Rethink Real Estate. For Good.

Environment

The modern village.

“Co-housing communities are not communes. Residents do not give up financial privacy any more than they give up domestic privacy. They have their own bank accounts and commute to ordinary jobs. If you were lucky enough to grow up on a friendly cul-de-sac, you’re in range of the idea, except that you don’t have to worry about your child being hit by a car as she plays in the street. A core principle of co-housing is that cars should be parked on a community’s periphery” writes Judith Shulevitz for the New York Times.

Modern co-housing came about as a work/life solution. One of its pioneers was Hildur Jackson, an activist whose passion to solve the 1970s women’s dilemma between full-time work and being isolated and dependent as housewives, inspired her to cofound one of the first Danish co-housings in 1972.  

This first attempt was a six-family “living community” on an old farm in Copenhagen. Six houses were built around large open spaces with the old barn converted into a common house. The families shared a large vegetable garden as well as maintenance tasks. Hildur recalled never feeling isolated in the 20 years she lived there and mused that her children grew up with 12 parents.

Co-housing soon spread throughout Scandinavia and the world. Today there are over 165 co-housing communities in the United States. Most have common areas for social interaction which might include a shared kitchen, a pool, a workshop, community garden, or rooms for meetings or celebrations.

Beyond the shared workload, there are clear advantages to co-housing:

  • Affordability. With a shortage of affordable housing options, co-housing can be an attractive alternative with some shared resources and costs.
  • Shared parenting and the shared cost of childcare.
  • Community. Loneliness is a growing societal problem which has been highlighted for many by the pandemic. Co-housing provides a large, extended family to interact with. This is never a requirement but might include cooking and eating together.
  • Environmental impact. Many co-living communities share greener living values, and some communities are designed and built specifically for lower energy use. Even if they’re not, sharing resources reduces your environmental footprint.

In the 1980s, partners and architects Charles Durrett and Kathryn McCamant went to Denmark to study co-housing. They were intrigued with this Danish concept and set about bringing it to the United States. Together they were instrumental in building many of the co-housing communities that exist today in the US. Charles now leads The Cohousing Company, which designs co-housing projects for a variety of clients. A typical design includes densely packed cottages of 30 or so homes that form a ‘village’, with a liberal sprinkling of communal areas and amenities, occupied by people who want to live co-operatively. 

Want to learn more? Read more about how co-housing might provide a path to happiness for modern parents or listen to Charles Durrett and Eve Picker in this Rethink Real Estate (for good) podcast.

Image courtesy of The Cohousing Company

Sustainable, affordable and beautiful.

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

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

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

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

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

Insights and Inspirations

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

Information and Links

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Eve: [00:09:44] Wow.

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

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

Jeremy: [00:09:48] Absolutely.

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

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

Eve: [00:10:49] Wow.

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

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

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

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

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

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

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

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

Jeremy: [00:12:35] Yeah.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Eve: [00:33:04] That’s astounding.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Image courtesy of Jeremy McLeod

Shift real estate.

Jonathan Cohen, based in the Pacific Northwest, is an engineer turned developer/hotelier/social entrepreneur.  Always interested in sustainability, Jonathan also has a strong DIY streak in him. When he was younger, he volunteered on an environmental farm and did an internship working on wind turbines at the National Renewable Energy Lab in Colorado. He also built a house and worked at a charter school. When he eventually tried working at a high-tech firm, he just didn’t like it.

So, in 2003, embracing the proliferation of new sustainable energy technologies, Jonathan launched Imagine Energy, as an online resource to connect people to creative solutions to fulfill their energy needs. Later he added solar installation to the business, as well as heating, ventilation and air-conditioning solutions he went on to devise for a range of unusual projects.

The Society Hotels came a decade later. Jonathan (along with three partners) purchased a vacant, historic building in downtown Portland, OR, built in 1881, but vacant since 1975. A challenging adaptive reuse project, the vision for The Society Hotel was part hostel, part hotel, with a 24-bed bunk room, 38 private rooms and suites, a café and a rooftop deck. Acting as their own general contractors, they completed the project in 2015 to a wave of positive press. And that first project soon led to a second, larger one in Bingen, WA, in the Columbia River Gorge, which opened up in 2019.

While the Society Hotels certainly have a sustainable and social component, Jonathan’s next act goes even further. He has cofounded Equity Development Lab, an innovative development company created to shift business and real estate development industries towards social equity. While it’s still in stealth mode while he builds trust with his largely minority clients, his goal is big.  He hopes to shift ownership of some Portland neighborhoods into the hands of those who have never had ownership before.

Read the podcast transcript here

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

Eve: [00:01:00] Jonathan Cohen has made his mark. While he started his professional life as an environmental engineer, his true persona as a restless entrepreneur emerged when he tackled the remake of an historic building in Portland’s Chinatown district. This project might have frightened most people, but Jonathan and his partners turned the building into something shiny and new for the 21st century. They rebuilt it from the foundations up and converted it into a hotel for everyone. The Society Hotel offers bunk beds for weary travelers for as little as $35 and private suites for those of us who like a little privacy. All of this neatly offered in a very hip package. Jonathan and his partners were ahead of their time, and he’s doing it again. Listen in to hear more.

Eve: [00:02:01] If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast and go to rethinkrealestateforgood.co where you can subscribe to be the first to hear about my podcasts, blog posts and other goodies.

Eve: [00:02:20] Oh, hello, Jonathan, I’m really delighted to have you on my show today.

Jonathan Cohen: [00:02:26] Thanks for having me here.

Eve: [00:02:28] So your best known as the developer behind the Society Hotel Brand, which launched in Portland, Oregon. But you started your professional career in a very different space. As an aerospace engineer, I read. And you also own an energy company?

Jonathan: [00:02:45] That’s right. Yes, I’ve definitely had a non-traditional career and it’s kind of wandered all over the place, but I promise there is a thread of theme in all of those different career choices.

Eve: [00:02:58] Yeah, that’s what I want to hear about. How do they all fit together?

Jonathan: [00:03:01] Sure. So, as you stated, I started my educational career in aerospace engineering and I studied that for my undergraduate and graduate programs, and I was really interested in aerodynamics and how that could be applied to make the world better specifically in green energy. So that naturally led me to study wind turbines because you take aerodynamics and green energy, and that’s what you get. And so I studied that for a while, but I could never quite find my toe hold in the field at that time, which in the early 2000s era was really just beginning the wind turbine industry in the United States. And I just couldn’t get my foot in the door as a young engineer. So, I ended up trying a bunch of different things. I worked in high tech for a while in Silicon Valley. I came back to Pennsylvania, and I worked in agriculture, small agriculture. I worked in construction, briefly building timber frame homes, also in Pennsylvania. And then when I moved to the West Coast, I wanted to kind of combine these interests in education. And I also forgot to mention it was a fifth-grade teacher there for a little while. So, I loved education. I love green energy, I love green building, and I wanted to kind of combine all of those interests. And when I moved to the west coast of Portland, Oregon, in 2003, and it was kind of in this little mini recession of the post bubble bursting and I couldn’t find a job. So, I decided to start my own job of having an energy company. And our goal was to fundamentally change the way people think about and use energy. And that company was called Imagine Energy. And I started that in 2003 and ran it all the way until last summer when I handed off the reins to a co-worker. I ended up doing that. I ended up being kind of where the rubber meets the road with energy technology. And I was really it was a really good time to be in that field where we brought a lot of technologies to the forefront, including solar for homes and businesses, high efficiency approaches to insulation and air sealing of buildings. And I worked on retrofitting a lot of buildings and really transforming the way that they were. So, you could have this really old building that really had all the modern comforts and efficiencies of brand new buildings. So that’s what really got me hooked. And that idea of transformation was something I became really obsessed with. Of how can we take something that’s old and give it a once over? How can we transform what people think is possible with certain things? And so, a friend approached me some years later in 2013 and said he was interested in developing kind of a boutique hotel/hostel, kind of hip hostel concept in Portland. And I thought it was a great idea, and I made the mistake of telling my wife who told me that we immediately had to do it. And so, I knew that once she got her teeth kind of sunk into it, there would be no going back and that’s what happened. And literally, within a couple of days, we were in contract on a building, which ultimately is the one that houses our hotel currently in the Old Town neighborhood of Portland, Oregon. It’s a beautiful old building built in 1880. Has a cast iron facade like many buildings do in Portland, as well as New York City. Lower Manhattan has a lot of buildings like this as well. And it needed a little bit of everything, so it really fit into my idea of transformation. How could we transform this once sailors’ lodging house into something modern, something new, something exciting? And we gave it the full treatment, including all of the energy goodies that I care about. So, we gave it LEED certification through all of the energy work that we did, and it actually performs about 40 percent better than a modern code built building.

Eve: [00:07:17] Interesting.

Jonathan: [00:07:17] Even though it has no wall insulation. It’s an old brick building, has no wall insulation.

Eve: [00:07:23] And also the neighborhood needed a little help as well. I’ve had the pleasure of staying in your hotel. So, I remember the neighborhood, this was a few years back, still was teetering. It’s a gentle way of putting it.

Jonathan: [00:07:36] Yeah, I think that’s a fair way to say it. Yeah, the Old Town neighborhood is kind of, it’s always been a little rough and ready, a little on the fringes. Since its beginnings when people disembarked from ships there and brought all kinds. It was really our Ellis Island for this port city. And it’s always been a rough and tumble place and continues that legacy. Although it had an iteration as Chinatown and Japantown and many other immigrant groups came through. Jews, Roma people, Greek immigrants, all kinds of different people, African Americans called this district home at different periods of time over the last 150 years. And so, it’s been kind of taken ownership by everyone, but by no one at the same time. And it’s been in a long period of decay over the last 40, 50 years as its searched for an identity. And it’s become a home for a lot of social service agencies. Which is not in itself a bad thing, but we’ve become a little bit out of balance. We have only 54 units of market rate housing in the whole district. Which is many city blocks.

