, Hey, we’re going to be joyous in how we try to disrupt systems. And so, we’re going to be really passionate about what we do. And if you’re already leading the way, let us be a part of what you’re doing. If you like what we’re doing and you haven’t been doing it, come join on. And if it’s not for you, that’s cool. We’re not going to try to force you into seeing the world the way that we see it. And so, empathy is one of our values. Thoughtfulness is one of our values. Excellence is one of our values. Resilience and then joyous disruption. But joyous disruption is the one that for me sits at the top because it’s, we want to be passionate and we want to be excited about what we’re doing, but we’re not going to use the typical tools that people use to try to get other people involved.

Eve: [00:11:39] Well, that one’s making me smile. So, give me an example of something you joyously disrupted.

Jonathan: [00:11:47] Yeah. No. Great. So, one way to look at that is our project on the east side. And this is what I think connected us to a lot of great people. We won an ULI international award of excellence. And so, Oklahoma is a state has had three award winners. One is $1 billion tower, another one is a half-billion-dollar park, and then our $10 million development on the east side of Oklahoma City. And so, what we did in that project, very briefly, is we were asked to go redevelop in an area that hadn’t been developed in in 35 years, and it was the historic kind of black community. And so, we said, we’re going to take six things. We’re going to do it, basically, this process will be broken up into six pieces, and we’re going to do the opposite of what we’ve seen done. So, the first was to say that just because people have access to power and money, it doesn’t mean they’re a blessing to the community to go in. So philosophically, we said we are going to leverage access to those things if the community would be willing to take us in, because what we really value is resilience. What we really value is community. What we really value is seeing the world a little bit differently, and they had that in abundance. So, we said, okay, we’ll go leverage this if you’ll let us in. The second thing we did was we said we’re going to flip the script. So power, with developers, power’s like the one thing we don’t want to give up. We don’t mind bringing in partners, but we don’t want to give up power. And so, what we said is we will actually bring in a community member and give them authority over us. So, Sandino Thompson, who is a friend, he actually had authority to veto anything we did. We brought him in as an equity partner, and he received development fees.

Eve: [00:13:30] But why him? Did he live, does he live in the community? or…

Jonathan: [00:13:33] He lived in the community. He’d been at it for 20 years and he had a vision that we felt like was something we wanted to be a part of, right? And so, we had some development skills that he didn’t have. He had been dreaming and eating and sleeping this stuff.

Eve: [00:13:49] He was really a part of the community and understood what thriving yeah, and okay, so you chose someone who was really a representative for the community.

Jonathan: [00:13:59] Absolutely. And so, and then we said we’re going to give you authority over us and then we’re going to pay you like one of us, right? The third thing we did was we said, we are going to pay the community to tenant the buildings. So, what typically happens is a developer calls all of their buddies and says, hey, you want to move over here? And we could have brought some really great white developers to the east side of town. But that’s not what’s needed, right? When we did all of these different charrettes, they said, hey, we want to walk it, we want representative retail, we want to be able to walk into a building and it feels like it’s a part of the community. The ownership is Black, all of those things.

Eve: [00:14:33] And what is the demographic of that community?

Jonathan: [00:14:35] It’s mostly African American and Black. And so it needed to feel like one guy actually was really passionate and he said it needs to feel Black, but we need white people’s money. And, you know, because that area had been so decimated by redlining and all of this, right? And so, what we told the community was, if you bring us a tenant and they sign a lease, we’re going to pay you a consulting fee that’s commensurate to a brokerage fee. And so the idea being that we don’t know what’s best for that community, but they all know if someone was going to open up a bar, who should that be? If someone’s going to open up a restaurant or a pizza joint, who’s that going to be? So that was the next thing we did is we said, we’re going to pay the community to help fill the building. The fourth thing we did was we said we were going to take funds from the city that we get through TIF and we’re actually going to pass those on to our tenants. So instead of protecting our bottom line, we’re going to pass those on to the tenant. So, the tenants got six times the amount of build out dollars that they would get right down the street. And then they got a 35%, or 30% reduction in rent. That was important.

Eve: [00:15:36] I got to butt in because there’s a lot here. Are you allowed to do that with TIF funds?

Jonathan: [00:15:43] Uh, the city actually asked us not to do that, but we felt like it was critical to the project, right? So, the two things that were hard for the city to see was allocation of TIF, how we pass that through. That was going to improve the project, right? But we were trying to make it financially feasible because there had been no development over there in 35 years.

Eve: [00:16:10] So TIF is really meant to improve public places, right?

Jonathan: [00:16:14] Yeah. So, the TIF in Oklahoma City is a little bit different. It’s more project specific.

Eve: [00:16:18] Oh, okay.

Jonathan: [00:16:20] So there is, you can allocate it to the project itself to try, you know, it’s the whole but for. Could the project happen But for TIF and the answer here was obviously no.

Eve: [00:16:32] But essentially you used funds that permitted you to, you know, offer spaces at a rent commensurate to the skills and abilities of the local people, but still let you pay your mortgage and keep the building maintained, etcetera. And that, as I know really well, there’s usually is a very difficult thing to do in a soft market, in a disinvested neighborhood. You need funds like that.

Jonathan: [00:17:01] We probably needed more, and we can talk about lessons learned on this later. But our spaces were, some of our spaces were too big. So regardless of the 30% reduction in rent or 40% reduction in rent, the square footage itself just made the leasing hard, right?

Eve: [00:17:15] Really wrong. Yeah, because someone wants to pay $1,000, not $1500 or $2000. Right.

Jonathan: [00:17:20] Exactly, yeah. So, the next thing we did, which I feel like is one of the most important things, was we said, gentrification can be good and bad. In some areas it can be a good thing, in some areas it’s not a good thing. In underserved communities, it’s almost always a bad thing because it can lead to displacement. And so, in an underserved community and, you know, all this stuff, but in an underserved community, the community ends up taking and filling the resource gap that exists because the city or other services haven’t been funding that or taking care of that, right? So, if that person gets this place, they not only have to move, you know, they’re moving not just down the block, but they’re moving nine miles away to the suburbs. They’ve not only lost their community, but they’ve lost all the community resources that existed there, right? And in our development, I think we’re like at 92% single parent households. So, the need for people to be close to these things is really important.

Eve: [00:18:16] Yeah, it’s a support system, right? When you’re a single parent. Yeah.

Jonathan: [00:18:20] And so what we did was we said we going to allocate 15% of the capital stack for our tenants. And the idea being that if you sign up and you sign a lease with us, and as long as you don’t have a payment default, you become a partner in the real estate from day one. And if there’s capital calls, you don’t get diluted and you don’t have to put in money. But the idea being that the value, there’s two things that that does, if the value that they help create over a period of time is good, they should be compensated for, especially in a project like this. The second thing is, is it ties our hands that if we became greedy or we found out that, hey, we got Starbucks that now wants to come in, we don’t get, like they’re our partners now, right? They’re just not tenants that we can cast aside. And so that was a really important part of us to say is we want to actually have partners and not just tenants in this process. And so we were able to do that. And I think we’re at, I think of the spaces we have, it’s 90% Black-owned businesses, 50% female Black-owned or minority owned businesses in this development. And so, and then the final piece was to say, this was a really hard project for us to do. Phase one was healthcare related. We were told that what the community wanted through our meetings with the community was access to healthcare, access to food and then representative retail. And so, phase one was access to food and health care. And we had our first tenant that came in signed a ten-year lease. They were 100-year-old health care company, their rent alone debt serviced the project. And we went out to 25 banks and couldn’t get a term sheet.

