Rethink Real Estate. For Good.

Finance

From $124,000 to $350,000.

Maybe this is not super big news to you, but it is to me.

In plain English, there’s a recommendation on the table that if approved by the SEC, will permit small businesses to raise up to $350,000 without the burdensome financial review requirements that currently exist.

This promises to be a momentous change for the small-scale developers who come to my SmallChange.co platform seeking to raise a little capital from friends and family, neighbors and enthusiasts. It will simplify and speed up the process for them AND reduce their costs.

And all of this inches us towards a more level playing field, making it a little simpler for small, women and minority developers to get a foothold in the very un-level landscape of real estate development.

A big thank you to the SEC Small Business Capital Formation Advisory Committee for pushing this forward. Here’s their recommendation.

Public Assets.

Former U.S. Congressman Ben McAdams is the founder and CEO of the Common Ground Institute, an organization supporting jurisdictions working to create revenue and other public benefits from government-owned real estate through public-private partnerships. He is also a Senior Fellow for the Government Finance Officers Association, where he leads the Putting Public Assets to Work Incubator, working with jurisdictions across the U.S. to support their development of public asset management strategies.

From 2009 through 2020, McAdams served as a Member of the United States Congress, a Utah State Senator, and Mayor of Salt Lake County, where he represented 1.1 million constituents and balanced a budget of $1.2 billion. In his public service, McAdams brought Republicans and Democrats together to find solutions to address homelessness, improve education and health outcomes, and promote evidence-based decision-making at all levels of government using innovations, including the first social impact bonds to achieve measurable outcomes for the public good.

Prior to elected office, McAdams taught Securities Regulation at the University of Utah Law School and was an attorney with Davis Polk in New York and Dorsey & Whitney in Salt Lake City, where he specialized in public and private securities transactions for U.S. and international issuers.

Read the podcast transcript here

Eve Picker: [00:00:13] 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: [00:00:48] As mayor of Salt Lake County a decade ago, Ben McAdams was frustrated that there wasn’t $500,000 in a $1.3 billion annual budget for a promising early childhood education program. Not one to permit defeat, he decided to map the value of the city’s underutilized real estate, and that yielded an impressive number. All of a sudden, the city had $45 billion on its balance sheet. I found out there is actually money under our mattress Ben says. It’s real estate that is just forgotten. Since then, Ben has spent time in politics as mayor, senator, and congressman, but now he’s launched an incubator to help cities map their public assets, much like he did a decade ago, providing a path to solve issues that need money like affordable housing and homelessness. Every city should listen in.

Eve: [00:02:11] Hi, Ben. Thank you very much for joining me today.

Ben McAdams: [00:02:14] Eve, it’s so great to be with you.

Eve: [00:02:15] So the common theme in your life for many years was politics. You’ve been a mayor, a senator, and a congressman, but you started off as a securities attorney. How does a securities attorney become a politician?

Ben: [00:02:29] Well I am passionate about public service and really, from early days in college, wanted to be in a position that I could give back to a community that I love. And so, I went to law school and also found a passion for corporate finance. So, I went to a firm in New York. I did a lot of work in Latin America with issuers who were raising money in the US to do big projects, typically in Latin America. And I found kind of an alignment between my passion for public service and finance. And what I saw was the power of finance to transform communities for the better. So, I did a lot of work in Brazil and with telecom and what we saw, I’d spent some time in Brazil previously, and when I was there nobody had a telephone. And we saw because the cost to install a landline to a home was about $5,000, and nobody could afford that upfront cost to install a landline. And then cell phones come along, and people are raising money to just skip the landline process and go straight to cell phone.

Ben: [00:03:32] And I saw in Brazil, everybody went from not having a phone to having a telephone and what that meant for their productivity, for their ability to earn money, to stay in touch with family and loved ones was transformative. And so, we found an alignment between the power of finance to do good and to lift people for the better. And so, I spent about five years working in, as a securities lawyer, I taught securities law at the University of Utah. And then there came a chance to transition to directly public service. So, I went to work for the mayor of Salt Lake City as his director of government affairs. And in that capacity, I found that somebody with a good finance background was able to add a lot of value to government. We were able to, you know, figure out how to do the Rubik’s Cube of some pretty complicated public projects that we were trying to get done. And I think that was then my life mission. I found this passion for bringing a knowledge and understanding of private finance to the world of social impact.

Eve: [00:04:34] So, after quite a few years in politics, you have now launched something called the Putting Public Assets to Work incubator. So first I want to ask what are public assets?

Ben: [00:04:47] So public assets can be any number of things. You know, it can be a mass transit system that we’ve built. It can be an educated population. It can be, you know, public safety infrastructure. But when I was mayor and looking to, so I served first for the city of Salt Lake City, and then I was elected to the Utah State Senate, and then I was elected Salt Lake County mayor and I served for six years as mayor. And that was my favorite job, because I was really in a position to impact my community for the better. And one of the things that I found is that we knew, we know empirically from numerous studies that have been done globally, that it’s less expensive to educate your population than it is to incarcerate. It’s less expensive to treat somebody with addiction than it is to watch them cycle through a homeless services system. It’s less expensive to, you know, to maintain a road than to let that road fail and then come in and rebuild the road. But what frustrated me is, while we knew these things would save taxpayer dollars over the medium term, we just didn’t have the money to do it. And I said, there’s got to be a better way. We know we are acting in a way that’s going to cost us more money in the long run. We’ve got to figure this out. So, I started looking at our budget. And, you know, government budgeting is really built around cash flow. We project how much money we’re going to bring in from taxes and fees, and then we decide where we’re going to spend that. And what we ignore in government budgeting is our balance sheet.

Ben: [00:06:13] What assets does government have? How much are those assets costing us to maintain and what opportunities can we derive from those assets? So, I started focusing on the balance sheet aspect. You know, if we have, if we’re able to better utilize our mass transit system, that means and to better utilize that asset means we’re building fewer roads, maybe fewer stormwater systems and water and electrical systems. We can actually save money by better utilizing existing assets. Pretty quickly we came to what I think is the biggest asset class of government. It’s real estate. And, surprisingly, government has very little understanding of what real estate they own, what it’s worth and because of that, they don’t make good strategic decisions about how to manage their asset, how to minimize costs and maximize value. So, I said, you know, as a county, we are spending over $1 billion a year. We should have a handle on what we own and what it’s worth and start thinking about that as a way to minimize expense and maximize value. So, we did an inventory. We hired Urban3, who came in and did an inventory for Salt Lake County, helped us to identify all of our assets and hone in on the value. And what we found was shocking. So, we said we’re going to exclude assets that have no commercial value. We excluded our watershed, our, you know, our ski terrain is sacred here, so we don’t want to touch the ski terrain. Of course, our airport runway you’re not going to, that’s going to just be what it is. It’s an asset of a different…

Eve: [00:07:44] So you’re talking about the land, even the land. You just didn’t include those assets that you’re not going to touch.

Ben: [00:07:48] We didn’t include those. So, we looked at land that had commercial potential in addition to or instead of government value, so we could make better strategic decisions. What we found was in a county that’s about 500mi², we found 44mi² of commercially viable government owned land that was not on the tax rolls. We estimated the value of that was about $13 billion. This was 2017. So, you know, it’s about 10% of our land mass. It’s about ten times our annual budget that’s tied up in non-producing land. You know, some of these things we’re still going to want them to be non-producing. A library serves a function. But we started thinking, you know, could that library in an urban area, it’s a one story building with a big parking lot, instead of just being a rundown, dilapidated library surrounded by ten story office and residential, could we think of a library as a ground floor retail, so to speak, of an office building and reduce the cost of owning and operating that facility and actually maybe even generate some revenue off of it if we were able to activate the land.

Eve: [00:08:54] Let’s just go back a bit. So, these public assets that you found, like the library, is a fascinating example. What are some other examples? Not just vacant land, like not just abandoned houses, right? It’s way more than that, right?

Ben: [00:09:07] Yeah, vacant abandoned homes is a big one, but that comes with some other policy challenges around it. You know, governments think in terms of decades and centuries, and private sector thinks in more in terms of, you know, 7 to 10 years. So, we found a lot of parcels that 50 years ago, 75 years ago, we made a decision. Maybe we were widening a road and so we did some eminent domain to condemn some homes to acquire parcels. And we will widen that road, but we didn’t need the entire parcel. So, you have kind of the scrap that’s off to the side.

Eve: [00:09:38] Right.

Ben: [00:09:38] I can think of, you know, here in Salt Lake we have a major roadway, you know. So that roadway is a valuable asset. Transportation assets are expensive and desirable. And on the side of that roadway, there are these fantastic parcels of land that have signs on it that say property of the government, you know, and we go out and we cut the grass, and we clean up graffiti. And they just have been sitting there for decades being maintained and not being activated. So, there are not vacant abandoned homes but vacant parcels that the government is banking for another use or just kind of maintaining but has forgotten.

Eve: [00:10:14] Oh, interesting.

Ben: [00:10:15] So that’s one asset class.

Eve: [00:10:17] I just have to hop in. I bought one of those little abandoned pieces of property in Australia. I’m doing a project there with my sister, and there was this tiny little laneway that we really needed to make the project. It’s a very dense urban site. The city didn’t even know they owned it. They, we paid them for it in the end, quite handsomely. But they didn’t know they owned it. No one had a record of it anywhere. It was a very interesting exercise in a very desirable neighborhood.

Ben: [00:10:47] Surprisingly, or maybe not. But that scenario where government does not even know that they own a valuable parcel of land, we’ve seen it over and over again in this work. So, you know, helping them understand what they have and then make strategic decisions about that is a big part of putting assets to work. To your point, it’s not just the vacant parcel of land. Maybe it’s the parcel of land that is being used. It’s the library, it’s the senior center. It’s the parking lot adjacent to a rec center that you know could be used. You still need parking, but in some of these urban areas, does it really make sense for government to have a surface parking lot? The private sector’s concluded that it doesn’t. Right?

Eve: [00:11:24] The highest and best use, yeah. Yeah. We’re working with a developer who actually made a deal with Alexandria to purchase and redevelop three surface parking lots, and he’s building 50 housing units and putting robotic parking in place and expanding the parking, I think by three times, all on those three lots. So, I think that’s a really good example of what you’re talking about, right?

Ben: [00:11:50] They’re getting everything they wanted, right? They’ll still have parking there, but they’re just bringing property on the tax rolls and giving people a place to live.

Eve: [00:11:57] Exactly.

Ben: [00:11:57] That’s close to transportation and transit.

Eve: [00:11:59] Right? Right.

Ben: [00:12:00] It’s checking so many boxes instead of just one.

Eve: [00:12:03] When you uncover the value of a city’s assets, how can you leverage them? On a developer’s balance sheet obviously, their net worth is what banks look at and they want to make sure that they have enough money to support a project. If it fails, how does it work in government?

Ben: [00:12:19] Evidenced by the fact that we had $13 billion of latent real estate it doesn’t work, right? So, you know, every government has a story of where they’ve taken a public asset and done a public private partnership and activated that asset. So, there are exceptions to that. But these exceptions are few and far between. It’s, you know, one every several years. And when I saw that we had $13 billion of opportunities, it dwarfed the, you know, the one opportunity that we could think of three years ago where we did something. And look, we did do, we are doing interesting things and governments are doing these, but how do you systematize it and scale it that it’s not just something that happens when somebody knocks on your door, and then they’re persistent enough to wait out a government process that takes three years. These are the examples that are successful. How do we make this the norm of what we do not an exception? I’ll tell you, when I taught securities law, I would start my class with a kind of a dumb joke. I would say two economists are walking down the road and one economist says to the other “hey look, I think I see a $10 bill lying on the ground up ahead”. And the other economist says “you’re an idiot. There’s not $10 lying on the ground up ahead. If there was $10, somebody would already picked it up”.

Ben: [00:13:31] And so I think about this with the public assets, you know. I see $13 billion under the mattress of government. Is it a mirage? Is it really there? And what are we missing? Why is it there? And I think there has to be an explanation for why the market is failing in this. And I think the first explanation is government doesn’t even know it’s there. And when they do discover it, then the second explanation is the process to unlock that is so cumbersome. So, I’ll give you an example, a different government outside of my own that we were working with in this Putting Assets to Work. They have a salt pile, you know, governments when it snows, they need to de-ice their roads. And 75 years ago, they put this salt pile in an industrial corridor on an industrial rail line. Smart place to put it on a kind of a low value parcel of land. And then they go into autopilot. The salt pile has been there for 75 years. They use it. They know, you know, somebody knows that it’s there. We are looking at this and we say, do you realize your salt pile, that industrial rail line is not an industrial rail line today? Like many governments are doing with rails to trails. It’s a trail. It’s some of the highest value real estate in your city. And your salt is sitting on land that’s worth $10 million.

