Rethink Real Estate. For Good.

Equity

Real Estate Artist.

Liz Dunn is the owner of Dunn & Hobbes LLC, a Seattle-based real estate development and property management company.  Her focus is on repurposing older buildings and constructing new “skinny infill” mixed use projects.  These include the 1310 east union lofts, the Piston & Ring Building, Agnes Lofts, Melrose Market and Chophouse Row.  Liz also works as a consultant on urban design, retail curation and policy initiatives around building reuse and neighborhood fabric.  Affiliate companies of Dunn & Hobbes include the Cloud Room, a membership-based shared office and social club, and Cloud Studios LLC, a podcast recording and band practice rental studio facility.

Liz is passionate about supporting other entrepreneurs. Most of her retail and restaurant tenants are women-owned, BIPOC-owned, or both, and she is an active angel investor in tech, alternative energy, cannabis and consumer-facing companies. Liz currently participates in a board or steering member capacity for the Bumbershoot Arts & Music Festival, the Downtown Seattle Association, Capitol Hill Housing, the Pike-Pine Urban Neighborhood Coalition, and Lid I-5 and is a long-time member of the national Small Scale Developers Forum.  She is an affiliate fellow at the University of Washington’s Runstad Center for Real Estate Studies and a regular guest lecturer in the real estate program at UW’s Foster School of Business.

Read the podcast transcript here

0:00:08 – Eve Picker
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.

0:00:43 – Eve
Liz Dunn is a real estate artist. After spending the early years of her career as a software developer at Microsoft, Liz made a hard pivot and launched her own Seattle company in a completely different field: real estate. The last 20+ years have been filled with people and buildings for Liz. Of her 35 or so retail tenants, all are local and over half are minorities or women. Fascinating names like Chophouse Row, the Agnes Lofts and Melrose Market label even more fascinating spaces. And then there is the Cloud Room. It’s a Culture club, lounge and bar packaged as a coworking space and located inside one of her buildings. Liz runs two affiliated businesses as well: Cloud Studios, a practice facility for musicians; and the Overcast Room, a podcast-recording studio. These businesses add a vibrant dimension to already fascinating buildings. With an organic but masterful style, there’s lots to learn from Liz, so listen in!

0:02:01 – Eve
Hi Liz, I’m so excited to chat with you today.

0:02:07 – Liz Dunn
Hi Eve, I’m excited to be here.

0:02:10 – Eve
So, you’re 20 years into life as a real estate developer now and I’ve been to your projects, and they are just completely inspired places that I really, I really can’t get enough of them. I mean really. With destinations with fabulous names like Chophouse Row and Agnes Lofts and Melrose Market. They just inspire me thinking about them. So, tell me about your company and when it began and where and why.

0:02:44 – Liz
Okay. Well, I fell into real estate development a bit accidentally. I did a major career pivot at about 35. I left tech and I really was going to go back to architecture school, try and get into the Masters of Architecture program somewhere. But of course, I didn’t have a portfolio and my skills were all tech and project management and I’d done an MBA, so I knew a little bit about finance and so I enrolled in a couple courses at UW to try and get a foundation while I worked on a portfolio.

And the portfolio just didn’t go very well because I got sucked into my first project, which was this tiny piece of property 3200 square feet, so 40 by 80, like that’s smaller than most single family home lots in Seattle, and, but it was zoned commercial six story and some friends who were also sort of interested in real estate development, it was in a good neighborhood, it was a weird property in a good neighborhood, they said let’s come, let’s go do this, let’s go do this together.

And so, you know, I was taking my courses and we were sort of trying to figure out this property and, long story short, the portfolio never happened and the application to architecture school never happened because they then decided to leave Seattle and move to another city and left me with this weird property. And in some ways, that’s good because, you know, none of us really knew what we were doing. So, three people who don’t know what they’re doing can just be chaotic. And, of course, I did everything wrong on my first project, and I think it’s really important to talk about that, because I know a lot of developers who feel like they did everything wrong on their first project.

0:04:37 – Eve
I did everything wrong on my first project. It took me about three times as long as the second one.

0:04:43 – Liz
Well, it’s funny, like how much you learn, and both good and bad. We used a great, fantastic architect who also had never done a multi-story building. He did beautiful AIA award-winning residential and institutional projects but had never done a multi-story mixed-use building. And we decided to do condos. So, like, I’ve never done for-sale products since then. But for some reason I thought it would be a great idea we were going to do these industrial lofts. They would be for sale.

0:05:13 – Eve
Liz, that was my first project too.

0:05:17 – Liz
Right? I mean it’s a great idea.

0:05:18 – Eve
I’m serious. Condos downtown. Eight of them.

0:05:20 – Liz
Condos downtown. Eight of them! That’s exactly right. Eight of them. Steel and concrete buildings. Spare no expense. And I’ll tell you, I want to, I don’t want to belabor this story too much, but fast forward to 911. Okay, so, as we’re building the project, the tech market melts down. You know, the dot com bubble burst. So, all my buyers, theoretical buyers have been eviscerated. And then 911 happens, two days before we got our certificate of occupancy. And the people may not remember who are younger than you and I but the real estate market came to a standstill and I had already taken deposits from two buyers who literally walked away from their deposits, they were so freaked out by 911. So, long story short, this is also pre internet, so you couldn’t do this fabulous instant guerilla marketing campaign to show people how fantastic the units were.

You had to, I had to wait a year until the Metropolitan Home article finally came out and the architectural record article finally came out, and in the meantime my partner at the time and I had to move out of our house and rent it to make the mortgage payments and move in. We ended up living in three different units of those eight units. We just moved, we just moved from unit to unit for two years. So, that was my first project. But the bank got paid and that’s an important lesson, right? Everybody got paid except me. I lost all my equity, but I did live to fight another day because, well, with that project was under construction, with the same bank, I purchased a much bigger property down the street and because I got such a fantastic deal on it, they lent me both a 90% loan-to-value long-term loan and they lent me the other 10%, my down payment. They lent me my down payment on a one-year line of credit.

0:7:29 – Eve
Those were the years!

0:07:30 – Liz
Those were the years. That does not happen anymore.

0:7:32 – Eve
No, it doesn’t happen anymore. No, it’s like 50%. You gotta go find the other 50%, right?

0:07:39 – Liz
Exactly, exactly. And I don’t recommend it. It did, it was why I lived to fight another day, because then I had this fantastic property and then the rent paid off that line of credit in the first year. So it was, it was structured to work, and the property was worth a great deal more than I paid for it. That’s a long story that I won’t bore you with today, but that’s what actually got me back on my feet as a developer, and that was five buildings and two empty lots in a package that I’ve been incrementally developing for the last 20 years, 23 years because I bought it in 2000, and one by one by one, so that’s Chophouse Row in the end. But I did it one building at a time, and each time I did a building I carved out a piece of that courtyard in the middle of the block to make it bigger. So, you’re familiar with that project.

0:08:36 – Eve

Oh, it’s just beautiful. It’s an organic piece of art. It’s lovely.

0:08:41 – Liz
It’s very eclectic because I did it one piece at a time, so some of it’s very old, old for Seattle. Some of it’s over 100 years old, pieces of it and other pieces are brand new. And I picked up one more piece along the way much later, and so there’s an alley that I carved out of one old building and a courtyard that I carved out of three others. So that’s what I love to do, and I’ve had some really great friends along the way that have helped me. Like I don’t want to pretend all the creative vision was mine, I have one architect friend, Jim Graham, who I met when he was working at Olson Kundig for Tom Kundig, who’s become very well known. But Jim peeled out of there pretty early and started his own firm and has helped me with a lot of these commercial projects and he’s got creativity coming out of eyeballs and he’s very good at the things that you see and touch, you know, at the ground level of these projects. And he helped us with Melrose Market as well.

That’s one that we did, I think we… oh well, I do remember the timing on Melrose Market. I had had an option on that property for many years, but the seller needed to figure out a 1031 exchange. He was an old guy who owned these three auto body shop buildings. He needed to figure out a 1031 exchange. He ended up buying a cattle ranch in Montana, which I thought was an interesting proposition to the IRS, but in any case, he did it and at that point it was time to close on the property, but it was 2008. So, I think we closed, no kidding, the last commercial loan in Seattle, which is an uncomfortable feeling. September 30th, we closed the loan 2008 and, joking aside, that’s literally the week that Lehman Brothers melted down and bankers were jumping out of windows. Like, it was not, it was terrifying, in fact. And we would have left a quarter million-dollar earnest money on the table, and we seriously talked about walking away, but we didn’t. The bank that lent us the money did go under but got the loan got picked up by another bank. We kind of toiled through that 2008 to 2010 timeframe and by the time the project opened in 2011, actually, things were sort of looking up. But what was interesting, and this goes, I know you wanted to ask me about tenant curation…

0:11:16 – Eve
It’s okay, it’s good.

0:11:18 – Liz
Yeah, well, I’ll hit on that tenant curation piece of it with Melrose, because we had two buildings that were pretty big for us, like, this, including this odd shaped one, that Trapezoid shaped one.

0:11:37 – Eve

And they were all auto body shops, right?

0:11:40 – Liz
Auto body shops.

0:11:41 – Eve

They’re very beautiful auto body shops, but it’s…

0:11:44 – Liz
It’s funny because they were pretty ugly on the outside, because they’ve been all sort of boarded up. They’re pretty on the outside now but they were ugly ducklings on the outside. But when you walked inside, you know, you couldn’t believe… the one building that’s now the market hall was clear span, but it was this weird trapezoid with a hanging mezzanine. It had this weird mezzanine hanging from steel rods, but it was stunningly beautiful with exposed brick, and we didn’t know what to do with it. And this is the only project I’ve ever really had a partner on, which was, you know, had its upsides and downsides. I don’t want to say anything. It’s I just do better, I do better rowing my own boat. I think it’s I just have a different outlook about how to deal with tenants than a lot of developers do.

So, I don’t mean to make that personal, but we did quite well together during the design and development phase and he, it was his idea to, well, it was originally my idea. I had had this micro-Retail idea for the next phase of Chophouse, which at that point wasn’t built and I’d put on hold. And he said what about that micro-Retail thing that you wanted to do along the alley up on your 11th Avenue project? He said I think that would be a great way to divide up this 6500 square foot weird trapezoidal space. And so that’s what we did, and so we put in these tiny tenants who actually paid really quite healthy dollar per square foot rents because we weren’t asking each of them to take very much space. And this is going to seem obvious now, but don’t forget, in 2008, when we started designing this, it was before this whole market hall renaissance had happened across the US, and so we were kind of out on a limb. But so, we put in the bathrooms, and we put in the heating systems and I do that a lot in my projects for all the same reasons, which is that you just want these small tenants to come in and be able to do their little thing, but make the rest of it turn.

0:13:45 – Eve
How small is small?

0:13:47 – Liz
Well, some of these spaces are 300 to 400 square feet, some of them are bigger.

0:13:53 – Eve
Could you do this in a 1750 square foot space?

0:13:57 – Liz
I think it just depends on if you can carve out a common area that feels generous and spacious. And we charge for the common area, like, like that’s part of what each tenant is paying for. So, someone in a 300 square foot stall, 300 square foot usable net square foot stall, is probably paying for 500 square feet. Like it’s quite, the common area plays quite a role, but then the common area is where the customers are standing and sitting and milling around and oohing and aahing over the building. So, the common area is part of the deal, you know, and if those tenants were in their own building, they’d have to build their own bathrooms and they didn’t have to do that. So, we provide all that.

0:14:48 – Eve
They have to get their own heating and cooling and everything else, yeah.

0:14:50 – Liz
Yeah. So, most of my experience over the years is with these smaller tenants who, you know, they’re often, and this goes back to how we were able to pull Melrose together during like what was, to that point, the biggest economic downturn we’d had in decades. The regular banks stopped lending money, especially to small tenants like that, like they couldn’t go to regular credit sources, but friends and family still had money, and so that’s how these small tenants were able to do their buildouts is, they raised their startup money from friends and family. SBA was still lending money, if I remember correctly, and so there was that as well. And so, in the end, we cobbled together I want to say three, four, six, ten, twelve tenants in the two buildings. And they cobbled together, just to repeat, you know, their money from friends and family and SBA loans, and a couple of them had other locations that had cash flow. But they’re all local. That’s just another defining thing about what I do. I don’t deal with national chains. They’re just not interesting. I mean, I’d hate to sound like a snob, but they’re not interesting and they don’t need my help getting established.

