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Eve Picker: Hey, everyone, this is Eve Picker, and if you listen to this podcast series, you’re going to learn how to make some change.

Eve Picker: Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Sadie McKeown, executive VP, and chief operating officer of CPC, the Community Preservation Organization. There, she oversees the company’s construction, lending, and sustainability initiatives, and she also oversees the operation of its regional field offices located throughout New York State. Finally, she leads CPC’s Agency Lending subsidiary, a full-service operation focusing on Freddie Mac, Fannie Mae, and FHA lending products.

Eve Picker: Sadie has been involved in community development for over 25 years. It’s rare to meet someone who still loves their job and the company they work for after all that time, but Sadie does. No one understands the dynamics of community and the role that leadership and politics plays in whether a community thrives or dies better than Sadie.

Eve Picker: Be sure to go to EvePicker.com to find out more about Sadie 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 Picker: Sadie, thanks for joining me today. You and I had started a conversation a few weeks back that was really pretty fascinating – the politics of community development. I’d love to explore that with you today. How much impact does politics have on whether a community thrives or not? First, just a little bit of background. How are you today?

Sadie McKeown: I’m doing well, thank you. Thanks very much for having me on your podcast. It’s my first.

Eve Picker: It’s a pleasure. I read that you’ve worked for Community Preservation Corporation, CPC, for quite a while now, so you must love it there. I’m wondering if you could tell me a little bit about the nonprofit and what you work on there?

Sadie McKeown: Sure. Yeah, it’s been a long time. I started at CPC back in 1991, as an intern, and I really did-

Eve Picker: Wow!

Sadie McKeown: -I really did fall in love with the company and the mission. CPC occupies a very unique space. We are a not-for-profit, but we are fully self-sustaining, so we don’t take grants or government assistance. We’re a construction and permanent lender for affordable multifamily housing, primarily, but we also do a lot of economic development and downtown revitalization.

Sadie McKeown: We are mostly a New York State- and City-based company, although we have a mortgage company that does lending for Freddie Mac and Fannie Mae on a national basis, as well as FHA. But today, I’ll focus on our community development and the construction lending that we do. We started in New York City in 1974, at a time when the Bronx was burning and there was a tremendous amount of disinvestment in neighborhoods in New York City. Manufacturing jobs were leaving, there was white flight to the suburbs, and a lot of neighborhoods in New York fell on hard times.

Sadie McKeown: CPC was created by David Rockefeller, when he was the chair of Chase Manhattan Bank at the time [crosstalk]

Eve Picker: Really? I didn’t know that. That’s really interesting, yeah.

Sadie McKeown: Yeah, he got together with some of the other commercial bankers in the city and said, “We have to do something about this crisis and really stem the tide of disinvestment and abandonment in New York City.” So, CPC was created. We started pretty small. Within a couple of stable neighborhoods, we were successful. Then, Mayor Koch came in and started the Ten Year Housing Plan, and CPC was pulled up to the next level to do a lot of vacant building construction, renovation, and permanent financing.

Sadie McKeown: The way it worked was that the banks would come together and make the construction loans on a pari-passu risk-sharing basis, and they would also forward-commit a 30-year permanent loan to take out those construction loans when the projects were completed and fully leased. It was great, and we started in Harlem, and the South Bronx, and Bedford-Stuy, and neighborhoods that really needed a tremendous amount of investment.

Sadie McKeown: It was decided that more was required to get at the scale of the need, so we worked in partnership with New York City, utilizing their tax-subsidy programs, their vacant building stock, and their subsidies, in conjunction with our first mortgages, to do the construction piece. Then, we went to the New York City and, eventually, state pension funds, and they agreed to buy our 30-year fixed-rate permanent loans because they were insured by the State of New York Mortgage Agency.

Sadie McKeown: So, we created this very special product back in the late ’70s that has served the State of New York and the City of New York very well, because it’s provided certainty in the financing world with a 30-year fixed-rate non-recourse loan with a forward-committed interest rate. We took a lot of the risk out of real estate, which was necessary – I should say the risk of real estate construction financing – which was necessary because we were in what banks would consider to be the riskiest neighborhoods; lots of vacant buildings, low rents, uncertain demand. We did that in partnership with subsidy programs in New York City, primarily, but then, we expanded to Upstate New York with all of the different municipalities across the state.