Eve: [00:08:51] Oh wow. That’s not a lot. Yeah. Yeah, yeah.

Jonathan: [00:08:52] Not a lot. So we’ve really seen the need for transformation and that’s where my wife comes in. She’s really Jessie Burke. She’s really passionate and has degrees in urban renewal, and she’s done that to our, where we live in North Portland. She’s really revived our neighborhood here through commercial activity and activation. And she’s been the large driving force on reinvigorating our district now. And I’m also helping out with that effort through a new entity that we formed called Equity Development Lab.

Eve: [00:09:32] Let me stay with the hotel for a moment, though, because it’s an unusual hotel, and I’m wondering if the history of the place sort of spoke to what you decided to do with it. Can you explain? It’s not a whole bunch of suites, right?

Jonathan: [00:09:45] Yeah, you’re right. Thank you. And I forget that people may not know that know this is a very unusual hotel, especially in America. It has more analogs in other countries, like in Europe and in Asia, for sure. But we call it kind of a boutique hostel and hotel, if that makes any sense. But we kind of think of it as being between those spaces. So between the hostel and between a higher end boutique hotel. So, we’ve kind of got affordable style kind of place to stay. So, it has three types of rooms. It has a bunk room, which is very unusual. You have to imagine this. Has 18-foot-tall ceilings and we filled those with triple tall bunk beds, and they have steel frames and are clad in beautiful northwest Douglas fir cladding. But so, they’re very, very sturdy. They’re adult bunk beds. They’re not meant for kids. In fact, you can’t be. You have to be over 18 to stay there, but they’re triple tall, so you have to climb a very large, tall ladder to get to that upper bunk. And they’re very unique and they stay. You can stay there for anywhere from 35 to 55 dollars a night, depending on the season. And they’re a fun, affordable way to explore the city because we’re right downtown, right on all of the transit lines in the city so you can get anywhere, including the airport, for about two dollars. So, it’s a really affordable way to explore the city.

Eve: [00:11:07] And how popular has that been? The bunk beds?

Jonathan: [00:11:09] It’s been incredible. I mean, through our history until COVID, those were occupied on an annual basis about 85 percent.

Eve: [00:11:16] Wow.

Jonathan: [00:11:17] So even including the winter, so very, very popular. We have had some new hostel type properties come online, but it really hasn’t diminished our success with those types of rooms. So that’s been a really fun place to stay. And then you can kind of step up from there and go to our what we call European standards, which are a private room. They range from about 10 by 10 to about 10 by 12. They’re pretty small. Their largest dimension is usually the height, actually. The ceilings range from 14 to 16 feet, and they have really large windows that let in tons of light. But the rooms themselves are very compact, so we’ve been very efficient with the space layout. The beds are custom made so you can fit your storage underneath. We have lots of hooks and little storage cubbies on the walls, and then you have a sink in every room so you can brush your teeth, wash your face, and then there’s a private bath across the hall that you share with up to two or three other rooms. And those rooms are again affordable. They go for anywhere from 75 to about 109 dollars a night, depending on season. So again, substantially less expensive than other hotels downtown. Even comparable hotels, we try and be about 30 percent less than them. So again, our goal is like affordable boutique style. And then finally, we have some suites that recently got treatment from some local artists. So, we have some really unique suites that are again, kind of a more traditional size for a hotel room with an ensuite bath and all the things you would expect of a normal hotel room. So, yeah, it’s a unique property.

Eve: [00:12:52] So as a developer, I’m thinking, how do you make that cash flow? You had a what sounds like a fairly big renovation with a lot of care to green environmental sustainable issues, which are expensive up front. And you know, and now you have a variety of rooms that are really at the lower end of the market. How does that? How does that pencil out?

Jonathan: [00:13:17] That is an amazing question. I love that question, and I love talking to people with the development mindset because that’s exactly where you’re going. You’re like, well, wait a minute, how does that work? And the funny thing is, this model was actually the most effective model because you’re right, in our district, we get lower rents than other areas. And if we wanted to develop this building for office or apartments, we just would not be able to make it work because the building needed everything. It sat vacant for over 75 years. Needed every type of upgrade you can imagine, including dramatic seismic upgrades to protect ourselves against future earthquakes here. So, the way we amortized out those costs was by two means. One we did general contract the construction ourselves, both myself and my partners at the time all had construction backgrounds, so that wasn’t as a big deal for us, as it would be for other people. But that is a big way that we saved money. We probably saved about a million dollars there. The total budget for the whole project, including project, including hard soft costs and acquisition, was about 4.2 million dollars. So we saved a significant chunk by general contracting it. Though I think the project could have survived if we hadn’t done that because the other way we saved money was by operating the hotel ourselves. A lot of people would bring in an operator, but for a hotel this size, relatively small, it has the equivalent of about 50 keys, 50 doors. It’s hard to find an operator to run a building that small. So, it’s kind of in between a mom-and-pop operation and a more traditional hotel that would have an operator. So, we operated it ourselves and we had some experience in both retail, food service. My wife had run a café for several years at this point, and we have done Airbnb in our houses. So, I guess that was something, but we learned the industry and it wasn’t as hard, honestly, as the food service business. Things are a lot steadier; your margins are thicker and there’s just a lot it’s a lot easier to work with. The rooms are less perishable than food, let’s just put it that way. So, it’s a lot easier to manage that. So that made it palatable to run the operation ourselves, and it’s quite successful, with over 25 percent net profit margin sometimes higher. So that was the way we made that work. When we developed our hotel again, we have a lot of shared bath type rooms where there are private baths, but they’re used by several different rooms. So, we’re not building one bathroom for every room. That means that we have more space for more rooms, so our density is very high. So, in 12,000 square feet, we sleep one hundred people, which is quite a lot for that size footprint. Even our café is only about 100 square feet and we do almost a half a million dollars a year of business there.

Eve: [00:16:11] Wow.

Jonathan: [00:16:12] So it’s all about efficiency. So, if you take each of our standard rooms at 100 square feet, four them is 400 square feet and we didn’t have, we only had to build one bathroom for those in addition to that. So, a typical room, let’s say a 400 square foot suite in a regular hotel might go for 250 to 350 dollars a night for that size suite. Well, in that same 400 square feet, which we at a lower build cost for, dollars per square foot of build cost, we actually get more like 400 to 450 dollars of revenue.

Eve: [00:16:49] So the economics are pretty good.

Jonathan: [00:16:50] So we get more revenue per square foot, and we have less build cost per square foot. So actually, our business does quite well through this efficiency model. And our theory was when we built it that we could do well even with suppressed rates, which has come to pass and we’re able to survive or break even with much lower rates than other hotels.

Eve: [00:17:15] That makes sense.

Jonathan: [00:17:15] The downside of our business is that we have relatively low keys, so we still have a same number of desk agents and café agents and all this stuff, despite the fact that we have a lower number of rooms to amortize those out. So, it’d be more ideal to have more rooms for the staffing level we have. But in general, our business model can work because of that efficiency of our space and build.

Eve: [00:17:41] But that’s the story of all smaller projects and that that’s something I think about a lot because, you know, cities are great. Not because you rip down an entire block and fill it with one mega structure. They’re great because there’s all these little interstitial projects just doing different things. And yet they’re very inefficient to build, and they cost a lot more. And I wish someone would solve that.

Jonathan: [00:18:07] Yeah. Well, I mean, it’s it’s what we do a lot in our neighborhood is trying come up with creative ways of finding different types of occupancies that can have that sort of efficiency model. And certainly, co-working is one of those things. It’s just been kind of overdone at this point. So, it’s hard to find niches. But I still think a few unexplored areas that I’m very curious to explore in our city that haven’t been done but have been done in other parts of the world are really the micro loft type model.

Eve: [00:18:38] Oh yes.

Jonathan: [00:18:38] Even with our shared kitchens. This is not a new idea, right? I mean, boarding houses of some depression-era or other immigration areas. Lower Manhattan. In the turn of the century, this has been done many, many times over. It’s essentially a boarding house model. It’s now becoming kind of called like a co-housing model, but these are other things that we have not tried with our housing. And but they’re also good for real estate development because they create that same sort of high efficiency space utilization with lower build out costs.

Eve: [00:19:15] Well, you know, there’s the whole kitchen thing, which I don’t get. American kitchens are huge. And what do most people do in them? They get out their frozen dinner and they stick it in the microwave. I don’t get it.

Jonathan: [00:19:28] We don’t need a bed to be sitting there all day long. Right? Beds can be stored away.

Eve: [00:19:32] Yes. Yes, exactly.

Jonathan: [00:19:35] We’ve had Murphy beds for over a hundred years.

Eve: [00:19:37] I know I have a couple myself. Yeah. And then, I have to ask, financing. When you started this, this didn’t look like a normal hotel. Who’s interested in helping you with financing something like that?

Jonathan: [00:19:50] Yeah, it’s a great question. Luckily, our urban redevelopment agency, Prosper Portland, is right in our neighborhood. Now, I have a lot of choice words to say about them and how they don’t really achieve their mission of improving equity, and that’s part of why I started my own organization. But one of the tools that they have is a subordinate loan and subordinate loan means just they’ll take…

Eve: [00:20:15] I’ve used them often.

