Equity

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

Eve: [00:01:00] Early in his career, Jim Heid worked on humongous real estate projects all over the world as a management consultant. Over time, the diversity of places he lived and worked in shaped his appreciation of small, community-centric places with soul. He moved his head and heart from a loft in downtown San Francisco to the tiny 12,000-person town of Healdsburg in California, where he is building his thesis that small is big. There are some big things that Jim is working on. They include his small-scale developer forums, which are growing bigger. A recently published book called “Building Small: A Toolkit for Real Estate Entrepreneurs, Civic Leaders and Great Communities” and real estate projects that are small and meaningful. Jim Heid has a big story to tell, so listen in.

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Eve: [00:02:29] So welcome to the show, Jim. I’m really excited to talk to you.

Jim Heid: [00:02:33] Yeah, I’m happy to be here. It’s long overdue, right?

Eve: [00:02:36] It is. I met you a while back. I don’t even know how long back, through the ULI Small Scale Developer forum. So, my first question to you is, like how did the theme Small Scale, which will emerge as we talk, come to take center stage in your professional life? And actually, what does that even mean in your professional life?

Jim: [00:03:01] Those are two loaded questions. So, I’m going to start with the first of all, how did I get there? Why am I so passionate about it? And then I can talk a little bit about at least how I’m defining it. There’s those moments in your life that you remember pretty clearly, and I do remember the kind of, the aha moment for me with Small Scale, which was coming out of a ULI meeting. It was a spring meeting in 2011. I was talking to a colleague of mine. I don’t know if you know Howard Kozloff a great guy.

Eve: [00:03:28] I do know that name. Yeah.

Jim: [00:03:30] Yeah. Southern California, developer. And we were talking about we’ve spent a good part of our careers attending, participating, teaching for ULI, really loved the organization and its mission, but felt that a lot of the content was increasingly focused on really big stuff and it kind of was like, Hey, if I’m not $1,000,000,000 rete or a multimillion dollar six block project, like where do I go anymore? Where do I get content? Where to get inspiration, where to get tips? So, we came up with this idea that there needed to be some place where people, like ourselves, that wanted to. We weren’t doing small deals to get to big deals, we wanted to do small deals because we felt they were important. And I can talk a little bit about why, but I felt they are really important and personally very fulfilling. So, it became a passion, took the form through support of ULI into the small-scale forums. We’ll talk about how the forums fed the book and all that kind of stuff. But the definition of small scale.

Eve: [00:04:36] Well, you know, let me add something, because right when you were figuring out a solution, I decided to quit ULI for exactly the same reason I thought, I don’t belong here. These are not the sorts of projects that really interest me as a developer, and I don’t see how I fit. So, I think you were looking to address exactly what I was feeling.

Jim: [00:04:59] Yeah. And I think the hope was to create a safe place within the organization that could embrace this idea and bring people together. And now, with this incredible focus on DEI, the comment is that’s where the emerging developers, the people of color, the people who want to reinvest in their neighborhoods and make a difference in the built environment where they’re from or where they live or where their neighborhoods and their families are. They’re starting at the small scale and so.

Eve: [00:05:30] So small is now big, right?

Jim: [00:05:31] Yeah, small is well, that’s my other venture now called the Initiative to Make Small Big, so yes.

Eve: [00:05:38] Okay.

Jim: [00:05:39] But so, the other question you had was how am I defining small or how do we define small? And, you know, it’s a great question that’s hard to answer because this is an industry that’s extremely quantitative. It’s all about square feet. It’s all about returns. It’s all about dollar value of a project. And after ten years and working on the book and trying to come up with that singular definition of small really came to the idea that it defies a a quantitative definition and it’s much more qualitative. And so, small is the way that we’re defining it. And in the book, there’s the ten hallmarks of small. It’s typically coming from sponsors that have a very clear core set of values. It’s people who are investing in their neighborhoods and care about their neighborhoods.

Jim: [00:06:29] It’s really the attitude and perspective of the developer. It’s developers that have skin in the game and are typically long term holds. It’s not about fix and flip and move on opportunistically. And the biggest thing that I say about small is it’s people that are involved in this and are working in the small genre. See real estate as the means to the end as opposed to the end itself. And what I mean by that is they’re focused on creating human connections, community uplift, creating great places, bringing economic value to their communities, but also building wealth. This is not philanthropy. This is using disciplined capital and execution to create real estate. But they’re doing it in pursuit of something bigger, which is creating great places, as opposed to simply just building real estate as an asset class.

Eve: [00:07:20] So basically, I always say, you know, I could never build a building as a commodity, right? You know, just as a way to make money. It’s way more than that because people experience buildings in the city and they live, the buildings make the places they live in. So much more.

Jim: [00:07:37] Yeah. So, my shorthand that’s evolved after a lot of these kind of presentations is it’s about building community, not commodity, to your extent, and it’s about doing transformations, not transactions. And so, yeah.