0:16:13 – Eve
And they may not have a soul, right?

0:16:16 – Liz

Yeah, and also, you know, there’s been some good research done on the fact that local business has way much more powerful knock-on effect in the local economy than a national business does, because national business is sending all their profit back to a headquarters somewhere else. In a local business, by definition, that money is getting spent in the local economy. And also just who they hire in terms of lawyers, and accountants, and so it’s all a local economy thing. So, it’s good for the city.  

0:16:48 – Eve
So, I was gonna ask you what gets you juices flowing, but I think it’s this huge, challenging jigsaw puzzle, right?

0:16:54 – Liz
Yeah definitely, definitely. I use the word, the term jigsaw puzzle, a lot. And it’s actually interesting, and you probably know this, but when you’re trying to put together a collection of six tenants, at Chophouse Row it’s actually, I want to say, 12 or 13 or 14 at ground level, you’re constantly, during those couple of years that you’re trying to get the tenant roster filled out, constantly running around in a circle saying, well, I think so-and-so is really gonna do it. You know and they’re really cool, so you should really be in here.

0:17:30 – Eve
Oh, yeah, yeah, yeah. Who’s going to be the first to bit, you know.

0:17:33 – Liz
Yeah, yeah. And so you run around in a circle for a long time, sort of getting them gradually closer to commitment and telling them who else is gonna be in with them, so they feel like they’re in good company when they all hold hands. But of course one question I get asked a lot is oh, isn’t the failure rate of these tiny local startups higher than national? And it’s actually not, because if you look at what happened, say, during the Great Recession or during COVID, I’m willing to bet I know this based on data from the Great Recession and I speculate that it’s true during COVID, the nationals will just shut down a hundred stores overnight and think nothing of it. They’ll just go poof. My little tenants work their asses off. Like you see them, they’re trying to preserve their livelihood and if it’s not working, they’re still working to the bitter end, they’re trying to save the business.

0:18:29 – Eve
I have a lot of small tenants too. They’re different, but I don’t think any of them shut down because of COVID. I mean, certainly some of them needed help with rent and free rent and all of those things to get through it, but they didn’t disappear because of COVID. Interesting.

0:18:46 – Liz
Yeah, it’s really interesting. I didn’t lose a single tenant during COVID, but I did give them quite a bit of help. And that was an interesting discussion because there were a lot of bigger players in Seattle who were quite harsh with their tenants.

0:19:03 – Eve
Same here.

0:19:03 – Liz
Yeah, and people would say to me, well, how can you afford to give them a break on their rent? And it’s because right at the beginning I went straight to my banks and said would you rather have an empty building, when all is said and done, or would you rather have tenants who are ready to pay rent again when the time comes? So, I did, definitely had to do it with the cooperation of my banks.

0:19:29 – Eve
I was pretty much the same. I mean, for me it was look, I’ll have the space empty when COVID’s over, or I will have helped these tenants survive, and I know which I prefer. So, it really varied from building to building how much I had to talk to my banks, but some buildings had tenants that, sort of, made it easier for the building to survive on a whole and others not. So, you know. But I heard the same thing from large landlords, like why would I give them a break if they owe me the rent? But maybe when you have millions of square feet of space it doesn’t matter so much. I don’t know.

0:20:04 – Liz
Maybe, maybe. But you see all these lawsuits going on in big markets, like, you know, New York and Chicago, where the landlords are insisting that the tenants pay all this back rent. The tenants don’t have that additional income to pay it. So you know what the end of the story is going to be, the tenants going to go bankrupt and get sued, or move out and get sued.

0:20:26 – Eve
And what can you get from a bankrupt tenant? Nothing.

0:20:29 – Liz
It’s nothing,

0:20:30 – Eve
Really pointless.

0:20:32 – Liz
Yeah, it is quite pointless, it doesn’t make any business sense, so anyway. So, but that’s the world of small tenants, and I think what goes hand in hand with working with local small tenants is working with local banks, because, even though, and this is kind of become a more maybe controversial or less certain statement than it might have been a few years ago because local, regional banks are looking shaky in certain ways, but I still would prefer to work with local and regional lenders because they actually give a shit and I know where they office and I can walk in if I have to and make eye contact with them.

0:21:23 – Eve
Yes.

0:21:25 – Liz
And they’re not going to. They’re not, you know, Unlike the CMBS loans.

0:21:29 – Eve
They know your market.

0:21:31 – Liz
And they know your market.

0:21:32 – Eve
They get what you’re doing so it’s not somewhere out there in the nether nether, yeah.

0:21:38 – Liz
Yeah, so that’s why I think that’s why I was able to have conversations during COVID with my lenders that others who bank with nationals might not have been able to have. It really worked out for me, and that was a lesson that I learned.

Going back to the Great Recession, I had one property financed, well not name names, but a big national bank based in Charlotte, anyway, who, almost who, basically turned out the lights for two years and didn’t pick up the phone at a time when they were supposed to be extending my mini perm into a perm loan on a project that was working beautifully, completely full, cash-flowing like crazy. But they wouldn’t pick up the phone and so I was just literally going to fall into default, and it was a terrible time to go find a new lender. Just because nobody wanted to lend. Nobody wanted to lend, right? But these guys were going to make my loan a perfectly good loan go bad and I thought never again. They came through at the 11th and a half hour just as I had found another bank and was about to move the loan. But well, never again.

0:22:57 – Eve
So, you’re a resilient woman, Liz.

0:23:01 – Liz
Aren’t we both, Eve?

0:23:04 – Eve
Don’t we have to be, right? Well, what is, out of all of this, what would you say is the biggest challenge you’ve ever had to face?

0:23:11 – Liz
Well, I mean, that’s a really good question. So, what I, when I talk to young real estate students, because I occasionally lecture on stuff like this and get that question, I’ve been through three massive financial crises, and you could call work from home a fourth if you’re in the office space.

0:23:32 – Eve
That’s my problem building, absolutely. I wish they were all tiny little offices.

0:23:40 – Liz
So, it’s interesting because each one of those crises felt literally existential, like each one could have easily wiped me out. So, I have to realize sometimes that I’ve been quite lucky and be grateful, because I could have gotten wiped out completely by that condo project and I hung on with my fingernails. I could have gotten wiped out in the Great Recession because there was a project that I was literally ready to well, Chophouse, I was literally ready to break ground on and wisely put on the shelf just the year prior, like, not knowing that there was going to be a meltdown. I just wasn’t quite ready to go raise the money and do the things I needed to do. And then, of course, COVID felt pretty existential. And then, you know, I remember the first months of COVID where we all thought this was like a three-month thing, you know, not a three-year thing. And so that really wore me down, I mean personally, physically, mentally, because it felt like a race that didn’t have a finish line.

0:24:51 – Eve
It did not have a finish line. Still doesn’t, actually, I think.

0:24:53 – Liz
Still doesn’t.

0:24:55 – Eve
Still really dealing, those of us in the physical world, are really dealing with the consequences of that little fuzzy virus.

0:25:05 – Liz
Yes, I’m still swimming around in a big black hole, not knowing what’s actually going to happen. Things have stabilized. I’ve just rented my office spaces for appallingly low rents, but I’ve decided that it’s going to take a couple of years to even get any visibility into the office market long term. And I just decided to take these horrible leases because some cash is better than no cash.

0:25:30 – Eve
So, what percentage of market rate are you talking about?

0:25:34 – Liz
Like two thirds, no, but that’s a good question. I’d say like I’m, I’ve just done a lease at a rate that is probably less than two thirds of what I where I thought we were headed in 2020.

0:25:48 – Eve
Yeah, I’m in pretty much the same space, yeah.

0:25:53 – Liz
Yeah, and so, you know, first of all you’ve got to cover your expenses, your triple nets, and second of all you’ve got to pay your, so I’m covering my bank debt and all my properties are covering their bank debt. I’m still sort of in what you might call special servicing, but just in the local, more personal sense, with one bank that is giving me two more years to kind of pull up my s and get back to sort of normal for them to agree to extend the loan.

But that’s one where if, even if at these horrible office leases, as long as these tenants do well and decide in two years they want to extend, I’ll actually cover the debt service coverage on it. So that’s one where I just need these tenants, or tenants like them, to keep leasing space, even at these horrible rates, I would be okay. And then there’s another one that switches from non-amortizing to amortizing in two years. That one’s actually trickier because, even though it’s a great property in a full building, I did a cash out refi I shouldn’t have done so I’ve leveraged myself too much on that one. So, when it starts to amortize, I’m not actually sure I will meet the debt service coverage ratio.

0:27:15 – Eve
So, anyone who’s listening might be wondering why we wouldn’t call this ‘If you do, you want to be a real estate developer, don’t’.

0:27:24 – Liz
Yeah, don’t. Well, and then, I don’t know, tell me, Eve, if I’m getting too arcane if that’s(unknown)

0:27:31 – Eve
No, I love listening to this, but what I would say to people listening is you know these have been real problems during these economically disastrous times, but the job of being a real estate developer is so immensely rewarding. It just surpasses these incredibly awful, challenging moments, don’t you think Liz?

0:27:55 – Liz
Well, it must, but I think there’s a certain personality, addictive personality type, that does it. I’m not sure it’s a completely rational trade off, but yes, I get, I obviously must get enormous joy from my completed properties, or I wouldn’t do it. And also, let’s talk about design, because I love the design process.

0:28:18 – Eve
Oh yes, I call myself a design slut.

0:28:21 – Liz
Yes, so I am, absolutely. I’m hovering over the architect’s shoulder trying to grab the pencil and they don’t seem to mind, so it’s OK. But I do think design matters and I really think I fundamentally got into this business and love it, because every building should not stand alone but can contribute enormously to its block. I’m profoundly passionate about blocks made up of buildings. I wrote my Master’s thesis about blocks made up of buildings, about the granularity of blocks and the composition of blocks and how older cities are so much more beautiful and functional and active because of the composition of multiple buildings on a block, which is unfortunately not what we tend to do anymore. I’d still do it, so I still will buy up properties on blocks where there are missing teeth and just fill in the missing teeth, and the result is stunningly more beautiful and interesting than tearing it down.

 
0:29:29 – Eve
Yes, I agree.
0:29:31 – Liz

And, as I like to point out to my, when I’m lecturing my MBA students who are all about the dollar signs, I get higher rent. I get higher rent because these are more interesting blocks and more interesting neighborhoods, because of these decisions, because it’s special. Because it’s special. And I get calls every day from brokers saying, Liz, do you have any character spaces? I’ve got a restaurant. They want an old building. Because in Seattle we’ve torn a lot of that down. So, I know this isn’t true in other cities and especially East Coast cities, where there’s much, much more original building stock, but in Seattle we have stupidly torn most of it down. Now it’s in really high demand.

But it’s funny, you still get these developers who don’t want to deal with it. They just want to assemble a bigger site to get economies of scale. And I think the economies of scale argument in construction is not complete bullshit. But I think the other end of it is you can afford to do things in a more granular way if you’re going to get more rent on the other end. And the other piece of it is, my buildings look good 10 years later. I mean they had character to begin with. Like, that doesn’t go away. Old buildings just get more beautiful and interesting as each year ticks by, by definition. And even the new skinny infill stuff I do I try to make really architecturally interesting in a way that I think will age gracefully, like my eight-unit condo building still has Instagrammers who take photos of it.

0:31:23 – Eve
Yeah, I live in a four-unit building. That was maybe even more foolish. It’s on a lot that’s maybe 16 feet wide and 100 feet deep and I had to purchase it from the city, get through historic review to build a new building with a sculpture at the front. 5,000 square feet took me 5,000… 5 years to build.

0:31:44 – Liz

But it felt like 5,000 years.