Ben: [00:14:44] If you would just pick up your salt and move it a couple of miles away, you’ve got $10 million in an area that has incredible affordable housing needs. So, government can decide, do you want to pocket $10 million by selling the land? Do you want to roll up your sleeves and become part of a public private partnership and create some affordable housing? All of those are options. And so that government is doing exactly that. But I think if so many other governments where once they’ve identified that opportunity, the next step would be to turn to the public works director and say, okay, can you do a public private partnership to create some affordable housing? And the public works director would say, are you kidding? Like, I’m overworked, underpaid, and I don’t know the first thing about doing a multifamily affordable housing development. And you want me to do that on top of my job? And so that starts the process of five years of it’s on a back burner but the public works director is trying to write an RFP. They have to maybe carve out money out of their budget to hire a consultant to help them write the RFP. And it just, the systems of government…

Eve: [00:15:48] Oh, I know I’ve been there. Most of my projects have been very small public private partnerships. So, I totally understand the pace of things in government.

Ben: [00:15:57] Yeah. And so most private developers, in your perspective, just say it’s not worth the effort. There’s a, it’s a great parcel but down the road there’s a parcel I can just buy in a few months and be done with it and be on my way with my project. I can’t spend three, five years trying to unlock this. And so, where the market’s failing, why there’s still that $10 bill on the ground is first, government doesn’t know that it’s there. Private market and the neighbors know that it’s there but the process for talking to government, to engage with them and to form a partnership with them is just so exhausting that nobody’s doing it. And so that’s a couple of things.

Eve: [00:16:31] It’s exhausting. And then I wonder what this partnership looks like. Because I’ll give you an example of a project I did that, hearing what you’re saying, I think the government would have, if they had approached it differently, they would have something of much greater value now in their pocket. I redeveloped a building that’s 30,000ft² and had been vacant for 15 years in a largely Black demographic. I responded to an RFP just like the one you talked about. Spent a lot of time putting my response together. Was apparently the only developer who responded. And eventually the city sold me the property for $1,000, and it was really a liability for $1,000. They also helped in a number of ways with loans and deferred interest payments and matching facade grants, the sort of things they normally have in their pocket. But now we’re like 20 years later and the building is fully occupied, bar Covid, which rocked the boat a little bit and worth a lot of money. And I often wonder if they had said, look, we’ll give you the land and we’ll give you these special grants, but we want to be a partner what they would have today.

Ben: [00:17:40] That’s right.

Eve: [00:17:40] You know, they would have a part of a project or building they basically gave away because that neighborhood has, a little unfortunately, gentrified. Just a few blocks away we have the Google headquarters and Facebook, and it’s very close to the universities. It’s very desirable. Right across the road there’s very expensive apartments that have been built. And I mean, no one could have foreseen that, but no one really. They didn’t have the belief in the property that I had, you know. So how do you change, how do you flip that switch?

Ben: [00:18:14] Well, we have some tools that we have developed that we are advising governments to try to unlock this, because if the tool is look to your public works director, look to your library director to figure this out that doesn’t work. But I think you’re right that also just selling it for, you know, long term lease for a dollar a year, selling it for $1,000, government’s leaving money on the table and the private market’s probably fine with that. But if you want government to not just do this once every five years, but maybe make it a part of what they’re doing every day and to accelerate the pace of these partnerships, there has to be a different approach. But government has some things going for it that the private market doesn’t have. First of all, we own these land, these parcels outright. We have been sitting on them for decades and there’s no expectation to generate revenue tomorrow. The private market has to look at a IRR. How much are you going to make per time, right? And government, I think government should look to say can we, are we using tax dollars or taxpayer assets well? But we can say we can go to a partnership and say we want you to pay a market value for this, but we don’t need that market value up front before you do the development.

Eve: [00:19:27] Yeah, it’s a patient wait.

Ben: [00:19:30] We can contribute it to…

Eve: [00:19:31] Patient capital.

Ben: [00:19:32] Patient capital. Yeah, we’ll contribute it. We understand that you’re going to have bank debt that’s going to be very sensitive to time. You may have other equity investors that are very time sensitive. So, we’re going to negotiate some benchmarks. And once the project has stabilized and you’re paying your debt and you’re paying your investors and negotiated rate that, you know, then we’ll be in the waterfall, but we can be towards the back of the waterfall. And so, government can say we’re willing to absorb that time risk that, you know, we’d like to get paid, but if it takes five years or seven years, we’re willing to be patient. It’s better than what we’re doing right now, which is spending money to let it sit, you know.

Eve: [00:20:10] Right.

[00:20:10] And so there’s some tools that government can bring to the table. So, to capture value but also…

Eve: [00:20:15] Sometimes in those instances I’m thinking about this building. The fact that I renovated the building, redeveloped it, meant that other developers came in because I just happened to like being in underserved neighborhoods. I like the challenge of those projects, and it’s where I prefer to work. I want to do something that’s meaningful. But other developers are waiting to see where something’s already been invested. And so, you know, maybe government’s thinking, well, we’ll give this one away, but we’re going to get other ones. As a result.

Ben: [00:20:45] They have the ability to do, to lead out, to maybe do some philanthropic investments with their land, because, you know, their baseline is zero. So, absolutely.

Eve: [00:20:56] Okay. So interesting. So how does the incubator work? The Putting Public Assets to Work incubator?

Ben: [00:21:04] Yeah. I was mayor. I was then elected to the United States Congress. I served only two years in Congress. I lost my re-election in 2020. So, I still had a passion for public service, a passion for finance, and came back to this idea that I’d been working on as mayor of public assets. And I just said, I know there are billions of dollars under the mattress of government. I know that if we can unlock it, the amount of good we can do in our communities, you know, that can, to your point, it can catalyze growth in an underserved neighborhood. It can form affordable housing. But maybe what you’re doing is just looking to maximize revenue into government to then support childcare or, you know, childcare vouchers or investing in homeless services or investing in clean and renewable energy. There are so many different things you can do with that asset once you unlock it. So, I said, this is where I want to spend my time, is figuring out how to help governments unlock the value of their underutilized assets. So, I teamed up with the Government Finance Officers Association, GFOA. They’re a membership association, you know, pretty much every city, county, school district, the CFO of those government entities is a member of GFOA. And so, we worked with GFOA. And I said, look, putting assets to work should be part of every government’s finance. Let’s start working with GFOA member governments and helping them and others but helping them to unlock the value of their real estate. So, we started Putting Assets to Work incubator.

Ben: [00:22:34] We’ve now worked with about 15 governments, mostly cities and counties across the country. All of them saw what I saw when I was mayor. They’re all sitting on billions of dollars under the mattress, and they have challenges to activate that. So, we help, we go in, we help them identify their assets. We help them see what it’s worth. You may have an asset that is in the far flung reaches of the county that you would say, put on a back burner for now, but we help them identify 10 to 15 assets that they should take action on immediately that are really that proverbial, the salt pile. So, and then we work with them to develop some policy tools to help scale it, to make it not a one every once every five years initiative, but to make it part of what they’re doing. So, the concept that we have there is we go in, and we serve as a, what we call a municipal property advisor. And we say, you know, once we’ve identified the asset, we would like to represent you in structuring a transaction. And we’re going to do this at no charge or very little charge to the government. You know, the private developers will pay a finder’s fee for this. So, our model is built on passing that fee onto the private developers. But if we can say, look, we can clear all of this government red tape, all of these hurdles to give you a parcel that is in a prime location in a great downtown area that has already…

Eve: [00:23:55] Hell yeah, I’m in!

Ben: [00:23:56] …cleared the boxes. Yeah. And then, you know, and here’s our fee, you know. But we pass that not onto government, but onto the private sector. So, all of a sudden, the library director, the public works director, we say we don’t need you to model a multifamily real estate development. Just tell us what you need. You need us to find another parcel for your salt? You need a library that’s 20,000ft², and you need so many parking stalls. Okay, we’ll take your inputs, and we’ll work up a model, and we’ll bring it back to you, government to sign off on. And if you sign off, we’ve got private developers who will, you know, also come in and pay for the architectural work and the design work to get these projects shovel ready. All of this government doesn’t need to pay for that. They just need to create a process where they can get out of their own way and still maintain what they want out of the land. And then and then let the private sector do what they’re going to do.

Eve: [00:24:48] So you said you’ve worked with 15 cities. Can you mention some of them?

Ben: [00:24:53] Yeah. I think some of the ones that have taken this work and are now doing amazing things. City of Atlanta. The mayor of Atlanta, mayor Dickens, said he wanted to build 20,000 affordable housing units. That’s a huge goal. But they identified all of these public assets that can come in and be part of the capital stack to start lowering the cost of development and consequently insisting that those developments have affordable housing. We worked the city of Cleveland. They’re trying to create jobs. And so, they know that they have, they’re actually losing population. So affordable housing is not at the top of their to do list. It’s clearing space. You know, they want to bring in employers and they said we need parcels that are 30 acres or larger. And they did the survey of the entire city of Cleveland and said that parcels that could work for that they had one in the city of Cleveland. So, they said, we’ve got to do some work to assemble parcels, remediate any environmental contamination, and make these available. So, Atlanta and Cleveland are two that we’ve worked with. Of course, you know, given my roots, we’ve worked with Salt Lake City and Salt Lake County. We are doing some work with the city of Annapolis, Maryland. Chattanooga, Tennessee.

Eve: [00:26:02] So pretty big cities.

Ben: [00:26:04] Yeah. Austin, Texas. And some small ones, too. And some small ones, you know, Sugarland, Texas is another one that’s doing some really innovative things.

Eve: [00:26:11] I don’t suppose my city, Pittsburgh is on the list, right?

Ben: [00:26:15] Not yet. We’d love to talk to them. Although they have done some interesting things thinking about their assets as well, you know.

Eve: [00:26:22] Our Urban Redevelopment Authority has always been at the forefront, I think. Yeah, they’ve worked a lot at clearing some very large vacant assets called steel mills. You know, they’re very good at that. And they were a fabulous partner in all my projects. So, yeah. So, do you have a waiting list? Do you have cohorts that you take through? I mean, how does it work?

Ben: [00:26:44] We do. So, we have cohorts. We are preparing to start with our third cohort. So, you know, we think the, the best size for a cohort is about 4 to 5 jurisdictions, and it takes us roughly 6 to 8 months really depending on the speed of government.

Eve: [00:27:00] Doesn’t work fast.

Ben: [00:27:02] Employees have a busy schedule. Yeah. So, and we understand that we work with their time. So, we do most of the workload ourselves. But we’ve got to get into their data and sort through their data. And we need some collaboration with them, or we need them to look over our work before we go public with it. We want them to give a trained eye to tell us what they like. So, it takes about 6 to 8 months to do a cohort. We’re launching a cohort over the next couple of months. We have, almost full, we actually have one spot left for a government to join with this cohort. You know, we do 4 to 5. So, we’ve got four, but we’re looking for that fifth one. And then we’re also soliciting interest for our fall cohort with putting assets to work.

Eve: [00:27:41] It’s fascinating.

Ben: [00:27:42] So yeah, if any governments are interested, we’d love to talk to them.

Eve: [00:27:45] You must get pushback, right? There must be plenty of places that say, why on earth would we do this? We’re stuck in our ways. We don’t want to change.

Ben: [00:27:55] Yeah. No, a little bit. I think you get some pushback from some of the staff that say, you know, if I’m that public works director and I say my budget’s $100 million a year, I don’t want to spend my time on, you know, this salt pile just. It’s fine. It works for me right now. What’s the reward for thinking innovatively? And so oftentimes, what we look for when we’re deciding who to admit into the cohort, we want to see a mayor, a council, some city managers who are willing to push it a little bit to say, no, this is important. We want to be better stewards of taxpayer assets. And so, we want to see some leadership from the jurisdiction. Sometimes we think it’s our job to have some uncomfortable conversations. One jurisdiction we worked with, we saw that they had an abundance of parks and open space that were poorly maintained. And they probably had like, I’m a as a mayor, I’m a big supporter of parks and trails and open space. But if they’re too many and underutilized by the public, we said, maybe, you know, you should think about, you know, a slight reduction in your parks and go for quality over quantity. And, you know, that’s always a hard conversation to have. And we think it’s our job to like to provoke that. So, we encourage them to look at their parks parcels. And do you really need a pocket park across the street from a pocket park or can we rethink how you’re using those assets? So, you know, there are some uncomfortable conversations that we think it’s our job to have.

Eve: [00:29:25] So, what’s been the biggest surprise for you in this work?

Ben: [00:29:28] Well, I think my biggest surprise was to find that what I discovered in Salt Lake County was not unique. It is every, 100% of the governments we’ve worked with. And many governments say, look, we don’t have any vacant assets. We’re on top of it, and we’ll go in, and we’ll find them everywhere. It’s, you know this this concept actually isn’t new. It’s done pretty regularly in Europe and Asia when they think about, you know, the city of Hong Kong built their entire mass transit system without tax dollars by simply saying, we know that when we put in a transit stop, the land around the transit stop is going.

Eve: [00:30:05] Increase in value.