Eve: [00:07:49] So what are the ten hallmarks then in your book?

Jim: [00:07:53] Well. So, it’s a clear sense of purpose, commitment to positive evolution of neighborhoods, understanding and building on the assets of fine-grained street character and neighborhoods. So, instead of building amenities, it actually sees the neighborhoods and what is in the neighborhoods as the amenity and how they add to it. It’s entrepreneur individuals and organizations seeking a contextual and best use for the neighborhoods so very much about what I call context and connections. And those connections are both physical as well as social. Long term agility and flexibility. So, kind of future proofing, thinking about assets, these are not one offs that can never be adaptively reuse, and obviously a lot of the stuff that we see in small is adaptive reuse because there’s a story there, there’s a soul and character and it has an impact on the neighborhood, transforms buildings, and it’s kind of a commitment to transform building sites into economic assets.

Jim: [00:08:52] Again, this idea that this is not philanthropy, this is not unreplicable, the idea is this is disciplined use of capital and good development skills to create a model and an approach both at the enterprise level and the project level that many people can scale up and do. And then, the contextually responsive community responsive and market differentiated. So, what I often say is a lot of these projects are very experientially based and they’re focusing on creating the experience which feeds the sales as opposed to just focusing on what’s my lease rate. It’s like, what am I going to create in? What we see in most of these is if you get the experience right, you create something unique, the rates and the revenues follow pretty handsomely.

Eve: [00:09:36] Interesting. But all of this came after many years of these forums, right? Which you developed, and I’ve been to a couple and really, really love them because I do feel like I fit in there. So, how do they work and how many have you had and where’s the next one?

Jim: [00:09:54] Glad you asked because this is kind of like the best thing I get to do in my world. And so, the epilogue to the aha moment that I had with Howard about, hey, how do we create a place for this conversation? And what I like to say, we’re not trying to disparage big, but we’re trying to elevate small so that civic leaders, people that are interested in the built environment, capital sources, can start to consider it as another alternative approach to real estate as opposed to binary, it’s either big or small. But anyway, so when we were talking about this, and at the time I had been teaching a number of programs for ULI, first the Sustainable Community Development, then the advanced residential, then mixed use projects. They asked for some new content, and I said, Well, maybe there’s a place where we could create a forum for people that are interested in this, small scale developers. And we thought it would be a collection of people that were interested in getting into real estate that maybe had just graduated or leaving some other profession, design, brokerage or whatever else, and wanted to kind of learn the basics of real estate, but again, apply it in a small kind of workmanlike way.

Jim: [00:11:04] So, we did the first one in San Francisco in 2012, so a decade ago, and we’re blown away that what we got was not people coming into the profession, but a lot of people like you and I, people who passionately and deeply believed in this, who had a lot of experience and were desperately seeking what has become, the short end is I finally found my tribe. It’s a group of people who share the same values are dealing with the same challenges. There is one woman said, I’m an investment committee of one. I’ve got to make these decisions myself, which is, leads to incredible agility but also is very nerve racking. So, we did the first one in San Francisco that was good, went on, did one in D.C., went to Seattle, Miami, and every time it grew and we were getting people not one time but every time.

Eve: [00:11:56] A real tribe, right?

Jim: [00:11:58] Yeah. Yeah, real tribe. So fast forward, we just did our 17th one, just completed our first decade. It was in San Antonio. We had 80 people. It’s a two-and-a-half-day program where we do panels and case studies and tours, and a lot of it is networking where people are now sharing pro formas. I’m constantly calling up some of my colleagues and say, hey, I’ve got this contract. I need this kind of a clause. Have you ever done that? So, it’s become this…

Eve: [00:12:30] It’s become a big board, right? A big board for your project.

Jim: [00:12:34] Yeah, it’s an open-sourced approach to small scale development as well as I mean, the feedback that I got from the last one is like, you know, I just always leave so inspired. I’m ready to move forward with my projects. It’s so nice to find people who feel the way I do. I thought I was like living out here on my own. And so, it’s become a great thing. And we go to a different city every time. So, as I said, we just did our 17th one or 18th one will be in Nashville in November.

Eve: [00:13:01] I think I’m going to come to that, hold a spot for me.

Jim: [00:13:04] We have people now that have been to 15 or more. So, it’s become, like I said, a real thing. It’s kind of for people in the small-scale space, it’s their annual or twice a year conference where they really love to get together.

Eve: [00:13:20] That’s awesome.

Jim: [00:13:21] Just as a quick sidebar, one of the super fun things that we do and we tried this about, I don’t know, I guess it’s been about eight years ago, but we called it the small petracca slam or Cochon char or how we say it.

Eve: [00:13:33] Pachuco, I think it’s called.