0:31:45 – Eve
But we have an Instagram site because every day, flash, flash, flash, there are like thousands of photos being taken. And once I got into a cab and I gave the address to the cab driver and he’s puzzling over where it is and he says, oh, you mean the building with the sculptures downtown and off he went, yeah.

0:32:05 – Liz
No, I mean, that’s why we do it too, right? That’s the reward, is to feel like you made a little piece of city that contributed. And so, I talk to the students about don’t build something that doesn’t add to its content. You’re making a piece of city, you’re building a building, sure, and I also say don’t let your architects go on an ego trip and do something that doesn’t, it have to match, that’s not what I’m saying.

0:32:37 – Eve
It isn’t the contextual, it’s got to feel right.

0:32:41 – Liz
It’s got to feel right, even if it actually is a huge contrast. I mean, just use your judgment, but you’re making a piece of city, to figure out if it works as a piece of city.

0:32:50 – Eve
You’re not making a money-making machine, you’re making a piece of city, right?

0:32:55 – Liz
Yeah, so that’s one of my favorite taglines.

0:32:58 – Eve
So, tell me, like, after doing all of this, what possessed you to also start a co-working space? You have the cloud room, and it’s not a chain.
And you also have something really tantalizing called Cloud Studios and the Overcast Room. I need to know what those are.

0:33:29 – Liz
Well, the Overcast Room is our podcast recording studio, which is booked this morning by another podcaster, which is why I’m not sitting in it. So, the overcast room is a podcast recording studio. The larger answer of how I got into the… oh, so Cloud Studios is a band practice rehearsal facility. So, it’s got 10 rooms. And the larger story of how I got into any of those businesses is sometimes, as a developer, you have to start a business to fill one of your spaces, to get your bank loan. I mean, it really is a practical thing that small developers often do. In Melrose we started a event catering wedding venue in one large sort of downstairs space that we couldn’t get at lease so suddenly we were in the wedding business. So that’s, it happens.

But I do enjoy the co-working business. I will say it’s not for the faint of heart. Our mutual friend Jim Hyde had me participate on a panel about it a couple years ago at the Small-Scale Developers Forum and we had three co-working owners up there, all of whom told the audience not to get sucked in, because you don’t do the math correctly unless you really know the business. You think, oh, there’s this great space and I can just throw some desks in there and if I charge this much for the desks, wow, that’s more than I have to pay the base rent on this space and what you’re missing is enormous costs around actually properly fitting it out and furnishing it and, on an ongoing operating basis, staffing it and marketing it and maintaining it and cleaning it and paying for your high-speed internet, and that often is far more than the rent. So, it is not a get rich scheme, but…

0:35:35 – Eve
But it can get your building full, and at the moment.

0:35:35 – Liz

It can get your building full and what it can do is spin out other tenants into other spaces as they grow.

0:35:44 – Eve
And also, at the moment, it is definitely more desirable space than larger, you know, floor plates, even if those larger floor plates are not that large, I mean. I have a building that’s an accidental co-working space. It’s a little bit like a schoolhouse and it’s got 13 small rooms, studio spaces, that, it’s very historic building. We didn’t set it up as a co-working space. But you know, electricity and heat and cooling are included, so someone can just move in and put a desk in there and start their business, right? I wish I had five of those things right now, you know, and I have other buildings which have two thousand, three thousand square foot floor plates. There are just no tenants for them, so that you know it’s four hundred square feet is an amazing place to have in your arsenal right now, I think.

0:36:44 – Liz
In Seattle the market is similar, but we can rent the two thousand square foot spaces. What we can’t rent are the four thousand and up square foot spaces. So, the co-working space, which is open plan, so it’s not private offices, is full, coming out of COVID. There’s so many freelancers and people working partly remote and people working remote to another city but who don’t want to be in their bedroom or their kitchen. So, we’re full of individual co-workers and all our small private offices scattered around our various buildings are full up to about Two thousand square feet and that’s where it falls off for us. So, you know, again, we’re very lucky to have filled our last Large office spaces, but at quite depressed rents. But we’ll see, we’ll see.

I think the pendulum on work from home for large, well, medium to large companies is yet to swing back and forth a couple more times before it settles, I think. I Think demand for office space will come back but before that happens, a lot more may leases may get terminated and not renewed, so a lot more space may get shed. I think the next couple years are going to be quite painful.

0:38:03 – Eve
I agree, I agree. So, and what about the bands? How often do they practice?

0:38:14 – Liz
They practice mostly at night. So, thank God, they are in a building, the basement of a building, that is below a restaurant and a furniture store and a bunch of office space. So, when they’re down there banging away at night, right? Because they all, they all have day jobs, these local bands they all have day jobs, so they’re practicing late into the night. I’ve been in that business for a long time, and I’ll tell you why. Not in this building that I that they’re in now, because I bought a building in 2000 that had a thriving band practice business in it, 35 rooms with 50 bands because sometimes they share, sometimes they share. And so the operator, the couple that was operating the business, decided to just up and leave to LA in about 2010 and I took it over. So, then I was a band practice space operator, having never done that.

0:39:12 – Eve
What haven’t you done?

0:39:13 – Liz
But it’s always out of necessity, right, Eve? It’s always out of necessity.

0:39:19 – Eve
It is. Yes, it is. So, tell me, what role does Seattle play in your work and the projects you undertake?

0:39:25 – Liz
Well, you know that’s such a such a tough question to answer because I’ve never done anything not in Seattle, you know and so I don’t really know. I don’t have a basis for comparison.

I will say, if I roll all the way back to the beginning, really, I started the company 25 years ago and there weren’t very many women in development. Even in staff roles at bigger development companies, there weren’t that many women doing developer type work. And I feel like Seattle was a place where I could do that, because it’s, one, it’s very squeaky clean. It didn’t matter that I didn’t have an old boy’s network. People were quite generous with their advice. I mean, Seattle is a nice town, let’s be honest, and the people are helpful, and the city is squeaky clean.

I will also say the woman that ran the entire department at the City of Seattle for buildings planning construction was in her job for decades and she was a gem. So that was helpful, right? Because when I started in the business 25 years ago, I could literally call her up or send her an email and say, Diane, I think the code, there’s a mistake in the code in this, in this particular way that affects my property. Like, if you read through it, it doesn’t… and she would look at, read it, you know, while we were on the phone and say, oh no, you’re right, we got to fix that. That’s not meant to do that. And you know, a week later one of her staff would have written a director’s rule fixing it because it just needed to be fixed, right. Now in Seattle that would be a year’s long process of red tape because you know she’s gone and it’s a much more bureaucratic,
I don’t know that the, the kludge is the informal, I don’t know if you’ve heard that term. The kludge of city regulations around development, just the layers and layers and layers of zoning and building code that have…

0:41:23 – Eve
It’s become impossible.

0:41:35 – Liz

Yeah, and it’s like, it gets layered on without anyone sort of going back to the, and so it’s actually this sludgey mess that needs to be cleaned up. You know, someone needs to start over. It doesn’t serve us in any way and it, Seattle’s particularly prone to Nimbyism and process and that kludge, that kloodge,kludge, I don’t even know, but I just read an article about it and it was very funny. All that layers and layers of gunk just serves people who don’t really want us to become a more dense, city and it doesn’t serve those of us who see an incredible affordable housing crisis that could quite easily be solved.

0:42:28 – Eve
Without the sludge. I think of Seattle as a creative talent magnet and so the projects that you do kind of fit perfectly there because it’s very vibrant and young and creative in feel. So, I think you got really lucky.

0:42:50 – Liz
I think so too, and that’s not something I could have foreseen 25 years ago. Seattle did have an energy, don’t get me wrong, and I had spent 10 years as a young kid at Microsoft and that was really early in that feeling like Seattle was gonna be a tech place. But we had a great indie art scene back then that we’re actually trying to figure out how to bring back because it kind of got lost in the sort of Amazons and others sort of washing over our city. The indie art scene and the indie music scene kind of got washed away along the way. But there’s a big effort now. We’re bringing back our music festival, which is called Bumbershoot, and I’m very involved in that. Yeah, it’s Labor Day weekend and it’s gonna be local and fantastically weird. There’s a huge visual and performance art component to it this time around and a great but obviously a great music festival line-up and we’re gonna see if we can turn it into a year-round brand and have parades downtown at different times of year and performance artists doing weird things on street corners. Yeah.  

0:44:02 – Eve
That sounds like fun. So, what are you working on next? You and I have talked about what that means right now, post COVID, but what is the next project?

0:44:13 – Liz
Well, I’ve got to be honest, like, I’m not doing as much next as I’d like because I’m a bit capital constrained because of everything we’ve talked about. What I would love to do more of, and I don’t think this will happen until I actually can figure out how to exit from some of my larger properties, but what I would love to do more of is these tiny neighborhood interventions. So, I just did one that was very satisfying with my own money. Like, so I do have a lender, but I didn’t need to bring in investors.

It’s a tap room for a brewer that I’ve been very good friends with for 20 years. He was the only African American brewer in Washington state, but there’s now a couple more, which is fantastic. But he and I always wanted to do something together and he left Starbucks. He was an executive at Starbucks, and he left to start this brewery. And then we were like, let’s do a tap room in the central district, which is traditionally our African American neighborhood. It’s been horribly sort of gentrified and lots of people have been pushed out, but there’s a really great energetic cadre of young black professionals that are trying to reclaim it.

It’s easier to do in the commercial corridors than it is, obviously, in the residential streets that have been sort of bought up by wealthier people, tech people. I mean that’s a little bit the yin and the yang of all this tech money, right? But we’re trying to reclaim the commercial corridors. I feel like I have learned a lot over the years and continue to believe I have a lot more to learn about what it truly means to be anti-racist and try and get property ownership back in the hands of the African American community. Like, this is a neighborhood that was redlined until the 1980s, like just before I moved to Seattle. Like it’s as a Canadian, this has just been also just such a, my trajectory in Seattle, like it’s just been an eye-opener and I’ve just learned so much along the way and it’s a little bit shocking that this neighborhood was redlined literally until just a handful of years before I landed in Seattle.

So my approach to these little projects is not to tell people what I’m gonna do, but for them to tell me what they want me to do. And to set them up so that eventually they can be owned by the people who are gonna occupy them. So, it’s a two-step process in a lot of cases, because I have the privilege of having bank relationships and investor relationships, so I can bring the money and be the platform and I can get people set up in their spaces and then over time they can buy those spaces from me, and so I wanna do more little projects like that.

0:46:48 – Eve
Oh, that sounds fabulous. You’re going to have to give me your formula. It really sounds like a fabulous…

0:47:03 – Liz
Well, I don’t know if I have one yet, Eve. I’ve done one, but…

0:47:06 – Eve
When you do, I would love you to share it with me.

0:47:08 – Liz
When I figure it out.

0:47:10 – Eve
Okay, well, this has been delightful. As delightful as your projects. I’ve really enjoyed every moment of it. Thank you so much for joining me.

0:47:17 – Liz
Welcome. I love talking to you always, and so it was a pleasure and I’m flattered, and I hope I get to see you in person soon.

0:47:24 – Eve
I hope we go to Savannah, is that? Are you going to, Savannah? Small Scale Developer Forum, everyone. If you’re a Small Scale developer, you really must go, so it’s really the only conference I like. What’s there to say? Thank you so much.

0:47:39 – Liz
Absolutely, so I will see you in Savannah in November. Okay bye, Eve.

0:47:45 – Eve
Bye.

0:48:06 – Eve
I hope you enjoyed today’s guest and our deep dive. You can find out more about this episode or others you might have missed on the show notes page at RethinkRealEstateforGood.co. There’s lots to listen to there. Please support this podcast and all the great work my guests do by sharing it with others, posting about it on social media, or leaving a rating and a review. To catch all the latest from me, you can follow me on LinkedIn. Even better, if you’re ready to dabble in some impact investing, head on over to smallchange.co where I spend most of my time. A special thanks to David Allardice for his excellent editing of this podcast and original music. And a big thanks to you for spending your time with me today. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change

Image courtesy of Liz Dunn

Be Good Development.

Franchell Abdalla is the principal of BE GOOD DEVELOPMENT PARTNERS,  a real estate development firm specializing in the acquisition, financial structuring, community engagement and execution of real estate projects.