Ben: [00:30:06] Increase exponentially in value. So, they just were thoughtful about how they built a transit system and paid for their transit system with the value that the transit system created. So, it happens in Europe and Asia. I think it just doesn’t happen in the US because our governments are so much more fractured. You have cities and counties and school districts and housing authorities and transit authorities. And, you know, we have a mosquito abatement district here that, you know, and to get all of these entities working together is hard. And so, I think we have to develop new tools that they don’t need in, you know, in a jurisdiction where there’s just the federal government and it’s very hierarchical and aligned. So, you know, it’s been a surprise that how many assets we have and how, and what incredible opportunities there are to unlock it.

Eve: [00:30:55] One other big question, how do you plan to scale this work? What are your plans?

Ben: [00:31:01] Yeah. Well, first of all, I would say we hope people copy us. My hope is that ten years from now, this is the norm of municipal government. Everybody has a municipal property advisor or 2 or 3 who are on tap with the government, who are making unsolicited proposals to government to say, hey, we’ve noticed you have this parcel, and we’d like to help you think about how to use it better. And that government is well versed in saying, okay, let’s have that conversation, you know, and here’s what we want. And if you can hit these objectives, then we’re game. So, I would love people to copy what we’re doing and to make this the norm of municipal government. Because if we do, so many communities are going to be benefited. We have the capital to solve our homelessness crisis, to solve our housing affordability crisis, to transition to clean and renewable energy. We have the assets to do that. It’s just a matter of figuring out how to activate those assets.

Eve: [00:31:53] It’s really fascinating. Ben, thank you so much for joining me. I can’t wait to see where this goes, and I hope my city is listening.

Ben: [00:32:03] We’d love to talk to them.

Eve: [00:32:04] Okay. Thank you so much.

Ben: [00:32:07] Thank you. Eve.

Eve: [00:32:20] 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 Ben McAdams

BREIF. Boston Real Estate Inclusion Fund.

Kirk Sykes is Managing Director of Accordia Partners, LLC, a Boston-based real estate investment and development company. Accordia executes large scale public-private real estate projects with a goal of financial and socially responsible investing success. He was previously the head of Urban Strategy America Fund, L.P., an urban investment, development, and redevelopment commercial real estate equity fund focused on investment returns, economic development and environmental sustainability.

Mr. Sykes combines his professional training and hands-on experience in the areas of finance, investment, development, design, and construction to create customized responses to the complex issues of urban real estate development. His approach is grounded in the bottom-line driven perspective gained during his tenure as chairman of the Federal Reserve Bank of Boston, and other roles that included serving on Fleet Bank and BankBoston’s Community Bank Advisory Boards. He currently serves on the Eastern Bank Board of Trustees and Risk Management Committee and on the Board of Directors of Apartment Investment and Management Company. He was formerly a member of the Ares Commercial Real Estate (NYSE: ACRE) Board and Compensation Committee.

Mr. Sykes has attended the Harvard Business School Owner/President Management Program, the MIT Center for Real Estate Development Commercial Development Executive Program, and L’Ecole Polytechnique in Paris. He earned his Bachelor of Architecture from Cornell University.

Read the podcast transcript here

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.

Eve: [00:00:52] Kirk Sykes is managing director of Accordia Partners, a Boston based real estate investment and development company. Accordia develops large public private real estate projects. Kirk was previously the head of Urban Strategy America Fund, perhaps one of the first urban real estate equity funds focused on the triple bottom line. And that brings us to this podcast. Kirk has had a highly successful career, but that is not enough for him. He has always given back. And for Kirk, that means helping the black community he is part of access capital and investment opportunities that have historically been unavailable to them. Listen in to learn more.

Eve: [00:01:48] Hello Kirk. Thank you so much for joining me today.

Kirk Sykes: [00:01:52] Eve it’s a pleasure to be with you.

Eve: [00:01:54] So you’ve had a pretty rock star career in real estate, founding, owning and managing companies in the financial services, real estate and architectural sectors, and even serving as the chairman of the board of the Federal Reserve Bank of Boston. But all the while, you’ve been building your profile. You’ve made inclusion for BIPOC and women in real estate a lifelong mission. My first question for you is a tough one, but how does it feel to be a black man in real estate today compared to, say, 25 years ago?

Kirk: [00:02:27] Well as we all know all real estate is local so I’ll answer that from the perspective of being in the Boston market. So, I would say it’s better in Boston. And I didn’t know that I would say that when I first came to Boston 40 years ago. But there has been a substantial improvement from the time that I first came to this market.

Eve: [00:02:53] That’s good to hear, because, you know, my vivid memories of ten, 15 years ago in Pittsburgh were entering a real estate event room and literally feeling like the only woman there. It was a pretty elite club. So, do you think we have come even vaguely close to equality?

Kirk: [00:03:15] You know, it’s hard to say what equality is. Commercial real estate has been notoriously inequitable, you know, due to the demands in terms of capital and access and going back to redlining and even where the banks’ insurance companies wouldn’t lend to people of color and also to women. So, I think we’re getting closer in equity in many ways. I think there are a lot more people, capable people, in the market that I’m in than there were when I started. I was one of a few, or a handful, and now I’d say I’m encouraged by the number of folks that have shown up. I can talk a bit about how we got there, if you like, at some point.

Eve: [00:04:09] Oh yeah. No, I’d like to know. And my next question will be what still needs to be fixed?

Kirk: [00:04:14] Yeah. So, a few things in the Boston market changed in the last 20 years. One of the most significant was something called the Massport Model. So, a public entity, the Port Authority decided that it would make inclusion by women and people of color in all aspects of projects, 25% of its selection criteria for who got to develop sites they controlled in Boston Seaport, which became very valuable over the last 20 years. That process has evolved and gotten better and has led us to BRIEF which we’ll talk about a little later. But I would say I never imagined Boston would be the leader in change in public disposition of valuable real estate assets. But it has evolved into that. And that Massport Model has now expanded to be part of the disposition and expectations of the city as a whole, and not just the state. So that’s quite an accomplishment for Boston.

Eve: [00:05:32] It is. So, it’s gone from being an unusual idea to something that’s sort of part of the fabric of doing real estate in that area, by the sounds of it.

Kirk: [00:05:42] And it’s continuing to evolve. So now there is a request from the city on every development project that developers disclose what they are doing in terms of inclusion and equity, resiliency and affordability. And it is presumed that that may evolve further to be more than just a voluntary disclosure. So, I think the message is coming across that if you want to get approved or entitled to build a significant real estate asset, you need to be doing meaningful things in terms of transformation.

Eve: [00:06:20] So how? I mean, at least in that area, how close are we to equity? Like, how far do we still have to go? You know, you said you’ve been working on this for 25 years. Is it another 25 years? Is it around the corner?

Kirk: [00:06:35] Well, it’s a diverging trend line, isn’t it? If you look at opportunities and the number of people able to execute them. And that’s unfortunately related to access to capital in many ways because there isn’t sufficient accessibility to be in a position of controlling projects, not just to invest in a project, it’s who’s in the decision making position to leverage those projects to be transformational in terms of labor, in terms of occupancy, in terms of, you know, affordable retail, you know, all the transformative things that come along with control are so important. And if, by way of your question of equity, it’s a broad question. In terms of how many people will be able to be, able to own valuable commercial real estate assets, aren’t we playing a 400 year catch up game?

Eve: [00:07:38] Probably, yes.

Kirk: [00:07:39] Closing that gap.

Eve: [00:07:41] Yeah

Kirk: [00:07:41] But there is reason for optimism. When I took over Real Estate Executive Council in the early 2000s as the preeminent organization of African American real estate executives in the country, it grew from 30 to 70 people, but now it’s 250 people. So, that seems to be exponential growth and something to celebrate.

Eve: [00:08:05] Right. Although I have to say this, and people have heard me say this before, when I look at the investments made by VCs in 2023 versus 2000, nothing has changed. I mean, you’re looking at companies, you know, women-owned companies, 2% of the investment dollars, minority-owned companies, 1% of the investment made during that year. That feels to me like we’re never going to get anywhere.

Kirk: [00:08:37] It’s easy to be disheartened and it’s hard to continue in the face of the challenges. But, you know, you mentioned venture. I think something has changed. I have the good fortune to be the father of the founder, one of the founders of black VC and, BLCK VC didn’t just try to promote people going into venture as investments, but creating an ecosystem where BIPOC and women venture platforms could be launched. So now, while the numbers are still pretty small, you know, I think when Sydney Sykes went to the Valley after Stanford Business School, it was 300 folks of color in venture platforms. Probably hasn’t gone up a lot, but there are a lot more people nationally in that ecosystem of venture investing platforms which didn’t exist before black VC. So, I’m encouraged, I guess, and I’m an optimist. I’m a developer, I got to be an optimist.

Eve: [00:09:40] I tend to be discouraged and encouraged in cycles, you know, with my platform. Small Change. What I’ve seen in that, the world of democratized investment opportunities is that there’s a very large percentage of women and minority owned businesses looking at that tool as a way to startup businesses. And I think that will eventually Sort of become part of the status quo. So that’s also I think a check mark, right?

Kirk: [00:10:07] Yeah. That’s true.

Eve: [00:10:08] Okay. So, what initiatives in particular have you tackled over the years in an effort to move this needle?

Kirk: [00:10:15] Yeah, interesting. You know, I’ve had a few hats, as you’ve mentioned, from architect to developer to investor. So, I guess it depends on which hat I’m wearing. But I like to say I’ve built community with a pencil, a dollar and a brick, and building community is important to me. They’ve all worked well at different times. So, if I were to point to some specific opportunities or, I should say, initiatives, going back to the 90s we changed the point system on the largest highway construction project in America, the Big Dig, $20 billion.

Eve: [00:10:56] Oh, I remember that.

Kirk: [00:10:57] But we found out people were winning contracts by a very few points. So, when we gave value and attention to including first time and diverse team members or companies, it automatically, out of greed, kind of propelled opportunity for those companies to grow. In 2000 we got involved with developing the first African American owned branded hotel in New England. And it was in an Empowerment Zone. And we learned how to use Empowerment Zone financing and tax preferences to create the most diverse workforce, in terms of construction and union labor. The first African American general manager, a hotel staff that was 98% people of color, mostly women. So, leveraging the Empowerment Zone objectives to create change. And then coming into early 2000s with the launch of Urban Strategy America Fund, which I started, which was sort of the early socially responsible investing private equity strategy, which included all the banks and a number of institutional investors and pension funds, we created change in terms of keeping track and measuring investment with women and people of color and transformation of communities and we found investors that wanted to invest in that. And so, you know, I could keep going, I guess what the theme is that over the years, not only the initiatives have changed but the tools required to create change have changed. And so, I keep trying to evolve to stay one step ahead. And now with the BRIEF vehicle we’ve launched with Small Change, we’re trying to figure out how to make large scale commercial real estate opportunities that typically don’t see commercial real estate investors out of the diverse communities more available and accessible. So, thank you for helping us with that.

Eve: [00:13:15] Oh sure. Well, it’s been a little bit disappointing in some ways, but we can talk about that too. But let’s talk about that BRIEF and what and who is BRIEF and what inspired it.

Kirk: [00:13:26] BRIEF, Boston Real Estate Inclusion Fund, kind of came out of that evolving leadership in Boston to want to create opportunities for people of color and women to invest in some of the growth that’s happening and has been happening specifically around the life science industry, but in other industries as well. And so, three partners came together. We were once competitors and, you know, we joined up to identify commercial real estate investment opportunities in the city and then bring retail investors together with Basis Investment Group. And Basis as the largest woman of color owned platform in commercial real estate, having done about 6 billion, had the ability to come in and finance investments and underwrite investments with large scale developers who had very attractive opportunities. And then we came along and syndicated out a portion of that to make it available to smaller retail investors, qualified investors, who could invest $50,000 or more. And now we’re putting about $3 million into one venture, which Basis has put $11 million into with related companies.

Eve: [00:14:50] So this opportunity is on Small Change, but it’s accredited investors only, or qualified investors. That’s my disappointment and for yours too, right, that it couldn’t be non-accredited investors, because if you can’t get your foot in the door, then it’s pretty hard to start building wealth. But nevertheless, the rules dictated that. And so, you’re trying to raise 3.75 million towards this pretty spectacular life sciences project in Boston. Do you want to tell us a bit about the building and the tenants and developers?

Kirk: [00:15:25] Yeah, yeah, the building is exciting in that it’s a life sciences building for Vertex Pharmaceuticals, which is a fortune 100 pharmaceutical company. The project itself is about $418 million, 344,000ft². But what’s more exciting is that Vertex is the 100% commercial tenant for the building, and it’s expected to come in as a equity investor alongside the retail investors. The sponsor is equally impressive, related companies, which build projects like Hudson Yards in New York, is the sponsor for the venture and is quite qualified and capable in the Boston market. We’re excited to make this available in much smaller retail investor increments to qualified investors than has typically happened before. And with your help, we’re making that possible.