Sadie McKeown: We know community development on a large scale. We also know it on a really small scale because some of the municipalities we work in, outside of New York City, are pretty small. So, we have a pretty special lens, where we really go in, and meet with municipalities, and we talk to them about what their housing priorities are. We look at what they have in their housing stock and what they might need. You can imagine, it’s Upstate New York, and New York City; there’s a lot of historic buildings. There’s a lot of old manufacturing buildings.

Sadie McKeown: We get to do a lot of really cool deals that preserve what was there a hundred years ago and bring it back as something new. We preserve the cosmetics of it, and the place of it, but we get to interject financing to make it something new – housing, offices, retail; the whole concept of live, work, and play in downtown, and transit-oriented developments. We’ve gotten to invest in a lot of communities that are focused on that. Like I said, it’s a very unique company, CPC, because we’re not a bank; we’re not regulated the way banks are, so we have more flexibility; we’re more nimble. We partner with government, but we’re not burdened in the same way the government is burdened, and I don’t mean-

Eve Picker: Sounds fabulous [crosstalk]

Sadie McKeown: Yeah, it’s really cool.

Eve Picker: What’s the most fascinating part of your job for you?

Sadie McKeown: I guess the most fascinating part of the job is when you go to a place, or you go to a project that a developer wants to do and it’s a vacant building, or it’s a distressed neighborhood, most people would only see the negative, and they wouldn’t want to be in that place. I remember, early on, with my clipboard, as a loan officer at CPC, I would be on some of the worst blocks in the neighborhoods that we were making loans in, thinking every other person I know in my life would get in their car and drive away as fast as they possibly can.

Eve Picker: That’s true. I love those places.

Sadie McKeown: Yeah, me, too, and yet, there I was waiting for an opportunity to make a difference, to create change. Lots of times, what CPC does is we’re first in with our capital, and we create excitement with the first two, or three, or four projects. Then, all of a sudden, there’s projects going up that we’re not financing because other investment is coming in, so I think-

Eve Picker: So, your investments are really much more than an investment into a project. They’re an investment into a community so that other developers feel more comfortable following, right?

Sadie McKeown: Absolutely. That’s one of our big priorities is to create an investment environment, which will attract other capital, both equity capital, as well as other debt capital [crosstalk]

Eve Picker: That’s really, really tough to do.

Sadie McKeown: It is tough to do, but that- I think that’s my favorite part of the job is when you get to that point, and you start to see other investment coming in, you know you’ve been successful [crosstalk]

Eve Picker: What’s your biggest success story?

Sadie McKeown: So, I mean, New York City is a huge success story for CPC, but it’s too big for us to claim, so I’m going to go-

Eve Picker: I would just claim it!

Sadie McKeown: -I’m going to go further north along the Hudson River and talk about a small city called Beacon. Beacon, New York is a population of probably about 20,000. It’s a former industrial city right on the Hudson River, which thrived before the Newburgh-Beacon Bridge, before cars. It had a lot of manufacturing, and there was a lot of boat traffic up and down the river. Beautiful, historic buildings; a really interesting, long Main Street and interesting downtown; just a really neat place.

Sadie McKeown: When CPC started making loans there at the end of- in the beginning of the 1990s – ’89, ’90, ’91 – it was all vacant buildings, prostitution, drugs. It was not a place that you wanted to be, and-

Eve Picker: Isn’t this where Pete Seeger lived?

Sadie McKeown: Yes, in the Hudson Valley. Pete Seeger lived up that way, absolutely. So, the mayor at the time – and this goes to your point about politics and community development – was really focused … Her name was Clara Lou Gould. She was really focused on trying to transform the downtown, and the Main Street, and bring it back because what often happens to Main Streets that don’t come back – this is going back to urban renewal – sometimes, you can lose the history because you just get rid of the- you erase the problem by demolishing buildings, and you start over because you think that might be the best way forward. It’s certainly one way forward, and you can do lots of interesting, and new, and exciting things, but in cities like Beacon, you want to be able to preserve that history because the buildings, themselves, are beautiful.