BE GOOD’s development consulting services enable their clients to achieve their full development goals. For municipal governments and public housing authorities, Francell adapts methods suited to the particular municipal context and agency portfolio. For non-profit and for-profit developers, she provides a range of services throughout the pre-development, development and post-development periods, emphasizing strategic investments in people, places and transformative projects.  In addition, Franchell has an equity stake in many of the projects she is working on.

Franchell has over 15 years’ experience driving strategic growth and diversifying funding portfolios for nonprofit organizations, government entities, public housing authorities and community stakeholders. She is highly competitive, detail focused, persuasive and articulate, able to achieve results others believed to be impossible. Her expertise lies in forging collaborations across sectors, building sustainable partnerships, commercial real estate development, strategic visioning and program development. She is trained in social anthropology, at the University of Nebraska, holds a Masters in Public Administration from Bellevue University and a Masters Certificate in Nonprofit Management (focus in Urban Public Policy) from the University of Nebraska at Omaha.

Read the podcast transcript here

Eve Picker: [00:00:07] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo in order to build better for everyone.

Eve: [00:00:41] Today I’m interviewing Franchell Abdalla, a minority in every sense of the word. She is black, a woman, and a real estate developer. But that’s not stopping her, not for one little moment. Franchell only recently launched her development company, Be Good Development. And yet she has her sights set on an incredibly complex and rich real estate project. She assembled an astounding team to win a significant request for proposals issued by the city of Tulsa in Oklahoma. She won and has been grappling with a 100,000 square foot foundry building, planning its repurposed life and working on the legal and financial structure. There are plenty of setbacks, as there always are in projects like this, but to Franchell it is all a joyful challenge. There is lots to love in my conversation with Franchell. Please listen in.

Eve: [00:01:54] Hello, Franchell, I’m really delighted to have you join me today.

Franchell Abdulla: [00:01:57] It’s great to be here, Eve. Thank you so much for inviting me.

Eve: [00:02:01] Good. So how does a sociology major become a real estate developer? I’d really like to hear about your journey.

Franchell: [00:02:09] Yeah, absolutely. I would say in a very non-traditional, kind of circuitous way. I started off really, as a pre-med major in college, and so as a pre-med major, I thought, you know, like most people, I’m going to graduate, go to med school and then my focus was really on becoming a Foreign Service officer, wanted to do Peace Corps and the like. And so, started off, but, you know, never thought about sociology, didn’t know anything about sociology, started taking classes and was hooked, right? So sociology and then cultural anthropology were things that I focused on as an undergraduate. And really, just the study of people and cultures and societies is what really gave me this kind of foundational understanding of the importance of community and community building in real estate development. I landed in real estate in a way that’s very non-traditional, right? I needed a job. I just had my second little one. She was six weeks old and there was an opportunity to work at the Housing Authority in Omaha. And so. I literally took a temp job on a whim because we needed to feed them and went and just fell in love.

Franchell: [00:03:19] I’ve always had a love of the built environment, and I think my mother probably would have been an architect if she had the language for it. But she went into computer science engineering instead. But she was an artist and a very analytical mind. And so, we were like really steeped in that. And so when I get to the housing Authority, it was really a merging of all of those experiences I had had along the way. It was both built environment it was just kind of pragmatic approach to development and my understanding of development, it was the practical application of really learning how to work through grants and fund raising and capital improvement projects. And then at the same time, it was just undergirded by the love of community and how do you create opportunities in communities. So, it wasn’t a direct path. I didn’t even know what real estate development was when I got into it. But I definitely am so grateful for the way that it is, it’s kind of unfolding.

Eve: [00:04:17] Isn’t it great the way you can find a path unexpectedly and fall in love with it? It’s really great.

Franchell: [00:04:23] Absolutely. That’s why I love the story of Iris Apfel, where she talks about, she is like this accidental icon. I feel like I’m the accidental developer very much in the same way.

Eve: [00:04:34] The accidental developer. That’s what we’ll have to call this podcast. Okay.

Franchell: [00:04:36] Yes.

Eve: [00:04:39] So then you launched Be Good Development Partners. What led you to launch that? That’s a long journey from the Housing Authority too, and when was that?

Franchell: [00:04:51] So I launched fully in 2018 as Be Good Development Partners, and it really initially was called Transformative Community Development. It was a way that I was consulting for the Housing Authority and for the city of Omaha while I was working at the Housing Authority. And so, once I transitioned to Tulsa, I wanted to be able to move TCF with me and thought, you know, it’s a, it needs a rename, right? It’s time to rebrand. I wanted something fresh and new, and I really grew up with a very large family and something that my grandmother always talked about, you know, was like being like this silent kind of goodness, right? At the block level. My grandmother didn’t go past sixth grade, and so she was kind of like this rock on our block, right? when I was a little kid. And she always had a saying that was be good. Every time we would talk to her or leave or have a conversation with her, she always ended with, well, be good. And so, for me, that was a way to kind of like honor her legacy and honor her. And so, when I came to Tulsa and decided that it was time to also go into development, which was also accidental, by the way, Be Good seemed fitting as a name, so Be Good Development Partners kind of was born out of that.

Eve: [00:06:04] So what is your philosophy then as a real estate developer?

Franchell: [00:06:09] I would say my philosophy is really about transforming communities from the inside out, really looking at what are ways that we can create goodness by being small and intentional and impactful in the spaces that we reside in? How can we think about the communities that we’re developing and as a neighbor rather than an outsider? And then, how do we create this real, not only catalytic, I think, but disruptive change from a systems level? And so Be Good really is that amalgamation of those things. It’s how do we create good? How do we ensure that there is long, impactful good? And then, you know, at the end of it, how are we just being in community, showing up in those ways in order to be good?

Eve: [00:06:56] And then I have to ask, so, your portfolio, when did you launch? It’s been a while.

Franchell: [00:07:03] It’s been 2018 since I came here, but I literally launched in 2021 with the Evans Venture Project. Oh, so very young.

Eve: [00:07:13] Very, very new firm.

Eve: [00:07:15] Yes. And why Tulsa?

Franchell: [00:07:17] So, I was initially relocated to Tulsa for a job, so I was kind of poached out of Omaha doing some of the work that I’d been doing in community and, you know, attracted to come here. So, I worked for a small nonprofit, and my goal was to really raise about $13 million and do a full-blown capital campaign for our Child Abuse Network, which is a small nonprofit focused on like childhood intervention and prevention around child abuse and neglect. And so it was in a very different space that I had operated in. But it was kind of this opportunity that I couldn’t pass up. There was a great leader at the helm of it at the time that had come. She’d been a city councilor. As soon as I came here, I really believed in the vision. I really believed in, like, what the direction was going to be for the organization. And so I just decided it was time, you know? And so we uprooted and came to Tulsa, and six weeks later she left the organization. It ended up in hindsight, it was probably one of the most incredible opportunities that ever happened because it forced me to dig in and figure out where I was at, start to break apart what is this community? Who are some of the key stakeholders in the community around this particular issue? What are other communities that I’d be interested in? And I got an opportunity to really raise and recruit money and then do the construction feasibility and build out. So, I was able to kind of like lean into all these different spaces in a very unique way. And then we stayed, you know, great friends and stuff. So, she continues to be a mentor, even though she works for the city of Tulsa now.

Eve: [00:08:53] Interesting. So, do you have any projects under your belt yet for Be Good?

Franchell: [00:08:59] So projects under my belt for Be Good, again, like I said, I do a lot of development consultant, so working with the small ten-acre project, it’s really an agrihood kind of project I’m very excited about where it’ll be a really an arts and culture enclave, so it’ll be a small creative co-working space and venue. It’ll be some Air BnB cabins, and then it’ll also be a small, tiny home village for artists to come and do residencies and fellowships in the arts. So very excited about that. Um, I would say we’re also working on a very, very, very, very cool project that I’ll be heading out to look at today that’s really focused on our large, unhoused population. And so, it’s also a village concept looking at what are, like, how do we insert supportive services and wrap-around supports for people who are chronically unhoused? And its master planning that site. And so being able to pull together, you know, a small all-female team is like really exciting for me on that. And it’s 23 acres. And then of course, the one that we’re probably the most well-known for that really launched us is the Evans-Fintube project in historic Greenwood. And so those are some of the projects that I’m working on.

Eve: [00:10:16] And that’s a really big one too, right?

Franchell: [00:10:18] It’s a huge project, not in terms of its footprint, although it is an 11-acre site and it’s a historic mixed-use. It would look to change the Oklahoma Ironworks into commercial retail community anchored commerce as well as some retail and breweries. But then it would also create hospitality as well as some additional office space.

Eve: [00:10:41] So you’re glossing over these, but really, these are unusual, unusually large and complex projects for a small star-up real estate developer.

Franchell: [00:10:52] Yes.

Eve: [00:10:53] You know, typically you hear, well, I flipped a couple of houses and now I’m looking at a fourplex. So, you just went from nothing to everything, Right?

Franchell: [00:11:05] Right. If you’re just going to go, go all the way in. Right.

Eve: [00:11:55] And especially through Covid, which has been really horrendously difficult in the construction industry. And borrowing money. So, any of these projects yours or are they mostly consulting projects?

Franchell: [00:11:20] The first project that I talked about with Agrihood, I am an equity partner and then the developer on that project, the same with Evans-Fintube would also be a part of the ownership group as well. And that would be my project.

Eve: [00:11:33] Okay, that’s fabulous. They are big and complex projects. So where does your inspiration come from and how do you find these projects and does history count?

Franchell: [00:11:46] Um, history always counts, right? If we’re going to be thinking about how we build for the future, history is critically important, but I think the projects, they come out of where I am, you know, the folks that I’m working with, architects, planners, construction folks, community members, my neighbors. I think they come out of my love for this place. Um, seeing things that are currently missing in either the skyline or the landscape that that we deserve to have injected back into community. And I think they come out of this just passion for making sure that what we build is not just meaningful, but it’s sustainable and it’s built and designed and led by and owned by folks who look like people that come from the places and spaces I come from. So that’s kind of what it’s born out of.

Eve: [00:13:40] Let’s talk about the Evans-Fintube project, which is the big one in in Tulsa, Oklahoma, and just explain what is that?

Franchell: [00:12:55] Evans-Fintube, it was a foundry. And so, it was a site for one of the largest kind of steel and metal manufacturing facilities in the state of Oklahoma, let alone Tulsa. But it was established in about 1901, and it was originally Bethlehem Steel and Supply. And so much of the steel that’s in the skyscrapers that are in the downtown skyline came out of this particular foundry. And so, between 1901, which is really pre-statehood in Oklahoma all the way to about 1961, this building operated and it was a series of about 20 buildings that were on 22 acres of land. Well, to the north of us now is the BMX international headquarters that occupies 11. And then Evans-Fintube, which is the only originally standing building, is on the remaining southern edge, which is 11 acres as well.

Franchell: [00:13:52] But what’s really unique, I think, about this particular site is that it tells the story of Tulsa. It is Tulsa. Tulsa as we know it. It talks about the story of philanthropy, Bethlehem Steel and Supply, which then became known as the Oklahoma Ironworks Building. It is sitting on 11 acres of historic Greenwood. And what that means in terms of the 1921 Tulsa race massacre, the building itself sits on top of two Cherokee allotments, which is interesting because Tulsa, yeah, Tulsa is the largest reservation in Oklahoma. And so, we’re still in Indian territory. And this building kind of is a line of demarcation for that. And then the southern edge is actually the original block 49 of the city of Tulsa. And so, it is an actual Creek Freedmen settlement.

Franchell: [00:14:42] And so it’s all this unique complexity and beauty of Tulsa, both, you know, good as we know it, right? The oil boom, the art deco buildings that have gone up, you know, the story of, you know, small town boomers that come and build their livings. And then it’s also the complexity of the forced migration into Indian territory, being on a reservation, re-allotment of land. We’re bounded by Highway 244, so it speaks to eminent domain and what that did in communities of color. And then again, it’s in historic Greenwood. And so, when we think about what happened in 1921 and the Tulsa race massacre, this building actually sits as a backdrop to that experience. And so, while most of Greenwood burned in 1921, this building was never scorched. And so, you know, we really feel like it’s an opportunity to not just reclaim space but reassert the right to have space into the future. And so, for us, it’s really this interesting weaving of a Tulsa narrative that I think has the potential to speak to not just Tulsans, but I think The Globe. And so that’s what’s exciting about the project. It’s a very unique project.