Eve: [00:16:26] Yeah. So, the disappointment is that because this is such a small piece of the pie, right, of a very large project, it’s really a passive investment into that project. And so therefore non-accredited investors are not permitted to invest through regulation crowdfunding, which is a very big disappointment. But maybe someone at the SEC is listening.

Kirk: [00:16:50] Well, we’re happy to at least, this is a very cutting-edge effort in our opinion. And hopefully it will continue to get even better in terms of its availability as time goes on.

Eve: [00:17:03] So what is the ultimate goal for BRIEF?

Kirk: [00:17:06] Yeah. So, you know, BRIEF is ultimately trying to promote opportunities for diverse investors, Bipoc and women investors, who don’t get a chance to participate in these investments. But our ultimate goal is for transformational real estate investments that do well and do good. And, specifically, in the terms of inclusion and all aspects of inclusion, which is a dimension of this project. 50% of the project’s participants are women and people of color. It is a LEED-certified building and aspires to be Net Zero. So, in terms of ESG dimensions, this is a home run. So doing well and doing good, as was the case back when I launched my triple bottom line fund in 2005 is People, Planet, Profit. And I like to say that there are not the other two Ps without the profit P but the same is true in terms of the People and Planet dimension. And we will look forward to chronicling how this building is transformational and we’re excited that people can actually also be profitable in doing that.

Eve: [00:18:32] So for anyone who’s listening, if you don’t already know, we are at SmallChange.co. So you started life as, or at least your career not life, as an architecture student. And what led you to start a fund? It’s a pretty big step. Yeah.

Kirk: [00:18:49] Big step. You know, I think the cornerstone of everything I’ve done in my life has been about building community. And that sounds rather broad, but, you know, my family came out of the black community in Alabama, and my great grandparents were involved in setting up the education system in Alabama. And, you know, we’ve always been part, not only of building community in the black community, but standing up for civil rights. Grandfather testified in the Scottsboro trial, helped black people have a voice up to the Supreme Court to be on juries in America. So, there’s an obligation where to much those who’s given, much is expected. And I think that’s a roundabout way of saying I see real estate as my vehicle for giving back. And you heard me say earlier, I built community with a pencil, a dollar and a brick, and they’ve all worked at various times. I’m kind of agnostic. I want them all to be, all the tools on the table, to achieve the outcomes we want to try to attain. And so, that’s the path I’ve chosen for my life. And the fund vehicle has been maybe the most transformational, because you’re leveraging capital and you’re able to leverage that to create the change that sometimes doesn’t get attained without capital leverage.

Eve: [00:20:26] Yeah, I personally agree. You’re a real estate developer, what sort of projects are you working on today?

Kirk: [00:20:33] Our singular and greatest focus beyond BRIEF, and BRIEF has the ability to be in lots of investments in an investor role as it’s evaluated and underwritten, and we’re able to be confident that we can share that with retail investors in a way that they can make an intelligent investment decision. Beyond that, we are developing 6,000,000ft² at a place called Dorchester Bay City, and this is a 15-year capstone project. We’ve been at it for four. It’s 36 acres on a peninsula on the Red Line in Boston, on the water next to the third largest park, next to an urban beach, next to the third most diverse university in the country. And we are extremely excited about that project. So, for me, I’ve gotten more focused in my efforts, and they are really bifurcated between the retail opportunities for diverse investors that BRIEF affords and the transformation and placemaking and inclusion that can be attained through a 6,000,000 square foot, $5 billion project.

Eve: [00:21:52] So what have been some of your very biggest challenges over the years and maybe disappointments?

Kirk: [00:21:59] Yeah. You know, it’s interesting. I guess I don’t see barriers, I see opportunities. And so, I suppose in that regard everything’s a disappointment, right? Or anything that gets in your way.

Eve: [00:22:16] Yes.

Kirk: [00:22:17] But, you know, I’ve been very fortunate to take advantage of opportunities that have been presented to me, and many of them have showed up in ways that I never expected. So, I go into life looking for a great story. If I come up with a great outcome, then it’s an additional success. And so, I try not to be disappointed, but, you know, I would like to have been where we are now 20 years ago, in terms of being able to access 36 acres and do a 6,000,000 square foot project. But, you know, it wasn’t the time. And by that, what I mean is I didn’t have the capital relationships. I hadn’t spent the time in financial institutions and environments. So, I’m not answering your question because, as an optimist it’s really hard for me to look at and find the disappointments. I just see them as impediments that can be removed.

Eve: [00:23:23] Interesting. So, they just even, they just become bigger challenges.

Speaker3: [00:23:28] Well, you know, makes life interesting, right? I mean, if it were easy, everybody would do it. And many of the opportunities have come out of adversity. When we acquired the Crosstown site, we were unable to test for anything by the agreement on the contract. There was a lead paint factory underneath it.

Eve: [00:23:50] Oh.

Kirk: [00:23:51] So a guy with no money had a project for a city block. But he had a lead paint factory he had to get rid of. So, we created an environmental risk transfer company with an insurance company and an engineering company. We fixed the problem. We got the regulatory closure. I sold the company back to them. They went on and did it for other people. So, I guess the story of that is, maybe the opportunity was there because somebody else knew there was a lead paint factory, or maybe they didn’t know how to solve the problem, but once you can remove it, it became a valuable asset. And we own that asset today. But if I gave up…

Eve: [00:24:33] You wouldn’t own it. That’s right. I’m going to go back to BRIEF at the moment and the 22 DryDock offering. What will success look like for you with that offering?

Kirk: [00:24:45] Yeah. You know, success here, because it’s all about the qualified investor and their ability to obtain the expected outcome. So, we’ve been able to scrub a lot of the risk in this project. One of the advantages of coming in later, which is not always where people of color are invited to come in, usually it’s in an effort to win something. If you come join me, I’ll tell you what you won. Win, win. This is the exact opposite of that. We’ve reverse engineered inclusion. And so, to your question, success will look like a predictable outcome where people attain the 1.7 equity multiple that they’re expected to get and the 17% internal rate of return. But the only way to do that is to have risk adjusted returns that are based in fact. And so, 22 DryDock project is unique in that 60% of the project has been bought out in terms of construction costs. Normally, you don’t know that when you go into a project, it has a tenant for 100% of the space. Normally you don’t have a tenant before you start a project. It has the success of a very viable fortune 100 pharmaceutical company who has a building across the street already in their headquarters in it. So, there is certainty of tenancy. And so, I guess I’m describing to you predictable outcomes that track along the lines of the underwriting that we offer to our investors. The by-product is that we can engage a lot of people of color and women in the execution of this project, and that we can prove that doing well is not at the exclusion of doing good or the opposite.

Eve: [00:26:46] Well, on that note, I thank you very much for joining me. You’ve had a pretty spectacular career. I’m not sure what else to say. I was gonna say, what’s next for you? But it sounds like you have your hands full.

Kirk: [00:27:02] You know it’s interesting. I keep finding things that I should do. I took over as the president of NAIOP for the largest national…

Eve: [00:27:14] Oh, I know NAIOP well, that was one of the real estate industry events that really turned me off a while back.

Kirk: [00:27:22] Yeah, but that’s been exciting because there’s a whole regulatory piece. I’m skiing every continent of the world so I’m off to New Zealand in August.

Eve: [00:27:33] Oh, close to my home country.

Kirk: [00:27:35] That’s right. And I’ve been there and love it. And Oceania is a destination for us. So, you know, I think BRIEF will be a wonderful thing to bring to fruition and bring ten more BRIEF projects to Small Change and have them bring lots and lots of retail investors into the fold. It’ll be great.

Eve: [00:27:57] Well, we would love that too. So, we’re ready for it.

Kirk: [00:28:00] I know you are.

Eve: [00:28:01] Thank you very much, Kirk. It’s been it’s been a pleasure.

Kirk: [00:28:05] Thank you Eve. You take care.

Eve: [00:28:12] 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 Kirk Sykes

Crowdfunding tax credits.

Rich Rogers is an urban planner and attorney in Buffalo, New York. As a principal at Urban Vantage, he focuses on creative problem-solving to help public and private sector projects work from concept into financing and implementation. He frequently interfaces with clients, related professionals, and the public to work collaboratively on public and private sector projects. His work at the firm generally includes preparing financial projections and evaluating the applicability and utility of certain incentive programs for specific projects.

In addition to his role as a principal at Urban Vantage, Rich is a Shareholder at Yots Law Firm P.C., where he concentrates his practice on real estate financing closings, particularly in structuring and preparing documents for projects utilizing Historic and New Market Tax Credit Investments and Qualified Opportunity Zone incentives.

Rich also co-founded Common Owner, a web-based platform designed to attract capital to community and economic development projects while democratizing investment opportunities.  And now he has joined Small Change as a shareholder and member of the team.

Richard decided to pursue Urban Planning while hiking on the Appalachian Trail prior to entering his first year of law school. His motivation to become a planner is largely to protect and provide increased access to natural and scenic resources, which frequently includes researching methods and advocating for suburban sprawl prevention. Richard’s academic work focuses on how to use land use and economic laws and policies to conserve land and promote smart growth-oriented (re)development.

Read the podcast transcript here

Eve Picker: [00:00:05] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich, or poor, beautiful, or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo in order to build better for everyone.

Eve: [00:00:45] Rich Rogers is an urban planner and attorney in Buffalo, New York. In his practice, he focuses on tax credit financing and on creative problem solving to help public and private sector projects work from concept into financing and implementation. Rich is also a real estate developer with a project in lease up on Buffalo’s Main Street. There he’s put his knowledge to good use, converting a 30,000 square foot historic building into modern retail and affordable housing units, and employing every trick in his book to build his super complicated capital stack, which of course includes tax credits. If that’s not enough, Rich has a crowdfunding platform called Common Owner, focused on real estate and you guessed it, crowdfunding tax credits as well. There’s a lot to learn here. You’ll enjoy listening in.

Eve: [00:01:51] Hi, Rich. I’ve been looking forward to this conversation.

Rich Rogers: [00:01:54] Likewise.

Eve: [00:01:55] So what led you to study both law and urban planning?

Rich: [00:02:00] I think there were a couple things that influenced that decision. When I was an undergrad, I was, in the SUNY Model European Union program, traveled to Exeter and Limerick in Ireland and just kind of saw some really great urbanism right up against some really beautiful countryside and, you know, wanted to learn about that and ways to replicate that, you know, here in the States, hopefully. And then also when I was out hiking the Appalachian Trail, I got really into conservation easements and, you know, similar kind of legal concepts where I really wanted to study both things.

Eve: [00:02:50] Interesting. So, what is your specialty in law today?

Rich: [00:02:55] In real estate development and commercial finance, typically representing developers. But, you know, largely focused on tax credit syndication and the monetization of tax credits. So, that includes historic tax credits, new markets tax credits, Low-Income Housing Tax credits, and kind of other subsidies to help close construction financing.

Eve: [00:03:19] So that kind of really puts you in the, I don’t want to say distressed, but I suppose distressed neighborhood realm, doesn’t it? More often than not, with those types of credits.

Rich: [00:03:30] In many cases, I think, particularly in upstate New York there’s a lot of communities that have, you know, eligible buildings, to undertake historic rehabilitation projects. So, we see, we kind of see it all over the map. And in particularly more recently with higher interest rates and high construction costs probably folks looking at using those types of credits who wouldn’t do so maybe a few years ago, you know, as capital kind of gets tighter.

Eve: [00:04:09] Interesting. Okay. So, I know you have a lot of other things cooking. You’re a very busy person. Tell us about your real estate development projects. I think you have done a few of your own, including renovating your own house. Right?

Rich: [00:04:25] Yeah, that’s right. Right now, so we’re undertaking the rehabilitation of the Monroe Building, we’ve called it. It’s the former Record Theater in Buffalo, New York. Roughly $7 million project, roughly 30,000ft². We have 17 apartments that will be affordable to folks making 80% of area median income. And we have, six commercial spaces that kind of range from 750ft² to 5500ft². We have kind of an exciting mix of tenants in there, including a coffee shop. We have a hair salon, some restaurants, some other stuff. So, it’s been a very exciting process, albeit a bit scary closing on the building just before Covid hit.

Eve: [00:05:21] Oh, yeah, that’s really bad timing. So, and how far along are you with the project now?

Rich: [00:05:28] So we are currently pre-leasing apartments for occupancy March 1st. The first ten apartments should go online next month with the other seven to follow, you know, likely in by April. Mid-April. Some of the commercial spaces are just starting construction. We do have several signed leases. We have a couple more commercial spaces to to lease and finish designing. But that lease up should occur over the next couple months with full occupancy by June, I would say.

Eve: [00:06:05] Oh, that’s really exciting. So aside from Covid, what’s been the most challenging thing about this project for you?