Sadie McKeown: We literally would go door to door, knocking on the doors, and these were all small multifamily buildings, two or three apartments above a store; figure out who owned the buildings, in partnership with the City of Beacon, because they knew who owned these buildings, as well, and we would sit the people down and say, “Okay, you can borrow money from CPC. We’ll get money from Duchess County. We’ll get money from the Federal Home Loan Bank, from the local utility company, and City of Beacon will give us a grant.” We married together all of these subsidies, and we were able to do about 25 different projects in the concentrated Main Street area.

Eve Picker: Oh, that’s a lot!

Eve Picker: Be sure to go to EvePicker.com and sign up for my free educational newsletter about impact real estate investing. You’ll be among the first to hear about new projects you can invest in. That’s EvePicker.com. Thanks so much.

Eve Picker: Well, it’s actually a pretty long Main Street, but it’s a small town.

Sadie McKeown: Yes, and all of the buildings, themselves, were really small. What we would do, uniquely there, that other banks wouldn’t do is actually finance four units above a store that would take three, or four years to complete. We didn’t make any money, as an organization, but because we’re mission-driven, it didn’t matter. CPC always does a blend of different types of deals, and we service all the loans that we underwrite and close, so that we’re making money in other places, which allows us to go in and concentrate investment in places like Beacon.

Sadie McKeown: Over 10 years, we provided about $5 million of private financing from CPC in these different projects; very small average loan size, like $200,000 or $300,000. Then, another $3 million was leveraged in all different sources of public subsidy. We did about 32 storefronts with that $5 million, and about 120 apartments [crosstalk]

Eve Picker: -that’s incredibly efficient, Sadie.

Sadie McKeown: Well, it didn’t feel efficient at the time, but what happened was we created … There were some pioneers. I want to give credit to Ron, and Ronnie Beth Sauers, who were a couple that lived up there and were the pioneers that did the first couple of deals. We started to create a buzz, and people started to come to Beacon because it’s a beautiful place, and the Metro-North train from New York City stops there.

All of a sudden, people were coming in and buying up the other vacant buildings. Then, there were a lot of artists there. Then Dia:Beacon opened. Dia:Beacon is a large modern art museum that was put into a vacant warehouse down by the river. It’s just fabulous. It’s a fabulous, fabulous art museum. It attracted a lot of attention, and more, and more people came.

Sadie McKeown: We started in the early ’90s; by 2004, or ’05, say, we stopped making loans there because other banks were there. We were successful. We kind of worked ourselves out of a job. We still do some financing [crosstalk]

Eve Picker: That’s pretty fabulous.

Sadie McKeown: -but we brought back a lot of other capital. Now, I hadn’t been to Beacon, in Beacon, for eight years. My husband and I went for a hike across the river, and we were on our way back. I said, “Let’s drive through Beacon. I hear great things, and I want to see it.” When we parked the car and walked from one end of Main Street to the other, I was absolutely stunned at the activity, and the stores, and the restaurants, and the people. I literally had the chills because but for that initial capital that we took the risk investing there, it may not have happened, or it may have taken a lot longer to happen. So, that was a wonderful story for us.

Eve Picker: That is a wonderful story. You know I’m very fond of Newburgh; fond, and sad about Newburgh, which is across the river, which has enormous potential and is full of very beautiful, beautiful buildings; architecturally significant buildings. But that, in the same period of time, hasn’t had the same story, has it?

Sadie McKeown: No, it hasn’t. When CPC opened its Hudson Valley office in 1989 or ’90, we decided to target cities because it’s easier to target than to just spray small loans all over the place. We targeted Beacon, Newburgh, and Poughkeepsie, in the Mid-Hudson Valley, as our three cities where we would concentrate investment. You heard my story about Beacon. Well, I spent as much time in Newburgh as I did in Beacon, but without the same results.

Sadie McKeown: There’s a couple of reasons for that, that I’ll talk about, but before I talk specifically about Newburgh, because I, too, love Newburgh the same way you do, and I am very much a believer in Newburgh; it’s just going to take a little bit longer. But, when CPC evaluates whether or not there’s investment potential in a place, we look at five criteria.