Jonathan: [00:20:15] Yeah, they’ll take a security position behind. Sometimes people call it mezzanine financing. So, it’s usually higher interest, but they’ll take a position behind senior debt or a conventional loan from a bank. And so, what we did was we raised money from friends and family, and we raised about $900,000 from friends and family through individual personal loans. And we used that money to buy the building, and we bought the building with cash and the banks like seeing that. They like seeing that we owned this asset outright or it was outright to them because they didn’t have to deal with our personal notes. And then we were able to leverage that equity we had in the building to secure this, this mezzanine financing from the local redevelopment agency. And that was $750,000, including a $50,000 grant that they offer. So now we had roughly 1.6, 1.7 million dollars and of what of what a bank saw as not equity. But they didn’t see it as dead either because it was all behind them. So, we were actually able to secure a commercial loan, although it took calling about 20 banks to find the right bank.

Eve: [00:21:26] Wow.

Jonathan: [00:21:27] But we did find a bank that was willing to lend us the other roughly 2.5 million dollars that we needed. And we had a commercial loan. And we refinanced that several years later with a little bit better one when we built our second hotel. But we were able to do it in a reasonably traditional way. So, a little bit of grant, a little bit of friends and family financing and some mezzanine financing and a commercial loan.

Eve: [00:21:53] Yes, that sounds, the friends and family sounds like crowdfunding before it started.

Jonathan: [00:21:59] I think that’s accurate. I would say that’s accurate. Yeah.

Eve: [00:22:02] Yes. Yes. Interesting. And you’ve got a second hotel. Where is that located?

Jonathan: [00:22:07] So our second hotel is in a scenic area called the Columbia River Gorge. It’s a really beautiful area just east of Portland. The Columbia River runs just north of Portland and cuts through the Cascade Mountains, and when it does, it creates this dramatic river gorge with 4,000-foot cliffs on either side. It’s really a beautiful area for hiking, biking, skiing. Every outdoor activity you can possibly imagine. And it’s truly the kind of backyard for Portlanders, so everybody from Portland goes to the gorge at some point or other to look at waterfalls or do whatever do it any million number of different activities there are through the seasons. So nestled in that, so that whole region is a protected area, and it stretches for about 60 miles or about an hour’s drive. But at the kind of end of that is a small town called Hood River, which is also known as the windsurfing capital of the world because the wind whipped through that gorge. And so, it’s where wind surfers and kite boarders and everybody interested in wind sport goes. There’s also amazing river kayaking there, just anything you could want to do. And so in that little area, there’s a few small towns, Hood River one of them. That’s about 7,000 people. And then a couple of other small towns Bingen, Washington and White Salmon. Bingen has 700 people, and that is where we found our little Old Bingen Schoolhouse, which had been used as a hostel up until we bought it, but needed a lot of love, and we re-imagine that as a sort of adult summer camp getaway for Portlanders. And that’s what it’s become. We turned the schoolhouse into lodging and a cafe. We have a gym for events and parties, and then we built on the old ball field a ring of cabins in a very sort of Asian inspired design motif with a beautiful spa and bath house in the middle of it that has soaking pools warm, hot, and cold soaking pools, a sauna and massage services. So, it’s a nice getaway from Portland, or to make a ski weekend of it or just get out of town and enjoy the outdoors.

Eve: [00:24:20] So is this the last one?

Jonathan: [00:24:22] Oh, I don’t know. You never say never, you know, but you know, it’s been a challenging pandemic for us in the hospitality industry.

Eve: [00:24:29] I was going to say, I was going to ask you how you made it through the pandemic. Well, it’s not over, but it’s. at least we know what we have to do now. Yes.

Jonathan: [00:24:38] We’re past the worst of it, we believe. Yeah, I think that you said it exactly right. We know what we have to do. I think that’s the right way to think about it. It’s been challenging for sure. Our Gorge Hotel, which has been a getaway for locals, has fared a little bit better. But as you know, most travel within the United States and international travel, which is just opening today, has been shut off.

Eve: [00:25:04] That’s right.

Jonathan: [00:25:05] So we haven’t seen anybody from even from Canada in 20 months. And so that’s really hurt the Portland hotel, which is more of a destination for people from outside of the area. And Portland’s undergone a lot of challenges, with its downtown being largely abandoned during this time. So, the Portland hotel has had a harder time and been closed for in total about six months during the last almost two years, a year and a half to two years. But we’re recovering, and the Gorge Hotel has done better and recovered faster but has never closed. So, it’s been challenging like it has for many hospitality properties and restaurants across America. But we’re surviving,

Eve: [00:25:48] So I’m going to move on to your next business because we reconnected. I met you a few years back at your hotel. And we reconnected recently through a new business that you’ve started. I wanted to talk about that. Remind me what it’s called. It’s called the…

Jonathan: [00:26:05] Equity Development Lab.

Eve: [00:26:06] Equity Development Lab, and it’s a very mysterious website. It does not have a lot on it.

Jonathan: [00:26:11] That’s true.

Eve: [00:26:13] I really wanted to figure out what you’re doing and there’s nothing there. So tell me what that’s about.

Jonathan: [00:26:20] Yeah, thank you. In March 2020, you know, we really, the world was in flux and we didn’t know what was going to happen with our hotel businesses. And of course, that summer, many protests were sparked across the country and in Portland as well after the death of George Floyd. And it really brought light once again to the gross injustices that are experienced by many people of color in the United States and other parts of the world, too, but in particular in the United States. And with these two things happening of our business being in flux and seeing this happening, we really were thinking a lot about the experience of minorities in America, in particular Black Americans. And it reminded us of, we went to an MLK Day breakfast some years ago, which is led by the Black community here in Portland. And this was years ago, and they talked about business ownership in the Black community and that even though there’s a high rate of business ownership and entrepreneurship in that community, the average number of employees is like less than two. So, the point is there are really a lot of sole proprietors and they’re not able to grow those businesses successfully for many different reasons. But access to capital is a big one. And, also, real estate ownership is almost the lowest among all groups in America, and it really reminded me of that last year and how the path to generational wealth has been cut off for most of these communities. And it was something that we’ve learned a lot about through real estate development and we wanted to share our knowledge. So, we started this organization, which is it’s just easier to pop up an LLC, but we’re going to apply to become a non-profit here very soon. And our goal is to really teach other communities about real estate development and assist entrepreneurs, particularly people of color in starting businesses, building their businesses, leasing retail space, or buying buildings and developing those buildings. And so, the way that that happens, we offer many different services. Currently, all of these services are free. We don’t charge for any of them. Eventually, we’ll support them internally with grant funding, but we help with negotiating leases. My wife is a commercial broker, so she helps negotiate commercial leases. We help negotiate purchase of commercial property and residential property. And I help a lot with business plan development, business plan financials, finding, financing, and presenting that information to financing organizations like yours and working through that process really in tandem with you and helping through construction. With my 17 years in the construction industry and developing my own properties. I also built the Second Gorge Hotel by myself, as well as a general contractor. So, applying all of those lessons to help people navigate the process. Because entrepreneurs a lot of times have a lot of knowledge and passion and expertise in their particular area, whatever that may be. But there’s all these other things you have to do to open a brick-and-mortar shop, right? Or even an online presence.

Eve: [00:29:52] That’s right.

Jonathan: [00:29:53] And the reason our website is fairly naked…

Eve: [00:29:59] Mysterious?

Jonathan: [00:30:00] Mysterious. It’s intentional for now because we’re really just trying to build support through because we’re one still trying to recover our own businesses. So, we have a limited amount of time and we really don’t want word to get out too fast. And we want to be able to help people kind of one at a time. So that’s what we’re doing is we’re kind of building a portfolio and we’ve helped about seven different clients so far and they’re in different stages. So, we have one guy that’s just about to start construction on his retail tenant improvement for a high-end menswear shop in our neighborhood in Old Town. And that’s going to open this winter. He’s almost there. We have another set of gentlemen who were helping. We’re working with you to to acquire a commercial property, 16,000 square feet in our neighborhood and redevelop it. And they’re in contract right now to do that, to close at the end of the year. Just had our first kind of fundraiser for that on Friday night. And so, we’re working with a variety of people in different stages of their businesses, and we’re going to put up some case studies to explain more of what we do. Probably this winter, once those property projects are all further along.

Eve: [00:31:13] It’s a very big idea. It’s something I’ve heard other people talk about. How do you take the vast knowledge? Let’s just talk about the real estate industry, in the very white real estate industry and start sharing, sharing that knowledge. I mean, most of us who are developers have a lot of fun thinking those sorts of projects through. You can count on me being a volunteer for you.

Jonathan: [00:31:38] Thank you.

Eve: [00:31:38] I mean, it’s, I think you would find a room full of people in no time at all who would say, Yeah, I can spend a little time helping someone else find capital, build a business, figure out how to renovate a building. It’s almost like, you know, in the legal world, aren’t lawyers supposed to do some pro-bono work? I feel like we should be. We should be required to as well.

Jonathan: [00:32:04] Yeah.

Eve: [00:32:04] It’s a fabulous idea. So, I have to ask the obvious question. Two things you talked about the redevelopment authority letting you down, and that’s in part why you started this business. And the second is, well, how is this going to pencil out for you eventually?