Rich: [00:06:12] Yeah. It has certainly been a challenge. I think, you know, Covid, kind of, the outcomes there, right? Certainly, a spike in, in construction costs have been very, very challenging to deal with. We’ve really great general contractor on the job BRD and they kind of worked with us through various value engineering and different kind of iterations of the project, which is unfortunate. On one hand, you hate to value engineer out some really cool amenities and things like that. But at the same time, you know, you need to get the job done, right? So, construction costs were definitely a challenge. I would also say holding costs. I think folks don’t think about that all of the time. You know, the building had a sprinkler system that had, you know, stay heated so the the pipes don’t burst in the winter. And, you know, so we had the gas on for a time. And we have recently, but also had to do propane the one year which got very expensive. Yeah. So, holding costs are tough. And then, you know, obviously interest rates were a big one. Ultimately, we were able to rate lock with our permanent lender. And that’s what kind of finally got us over the hump into the construction loan closing. So, there were a lot of challenges and factors to kind of tackle.

Eve: [00:07:48] So I gotta ask, how are you financing it? Are there any tax credits in there?

Rich: [00:07:54] There are. So, we have both state and federal historic tax credits which are 40% of the qualified rehabilitation expenditures, which includes, you know, most of your construction costs, certain design costs, architecture, etc. We’re working with Chase Bank to monetize credits, Chase Community Equity. They’ve made an investment in the project. They’ll make additional investments once construction is complete, you know, based on the number of credits that we deliver to them. So, we have a master lease structure, it’s called, with Chase Bank, not to get too technical. But so, you know, that ends up being, you know, roughly 20 to 30% of the capital stack at the end of the day.

Eve: [00:08:50] Significant. Yeah.

Rich: [00:08:51] It really is. But it’s, you know, really a necessary gap filler in places like Buffalo, you know, where the rents perhaps aren’t as strong as some other areas. We also are using what’s called the Small Building Participation Loan program through New York State Homes and Community Renewal. That’s a per unit subsidy for us to keep our rents at 80% of AMI on average. So, I believe we got $50,000 per unit, very low interest subordinate loan that closed simultaneous with the construction financing. I guess what’s nice about that program is when you’re doing one of these rehab projects, you’re kind of stuck with the building envelope you have. Right? And so we have some units that are nicer than others, some that, for example, we have two units that don’t have windows. Um, so the fact.

Eve: [00:09:48] I’ve got a building like that.

Rich: [00:09:51] They’ve actually come out great. I really actually prefer some of those units to some of the other ones.

Eve: [00:09:58] Yeah. We have, we have spectacularly big skylights in our windowless units that are just amazing, yeah.

Rich: [00:10:04] Same thing. And so, you know that worked out well. But I guess my point is that the flexibility with this program, where it’s not that every unit has to be below a certain AMI, some can be up to 120% of AMI, So, a couple thousand dollars per month. And then you can have some others that are far below.

Eve: [00:10:25] AMI, for our listeners, stands for?

Rich: [00:10:27] Area Median Income. So, essentially, yeah, there’s a rental rate based on, you know, how much money you take home per household, right?

Eve: [00:10:42] How much you can afford to pay. Yeah, yeah, yeah. So, this is brain damage, this capital stack.

Rich: [00:10:48] It’s a lot. We have another program that’s a permanent loan program through Empire State Development in New York. And that’s a transit-oriented development loan program called the Better Buffalo Fund. It’s funded from Buffalo Billion. And, you know, that provides low interest financing coterminous with the permanent loan. So, it’s a 30-year term. But where our project is on Main Street in Buffalo it’s directly across from a college and it’s very close, maybe a five-minute walk to two, light rail rapid transit stations, which, we only really have the one line that goes under Main Street in Buffalo. But I think this project really helps support that light rail system and, you know, kind of both ways. I think that’s a huge amenity for our project. And then it’s also on several bus lines. So, it’s definitely very transit-oriented.

Eve: [00:11:47] Fabulous. Okay. If that wasn’t enough, you decided to co-found ma real estate crowdfunding platform called Common Owner. What led you to do that? And that was also during Covid, right?

Rich: [00:12:03] Yeah. I would say just before Covid. You know, it’s a bit of a process to start a funding portal. If you’re not familiar, obviously you are, but for listeners who aren’t, it takes quite a long time. So, we started that process before Covid and were able to launch, kind of, during Covid, but, you know, essentially with our legal work and also consulting work and my partners’ consulting work, we found a lot of folks struggling to access capital, right? Under kind of traditional means, you know. Perhaps not having the network to raise the capital or, you know, kind of other challenges around that. So, you know, I think just the complexity around some of the rules raising capital or folks not knowing those rules or realizing them. And so, you know, by creating a crowdfunding platform those folks would then be able to access a broader pool of potential investors to help get their projects done, because in many cases, those projects were quite good. You know, they have grant funding, they had tax credits. They looked a lot better on paper than many projects that we did see getting financed all of the time. They just, you know, didn’t have the access to raise the developer equity. And so that’s something that we wanted to address in addition to, in some cases, monetizing tax credits can be very difficult if the project is smaller in nature. And so, using crowdfunding and bringing in additional partners and investors, you know, allows for some structures to spread out those tax credits a bit and, I think, many people would argue kind of the way that Congress intended with some of these programs. So those were the private and primary motivations behind starting Common Owner.

Eve: [00:14:11] So I’m sort of fascinated by the historic tax credit equity twist on your platform. How does it work? Like, what are the types of offerings that are listed and how does this, how do tax credits weave into crowdfunding?

Rich: [00:14:26] Yeah. Yeah, sure. So, typically in a real estate financing that includes tax credits, you have a tax credit investor that will come in and take 99% of the credits. And there’s very specific IRS rules around the way to structure these types of financings. But typically, a bank, an insurance company, a similar entity will come in and they’ll take 99% of the credits and they’ll put in capital during construction.

Eve: [00:15:02] And they’ll be a limited partner, right? They’re not taking control. They’re just a partner for the purpose of those credits. And then they give you a certain number of pennies on the dollar, right? For the credits, and they turn around and get value for that immediately as a credit against their own taxes, right? That’s why they’re interested. Yeah.

Rich: [00:15:30] Yeah. And so. Right. They have the type of income that these credits work really well to offset and, you know, they know, right, how much income they’re going to have. There’s a lot of things that work well for a bank or an insurance company to invest in these types of projects. Banks also get CRA Community Reinvestment Act credits for doing so. But the issue here is that, in many cases, these tax credit investors want to do the, you know, the smallest number of largest projects possible to reduce their due diligence overhead, asset management overhead, and the types of projects that a lot of cities and villages and urban areas really need are not necessarily these massive, you know, redevelopments of old factories or train stations. Right? They’re these kind of mixed use Main Street buildings and that that creates a challenge. Right? Because these more traditional tax credit investors may not want to be bothered with those smaller deals. So

Eve: [00:16:43] It follows the same pattern that all real estate investors follow. They don’t want to be bothered with smaller deals which are…

Rich: [00:16:51] Absolutely.

Eve: [00:16:52] …so important for our cities. Right?

Rich: [00:16:55] Yeah, absolutely. And I think, crowdfunding, I think, broadens the pool of potential investors, right? In general, but also if you have these tax credits, maybe you don’t need to undertake this highly structured, very complicated, you know, kind of financing where an investor comes in for 99%, especially in many states that have state historic tax credit programs like New York. You know, those credits in New York are refundable meaning that if you don’t have tax liability, the state will write you a check for the overpayment of tax. So

Eve: [00:17:36] Oh, wow.

Rich: [00:17:37] Yeah. So, it makes it a lot more user friendly for regular people to then benefit from some of these credits. But your typical, you know, real estate developer, sponsor, managing member kind of person is going to have a lot of losses, right? From depreciation. And won’t necessarily be able to use these credits. So, by bringing in a lot of different investors you can slice the credits more thinly where they can, you know, hopefully more effectively be used. And I think, you know, one thing with crowdfunding is, folks think about it as a, you know, kind of individual non-accredited investors. That’s kind of who it’s for. And I think that that’s a challenge in the industry right now because I think if you look at SEC data, you know, that’s in many cases you still have mostly accredited investors investing in many of these offerings. And I think really when you’re talking about these tax credits, you know, ideally you have a mix of maybe real estate professionals, some individuals, but then also, you know, starting to have, you know, corporations, maybe banks, you know, some other types of investors investing alongside these other folks to kind of, you know, raise more capital for some of these projects.

Eve: [00:19:04] So instead of a 99% like financial institution, tax credit investor, you could replace that with a crowd of people who own, or get their little pro rata share of however much they invest towards a tax credit which they may be able to use. Yeah.

Rich: [00:19:23] Right. Yeah. So right, you could, I mean there’s all sorts of ways to structure it, right? You could follow that more traditional model of the 99%. And then typically what happens in that type of a structure is after the five-year recapture period for the tax credits, the interest flip, right? So, the investor will take all of, or 99% of the credits for the first five years. And then the investor flips down to some lower amount, maybe 5 or 10% of the interest and in some cases will exit the transaction, right? So, here you might think of, if you’re raising equity anyway, perhaps you’re going to, you know, syndicate 30% of the interest in the deal to investors. You know, maybe instead you sell, you know, 50 or 60%. Those folks, along with the cash flow they would get, you know, may also get some tax credits. And that that can sometimes be a better, you know, or a way…

Eve: [00:20:27] You could also say that you, the developer, keep some of the credits for yourself. So maybe, you know, you keep 40% flow to you and the other 60%. So, there’s lots of ways to skin the cat, basically.

Rich: [00:20:40] Absolutely, absolutely. But it can be a bit more straightforward, I think, than some of these really complicated structures, you know, with hundreds of documents and hundreds of pages of projections and, you know, everything like that, you know, looking more like a more traditional partnership.

Eve: [00:21:03] Interesting. Okay. So, have how many historic tax credit deals have you had on your site and have they been successful?

Rich: [00:21:11] We only have a handful that I would say are really, you know, raising equity for the tax credits. And there’s a couple ongoing right now that you could check out if you go to the site. We haven’t had one fully closed that’s that type of offering, in terms of a regulation crowdfunding offering. We have had several deals closed that, you know…

Eve: [00:21:43] Just plain old crowdfunding.

Rich: [00:21:46] Yeah. Which might have a, right, plain old crowdfunding, but also, some Reg D deals on the platform that have closed that have a tax credit investor, right. A separate tax credit investor, this more traditional method, where the capital that’s being raised is more for that developer equity piece.

Eve: [00:22:10] Interesting. Okay. So, what do you think are the most challenging, the most significant challenges facing less experienced real estate developers?

Rich: [00:22:23] Yeah, I think there’s a lot. I think you know, in my mind maybe several years ago, it was mostly this, this equity piece. And obviously that’s a really significant challenge and problem. But I actually think a really big challenge is guarantees, right? And liquidity and net worth and balance sheet, you know, for folks especially who are starting out, who might, you know, not have a really strong balance sheet, maybe they have a lot of student loan debt or mortgage debt or, you know, something else. Right? Being able to close one of these loans is challenging, right? You’re going to need a partner not only to invest capital, but to also, you know, sign a guarantee and, you know, kind of be recourse on some of the financing. And that can be very, very challenging, especially, you know, for someone starting out to, you know, not only identify that type of partner, but negotiate a deal that still makes it worthwhile to do all of this work and be the general partner in the deal, right? You know, especially with some of these deals and, you know, some of these, I guess tertiary markets, you could say, you know, they’re already very thin from a cash flow perspective. And so, by the time you bring in a partner and dice it up, you know, for the guarantee, and then you also raise your equity, you need you need to really make sure there’s something left for you at the end of the day. And I think that can be a very significant challenge, especially once you get into these deals and perhaps you own the building, and now you’re committed. And, you know, it can be enormously stressful. But yeah, I think that…

Eve: [00:24:19] Also in sort of distressed markets where or softer markets where the returns aren’t as high, but construction costs are probably the same or close to the same. You know, this is why all those little bits of funky funding that you talked about become so important. Because there’s got to be something left for investors, right?

Rich: [00:24:44] Exactly, right. You know I think these subsidies are very important to essentially create a market where one doesn’t necessarily exist, right? In a lot of these geographies. So, but, you know, it doesn’t always quite get there, right? Especially in the, you know, this type of interest rate environment that we’ve seen. So, it’s challenging.

Eve: [00:25:12] So how do you think increasing interest rates are affecting developers in Rust Belt cities like Buffalo and Pittsburgh and…

Rich: [00:25:21] Yeah. I mean, I think it’s been a tough situation, right? Because I think a lot of people didn’t see it coming, obviously. And, you know, it’s made it harder to get deals done. You know, I think I mentioned we were fortunate enough to rate lock on our deal at a good time with our permanent lender, and that ultimately allowed us to get it closed. But, you know, I’ve seen folks who didn’t rate lock who, you know, never ended up closing their deal, right? As rates really climbed up. So that’s a challenge on the front end. But then also, you know, if you did a deal five years ago or ten years ago and that interest rate, resets right at the end of of that loan term, you can get in a, you know, a really bad situation, right?

