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Finance

Jumpstart desegregation.

April 26, 2021

The United States has an ugly history of displacement, exclusion, and segregation which continues to this day. Blacks continue to be denied the same opportunities that are given to whites for affordable rental, home ownership and wealth building. While many may believe that this state of affairs somehow occurred organically, the truth is that Federal, state, and local policies have all led to that displacement and segregation. Those policies continue to undermine the prosperity of minorities, stripping them of wealth and financial stability.

Just a few of the policies that led to catastrophic outcomes for Blacks were:

  • Policies to create outdoor space. In the 1850s thousands of predominantly Black residents were displaced to create Central Park in New York city. And in Atlanta, the oldest subsidized affordable housing project, where 30,000 mostly Black families lived, became Centennial Olympic Park.
  • Policies that discouraged racially diverse neighborhoods. The Federal Housing Administration justified housing discrimination by asserting that if Blacks bought property in white neighborhoods, then insurance values would fall causing loans to be at risk. There was no basis for this rationale.
  • Policies that ‘red-lined’ neighborhoods.  The New Deal, established by Franklin D. Roosevelt to stimulate the economy after the Great Depression, offered home-buying aid to Americans. But color-coded maps of every metropolitan area in the country determined where it was “safe” to insure mortgages. Areas where Blacks lived were ‘red-lined’ to indicate that they were too risky.
  • Policies that encouraged ‘white flight’. Post World War II, the Federal Housing Administration and Veterans Administrations focused on moving the entire white working-class and lower middle-class populations out of urban areas and into single family homes in all-white neighborhoods. This was the beginning of suburbanization and these suburbs came to ring all American cities. And it led to the devaluation of inner city neighborhoods where Blacks lived for many decades.

More recently there has been a shift in housing tastes when life in suburbia, with its gridlocked highways for the morning and evening commute, became less appealing. And so a shift in housing demand has emerged, changing the landscape once again. Wealthy and middle-class people began moving back into urban areas, leading to the redevelopment of previously blighted urban neighborhoods. This revitalization and resulting gentrification exacerbated racial inequality and caused further displacement as Blacks, unable to afford newly gentrified neighborhoods, had to leave once again.

In his book, ‘The Color of Law: A Forgotten History of How Our Government Segregated America’, Richard Rothstein explores the history of housing segregation in the United States. He argues that each of these policies violated the Constitution. Although he recognizes the efforts being made to remedy the situation, he believes we need a more coordinated, new civil rights movement. One focused on housing segregation, to jumpstart desegregation in a meaningful way.

Listen to my conversation with Richard.

Civil Rights March on Washington D.C. from Library of Congress, Public Domain

Andrew loves real estate.

April 21, 2021

Andrew Luong has deconstructed the often lengthy and confusing process of small scale real estate investment, making it accessible to everyone.  He and his partner, Justin, created Doorvest as a turnkey service built entirely online. They help their clients find a property, borrow the funds to renovate it and then sell the finished package to them. Keeping it as simple as possible, they have flat fees and even provide a rent guarantee for the first year. Their track record has allowed them to purchase and renovate properties in poor condition, or in neighborhoods that bankers might not normally like, thus opening the door for new real estate investors who might not have the wherewithal to take those first steps on their own.

Although Andrew began by working in the start-up world, his “squarely middle-class” upbringing led him to decide early on that real estate would be his path to financial security. In his early 20s he started buying and fixing up single-family homes in his spare time. Over just a few years his portfolio grew into the double digits, and he became not just a real estate investor, but a realtor and mortgage loan officer as well.

Over time it dawned on Andrew that the long laundry list of items that comes with purchasing a property, and keeps many people from considering investing in and managing a real estate portfolio, could be rebuilt into an almost frictionless service … bringing real estate investing to everyone. This is what ‘proptech’ is about, and Andrew’s bet is that within a few years most aspects of real estate will be transacted entirely online.

Insights and Inspirations

  • The bigger mission is to democratize access to financial security for all.
  • Andrew mainly sees two kinds of investors through Doorvest, neither of whom has invested in real estate directly before – those recently out of school, gradually building up their savings; and those mid- to late-career, looking towards retirement.
  • Doorvest serves as sort of training wheels for people to get their feet wet, get the exposure, learn about the processes along the way.
  • Andrew thinks most online real estate services are still a bit v1.0. Doorvest is looking towards aggregating far more data and streamlining services, all to empower people to invest in many kinds of real estate “within a matter of clicks.”

Information and Links

  • A quote Andrew lives by: “Your problems never go away, they just change.” It helps him put things into perspective, that no matter how much one “accomplishes,” that satisfaction can really only come from within.
  • Andrew is a fan of “The 4-Hour Workweek,” by Tim Ferriss, which shaped much of his views about work and how to live an optimal life.  (Disclaimer: He spends much more than four hours working per week 🙂 )
  • He is a big proponent of the concept of “work-life integration.”
Read the podcast transcript here

Eve Picker: [00:00:09] Hi there, thanks for joining me on Rethink Real Estate. I’m on a mission to make real estate work for everyone. Real estate can help to solve climate change, can house people affordably, can create beautiful streetscapes, unify neighborhoods and enliven cities. So I’m on a journey to find the most creative thinkers and doers out there. I’m not the only one who wants to rethink real estate. You can learn more about me at EvePicker.com or you can find me at SmallChange.co, a real estate crowdfunding platform with impact real estate investment opportunities open for investment right now. And if you want to support this podcast, join me at Patreon.com/rethinkrealestate, where there are special opportunities for my friends and followers.

Eve: [00:01:16] Today, I’m talking with Andrew Luong, the CEO and co-founder of Doorvest. Andrew loves real estate. Growing up in a lower middle-class family, he decided early on that real estate would be his path to financial security. So he started buying and fixing up single family homes in his spare time. While he honed his skills as an entrepreneur in a variety of start-ups, his portfolio grew into the double digits. He had honed his skills as a real estate investor as well. It dawned on Andrew and his co-founder, Justin, that the long laundry list of items that comes with purchasing a property could be deconstructed and rebuilt into a frictionless process to bring real estate investing to everyone. And so Doorvest was launched to provide a turnkey real estate investment service online. You’ll want to listen in to learn more. If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast or go to Patreon.com/rethinkrealestate to learn about special opportunities for my friends and followers and subscribe if you can.

Eve: [00:02:46] Hello, Andrew, thanks so much for joining me today.

Andrew Luong: [00:02:50] Excited to be here. Thanks for including me.

Eve: [00:02:52] Yeah, I’d heard about your brand new start-up, Doorvest, and I was interested in knowing a little bit more about what you’re doing, what you’re trying to provide.

Andrew: [00:03:03] Right. Our mission as a company is to make, is to democratize access to financial security for all. Kind of where we’re at today is we make real estate investing easy, affordable and accessible to anyone, anywhere, sort of entirely online.