Eve: [00:19:57] Oh, why not? Why not, ’cause of the neighborhood?

Jonathan: [00:19:59] And what we were told, we don’t lend money to that side of town.

Eve: [00:20:03] Oh, God.

Jonathan: [00:20:05] So, and now the honest bank said that, right? Now what I would say is what I’ve seen in this process and just to highlight to how hard it is, we actually had a bank who said, hey, if you bring in someone really wealthy, you give them more ownership than you guys have, they guarantee the debt will then finance the project. And so we got a guy who had more single malt scotch than debt. So that’s how rich he was, was like, you know, he had more single malt scotch in his cellar than we needed in debt. And he said, I’m in. I’ll guarantee the debt. And so, he went back to the bank and the bank came back and said. That guy’s not, like, he’s not rich enough. And so, what hit me at this time was when me, Ben and David did our first project at the Tower Theater, it was 100% vacant, we had no development experience, really. We were able to go in and get a bank to lend us construction money with no plan in place. And we leveraged tax credits so that we didn’t actually put any money in the project. So, I had no money to put in, right? Like I didn’t have a job. So, two miles from this Tower Theater building, five years later, after we’ve developed all this stuff, we have 100-year-old health care tenant who signed a ten-year lease and we have another guarantor on top of it and we can’t get a bank to say yes. And so, what, when you talk about systems, so joyous disruption, there’s something that happens. So, in the 50s, if you were a Black male or female and you came to me and asked me for a loan and I was a banker, I would just say no, because of the color of your skin, I’m not going to give you money. And I would do that in the 60s and I would do that.

Eve: [00:21:43] If you were a white woman, that would be true, too.

Jonathan: [00:21:45] Yeah, that would be true too. Yeah. But they would do that in the 50s, do it in the 60s, do it in the 70s. But by the time 2000s roll around, a banker is no longer even forced to think that way. What he sees is he says, hey, you have not invested in your community in 40 years. Why would I risk my job to lend money in an area that, obviously this community doesn’t even care about itself, right? The system has so well baked-in the decisions that it’s hard for people to say, oh, there’s a system in place that’s prevented these people from being able to redevelop in their own community and you’re part of the problem, right? And so, my first reaction to that was to be super pissed and to get really angry at all of the banks and, you know, want to take them all down, right? Shame and guilt were very much the methodology that I wanted to use there. But what we realized is that that was not going to win anyone’s heart and so white culture in general is anemic, I think. It’s a deceptive, anemic, because we think we have everything we need. We have access to power. We have access to money. We have access to what we think is culture. You know, when an anemic person gets exposed to iron for the first time it’s like the grinch’s heart gets bigger. It’s like, oh my gosh, you know, I have more energy. And when we get exposed to cultures that are different, our hearts become bigger, too, right? And so trying to say, okay, if you didn’t lend me money. Now what’s cool is they come to Kindred, which is a really awesome bar on the east side, or Scrambled, which is an awesome breakfast spot or East Side Pizza and they’re seeing people that don’t look like them. They’re experiencing great food and they’re calling me going like, Holy crap, this is like really cool.

Eve: [00:23:30] And they realized they missed out, you know?

Jonathan: [00:23:32] Yeah, yeah. And my job isn’t to tell them that they missed out, but if they start to see the world a little differently, then how cool is it that I got to be a part of that? You know? And my role is very limited. Really my role was to fight long enough to find a bank, to say yes and then find storytellers through the community’s help to go put them in buildings so that they can tell their own stories, right? So, I have a very limited scope of influence, but we’re committed to use that scope of influence we have to be a part of these kind of stories.

Eve: [00:24:03] Oh, I think your influence is enormous if you’re providing a way for the community to generate wealth and have ownership as well, that’s a pretty big influence, I think.

Jonathan: [00:24:14] Well, we’re having fun. And it’s again, it’s having friends that, what we’ve realized is, a story that I’ve told before, but we talk about if you were going to come to Oklahoma City and open up, build an office building and you’re new to town, I’d be like, Eve, okay, I got to connect you with some of the other office brokers in town. I got to connect you with these people, so, you know, right. And I would play the relationship game, right? So that you came in and you’d be accepted. And no one’s going to try to, like, stop you from doing what you’re doing, right? Financially or, you know, making phone calls or whatever. So, I get a call from a friend of mine who’s a part of the project as a tenant and a partner, because he’s a tenant, and he calls me and says, I need you to come meet me at 2:00 today. And so, I drive over there and to the East Point project and he’s like, we need to go for a walk. And so, we go for a walk, and we go to this nondescript door that just says Barber. And he says, we need to go inside. And so, I’m like, Dude, what’s going on? He’s like, just go inside. So, we walk inside and there’s three dudes playing NBA 2K smoking weed, there’s a dude getting a haircut, and then there’s this guy that’s probably like six foot four has no body fat and he’s got one picture on the wall and the picture of the wall is of my buddy. And he and the buddy start talking and then, Mailman this this barber starts asking me questions. He asks me, what am I doing next door? He asked me, why am I doing it? He asked me what kind of food am I going to try to bring in? He asked me what my intentions are. And so, we go through like a 20-minute, and I know I’m being interrogated.

Eve: [00:25:50] You’re being interrogated?

Jonathan: [00:25:53] Yeah, yeah. I know something is happening. I am not smart enough to figure out what’s going on. And so, we, he’s like, he finally says, Man, you’re cool. Like, you’re good to go. Uh, and so I say thank you. And I walk back out and I tell JB, I’m like, what the hell just happened? And he said, I needed you to meet the Mailman. And he’s, uh, he’s an OG. And I was like, all right, I know from like, 90s rap what an OG is, but like, what does that mean? He’s like, well, he’s made. And I said, well what does it mean to be made? And he said he’s untouchable. All of the gangs respect what he does and who he is, and I needed you to come in. And actually, I leveraged my reputation so you could have a meeting with him because now your project is safe. Like, it won’t get tagged. People aren’t going to do anything to it. And I needed you to have that kind of protection for your building, since this is the first building over here in 35 years. And it was a super humbling moment for me because as a, just a white dude who’s trying to figure things out for my friend to leverage his whole reputation to give me access to a meeting, to make sure that this development would be successful, you leave and you feel like how little I’ve done for other people and how much he’s done for me and like, just again, your heart gets bigger, right? And you start realizing how important these things are. And so those are the kind of stories when you say like, what’s joyous disruption look like? It looks like all of those things. And when we get to be a part of that, I really do think we become better humans.

Eve: [00:27:25] Yes. How large is your portfolio now and what’s the end goal?