Eve: [00:26:11] That’s one that I’m actually in. Yeah. I’m smiling because I really want to cry. We have a building which actually reset in mid-January. And fortunately, the upper interest rate was capped, or we would have been paying an additional 1%. So, and fortunately also at this point there are no prepayment penalties. So, if the rates go down we can we can go shopping. But still it’s another $2,000 a month that we have to pay on a building that’s limped its way through Covid, and we’ve had to discount rents and I. That part has brought us to our knees, you know, it’s been, it’s really tough. Yeah.

Rich: [00:26:59] Yeah. It’s really a bad situation, I think, for a lot of folks, especially in some of these deals where they don’t necessarily cash flow well. And, you know, at least in New York State, typically we’ll see these tax abatement programs for real property taxes that burn off in many cases simultaneous with these rate resets, right? So, you know.

Eve: [00:27:24] It’s really hard, it’s really hard. Yeah.

Rich: [00:27:28] So it’s yeah, it’s challenging, but I think that the interest rates have really brought many deals to a halt. I guess the as I mentioned earlier, the interesting counterpoint is, you know, projects that might not have, you know, been looking for tax credits or other subsidies, historically, you know, now might need them to make the numbers work. And some of these, you know, other markets that, you know, perhaps a bit more, stronger rents and things like that as rates go up, you know, those folks start to, to kind of seek these types of subsidies and alternative financing methods.

Eve: [00:28:09] So tell me then, how tax credits, not just historic tax credits, but maybe New Market and I don’t know what else is out there, how tax credits can move the needle for closing construction financing.

Rich: [00:28:23] Yeah. So, in many cases, you can, you know, reduce debt. So here in New York State, we have a brownfield tax credit program which is, again, a refundable tax credit. It’s based on, you know, cleaning up a historically, you know, contaminated site and essentially get a percentage of the overall construction cost that’s capped at either 3 or 6 times the site clean-up costs. Right? So, and there’s all sorts of adjustments. But at the end of the day, you know, that refund can sometimes be a source for the construction lender to pay down their construction loan. Right? So, when that refund comes in on the brownfield tax credit, you could make pay down to convert your financing or, you know, there’s some bridge loan products that folks are able to tap into. Some of the other subsidy programs, you know, New Markets Tax Credits is a very complicated program, but it does generate a nice subsidy if you can kind of get through the brain damage. You know, again, essentially, you’re reducing, you’re really reducing debt, right? And reducing leverage on the product, on the project, bringing in equity that doesn’t necessarily expect a traditional return, let’s say, on capital, which, you know, allows you to fill these gaps in your capital stack and get through construction financing, right? Because you need less debt on the project if you’re able to kind of raise capital by using these tax credits.

Eve: [00:30:09] And then there’s also opportunity zones, which are also another incentive for some investors. Yeah, so tax credits can be really huge, I think. But perhaps not, as you said, for small or non-accredited investors. So, it’s a slightly different market, right?

Rich: [00:30:28] Yeah. It depends, I think to really use the federal tax credits in particular, you have to have the right, you know, tax profile. You know, anyone who’s thinking about planning and trying to use tax credits should really have a long chat with their tax professionals just to make sure that they can use the credits. There’s all sorts of rules around that. And, which again, is creating this more limited market for tax credit, you know, monetization, right? So, but, you know, it varies, right? There’s things like, you know, the real estate professional election, if you’re a real estate professional to, you know, you may be able to use credits in a way that other folks can’t. So, it largely just depends on your tax profile. But that varies so dramatically from person to person, right? So definitely talk to your accountant.

Eve: [00:31:28] Yes. So, back to crowdfunding. What do you think are the biggest challenges for developers who try to crowdfund capital?

Rich: [00:31:37] Yeah, I think there’s a few, right. I think, you know, especially for folks who haven’t raised capital before, I think it’s just a lot harder than people think, right? At the end of the day, it’s really kind of sales, right? You’re selling your project in terms of pitching it to investors and, you know, that’s challenging, especially if you don’t really have the personality where you love sales. That that can be really hard. I think understanding the rules and complexities around crowdfunding and kind of the advertising regulations and prohibitions and stuff, it can be a challenge, right? I think especially for folks who, you know, the rest of the capital stack in many ways is more straightforward, right? Even if you’re going out and getting grant funding, right? And, you know, certainly applying for a construction loan, you know, none of that is all that complicated. Tax credits may be more complicated, but then you get into this capital raising piece that is really very hard work.

Eve: [00:32:57] It’s very hard work. I agree with you.

Rich: [00:32:59] Yeah. And so I think a lot of folks underestimate it.

Eve: [00:33:03] Yeah. Whether you crowdfund it or not, it’s hard work. It’s just different work. Right?

Rich: [00:33:08] Right. And so, kind of understanding those nuances and challenges. And then I think again, you know, being realistic in your anticipations of how much an investor is going to invest. Right? I think what I’ve seen a lot of is folks, you know, kind of have their list and they think that’s going to be sufficient. And then investors will come in and maybe they’re investing half or a third of what they anticipated. And that can leave you in a really tough spot, right? I think there’s definitely this, you know, build it and they will come kind of mentality for some folks. And that’s just not the case. Right? There’s not just people out there waiting to invest in your project in general. Right? You need to really build and cultivate those relationships. So, it’s hard. And especially in this environment.

Eve: [00:34:09] I think it works best when you have developers who understand that it’s just not a one-off thing, that crowdfunding offers them an opportunity to gradually build a group of investors who will follow them from project to project. And that is not just one project. It’s a series of projects. And I think those developers who get that really do best, and they sort of come up with a marketing strategy first with the first project, and they figure out what works for them and what doesn’t. And it can be wildly different for different people depending on where your network lives. Does it live on social media or the local coffee shop? You know, very, very different. So, I don’t know, I think, I wish people understood that instead of sort of believing, it’s just as you said, you just build it and they will come because it really doesn’t work that way. It’s really…

Rich: [00:35:10] Yeah, I agree. I also think that, you know, in some cases, I think folks who are, you know, really new or inexperienced or, you know, developing real estate, don’t realize that they’re selling securities and that they’re even, you know…

Eve: [00:35:30] And that was the other question I had for you.

Rich: [00:35:30] These rules, yeah.

Eve: [00:35:33] And then they have to follow the rules when they have these investors and they, you know, they need to do what they offered to do. You know, they need to follow through, you know. So

Rich: [00:35:45] Yeah, exactly. And so I think that’s a big challenge, telling people that they have to follow all these rules. And, you know, folks can sometimes get pretty defensive about that if they’re really confident that they’re right. And so, I think for that reason and, you know, it’s still fairly new, right? And I think, you know, I certainly thought that the crowdfunding, the equity crowdfunding space would take off faster than it has. But I think, you know, when you combine the fact that some people in real estate don’t realize that they’re selling securities when they’re raising capital and, that, you know, this is, you had this really long period with no changes to the securities laws, right? I think there’s still a lot of absorption that’s still kind of starting to happen. I do think, you know, over the last five years, there has been, you know, a broader swath of the population that’s hearing about crowdfunding and excited about it but I think there’s still, you know, we’re kind of scraping the tip of the iceberg, so to speak.

Eve: [00:36:53] Yeah, I agree. Are there any warts to the regulation crowdfunding rule that really irritate you? I have some!

Rich: [00:37:03] Yeah. I mean. I think, you know, the audited financial requirements. And I think they have made some good changes over time in terms of a lot of the rules that have bothered me. But, you know, just the cost of the financial statement audits.

Eve: [00:37:26] The financial statements. Yeah. So, I think what’s most upsetting about those, for, again for our listeners, is that there’s a financial review or an audit required if you want to raise more than $125,000. And that was, you know, I suppose that this rule was really intended for small businesses that were already operational. So, sharing financials makes sense. But in real estate, you typically have a brand-new inception entity that has done nothing. And often it’s formed right before the property is purchased. So now you’re spending money on a financial review or an audit of a whole bunch of zeros, and you can’t get out of it. It’s a regulation, right? It’s just, it’s very silly. And even for a small business, that’s a pretty high bar. You know, that’s a very high bar and I’m not sure that anyone looks at them.

Rich: [00:38:24] Yeah, except for us. Right. I think most investors. Well, it’s a bit hard to say, but, you know, also there’s a lot of rules and regulations around forward-looking statements and not being able to have these types of projections essentially, which is ironic because, as an attorney, you know, closing these tax credit deals, the projections really drive the deal, right? You have this set of 70-page projections and everyone spends hours and hours and hours poring over them, from the investor to the lender to the developer and all of their counsel, right?

Eve: [00:39:08] But it doesn’t mean that you can’t present a cash flow picture and an operational budget. You just can’t project an internal rate of return. You could, you can show investors how much free cash there is. You can show people exactly what the project is going to do, but you can’t, and an experienced investor is looking for internal rate of return, they’ll have to figure it out themselves. Right? That’s…

Rich: [00:39:36] Right. And I guess my point being is that, you know, on some of these other deals with these, granted, more institutional types of investors, that’s a specific, that rate of return is a really material thing that everyone is commenting on and adjusting the deal terms to accommodate, right? So, you definitely have a different kind of framework there. So that’s a challenge. I think the advertising, you know, rules and, you know, the way that these offerings can be marketed, I think could just maybe be a bit more clear for some of the issuers and the folks trying to raise capital, I think they’re a little confusing as well. And so then, folks, you know, don’t want to do something wrong. So they’re very scared about it. So, yeah.

Eve: [00:40:34] But Rich, we still love this rule, right?

Rich: [00:40:37] Yeah. No, I mean, I think the way it opens up, you know, access to investors is absolutely transformative and really important. Right?

Eve: [00:40:48] It is, it is.

Rich: [00:40:48] Even, you know, in spite of all the challenges that we’ve been discussing for much of the call, I think it’s really important. And I do think, you know, the thing that maybe gives me the most hope is that many of the changes that were subsequently made to the rule, I do think were really helpful in terms of, you know, the accredited investors and the special purpose entities and, and all sorts of changes. So, I think that there is, I’m cautiously optimistic about the future of the rule.

Eve: [00:41:25] We hope it will go mainstream, right? Okay. So, uh, just to finish up, what’s next for you?

Rich: [00:41:35] So, I have one more real estate development.

Eve: [00:41:40] This is a loaded question, too, right?

Rich: [00:41:45] Yeah, I have one more real estate development project, and then I am done developing real estate. I will be retiring from that aspect of my life. But, I’m actually looking forward to joining the Small Change team with some of my colleagues and really excited about working with you, Eve and your team, moving forward.

Eve: [00:42:10] And we’re very excited too. We think together we’ll be stronger, bigger, more mainstream, maybe.

Rich: [00:42:18] Hopefully.

Eve: [00:42:19] Well, thank you very much, Rich. And I actually can’t wait to see your project in Buffalo. I’ve got to go up and take a look.

Rich: [00:42:28] Yeah, it’s really exciting.

Eve: [00:42:29] It sounds fabulous.

Rich: [00:42:30] Yeah, it’s a beautiful building.

Eve: [00:42:35] Thank you very much for joining us.

Rich: [00:42:38] Thanks Eve.

Eve: [00:42:47] 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 Richard Rogers

Architectural entrepreneur.

Atif Z. Qadir, AIA is the Co-founder & Chief Impact Officer of Commonplace, a market network at the intersection of real estate and capital markets. He is a Registered Architect and LEED Accredited Professional turned entrepreneur with a particular interest in housing and impact. His strengths are observing, asking, analyzing, and using the power of narrative to uncover, share, teach, support, advocate and champion. He is a builder at heart, who is comfortable in different scales and settings – from small workforce housing units to multi-billion dollar redevelopments, from podcasts and panels to public service, from nonprofits and academia to private equity & venture capital backed companies, and from design to finance to public policy.

Atif is also a Founder & Partner at Amanat Properties and serves on the Planning Commission in the City of Hoboken, the Advisory Council of Provident Bank and on the Board of Trustees of The Hudson School. He previously worked at Extell Development and Turner Construction. He began his career at Rafael Viñoly Architects and Boston Housing Authority. He studied at MIT, where he received dual bachelor’s degrees in Architecture and in Urban Planning, and at Columbia Business School, where he received a MBA focusing in Finance.

His work has been covered by MIT Technology Review, Commercial Observer, Propmodo, and The Real Deal. He’s also a frequent speaker on the future of buildings and cities on popular industry podcasts and at conferences, including this past year at the Commercial Observer National Diversity & Inclusion Forum, Yale Alumni in Real Estate Association Conference, the Columbia Real Estate Symposium, NYC Open Data Week NYC and Austin Design Week.

Read the podcast transcript here

Eve Picker: [00:00:04] 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: [00:00:39] Atif Qadir is a serial entrepreneur, but that’s not where he started. Trained as an architect and urban planner. Atif decided pretty early on that what he wanted was to work his way up the ladder from servicing developers as an architect or builder to being one. So, he started developing his own small properties. And as his frustrations with finding project financing grew, so did his entrepreneurial ideas. He launched Commonplace, a fintech platform with a mind to create a marketplace for emerging developers and investors. Dating for development projects. In amongst all of this and in partnership with the Office of Michael Graves, Atif hosts a podcast show called American Building. He’s a high energy guy. You’ll enjoy listening in.