Jonathan: [00:32:19] Yeah, thanks. Yeah. Well, so one area, I’ll answer the revenue question first. So, one area that we have revenue is real estate commissions. So, our clients aren’t paying the commissions, but the sellers are or the property owners who are leasing the space. So that’s one way we can support ourselves. But eventually we believe we’ll be able to get substantial grant funding once we’re a non-profit, the 51c3. So, I don’t think that’s really going to be a problem. And for now, it’s really just kind of done in our spare time and once our properties are more stabilized, I’ll have even more, more free time because I am not looking for more development opportunities right now. This is kind of where I’m funnelling my development energy into our own neighborhood, our own community, by helping other people do it. And honestly, I don’t really have more to learn. I’m not interested in learning too much more about developing another property myself. I’m more interested in learning what I learn by helping somebody else develop a property. So that’s for my personal growth. My personal…

Eve: [00:33:26] Teacher’s bubbling up now, right?

Jonathan: [00:33:27] Yeah, that’s a good, good point. So, when I was when I was teaching fifth grade, Eve, you’re really good at this, I’ll tell you. When I was teaching fifth grade, I was just exhausted. It was so much energy to give to teach children all day long. I loved it. I mean, I love working with kids. I have three children of my own now and I love working with children. I love teaching. But it was exhausting, and I felt like I wanted to learn so much on my own. I wanted to do. I wanted to achieve. At that point when I was 22 years old or whatever. So, I wasn’t ready to give. And that’s what teaching is, is really giving. But now, so now I’m bringing that energy back, as you rightly said, and I’m just I just love it. I love it and I’m learning so much. I’m learning so much through the process. It’s fascinating. And I think back to myself in earlier years of what I knew and what I didn’t know. It’s like I had all these bits of knowledge that helped me in doing development, about finance or about just about construction or just all these little bits, you know? But like, you need it all filled in with different mentors. And I would see those different mentors, or I learned it myself because, you know, I became a self-starter and I learned how to I learned how to learn really well. But I got a lot of help from other mentors, too that filled in those gaps of knowledge. So, I’m just doing the same thing for these entrepreneurs.

Eve: [00:34:53] But that’s what’s interesting. You’re a white man. Your mentors were probably white men.

Jonathan: [00:34:58] Yeah.

Eve: [00:34:59] Yep. And so the Black community doesn’t really have that wealth of knowledge and therefore no mentors, right? So, I know capital is the thing that’s talked about most, but it’s also the whole educational experience is somehow missing.

Jonathan: [00:35:16] Yeah, the institutional knowledge has not been passed down because I mentioned there are not very many large Black owned businesses. There’s not a lot of commercial real estate owned by Black individuals.

Eve: [00:35:29] Right.

Jonathan: [00:35:30] So there’s not a lot of that experience to pass down through the community. And rightly so, the community is very slow to trust people from the outside for very, very good reasons.

Eve: [00:35:44] Yes.

Jonathan: [00:35:45] That’s another reason our website is sort of incognito because we want to build trust slowly. And that’s why word of mouth is the best referral because it means that people felt like they had a good experience from with us and they could trust us. And so, we are trying to kind of take that slowly as we go.

Eve: [00:36:02] Yes. This is really fabulous, so what’s your big, hairy, audacious goal?

Jonathan: [00:36:08] Hmm. Well, our goal, right now… So, with different stakeholders in our neighborhood in Old Town, we have a lively kind of nightlife district. We have a large social service agency with a lot of affordable housing, and we have a smattering of independent businesses and restaurants and other, kind of, and we have some education and cultural institutions. We have this fabulous Lan Su Chinese Gardens, this world class Chinese gardens, a block away from us. It’s just incredible. And many other cultural institutions, educational institutions. So, we have this really, really diverse group of stakeholders in our neighborhood. But some of those stakeholders pulled out during the pandemic. And what that meant was that there was opportunities for new stakeholders to come in. So, our goal is really to get as much commercial real estate in the hands of people of color as possible in the next five years in our neighborhood and to activate those spaces and that wealth building process to go 100 percent to those communities. That’s what we want. We don’t want. I’ve seen other models where people do what we’re doing and they often take a stake in these properties that they’re working on, and we don’t want to do that at all. We don’t want, if we’re taking a stake, it’s only ever going to be, and this has never happened yet, this is just an idea, but we would potentially partner only to help people secure financing that they need, but with the express goal of exiting as soon as possible so that the equity is 100 percent belonging to the communities that are developing these properties. So, we really want to transfer this knowledge and this wealth building potential to these communities and so that they can have generational wealth and generational knowledge to pass on to their community and their family and friends.

Eve: [00:38:05] That’s a pretty great goal. So, what would you change in the real estate industry? Aside from what you’re doing to make it a more equitable place. I know that’s a very big question.

Jonathan: [00:38:17] Yeah.

Eve: [00:38:18] It’s one of the toughest industries, I think. You know, I was the only female developer in Pittsburgh for a long time.

Jonathan: [00:38:25] Yeah.

Eve: [00:38:25] Which is like, are you kidding me?

Jonathan: [00:38:28] Yeah, no. I’m sure you faced a big uphill challenge of that.

Eve: [00:38:31] Well, not as big as Black people.

Jonathan: [00:38:34] Yeah.

Eve: [00:38:34] But still, you know, anyone’s really been excluded except white men. So that is a seismic shift that you have to…

Jonathan: [00:38:47] It’s, there’s a story I want to tell you, but I feel like I’ll to save it for a repeat visit once this transaction is complete.

Eve: [00:38:54] Okay.

Jonathan: [00:38:54] That’s really germane to this question, but I’ll certainly share it with you privately. And then maybe on another time we can talk about on air once the time has passed that it would matter. But, you know, I think the answer is just standing alongside people, fighting alongside people, calling out when you see it. My wife is extremely good at this. I’m learning and becoming better at it. But once you get tuned in to the experience, and that’s honestly the biggest gift for me doing this work, I’m Jewish and which is not a handicap in the development world at all. In fact, it might be a benefit because our community is pretty well embedded in real estate development and banking and other places. So, I actually find more friendly faces than not. But I also have had the experience of discrimination outwardly and more covertly in my lifetime and obviously in every generation before. So, there’s a lens from which I can understand the experience that particularly Black Americans feel. And now that I’m kind of alongside a lot of my clients whom most are Black, not all. But I see what they experience, and it is shocking and fascinating and horrifying. And you just watch the ease with which people dole out discrimination and they maybe they have no idea they’re doing it, but you just, when you’re standing alongside, you’re like, there it is. Boy, wow. There it is. You know, in small ways and big ways. And so, my job is to call it out. To call it out for what it is because I’m sort of like a translator. Like I can understand, I can see it happening. But because the way I look, people don’t expect me to call it out, but I call it out.

Eve: [00:40:53] Can you give us an example?

Jonathan: [00:40:56] Yeah. So, we’ll go to a lender or a seller and they’ll say, Well, we’re really interested in leasing this to anybody. We’re really desperate. We don’t have any tenants. We’re really interested in leasing this to anybody. And they said, oh yeah, this woman was here, and she had an idea, and we were just really willing to do anything. And so we said OK, well, we’ll put together a proposal with our clients. And our clients, put together a really beautiful business plan. And I’m saying this because I vetted it and I know I’ve written and I’m not patting myself on the back here.

Eve: [00:41:33] It was a good business plan.

Jonathan: [00:41:34] I’ve written many business plans and I know what a good business plan needs to look like, and it doesn’t have to be a white paper. Doesn’t have to be complicated. It can be…

Eve: [00:41:42] Just thorough, right?

Jonathan: [00:41:43] Thorough. It covers all the bases, looks great. The financials look great. We’ve done analysis. Best case, worst. We’ve kind of pressure tested the financials. We know that they can survive even if it doesn’t go as well as we think. We present conservative estimates, and it still looks great. And then we put these guys pictures in there. And all of a sudden, there’s extra questions, all of a sudden there’s oh, well, we just don’t know if their business can attract that type of customer. We just don’t know if that type of customer exists.

Eve: [00:42:20] That’s just heartbreaking.

Jonathan: [00:42:21] It’s like, oh well, because that’s not the kind of customer you would be. Then you don’t believe that they can attract that type of customer. And it’s subtle things like that. It’s little things like that. It’s like, oh well, these aren’t high net individuals. Oh well, neither was I.

Eve: [00:42:40] Right.

Jonathan: [00:42:40] Any time I’ve been under bank scrutiny, I’m still not particularly a high net worth individual without my hotels. And those are very subjective to their performance right now. So, it’s just funny the questions I’ve gotten versus the questions that they get.

Eve: [00:42:57] Yes.

Jonathan: [00:42:57] And it’s like you think about things like redlining, right? And we think now with this lens of like, oh, redlining was this, you know, horrible, pernicious, intentional action where evil real estate agents and mortgage brokers and banks carved up these cities and said, here’s where Black people have to live, and here’s where you can’t. Well, you look to the actual maps from those days, which you literally had red lines on them. And it wasn’t quite as evil as you might think. It was kind of like, well, here’s where Black people live. So, we’re considering these higher risk loans, right? But I’m not saying it wasn’t overtly racist. I’m sure it was. I mean, this is the era of Jim Crow. This is definitely overtly racist. But the things that are happening now that I watch and experience, I think in 20 years we’re going to look back at those with the same lens and be like, this was overtly racist. And yet today, when I do say it to people, they’re like, Oh, no, no, I wasn’t saying that. And it’s like, well, what are you saying then, right? Why are you saying that when you wouldn’t say that to someone who looks like me? And so, I think we might be surprised at how our viewpoints on how people act now will change over time. And we’ll see some of the actions that people take right now as being much more overtly racist than they’re perceived as currently.

Eve: [00:44:25] I hope in 20 years. I’ve been waiting all my life for people to treat women differently, so it’s been a lot longer than 20 years.