Jonathan: [00:27:30] Yeah, great question. So, we, over the last seven years, we’ve developed about $100 million worth of real estate, all within kind of the Oklahoma City urban core. Over the next 3 to 4 years, we’re growing and we’re doing some bigger projects. So, we’ve probably got about 350 million over the next 3 to 4 years that will be taking on. And it’s Oklahoma City and Tulsa, which are, you know, if you’re not familiar with Oklahoma, they’re about an hour and a half drive from each other. And so, they’re the two largest cities within Oklahoma. And so really what we’ve said is we want to continue to grow what we do. We have added a brokerage wing to our team. And so, for me, one of the things that I realized was that another way to form joyous disruption and to like do things differently, is just to do different. And so, brokerage is one of the industries where if you’re a really hard worker, you pick up the phone, you call, and then you’re willing to not take shortcuts. I mean, brokerage by default is transactional, right? Because it’s like you’re trying to close. And so, if we could maintain a level of our values and how we do things and incorporate and integrate a brokerage firm into that, we could hire differently. And so, our brokerage community in Oklahoma looks like a lot of brokerage communities where it’s 90% white male, and there’s some females scattered and some minorities. But our intention was what if we actually hire differently and we hired primarily females or minorities? And that’s really all we hired.

Jonathan: [00:29:02] We got a gentleman who’s really trained almost every broker in the city who’s 70 years old, and he was at the most preeminent firm in town. And he said, I will come start your brokerage company and I will try to replace myself as quickly as possible, but I will commit myself to do that. And so, the brokerage company is another way just by hiring differently, right? You’re able to disrupt systems. And so, we started a brokerage company. We have a property management company, and then it’s trying to expand our development scope not because bigger is better, but really as we’re trying to use the company, I believe, Pivot when it uses itself to create wealth for its employees and for the community and for all the people who touch it, if we can do some larger projects, that gives us larger runways to actually put capital into smaller projects where we don’t have to go try to raise capital, you know, $500,000 or $750,000 to do that. We can do that ourselves. And so really, we’ve got a, you know, a ten-year plan. I’m currently the CEO at Pivot, and I talk to my team all the time but at some point, I won’t be the best CEO for Pivot. And so, when that happens, I’ll step down. But until then, I’m passionate about building this company and what’s a little weird about Oklahoma City is we really don’t have development companies in Oklahoma City. We have developers, we have development companies. And so, we’re really kind of forging our own path in terms of what we’re doing and how we see it. And we don’t have a lot of groups that we can say like, hey, we’re going to do it just like them. We have people we respect, but they’re not really building development companies.

Eve: [00:30:30] I was going to ask you that. Has anyone influenced your work?

Jonathan: [00:30:34] Yeah. And I would say I think one of the most influential groups for us has been the group that Jim Hyde has put together through the Small Developers Conference. Having Lorenzo and having Hector and so many of these people, Michael Lander, that I get to talk to and see how they’ve done stuff and how they’ve put a project together. And what we do can be really lonely, right? Because you’re going against the grain at every single avenue. Nothing is easy, right? We always laugh like there is. We’re the most inefficient development company because we haven’t just done just one thing, right? We have this portfolio of all sorts of stuff. And so…

Eve: [00:31:13] But damn, it’s so much fun.

Jonathan: [00:31:16] Yeah. No, it is. It absolutely is. But at times you’re like, Man, am I crazy? You know? And so, to be able to call or to be able to have a conversation with somebody and then go see what they’re doing, I mean, the affirmation that they give us when they come to town and are able to encourage us, and then what we’re able to see when we go to their towns, it’s so much fun and it really is. So, I really think what he’s done has been super important for us. And then we just have individuals here in town that we see them doing really great work and excellence is one of our values. And so, we’re, when we decided to grow, we said we have some very large gaps within our company that we can’t be excellent. One was, we were doing property management in-house, and we weren’t good at it. And we didn’t have anyone who had like a skill set in it. So, we hired someone who had property management experience, right? We didn’t really have a high level, what I would call financial mind. All of us have finance degrees and we could put together but there’s a huge difference between having a finance degree and then actually knowing what you’re doing. And so, we brought in a lady named Megan Bruner, who had been at Grant Thornton for 15 years, and she came in to help us with that. And then we didn’t have anyone in the construction world. And so, as a developer, we felt like we kind of getting taken advantage of, whether it was intentional or not. But once we got the process going between the architect and the GC, there’s was a game being played that we just didn’t know well enough how to play it right. And it’s like…

Eve: [00:32:42] Absolutely.

Jonathan: [00:32:43] You could see it happening, but we couldn’t stop it, right? And so, we were able to hire another female who had been at one of our largest general contracting companies for 15 years, and she came on board to help us. And so, it’s like we’re starting to fill these gaps that we have, which has been really fun.

Eve: [00:33:01] Little gaps of knowledge, yep.

Jonathan: [00:33:03] Yeah, and it allows us to, I mean, empathy is one of our core values, but excellence as well. So, we don’t want to just be a nice company, we want to be a nice company that does it really, really well. And so, we’re hopefully headed in that direction.

Eve: [00:33:18] So who gives you pushback and why?

Jonathan: [00:33:22] What kind of pushback?

Eve: [00:33:24] Whatever you want to talk about.

Jonathan: [00:33:28] So, what I will say one is that David Wanser, who was a co-founder with me, he is a voice of reason for me in regard to, there’s been a lot of times we talk through things, and he’ll say we’re moving too fast. We need to rethink this. Do we really know what we’re doing here? So, I would say he’s been a great voice. He’s a friend and he’s been a great voice of wisdom for me. All that we’re doing, we get pushback. I mean, I can’t think of a single thing that we’ve done where someone says, you know, this makes perfect sense.

Eve: [00:34:07] This is a great idea. Go, right?

Jonathan: [00:34:10] Yeah, yeah. Everything is like a fight, you know? And so we’ve got we’ve got some really big projects that we’re working on. And some people are saying this is the worst time in modern history to develop. You shouldn’t develop. Don’t do it now. And we’re saying because you say that we actually think it is the best time, you know. So, but it’s obviously, development is hard right now because you’ve got inflation.

Eve: [00:34:33] The price differentials are ridiculous. It’s very insane.

Jonathan: [00:34:36] And your cost to borrow is increased. And then banks…

Eve: [00:34:39] But if you can get through that, you have some asset at the end of it. Yeah. I’m trying to finish a project in Australia and that’s exactly what I’m confronting. It’s just every moment is another problem. But you know, no is an interesting word because the impact that Nno has on me means, oh, I’m just going to try harder.

Jonathan: [00:35:00] So, I have this great example of, there’s this, someone that I really respect, and I was really lucky to meet, a guy named Sam Hinkie, and he was the GM for the 76ers and he worked at Bain & Company as like a 20 year old. And now he teaches at Stanford. And I got two hours in the car with him, and he said, go show me your projects. So, I drove him around and told him the stories of all of our projects, right? And he all he did was ask questions the entire time. And so, at the very end, he said, well, do you want to know what I think of you guys? And I was like, no, I don’t want to know what you think of us.