Eve: [00:15:53] I’m watching your face and I’m seeing your excitement. And most people would run screaming from this sort of complexity, but it looks to me like you run right into it. Yeah, yeah, That’s pretty fascinating. So, what is the building? How big is it and what are you turning it into?

Franchell: [00:16:12] So the building is 100,000ft² and it’s simply beautiful. It has this incredible layout. And because it was a foundry, I mean, there are lots of, like, steel and brick and glass. And so, we’re going to be reskinning it in that way. But what we’re looking at is having a 54-room boutique hotel. And really that’s a tribute and an honor to J.B. Stratford, who was one of the, I would say, singular, most well-known folks who had a hotel in Tulsa at the time of the height of 1921. It was burned to the ground. And so, we want to be able to pay homage to that and rebuild that with inside the footprint. And then there will be about 25,000ft² of localized retail. So again, really kind of restitching that thought and that ethos around Black Wall Street being rebuilt, creating these opportunities for local businesses and small entrepreneurs to come into this space and that retail space and have pop-ups to be able to have shops, to be able to really make their mark and create a new market for commerce and cultural tourism. And then there’s a small, I would say it’s about 14,000ft², of creative office. And so it’s like, how do we encourage folks who are into tech, who are into arts and culture, music production, video production, to be able to come and be housed there? So it’s a producers lab is really what it is in terms of creative office and then again, a food hall concept, but not your food hall of the 2000s, really more of a chefs collective, where it’s a curated list of local restaurateurs and local chefs that have pop-up menus, provide a variety of different offerings to folks at our site as well as to the BMX and then also throughout the downtown corridor. So that’s the building.

Eve: [00:18:10] So in other words, as complex as its history.

Franchell: [00:18:14] It could get. It is actually.

Eve: [00:18:17] It’s totally wonderful. So, you won an RFP. The city owns this project. Tell me about that. For those of our listeners, you’re a Black real estate developer, which is in itself extremely unusual. But you won this, unfortunately very rare, but you won this RFP from the city. Probably, there was some, you know, rather traditional developers who went up against you. Right?

Franchell: [00:18:45] There were, there were lots. There were actually 12 that we competed against.

Eve: [00:18:50] Wow.

Franchell: [00:18:51] And that was exciting. So, we started the RFQ originally in April of 2021. And so, we had been in that process for a while. And so, we went through RFQ and out of the 12 developers or development teams that submitted, it was actually whittled down to four. And out of the four, I was on two teams and so I was on one team as a development consultant and then one kind of leading this small, localized, ragtag team of folks. And at that point it became public that I was on two. And so, I made a decision that if there was ever going to be an opportunity to launch, this might be the way to launch.

Eve: [00:19:35] Yes, indeed.

Franchell: [00:19:36] And so decided to lead that team from RFQ into the RFP. And then we were in the RFP for about a year, and I was able to assemble not just a local team that was really strong that I love, right? Because we have a lead project engineer that is African American. Our lead project architect runs a small architecture firm, young African American woman. The head of our construction, while it’s a large construction entity, our project director is an African American woman. The person who leads the minority contractor Academy for Trade Partner Development and Skill Development is an African American woman. We were able to really start to identify these strengths in community that oftentimes get overlooked but could be elevated given the opportunity. And so, you know, our mantra was this, you know, we have an opportunity to create and really expand local capacity, leveraging national talent. And so our construction company is a national firm. We have a design consultant, is a national firm. Our historic preservation consultant is also a national firm.

Franchell: [00:20:50] And so we’re able to use those skill sets, that capacity to be able to bolster what we have at the local level. So once this development project is over, that capacity stays in community and can only grow and evolve. And so that has really been the gift of being the leader of this team, is being able to see that flourish. Stayed in the RFP for a year, went through a lot of series of, you know, fits and starts in that process because there were many people that didn’t want to see it maybe progress as far as it did. But eventually, you know, after we started, we were awarded May 10th of 2022, the RFP, and it was announced. And then since it was announced, we have continued to kind of work through a series of both requirements and challenges. Community engagement. I really credit community to ensuring that we won not because we weren’t the most qualified with community backing, but we were the most qualified team with the greatest amount of community engagement and support. And so, I’m very, very proud of that because we are a community team with, I think, national expertise. And so, we just continue to work on that. We have definitely faced challenges as it relates to this project.

Eve: [00:22:12] Tell me about the challenges, because I’ve been through an RFP process like this as well, and we had the architecture team drop out at the most awful moment when I think we would have been selected. So it was, you know, I understand that because it’s such a long process, it’s a pretty fragile process.

Franchell: [00:22:32] It is. It is. And I think those are the lessons that you learn when you get into this space, right? It’s the things that you don’t know that can happen. And so as we’ve progressed through the project, have had lots of iterations around how to properly set up the LLCs, what are the roles and responsibilities, what is the role of the city, right? Because the city is the actual owner of the land. But there is an economic development entity that has actually managed and facilitated the process even though they don’t own it. So, we kind of have two constituencies that we have to support and ensure that they feel comfortable with us. The project team, the project team has stayed intact. We did have one shift. We previously had someone who was maybe a managing member of an entity moved from being an employee to becoming his own kind of developer. And so that shift caused a great amount of concern in our team to the point where this kind of economic development entity said, well, you know what, no, you no longer have the capacity, you no longer have the skill set that left when this individual left. And so we want to stop the process, put it on hold and not award you the RFP.

Franchell: [00:23:47] What it is teaching me is that I never understood how political the development process is. Right? You can love a great building, love a great space, believe in the possibility of a project, but understanding the complexity and the politics around how things get built is equally important. And it’s also showing us, I think, as a team, a collective team, because I will say, while that individual left, no one on my team has dropped out in the two years that we’ve been in this, which is a testament to their own passion and commitment to this. But what I love about it is it’s also showing that there are tough times where, as women and as developers of color, in particular, you know, being a black female developer, developing in a space that there are no black female developers. I’m the first black developer to ever make it this far in an RFP in the city and absolutely the first female developer to do that. It is creating conversations around the discomfort of seeing me show up in the space that traditionally we have not occupied. And so, I love that, right? I love that. The room doesn’t have to be prepared for me. I can figure out a way to create a new table, but I want to have those uncomfortable conversations about why it’s necessary that I’m in the room. Necessary, why folks who look like us are in those spaces. We bring a very different view to development and one that’s missing and necessary in the future of how cities are built and created.

Eve: [00:25:28] Right. And there are challenges with financing, too, which may be.

Franchell: [00:25:33] My goodness.

Eve: [00:25:34] Are they political or are they just inbred? I don’t know.

Franchell: [00:25:38] Right. And are they both?

Eve: [00:25:40] Are they both.

Franchell: [00:26:41] You know, political at the local level, right? Like did you use a local bank? Who got the local construction contract that’s going to have the depository, you know? And then at a national level, like these changes in capital markets, inflation, rising interest rates, I mean, they’ve increased our project budget by about 20 million in the first phase. And so, to have a project that went from $41 million in the first phase to $68 million in the first phase, I mean changes all the numbers, right?

Eve: [00:26:12] And so now I’m building a project where it’s exactly the same, a 50% increase. It’s crazy. It’s been a crazy couple of years, Franchell, really crazy.

Franchell: [00:26:23] It has been. I mean, whether it’s lending requirements have changed, how you’re being scrutinized through underwriting, right? And there’s something to be said when you’re managing just numbers and they’re looking at that as a package. And then there’s something to be said when you add on the layer and complexity of the mitigating you as the risk as well. And so, we’ve had to think through that and get creative about reprogramming, building out in stages even within the first phase. And then we’ve had to think more creatively about what type of capital should we attract, whether that’s individual investment, community investment now. What additional federal dollars could be attracted to the project, new markets, tax credits, solar? And then also, you know, is there philanthropic investment that we can look to to fund some of these, like, financing gaps?

Eve: [00:27:14] Right, right. So, do you think all of this is going to be resolved?

Franchell: [00:27:18] You know, development is funny. That’s why I kind of love it. You never, never know, right? We get a notice from partner Tulsa or, excuse me, the development entity that they no longer want to negotiate with us and the project is off. But ultimately, they’re the facilitators of the process, not the owners of it, right? And so I always learned, you know, in real estate, it’s about the buyer and a seller. And so we went to the seller, which is the city of Tulsa, right? And had a conversation with the mayor. And what I recognize is that there is a desire to come to a common ground. What is the middle? Right? Because we could have polar views on how we get this done, right? You know, the economic development entity and I might not see eye to eye, but where is the middle space in which both of our kind of initiatives and goals are achieved? And I’m finding that that’s actually sitting within the city of Tulsa, at the mayor’s level. And so, I am hopeful. We’ve had great conversations about moving the project forward. What are the ways in which we can do that and then what are the ways that we can create a lose-lose and not a win-win, right? Because we’re taught, okay, you want the win-win, we want everyone to win. Well, that’s not possible. How do I lose a thing that I want without changing the nature and character and the integrity of the project and how do they lose a thing that maybe they want in order to ensure that there is partnership on board, that we can move the project to become built? I believe in our administration, challenging as it is at the city level, I believe that the mayor is committed to getting this built and committed to ensuring that the legacy that he leaves is one of like, opportunity for the city of Tulsa. So, I remain hopeful. I’m optimistic by nature.

Eve: [00:29:14] So you don’t see it as a setback. You see it as another challenge, right?

Franchell: [00:29:18] Absolutely. Only challenges get….

Eve: [00:29:31] Only challenges, right. So, I’m going to shift gears a little bit because I met you at a really interesting event. It was a panel discussion that Freddie Mac, of all institutions, invited us to. And I learned a lot about Freddie Mac there. They’re actually a really amazing organization. And one of the things I learned about was that Freddie Mac has started a Develop the Developer academy.

Franchell: [00:29:46] Yes.

Eve: [00:29:47] And that you were the first graduate from their first cohort. So, I was astounded by that. I want to hear what it was like and how they found you.

Franchell: [00:29:59] Yeah, absolutely. So, like you said, Freddie Mac has been an incredible partner. And so, in 2019 going into 2020, Omaha actually launched the first Develop the Developer academy through a CDI called Spark. And because I’m from Omaha, Nebraska, still had really great ties there, learned of the program. I said, well, you know, can I participate? And was selected, went through an application process, was selected, and it went online because of Covid. And so that hybrid opportunity gave us an opportunity to just dig in. I mean, we learned about Proformas at length, the development team, the development process. Who are the, you know, what roles and responsibilities, how do you actually think about equitable neighborhood development? There were a series of panelists exams and through that process I really found the confidence to become a developer, a confidence to launch, right? Because much of my experience has come inside of institutions, nonprofit institutions, the Housing Authority, the municipality and so much of what I know is attributed to them. This is an opportunity for me to say, no, no, no, no, I know some things and support it with some additional learning and expanded networks and resources. I could do this for myself. And so, their whole focus is to create a cadre of really skilled developers of color and those who identify as women to be able to go into community and to begin transforming it.

Franchell: [00:31:36] And so we went through this class, you know, they laid out everything and it was just, um, it unlocked something in me around development to where I didn’t know that I shouldn’t go after an Evan-Fintube, right? Like I felt like, hey, I’m ready to launch. Like, I can figure it out, right? We can build it as it’s flying. And so given the opportunity, once I had graduated from there, I felt like there are so many folks right in Tulsa that are doing incredible work and given the same experience, would create incredible change. And so, I wanted to bring it to Tulsa. Talked with Freddie Mac, talked with Spark about mentorship and kind of helping us form it. And I was working at a CDFI at the time, and they literally were looking to create some type of developer’s academy, more so focused on nonprofits, But we were like, no, no, no, no, this is an opportunity to create like real generational wealth change. And so, we were able to launch it in Tulsa solely focused on BIPOC developers, developers that identify as women, folks from community that really wanted to launch into for-profit development.