Jonathan: [00:44:34] Yeah.

Eve: [00:44:35] So, no, I don’t know what my next question is, because that’s so fascinating. Ok, so let me just ask you, look, are there any. this is just a real estate question after these much more difficult questions, but are there any current trends in real estate that you find really interesting that are worth watching? I mean, especially now, you know, this pandemic has really shifted things the way we do things. I don’t want to put on the same clothes anymore. I don’t know about you, but in real estate, you know everyone debating what’s going to happen to Main Street, what’s going to happen to this? Have you seen anything emerging that might provide an answer?

Jonathan: [00:45:19] It’s a good question. I mean, you know, it’s sort of the question I ask myself every single day, right?

Eve: [00:45:24] So we can ask it together.

Jonathan: [00:45:25] Yeah, because I’m in my job specifically within our own company is forecasting people’s behavior. And it’s been that way throughout the whole pandemic as we’ve tried to stay open and make our staff feel comfortable and make our guests feel comfortable with the varying regulations and health concerns around the pandemic. So it is a challenging question and I do scan, you know, I’m watching for trends all the time, both in our city and across the country. Gosh, a lot of things are happening, right?

Eve: [00:46:01] People have moved online so rapidly. It’s kind of head spinning. I was pulling some numbers together for a deck to explain our business and this statistic really floored me. It took about 12 years for 70 percent of Americans to use social media in their everyday lives. Mm hmm. It took one year from last year to this for the adoption of fintech to go from 60 percent to 90 percent.

Jonathan: [00:46:29] Wow.

Eve: [00:46:30] So, you know, now depositing a check. You do everything online. Everything to do with finance is just moving online rapidly.

Jonathan: [00:46:41] I just got a request from my insurance company to do an inspection of our property, which the insurance company normally does, by myself. They want me to send them the pictures. I’m like, oh, for commercial insurance it just seems bizarre. Yeah, I think so many things have been found to be cheaper and more efficient by doing online or outsourcing so that people don’t have to travel places to do it. I think that will stick in a lot of different ways. You know, even before the pandemic, using social media so much, people were feeling isolated from each other. You know, you’ve maybe read the book Bowling Alone, which was written 20 years ago, and talking about how people become more and more lonely and depressed from lack of community. So, I feel like the pandemic has only accelerated those feelings. So, on one hand, we are definitely going to do more business by ourselves and separated and through this medium where we’re remote. On the other hand, I think the need has never been higher for people to feel connected to each other.

Eve: [00:47:54] Um hmm.

Jonathan: [00:47:54] And I’m curious of how that’s going to sort itself. Our hotel model is all about creating communal spaces and we’re like, Oh God, this is not a good pandemic for us, right?

Eve: [00:48:06] No, no.

Jonathan: [00:48:06] Like, it’s not good, you know, between our bunk rooms and our bunk rooms have been slowest to recover of all of our room types, for sure, because of those health concerns. Rightly so. But on the same hand, people meet each other, people need. There’s a difference between seeing someone virtually and embracing someone, shaking their hand.

Eve: [00:48:28] That’s right.

Jonathan: [00:48:28] You know, there’s, you’re not going to change that biochemistry need for people to be physically near each other. It’s exhausting being on Zoom meetings all day where your eyes are darting around the screen because you rely on your peripheral vision to get a lot of data input, and it’s exhausting to have to look everywhere. So I don’t know what’ll happen, but I do know that people need each other. And I think that there are certainly people who are going to be last to come back to that world of greeting each other. And there will be people like our clientele. It seems that boutique hotels are recovering fastest, not chain hotels. And I’m a little bit surprised by that on one hand. But on the other hand, I’m not because our travelers are, who want our kind of unique type of hospitality, are more adventurous travelers. That’s why our tagline is serving adventurous travelers since 1881. That’s when our building was built. And so we feel that those are the type of people who want to come out in the world first. So that’s who’s out there right now. But as things recover and more people are willing to travel, they have those needs and those needs are going to be pent up of connecting with people having real experiences together. So, I don’t know. I think a lot of things will change permanently, and this is something that you can’t change. But where is the trend? Man, I haven’t seen anything that’s even like a trend lit yet.

Eve: [00:49:55] No. Well…

Jonathan: [00:49:56] I haven’t seen anything.

Eve: [00:49:58] I do know that the restaurant industry is just decimated, and it’s not just people coming to eat, but I have a friend who has four bars and he said he can’t hire people. He’s paying extraordinary prices for line cooks. He says that a complete restaurant crisis, so that whole industry. Oh, it’s pretty heartbreaking.

Jonathan: [00:50:24] It is. It’s really hard. It’s already one of the hardest industries.

Eve: [00:50:28] Yes.

Jonathan: [00:50:29] And to add the staffing crisis that we have right now is even harder. So, we’re struggling with it too. It’s just been hard through the pandemic of people’s emotional level. And hospitality requires a positivity, and that positivity has been hard to find at times during this time.

Eve: [00:50:48] So that’s been the hard stuff. But look what’s come out of it, your Equity Development Lab, and that’s the upside of it all, right? That’s a pretty amazing thing to give birth to in the middle of a pandemic.

Jonathan: [00:51:03] I would guess I would say I’m bullish on humanity, you know?

Eve: [00:51:07] Yes.

Jonathan: [00:51:07] You know, I’ve always been I’m a scientist first, you know, and I’m just a true believer in humanity’s ability to solve problems. And so, I’m always positive even about climate change and big, big, big issues. I believe in our ability to solve problems. If you want another fabulous podcast is The Secret History of the Future. Have you ever listened to that one?

Eve: [00:51:33] No, no.

Jonathan: [00:51:34] And it’s all about problems that we’re facing now. I think they only have one or two seasons. Supposedly, they’re coming out with another one. But they talk about, here’s a problem we’re dealing with now. Here’s how we already dealt with that problem 100 or 200 years ago. It’s similar but different, and I like it because it gives me hope about how we always find a way. We have gone from a billion people on Earth in 1900 to eight billion people in 2000, give or take. And that’s dramatic, and that doesn’t happen without solving a lot of problems. So, I’m not saying that growth rate is sustainable, but I also believe that we will solve those problems of sustainability in the next hundred years. So, I believe in our society to solve these problems, and I think the pandemic showed our resilience, even if it was not easy for everyone, myself included.

Eve: [00:52:32] Well, Jonathan, this has been a fascinating conversation. I can’t wait to see what happens with your Equity Development Lab and I’m expecting to be included.

Jonathan: [00:52:40] You are.

Eve: [00:52:42] Thank you very much for joining me.

Jonathan: [00:52:45] Thank you so much for having me. It was a pleasure.

Eve: [00:53:03] That was Jonathan Cohen. In everything he does, Jonathan is focused on the underdog. He’s out to level the playing field and we’ll be eagerly watching him. You can find out more about this episode or others you might have missed on the show notes page at our website. Rethinkrealestateforgood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Image courtesy of Jonathan Cohen

3D-printing, robotics and automation, oh my!

Sam Ruben is passionate (with a capital P) about sustainability. Sustainability is not just a moral principle for Sam – he believes that as a core value it can improve the bottom line, and increase the brand value of any company. Today, he is Chief Sustainability Officer and co-founder of Mighty Buildings, a company that has leveraged rapidly evolving technologies in 3D-printing, robotics and automation for the construction industry, specifically to create affordable and sustainable homes.

Mighty Buildings developed a breakthrough material that can be printed into any shape, a series of ADUs with a growing order list, and a house kit of parts. They can 3D print a floor, walls and a ceiling that are fully set within 24 hours. Plus, it’s all up to code and UL-certified. Sam says, “We didn’t want to create a lot of hype or expectations we couldn’t meet, and we wanted to show that we’d done the work on the regulatory side.” This meant working with developers, planners and regulatory bodies from the start.

They started by touting market-ready, prefabricated ADUs. Their bigger goal is Zero Net Energy homes. And their process offers 95% lower labor hours, double the construction speed, and ten times less waste compared to conventional construction. And most of the construction process is automated. And Sam says their goal is to create a new way to build, and “at the scale necessary to really have an impact on the housing affordability crisis.”

Insights and Inspirations

  • Sustainability in housing can be about how you build, or how the building uses and saves energy over time. Mighty Buildings is focused on both.
  • Before they even ‘printed’ their first building, Mighty Buildings had to invent a new material that cured quickly. In a day.
  • Sam and his team spent years in R & D stealth mode, working with code and certification partners long before unveiling their first building.
  • Their BHAG is to create a distributed network of factories across the country, printing 3D houses in idle warehouse space, creating fabulous housing and jobs for everyone. Quickly.

Information and Links

  • Sam is really excited for the launch of the ABC Collaborative, which promises to jumpstart the off-site construction industry in the U.S. (similar to what was done for the silicon chip industry in the 1990s).
  • He also loves taking part in events/webinars by the Housing Innovation Alliance, which does an amazing job of fostering and elevating new ideas and insights that have potential to change the housing industry.
  • And he spends a lot of time thinking about the idea of a Circular Economy – both the Ellen MacArthur Foundation and GreenBiz are great resources on this.
Read the podcast transcript here

Eve Picker: [00:00:14] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo, in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website RethinkRealEstateForGood.co or you can find them at your favorite podcast station. You’ll find lot’s worth listening to, I’m sure.

Eve: [00:01:15]We’re going to point you back to one of our golden oldies today because it’s been an insanely popular podcast. If you missed it, here’s another chance to listen.