Jim: [00:13:35] Yeah, we were trying to figure out a way that people could introduce themselves without the mind-numbing things that typically happen when you go to conferences. Hi, I’m Jim Heid from Healdsburg, California, I’m an infield developer. So, about eight years ago I asked people to send me three slides and they get 15 seconds for each slide to talk about a project they’re doing a value or hold or a trend they’re watching. And I put it all together into one slide deck. We do about an hour-long cocktail hour, and then after the hour, after everybody’s been appropriately lubricated, we just turn it on and people go and pass the mic. And it’s this like firehose of amazing projects and people’s values and what they’re doing. And then it creates this bond where people like, oh, I saw this thing you were doing in Minneapolis, I’ve got something similar. How you doing this? So, it really opens up the door for conversations, but it’s also super fun and amazing to see the diversity of stuff that is going on in this space around the country. That’s the other thing I should say is of this 70-80 people that typically come, we’re probably getting somewhere around 30 different states represented.

Eve: [00:14:44] That’s amazing.

Jim: [00:14:45] So this is not a local audience. It’s a national audience.

Eve: [00:14:46] You know, it sounds a little bit like Small Change. 30 states represented, an amazing variety of stuff. Yeah, really interesting. So, yeah, hold a space for me in Nashville.

Jim: [00:14:59] Okay. I will do.

Eve: [00:15:00] Okay. And when is that?

Jim: [00:15:03] We’re still trying to pin down the dates. It’s a Sunday, Monday or Tuesday, so it’s either six, seven and eight or 13, 14 and 15.

Eve: [00:15:11] Of which month?

Jim: [00:15:12] November.

Eve: [00:15:14] Okay, so the forums grew into the book, which you described, and who should read the book and why?

Jim: [00:15:25] So, in the genesis of the book was, so let’s see, it was it was Denver, so it was our 2016. So, it would have been probably our ninth one that we had done. And I remember flying back and I’m like, every time we go to one of these, I am so inspired by what people are doing. I’m so frustrated at the stories they’re telling about the barriers that are thrown at them and how hard we are making this to do when in fact so many people want it. Because while I was doing that, I had my consulting business, Urban Green, and I was doing a lot of community outreach and facilitation work for projects. And I would go into towns and people would say, you know, we want stuff that fits better. We don’t like these big formula projects that come in from out of state. We want small scale. We want this, hey, I read this thing and strong towns or incremental development. That’s what we want.

Jim: [00:16:14] And so, and then I would go to the forums, and I’d listen to these people who have done these beautifully crafted projects and listen to the pain and suffering and years of struggles from a capital standpoint, a regulatory standpoint. And it was like, this is a really important story, and somebody needs to tell the story both about the projects and how valuable they are to the community, but also the barriers that most places have put up to make this harder rather than easier than big development. And so, started whittling away at this idea of the book. And it originally was going to be kind of this journalistic opinion about small scale development and then quickly grew into this life’s work that is basically three parts. It’s the what and why of small. So, the definition that we talked about and then why it’s important not only urbanistically, but as a critical part of a resilient local economy and the value of the inextricable link between locally owned businesses and small real estate, and how important that is in economic cycles to have people that are really invested in their community as opposed to just a bunch of out of town lessees that will mail back the keys the first time they run into trouble.

Jim: [00:17:28] And then there’s a whole how-to toolkit, which is about a third of the book or two thirds of the book that was really meant to explain not real estate 101, but what is different about working in this small space than what they would teach you in grad school? And so, I say this is what they don’t teach you at real estate school section. And then the last one is classic Urban Land Institute case studies. And you’re profiled in this because we thought it was more than just talking about projects. It was really important to talk about the people, the agencies, the non-profits that were at the vanguard of this and how they were accomplishing it. Because we wanted people to pick up the book and say, oh, we could do that. This person did this, and I share those values as opposed to, oh, that’s a cool project. What’s the numbers look like on that? So, who should read it falls into two camps and it was written very specifically to two audiences. The first one is the real estate entrepreneur. The people who want to pursue this as a career path or are already in it. And we’ve had a lot of universities now that are using it as a textbook for their design schools.

Jim: [00:18:39] We have some non-profit housing providers that are actually using it as part of their emerging developers curriculum program. And you ULI, a number of the district councils are using it as part of their real estate diversity initiative. But then the other audience was meant to be civic leaders, planning staff and even citizens who are going around all the time saying This is what we want but don’t realize how hard they’ve made it.