Jonathan: [00:35:36] And he said, You guys don’t give up. He said, every single asset that we’ve gone through there has been, you know, our first project, our music operating company, defaulted on their lease within three months of signing a ten year lease. And we had to form an, overnight a music operating company with no experience and go raise $1 million, which meant we borrowed $1 million to go build out the space. And we learned how to run a music operating company, right? Those are things that he said on the West Coast you just walk away from, right? You just, that just didn’t work out like we thought, we’re going to leave. He said, I know that if I give you money or someone does, you’ll never treat that lightly and you will work to make that project happen. And so to your point, no is not no, no is like we got to be more creative. We got to work harder. We got to figure out another way around it, right? And so, I think that’s in the DNA of anyone who’s doing what we’re doing.

Eve: [00:36:38] Yes. Wow. So just any big disappointments?

Jonathan: [00:36:45] Yeah, I journal a lot. And so it’s funny to go back and look at the things that are disappointing, right? That you look back and you go, at the time, it feels like it’s soul crushing. We had a tenant that we wanted so bad it would have been the first location, it was our first project at Tower Theater, we knew they were going to say yes. The CEO said he was going to say yes, and then he changed his mind on the day of the vote to bring this tenant to Oklahoma City. And for us, it was like we were so, one, we were naive, but two, we were so excited. We felt like, you know, we just hit a home run. And so, you look at whether it’s tenants saying no, it’s bankers saying no, it’s working your butt off on a project and then losing it because it doesn’t make financial sense anymore and you have to walk away from it. Those are all things that I think you take. I look at how much we’ve had to grow as a company. And when you take other people’s capital and you bring it in, they’re entrusting you to not just get their money back, but to make a return on that, right? And, you know, Covid was so difficult, right, to try to figure out how do you. We were…

Eve: [00:37:53] Crushing.

Jonathan: [00:37:55] 40% of our portfolio was food and beverage at that time. And so, trying to figure out how do you handle that? And so, those are things where I think we’ve said if we are forthright, honest and we’re communicative and we problem solve, even in the midst of disappointments, we’ll be able to find a way out. And whenever you have a plan to not flip, but your goal is to hold, it gives you some runway, right? To be able to weather things that otherwise would’ve been, if you were trying to sell during this time, you would have been totally screwed.

Eve: [00:38:29] Yes, I agree.

Jonathan: [00:38:30] I posted this the other day on LinkedIn because I’ve been thinking about this a lot and some of this is from Jim Hyde’s stuff that he did, but that an entrepreneur is, by definition, optimistic about the future. Right?

Eve: [00:38:41] Yes.

Jonathan: [00:38:42] We can make a difference. We’re going to figure this out. But I find for myself in most that we’re also like the hardest on ourselves and our companies. And we like, you live within disappointment because you’re like, I thought we would be past this by now, or why are we dealing with this issue again? Or, you know, like what’s going on? And because entrepreneurs have to be future looking, we very rarely measure how far we’ve come. And so, one of the things I’ve been trying to do is, look, I did a five-year, three year and six month look back to say like, what has Pivot done during that time period? And I think that’s where you can start to find, oh, we’re actually like, we’re growing. Sometimes it’s more painful and slow than you want but look at how much farther we were now than we were five years ago. And so there is stuff that is like, okay, I need to be more kind to how far we’ve come and not be so disappointed that we’re not where I wish we were right now.

Eve: [00:39:36] Well, this has been completely delightful. And I’m going to wait for an invitation to come and see all your projects in Oklahoma City. I have to figure out how to get there.

Jonathan: [00:39:45] We’re great hosts. As long as you like to eat and drink. Yeah, no, just come. Just come.

Eve: [00:39:49] Yeah, yeah. Okay. This has been great, Jonathan. And I hope I see you at the next Small Scale Developer Forum. And I hope everyone who’s listening checks it out because it’s really a pretty amazing group of people. It’s wonderful.

Jonathan: [00:40:04] I’m already booked, so you’ll see me for sure. So, I can’t wait to see you.

Eve: [00:40:08] Yes. And thanks very much for joining me.

Jonathan: [00:40:11] Thank you, Eve. Really appreciate it.

Eve: [00:40:16] 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 Jonathan Dodson

Lindsey is a scout.

Lindsey Scannapieco leads Scout, an urban design and development practice that focuses on the activation of underutilized space. Scout’s largest project to date is the redevelopment of Bok into an innovative space for makers, artisans and entrepreneurs. The project has been recently recognized with the Charter Award for Transformational Development by CNU (2021) and long listed in adaptive reuse by Dezeen (2022).

Lindsey has been recognized with the 40 Under 40 by the Philadelphia Business Journal (2023), Girls Inc Community Impact Award (2022), the Rising Star Award in Real Estate (2018) by the Philadelphia Inquirer. Outside of work, she is the co-President of the Friends of FDR Park and an active board member of Fleischer Arts Memorial and the Knight Foundation Advisory Council. Lindsey holds a B.S. from the University of Southern California and a MSc from the London School of Economics in City Design and Social Science.

Read the podcast transcript here

Eve Picker: [00:00:05] 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: [00:00:36] Lindsey Scannapieco is an urbanist and an artist in every sense of the word. While living and studying in the UK, Lindsey worked on projects such as activating an underutilized subterranean crossing alongside Westminster Council, supporting Tech Shop in their global expansion, and developing a community led design project that reconsiders traditional construction hoardings in South Kilburn. All of this led her to found Scout, an urban design and development practice that focuses on the activation of underutilized space. Not one to think little, Lindsey submitted a proposal to purchase a 340,000 square foot vocational school building from the city of Philadelphia. Much to her surprise, she won the bid. Eight years later, BOK, as it is called, is a thriving and creative mix of makers, small businesses, and nonprofits, and 100% full. The building is a testament to Lindsey’s staying power. You’ll want to listen in to learn more.

Eve: [00:02:03] Hi, Lindsey. Thank you so much for joining me today.

Lindsey Scannapieco: [00:02:07] Thank you so much for having me, Eve. It’s a pleasure to be here.

Eve: [00:02:10] Yeah, well, I had the pleasure of visiting BOK a few weeks ago. That was, that’s a monster project. I can’t wait to hear how you pulled it off. But first, I wanted you to tell me about your company Scout. When did it all begin and where did it all begin?

Lindsey: [00:02:28] Yeah. I’m so glad you were able to see BOK in person. It’s been a great project, but a little bit about how we got started. So, started Scout in 2011. We are an urban design and development practice, and in the early years we were really working on consulting projects, really about underutilized spaces, primarily for planning agencies in the UK. That’s where Scout was founded in 2011. We did our first kind of big public project that year, which was a pop-up cinema called Films on Fridges. And although a pop-up cinema might seem pretty different from large scale development, actually there was a lot of shared characteristics in both of those projects, which I think are kind of a common thread throughout our work, which is trying to reimagine histories of space and place. I think playfulness is a big piece of our practice and I think inviting people in to have an experience is another part that we think is a really strong tool in any project. And so, we started Scout with this idea of looking at underutilized space in different ways. And in the beginning that started off as cinemas, community engagement projects, public realm work and evolved into development many years onwards.

Lindsey: [00:03:58] And we got the name because when we were talking about it, we were thinking about this idea of both scouting for space, so actually being a scout in that way, but also kind of a Boy Scout or Girl Scout sash in that we were accumulating skills and we didn’t know where they would take us. And so, I remember after we did this pop-up cinema, we got calls from a bunch of people who said, oh, can you do a pop-up cinema here? And we said, actually we don’t want to become known as the pop-up cinema company. For us, the cinema was a tool to bring people to a space that they otherwise would not go to because people are willing to travel for experiences. And so, we kind of put that on our sash or on our badge and turns out that was kind of a skill set or an approach to space that came in handy when we were tackling much larger projects down the line. So, this kind of idea of a tool kit or different badges of different types of skills for how to reimagine vacant space.