Eve: [00:01:21] Sam Ruben is passionate with a capital P, about sustainability. Sustainability is not just a moral principle for Sam. He believes that as a core value, it can improve the bottom line and increase the brand value of any company. And Sam is living this belief. Today he is Chief Sustainability Officer and Co-Founder of Mighty Buildings, a company that offers 100 percent digital prefabrication of its modern ADUs and kits. In the first three years of their existence, Mighty Buildings developed a breakthrough material that can be printed into any shape, a series of ADUs with a growing order list and a house kit of parts. Now deploying a Series B round of funding, their goal is to manufacture thousands of houses through the 3D printing material, in thousands of locations globally within the next 10 years, reducing waste and energy and helping to house people quickly, affordably and beautifully.

Eve: [00:03:36] If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast and go to rethinkrealestateforgood.co where you can subscribe to be the first to hear about my podcasts, blog posts and other goodies.

Eve: [00:03:04] Hi, Sam, it’s really great to have you on my show.

Sam Ruben: [00:03:07] I really, really appreciate the opportunity.

Eve: [00:03:10] So I think you are thinking real estate to the nth degree with your company, Mighty Buildings, which is really such a great name for a company. So, I would love you to tell us what Mighty Buildings is all about.

Sam: [00:03:23] Yes, Mighty Buildings, we’re an Oakland based construction technology company that has a mission to create beautiful, affordable and sustainable housing using 3D printing and robotics. So, what we’ve done is we’ve developed a unique material and unique printing process. That’s, so we’re not using cement. We’ve developed a material, it’s called Light Stone. So, it’s essentially a synthetic stone, but we don’t have siliceous. We don’t have to worry about those health impacts. And what we’ve done is we figured out how to print it into curves as well as traditional forms and allow, which allows us to print not only the floors and the walls, but also the roof of homes. And so we’re initially delivering accessory dwelling units directly to homeowners and recently announced our first project which is going to be a community of 3D printed zero-net energy homes in Rancho Mirage.

Eve: [00:04:06] Oh, wow. So then what problems are you hoping to solve with Mighty Buildings?

Sam: [00:04:12] Yeah. So, even though we’re bringing 3D printing and robotics into it, our goal isn’t to replace labor. What we’re really trying to solve is the fact that we just don’t have enough skilled labor to build all the housing we need. And in 2008, most of the skilled contractors left the industry. Those that stayed or came back tended to be older. They’re retiring and they’re not being replaced. For every five skilled GCs that are leaving the industry right now, we’re seeing one lower skilled worker entering.

Eve: [00:04:36] Oh, really?

Sam: [00:04:36] Yeah, it’s pretty, pretty fascinating. I was talking to a professor at the University of Denver, Burns School of Construction Management, and he was saying there’s something like 40,0000 construction jobs that are open in America right now that no one’s taking.

Eve: [00:04:49] You know, years ago I was hearing this just about stonemasons that was a really dying trade. But I didn’t realize it had now crept into everything.

Sam: [00:04:59] Yeah, that’s what we’re seeing. I mean, it’s particularly acute here in California, but we’re starting to see it in other places in the country as well. And at the same time as we have this huge housing crisis, I mean, we need globally, we need billions of houses. I mean, in California alone, we need like two and a half million just to get on par with the rest of the country in terms of per capita housing, not even to actually close that affordability gap. And at the same time, the construction of buildings accounts for 11 percent of all global greenhouse gas emissions globally. And the building energy use phase is another 28 percent of greenhouse gas emissions globally, which means that if we’re going to solve this housing crisis and we’re building billions of new units, we really have to do so in a way that doesn’t exacerbate the climate crisis, which along with the fact that we need a better way to build in order to get all the units out there in the first place means we need a better way to build to make sure we do so in a way that doesn’t exacerbate that climate crisis and frankly, leave us off worse off than we would be if we hadn’t built all that housing.

Eve: [00:05:53] Wow. So you’ve had a background in sustainability, I see.

Sam: [00:05:57] Indeed.

Eve: [00:05:57] Yeah. How did you, how did you arrive at, like, this sustainable building solution as something that you wanted to pursue?

Sam: [00:06:06] Yeah. So, it’s been a fascinating journey. Sustainability is something that’s just kind of always been a part of my life. I was really lucky where I grew up in Ann Arbor, Michigan. We had curb-side recycling as basically going, I don’t remember not ever not having curb-side recycling. So, it’s kind of all those things that just was always a part of my day to day. My mom would always compost and we were always very, very eco-friendly in my house. And then obviously the social aspect of sustainability was very important as well, because social justice was something that was very important to my family and the kind of the ideas of equity and diversity and inclusion were which kind of baked into how I was raised. And so, after college and my political science and economics college, thought I was going to be a lawyer. Ended up working in interfaith peace building for a number of years. Once I moved out to California here in San Francisco. And then attended Presidio Graduate School, because one day I realized maybe I didn’t actually want to be a lawyer and knew about Presidio Graduate School, which is this amazing program that offers both an MBA, so Masters of Business Administration, as well as an MPA, a Masters of Public Administration, and it’s one of the first programs in the world to focus the entire curriculum around sustainability and systems thinking. And so I was lucky enough to get to go there, decided to pursue the dual degree, so get both the MBA and the MPA, because coming from the civil society sector, it was really clear to me that too often public, private and civil society are trying to solve the same problems, but they end up fighting over resources and doing so because they don’t understand each other and they don’t necessarily realize that they’re trying to solve the same problems. And so that was one of the reasons that I did do the dual degree and then found myself doing sustainability coaching and in terms of 3D printing. And that’s kind of where it becomes obvious just how big a nerd I am. I’ve been in love with 3D printing ever since I realized that Star Trek replicators were just atomic level 3D printing with energy modulation. So, like, this is what I like. So, 3D printing is something I’ve been passionate about like I’ve always loved the idea and love the potential of it. And so in grad school for my MBA Capstone, me and my team developed a business model to take clean, virgin, uncontaminated plastic hospital waste and turn it into 3D printer filament.

Eve: [00:08:17] Interesting.

Sam: [00:08:18] And so it’s an area we’ve been working on. And then after grad school ended up doing sustainability coaching and consulting, helping organizations optimize their impacts as well as their bottom line, largely looking at building systems. So, looking at the envelope. Heating and cooling, lighting. But even little things like what’s it mean to move garbage can 10 feet? What’s the impact on the waste generated there? And then modeling out both the sustainability impacts in terms of impacts on wastewater, energy, transportation. But then also what is the, what are the bottom-line impacts? What are the operational efficiency improvements available? And really to the people I was working with in position to make the business case to their CEO suites or their organizational leadership to implement the sustainability changes and then connect with my co-founders who had originally met each other in Singapore, where the government owns all the housing, and they completely rebuild their housing stock every 20 or 30 years with the latest and greatest in technology. And then they were coming here and saying it’s like, why are you still building using technology that’s 100 or 200 years old, just didn’t didn’t make sense to them. And so, they had previously come up with a 3D printing concept. That was the basis for the technology we use today. And they shared the vision with me and it just made sense. It really clicked like they had the fact that we need a better way to build both the close the housing gap, but also to address the sustainability impacts of that housing, which was really, really clear to me and something that I felt passionate about. It made it easy to say yes and join the team.

Eve: [00:09:42] It’s really fascinating to me how, you know, all these interests and people sort of collide to make the perfect storm really. It’s pretty interesting.

Sam: [00:09:52] Yeah, yeah and I was lucky because, like, they had worked with a classmate of mine who had been working at Indiegogo when they were doing some crowdfunding previously and so that’s how we connected, is they reached out to her. She posted something on one of our Facebook alumni groups, and I think I might have even recommended a former classmate would advise my Capstone team. But at the time he had I taken a job with a Hitachi Smart City Program. So, I ended up meeting with our CEO, Slava, and just, yeah, we hit it off, fell in love with the idea. And the rest is, as they say, history. I mean, and that was just about four years ago. They’ll be four years ago in a couple months.

Eve: [00:10:25] Yeah. It sounds like you’re a pretty young company. But what types of buildings are you printing? Like, how far have you come with this?

Sam: [00:10:33] Yeah. So initially what we’re delivering are accessory dwelling units, so more commonly known as like granny, in-law units or granny flats or just kind of the idea of a backyard, small backyard apartment. And the reason we chose that as our initial market is that the state of California has passed a series of series of legislation going back to 2016. So went into effect beginning in 2017.

Eve: [00:10:54] Yeah.

Sam: [00:10:55] Yeah. So yeah. And so I think I also made it much easier to promote them, but it also because of the size of ADUs, they’re too small for most builders and developers to really be able to afford to build because of the overhead. And so it may not only made a great place for us to step into a new growing market, giving us a chance to demonstrate the viability of our technology while we continue to build out our certification and roadmap, but also meant that we weren’t competing with the builders and developers who we’ve always seen as our customers, because at the end day, our goal is to be a tool for industry and essentially provide production as a service, as a platform, and so do that. And that’s why we’re really excited about this project down in Rancho Mirage, the Palari Villas that we’re doing with the Palari Group, because that’s our first foray into that model of delivering units at scale, because that’s really where we start to see impact. And so with those, we’re doing single family homes plus ADUs, and then we have a new fibre reinforced version of our material that we’re working on and taking to certification this year with the hope of being able to move into a low rise multistorey, hopefully by the end of next year.

Eve: [00:11:55] It’s not just buildings. It’s a material that you’ve developed.

Sam: [00:12:00] Correct.