Jim: [00:19:04] So, it’s part inspiration and call to action of what’s possible, then it also breaks down in a pretty common sense way of when you make it more difficult to get approvals, you increase the risk, which means the capital costs more, if you can even get the capital and therefore a lot of the community benefits that you think the developers should pay for can no longer pay that because he’s had to pay for it as entitlements or the project doesn’t work. So, there’s a pretty broad audience, and my favorite thing is when people are buying this and giving it to their council members or they’re planning commissions or there are a lot of people who buy like ten or 20 and have me sign them and give them to their whole town council staff. When I get city managers that call me up and say, you know, come talk to me about this, I’ve got this site and we’re trying to figure out what to do and maybe we should try a small approach. So, you know, I think we’ve reached the broad, and then obviously there’s a lot of real estate entrepreneurs. People come in and they’re like, oh, I love this. I’ve been waiting so long for this. It’s just, you know, the other quick thing that I’ll say about the book is this, I was two years late delivering it and actually finished it during COVID. But I say it’s a much better book because during those two years I did two projects of my own and that personal journey and what I learned and the nuances beyond the academia, what the real details and just the personal introspection of what you’ve got to go through to really succeed, found its way into the book, I think as more than just a how to it’s how to do this and how to survive the rollercoaster as a small developer when you’ve got everything hanging out on the line and not sure.

Eve: [00:20:47] Right, it is a roller coaster. Sounds like the book took longer than a real estate project.

Jim: [00:20:51] No, the book was four years. The projects were, well, one was three and one was five. So yeah.

Eve: [00:20:57] So right in the middle.

Jim: [00:20:59] Right in the middle. And they all finished about the same time. So, last year was pretty big.

Eve: [00:21:06] So let’s talk about your projects. So, I’m fascinated by first of the fact that you live and work in Healdsburg, California, which is a small town, and the two projects I know about really exemplify sort of entire community life. One is directed at small businesses and the other is directed at small residences. And the first is craft work, which is a co-working space, which I think you opened right when the pandemic began.

Jim: [00:21:35] 63 days before the shelter in place. But who’s counting?

Eve: [00:21:40] And the second is one that it looks like it was, I don’t know when it was completed, but River House, which is 12 residences also in that town. So, tell me about craftwork first, why did you decide to develop a co-working space? That’s another business again, you know.

Jim: [00:21:57] Yeah, well, back up first, I’ll just gives some quick context for Healdsburg. So, Healdsburg is a town of about 12,000 people an hour north, door to door north of San Francisco, right at the center of kind of the wine and food culture in Sonoma County and has an incredible kind of historic walkable urbanism DNA and it was discovered, really discovered and kind of current trajectory about 2000 we bought a place here in 2003, it was a weekend place. We would come up from the city we were living like right downtown San Francisco in the warehouse district and a loft. So, it was our perfect little town and country lifestyle. And then in 2013 sold our place in the city and moved up here full time. It’s one of those things where every Sunday was a.

Eve: [00:22:43] That’s a Really big move. That’s a big move.

Jim: [00:22:45] It’s a big move. And it was one of those things where every Sunday where you’re packing up the car to go back to the city and your job and then you’re say, oh, it’d be so nice to live here. Really would hate to go. And so, finally we reached the point and said, well, you know, there’s nothing keeping us in the city. We were both independent, you know, mobile. So, it’s like, okay, let’s move up here and do that. So, when I moved here, you know, it’s a small enough town and parochial in some ways that until you really live here, you don’t have as much credibility as when you do. And so, I moved here and then I had all this experience through my consulting and my work with Urban Land Institute and a lot of the projects I’ve worked with around the globe. So suddenly I had this opportunity to bring and test what I’d learned other places to a small town with great DNA that was experiencing, I wouldn’t call it rapid growth, and I’ll tell you about that in a minute, but it was experiencing certainly increased visibility and desirability. Smithsonian ranked it the number two town in the country to visit one year. It’s got one of the one of the top five town squares. So, it gets a lot of press and visibility.

Jim: [00:23:51] So, I had come back from our Detroit forum and each of our forums are themed around something and that particular one was themed around co-working, urban manufacturing and makerspace. And so, we toured a number of co-working spaces in Detroit, and they were really phenomenal. First of all, I just love the aesthetic, I love the concept, I love the kind of community and the flexibility of that. This is so, you know, I can do this. This is what I want to do. So, I came back to Healdsburg, and I live one block from my co-working space and which at the time was an empty, vacant 5000 square foot bank in a sixties strip center between my house and the coffee shop that I went to every morning. And I would walk by it, and I would fantasize about, wouldn’t it be cool to do that? You know, I could do that. And this is a town that even though it’s only 12,000 people, it’s fairly well-to-do. You’ve got a lot of people who I call tech emigres that have left the city and are now living their life up here, but they’re working remotely. Got a lot of people to come through, stay a weekend and want to connect into the town. They want an authentic experience. They just don’t want to do the stuff that’s on the Three Perfect Days in Healdsburg kind of thing. So, I naively said, well, yeah, I can do this. And I talked to a couple of friends and they’re like, yeah, I know this makes total sense. So, this was this was about 2017, we started the discussion. So, WeWork was still in its heyday and rapidly growing. I don’t think even industrious, I don’t think industrious was around. But anyways.