Eve: [00:03:21] So that’s your elevator pitch, right? Right.

Andrew: [00:03:25] Right.

Eve: [00:03:26] But what is the main mode to make? Because there’s so many different ways to make real estate investing easy for people nowadays. What does that mean, Doorvest?

Andrew: [00:03:36] Yeah, I guess to dig into a layer further, we’re essentially a tech enabled turnkey provider. So effectively we begin with our customers. What we’ll sort of learn more about our customers, often everyday individuals that have never participated and owned real estate directly before. We’ll learn more about the individual, kind of what they had earmarked as a down payment. So, what sort of returns or cap rates were they hoping for to what’s their general risk profile? And then with that, we’ll ask for deposits upfront. At that point, we’ll sort of get into what we call production. So, we’ll, based on customer objectives, we’ll then go out into the market. Identify, underwrite and acquire usually distressed, uninhabitable homes. We’ll purchase it. We’ll renovate it and we’ll lease it out. So, the home has sort of completed an income generating from day one. At which point we’ll kind of walk the customer through the mortgage and sort of the third-party transaction process. As the customer closes and takes title, we’ll take on operating. So, we’ll manage the homes for them once they close and take title. Where we position ourselves is that hopefully we will get our customers into again, oftentimes their first rental, hopefully if we perform. So they’re generating the returns that they expected and they like working with our team, hopefully that they come back as they sort of build out their nest egg and portfolio.

Eve: [00:05:09] So let’s back up a little bit. So, what you’re doing is actually helping people buy a piece of property that is going to be income producing for them. And you’re sort of getting rid of all the stress and anxiety of finding the property, renovating it, finding the mortgage. You kind of package all of that up front and turn over to them a fully renovated income producing property, is that correct?

Andrew: [00:05:38] Right. I didn’t think I could have said it better myself, but that’s absolutely correct. The goal is to make it really easy for them because oftentimes our customers are really busy people that have never done real estate before. So that’s sort of the three constraints that our customers see. And I think where we fit in nicely is being busy, being an experienced and oftentimes not having a lot of capital to begin with are kind of the three major points that I think we touch on.

Eve: [00:06:10] Oh, interesting. So, you’re taking the fix and flip out of fix and flip through them.

Andrew: [00:06:15] Right. And giving them the ability to kind of have and lean on a company that has some scale efficiencies. So generally, our appliances are cheaper, our flooring is cheaper, et cetera.

Eve: [00:06:29] Interesting. So what prompted you to launch this?

Andrew: [00:06:33] Right. I’d say it’s sort of my story and or the Doorvest story goes back roughly maybe seven or so years ago. At the time, I was in school studying chemistry and trying to be a doctor. Certainly, you could say that that didn’t work out. But I think I was fortunate and found my way to my first job at a start-up company, ultimately ended up doing okay. And I think I walked away with sort of two learnings. Number one sort of wanted to be spending my waking hours building companies from the ground up, but I really enjoyed the thrill of it, felt like I was okay at it. But secondly, I grew up squarely middle class and grateful that we never had to worry about where sort of dinner was coming from, for instance. But we were certainly by no means financially secure, so experienced firsthand financial security or maybe the lack thereof and its ability to sort of inhibit one from pursuing their dreams. Maybe for my parents, it was the dreams of having a happy family because you’re arguing over sort of the vacation plans. Maybe for others it’s to do something entrepreneurial or work at a non-profit or launch a podcast, what have you. And so, kind of found that that looked for an avenue to kind of generate some income security, build a long-term nest egg for myself. That’s where the two worlds collided. Found my way to real estate investing. Kind of did okay for myself. Built up a small double-digit portfolio for myself sort of nights and weekends while my day was sort of busy working person. And then along the way, through lots of organic conversations, coffees, dinners, what have you, saw others similar to me. And maybe these are folks that traded some stocks on Robinhood and maybe they had a 401k and brokerage account, high yield savings account, et cetera. And we’re thinking about sort of the next progression in assets. Real estate, it’s kind of natural there. But I think and you’ve been in the space arguably a lot longer than I have, but due to sort of the friction filled process along with sort of the capital barrier to entry, weren’t able to participate in sort of America’s number one source of wealth generation. One of those folks along the way was my good friend and now good friend and co-founder, Justin. But as we kind of went through the process together, it kind of dawned upon us that hopefully if we can build a sort of modern, easy way for anyone anywhere to buy and own income generating real estate entirely online, hopefully we could sort of bring this to the masses.

Eve: [00:09:20] Well, you know, you just said something really interesting and that was, you know, access to capital for people who normally can’t access capital. I mean, how does that work? How do you get them access to capital?

Andrew: [00:09:34] A part of it is investing in sort of affordable markets, encouraging our customers and giving them the resources and tools to be able to save and then sort of leveraging that into a market that’s affordable for them. That’s kind of one. I think the second component to that is sort of guiding them through and coaching them through sort of the mortgage financing process. That, in and of itself, is a pretty convoluted process. We hope, longer term to be able to impact sort of the financing process more more directly. But as of right now, we kind of see ourselves as a coach in that aspect.

Eve: [00:10:14] Do you go out and borrow money for the renovations or is that up to your customers at the moment?

Andrew: [00:10:19] We do it. So, we borrow debt as we acquire and manage the renovation.

Eve: [00:10:26] Does that make it easier for them because they are then borrowing or acquiring debt on an already renovated property that a bank can lay eyes on.

Andrew: [00:10:36] Exactly. So that’s one of the ancillary sort of value propositions for us is…

Eve: [00:10:43] That’s huge.

Andrew: [00:10:45] Right? Yeah. So, we’re doing pretty extensive reno. Like for context, we’re doing about 30 percent of the acquisition price as renovations to that number works itself out to roughly 40 or so thousand customers able to roll this into their conventional mortgage. And like you said, the banker is able to sort of have this finished product.

Eve: [00:11:07] Yeah, but I think what I mean by that’s huge is now, you are putting buildings back into circulation that most banks would not probably lend money on, especially not to a first-time fix and flipper. And so that really does expand opportunities for people in a pretty significant way.

Andrew: [00:11:31] Right.

Eve: [00:11:32] Oh, yeah, I was just putting it together because, you know, when we started, I wasn’t quite sure where the impact lies, but I can see the impact really lies here in the ability to help people build wealth. Because, you know, I’ve done this myself. I’ve gone to a bank with a property in a pretty rundown neighborhood and talked about my visions for the property and the bank, scratching their head, saying we definitely don’t want to lend money on this. And then I come back and show them the renovated property and they say, oh, now we get it. So, you are bridging that gap for people.

Andrew: [00:12:12] Right, and I think sort of the second letter to that is sort of the operational component to, again, sort of our target sort of customer and that we serve our folks that are busy, oftentimes with a demanding sort of day job and our folks that sort of haven’t done much real estate investing directly. So, we kind of serve as sort of training wheels for them to get their feet wet, get the exposure, learn about the processes along the way. And then the second component is that we do the heavy lifting for them to kind of have that finished product.