Eve: [00:12:01] Absolutely critical to…

Sam: [00:12:02] Exactly. Yeah. And it’s a non-cement material which has, and we use light to cure it. So, what that means is that it cures quickly enough that it can support its own weight, which is what opens up the ability to do bring organic forms and shapes into the printing process to print the roof as well as the floors and the walls, but not so quickly that we don’t get full cohesion between the layers. So that means that at the end of the day, we end up with the monolithic object. And so, the material itself, I’m sure many of your listeners are familiar with Corian by Dupont. Yeah. Which has been used as countertops and claddings and things since 60s. So, it’s the same class of materials insofar as it’s a thermostat composite. But our material is unique in that we’ve developed a manufacturing process that allows us to put it into a printable form and we’ve also designed it and engineered it to be a higher performance. So, like, for example, Corian, I think generally has a Class B flame spread rating. Ours has a class A flame spread rating. And then we’ve also developed the ability to move it into structural aspects of the build as well.

Eve: [00:12:58] Interesting. So, what do your buildings look like? How different are they to stick built buildings?

Sam: [00:13:08] Yeah, so we’ve we intentionally decided to not go really crazy with the the design in terms of highlighting the 3D printing. So the units we’re delivering currently are more or less, looks like modern boxes, but they have a curved end, which kind of hints at the possibilities. And then, so those are what we call our Mighty Mods. So our studio, our studio one- and two-bedroom accessory dwelling units that we’re currently delivering. And then our next product line, which is based off of our Mighty Kit System, which is essentially a serious kit home, but made with 3D printed components.

Eve: [00:13:41] That’s the one I want to get.

Sam: [00:13:41] Yeah, and that’s what the Palari Project is. And so, the first product line that we developed with that is called the Mighty House Line. And those were designed with EYRC Architects, which is one of the nation’s leading modern design firms. So those have a real modern feel to them. Part of why Coachella Valley was a perfect location for the first deployment at scale. It’s kind of the heart of modernism. And so it was really, really great to have a chance to have one of our big projects right there.

Eve: [00:14:05] So I have to talk about building codes then, because…

Sam: [00:14:11] Indeed.

Eve: [00:14:11] That must be pretty horrendous trying to convince your local building department that a little building like this, using this technology complies with all regulations.

Sam: [00:14:23] Yeah, no, great question. And obviously, because we’re bringing something unique into the space, it’s been really, really important to us from the beginning that we are addressing the regulatory and safety side of things. Because, I mean, as you as you’re well aware, building codes are written in blood. They exist because things went wrong, and people died. And like I mean, that’s the sad truth about it. And so that’s why we have so much respect for them. And that’s also part of why we stayed in stealth mode for the first three years of our existence and didn’t really start to talk about what we were doing until last August. Was that we wanted to take the time to really be working on the regulatory side. And so we’ve been partnering with UL, Underwriters Laboratories, and the reason we chose UL as our evaluation and certification partner instead of the International Code Council or Atmo or Airtech or some of these other evaluation services that are out there, is that UL not only has over 100 years of building life safety experience, they also have some of the world’s leading additive manufacturing experts, which means that they’re uniquely situated to really understand our technology in order to see what does it look like to demonstrate code compliance. And so, what’s come out of that process is a new standard, which is the world’s first standard for 3D printed construction. UL 3401. That’s also… 

Eve: [00:15:32] UL 3401?

Sam: [00:15:34] Correct? Yeah. UL 3401. I believe the full title is Outline of Investigation for 3D Printed Construction. And what’s really, really exciting is that that has since been used as the basis for Appendix A.W. in the 2021 International Residential Code update that will go into effect next year. So that means we’ve actually helped get 3D printing into the building code in actually pretty much less than three years. And so with the new update, once that’s published, jurisdictions will be able to take that appendix and plug it into their code because it is an adoptable appendix. And even those that don’t formally adopt it will have that opportunity to look to it for guidance as we start seeing more and more 3D printed homes coming to the market.

Eve: [00:16:13] So does that mean that the tiny little town, where I have a little cottage, that I like to stay at from time to time, that has very, very old-fashioned conservative building codes, that I might actually be able to buy a piece of land and put one of your 3D printed buildings in there next year sometime?

Sam: [00:16:31] Yeah, well, and potentially you could even do it now, because one of the cool things is that in the meantime, we’re able to operate under the alternative means and methods portion of the code, which allows you to build pretty much anything in any way as long as a building official approves it. And so as long as you’re able to demonstrate and provide all the information necessary for them to feel confident that it will do will have the safety and compliance. And so in, that’s what we’ve been doing there is actually working with the state of California through their Housing and Community Development’s Factory Built Housing Program, which allows us to certify our units and effectively get a building permit from the state. So, we work with a third-party design approval agency that’s certified by the state and they do the all the code reviews for all of our units. So that means we get to work with a single design approval agency instead of each local AHJ. And then we have in factory inspections by another third party that’s certified by the state as a quality assurance agency. And so that basically takes care of what would be inspections that would normally happen on site but can’t because we’re building in a factory. So that means when we get to the local municipality, it’s really about getting the permits for the site work, foundation, utilities, all that, as well as going through the plant check for zoning purposes.

Eve: [00:17:40] Interesting. So are you, the kit of parts that you’ve developed, are you planning to ship that nationally?

Sam: [00:17:48] So, yeah. So, what we’re actually planning on doing is having a distributed network of factories because for a lot of reasons. One, it does not make sense to ship California construction costs out of the state because we have one of the highest cost structures of anywhere in the world. Additionally, we want to make sure that we’re not only providing housing for market, but we want to be creating jobs for that market. So, we’re identifying areas where we have high demand, where we have builders and developers we can partner with and then deploying these, our factories in existing warehouse space near where the demand is. So that’s one of the really cool things about using 3D printing and robotics, is out of 50000 square feet, we can currently produce 300 units a year, about 360,000 square feet out of that 50,000 square feet of production. And where we’re going is to be able to generate a thousand units or 1.2 million square feet out of that same 50,000 square feet.

Eve: [00:18:37] Wow.

Sam: [00:18:37] So we have the ability to set up in either warehouse space, like where we are here in Oakland. It’s an old Pete’s Coffee warehouse. And so rather than needing to build hundreds of thousands or a million square feet facilities that are far away from where that your labor and demand centers are. And so not only reduced logistic costs, but also reduces the carbon cost of that transportation.

Eve: [00:18:59] That’s really interesting. So, are you building, are you printing building parts as well or is it complete buildings?

Sam: [00:19:10] Yes. So, we have the ability to do fully printed shelves. And if people go to our YouTube channel to see one of our studios that we have fully printed, but most of the ones where we’re delivering currently are actually a hybrid. So they have a 3D printed curved wall combined with the traditional steel frame box. And the reason for that is that, as we’ve noted, the building industry is understandably ,and the building officials are understandably, conservative. Because of the nature of the, of the code being written in blood. And so for us, we’ve been moving incrementally to make it as easy as possible to get that a code approval at every step of the way while we continue to expand out the certification and testing portfolio, which takes time because many of these tests have backlogs as long as six months or more. And so, what we’ve also done is that, so, and those ones we’re currently delivering as volumetric models. So those guys are completed, fully finished modules with all the finishing, including appliances and everything, when those arrive on site and so laid on the foundation and placed in a matter of a day, then generally, depending on how we’re able to create the subs for the finishing work, ends up being about a week or so until they’re completely installed. And so, yeah, so we can go from a blank slate to a fully finished in under a month with our Mods. With the kit, it’s going to be a little more, a little more involved on site because it is arriving and shipping containers as panels and as components. But again, with everything you need to fully finish the unit. And so with that, it’ll take a couple, a few weeks to stand up, but it’ll still be faster than traditional onsite construction and less disruptive.

Eve: [00:20:39] Wow. OK, so what does the process look like for printing? Let’s say, in ADU from design to move in.

Sam: [00:20:48] Yeah. So currently we’re offering as kind of a set number of designs that we have. So we can obviously take advantage of prefabrication in which having some limited customization is going to look…

Eve: [00:21:02] Like the old-fashioned Sears blueprints. Right?

Sam: [00:21:06] For where we are now. Yes. Where we’re going as a part of our kit system, we’ve already developed a Revit library for our panels to make it easy for us to create custom floor plans for builders and developers, because obviously with volume, it’s much easier to do customization. But where we’re going is to continue to build that out, to allow third party designers to work directly with our technology and so be able to bring in those third-party designs and really unlock customization at the scale of a single unit and small batches. Because for us, we don’t need to change the floor or rearrange our production system when we go from one design to another. It’s literally just a matter of changing the file in the computer.

Eve: [00:21:45] Wow.

Sam: [00:21:45] So that’s one of the really exciting things. And so particularly when we get to multi-story, really excited about the opportunities that creates for instituting late stage design changes because those always come up, but to do so in a way with minimal additional marginal cost.

Eve: [00:22:00] So what’s the end goal date for getting rid of the hybrid and going fully 3D on these buildings?

Sam: [00:22:10] Yeah, so we’re looking to potentially by next year with our new fiber reinforced material, which the goal is to allow that to remove the structural steel that we’re currently using as a kind of safety buffer. Because in truth, units are currently designed to not need the scale, but we utilize it again just to make sure that we’re have that safety buffer because it is still new technology. And even though all the testing shows there shouldn’t be any issues, we really don’t want to take any chances.

Eve: [00:22:34] Sure, sure. So where are you printing now? You said you had 50,000 square feet.

Sam: [00:22:40] Yeah. So, it’s so the whole facility, here in Oakland is about 79,000 square feet. Of that, 50,000 is production floor and the rest is our offices and material storage.