Eve: [00:32:46] Yeah, it’s pretty amazing. Really impressive. So, you were obviously a star pupil because you are a star graduate because they invited you onto that panel, which was really pretty fabulous too. So, all of this is amazing. So, what’s next for you Franchell?

Franchell: [00:33:05] To continue moving forward, right? Like continuing to be good, like making change where I can, partnering on projects where I can, leading development projects. Um, you know, being a parent, like running a very solid business, like that’s really what’s next. And so, I’m thinking about ways in which that we can reframe Evans-Fintube. I’m looking at new opportunities in the landscape around redevelopment. Um, I do kind of want to go back to my roots a bit in terms of residential infill and incremental development. And so, kind of, going back to that block level two and four unit that I was doing in Omaha, just as a person living in community. I’d love to see the opportunity emerge where I could consult in other spaces around creating new developer academies. There is something about the mix of information and training and expanded networks and the opportunity to practice that, like really makes a difference in terms of the confidence of developers. You just need an opportunity to launch. And so, to be able to create that or help facilitate that in other communities, I would love that. So that’s really what’s next.

Eve: [00:34:26] Well, I can’t wait to see what’s next. And thank you so much for joining me today. I’ve really thoroughly enjoyed this, and I’ve thoroughly enjoyed meeting you. So, best of luck with the Evans-Fintube project.

Franchell: [00:34:38] Thank you. I appreciate that, it was wonderful connecting with you too.

Eve: [00:34:59] I hope you enjoyed today’s guest and our deep dive. You can find out more about this episode or others you might have missed on the show notes page at RethinkRealEstateforGood.co. There’s lots to listen to there. Please support this podcast and all the great work my guests do by sharing it with others, posting about it on social media, or leaving a rating and a review. To catch all the latest from me, you can follow me on LinkedIn. Even better, if you’re ready to dabble in some impact investing, head on over to smallchange.co where I spend most of my time. A special thanks to David Allardice for his excellent editing of this podcast and original music. And a big thanks to you for spending your time with me today. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change.

Image courtesy of Franchell Abdalla

Globe Street Class of 2023

Who’s my crowd? According to GlobeSt.com/Real Estate Forum, the 2023 Women of Influence. 

That’s right: The publication named me a “Diversity Champion,” one of its special recognition awards. I’m proud to be included among so many women who are making their mark in what is still a male-dominated industry. And I’m especially proud that my work to enhance participation of women and minorities in real estate development and investment has resulted in this honor. 

Thank you to GlobeSt./Real Estate Forum!

Later this month many of the other winners will congregate at the annual Women of Influence event in Lake Tahoe. Although I’m unable to attend, I’ll be celebrating and congratulating my “new crowd” from afar. Let’s keep the momentum going as we further democratize commercial real estate! 

Strong Towns

Charles Marohn, known as “Chuck” to friends and colleagues, is the founder and president of Strong Towns. He is a land use planner and civil engineer with decades of experience. He holds a bachelor’s degree in civil engineering and a Master of Urban and Regional Planning, both from the University of Minnesota.

Marohn is the author of Strong Towns: A Bottom-Up Revolution to Rebuild American Prosperity (Wiley, 2019) and Confessions of a Recovering Engineer: Transportation for a Strong Town (Wiley 2021). He hosts the Strong Towns Podcast and is a primary writer for Strong Towns’ web content. He has presented Strong Towns concepts in hundreds of cities and towns across North America. Planetizen named him one of the 10 Most Influential Urbanists of all time.

Chuck grew up on a small farm in central Minnesota. The oldest of three sons of two elementary school teachers, he joined the Minnesota National Guard on his seventeenth birthday during his junior year of high school and served in the Guard for nine years. In addition to being passionate about building a stronger America, he loves playing music, is an obsessive reader, and religiously follows his favorite baseball team, the Minnesota Twins.

Chuck and his wife live with their two daughters in their hometown of Brainerd, Minnesota.

Read the podcast transcript here

Eve Picker: [00:00:12] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo in order to build better for everyone.

Eve: [00:00:55] Charles Mahron is a recovering engineer. He used to build roads. Charles followed all the rules he learned while studying to become an engineer. But in 2008, well into his engineering career, he became disenchanted with the notion that more roads lead to prosperity. So, Charles started blogging his thoughts. He advocated for a new approach to land use and warned about the dangers of suburban sprawl. With each blog, Charles gained readers until the blog converted into a nonprofit organization called Strong Towns. Today, Strong Towns has millions of followers. Listen in to learn more.

Eve: [00:01:43] 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: [00:02:09] Hi, Charles. I’m really honored to have you here today.

Charles Mahron: [00:02:12] Thanks, Eve. It’s so nice to chat with you.

Eve: [00:02:15] Very nice. So, you recently wrote a book called Confessions of a Recovering Engineer: Transportation for a Strong Town. That’s a really tantalizing title. What’s behind it?

Charles: [00:02:27] Well, I have a lot on behalf of the engineering profession to confess to people. I think there’s a lot that people take as being normal in our transportation system. And when you work inside of it, when you work as an engineer, when you work as a design professional, many of those things that are taken as gospel, that are taken as this is the way things are and this is the way things have to be, are built on a very kind of fragile construct. And it’s a construct that conflicts with a lot of the way humanity actually operates. We have these books that are seen as the, you know, the founding texts of our profession. We have these doctrines that are brought down from on high. And I just wanted to pull back the curtain and talk seriously about those things and make it far more accessible for people, particularly people who don’t think the system is working very well.

Eve: [00:03:30] So, I suppose my question is, is what made you think about that at all in the first place, if you were trained just like all other civil engineers in your profession?

Charles: [00:03:38] It’s a fair question. I’m not a very good engineer is the way I put it. I think a good engineer is someone who colors within the lines

Eve: [00:03:49] Embraces it.

Charles: [00:03:50] Yeah, follows the rules. I got a civil engineering degree and then worked as an engineer, got my license, but then I went back to graduate school and got a planning degree, a degree in urban planning and it’s interesting because I have only met one other person who holds the same two degrees, yet, I’m sure there are more, but I’ve only met one. They seem very similar, right? They’re both working with the built environment. They’re both the physical layout and construction of cities, but they’re two very different mental approaches and two very different backgrounds. One is a very left-brain pursuit; one is a very right brain pursuit. And I think that discomfort with both allowed me to see it in a different way. And so, I’ve acknowledged I’m not a very good engineer, I’m not a very good planner, but I am a really good strong towns advocate, which kind of tries to understand and reconcile some of the things that conflict between both of those pursuits.

Eve: [00:04:54] So then, you gave up this job and you created a nonprofit, Strong Towns, eventually. What is Strong Towns?

Charles: [00:05:01] Well, giving up the job was part of figuring that out, right? I started to write a blog and it was an evenings and weekends kind of pursuit. I was interested in figuring out why our cities were going broke. Why the cities that I was working with, which were all very fast growing, you know, had some degree of affluence, although a lot of them were very small and very poor. But they were all investing in growth in a certain way. And it was very obvious to me that this was not leading to success. And so, I started a blog way back in 2008 to explore that. Like, why is that? And, you know, because you do writing as well. When you write, it forces you to think through ideas in ways that, you know, just talking about them or just experiencing them doesn’t. And so, three days a week, I would write about these issues. And out of that came this kind of body of insight that some friends of mine said we need to start a nonprofit over. And my first thing was like, No, I don’t want to do that.

Charles: [00:06:09] And they’re like, no, we insist. And they actually filled the paperwork out and got it going. And all of a sudden, we had a 501C3, and then a foundation gave us a grant, and I’ve been trying to figure out how best to infect the world with a new set of ideas ever since. And that’s really what Strong Towns is. Strong Towns is about sharing this message, here’s how we build cities that are financially strong and resilient. Here’s how we build places that are prosperous and places where people can, through their own efforts, working together with others, make their community a better place to live and a better place to pass on to the next generation.

Eve: [00:06:52] So, how many followers do you have today? How has that grown?

Charles: [00:06:56] It depends on how we measure it. I remember in the very early days when I would have, you know, 20 readers in a month and I’d say, oh, my gosh, that’s incredible. We had two and a half unique viewers of our content last year, so it’s grown quite a bit. Strong Towns has, I think, 4200 members, which are people who have donated to our 501C3 in the last 12 months. And that also is trending upward. It has grown to be quite a movement of people dedicated to doing something different.

Eve: [00:07:30] So, let’s talk a little bit more in detail. What are the key features of a strong town versus a weak town?

Charles: [00:07:39] Yeah, it’s a very good question. And we have, you know, a Strong Town’s approach and Strong Town’s principles. We are currently in the midst of something that we call the strongest town contest. And in that contest, we try to identify places that are using good practices. So, ultimately, we describe a strong town, not in terms of a destination, but in terms of the journey. Are you doing things in a bottom-up way? Are you attentive and attuned and sensitive to the struggles of people in the neighborhood as opposed to the cash that you can get from this program, that program or this developer? Are you building things at a human scale as opposed to orienting your neighborhoods around the automobile? Are you taking incremental steps to try to learn and figure things out? Or are you doing kind of these big Hail Mary transformative projects? So, for us Strong Towns is about a frame of mind. I’d like to use the analogy, it’s a lot like diet and exercise for a city. How do we have good practices, good approaches, good discipline about how we go about things and then we celebrate that because the results are there, the results pay off.

Eve: [00:09:02] So, I mean, let’s talk about practices. I’m just wondering what position you take on key issues, just to spell it out for our listeners. So, what about zoning and density? What makes a strong town?

Charles: [00:09:16] I always like the density question. When it comes to zoning, and it comes to density, I think we recognize a couple things. First, if we look at traditional development patterns, the pattern of development we had really before the Great Depression and even going back a little bit further than that, it was organic. And in being organic, it did not have anything like the regulatory framework we had today. That is almost like a libertarian ideal of what a city is. I’ve been fortunate enough to spend a lot of time in Italy. I think you can think of like the Italian hill town is such a beautiful, wonderful place to be built with completely without regulation. We recognize, though, that today the body of knowledge that created that is in a sense, absent. All of the incentives, all of the cultural understandings, not to mention the trades understandings of how to build places like that. And so, zoning becomes this like essential thing we need to make our cities work. And we spend a lot of time on how do we make zoning codes better, less responsive to, again, the cookie cutter exercise of repeating the same development pattern over and over, and instead the very kind of humble and urgent exercise of making sure that the things we build connect with and respect neighborhoods and the, you know, the adjacent buildings and all that.

Charles: [00:10:56] If we take the next step to density then, we actually are not anti-dense, we’re very pro kind of density as an outcome, but we tend to struggle with density as a metric. I see a lot of planners who obsess over density and they build really horrible places. What we talk about is neighborhoods maturing over time. Every neighborhood should be allowed to evolve and mature and thicken up and the goal of a good street, the goal of a good zoning code, the goal of a city regulatory process should be to assist every neighborhood in reaching its next level of maturity. So, if you are a toddler neighborhood of single-family homes, the expectation should be how do you become an adolescent neighborhood of duplexes? And if you’re an adolescent neighborhood of duplexes, how do we get you into something that would be more intense. Two, three story buildings, densities of multiple units per lot. How do we get you to that next stage of success? That kind of mimics the development patterns of the past that were so successful. It also tends to harmonize a little bit some of the tensions across neighborhoods that make us resist growth. And I think it’s a more kind of realistic and reality-based way to experience prosperity as opposed to neighborhoods that are stagnant and designed to never change.

Eve: [00:12:29] So, I’m going to go back to something you said, which I think maybe a lot of people don’t agree with, and that how do you move a single-family neighborhood to the next level of success, which is duplexes? And I’m pretty sure that there’s a lot of people in this country who don’t see that as a successful move. Why is it important?