Eve: [00:05:03] But let’s go back a little bit even further. So, what sort of training did you have that made you even want to think about scout? There’s surely a lot of story before that, right?

Lindsey: [00:05:17] So my background in undergraduate, I studied real estate finance with a minor in classics and art history. And at that time in my life, I thought I would go into art business because I really enjoyed the arts and that made sense to me, arts and business. I actually think that what I’m doing today is I get to work with way more artists than I ever would have had I kind of gone down that track further. And so I guess after I graduated, I became really interested in urban planning and development and then pursued a master’s in City design and social Science at the London School of Economics. And through that work focused my studio on an area adjacent to what was then the 2012 Olympic site called Hackney Wick. And from there started to work for the London Legacy Development Corporation, where I led interim uses, which was looking at kind of the opportunity of spaces before the long-term development plan comes to fruition, but is kind of a better alternative to just fencing or hoarding a site. And I think through that work was really the impetus to starting Scout and started Scout a little bit because of that role. I was encouraged to start my own company and to be able to kind of work for them as a consultant. And then through that we took on more clients and grew a team and grew projects and that was over a decade ago now, which feels pretty wild to say today.

Eve: [00:06:57] So how would you say your approach differs from a traditional real estate practice?

Lindsey: [00:07:03] I think one of the first things that we do is I think often times in development, people bring ideas for a project into a space. And so, they’re saying, I know what I want to do and I’m trying to force this building to do that thing. I think what we’re interested in is really looking at the infrastructure, the assets, the physicality of a building as it exists and finding value and usefulness in that and almost listening to the building, letting the building tell you what it should be and how it should be used. And I think, you know, we can be quite precious, I think, about development sometimes and sometimes actually there’s a real practical piece of what a good building can be or can provide, particularly in our cities. And so, we’re really interested in that. I say oftentimes I’m really interested in dirty work and that kind of means to say the work that doesn’t happen at kind of our clean desks. That unfortunately is often very fragile. It’s usually moved to, you know, the edges of our city. It’s at risk, it’s sometimes happening in buildings without proper heating or roof systems or it’s just, you know, warehouses we see, every single day, being converted into residential or kind of, quote, higher and better uses. And so, I think we’re really interested in the preservation of those spaces, and I think how we can allow spaces of experimentation and growth in cities, I think that’s really something that we’re very passionate about.

Eve: [00:08:49] Yeah. So, you moved out to Philly? That’s right. What was your first project there?

Lindsey: [00:08:55] So we moved Scout to Philly for BOK.

Eve: [00:08:58] Oh, okay. Okay, I didn’t realize that. So BOK came first and Philly came second.

Lindsey: [00:09:05] A bit, I’m from Philadelphia, so for me, it was a bit of a homecoming personally, but we had submitted to an RFP for this big old school. It’s a 340,000 square foot school. It occupies an entire city block. It’s nine stories high. It has a very commanding presence over its surrounding neighborhood. And so, we submitted a response to the RFP. And to be quite frank, we never thought that we would get it. I just thought we would learn something about what that process was like in the US. And we had been looking at buildings, but at the time in London we couldn’t afford a building in London, so it made sense to go to another place that I had familiarity. And to be honest, we were shocked when we found out that we were the highest bidder. I was also the youngest bidder, I was obviously the only female bidder and so said, uh oh, we’ve either done something really right or really, really, really wrong. And so we jumped in and built a team in Philadelphia to start to take on that project. We had a year about of due diligence before we actually closed on the property from the school district. And over that period of time, we realized that the building is not flexible. It was built as a bomb shelter. It was extremely resilient, and it has, you know, incredible floor cores and floor strengths. It was built as a vocational school. And so I think most people had said to the city, and I don’t know this, I’m just, you know, speculating that they said, I’ll give you a dollar because to convert the building into residential or something that was more market driven would have required a ton of money and they would have said there’s no way that they could tackle that.

Eve: [00:10:58] Yeah, I’ve been to the building. I’m not even sure it’s possible. It’s really, really tough. Very inflexible, as you said.

Lindsey: [00:11:07] And so we embrace that. And so, we said, you know, how do we take spaces that aren’t flexible and how do we actually allow them to stay that way, allow them to stay what they want to be? You know, that means that, you know, an old woodworking shop became a home to a woodworker, an old culinary arts classroom, became home to a catering company. And so, you know, it really was about looking at the infrastructure and matching that to people who could use the space.

Eve: [00:11:35] You saw the existing infrastructure as an asset rather than something that needed to be like swept away and replaced.

Lindsey: [00:11:43] That’s exactly right.

Eve: [00:11:45] Yeah. So, when you submitted your RFP, what did you tell the city you were going to do with it?

Lindsey: [00:11:50] We told the city our vision was exactly as it is being used today. We said that our goal was to create affordable workspaces and they were not just going to be for artists or nonprofits. It was a yes and, so art spaces, nonprofits, community services, small businesses, people who just need access to spaces to be able to work. We had a theory that South Philly, which is an extremely dense part of Philadelphia, is a neighborhood with a typology of kind of the 12- to 14-foot-wide row home so that, you know, people didn’t really have access to larger, wider open spaces. And so, you know, we had a theory that people would be seeking that space and seeking that space in proximity to where they live. And I think when we talk about local impact and community led development, I think the ability to walk to work has such an incredible impact not only on your mental and physical health, but also the health and wealth of your community and your neighborhood at all and attracts all different types of people to support the small businesses and operations that are happening in the building. So today we have over 260 businesses based out of BOK.

Eve: [00:13:14] A lot of businesses.

Lindsey: [00:13:15] And 72% of them are owned by somebody who lives in South Philadelphia. So very much locally driven.

Eve: [00:13:25] That’s amazing. How many residents in South Philadelphia like how big is the neighborhood?

Lindsey: [00:13:30] Oh, that’s a great question.

Eve: [00:13:33] It’s got to be big to draw that many people.

Lindsey: [00:13:36] Yeah, I’m just, hold on, I feel like I have this number somewhere, but I’ll have to look it up. I don’t have it off the top of my head.

Eve: [00:13:44] Nevertheless, it’s got to be a big neighborhood to have that many people wanting small business space. How long had the building been vacant?

Lindsey: [00:13:52] So the last graduating class at Bok was in 2013.

Eve: [00:13:58] Oh, not so long.