Eve: [00:12:51] So where are you doing this?

Andrew: [00:12:53] Right, we’re focused on Texas as of right now, it’s sort of an operating market.

Eve: [00:13:00] And how many times have you done this for customers so far? If you’ve been… you launched when, in the middle of the pandemic?

Andrew: [00:13:09] I’d say more or less we were born out of  Covid. So, I’d say Justin and I were sort of working out our best early last year kind of got started, maybe March or so. So that’s squarely at the beginning of the pandemic. And yeah, we’re at sort of low, sorry, mid double digits, sort of homes transacted. I don’t have the numbers top of mind, but we’ve been growing steadily. It seems like customers, kind of what we have to offer has been compelling to customers. It’s whether, the question then lies, how do we do this at sort of greater scale, serve more customers?

Eve: [00:13:52] Right. Right. Do you have repeat customers yet?

Andrew: [00:13:55] We’re soon to. Actually, we have a couple early ones, and we actually have a handful of them that are expected to buy their second home through us this month. So that’s sort of validation of our model and we’re really excited to have that and see that.

Eve: [00:14:14] That is exciting. So what do you, what do your customers generally look like? Are there any anomalies or is it pretty squarely one group of people?

Andrew: [00:14:25] Right. So as of right now, there’s two core groups of Doorvest customers. So, number one is busy working person, maybe call it five years or so out of college. They’ve been gradually building up their savings and are kind of thinking about real estate for the first time ever in their lives. That’s sort of one group. The second bucket is, I would call them mid to late career. So again, busy working person. Maybe they own their primary. Maybe they’ve got a couple of primaries over the course of their career or looking forward towards retirement and thinking about income streams and nest egg and what have you. They’ve never invested in real estate directly ever. They’ve always been sort of intrigued by the idea, but never had a vehicle or the time to do it themselves. And so Doorvest’s kind of serves as a retirement vehicle for them.

Eve: [00:15:26] Interesting and do you have a second market in mind already or you’ve got plenty to do in Texas?

Andrew: [00:15:34] We have plenty to do, but we are eying a number of other markets. I think market number two, whenever that, it’s a matter of time, don’t have sort of a concrete timeline. But at some point, we will expand into our next market. I think the way that we’re thinking through that, number one leads with customer demand. So, what are our customers asking of us? And what would sort of the early hypothesis being? It’ll be either a market similar to where we’re at in Texas or maybe a more yield focused market. Call it a Memphis, Tennessee or so, or maybe a sort of growth market, call it a Phoenix or so. Yet to be determined. Hopefully in the coming decades we end up in all of those markets and hopefully more. But we have plenty to do at this point.

Eve: [00:16:28] Yeah. So, you’re building a technology around all of this, right?

Andrew: [00:16:33] Right.

Eve: [00:16:34] And what does that look like? What do you have to build? What have you built so far?

Andrew: [00:16:38] Right. I think we have a long way to go. I think kind of where we’ve gone so far as customers are able to buy homes entirely online, leveraging the data sources that are either proprietary to us or data sources that we as an organization are able to access. Along with lots of sort of ways to analyze the home online, whether it be integrating Google Maps Street View, so they’re able to to do a brief walk around the neighborhood or whether it be having Mattermark reports, so they’re able to walk through the house. Whether it be crime or school data, et cetera. I see our work as sort of aggregating various data sources. I think that the first generation of sort of real estate companies, such as the Zillows and the Redfins of the world, brought a lot of real estate online. I think I see it as our sort of job is to organize that data, sort of make sense from it in a digestible, sort of actionable way. To kind of where we’re at. Today’s customers are able to buy a home entirely online. It takes many, many clicks, many emails, and many phone calls over time. Our sort of aspiration as a company is how do we get it to the point where an individual can be anywhere earning any amount of money and able to participate in America’s number one source of wealth within a matter of clicks. I think we have a long way to go, but excited about sort of the progress we’ve made so far.

Eve: [00:18:17] Yeah. So, I have to ask you, how many of your customers have gotten off the sofa and actually gone to look at the property they’re going to buy?

Andrew: [00:18:25] Right. Low single digits. Yeah. So, we’ve added a number…

Eve: [00:18:31] About 60, 50 percent, 40?

Andrew: [00:18:34] Sorry, sorry. I think it’s about five percent or so. So, the number is pretty low. The majority of the folks that we’ve served have sort of leaned on us, given sort of our business model and where we positioned ourselves to kind of do the heavy lifting for them.

Eve: [00:18:53] Interesting. So, then you’re also operating as a property manager and…

Andrew: [00:18:59] Right.

Eve: [00:18:59] So what does your team look like?

Andrew: [00:19:02] Right. So, I guess in terms of the entire team as of today, where we’re 17 folks, small but mighty, I think, and sort of gradually growing. Spread across sort of the many different facets of the business. About a third of our team is on what we call success, which is sort of property management, traditional property management. I think with the twist, yes.

Eve: [00:19:30] The traditional property management can be labor intensive and frustrating.

Andrew: [00:19:36] Right, right.

Eve: [00:19:37] Yeah. Yeah. So how do you hope to scale? Have you, must have thought about that as a start-up.

Andrew: [00:19:45] Oh yeah. Lots, lots of thoughts about that I think sort of beginning with our mission, but really to democratize access to financial security for all. As of right now, we’ve made it accessible to anyone, anywhere with roughly thirty thousand as a down-payment is able to participate in real estate directly, entirely online. I’m proud of that. But I think that still means that we have a long way to go to sort of make real estate accessible to anyone, which means sort of driving sort of the capital barrier to entry down. I think over time, our aspiration is to make it so anyone can participate in real estate with call it 30 thousand, maybe 20, maybe 10, maybe five, maybe 500, maybe 100. Again, I think we have a long way to go to get there.

Eve: [00:20:37] Oh, interesting. Yeah, yeah, yeah. So wow, that’s quite an enterprise, Andrew.

Andrew: [00:20:46] It’s a lot of work. And I’m fortunate that our team is really sort of thrilled and excited and cares deeply about sort of what what we’re hoping to build for the world. Again, I certainly see that we have a long road ahead, but I’m confident if we’re able to succeed, I hope we can impact the lives of many, many people for the better.

Eve: [00:21:10] Because it’s really three businesses in one. I mean, the property management business, you can have a fix and flip business, or you can have a technology start-up. Right?

Andrew: [00:21:19] Right. That it’s funny that you say that you mentioned the three businesses and one, this is something that I talk about with internal and external, whether it be our investors or our future investors or partners, et cetera. But effectively, we’re gluing three businesses into one and three very complex businesses. I think if we succeed, we offer our end users sort of the, a really nicely packaged, really nicely packaged experience.