Eve: [00:25:30] No, industrious is later, I think.

Jim: [00:25:32] Yeah, yeah. But the whole co-working phenomena and leading edge and all that was going on. And again, I loved it. I wanted to get my hands dirty, not just write about something, not just go to forums. I want to get my hands dirty. So, it seemed like a perfect opportunity. So, really funny story. So, I go to the landlord. So, this is built in 60 by a gentleman who has now passed away. So, I am dealing with his son and the son’s daughter. The son is 90 and the daughter is 67. And I walk in with my beautiful flipbook, you know, cribbing pictures from WeWork and all the really cool, sexy co-working spaces. And I say, I’d like to lease the space and I’m going to build this coworking space. And they look at me for a minute and they say, well, my dad said, you never should put office in your retail centers. And I’m like, well, don’t think of it as office. Think of it like a gym. Think of all the people moving through here. And, you know, it’s 5000 square feet. It’s been vacant for a while. And with Amazon and everything else is not going to be a lot of takers for the space. So, within a span of about an hour, a gentleman who is 90 years old kind of put the piece in. He’s just like, so if I was young and I came to town and I wanted to start a business, I could just get a desk and I wouldn’t have to, like, sign a lease and I wouldn’t have to, like, get internet and pay for cleaning. And I’m like, yeah, he’s like, wow, that’s a really cool idea. We should do that.

Jim: [00:26:57] So, we struck a deal and then I embarked on the design and planning, and I spent a lot of time talking to people I know I spoke to you about, like, how do you build a performer? What are the metrics? What’s the industry trends? There was a woman in Petaluma who had done one, and she was enormously helpful in terms of thinking through how people in these markets use co-working versus how they do in an urban center. And again, being a fairly upscale community, I knew this couldn’t be shag carpet and beanbag chairs for people with flip flops and hoodies. Our demographic is probably mid-forties professional. So, I immediately created this kind of verbal image of Hotel Healdsburg, which was our upscale hotel, beautifully done by David Baker, Banshee Tasting Room, which was eclectic, cool little hip tasting room meets flying goat coffee, which was the beloved coffee shop where everybody went and worked. And when I would explain that to people, they immediately got it. And so then embarked on the, the design, the construction turned out beautifully. People love it, had a lot of really interesting.

Eve: [00:28:10] And you got through COVID, how did you do that? What did that?

Jim: [00:28:13] So yeah, that’s a great story. And I think it’s, I’ve had these conversations with some other people in co-working. I mean, part of it is the town, but a big part of it is, I think the premarketing and our pitch was, and the business thesis was these small lifestyle towns. This is going to be an incredibly important community asset. It’s not just a business, it’s a community asset, a hub, a place to connect, a place to have informed conversations that talk about the future. And so, I spent a lot of time telling that story. I was telling Jamie Russo when we were doing this podcast on this. So, one of the first things I did was I put a survey out via the chamber that said like, would you be interested in a co-working space? We’re going to open this up, yadda, yadda, yadda. What would you like an office dedicated to? Just to see if there was any market depth. Got a lot of response right away. And then I called up and contacted everybody that said they wanted an office. And I started to talk about, well, what is it that you want? What are you going to need? What do you do? All this kind of stuff. So about two years of creating the story, building the trust. I think marketing and this isn’t just coworking, this is a community asset.

Jim: [00:29:27] So, to answer your question, when we finally got open, which is about a year after we promised we would, people were a very excited about it and B really believed that we were doing something important for the community. This wasn’t just another retail front; this was an important community asset. So, when COVID hit. People said, look, no, no, no, you’re too important to go away. Keep billing me. You know, I’m not going to come in, but I want you to maintain my membership. And so, that lasted for probably 90 to 120 days. And then people said, whoa, this could take a lot longer than I thought. But we immediately were able to backfill because a lot of people had left San Francisco, took an airbnb out in the country. They worked in tech. They didn’t have good Internet out there. So, we kind of backfill with that. And then by September, a lot of people are like, hey, I can’t work at home. The kids are there, we’re home schooling, no bandwidth or whatever else. So, we limped along. The PPP was enormously helpful. It was maddening at the time, but.

Eve: [00:30:31] It was helpful, wasn’t it? It was helpful.

Jim: [00:30:32] Hugely, hugely helpful. And then we just kept staying visible. One of the things I was really most proud of, so when shelter in place hit and it was really ugly, we did a thing called small joys for sheltering in place, and every Friday we picked a local vendor in town and we would curate for 20 bucks some kind of an offering bag of coffee and a jar of granola flowers for Mother’s Day, whatever else. And we would, we’d put it on our site and we’d send it out to our mail list, and then you would come pick them up on Friday. So, people came in and they were like, hey, can we participate? Hey, you know, we love what you’re doing. It wasn’t a lot, but we raised like $10,000 for the all the individual business owners and we ran that for about 12 weeks. So those kinds of things.