Lindsey: [00:14:00] So not so long. Although the top two floors of the building had been closed before we took it on. The building was a high or is a high rise, I should say, by its height. But the school district, in order to not comply with high rise building code, cut off the top two floors and said, see, it’s not a high rise so we don’t have to sprinkler the building. And so that was one of the big pieces of work that we undertook was the sprinkling of the entire building. But essentially it really wasn’t vacant for long. And crazily, the school district thought that out of all the schools that they put on the market, and they put over 30 schools onto the market in that year, that BOK would be the last to sell. So, they actually moved all of the stuff, all of the chairs, all the tables, everything from all the other schools to Bok. And people could essentially come and kind of find the furniture that they needed. And that was that was fine and good and when we went to actually go close on the property, obviously we wanted the building empty because there was rooms just filled with stuff up to the ceilings. Plus, it was practical stuff. And we all know that our schools need equipment, they need supplies, they need furniture. Unfortunately, approaching the end of the process of moving towards closing, they started to throw out things and we said, all right, that’s it we’ll keep the rest. So, if you go to BOK today, sometimes you’ll see, for example, children’s chairs and a lot of people will say, well, wait, wasn’t this a high school? And it’s because they thought that BOK would be the last building to sell, and I actually think it was one of the first.

Eve: [00:15:39] That’s interesting. So, when you tackle a project like this, 340,000ft², most people would feel overwhelmed. You had some really huge challenges like code compliance and financing. Where did you begin? What was your strategy and how full is it today, by the way? Is it 100% occupied?

Lindsey: [00:16:02] It is. Today, BOK is 100% leased. We have no available space in the building, Unfortunately, I know I’m supposed to say that’s a good thing, but I actually think it’s a bad thing because for so many years we’ve prided ourselves on being able to expand and grow with people as their business changes. And it’s actually been, it’s hard now when you actually are full. But I think we also feel very grateful to be at 100% occupancy. So how did we start this? I always kind of say, you know, how do you eat an elephant one bite at a time? But our first bite was a decision to open up a pop-up bar on the roof of the building. And I think kind of going back to the beginning of this conversation, that’s because that’s something that we had done before. And I think that people are willing to travel for food and drink in a way that we’re not willing to travel for other things. We talk about traveling for other things. I talk about going, you know, maybe to a neighborhood I don’t go to frequently for an art exhibit or a shop, but most of the time it actually takes a lot for me to actually get there. I can think about it. But to actually get there and food and drink and I don’t know if it’s because it’s a shared activity or because there’s actually kind of a sweet adventure at the end but we kind of really knew that that was a strong tool and had seen that in the past.

Lindsey: [00:17:33] And so we opened up a pop-up bar and the joke is that I invited a bank every single night for a drink until I closed on our big construction loan, which I did. And, you know, we were open for 22 nights that first year and we had over 30,000 visitors. And so.

Eve: [00:17:54] Oh, wow.

Lindsey: [00:17:55] You know, I think a lot of people were saying, who’s going to come? How’s this going to work? How are people going to find out about this building? How are you going to deal with the parking needs? Who wants to be in a big old school? And I think for a lot of people, whether that was neighbors, future tenants, partners, bankers, politicians, coming upstairs to a very full and vibrant bar allowed them to say, wow, there’s something here. And people are willing to come here to find it and be a part of this place. And so, I think actually that was helpful in convincing people that, A, we could pull things off and make things happen. And we did that within 30 days of closing on the building, mind you, because I really feel strongly that oftentimes in development we wait years, we talk about grand visions, we undertake the large scale, you know, development, construction, and then we have a ribbon cutting and we’ve actually never had a ribbon cutting for BOK and never will, obviously at this point.

Lindsey: [00:19:07] But the idea of kind of incremental growth, I really believe that slow is really healthy actually, when we’re talking about large scale projects in a city. I don’t think it’s natural, normal or good to just open up the doors and add 350,000ft² of activity to a neighborhood. It’s much better to have that be an iterative process where people get to know you, you build trust. You also learn what works and what doesn’t work. There were mistakes along the way, you know, where should the trash sit, for example? You know, we moved that around a few times before we got it to the right place where trash trucks could access it and it wouldn’t disturb neighbors. And so, you know, I really believe in kind of iterative and slow development, but I always kind of say the bar is the thing that started it all. And that really allowed us to gain the momentum and the confidence of our team, even our neighbors, all of our collaborators and partners in that something was possible here.

Eve: [00:20:15] So as you built this thing, what other major challenges did you face during the project? Because you built it slowly with 200 tenants. It’s a lot of space.

Lindsey: [00:20:28] So it’s funny because I think sometimes your greatest strength is also your biggest challenge. And so, I say, I really like the idea of slow development, of iterative development, of the idea of the building kind of taking and evolving over time. And it really has. It took seven years to essentially finish all the construction pieces. And I’d actually argue that there still are pieces of the building that we still want to tackle or want to go back to or kind of take further. But I say that, at the same time one of the biggest challenges is that that meant that we were doing construction while we were an occupied building. And so that was also a challenge. There’s no other way to say it. We installed the sprinkler system actually when we were probably at 40% occupancy, something like that. We had outlined a scope of work with the fire board where we would basically install major infrastructure every six months with a kind of timeline of completion. So new standpipes, for example, went into all stairwells, I think for the first year. And then the second year we sprinklered a part of the building and then the next part and the next part. And so, I feel very grateful for the creative minds in the fire board and the city who kind of allowed us to create a safe building together, knowing that that was a huge piece of infrastructure and a huge cost item. But also, it was just a real operational challenge in terms of we did that work overnight in occupied spaces. So, I think, you know, to every strength also sometimes has its drawbacks too.

Eve: [00:22:14] I mean, financing is something that you fill slowly, is got to be really difficult as well because you need revenue to pay the loans. And how on earth do you manage that?

Lindsey: [00:22:25] Yeah. So, a similar approach in that how do you eat an elephant that one bite at a time and that our first loan was actually really just based on an appraisal of the building. We had had a zoning change and so kind of was able to argue to the bank that, you know, it was now worth three times more than essentially it was purchased for and it was purchased very cheaply, I think that should be acknowledged. We purchased the building for 1.75 million, although as I said, we were the highest bidder by a lot apparently.

Eve: [00:23:00] You could say that was a huge liability when you purchased it.

Lindsey: [00:23:03] Oh, 100%. But I actually think that that kind of that low entry per square foot is actually really essential in terms of allowing you to take a more creative approach. And I think, you know, Jane Jacobs says this best when she says, you know, new ideas must use old buildings. And I think it’s really because, in that when you’re getting a building for cheaper, that’s kind of been considered less valuable, it actually has more opportunities for experimentation in it and less pressures on it. And so I actually think that’s a really important piece of the puzzle. But essentially, we first got our first piece of funding just based on the kind of increase in value from a zoning change. And then once we signed kind of our first couple of leases, we kind of showed them that this was working. We were able to increase that by, I don’t know, 2 million or something like that, and then we increased it again, then we increased it again, and then we brought in new market tax credits and historic tax credits. And I had to condo out the buildings that I could kind of apply different financing pieces to different pieces of the puzzle as they came online. And that’s how we got it done.

Eve: [00:24:18] A little bit at a time. So, what about the community in the neighborhood? What role have they played in this revitalization of this, it’s a huge building sitting in the middle of a very dense neighborhood, as you said. It’s very, very large.