Eve: [00:21:51] I could see you adding in the fourth, and that’s real estate brokerage. Your missing…

Andrew: [00:21:57] That. That’s right. We’ll get there, I think.

Eve: [00:22:00] You will. I’m pretty sure you will. So so what’s the biggest challenge you’ve had?

Andrew: [00:22:08] Right. I think it evolves. I remember I was talking to Justin a little bit back, and I was like Justin, it feels like things we’re encountering more challenges than ever before. Is this because we’re not good at kind of what we’re doing? And somehow ,we’re facing more challenges. And as we’re talking, I think it kind of surfaced that as a small business that’s trying to be a bigger and bigger, more impactful business, the way that we get there is by unlocking ourselves a new set of challenges. That’s a long-winded way of me saying I think the challenges evolve. If you ask me four weeks ago, maybe I would have said the ability for us to consistently raise the real estate debt to be able to fund these transactions. Thankfully, I think we’re kind of past that now. As of right now, I think I mean, this might be outside of our control to a certain degree, but sort of the macro, as we’re seeing in the real estate industry. So, lots of competition, which makes inventory really tough, lots of delays, supply chain delays. So it feels like every step along the way is adding two or three days, which amounts to really long delayed timelines for our customers, etc.

Eve: [00:23:31] We’re experiencing that ourselves. Supply chain delays seem to have gotten worse in the last, I think, in this year than they were last year somehow.

Andrew: [00:23:40] Right. I’d love to see some numbers behind it, but this is certainly what we’re feeling internally, too.

Eve: [00:23:45] Yeah, it’s almost like people are trying to build their businesses back up and they’ve got to start from scratch. They’ve got to be reborn. We can’t get contractors to perform, yet, but that will go away, surely.

Andrew: [00:24:00] That’s a hope. Yeah. And I want to be sort of intentional and careful about us sort of having this hope and hopefully it’s validated. It sounds like I mean, based on conversations like our conversation right now and others that I’ve had, it sounds like this is a matter of time, in which case I feel good about that. But everything from appraisal delays to appliances taking a week longer to flooring taking a little bit longer, etc. Like that kind of adds up for our business.

Eve: [00:24:31] What part of the business do you love most of?

Andrew: [00:24:36] There’s many areas. Honestly, I’d say number one is, so I came from sort of the sales and business development background. What that means for us is sort of working with our customers who are oftentimes folks that have never sort of participated in real estate, nor did they think that they were able to right now. So, seeing and hearing their stories, whether it be, hey, my wife and I have been thinking about how we’re going to supplement our retirement and our 401K based on our number crunching just isn’t enough. And we hope that if over the course of the next 10 or so years, if we buy a handful of rentals and kind of get that paid off through Doorvest. Like, we have this sort of extra layer to our income streams, et cetera, and you all make it so easy for us to do this while we could still focus on our busy lives, which is our jobs. We both have jobs and our children who we care deeply about. Like hearing those stories and spending time with sort of our customers, it never gets old. I, believe as we go from mid double-digit customers to hopefully triple and quadruple etc. customers, I believe this will stick with me. So that gets me really excited.

Eve: [00:26:01] So what’s your very big, hairy, audacious goal?

Andrew: [00:26:07] Right. Our hope is to impact the lives of, I mean, every American, given the fact that we’re interfacing with busy working people, we’re interfacing with our residents, et cetera. I think sort of in the nature of the space that we’re in, we impact and touch a lot of lives, even beyond sort of these direct folks that we’re working with day to day. We’re impacting the lives of our general contractors and our vendors and our partners, et cetera. The big audacious goal, I think, is to sort of be cognizant of the position that we’re in and driving sort of win-win solutions across the board.

Eve: [00:26:53] Well, this sounds some really amazingly exciting, and I can’t wait to see where you are in five years from now. You’re very young. You just starting out. It seems like you’ve made big strides already. So, congratulations. And I look forward to hearing more.

Andrew: [00:27:09] Thank you. Yeah, I appreciate it. Sometimes it feels like we’re just getting started. And I certainly think that’s the case. I think if we kind of all align ourselves about what we care the most about in this world, I hope and I think we can do sort of amazing things for the world. So, hoping to stay in touch as we rebuild away.

Eve: [00:27:36] That was Andrew Luong of Doorvest. Andrew and his partner, Justin, have deconstructed the often lengthy and confusing process of small-scale real estate investment, making it accessible to everyone. Their turnkey service is built entirely online. They try to keep it as simple as possible with flat fees and even providing a rent guarantee for that first year. They help their clients find a property, borrow the funds to renovate it and sell the finished package to them. Their track record allows them to purchase and renovate properties in poor condition or in neighborhoods that bankers might not like. Opening the door for retail investors who might not have the wherewithal on their own. We’ll be watching Doorvest as it grows.

Eve: [00:28:38] You can find out more about this episode on the Show Notes page at EvePicker.com or you can find other episodes you might have missed, or you can show your support at Patreon.com/rethinkrealestate, where you can learn about special opportunities for my friends and followers. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change.

Image courtesy of Andrew Luong/Doorvest

Investing in community.

February 8, 2021

Community investment plays an important role in helping to make our cities more equitable and sustainable. Community investment contributes to economic vitality, affordable housing and the overall liveability of all communities. Often it is a necessary piece of the capital stack in under-served communities, where soft markets make it difficult to raise sufficient conventional financing for projects.

Community investment can come from numerous sources — foundations, banks, companies, individuals, public subsidy and philanthropy – and in numerous forms — loans, bonds, tax-credit equity, structured investment or even investment crowdfunding.

It’s not a new phenomenon. Black-owned banks, which came about due to segregation, once provided capital to Black entrepreneurs and prospective homeowners who had an almost impossible task finding loans. Credit unions (not-for-profit financial cooperatives) also met the need for financial services where banks would not step in and became an important source of micro-finance for poorer and rural communities.

In the 1960s, after Lyndon B. Johnson announced a ‘war on poverty’, community development corporations saw an era of unprecedented federal funding. But when this source of funding slowed down in the 1980s, non-profit loan funds emerged instead. And in an important policy innovation in 1994, the Community Development Financial Institution (CDFI) fund was born, creating the kind of equity capital that the community investment industry needs.

Community investment knits together all of these organizations and institutions from different origin stories. Today, despite still being a small part of the financial services sector, the industry has become more mainstream. This has been accelerated by the pandemic which has focused attention on the plight of underserved communities and has also brought attention to CDFIs.

LISC (Local Initiatives Support Corporation) where Annie Donovan is COO, is such a CDFI. The pandemic has increased their funding stream rapidly, specifically through corporations wishing to make a difference. By traditional measures, the rate of return for investing in underserved communities is not normally commensurate with the risk. That’s the reason capital doesn’t flow to those communities. But the pandemic and the Black Lives Matter movement has highlighted the inequity in communities, and LISC is proving that the places and the people they’re investing in are creditworthy. They’ve raised and invested funds and they’ve done it in a financially and fiscally responsible way. And this, in turn, is what helps the industry grow.