Eve: [00:22:49] You came out of stealth mode last year. How many people on your team?

Sam: [00:22:55] Yeah. So we, we have a pretty large team and we, we just closed our series B, so we’re in the process of expanding our team, but we’ve got about 30 people here in Oakland and then we’ve actually got about over one hundred people at our research and development facility in Moscow. So that’s kind of been one of our one of the secrets to our how fast we’ve been able to move and how fast we’ve been able to develop this technology is that we have overseas research. It was originally in Siberia, in a city called Tomsk, which is kind of like the Boston of Russia. Which is, it’s because it’s got a similar number of students per capita to Boston and three of the top 10 universities in the country. And the reason we have that is that all three of my co-founders are originally from Russia, though they all connected in Singapore. And then I connected with them here. And we are headquartered here in Oakland. We are a U.S. company. We are, this is our target market. But having that research and development there allows us to have a much larger team doing some amazing work than we could if we had that R&D based here in the U.S., particularly here in the Bay Area.

Eve: [00:23:53] Yes, that’s a pretty interesting model and example of partnership between Russia and the U.S.

Sam: [00:24:02] Yeah, well, I mean, it really, it really speaks to the fact that there are good people with good ideas everywhere.

Eve: [00:24:09] Yeah.

Sam: [00:24:10] And I mean, obviously there is always we’re always paying attention to what’s happening at the global level between the governments. But that’s something you do anyway when you’re looking at supply chain concerns. So it’s one of those things that obviously we’re paying attention to see how it might potentially impact us. But thus far, we really haven’t seen any impacts. And the biggest have been just visas. So that’s been probably the biggest impact and the some of the difficulties there. But no, no real issues in that regard.

Eve: [00:24:35] So you’ve got a Series B round. What are your plans for scale?

Sam: [00:24:39] Yeah.

Eve: [00:24:40] What’s your big hairy goal? Audacious goal?

Sam: [00:24:43] Well, our audacious goal is to hopefully within 10 years, to have mighty factories sprout across the globe. Starting here in the U.S. and then moving into other countries. We are of interest from the Middle East, Europe, Southeast Asia. And so having these across the globe, generating each generating a thousand or more units every year. So across Mighty Buildings, helping support some of the biggest builders in the world to build more with their existing labor, but to do so in a way that provides zero-net energy homes. So, minimizing the carbon impacts of the energy use phase, but also zero waste construction. So really eliminating that three to five pounds per square foot that goes to landfill and traditional build. And we’ve also committed to being carbon neutral by 2028, 22 years ahead of the broader industry with the secondary goal of achieving carbon negativity by 2040. So that’s something that we’re really, really excited about. And we’ve already identified potential savings along the way there and are continuing to work on that. So ,when we’re thinking about our how are units, we’re not just thinking about from when we build it to install it, we’re actually thinking 50, 100 years ahead to when it comes to end of life, what’s and what’s that going to look like? So, we already have the ability to mill the units up and reuse them as filler in new material. But we’re also looking at opportunities for redeveloping our formulations to unlock abilities to have a truly circular production system where we’re able to completely reuse and break down the components so that we can fully avoided landfill, because it’s so important to us that we’re doing everything we can to minimize and mitigate the impacts of new buildings on climate. Because that’s such a such a crucial thing and because it can’t be any either or. It really has to be a both hand with any solution that we’re looking at as a society.

Eve: [00:26:25] So are you planning your own Mighty Building to live in?

Sam: [00:26:28] Eventually. Eventually, if I can never afford to own property in California. No, actually. Yeah, there’s, my mother recently passed, and so my brother, cousin and I now share some property in western Massachusetts that we’re looking at potentially putting a unit on.

Eve: [00:26:46] Oh, fun. Fun. So, one final question for you, because this has been fascinating. I’m just wondering if there are any other current trends or innovations in real estate development or construction that you think are really important for the future, beyond what you’re doing with Mighty Buildings?

Sam: [00:27:03] Yeah, well, as I’ve spoken to, I mean, I think it’s imperative that we as a society figure out how to. So there’s a couple areas. One is obviously the sustainability of the structures. And honestly, I’d like to go back past sustainability into resilience and regeneration, because that’s really where the conversation needs to be, is how do we make housing units that are going to be resilient to the changes that are already coming down the pipeline while also being a part of the solution in terms of regenerating that ecosystem. Whether that’s through carbon sequestration built into the units or other opportunities. So that’s one huge area, because whether it’s us or anyone else, we need to build all those units. But we have to we have to be thinking about the impacts on the climate crisis when we’re doing so, or else we’re going to be in a lot of even more trouble than we are. Additionally, looking at, what does it mean to, like, and this is obviously a broader societal issue that comes up whenever we talk about automation and robotics, which is, how do we as a society want to embrace the potential benefits of these of automation and technology? And so there’s that. It’s been great seeing some of the work happening around like universal basic income and some of these other models that began to decouple work from worth. Because, I mean, Buckminster Fuller back in the 1950s was talking about how we had technology such that one person could do the job 10,000. We should be freeing those other 9,999 to do the things that further humanity. And that’s even more true today with the advances we’ve seen. So, there’s huge opportunity as a society for us to be thinking about what does it mean to embrace technology in a way that allows us to solve some of these really, really big problems while also taking into account the potential negative consequences? Because technology is neither good nor bad. It’s it comes down to how do we as a society choose to use it? So that’s another area. And then more broadly, I’m really excited about what we’re seeing in terms of shifts in prefabrication and off-site construction here in the United States. You may or may not be aware about the new Advanced Building Construction Collaborative. That’s going to be kicked off shortly. But the Department of Energy, Rocky Mountain Institute and some others are convening this amazing effort. That’s essentially a parallel to what was done in the 1990s for the silicon wafer chips for the semiconductor industry and microchips where the Department of Energy basically funded, put a lot of money into jumpstarting the industry in the face of competition from Taiwan and other places and kept the U.S. as a leader there. And they’re looking to do the same thing for off-site construction, because not only are we seeing some amazing buildings being built with really great modules from Poland and China, but as we’ve seen with the current pandemic and some of these issues in global trade, we’re really running into issues with getting those units here and getting, having global trade happening the way we used to. So it’s more imperative than ever that we’re really identifying ways that we can unlock that capacity here in the United States, to be able to generate all those homes. Because that also is going to have a huge impact on the sustainability of that construction in terms of the carbon associated with the transport. So I’d say those are those three areas or three big ones I’m really excited about and conversations that are ongoing, but that we need more and more people thinking about and engaging with, I think, because there’s so many good ideas out there and the problems are so big that I don’t think there’s any one one solution that’s really going to be able to solve it for everyone.

Eve: [00:30:13] No, I think that’s true. I think this, we’ve all got to chip away in lots of different ways. Well, thank you very much for the conversation. I can hear the excitement in your voice. And I’m incredibly excited now too. I’m going to go to your website and check out that little house that’s a kit of parts.

Sam: [00:30:27] Wonderful. Well, thank you so much for the opportunity and really, really enjoyed the conversation. You had some great questions. And it was a pleasure,

Eve: [00:30:36] I’m really looking forward to see where you go. It’s a big goal. Thank you.

Sam: [00:30:41] Oh, thank you. Well, the best ones don’t have to be audacious or else we’re not, we don’t get the change we need.

Eve: [00:30:47] That’s right.

Eve: [00:31:02] That was Sam Ruben of Mighty Buildings. Sam pivoted his life and career into sustainability in a very big way. He is making all bets on the need for the world to think differently and to build differently. The melding of housing that is built quickly to fill of dire need and housing that is built through a brand-new process that reduces waste and energy are a perfect place for Sam to be. We’ll be hearing more about Sam and Mighty Buildings, I’m sure.

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

Image courtesy of Sam Ruben/Mighty Buildings.

3D printed houses.

3D printing is the construction of a three-dimensional object from a digital model, and it’s now being used in a multitude of applications — from aircraft components to running shoes, cars to orthopaedic implants and prosthetic limbs. And one of the latest to come to market is houses. You can now live in a home printed out by a computer.

There are some big advantages to 3D printed houses. These include:

  • Environmental benefits. When you print a house there is very little material waste. Prefabrication also reduces building site waste as well as transportation needs. This will lessen the heavy carbon footprint that the construction industry.
  • Faster construction. According to McKinsey, the construction industry has struggled to improve productivity over the past 20 years and has grown at a third of the rate of the world economy. 3D printing is fast and could double the speed of production.
  • Cost savings. Automation can bring huge cost savings by reducing labor needs on a building site and speeding up production. The construction industry has been slower to digitize than most other trades and is also facing shortages of skilled labor.

3D printed houses are popping up all over the world – in Malawi, Mexico, The Netherlands, Canada, Germany, Dubai, Saudi Arabia, India to name a few. And NASA is exploring 3D printing for use on the moon and Mars.

In California, Mighty Buildings, co-founded by Sam Ruben, is collaborating with Palari Homes to build a solar-powered community of 3D printed houses. Components such as walls, ceilings and eaves are printed from a composite paste, then cured and hardened with ultraviolet light. The pieces are then put together on a prepared foundation using simple tools. Each home can be erected in less than 24 hours and may cost 40 percent less than conventional homes. Mighty Buildings offers printed studio units from as little as $115,000 and a 65-square-meter home for $187,250. Listen in to my conversation with Sam Ruben to hear about the progress Mighty Buildings is making.

3D printed houses are just getting started. It will be interesting to see if this idea takes hold and delivers some of the desired outcomes.

Images courtesy of Mighty Buildings