Lindsey: [00:24:32] Yeah. So, one of the first things we did when we started the project is we did a community asset mapping and I would encourage everyone to do that before you start anything kind of on your on your own turf, which is to look around you and see what’s already working and what already exists. Because I really think, although, you know there are certain characteristics of our neighborhood that we wanted to speak to, we started off by saying, how can we help the existing agencies, communities, organizations and people that are already are, you know, symbols of strength or kind of have agency or have organizing efforts within the neighborhood? And I think one of the best examples of that is a group called SEAMAC, which is the Southeast Asian Mutual Aid Coalition. And we invited them in to use this space for their elder’s breakfast on Tuesday morning. And so, they did that for 3 or 4 years. And through that partnership, which was pretty loose, you know, we were just giving them free space to be able to have their elders breakfast, they were able to work with Jefferson Hospital System to bring in a health clinic called the Wyss Wellness Center, which is a primary care health clinic. So, anybody can go and see a doctor there for primary care, but they’re specifically trained in the immigrant and refugee needs of our neighborhood, both language and cultural sensitivities. And that has just been an incredible resource for our community. Not just South Philadelphia but think of Philadelphia at large. A lot of the refugees recently who have been kind of bused into the city, that’s actually their first port of call in Philadelphia. And so, it’s really become an incredible space and anchor for that community. But that took almost six years to make happen. And so, I do think it really is about building trust and understanding how you can enable and support the growth of organizations that are already A, doing the work and B, very trusted within the community itself.

Eve: [00:26:52] I’m just fascinated about who the tenants are. Tell us a little bit about the mix of people in the building. I was lucky enough to walk through it, so I some of it’s burned into my brain, but I think you need to describe it a little.

Lindsey: [00:27:06] Yeah. So, we have over 260 businesses based in the building today. And of those, 52% are women owned businesses, 25% are minority owned businesses. And think about 15% of the building is nonprofits. And so, what that means is that we have everything from a glassblower who’s also doing glass recycling, to a daycare, to a tattoo parlor, to architects, jewelry designers, fabric printers, a tufting workshop, photographers, graphic designers, an accredited art school that focuses on contemporary realist painting, so a lot of work on the nude form and portrait work. We have a bakery called Machine Shop Bakery, which was just nominated for a James Beard Award in the pastry category. We’ve got a restaurant, Irwin’s, which has been rated one of the top ten best new restaurants in America. We’ve got a fabric recycling center, we have Girls Inc, which is a national nonprofit supporting young women, we have ballet classes, we’ve got a catering company, we have ceramic makers. It’s all types of people doing all types of things. And I think that’s actually really, really important, is that it’s not just a building for one type of person or one type of use. It’s a building for a lot of different uses to happen side by side.

Lindsey: [00:28:41] And I think one of the questions we always get asked is, oh, is there kind of a jeweler’s row or wing? Is there kind of the carpenter’s wing? Is there the band wing? And, you know, how much do you kind of curate this building and this space? And the answer is that we really don’t curate the building. We allow people to find spaces that suit their needs and their budgets. So, if somebody has a budget of $500, we’re trying to find a space that fits that budget and has the infrastructure that they need, that’s a sink or a lot of power. But the thing that we are really conscious about is sounds and smells. So, the people who make a lot of sounds and aren’t sensitive to sounds, they do go together. But beyond that, there’s not a ton of curation. On the first floor, obviously, we very much focused on things that are more public facing and want to interact with the public, because ultimately a lot of the building is just a workspace, not just but is a workspace. And so, people don’t necessarily want people knocking on their door saying, can I buy a, you know, a product that you’re making right there? They’re really there to focus.

Eve: [00:29:53] And how big is the team that manages all of this?

Lindsey: [00:29:56] Yeah. So, we’re about ten people, 10 to 12 people. And this, none of this would be possible without the team. I have an exceptional team. We have a facilities director who is just wonderful, is constantly, as an old building, it’s constantly moaning and groaning and he’s kind of there to oversee it with a great facilities crew. We’ve got a director of operations, we have an events team that does a variety of different events in the building we do around, we do weddings, we do community events, we do self-initiated events like Open Studios, for example, is one of them. Alumni Day, where we invite people to come back who are alumni of the school and so just have a great team. And I think that’s just so, so, so important for the project to be able to get to where it is today.

Eve: [00:30:53] But it’s not a traditional leasing and maintenance team, right?

Lindsey: [00:30:59] No, I mean, most of our leasing is done in house. I think over 50% of the people that we’ve leased to this is their first commercial lease. So, a part of our process has been trying to break down some of the jargon and lease terminology that really people aren’t familiar with outside of the leasing world, to help people to feel comfortable making that first big jump into a space. And in our work, we’re not working with a lot of large credit tenants. I think in the most more recent years we’ve had a few, but generally, and particularly the early years, we had no credit tenants. And so the idea of trying to lock somebody into a long term lease really doesn’t make sense for us or for them. And so really, it’s about allowing people to test and experiment and see what works and see what doesn’t work. And at the end of the day, if it doesn’t work for them, we’re lucky enough that there’s been enough demand and the scale of the space is kind of a very, I think, attractive size that that’s okay. It’s okay for us to have, you know, people move on and move out if it’s not the right fit. And we’re not locking people into leases that are longer than they can really take on.

Eve: [00:32:19] I think you and I see eye to eye on that. I’ve always been very disturbed at the real estate industry that rewards leasing agents based by commission, because of course, that means that they’re going to focus more time on larger leases. And so I have a couple of buildings where I took pretty much the same attitude. You know, shorter leases were fine. And if they could only renew for a short time, that was fine too. And what’s happened is I’ve had some tenants in some of my spaces for 15 years just renewing one year at a time or expanding and eventually moving on. But yeah, there’s just there’s something really broken with the industry that doesn’t allow for that to happen more freely. I think unfortunately, you know, real estate agents have to make money like they’ve got to live, right? But if they’re going to make $200 on a small lease, of course they’re going to spend more time on renting a big space where they can make $10,000, right?

Lindsey: [00:33:21] You know, I wonder if Covid has made anybody rethink that, because I always joke that in the beginning of Covid, I think I was my first bank call. They were like that building with all of those non-credit tenants. It’s, how are they going to fare through Covid? And the reality is that we fared better than any other building, a commercial building and my bank’s portfolio or any bank’s portfolio.

Eve: [00:33:47] Dare I say that’s because it’s 50% women owned businesses?

Lindsey: [00:33:51] I mean, I also think, you know, listen, it’s small scale. I think, you know, a third of our building is under 800ft². And so, you know, when somebody decides to close their business or move to Maine or move to Mexico or wherever it was that, you know, whatever they decided to do kind of in the pandemic.

Eve: [00:34:12] It’s a tiny percentage of the whole building, right?

Lindsey: [00:34:15] It’s a tiny percentage. And so we were able to kind of, you know, stay flexible, stay nimble. I think we also created a really incredible program around rent relief and deferment for our tenants, where we gave over $300,000 of rent relief and support. And that meant that we basically had, I think it was under 10% turnover during Covid. And so, you know, I hope that the industry as a whole looks at buildings like ours and says, oh, these buildings that we’ve always thought are more risky because they don’t have large anchor tenants, they don’t have the credit tenants, actually, there’s strength in the small and that there’s something very strong about our ability to be nimble. But at the same time, you know, I think it’ll always be interesting to see how that grows and goes. But I hope that maybe it’s made some of the industry just rethink a little bit about kind of who we think are dependable.