Eve: [00:31:20] So you’re a strong marketer.

Jim: [00:31:22] Yeah.

Eve: [00:31:24] Yeah, that’s really fascinating. So, you got through that. And then the second project, which is maybe even more challenging, I think the town has a minimum lot area ordinance of 6000 square feet, is that right?

Jim: [00:31:39] Well, it has all kinds of things. This is a case of where people want what they want and what the codes say are two different things.

Eve: [00:31:46] Codes can be enormously challenging. But you designed and developed an infill project that is very much in keeping with the town and I have a feeling took a lot to get to that point because of the way that zoning codes are. Just talk about that. This is 12 residential living units with ADUs and a whole variety of features that I think are probably unusual for the zoning board to see, right?

Jim: [00:32:16] Well, yeah. It was. So, quick stats just for people that are into this stuff. 12 units, 1.2 acres. So, ten units per acre, all single family detached. We did it all with as of right zoning, which is kind of unheard of. And in California we have very onerous environmental processes, and we got an exemption because we met all of the criteria as infill. But I said a little while ago that we’re not a high growth town because two decades ago, in the town’s infinite wisdom, we passed a growth ordinance that limits the town to 30 permits per year. So, I’ll say that again, 30 permits per year. So now everybody’s screaming about how expensive housing is because it’s high demand and we’re only building so many new ones here. So, we had to deal with that. How do we get enough allocations to build that? How do we do with these minimum lot sizes, which had to be 6000 square feet?

Eve: [00:33:09] That’s insane.

Jim: [00:33:10] Had some prescriptive dimensions of 60 by 90, and then we had some environmental considerations. But it’s a classic cottage court where the 12 units are pretty much organized around a central green space. Cars are subordinated to the rear, kind of a neo traditional, where there’s two alleys that flank it. It’s kind of a square site, the site lent itself to it very well. And big front porches facing onto the green and fairly good private space, and all done in a contemporary farmhouse style. So, a lot of references to kind of home, I think in people visually but also updated for contemporary living. And the big thing with this project and I just came back from a builders’ conference where we won a bunch of awards for it and I was explaining to a panel I was on is so many developments design, especially in these land, more land lot, developments. They lay out the lots and then they just plop the houses into it that will fit on the lot. And in this case, working with Dan Parolek from Opticos Design, we designed the urban form. So how do we want the homes to mass? How do we want them to shape the green? And then once we did that, we lotted them. And so, the lotting plan is highly gerrymandered. And to the town’s credit, once they saw the urban form and what we were trying to do, they understood that the very confusing lotting plan was the only way we were going to get there without having to go through a rezoning and all this kind of stuff that would drag it out way too long.

Eve: [00:34:43] Interesting.

Jim: [00:34:44] You know, the end result when you’re in the space is is actually quite magical. And super successful. We came to market July 4th last year, sold it out in five months.

Eve: [00:34:58] That’s amazing. Because some of the features are things that people say will never work. Detached garages, the units face a little sidewalk, right. A little pedestrian area. And there’s shared green space.

Jim: [00:35:12] And this is a classic case of where the processes and sometimes the people. So, I’m at planning commission and I’m showing this in one of the commissioners says I’m not going to carry my groceries in the rain. You know, you’ve got to attach the garage. And I’m like, look I’m the developer. I’m taking that market risk. That’s not for you to decide. Does it meet code or doesn’t it? But they’re opining on stuff. And then the other thing we did was we painted them all white, and we used different. So, we use shingles and some lap on some board. So, there’s a very subtle kind of textural shade and shadow difference, but there’s a continuity and a harmony between them and, oh my God, you know, I mean just.

Eve: [00:35:51] The they opined about the color.

Jim: [00:35:53] Oh, yeah, white. Oh, I hate white houses. You know, I have one in my neighborhood and they’re too bright. So, no, you can’t do that. And fortunately, the other commissioners are like, you know, I think that’s going to be pretty elegant. So, there’s these personal biases that people bring to these conversations, and they’re not even trained as designers, so they don’t get it. But they’re in this position of power.

Eve: [00:36:11] And then I think some of the other big moves you talk about, I’m a trained urban designer myself, and I think people don’t understand why they love spaces. But that’s what urban designers are trained think about. You know, how to make good spaces. So, you talked about using the existing trees as amenities and framing views. So, there’s a lot that went into the public space design of these 12 houses. Little in the houses themselves. Right. For a little project. You had quite a list of consultants.