Eve: [00:01:40] Hey, Atif, it’s really good to have you on my show today.

Atif Qadir: [00:01:44] Thank you so much for having me on, Eve.

Eve: [00:01:46] Oh, yes. It’s going to be fun! So, you have a very multifaceted resume, lots of fingers in many pies, but your background is fundamentally architecture and planning. And then you went on to get an MBA at Columbia. What prompted you to transition from a registered architect to entrepreneur?

Atif: [00:02:08] Sure. So, the job that I had before going to business school was at Turner Construction, doing construction management for huge projects in the New York area. And for me, I had thought that going from architecture to construction was higher up in the food chain about actually be making decisions. When I realized that as a construction manager for a developer, I still wasn’t making any decisions. I was executing on decisions, but I was telling the architect what to do. So I sort of had moved up in the food chain but not quite to the the decision making power center yet. So, I knew there was a few more steps I had to go.

Eve: [00:02:45] And what was the top step you were attaining to acquire.

Atif: [00:02:51] At that point? I think it was being a developer, but then not to bury the lead, I realized that even being a developer is not the top of the food chain because now you’re answering to the investors, so, and the bank most importantly.

Eve: [00:03:02] Always the banks, always the banks, right? But anyway, you can definitely, as a developer, you have more control over more aspects of the project, right? Not just, and that’s a lot more fun, right?

Atif: [00:03:14] I think it’s a lot more fun. I would say the way that I describe being a developer in the context of, say, jobs or roles that are easily understood is I think a developer is a lot about being a project manager, an accountant, a janitor, a babysitter, a therapist, a divorce lawyer. Like all of those things is all the skill set of being a developer.

Eve: [00:03:38] Well, I would add artist to that.

Atif: [00:03:40] Oh, yeah, yeah! Artist, of course, yeah. Sometimes it’s easy to forget that one.

Eve: [00:03:45] You’ve got to use that side of your brain to really envision things, right? If you’re going to do a good job of it, right?

Atif: [00:03:51] Of course. Yeah. I think that there’s this great quote that I saw on LinkedIn. There’s a gentleman named Tyler Sumaila who does coaching for architects about how to think and how to present themselves the value that they bring. And I think there’s a lot of similarity between what we’ll say for architects and developers. Basically, it says teaching an architect is like teaching a baker how to bake every bread that’s ever been made before and how to make every bread that could potentially be made in the future and not teaching them how to run the bakery. That’s essentially what an architect does.

Eve: [00:04:25] Actually a pretty good analogy. Yeah.

Atif: [00:04:27] And feel developers are maybe like a shade similar to that too.

Eve: [00:04:30] That’s true, that’s true. So, I’m going to explore three of your companies. They were the only three I could find so far.

Atif: [00:04:38] I’ve tucked to a few more into the side.

Eve: [00:04:40] If there’s a few more just let me know, okay? But the first is Amanat Properties, which is perhaps the most traditional of your companies. That’s your development company, right? And what type of projects do you focus on and where are they?

Atif: [00:04:54] Sure. So, it’s in the Garden State, the great state of New Jersey, and the types of work that I do is historic redevelopment on a small scale. So, these are the projects that completed are a rental building in Hoboken where I live, and a condo building as well. And then I also have a workforce housing portfolio of 13 different assets that are, I purchased them as Class C and then brought them to Class B with renovation. And those are in Hudson and Middlesex County in New Jersey, which is the I-95 corridor.

Eve: [00:05:30] Oh, okay. And what drew you to this niche?

Atif: [00:05:33] So I would say from a few different perspectives. One is from the geography perspective, once I moved to New Jersey after business school, I realized there’s this whole amazing place called New Jersey and Hoboken and Jersey City in particular is the half price clean version of Brooklyn. And I was like, there’s so much value, so much value there. So that was I think the geographic reset was really important. I think number two was having spent a couple of years at Extell, I realized that at a very prominent real estate development firm like that and perhaps others, there’s a glass ceiling that you come to. And of course, it’s based on gender. But there’s another layer, of course, on that, which is if you’re not the family member of the founder of the company, there is a limit to how far you can go. And in this particular situation, Gary Barnett, the owner of Extell, very intelligent, very prolific developer. All of his daughters were already married so there was really no option for me to join the family at that point. So, I started considering the other options.

Eve: [00:06:43] Was that your way in, marrying a daughter?

Atif: [00:06:45] I would be so good as a house husband. I would kill it as a house husband. But unfortunately, that route wasn’t available. So that was the second thing kind of draw out. And I would say in particular, when it comes to fixing, I’ve realized over the course of my career that my nature is actually very much more a fixer and a bringer together and a resolver than my nature is as an executor as opposed to a creator. So, for me, I actually enjoy the idea of historic redevelopment significantly more than vacant land. So, I think all those reasons were the influences that brought me to do development the way I described it to you.

Eve: [00:07:28] And so what are the unique challenges that you faced?

Atif: [00:07:32] Yeah. So, I think the most often thing, when ask this question to other developers, it’s how much time do you have?

Eve: [00:07:39] Go, go for it.

Atif: [00:07:42] Go for it, do it. I would say, the three that I would say come to mind right away, number one would be access to capital. So, I think that for me, for my deals, I had probably done a hundred tours of Hoboken and Jersey City to raise $8 million from a small handful of investors. And then I talked to 35 banks to get the debt that I needed for my two development projects. And I still ended up having to use a mortgage broker.

Eve: [00:08:13] And why do you think that is? Why is it so hard?

Atif: [00:08:16] I think that fundamentally it boils down to this issue of a supply and demand mismatch. And I think at the smaller level, there is an array of potential investors, but none of them are institutional level and being able to actually find them and find them at the time that they have the money to give to you is really like the whack-a-mole challenge.

Eve: [00:08:39] It’s a huge challenge. So, you’re talking about what I call the $10 million check problem, right?

Atif: [00:08:44] 100%. I was just talking to Caleb Ratinetz, who’s a principal at Asland Capital Partners. So, a mid-size equity provider for residential inclusive of affordable housing. And he’s like, asked me like, why wouldn’t you invest in projects where you’re cutting checks of three, 4 or 5 million? He’s like, why? They’re bigger headache than me for like a $10 million check and even a $10 million check is a headache.

Eve: [00:09:09] Which is a really big problem because that means that emerging developers, disinvested neighborhoods, all those things that you and I probably care about get left behind because I think that gap is widening and widening. It’s not, it’s probably no longer $10 million and it’s probably creeping up to $15 million.

Atif: [00:09:27] I think it’s inflation is now like 30% a year.

Eve: [00:09:31] So that’s a huge problem. And has that slowed you down in the projects that you’ve been able to? Well, of course it has.

Atif: [00:09:41] Come to think of it like this, is that if it took me, so 2018 is when I acquired title to the two properties and both of them were stabilized by the spring of 2020. So, it was two full years to do two projects that were under $5 million each. I just like, imagine the amount that I could have done. I could have done eight townhouses or like eight small multifamily buildings in that time if I wasn’t running around doing the dog and pony show for investors and for lenders. So, I think the volume of stuff is definitely what ends up being affected.

Eve: [00:10:18] Okay. And then, like, what does your team look like? Who are you working with? Yeah.

Atif: [00:10:24] Yeah. So, for Amanat Properties, it’s a one man show. So basically, I JV with a company called Hanini Companies, Hanini Group sorry, and that’s in, based in Newark, New Jersey. And the construction is sometimes from them and sometimes from a third party. Architecture is from a third party. The development soup to nuts is my responsibility, including the expediting, because I tried an expediter and that’s not a good idea. So, I did not decide to go down that path. And then asset management, all that stuff is me. So that’s essentially the way that I’ve broken down Amanat Properties. I’ve had probably at least a dozen interns over the course of the years that I’ve done development, but it’s more because it’s fun and I like teaching as opposed to like actually having any benefit from it for me.

Eve: [00:11:12] So Covid must have slowed you down a bit.

Atif: [00:11:16] Covid messed a lot of stuff up. And I think in particular it was the idea of the left hand not knowing what the right hand was doing when it came to government decisions as to what work was considered essential versus not. And it was as crazy as the state of New Jersey declaring certain trades as essential, and the city of Hoboken declaring others as non-essential. And then even when they were declared essential, oh, City Hall was closed for a few weeks. So, we were never getting the inspections that we needed anyway. So, I think that that was the biggest frustration. The banks, I thought my banks, they were patient. My investors were incredibly patient. It was the municipal approvals and all of that stuff. That was the problem.

Eve: [00:12:02] And coming out of Covid, like we’ve heard a lot about the disarray of the commercial real estate industry and how is that impacting you? Do you have a next project lined up? Is it harder than it was? Even harder than it was?

Atif: [00:12:17] Yeah, I would say the biggest issue that I am foreseeing is this reality. So, I’m talking to a chief credit officer of a local community type bank in New Jersey and said, oh, so how are you doing with new commercial real estate loans? And he’s like new commercial real estate loans? What are you talking about? And I was like, no, like, seriously, aren’t you deploying capital? He’s like, only for Perm and only to people that we’ve done business with before that have a significant amount of cash at our bank. That’s it. And that type of a of a response. I heard maybe a slightly more liberal like version of that from a super regional bank that I do a lot of business with. And then from the Wall Street and the larger banks of the community development banks that are operating in this space. For them, it’s generally business as usual, but the issue often is that the checks under $10 million, like there’s no use of, like they can’t do them anyway. Before they wouldn’t do them and now, they wouldn’t do them. So, I think it’s the evaporation of options, which is the issue right now. And I think coming forward for the next two years, it’s not going to get any better.

Eve: [00:13:30] Not going to get better.

Atif: [00:13:31] Yeah, there’s about $1 trillion of commercial real estate debt coming due dominantly in office and retail and dominantly held by regional and community banks. So that the lender that would lend to people like us, no, they’re not, they have bigger issues now.

Eve: [00:13:49] Right, it’s pretty difficult times. That’s really depressing Atif, but it’s really true and I think the bank collapse earlier this year is also going to make lending even harder because now experience will count even more. So, it makes it very difficult to start a career in real estate, you know.

Atif: [00:14:08] I feel like experience is often the catch-all term to incorporate many shades and variations of biases together, because the quintessential problem many of our colleagues, when we were together at the Small Scale Developer Forum that Jim Heid runs in Philadelphia, the last one, is that is the chicken and the egg problem. How is it possible to have a diverse group of developers in this country when your requirement is to have done 50 projects already? So, unless you were born to come out of the womb with 50 projects done, how would one even do that?

Eve: [00:14:42] Yes, it’s a very big problem. Very big problem. Let’s move on to the second company, which is now called Commonplace, which I think probably, I’m guessing, addresses some of these issues. So, what does Commonplace do? What is Commonplace?

Atif: [00:14:56] Sure. So, Commonplace is not a real estate development company or an investment company like Amanat Properties. It’s a technology company and it’s one that’s considered a startup. So, we have venture capital financing. And what our mission is, is to help impact developers be able to access capital more easily in order to do the good work that they’re doing. So, we’re a team of six, based in New York, and our focus is on making double opt-in qualified introductions between impact developers as well as capital providers. That’s our first product. And from there we’re building out a suite of other activities and initiatives and products that we hope to release in the next couple of months.

Eve: [00:15:45] Interesting. How far along are you with the product? How many introductions have you made?

Atif: [00:15:50] So we’re about 150 a week is where we’re at right now. So, we’re starting to now do the, like the assessments from the past quarter of how many went to first conversations, how many went to second conversations, and how many went to term sheets. And I think over the next quarter, we’ll be able to reassess that as well. But essentially what we’re, we’re approaching the problem from the perspective that the issue isn’t necessarily technology, and the technology is the accelerant of something like this. But the issue often is simply the relationship not existing. So, from that perspective, we’re taking actually, frankly, a low tech approach to the introductions and then implementing technology in different layers to make that accelerated. And we’re actually seeing this as the test case for us to be able to deploy something that is more robust and more technology native, which we’re calling Capital Applications. And that’s a product that we’re excited to launch with six capital providers in the next couple of months.

Eve: [00:16:53] Oh, interesting. So, when did you start Commonplace?

Atif: [00:16:57] So commonplace. We started in its original iteration in 2020 as REDIST, which was a software as a service company focused on data related economic development incentives and then Commonplace, we relaunched as Commonplace in May of this year.

Eve: [00:17:15] What prompted you to reimagine it?