Charles: [00:12:52] Yeah, there are a lot of people who don’t see that as success. I respect that and understand that, but I wholeheartedly disagree. The marketing brochure of the post-World War II pattern of development is stagnation and eternal prosperity. The idea is that if we go out and build the perfect neighborhood and we plan it just right and we zone it just right and we build the homes in a certain way, and then we come in with this regulatory overlay after it that makes it stagnate in place that we will somehow be able to not only achieve prosperity but sustain prosperity. And the reality is anybody can go look at 1950s and 1960s neighborhoods and observe that for almost all of it that is not the case. Suburbia, post-war development has a natural life cycle to it. And the life cycle is very simple to understand. It is one generation of being brand new and prosperous, a second generation of hanging on and trying to sustain that prosperity. And then a third generation of decline and sometimes gentrification, but oftentimes just decline. This is the way that all systems that are artificially stagnated operate and as opposed to pre-war pre-depression development patterns, which always had the next increment of development intensity as part of their DNA, you would start small, you would add on, you would take that house that kind of went into decline and renew it up to something more intense, more productive.

Charles: [00:14:36] And this renewal process created this kind of natural vibrancy, a cycle of life that we see in neighborhoods that allowed them to mature and allow the people who lived in it to participate in that maturing, both physically participate, like go out and build stuff, but also financially participate, gain in wealth and gain in standing as their neighborhood became a more complete and more productive, a more valuable place. We’ve arrested that from our development patterns. So, now you know your choice is one version of stagnation or another. And if you’re very affluent, you can get a high-end version of stagnation. If you’re middle class, you can get a middle-class version of stagnation. And if you’re poor, which, you know, increasingly we are a very poor country with very poor neighborhoods, you can have the poor version of stagnation. And to me, this is a one-way path to a stagnant economy, a stagnant country, a stagnant population.

Eve: [00:15:42] I think that’s a great description. It’s bringing to mind some places I know that are tackling that. But then how do streets and roads and parking minimums and walkability play into that change? Because, you know, if you start with the single-family suburban neighborhood, how can you progress to the next level in a place that’s really designed quite rigorously never to be that?

Charles: [00:16:07] Yeah, it’s really hard. And I’m not going to pretend that it isn’t hard. I’m on record as saying I think that over half of what we built post World War Two is going to ultimately go away, that we don’t have the wherewithal to maintain it. We don’t have the desire to maintain it. We don’t actually have the capacity to maintain all those roads and sidewalks and pipe. We certainly don’t have the money to maintain it. And so, the question that I kind of deal with is less about how do we get people who live in single family home neighborhoods to allow that accessory apartment or allow the house next door to convert into the duplex or that kind of thing. And I focus more of my time on the neighborhoods that are ready to do this, the places that are ready to embrace it. How do we clear the things out of their path so that this natural evolution can start to happen again? Because I’m convinced that those are the places that actually will be the leaders where, when this becomes a more, and it’s becoming more of a widespread phenomenon. But I think when that expands even more, we need good places to turn to as examples to say, okay, the trajectory of my neighborhood is one of two paths. Path number one is the stagnation and decline. And ultimately my neighborhood is going to fail and go away and be a place that doesn’t thrive. That is the natural destination for the stagnant post-World War II development pattern. Or option number two is like this neighborhood over here, which, yeah, they allow duplexes and triplexes and corner stores and other things to come in. But wow, look at the cool place that that is now. Look at how that has added to their prosperity. And those places are growing in value, growing in prosperity, growing in wealth. I want to be like that. And so, we’re really focused on getting, I think, those green shoot kind of neighborhoods up and started that, as this accelerates, we can point to and say, be like this. This is a better option.

Eve: [00:18:17] Right. You know, this brings to mind I am actually developing a project in Australia with my sister, just a small 15-unit building. But it’s in a neighborhood that was, you know, the city very purposefully said we want this to be the next Barcelona. And what’s really interesting about the neighborhood is it’s a hodgepodge of zoning. It’s got commercial and retail and industrial and housing all jammed together. It’s a fabulously vibrant place. It has a very long main street with, you know, 20 restaurants, five banks, everything you really want in one place, lots of public transit and their goal is to remove all parking in the next ten years. So, that’s kind of taking it to the ultimate, you know, hillside Italian town ideal, right. So, I suppose you need to have visionaries who get that to be able to drive that forward, you know?

Charles: [00:19:14] Yes. I feel like what you’re describing is a neighborhood, right? Like a real neighborhood. It’s a real neighborhood. Yeah. And the thing about a real neighborhood is that once it starts to accelerate, the massive waste that is parking becomes revealed to everybody.

Eve: [00:19:34] It’s expensive. Yeah.

Charles: [00:19:35] If we didn’t have this parking, we could have more seating. We could have more places to, you know, more room for walking. We could have more stores. We could have more stuff.

Eve: [00:19:44] More housing, more housing.

Charles: [00:19:47] More housing, right. In most cities in the US, parking is looked at this necessary thing, maybe even a necessary evil that we need for transactions to take place. But once you start accelerating in this way, parking becomes the huge, obvious extraneous waste of resources, and most cities seek to lessen it or eliminate it altogether, which is a really smart step to take.

Eve: [00:20:16] Yeah, and what’s been interesting to watch there is the evolution of public transit and how that city’s recognized the value of the public transit they have, which isn’t strong everywhere, right. But in this particular place, there’s a tram, they’ve added a subway station. And these have all been towards this goal of making this a walkable only place. It’s been really interesting to watch and I really want to live there. I mean, I’m not going to live there full-time. My home is in the US, but it makes me want to be there because it’s so incredibly vibrant.

Charles: [00:20:51] Yeah.

Eve: [00:20:51] So, this is really a fiscally responsible argument too, right? That’s really what it’s all about.

Charles: [00:20:57] That is where I started and that’s where I kind of focus. And it’s fascinating because I’ve gotten to places where I think a lot of people who quite frankly don’t care about the money end up as well. But I got there by doing the math, by actually sitting and running the numbers. And you brought up transit. Transit is an interesting financial case because here throughout the US we tend to treat transit as this charitable overlay of our transportation system. And when you think of it as charity for the poor or what have you, it really doesn’t work very well. It doesn’t function very well and it doesn’t create a lot of value. When you look at transit and understand that when you can successfully deploy transit, you can actually get rid of that wasteful automobile space. You can you can move out the parking, you can move out the cars because you don’t need them because people can get around easily. You can get more transactions, more people per block, per unit of space. You realize that transit is the biggest wealth accelerator that our cities have.

Eve: [00:22:05] Right.

Charles: [00:22:06] And I think we can embrace that as a financial reality while also embracing some of the other things that we value about transit in terms of being able to help people and being able to, you know, create better places for people to live and places where people who can’t afford an automobile can also utilize it and be very successful with that.

Eve: [00:22:28] I’m going to ask a question I normally don’t ask, but I’m going to bring politics into this. You’re a Republican and I’m a Democrat. And why should we both believe in strong towns? I know we do, but why should we?

Charles: [00:22:42] It’s a good question, because I know there’ll be people who will react to that strongly.

Eve: [00:22:48] I’m sure.

Charles: [00:22:49] In Minnesota, we have the caucus system. So, for our primaries, you have to identify a party and go and sit in a room with a bunch of other people and talk about policy. And for many years I caucused with the Republican Party. I haven’t caucused with the Republicans since about 2012, which is neither here nor there. I don’t generally vote Democrat. I voted a lot of independent and third party the last maybe decade, but I’m certainly more conservative than I am progressive. So, it’s a very fair insight.

Eve: [00:23:24] Right. I really meant it as you, generally. You know, I mean.

Charles: [00:23:30] Yeah. No, totally get it.

Eve: [00:23:32] I hope it didn’t make you feel uncomfortable.

Charles: [00:23:34] No, no, not at all.

Eve: [00:23:36] I generally vote Democrat, but from time to time I’m really annoyed with them. So let’s, so I think we’re all on that page, right?

Charles: [00:23:44] Yeah. No, we’re on the same page. Yeah. I voted for way more Republicans in my life. But the Republican Party, we’re in a very interesting, like, strange political time, right?

Eve: [00:23:54] Very strange. Yes. Okay. Let’s just say, why should everyone believe in strong towns?

Charles: [00:23:59] Yeah, let me answer your specific question, because I think it’s very good because I do think Republicans should be about cities. Right. And Republicans tend to not be about cities. Republicans tend to be anti-city. Right. If we go through the things that make me personally a conservative and let’s traditionally look at things like fiscal prudence, responsible government, family values, community. These are all things that require a community. They require people working together. They require people living in spaces together. And when we step back and analyze that and look at that about the most dysfunctional way you can arrange people on a landscape financially, community wise, working together, family values, prudence, all these things disappear the more dissipated we become, the more kind of separated from each other physically, which is what the marketing brochure of suburban America is. The more we actually undermine those values. And I will throw a bone to the progressives because I’ve learned to really appreciate and value, if not the means, at least the intentions of some of my progressive friends.

Charles: [00:25:25] I think if we look at the suburbs, we recognize that these are largely places that through zoning, through our way of assembling them, through our way of investing in them, have segregated themselves by class at the very least. And to a degree that is almost pathological. If you’re going to live in $200,000 house, you will be in a pod with other $200,000 houses. And if you’re going to live in a $400,000 house, you’re going to live in a pod with other $400,000 houses. And there will be earthen berms and forests and fences between you because God help us, if someone who could only afford a $200,000 house had to interact with someone who could afford a $400,000 house. This is a pathological degree of separation that we have brought into our places that is anti-human anti-community and really, I think, anti-everything that conservatives suggest that they value about, you know, just about living, about life, about places.

Eve: [00:26:33] And probably caused a lot of unnecessary friction.

Charles: [00:26:36] Yes. And I write about this in confessions. I think there’s a libertarian aspect of modern Republicans that starts and ends with equating the automobile with freedom. And you get to crazy places where I will have people like Randal O’Toole saying that the proper role of local government is to go to the state legislature and lobby for more government funding for roads, because that will give people freedom to drive more. And I believe I’m a little more intellectually honest than that, I would like to think. But when I look at the automobile, I look at a tool that is really helpful for moving me long distance at speed. But I look at it as a tool that is not very helpful for allowing me day to day to take one block two block six, block 12 block trips. But I’m forced to do it in my automobile because of the very, very expensive environment that we’ve worked. And then, by the way, I’m also required to pay large amounts of taxes for this environment because it’s not financially solvent. And I’m required to sacrifice other services in my community, like maintaining the park and running a good government because we don’t have the money to do those things because we’ve spent it all on these roads. So, there’s a very good fiscal conservative argument, but you have to get beyond the automobile equals freedom libertarian overlay to that discussion.

Eve: [00:28:14] So, what crises are we facing that you think make your argument an imperative today?

Charles: [00:28:20] There are a lot of overlapping crises, obviously. I mean, I think we’re in very tumultuous times. I’ll say this and it’s going to sound a little over the top, but, you know, there’s a little bit of like the Romanesque decadence thing that we’ve gone through. I remember watching The Hunger Games and I think a lot of people watch The Hunger Games in the US and we’re like, Yeah, I can identify with District 12 and all this, and I’m like, no, no, no, we’re paying ‘em. We’re like the capital. You don’t get it. Like, that’s the way we are living today. But the crises that we focus on at Strong Towns primarily is the financial crisis that local governments have. Local governments are broke. If you go to any city across the country that is mature. So, not a suburb in their first or second life cycle, but any place that has gone through that illusion of wealth phase of this development pattern, what you’ll find is that they have really high taxes, they have high levels of debt, they have enormous backlogs of infrastructure maintenance that they cannot fund.

Charles: [00:29:32] And they are, in all intent and purposes, a ward of the state unable to provide reliably their basic services. That is a failed local government. And we have thousands of them here in the United States. We are trying to help them understand why they are broke and we are trying to help them take rational steps to deal with that, because ultimately Detroit is not some kind of crazy anomaly. Detroit is the destination that you get when you mismanage your city, when you take a great city and you spread it out, drive up your costs, denude your tax base, you get Detroit. And Detroit is a beautiful place that has struggled and its people have suffered as a consequence. And to me, that’s the crisis that gets me up in the morning, is I want an alternative path for cities that have gone decades down this road.

Eve: [00:30:32] And what about social equity? How does that play into the equation for a strong town?