We’re optimistic that community investment will continue to blossom and so is Annie. Listen to our conversation here.

Image courtesy of Eve Picker

The third way.

January 25, 2021

Many people may be familiar with the broader concepts of real estate development, but what effect does the way in which a project is financed have on the final outcome?

For profit

Property development has long been a business enterprise. Like all investment, it’s all about risk and reward. For-profit developers take all the risks in order to obtain the greatest reward. Typically, developers, as individuals or companies, coordinate the buying of land, designing a project, marketing it, obtaining approvals, financing, building, managing and ultimately selling. The entire process is aimed at maximising profit, but it requires very deep pockets as a project may take years to complete and the developer will only see their profit when the project is sold.

Unfortunately, not all private developers do the right thing. Some developers, either unethically or unwittingly, cause gentrification and displacement in communities by building apartments and condominiums out of the price range of local residents. Even projects pitched to provide revitalization for underserved neighborhoods have sometimes driven long-term residents from their communities and homes.

Non-profit

Non-profit developers have a vastly different purpose of existence. Their mission is to build affordable housing for the underserved sectors of the community. Non-profit housing organizations and community development corporations (CDC) make up the bulk of the non-profit development sector and have so far produced approximately one-third of the social housing stock. Unlike their private counterparts, non-profit developers generally do not have deep pockets and need to access capital through a variety of sources for both development and management as these properties are not built to be sold.

Another major difference is that unlike for-profit organizations, non-profits are exempt from paying income tax – a government reward for their investment in community.

The third way

What if there were a third way to develop? Charmaine Curtis believes there just might be.

Charmaine, the CEO of her own development and consulting firm in the San Francisco Bay Area since 2004, believes that the middle ground should be occupied by developers like her – those who want to use their talents to develop in a more equitable way. Developers who know how to drive a deal to financial viability, while at the same time building a project to be proud of that adds value to the community.

Projects would be market-driven, but always with community-first principles in mind. A developer might make a fee, or a reasonable profit commensurate with the level of risk, but that profit would also benefit the people who the development is built for. This may be the perfect meshing of the non-profit and for-profit development world, and ultimately a nobler role that developers might play in shaping more equitable cities.

Listen to my conversation with Charmaine.

Image by J D Norton

Building generational wealth.

January 20, 2021

Last May, Lyneir Richardson told us about his audacious goal to help 1,000 urban entrepreneurs grow their businesses, through a nine-month program run by the Center for Urban Entrepreneurship & Economic Development (CUEED) at Rutgers University in Newark, NJ. This year we are talking to him again about his latest project, implemented through The Chicago TREND Corporation, where Lyneir is co-founder and CEO, to buy 100 community shopping centers with 100 community members. The first one will be Walbrook Junction, in Baltimore, MD.

The Chicago TREND Corporation is a social enterprise that was initially funded by the John D. and Catherine T. MacArthur Foundation and Chicago Community Trust. It was created as a centralized resource, for real estate developers, retailers and community development organizations wanting to invest in and understand Chicago’s neighborhoods, that can drive transformative change. Describing himself as an urban entrepreneur who is interested in strengthening economic conditions in underserved areas, Lyneir says he likes to work on bringing together private, public and philanthropic funds to support these kinds of projects. And he does that with incredible energy.

Lyneir was also formerly the CEO of Brick City Development Corporation, where he had responsibility for real estate development, small business services and business attraction in Newark, N.J. He is an experienced commercial and residential real estate developer with almost two decades of experience in urban retail development.

Insights and Inspirations

  • Wealth is generated by owning assets that generate revenue and appreciate over time.
  • Retail can be catalytic.
  • Lyneir started his career as a bank lawyer, but found his passion in smaller loans that made a serious impact.
  • His big hairy audacious goal is to buy 100 community shopping centers with 100 community members.
  • Lyneir’s first offering on Small Change, Walbrook Junction, can be found here!
Read the podcast transcript here

Eve Picker: [00:00:10] Hi there! Thanks so much for joining me today for the latest episode of Impact Real Estate Investment. Wealth is created by owning assets that generate revenue and appreciate over time. And today, I’m talking to Lyneir Richardson, the CEO of The Chicago Trend Corporation, about his wealth creation strategy, a strategy that he is  sharing with those who have missed out on wealth generation opportunities before. Lyneir is planning to buy 100 community shopping centers. He and his team have developed a rigorous set of criteria for finding and buying shopping centers that have solid cash flow and also added value over time. He wants to empower Black entrepreneurs and community residents to have a meaningful ownership stake in the revitalization and continued vibrancy of commercial corridors and Black shopping districts. And now he’s onto the next phase of his plan with a crowdfunding campaign for a shopping center he wants to purchase in Baltimore, which everyone over the age of 18 can invest in. You’ll want to hear more. Be sure to go to EvePicker.com, to find out more about Lyneir on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change.

Eve: [00:01:54] Hello, Lyneir, thanks so much for joining me today.

Lyneir Richardson: [00:01:57] Thank you for having me.

Eve: [00:01:59] So, you’ve lived a life in economic development and I’m just wondering how you got there from your initial career choice of the law.

Lyneir: [00:02:08] I tell people all the time that hopefully life is long and the world is big. I started my career as a bank lawyer. I worked in a law department of 90 lawyers and every day we’d work on transactions where we were making loans of 50 million or a 100 million dollars to some big corporate institution. Every day in the afternoon, around two o’clock, I started to fall asleep on the loan documents. The work was boring. It wasn’t until I had an opportunity to do a pro-bono assignment, which was making a 100,000 dollar loan to a local business on the west side of Chicago, and it was at that point that the work came alive. It was the same loan documents and, you know, mortgage and guarantee, and it was a 100,000 dollar loan as opposed to a 100 million dollar loan. But it was a lot of fun. And, you know, giving resources to people and places, that other people overlooked or undervalued, became my mantra. So, I’ve had a lot of fun with that. I left the bank shortly thereafter.

Eve: [00:03:17] Yeah. And what did you do after that?

Lyneir: [00:03:19] So, I went to a homebuilder who was building houses in on the south side of Chicago. I worked for him for a couple of years and really saved up some money. I was 27. I’d saved about 70,000 dollars of my own money. And I jumped out and I started my own little business. The first year I developed, built and sold, and I want to come back to ‘and sold’, six single-family homes in Chicago. I grew that business over the next maybe six and a half, seven years to about nine million dollars of annual revenue, building 80 to 100 homes every year.

Eve: [00:03:54] Wow.