Atif: [00:17:18] So I mean, I thought when I was banging my head against the wall and capitalizing my deals that, gosh, it must be economic development incentives that’s going to solve, they’re going to solve all my problems. And I was like, these are really hard to figure out and find and learn and get. So why don’t I put all the information together and I’ll make my life a lot easier and probably that of developers. So, we did that. We gathered all the data related to 6000 different incentives in 13 states. We curated all the content and wrote that up in a way for developers to understand, and we piloted that with 250 companies. We had paying customers. And often what we heard from our customers and from the folks that piloted our product was this is great, could you help us find debt for a new construction multifamily project in Detroit? Because we don’t know any community banks in Detroit that want to fund new construction right now. Or, like another classic one that we heard was, oh, I have all the capital from my 80 different sources for a repositioning of a historic hotel in a majority minority neighborhood in Chicago, but we just need another million and a half of equity and we don’t have any more friends and family to go to for $10,000 checks. Could you help us find some more equity? My favorite one was a developer in New Jersey who had said, oh yeah, we’d love to get debt help. We need help with debt besides the incentives. And he’s like, you’re a licensed architect, would you, could you also design our whole development for us too?

Eve: [00:18:54] So are you adding in design services?

Atif: [00:18:57] Oh, no, I’m not going back to that one. And also, it’s been so long since I’ve gotten CAD, but generally the three people that I’m describing all were of a similar style person, which was a midsize impact developer that was developing in a majority minority area. And we realized like the similarities again and again, and that’s what made us take a pause, spend a couple months, do a bunch of research interviews, go through our notes again and figure out how we want to address the same problem in a different way.

Eve: [00:19:27] Really interesting. Well, that brings me to the final one of the three I know about, and that’s called, the podcast, American Building Podcast, which you host. Tell us about that and what motivated you to launch it.

Atif: [00:19:41] Sure. This was motivated by the magic of LinkedIn. So, the new CEO of Michael Graves Architecture and Design, His name is Joe Furey. He has the three letters after his name it’ not AIA, it’s CPA. And he is probably the most fascinating head of a design firm that I’ve seen because he’s no nonsense. It’s like, let’s get to the point. And I think particularly for firms that are going through transitions where their founders have passed, particularly when it’s a very iconic founder, it is, not in every case, but I think it’s a challenge I’ve seen in several different places to transfer the business development responsibilities to the new generation. So, long story short, Joe was following a bunch of my LinkedIn posts that I did when I left Extell because, I mean, given I wasn’t developing because I couldn’t find the equity and the debt fast enough.

Eve: [00:20:35] The capital, yeah.

Atif: [00:20:36] So I had to fill the rest of my time doing something. So, I was making LinkedIn posts and Joe saw this and he was like, hey, you seem like a really interesting guy. Would you want to come and just grab coffee? I said, funny enough, I’m actually at my parents’ place, which is like five miles away from your office. Let’s meet tomorrow morning for coffee. So I met him and then I invited him to a panel that I was hosting at the Harvard Real Estate Symposium on Entrepreneurship and Intrapreneurship within our industry and we just started, on the way up, we were just like talking a lot about how does he, as a firm, reach out to a new generation of potential customers, who are now in their 30s and 40s leading development firms all across the country? And we said, you know, both of us listen to podcasts. Let’s just do it, let’s figure it out. So, we basically came up with our plan, what we wanted to do. We dug into our virtual Rolodexes of friends in the city, and the thesis that we wanted to bring was, let’s talk to a new generation of developers and the ones that you don’t see on the cover of the Real Deal, the ones that you don’t see on every single industry panel, though, and you know exactly what I’m talking about, all of those people. So that’s what we started with. And I think we really kind of struck a chord with people. We got some really great guests on. So, Vishaan Chakrabarti from Practice for PAU, great, great architecture design studio. Marion Gilmartin, Melissa Birch. A whole set of people that are really amazing. So our 75th episode we recorded yesterday with Keith Rand from Mill Creek Residential. So yeah, that’s basically the path.

Eve: [00:22:23] And what have they told you? What have you discovered in these interviews?

Atif: [00:22:27] So in each of these interviews we wanted to get to the heart of it is, the why of what they actually were solving for it. What was it that drove them to develop this building or design this building? And what is it that a listener can take away from them to understand what is the future of our industry going to look like? Generally speaking, that was season one and two and then three focused much more tightly on housing in the greater New York City area. And we included, started including a journalistic style monologue in the beginning that talked about a certain issue in great depth. So one of the ones that I thought was really fascinating was where did the modern system of home mortgages come from? Like, how did that even start? So, we kind of go all the way back to FDR, the 1940s, and describe that process on the way back. So that’s what made this season a little bit more unique than the other ones.

Eve: [00:23:26] Interesting. But what have you learned about developers, this next generation?

Atif: [00:23:30] Do you know? What I would say is this, as that as easy as it is to stereotype our whole industry as being in it for the money, which is usually what people yell at me when, I’m a city planning commissioner in Hoboken as well, so that’s usually what people in the audience will yell. They just yell indiscriminately aloud from the audience. And a couple times I’ve also done like the so tell who are these developers you’re talking about? But I think what, so what I’ve learned is that there are many people that aren’t that and there’s many people that care about the place that they develop. And there’s many people that care about the people that are going to live in, work in or enjoy the buildings that they’re creating. And that’s something that is deeply inspiring because I think the other description or stereotype of our industry tends to dominate the public psyche.

Eve: [00:24:22] I think that’s true. And then what about architects, this next generation of architects? How is the industry changing? Is it changing? Because, you know, architects are very undervalued on the whole. And I’m, I’ve puzzled for years over why that isn’t more actively addressed because I think they bring enormous value. But I’m not the norm in that thinking, right?

Atif: [00:24:51] Yeah, I think that it probably comes to something that my therapist would say, which is about boundaries. And I think that architects are terrible at creating boundaries in terms of what they will do versus what they won’t do and how they value themselves versus what they will give away for free with the hope of being able to get something else. And I think perhaps an old school way of thinking about this is what H.H. Richardson said, which is that he’ll design anything from a cathedral to a chicken coop. And I think the new-age version of this is where an architect’s values overlay with what they will actually do. So, for example, Vishaan Chakrabarti, the architect that I mentioned, makes it explicit in the manifesto for his business, he will not work for authoritarian regimes. He will not design a prison. So, and he is not interested in doing stuff related to law enforcement. So, I think that all of those areas and declarations are the beginnings of this boundaries of saying that this is me, this is what I do, I am valuable. And if you choose to value me, this is the price associated with it. And if not, somebody else will. That’s the tough one.

Eve: [00:26:08] I really admire that. But I’m thinking of value in a much broader sense. Like, I walk around my neighborhood or where I have my little cottage and I’m just appalled when I see the buildings that are going up in a place that has such distinct character. And the buildings are thrown up by builders who have never been trained to recognize that character or replicate it or build anything that fits into it. And architects are not even a thought. They’re just not a part of the conversation. And so, we end up with really wonderful places being just ruined over time by either an unwillingness to think about what it means to put up a building and the space it creates. And I am, I’m appalled when I talk to people about this who don’t know what architects do saying, but they’re so expensive why would I why would I need one? The builder can do that for me. I’m just puzzled at why the architecture industry hasn’t been able to find a way to talk about its value broadly.

Atif: [00:27:20] Yeah, I think that there is this element of, um…

Eve: [00:27:25] Elitism.

Atif: [00:27:26] Elitism. I think this idea that you poor people don’t deserve nice things and architects don’t work for poor people. And I think the, what I think about is also the minimization of our trade by the increasing presence of legality and fear of lawsuits throughout every aspect of our industry. So, I think the AIA has done a wonderful thing by codifying contracts that our industry uses as our norm for both owners, architects and contractors.

Eve: [00:27:57] And builders.

Atif: [00:27:58] And builders. Yeah. And I’ve read those contracts as a principle. Like I’ve needed to read all of those contracts when I’m hiring a contractor, I’m like, gosh, architects, we’ve really backed ourselves into a corner. And when I think about, let’s go all the way back to one of the greatest, still one of the greatest buildings of all time is the Taj Mahal. So, the head architect, his name is, was, Sir Ustad Ahmad Lahori. So funny side story, he’s essentially a Pakistani that designed in India, which is a whole other side story. But the amazing thing is that, um, as an architect, it wasn’t like he just drew the drawings and was like, okay, you do it and if you have a problem, I’ll probably sue you. Or if you want to sue me, let’s go to court. His whole responsibility was everything, including the supply chain. And what I found so amazing is he was responsible for the team of people that were getting all the precious stones and all the precious materials like Jade from China, Tourmaline from the Middle East, all of these different things. And they all spoke all these different languages. And he was responsible for all of that. And I think that owning of the whole process is what allows architects to truly be maximized in their value in the way that you’re describing.

Eve: [00:29:11] Yes, but I still puzzle over how that’s ever going to be brought into, you know, everyday lives because streets, neighborhoods, blocks are ruined by poor design, and then we all get to enjoy that.

Atif: [00:29:28] I mean, there’s some avenues. Let’s think, so, I mean, it’s not like us having to turn the clock all the way back to the, I guess that would be the 1400s when the Taj was built. Maybe I’m off by a century two, something like that. But I mean the idea is citizen commission. So, I think participatory democracy in some ways is a very good thing. And I think having planning commissions and zoning commissions and historic commissions can have positive benefit there. I think perhaps another one that’s not a fully baked idea, but the idea of perhaps making real estate more accessible from an investment perspective, I think there’s a really beautiful thought process around that. And then I would say…

Eve: [00:30:07] You mean like we’re doing at Small Change?

Atif: [00:30:09] Exactly! Yes.

Eve: [00:30:11] Oh, yeah. That’s how you build wealth, right?

Atif: [00:30:14] Completely, and I think that there should be, the way that the SEC thinks about and regulates funds at a larger level, I think being able to think through and structure and support the great work that Small Change is doing and people that are looking to invest at the smaller scale sounds like that’s something that’s worth effort from a legislation perspective and maybe even a funding perspective rather than huge amounts of money thrown at infrastructure to the tune of billions of dollars through the last two major bills and the Biden administration.

Eve: [00:30:44] So what was your favorite interview ever, and why?

Atif: [00:30:50] Okay, so my favorite one ever, and I love all my babies, all my babies are wonderful, all my episodes. But my one that I think of in particular is the episode I did with Louis Schump, who’s a creative director at Gensler, on the subject of the West Side Pavilion, which is Google’s new headquarters in Los Angeles. And it’s essentially, it’s a conversion of the mall that was featured in Clueless, the movie, into a mixed-use office complex. And as part of that, we talked a lot about the goals of Google and the, I guess you could say, the largesse of a large company like that to be able to promote good urbanism at a large scale. And then one area that we explored is just reeling it back. How did America get so many malls to begin with? So, both of us are amateur historians.

Eve: [00:31:45] And what are we going to do with them now? Right?

Atif: [00:31:49] I have an aunt, a great aunt, who is from Toronto that I’ll see in a couple of weeks. And every time I see her, she has the most creative ideas of what to do with, she’s not even in real estate industry, but she’s the most creative ideas and the one that she said nearly like a decade ago, far before the pandemic, she was like, hey Atif, basically what I do every day is I drive to the mall and all the other Indian aunties, we just walk around the mall together. And then sometimes we have to go to other places to pick up our grandkids and we go to other places to drop them off and then we come back. Wouldn’t it be great if there was like the mall just became my house and then the day care was there too, and then my son and daughter just lived nearby. Like, wouldn’t it be cool? And I’m like, oh my God, you hit on it right there, that’s it. That is what, that’s what malls should be. Multi-generational housing.

Eve: [00:32:37] If you want to live in that environment, that is. Because I’m not sure I could do it. Okay. So, one final question. Unless you have another company you want to explain to me?

Atif: [00:32:52] Any other companies, I would say no, I’m good for now. We’ll stay a three.

Eve: [00:32:56] You’re good for now, okay. So, one more question and that’s what’s next for you?

Atif: [00:33:02] Good question. So, we’re, for Commonplace, we’re coming up to a fundraising milestone. So, we’re excited about that. And we hope that that will allow us to expand our product offerings, our vision, our scale and bring on some more great talent to help us do that. And I think that there’s a couple other ideas I have in the works in my head. One of them is the investment portfolio that I have and scaling that perhaps to a much larger scale, allowing folks to be able to invest in workforce and affordable housing more easily on an individual level. That’s probably something a bit separate. And then the one that I love, which I feel like this is this could be the final one that I ever do, I call it, lovingly, it’s the wedding planner for high end home renovations. So, I literally, every month or so at least some family members, some neighbor, some friend from college is like, oh, P.S. I just bought a $5 million brownstone in Brooklyn. Can you just do, like the whole renovation? Because I know you did such a good job on it with your parents’ house. And I’m like, there has to be a business here. And that would be so much fun to do.

Eve: [00:34:17] So, you’re not even sure what’s next for you?

Atif: [00:34:22] One of all of them is the potential next one, so we’ll figure it out.

Eve: [00:34:26] Well, it’s been a pleasure talking to you. You’re such a high energy person. I can’t wait to see what you do next.

Atif: [00:34:31] Thank you so much for the opportunity, Eve. I love your podcast. I love everything that you’re doing and I’m so looking forward to seeing you again at our next Small Scale Developer Forum in just a couple of months.

Eve: [00:34:43] Can’t wait, in the beautiful Savannah, right? Okay.

Eve: [00:34:53] 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 Atif Qadir