Jim: [00:36:43] Yeah, we did. We did. You know, it’s interesting you say that, but the space is so again, at the PCBC last week, one of the jurors was glowingly talking about that and saying, you know, the layering of semi-private to private spaces, the size of the space and the scale of the space. And it’s my background’s landscape architecture, so it’s probably a little less concerned about the buildings and more concerned about how to in the world. She said, a lot of great trees on the site. So how do you use those too? As one of the other, one of my favorite lines last week for the juror was the trees allowed you to cheat history. So, it felt like this thing had been there. I mean, you go out there, you feel like it’s been there for probably 30 years. It looks like the Presidio.

Eve: [00:37:23] Versus the trees kind of make my car dirty, right?

Jim: [00:37:27] Yeah, exactly. And so, to your question, so the people that have bought there, there was a conscious pivot. It was a very interesting study in human psychology. So, buyers came in, I think almost universally loved the project. They were inspired by it. They loved the way it looked. It was beautiful. They loved the trees. They loved everything about it. But then they very quickly came to a fork in the road, and they said, but I’m not really that social and I really don’t want people seeing me on my porch. I’m a little more private. Or they said, I love this idea and I love the fact that spontaneously I’m going to go out to the green and have a drink with some friends or I’m sitting on the porch and people stop by. So, there was a natural selection that occurred by people who wanted that lifestyle, and so they’ve actually made it happen. So, it’s fascinating to me how much the group has gelled very quickly, do things together, spontaneously, gather in the green for happy hour and all that.

Eve: [00:38:29] It’s almost like co-housing, but not quite.

Jim: [00:38:31] It is, yeah. Without the kind of somewhat cultish idea that at least co-housing makes people think of. I know it’s not that there is a thing, but it is. Or we call it intentional.

Eve: [00:38:46] Yeah. So, is it too early to tell what has worked well and what hasn’t?

Jim: [00:38:53] I mean, definitely some good lessons. I mean, the thing that I missed on that was I call it barbecues, trash and dogs. So, one of the things was keeping things very open and kind of granular. But in the end, we had to add a lot more fencing than I originally would have thought, because at the end of the day, people have small dogs, they don’t want their dogs running away. So there had to be fences around that. What do you do with the trash when this is a layout where every square inch mattered and we kind of missed that. And then the other thing is like, what do people do with their barbecues? You know, it’s like, don’t really want to put them on the porch and risk, you know, creating a fire under the roof. So anyways, there are a couple of little things like that. I think the green, the scale of the spaces is really good. We spend a lot of time like how big is too big? How small is too small? And I really feel like we nailed that really, really well. The subordinated cars, I think people again that don’t really fret over having to carry the groceries love the fact that the cars are out of you.

Jim: [00:39:58] My marketing line was you sit on your front porch, and you look at the green, not your neighbor’s driveway. And, you know, so it’s a very different kind of visual experience. So, the other thing that we kind of, we were trying to be very egalitarian, so the green faces the street, and it faces the river across the way, which had been neglected for years. And so, we spent a lot of money to clean up the river and make it part of the amenity. And now one of the challenges we had was everybody in the neighborhood thinking it was their park. So, coming in and having picnics or bringing their dogs in, but not being responsible for them and stuff like that. So, we had to figure out some fairly low key ways to say this is a private, this is people’s private front yards. You wouldn’t walk. You don’t want people walking in your front yard, you know, be respectful.

Eve: [00:40:45] It’s a wonderful story. So, let me ask you, what was your life before small scale? What did you do?

Jim: [00:40:53] You know, it was almost the antithesis of it. It was big. And when I, I don’t know if you saw my TED talk, but the TED talk was I spent my life doing big projects. I mean, literally around the globe, 25,000 acres in the desert of Nevada, Australia, 3000 acres, 10,000 homes. And I was into community design. Two things were happening. I noticed in every one of those projects, after hours, wherever I was, I went to the cool little nitty gritty alleys and spaces and kind of emerging areas, and that’s where I wanted to hang out was probably the most inspired. And then I would come back to these big master planned projects, and I’d say, how do we get that kind of level of what’s now called tactical urbanism, but place and grit and you know, often talk about we’ve gone from greenfield to grit as kind of the cool thing now, and it’s like, how do you create that? And I would work with these big developers, but they, yeah, they couldn’t rationalize it. Their funders didn’t get it, it never met. And so, I finally got to the point where it’s like, I believe in this. I’ve seen it, I need to try and do it. And my sister once said to me, like, why are you doing this now at your age? And I’m like, well, because if I get to your age and I haven’t done it, I’m going to be really mad at myself. So, I kind of went all in and you know, I mean, it’s the classic entrepreneur story. Second mortgage on the house, couldn’t find financing so went in all myself and you know the story, jury’s still out, but it’s been enormously fulfilling personally and to see the reaction and all the things as you said people tell you that won’t work and then you do it and they’re like, oh my god, why don’t we have more of this? This is so great.