Lyneir: [00:03:55] And it was, it was a wild ride. I was a ‘Young Entrepreneur of the Year.’ And I always tell people I’d won what we would call today a pitch competition. I won a business plan competition and I won a 100,000 dollar prize. And what they said was the 100,000 dollars was rocket fuel, but no one ever told me that rocket fuel is highly flammable. So, I had all the highs and lows. Couple of claims, the need to sell that business, in like, a fire sale. But luckily, I was able to keep my reputation and sort of figure out what my next move is, would be. And now it’s sort of fun to talk about failure, and failure is necessary. And you learn it’s only lessons that failure can teach. But I’m telling you, at that point, it was hard for me.

Eve: [00:04:41] Yeah, I’m sure.

Lyneir: [00:04:44] But I got lucky. I met a guy at an Urban Land Institute meeting who was being honored, you know, for real, in the real estate industry, a guy named Matthew Bucksbaum and who was the founder and CEO of General Growth Properties. He ultimately gave me an opportunity. I send him a letter and said, I’m trying to figure out what to do next. And it worked. I got an opportunity to work at General Growth and and work directly with the CEO to formulate an urban development group. Again, back at passion work. How do you get retail development in ethnic, urban and underserved areas was the charge. The CEO had a personal interest there. I formed a national group and I got the resources in General Growth to do projects in Baltimore, in New York, in Detroit and Birmingham, Alabama. Worked on projects in Milwaukee. It just was a lot of fun. So, you know, step two, I always tell people the career is long and winding road. In 2007, General Growth experiences the financial, was the poster child for financial, financial sort of illiquidity, had great assets, but couldn’t refinance. It was the recession. And so, I left General Growth. Same way, trying to figure out what do I do next? And I moved to Newark and found this great opportunity working for Cory Booker and heading the Economic Development Corporation in Newark, New Jersey. And when the recession thawed out, we did two billion dollars of new projects, hotels, grocery stores, office towers for Panasonic and others. It just was a lot of fun. And then, when he became Senator Booker is when I started my current sort of career path. I lead an entrepreneurship center at Rutgers Business School and I am CEO of a social enterprise, again, focusing on development and getting capital to underserved, changing ethnic neighborhoods. So, it’s been a lot of fun.

Eve: [00:06:44] That’s really what we’re going to talk about today. So, you founded and lead The Chicago TREND Corporation?

Lyneir: [00:06:50] Yes.

Eve: [00:06:51] And what does TREND do?

Lyneir: [00:06:53] So, TREND aims to empower entrepreneurs and strengthen neighborhoods. That’s really our mission. We were formed out of a research assignment from the MacArthur Foundation and the Chicago Community Trust that really aimed to determine how retail impacted neighborhood change. And so, it was what every community kind of wanted, a grocery store or a coffee shop or sit-down restaurant. And the foundation at the time was trying to determine where to put its resources. They didn’t want to put grant and investment in neighborhoods that didn’t need it, that would act on it, would have that development on its own market forces. It also didn’t want to do grants in neighborhoods where the project would fail. And so my co-founder and I, Bob Weisbord, worked on a process, a data analytic tool, leveraging our retail relationships and then ultimately getting capital. We launched in 2016 with about seven million dollars of support from philanthropically motivated impact investors: MacArthur Foundation, Chicago Community Trust. We subsequently raised another 10 million dollars from Fifth Third Bank and something called Benefit Chicago, and the American Baptist Home Mission Society, and a host of other, again, philanthropic impact investors. Really excited.

Eve: [00:08:20] What do you do with that money?

Lyneir: [00:08:22] We find projects. We’ve now invested about nine million dollars in projects really largely led by the Black entrepreneurs or nonprofit organizations. Initially, all of our work has been in Chicago. We’re just starting to expand outside of Chicago. We invested in everything from, our first project was an urgent care and health care center, urgent care and a daycare center right next door to each other. A second project was relocating a historic restaurant in Southside neighborhood, literally across the street in a new building; a new restaurant in there. I think the restaurant was more than 70 years, 80 years old. And we brought in additional retail and African American UPS store franchisee, Military Veterans Doing Great Work. We’ve invested in land with the developer, two million dollars to buy land for a mixed-use project. We invested in a performing arts center. So, it’s that type of work. The theory is retail can be catalytic and can either stem the neighborhood’s decline or strengthen the neighborhood. That your first impression of a community is the commercial corridor, right? You drive in there, you see it. And so we try to use data and analytic tools to identify strategic commercial corridors where investment could happen. We then use a whole host of, we call it deal facilitation, relationships with URI, our relationship that ICSE, going to the shopping center convention and talking to the retailers, leveraging my old relationships at General Growth, but then ultimately finding projects and developers and investing 200,000 dollars to two million dollars on projects that have been our work up until the start of 2020.

Eve: [00:10:18] What are some of the challenges that you’ve been confronted with with this work?

Lyneir: [00:10:23] Well, this work again, I’ve been doing this since my time at General Growth in 2004. It is about perception, in some instances, that still redlining, retail redlining of neighborhoods. That’s been a challenge in communicating that it really is income and market viability to sites and finding the right location that has components that will work for retail. Accessible and visible, and finding projects that work and assembling land. So, just the nature of real estate development and getting tenants attracted is a challenge. Of course, retail, the industry is changing. So, right now there’s this thought about everything is Amazon, and Amazon sells everything. And so what retail is still necessary to communities are: restaurants, entertainment, necessity-type goods, health services and other things of that sort. And then finally, I always say it’s the narrative in the numbers. It’s sort of making sure that the project works, the project proforma works. There’s clearly often a narrative around communities. Maybe it’s a food desert, or a community doesn’t have a sit down restaurant. But you got to find a place where the numbers work, both from a development standpoint as well as for the retailer or the entrepreneurs operating the business. So, intelligently identifying, structuring, using data to identify opportunity and invest in it, all of that’s the challenge. Then just communicating and building relationships to get people to take a look at the projects.

Eve: [00:12:05] It sounds like up until now, in Chicago, transferral hasn’t really been as development, but more investment in development projects.

Lyneir: [00:12:13] That’s correct. That is correct.

Eve: [00:12:14] And so, now you’re shifting gears a little bit because you’ve listed a project on Small Change.

Lyneir: [00:12:20] Yes.

Eve: [00:12:21] And it seems you shifted into development mode. And why is that?