Charles: [00:30:39] It’s a very good question. I don’t talk about social equity the way that progressives talk about it, because I’m not a progressive. I’m a conservative. And I know that sometimes riles people up because they want to be affirmed in their approach and their way of talking about things. But if people will be generous with me, I think they will hear someone speaking who shares a lot of their goals and values. When we look at the landscape of North America today, what we see is that the most productive places in every city is the pre-great depression development pattern. If we just look at cities through a financial lens, what we see is that those neighborhoods that were built before the 1930s, the walkable kind of mixed-use gridded neighborhoods around neighborhood cores or a downtown, those are the places that financially are the most successful in every city. And here’s the key insight to this. They’re the most successful even when they are occupied by the poorest people in the community. And often that is the case. I mean, you have fast growing cities where these neighborhoods have gentrified, but the vast majority of US cities, the poorest people in the city, live in the old neighborhoods. And those people are subsidizing through their taxes that they pay, through the rent that they pay, that their landlord pays the taxes they are subsidizing the new affluent development that is being built out on the edge.

Charles: [00:32:11] And so, once we recognize that, that that is where our repository of wealth is. It is a massive injustice for us to not only ask these people living in these struggling neighborhoods to pay for a luxury that other people are unwilling to pay for in their own neighborhoods, but that we are devaluing and not providing the level of service and support that is commensurate with not only just being a human being. I mean, I think we can make that argument and I would be willing to go there. But my gosh, with the level of commitment and the level of contribution that they’re making to the city, my office is in a very poor neighborhood. It’s adjacent to the neighborhood that I live, which is not a very poor neighborhood, but is a, you know, on the edge of that. This neighborhood here is subsidizing the wealthy people who live on the edge of town, on the lakes. There is no reason that this neighborhood should ever want for broken and cracked sidewalks for a rundown park or any of those things. Yet we are required to live with all of that while our city invests millions of dollars out on the edge. It’s an injustice combined with a ludicrously dumb financial approach for the community. And it’s that intersection that I think can bring us together, right?

Eve: [00:33:39] So, I have to disagree on one thing. I think you are mis-labeling yourself.

Charles: [00:33:44] Please.

Eve: [00:33:44] That is a very progressive point of view. Well, it’s the same point of view I hold. I mean, I think these labels are kind of ludicrous. And, you know, you’re, it’s a very pragmatic way to approach it, but it comes to the same conclusion. Right?

Charles: [00:34:01] Here’s where I feel that you and I overlap Eve, and it’s where I find a lot of people politically who identify from a top-down way in different factions over that. You’re a very bottom-up thinker. I’m a very bottom-up thinker. And when you are very bottom up, what you recognize is that cities need people who are sensitive to conservative things, and they need people who are sensitive to progressive things, and they need those people to work together in a place. And that is how cities have always been throughout all of human history. It’s the top down where we get divided and where we struggle and where we kind of lose each other. And so, I try to avoid all those top-down conversations because I don’t find them to be very helpful.

Eve: [00:34:50] No, I agree. And I think political divide really for me comes around some very emotional and personal issues, not necessarily these ones. So, at least for me, that’s true. So, I think we agree on all of this. And in fact, you know, I live in downtown Pittsburgh and, you know, my view out the front door is often a homeless person. And I feel very uncomfortable in places where people are segregated into one class. I don’t think, I don’t know why I feel that discomfort, but I like and need to be where, you know, the whole of mankind is because that for me is reality. So, everyone has a different way they want to live their life, I suppose.

Charles: [00:35:37] I think the idea of discomfort is an interesting one, right? Because what I hear you saying is that I feel discomfort perceiving this in this way, and I’m going to give some validation to that because I think that as humans, we are wired to, for example, find nature to be beautiful, right? In many ways. But nature is nothing but organic chaos.

Eve: [00:36:05] It’s violent.

Charles: [00:36:07] It is. It is. But the beauty emerges from that. And what we try to do as humans is create and impose a certain order on the chaos. And what happens is that you don’t get the emergent beauty then. So, we can look at a city like Charleston and we can go to the old core of Charleston or Pittsburgh, where you live, which has beautiful pre 1930 neighbors. I mean, just gorgeous places.

Eve: [00:36:38] Gorgeous and the architecture in downtown is spectacular. Beautiful.

Charles: [00:36:42] Spectacular. We can go to these places and we can see that what emerged from that messiness and chaos was something very beautiful. And it feels almost natural and organic. The way that a forest does, because it did emerge in this way. But then we can go to a different neighborhood that was built in the 80s or 90s or in the last couple of decades, and we see something that is very orderly and is very clean, but almost like orderly clean in a hospital kind of way. Right. Like everything has its place. Everything’s been taken care of, but it doesn’t feel natural. It feels unnatural. And for people who are sensitive to this, it actually is very disorienting.

Eve: [00:37:28] It’s very disorienting. And my question is, is which one is likely to have more tourists?

Charles: [00:37:36] Well, yeah. Yeah.

Eve: [00:37:38] I mean, I’m an urban designer, not an urban planner. So, I think about, you know, the physical aspect of what makes streets and squares great places to be. And, you know, Italy is really the best place in the world to understand this. And when cities sort of stomp out the ability for those surprising moments through zoning or not permitting a wide variety of density, you start to get creep into that very sterile sort of boring zone. So, I don’t know, for me, it’s like, make room for that chaos a little bit. I like my cities with a little grit in them, you know. My husband always laughs when we drive into the suburbs and I start looking very nervous because there’s something about in my brain I need markers to help me figure out where I am. And I just get lost in the suburb. It’s a sea of all the same to me. And it’s not, it doesn’t, I don’t know where I belong there. Does that make sense?

Charles: [00:38:43] It is disorienting. Yes. Let me tell you a funny story. We had a friend of Strong Towns, actually, one of our early colleagues here, who would write for us occasionally. He was getting married and he had this funny idea to go out and take his engagement photos in a suburb. And you know how most people, if you’ve seen like my daughter, I’ve got a daughter, graduated from high school and she had her grad photos taken. And of course, they go to, you go to a city and you sit on the bench and you stand by the wall and you do. They’re all urban photos or nature photos, right? Like she went out to a park and stood in the park and stuff. But Nate Hood, this friend of mine, went out with him and his wife and took the pictures in a cul-de-sac and in like a strip mall and at like a suburban setting. And it was so, the thing about it is the concept was funny, right? But the photos themselves were so weird because you just don’t, people don’t pose in these environments. They’re not appealing to look at. They’re not appealing to be in. You looked at them and it didn’t feel comfortable or safe. You got this very, it was the abstract, right? It was you felt a level of discomfort looking at these photos, even though it was two very attractive people all dressed up, very nice, posing, very nice. They were in a landscape that was very anti-human, which is what a suburb is. It’s very car oriented, anti-human. And so, they looked ridiculously out of place and it was stunning. I mean, it was visually stunning to see.

Eve: [00:40:33] Interesting. So, do you live in a strong town? Like what are the features of your hometown that you love and what would you fix if you could?

Charles: [00:40:43] I would fix a lot of things if I could. I am blessed with living in a city where my great, great grandparents lived. In fact, I grew up on the family farm that was homesteaded by my great, great grandparents. And I live in the city now near where I used to walk to from school to have lunch with my grandmother when I was a little kid. I take the dog for walks and we go past the cemetery where my ancestors are buried. I go to church right over there, like right outside the window. And on the wall is a plaque that has my grandfather’s name on it because he was a marine in World War Two. And they did something then to, to acknowledge that. So, I am here because this is where I am from and when I acknowledge that I can see a lot of the beauty in this place. But when I lose touch with that, which we all occasionally do, I start to get very frustrated. A lot of the early strong towns writing was me voicing frustration with my city, which I think in a lot of ways has become stronger over the last decade, has evolved in our thinking. There’s an article in the paper today about how we’re looking to get rid of our parking minimums throughout the core of the downtown, which is 20 years overdue, but better late than never.

Eve: [00:42:16] What city is this?

Charles: [00:42:18] Well, Brainerd, Minnesota. You probably have never heard of this. It’s a couple hours north of Minneapolis, Saint Paul.

Eve: [00:42:23] Parking minimum reduction is taking hold rapidly. But anyway, please go on. Yes.

Charles: [00:42:28] Well, my city is 14,000 people. So, that gives you some context. And it’s not 14. Yeah, it’s not 14,000 people adjacent to a larger city. It’s 14,000 people two hours away from Minneapolis. So, we’re a long way away. Yeah, but, you know, I have found a lot of beauty here in working with my neighbors and in doing things that are very Strong Towns. This summer we have a park, a small little neighborhood park that’s kind of been neglected and overlooked. And some of us are getting together, and as soon as the snow melts, which it’s the end of March and it was below zero last night, so I don’t know what is going on. It might be June before we get rid of the snow here. But we are going to go out and spend a summer making this park a more special place just with the resources that we have and the elbow grease and the that kind of stuff. So, I feel like we have aspects of a strong town and like any place, it is a work in progress and a struggle. But I see it starting to move in the right direction. And I guess ultimately I’m confident and I think this is a core part of being part of a strong town. I’m confident that my contribution will not be wasted. Like I’m confident that we won’t get there. Like this is always going to be a journey and there’s always going to be things that frustrate me. But I am more confident now that the things I do are going to matter and will make life better for people who come after me. And a decade ago, I certainly couldn’t say that.

Eve: [00:44:20] Well, that’s a great note to end this podcast on. I certainly appreciate what you do and I really enjoyed talking to you, Chuck.

Charles: [00:44:32] Thank you, Eve. That is very sweet. And I hope you know that I follow your work as well. And I feel like your part of the answer is an important part of the answer. This whole Small Change, bottom-up funding concept is a very radical way to activate capital in ways that I think connects our heart to our pocketbooks and can be, is essential to transforming our places. So, I’m a huge fan of yours as well. And I’m grateful you took the time to put this together. Thank you.

Eve: [00:45:22] I hope you enjoyed today’s guest and our deep dive. You can find out more about this episode or others you might have missed on the show notes page at RethinkRealEstateforGood.co. There’s lots to listen to there. Please support this podcast and all the great work my guests do by sharing it with others, posting about it on social media, or leaving a rating and a review. To catch all the latest from me, you can follow me on LinkedIn. Even better, if you’re ready to dabble in some impact investing, head on over to smallchange.co where I spend most of my time. A special thanks to David Allardice for his excellent editing of this podcast and original music. And a big thanks to you for spending your time with me today. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change.

Image courtesy of Charles Marohn

Toronto

Canada has opened its arms to immigrants. We tried to build a wall. This is how that decision plays out.

Drive just 5 hours directly north from Pittsburgh, and weave around the Great Lakes a little, and you’ll be in Toronto, perhaps the most multicultural and multi-racial city in the world.

With the foreign-born population in Toronto now over 50%, New York City is in the rear view mirror. Pittsburgh is not even a speck on the horizon, with only 4% foreign-born residents. This multi-cultural population gap plays out in so many visible and important ways that it’s impossible to even begin to list them here. But what’s most visible when you visit Toronto is that minorities are fully-integrated into every walk of life. They are economists, real estate developers, taxi cab drivers and business owners. They have turned Toronto into a very colorful mosaic indeed. Every corner of Toronto is a thriving, vital metropolis.

And then there is the construction. There is not a block that has escaped. The foreign-born population is expected to rise by another 500,000 immigrants over the next year. As Ontario works to add 1.5 million new homes by 2031, construction in Toronto is unrivaled by any other North American city. According to the RLB Crane Index for North America, Toronto, at a count of 238, has more cranes in use than all U.S. cities combined. And while Seattle (in second place) has a commendable 51 cranes, Pittsburgh is not on the list at all.

This dynamic metropolis with a core of soaring skyscrapers is not shying away from immigration. In India, Canada is hailed as pretty much the holy land. Adverts abound in Punjab urging one to “Study English, move to Canada.” Along the way, someone (collectively) decided that an immigrant is an economic driver and will bring prosperity. And that decision defined the remarkable course of Toronto and Ontario.

They decided to encourage immigrants. We decided to build a wall.