Eve: [00:42:42] I can see you having a lot of fun, it’s inspiring for me. But I have to ask you a question now. This is like loaded. So, in amongst all of that you do, all these community projects, you know about equity crowdfunding, you know that it’s gradually taking its place in the capital stack, although most people still don’t know it. Do you think there’s a role in building communities using that tool?

Jim: [00:43:10] Oh, absolutely. I had no doubt. I think it has not found its stride yet. But I think we’re getting to, there’s enough consistency, coalescing in the conversation that people want something different. They realize, you know, California, the state legislature, there’s been a lot of pretty significant changes to help facilitate different and break through the NIMBYism and the barriers. And I think people are starting to recognize that unless they put their money where their mouth is, they’re not going to get different. And, you know, that’s not going to be everywhere. But I mean, where we are, again, we’re a fairly well-to-do community. I have a couple of partners who’ve invested in River House and yes, they wanted a return. Yes, they wanted to make sure they weren’t going to lose their money, but they were equally interested in doing something to demonstrate another way to do what we were getting and be a part of that change. And I think people want to do that and they’d like to be able to access that in a way that it’s not a $200,000 commitment. It’s Yeah, I’ll put 1000 and I’ll put in 2000. And we hear those stories a lot through the forums, the people who’ve done well, a lot of the times, entrepreneurs, they’re at a point in their life where they’ve done well, they’re well off, and they’re like, you know, I want to I want to help somebody else have the ride that I did. I want to support somebody. I like their energy. I like what they’re doing. I want to help. So, we need vehicles to do that. And I think, yeah, actually you were in Seattle when we did that panel with Kevin Cavenaugh, Lorenzo. And I don’t if you remember the guy who…

Eve: [00:44:51] Oh, yeah, I’ll never forget because Kevin, no one knew if he was going to actually show up.

Jim: [00:44:55] Yeah, yeah. Well, and then he had 80 slides and I said, you only have 10 minutes, don’t worry. And he was like, awesome. But at the, after that panel, the guy that stood up and said, raise his hand and gets up, and he said, look, I am from the institutional capital markets. I absolutely love what you’re doing. I believe so much in this. You do not want to talk to me because we will never get this. And so, there’s a lot of people saying, oh, we need to get the institutional capital. They’re never going to get it. And so, we need another vehicle and the crowdfunding and the people that care. But we do need to get along with giving people the vehicle to invest in their communities and take part in this. They also need to just become more educated about the relationship between the risks they create in the difficulties of approvals, of getting things done, and then how secure their investment is.

Eve: [00:45:44] Yeah, I mean, I think that’s the most difficult thing about this is with crowdfunding, you’re letting in a sea, 97% of the adult population who never had the ability to invest before. So, you have to educate them on the risks of investing, what it means to invest, the role they’ll play, and also real estate. How do you invest in real estate? It’s not a widget. It’s a different form of investment. I think the educational piece is definitely lagging. Okay, one more question for you, and that is you must have something else up your sleeve. What’s next for you?

Jim: [00:46:20] Oh yeah. Well really trying to say formalize the forums, they’ve been a work in progress. But I really want to see those continue to grow because they built so much momentum. And my dream is a really big kind of national seminal conference on small scale development. That’s 200 people in the coolest city that’s all around small you know, toying around with the idea Savannah, and really brings together, because there’s a lot of people working in this space and what’s already a fragmented business is further fragmented by everybody having their own little megaphone and not coming together.

Jim: [00:46:58] So that’s one thing. The other thing that I’m working on is a program called Small Coach. And a big part of my journey over the last six years has been participating in an entrepreneur’s coaching program called Strategic Coach. And it’s been really, really helpful in terms of not only tools around business and realizing your goals, but also balancing your life. But the one thing that I miss is it’s kind of industry agnostic. So, I’m trying to develop a curriculum for real estate entrepreneurs that is not just like raising money and getting through construction and entitlements and all that kind of stuff. But also, how do you manage your life? How do you set your goals? How do you embrace the fact that you’re an entrepreneur and make the most of it and really celebrate that? So, that’s hopefully we’ll launch here in the next the next couple of months. I’m hoping to get it off the ground in September.

Eve: [00:47:52] Well, this has been delightful. We should have really done two podcasts. I’m sure there’s a lot more to talk about.

Jim: [00:47:58] I told you I talk a lot.

Eve: [00:47:59] But we’re going to talk more offline. And thank you very, very much for joining me.

Jim: [00:48:04] Yeah, thanks for the opportunity. I hope to see you in Nashville in November.

Eve: [00:48:08] Definitely will. I’m going to make it happen.

Jim: [00:48:10] Very good.

Eve: [00:48:17] Jim Heid has found his tribe. Slowly but surely, he is bringing together like-minded thinkers with his forums, his book and his real estate projects. His path from big to small is inspirational.

Eve: [00:48:39] You can find out more about this episode or others you might have missed on the show notes page at our website RethinkRealEstateForGood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music, and thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.