Lyneir: [00:12:27] Yes, I’m really excited about it. So, you know, 2020, we all know it was the year of pandemic, of protests and a political pandemonium. That’s what I call it, the PPP. And in Chicago, right after the murder of George Floyd, there was looting in commercial corridors. And as I, as I watched the news and sort of talked to friends who were on the ground, and community, people were lamenting the fact that we just got these stores open. We fought for everywhere to get a Wal-Mart open or Walgreens open in the community. And there was looting even to some of the Black-owned business. There was looting. I’ve just observed that, that my thought was a very few people of color-owned commercial real estate. People of color didn’t have opportunities, sufficient opportunities to be commercial real estate agents or commercial property managers. And so, my thought was we should own assets. And as you remember, I talked about my initial business of developing, building and selling homes. Then, when I got to General Growth and met, you know, the Bucksbaums, when I got to Newark, I met a guy named Jerry Gottesman where they said, you know, we don’t sell. That wealth is created by owning assets that generate revenue and appreciate over time. So, my thought was, why don’t I start to buy assets? Commercial, small strip centers that generate revenue, have the potential to appreciate over time, are important to the community and provide services. And so, we bought our first shopping mall. It literally was our Chicago TREND business. You know, it was a pilot. So, literally, the first project, my wife and I put our own money alongside of our philanthropic capital. And one of the industry icons invest with us. And we bought the first center. And what we found is even during the tough part of the pandemic, the first center had non-Amazonable retail tenants. It had an MRI center, a carry-out chicken restaurant, State Farm dealer, Dunkin Donuts, a beauty salon. Right? So, those tenants, there were entrepreneurs. They were fighting and finding ways and finding grants to stay open. They paid their rent. They continued to provide services to the community. I say, essential services, and again, essential in the context of the pandemic is taking on different meanings. But these are places that people still went to that are, quote unquote, not Amazonable. And so, we bought our first one in the early part of 2020. We bought a second one in October of 2020. The second one we bought in partnership intentionally with local entrepreneurs and we decided that we could do that more. And so, that’s the project we’ve listed on Small Change and we’re really excited about continuing to grow this business line.

Eve: [00:15:41] Tell us about that particular offering that you have on Small Change. What does the building look like?

Lyneir: [00:15:46] So, we’ve put under contract a 47,000 square foot shopping center in West Baltimore. West Baltimore is a largely African American community, densely populated, median household income of a little over fifty thousand dollars a year. And we found a community essential services shopping center. Now, I want to brand the name. I want to call it SOCS, Service Oriented Community Shopping. Right, everybody needs SOCS. Everybody needs black socks, right? Service Oriented Community Shopping. You know, it’s a small shopping center, nothing glamorous. But even during the pandemic, it continued to perform. It has a Save-a-lot grocery, RiteAid Drugstore, carryout pizza, Papa John’s, a laundromat, a liquor store, all of those things, as you can imagine, even though the pandemic were still needed services for the community.

Eve: [00:16:50] Right.

Lyneir: [00:16:50] And over time, we’re going to own it. We put a contract. We’re going to invest. Initially, our plan was let’s buy it. Let’s talk to the city of Baltimore. But we intentionally have created this structure where we want to co-own with local residents and entrepreneurs and people that have some connection to the community. And so we create we create an opportunity. We’re investing half of the money, up to 70, 80 percent of the money if necessary. With our Small Change offering, we’re providing an opportunity for people with a little amount of money, anyone over the age 18 to invest with us and to co-own the asset with us.

Eve: [00:17:36] That’s pretty great. What’s the overall strategy? So, this is shopping center, number two, right?

Lyneir: [00:17:42] It would be number three, actually.

Eve: [00:17:44] OK, number three, what’s the overall strategy?

Lyneir: [00:17:47] So, our goal, it depends on who you’re talking to. Right? So some people only get excited by the big numbers and some people say, oh, big numbers are too, too aggressive, why be greedy? Our initial goal is we want to own 10 more shopping centers in partnership with local residents and impact investors, and sort of structuring these deals. We want 10 more of these in 2021. And the big business … could we own 100? Could we form the first urban shopping center that’s owned by people of color and have local investment? Can we make these assets better over time? So, imagine the conversation with the city is not just Lyneir and Chicago TREND saying to the city of Baltimore, you know, let’s help us make the center better. But it’s the community. It’s sort of the crowd. There’s power in the crowd. I believe in that. And then over time, just lastly, just measuring impact. Imagine if the neighborhood continues to get stronger. Imagine if more entrepreneurs found opportunity in the center. Imagine if the center becomes more profitable. The neighborhood becomes safer because there’s ownership here. All of those big, old, dreamy impact goals really excite me.

Eve: [00:19:00] Yeah, it is very exciting. Wow. Who do you hope the investors will be? What what do you hope they will look like? Do you have some avatars in mind?

Lyneir: [00:19:12] Yes. But, I mean, literally, we started with the thought of could we find more people of color? Right? That right now there’s a real conversation going on around racial justice investing and racial wealth gap closing. I firmly believe it can. I woke up one day with this sentence in my head, ‘that wealth is created by owning assets that generate revenue and hopefully appreciate over time.’ And by owning those assets over the long term and having a long term perspective, you have different opportunities. Maybe it’s a redevelopment, maybe it’s new tenant, maybe it’s a new program that provides capital. So, I really would love to have a whole lot of local community residents .. open a shopping center in Baltimore, have some Baltimore residents own it with me, open a center in Cleveland or Pittsburgh or Greensboro or Columbus, Ohio, or more shopping centers in Chicago. That there’s a place in our offering for local Black entrepreneurs so that they’re learning about commercial real estate development and ownership and also benefiting from the appreciation of the income that might be generated from the asset. But then lastly, I’m hoping that impact investors, not just them, I’m hoping that people who want a good return, want to strengthen neighborhoods, want a project that has the narrative, what we’re strengthening neighborhoods and bridging the racial wealth gap, but also has a return. So it doesn’t just have to be Black entrepreneurs. It doesn’t just have to be Baltimore residents or Columbus, Ohio residents or Chicago residents. It’s impact investors who want to believe that a commercial asset, community owned, well managed, managed from an advantage point of social impact as well as profitability. People want to invest and get a return. So foundation programming officers, impact investors, small people around the country, outside of the country. Anyone who wants to help neighborhoods get better. That’s my passion. I always tell you this this thing, you know, I have a younger brother who is financially much wealthier than I am, much more financially. But my goal was not to be because I never wanted to be the poor nonprofit executive. But I wasn’t, I didn’t want to be the billionaire either. Right. That was my first objective.

Eve: [00:21:53] Right. That’s pretty clear when the 100,000 dollar deal excited you, right.

Lyneir: [00:21:58] Exactly. I never want to be the poor nonprofit executive, but I wasn’t profit maximizing either. Right. So, it’s about impact. It’s about strength in the neighborhood. It’s about the small deal that again, seeing value where other people say that’s too small. You know, people will tell me all the time is just as easy to do a 60 million dollar deal or a 100 million dollar deal as it is to do a six million dollar deal.

Eve: [00:22:22] But do you feel as good about it?

Lyneir: [00:22:24] I don’t feel as good about it.

Eve: [00:22:26] No, you and I are alike.

Lyneir: [00:22:26] So, I’m hoping that some of those people want to do the big deals, but know that it’s important to do the little deals will also invest with us.

Eve: [00:22:34] Yeah.