Eve: [00:35:13] You know, I’ve had a similar experience. I’ve got a building that has these, it’s much smaller, but it has these 13 little studios that range from 400 to 800ft². And I keep telling people I wish I had four buildings like that because it really never lost steam during Covid. And the people who are looking for space now want space like that. And I’m thinking about how to subdivide larger spaces to turn them into these little spaces because, yeah, I totally agree with you. If it’s a, it’s much easier for a landlord to manage than losing an entire floor plate of a building.

Lindsey: [00:35:51] Yeah, I mean, it’s a lot of work. I think like, you know, doing 260 leases versus doing, you know, ten or something would have, you know, but we think it’s also more interesting. It’s the type of people we want to work with and…

Eve: [00:36:03] Much more interesting.

Lindsey: [00:36:04] I would take it every day. So.

Eve: [00:36:06] So what other projects is Scout working on today, or is this just keeping you busy full time?

Lindsey: [00:36:13] No. So, we’re starting to work on other projects, which is very exciting. So, we actually are working on two projects up in Providence. One is called 50 Sims, which is a manufacturing building that will be workspace. We have some great workforce development tenants in there today. We’ve got a great brewery; we’ve got people doing CNC training and forklift training and we have a boat builder and an artist studio and a preservation society that’s teaching people how to repair historic windows. So, we’re really, really excited about that project and excited to be also working in a new city. It’s been wonderful. I think Providence has a lot of similarities to Philadelphia and we’ve really enjoyed being a part of that community.

Eve: [00:37:11] And how big is that project?

Lindsey: [00:37:13] It’s around 110,000ft².

Eve: [00:37:17] Oh just weeny. Weeny Scale.

Lindsey: [00:37:20] I think for better or for worse, once you do big buildings, everybody calls you about big buildings. So, I think we have to get comfortable in this space.

Eve: [00:37:29] Yes. Yes. One other question. Is collaboration important in your projects? I know that’s what you started out doing with Scout, but how is that morphed into BOK? Who do you collaborate with? What does that look like?

Lindsey: [00:37:44] So yeah, Eve, there’s a few different things that come to mind there. I think we collaborate a lot with artists on site specific pieces. So, if we are looking for furniture, for example, for a space, we’re typically commissioning and working with local artists, oftentimes people in the building. In the last couple years, we’ve also done two amazing projects that are pretty different than our kind of real estate development practice side. So, we’ve done two projects for the flower show in Philadelphia, which were both incredible collaborations with a whole host of different creatives and makers in the city. The first year we did a Risograph printing house where we printed aspirational posters, or inspirational I’m sorry, inspirational posters to give people hope in 2021, kind of following the year of 2020 that we had all been through. Three of those posters were in a language other than English to speak to the population of South Philadelphia who previously really didn’t have any materials in their languages at the flower show. And then last year, I guess in 2022, we did an installation called The Smelly Tunnel, which was essentially just a piece that you would walk through, and it would mist scents on you. And the idea of kind of flowers in terms of our mental health and kind of the ability to just step back and breathe. And so pretty different from our kind of management and development of a large building. But I actually think are great examples of things that A, make our team really excited and B, kind of that that collaboration. And so, I think we like working at a lot of different scales and find that kind of continuing to keep our hand in some of those small scale installation work that makes our kind of our long term development practice also stronger.

Eve: [00:39:43] And one more question for you, and that is I’m wondering how your time in the UK influenced your perspective on the built environment.

Lindsey: [00:39:53] I think there’s so many examples in Europe, I think, of how adaptive reuse is encouraged and I think just really done well. I think that’s certainly something I think that the value of both the creative community, but also of the cultural community, of cultural institutions, cultural organizations, has a different value in Europe and a different, I think, support system in terms of actually how those entities are funded compared to here in the US. So, certainly drew inspiration from many projects that I had seen and worked on there in Hackney Wick. There were some great examples, The White Building being one of them, and Amsterdam and DSM, I think was a, is an incredible example of kind of a building where the government really allowed people to experiment with what was possible and has now become kind of a center, a cultural center in Amsterdam. So, certainly it was a was a huge inspiration, is a huge inspiration and certainly informs my work. And I think, you know, this idea of kind of allowing things to stay a bit unpolished, unruly, but also surprising, I think is just certainly something that continues to inspire me, and I certainly travel to get to see projects like that, that continue to just be an inspiration for our work here.

Eve: [00:41:27] Yeah, it’s pretty amazing when you can say government did something so fantastic. We should be able to say that all the time, right?

Lindsey: [00:41:37] It would be nice.

Eve: [00:41:38] I have one more question for you. What keeps you up at night?

Lindsey: [00:41:41] Oh, so many things, to be honest.

Eve: [00:41:44] Maybe nothing. Maybe nothing.

Lindsey: [00:41:47] Oh, no, I wish I could say it was nothing. I mean I think to be honest, um, maybe I’ll start with where I think the kind of the opportunities are in that I think we are seeing cities shift. We are seeing obviously a lot of office space come online and I think there’s an opportunity there. And just thinking about what types of workspaces we need. I think, again, that kind of dirty workspace is something that doesn’t actually work well in our homes. And I think particularly for creative individuals, I think collaborative and creative environments are really key as sources of inspiration. And you know, people work better in those communities than perhaps they would in a basement or a, you know, a guest room or whatever it is that they might otherwise be working. So, I’m excited to see how that evolves. I think I am always just, I think, I don’t know if you feel this way, but it always feels still very fragile, and I always feel like I’m, it’s hard to enjoy the successes because I’m always fearful of the next hit.

Eve: [00:42:58] Well, that means you’re prepared, right? I mean, I think, yeah, it’s scary, but it’s probably healthy too. If you don’t have any fear, then you’re probably being too cavalier because there will always be a next hit, right? There will always be something else.

Lindsey: [00:43:16] There will. And particularly in old buildings, there’s always the next hit. I think that’s the reality. And so, I think that certainly always keeps me up. And, you know, I think just also as we’re in this next phase, I think of trying to figure out, you know, what’s next for Scout as we’ve kind of gone to the city of Providence and I think we’re looking elsewhere, I think that’s something that’s certainly keeps me, kind of, keeps my brain thinking at night about all the possibilities and projects that we might take on. So…

Eve: [00:43:50] Well, it’s been a pleasure talking to you, and I can’t wait to see what you do next. You have to stay in touch. It’s very, very exciting work. I really appreciate it.

Lindsey: [00:44:00] Thank you. I would love to. I’d love to show you our next projects and the next ones after that. And I know many years ago when we were starting back, we came out to Pittsburgh to visit you.

Eve: [00:44:11] Yes, that was a long time ago. A long, long time ago, yeah,

Lindsey: [00:44:14] Long time ago. So, you’ve certainly been an inspiration and a part of this process.

Eve: [00:44:19] And maybe, sometime you want to even crowdfund one of your projects.

Lindsey: [00:44:23] I would love to explore.

Eve: [00:44:24] Can’t mention which one.

Lindsey: [00:44:30] That would be great.

Eve: [00:44:31] Thanks very much, Lindsey.

Lindsey: [00:44:32] Thank you, Eve.

Eve: [00:44:43] 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 Lindsey Scannapieco