Lyneir: [00:22:34] They’ll say, all right, I see he’s doing good work. I see that they’re intelligent about it. They understand how to operate it. Again, this is not just about imaginary goals or, you know, we’re going to close the laundromat and tomorrow we’re going to bring in Starbucks and Cheesecake Factory. We’re going to see opportunities. We’re going to find things that can also work with the municipality, we’re going to hopefully continue to own and improve the project in a way that both makes money and makes sense and is valued and appreciated by the community and by our investors.

Eve: [00:23:12] Yeah, it’s a really exciting strategy. And I think sometimes these little projects are harder to pull off than being one so big is not necessarily better.

Lyneir: [00:23:22] Yeah, I want to do this 100 times. I don’t know what you call that. I want to just bang my head against the wall. But I believe that local ownership, that if I can use the MacArthur Foundation, and Chicago Community Trust, and Fifth Third Bank, and Rockefeller Foundation, and Child Care Foundation and others … Farash Foundation, I don’t want to leave anyone out. They all invested in our little social enterprise to create capacity. And so, I’m hoping to use that capacity in other places around the country and further working in Chicago and in Baltimore and in Rochester, New York and other places to really make communities better to, you know, again, get resources to places that are overlooked and to help create wealth for people who, you know, who just haven’t had as many opportunities as some other communities.

Eve: [00:24:13] One of the things I find most exciting about this is that, I don’t want to call them unsophisticated investors,  but investors who’ve never had an opportunity to invest in real estate before can invest right alongside people who do know what they’re doing. And it’s an educational enterprise as well.

Lyneir: [00:24:32] Yeah.

Eve: [00:24:33] Embarking on this idea of, put a little bit of money in and see where it takes you. And it’s the beginning of a journey to create wealth. You know, along the way you can learn from the other people around you. I think it’s an amazing opportunity.

Lyneir: [00:24:49] I started out, I went to law school, a great law school, but no one ever told me, hey, you know, you hold some assets, you try to let them appreciate.

Eve: [00:25:01] Right.

Lyneir: [00:25:02] You know, there’s value in compounding, you know, you know, all those things. You know what really goes into the discussion with the retailer? So, it’s not just Starbucks is not coming to our community or it’s how do we create a structure that makes it attractive, the win/win for the community. And maybe it’s not Starbucks, maybe it’s a local entrepreneur. How do we get resources, but also shop there and patronize in a way that allows the entrepreneur to make money and stay open and continue to grow. So all of those things are byproducts. But first, it makes money, right? At first, it pencils.

Eve: [00:25:41] Right.

Lyneir: [00:25:42] Because of it doesn’t pencil, what I learned in my early period of entrepreneurship, is while you can do passion work if you’re not doing it in a way that’s profitable, it becomes exasperating, you run out of energy. So, I want to do passion work profitably.

Eve: [00:25:58] Yes, yep.

Lyneir: [00:26:00] That’s what this is about.

Eve: [00:26:01] So, there’s one other thing we haven’t touched on, and that is how you’re planning to staff and fill these shopping centers. I know that’s sort of an added value for the communities. Talk about that?

Lyneir: [00:26:13] So, literally the shopping centers that we are acquiring, first a shopping center we acquired, it was a little less than 70 percent occupied. And we initially identified an African American restaurant and signed a lease with them. It was a State Farm office, it’s an African American State Farm owner. We signed a lease with them. So we would love to find other ways to have local and people of color becoming tenants in our centers. We love to have people of color leasing, doing property management at our centers. There are these opportunities again, that by owning and being able to lead the decision making, you know, you’ll find opportunities, you’ll deal with a more diverse tenants. Over time, Baltimore has a center that has some tenants that people might turn their nose up to, or can make the case that they’re extractive, you know, things like check cashing and stuff, things like that.

Eve: [00:27:10] Right.

Lyneir: [00:27:10] Over time, we’ll find new opportunities. So, you don’t go in there tomorrow and say, OK, Mr. Tenant, we don’t like, that’s been paying rent that’s been operating here for 10 years, that obviously is serving a customer, you don’t  go in there and want to say, you’re out.

Eve: [00:27:25] Yeah.

Lyneir: [00:27:26] You go on there and say, is there a way to improve the operation in some way or can we make the case with another potential operator that may not pay as much rent as the extractive tenant?

Eve: [00:27:37] I’ve done that myself in a neighborhood where I had what I suppose you would call an extractive operator. And it really took me 10 years to be in a position to replace them with someone who paid less rent but added much more value at the street. And it’s it’s a really long haul. It can take a long time because you’ve got to stabilize the entire building to really kind of get to the point where you can afford to do that and not lose investor’s money, you know.

Lyneir: [00:28:03] So that, again, that’s the advantage, I believe, of our expertise and experience.

Eve: [00:28:08] Yes.

Lyneir: [00:28:09] So, from an economic development standpoint. So, my objective is how could I make the case to the city to, you know, the foundation community, to, you know, other government support sources, though, say, all right, we do want this tenant who we think would offer more goods and services and be, you know, a better asset or benefit to the community, but they’ll pay 40 percent less than the tenant is there that we are not as happy with.

Eve: [00:28:37] Right.

Lyneir: [00:28:38] Can we find resources to structure that? The other thing is, again, this is long term work. All of the work, I’ve been doing this work now for, in June, I’ll call it 28 years.

Eve: [00:28:51] Wow.

Lyneir: [00:28:52] This is evolution, not revolution. Right. That things get better progressively. We’re trying to have long term ownership not going in here, buying the center, flipping. Our goal is can we create wealth by a pool of shopping centers. This is the third, the first outside of Chicago. I’ve had great conversations about other markets. I’m very optimistic about how we will grow. And I’m hoping that we’ll do more with this crowdfunding approach of really democratizing investor interest and making opportunities locally, but also making opportunities available for people who are, you know, any place but want to have an impact. I’m really, this is our pilot test with this. And if it works, maybe we’ll do it 98 more times, Eve. Let’s do it ninety eight more times.

Eve: [00:29:40] I sure hope so. Well, thank you very, very much. I’ve really enjoyed getting to know you, Lyneir, and I’m just dying to see what happens with your offering. So, thank you. Thank you very much for everything you do.

Lyneir: [00:29:54] Great. Thank you again.

Eve: [00:30:17] That was Lyneir Richardson. Not only has Lyneir crafted a wealth creation strategy that could empower Black communities, he’s also being purposeful about driving inclusively in other ways. He plans to assemble a team of Black experts to provide hands on property management, stay on top of issues, retain existing tenants and attract new ones to improve financial performance of each shopping center. This culturally informed team will have a positive community impact by employing black people and cultivating and incubating Black-owned businesses in these shopping centers. If you want to know more, check out Walbrook Junction at SmallChange.co. You can find out more about Impact Real Estate Investing and access the show notes for today’s episode at my website EvePicker.com. While you’re there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Thank you so much for spending your time with me today and thank you Lyneir for sharing your thoughts. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change.

Image courtesy of Lyneir Richardson/The Chicago TREND

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