Sadie McKeown: We look at the physical infrastructure, and we say, “What are the buildings like? Are there opportunities for us to be here and invest here?” Clearly, that’s the case in Newburgh. Beautiful physical infrastructure – the streets, the river. There is definitely beautiful physical infrastructure. Then we look at the social infrastructure. Is there a ‘there’ there? Is there a reason why people would want to go there, and live there, and eat, and dine, and play there? A little bit less so in Newburgh, but certainly the potential was there [crosstalk]

Eve Picker: Yeah, the potential’s huge. I mean, Broadway is an amazing street.

Sadie McKeown: Exactly. We checked that box – social. That’s great. That’s awesome. Then we said, “What does the economic infrastructure look like?” In that, it started to get a little bit more challenging in Newburgh because the economics were tough. Rents are low, and taxes are high, so it’s very hard to leverage a lot of private debt to make deals work. But Orange County was committed to Newburgh. They had their home funds. This was 25-30 years ago, so there was a source from the federal government to use. So, we thought we could put deals together. The tax credit program was just coming online. We had some resources to help the economics, so that was good.

Sadie McKeown: Then, you look at the development infrastructure. Are there people there that are doing development, that care about the place, and that want to see things happen? This has always been true about Newburgh. Just like you, and me, Eve, people love Newburgh [crosstalk]

Eve Picker: Yeah, no, I think that’s right.

Sadie McKeown: -there’s always a core of people that are trying to make things happen. So, that gave us confidence, too. Now, that core has changed over time. There was a group called the Newburgh Development Association that used to host monthly lunches. We’d all get together in a little restaurant on Broadway, and we’d talk about the challenges, whether it was facades, or parking, or infrastructure; whatever it was. I mean, we’d talk about how to resolve the [soil]. Always felt good about the development infrastructure.

Sadie McKeown: But then you always have to look at the political infrastructure of a place, because if there isn’t political will to do what needs to be done, it’s a really- it’s very challenging. I’ll go back over to Beacon for a second, and say that Clara Lou Gould was the mayor, when CPC got started in 1990, and she remained the mayor for the next 20-23 years.

Eve Picker: Wow.

Sadie McKeown: So, her agenda for revitalizing her Main Street remained her agenda for that long. The more you do something, the better you get at it, and the more you can attract attention to what you’re doing, the more resources come to you. So, politically, she was a stalwart, and she wanted this, and that very thing happened. More and more people came to Beacon; more and more people wanted to invest. They had a welcoming presence in the government of the city of Beacon, led by Clara Lou Gould. It’s not easy to develop in these small cities. There’s a lot of things to consider [crosstalk]

Eve Picker: Right, and I would say, as an architect and urban designer, if I look at those two cities, Newburgh is by far the more interesting, in terms of its building stock, and streetscapes. Beacon is not as interesting as Newburgh. So, that political piece has been extremely important for Beacon.

Sadie McKeown: I completely agree-

Eve Picker: Well, except for the fact that there’s a direct train linked to New York, and that probably is really important, too.

Sadie McKeown: I was just going to say the exact same thing. The other thing that Beacon has going for it is that the Metro-North train does stop there. As crazy as that may seem to some people, people really do get on the train in Beacon and go to New York City for work every day, even though that train ride is more than … It’s probably an hour and 10 or an hour and 20-

Eve Picker: I’ve done it. It’s an hour and fifteen minutes, but it’s lovely. You can sit, and read, and work. It’s really lovely. The crazy thing is … This is where segregation comes into play a little bit, as well. I always wonder about the bridge between those two cities and why it doesn’t land in the middle of Newburgh and over to one side, instead, because it’s really very close. It’s just across the river.

Sadie McKeown: It’s interesting. So, back to the politics of Newburgh, I think in the time that the CPC was working there, maybe there were six different mayors. So, what you have is a lack of focus on what your agenda is and a concentrated focus on staying in office or running for office. Because you don’t … Without the continuity, there’s uncertainty. People that would come in with all of the greatest ideas in the world never had the same kind of certainty because there was never one strategy led by a strong leader around how to redevelop the city.

Sadie McKeown: A couple of other things, similar to the train, that I wanted to say, because it’s not just politics; didn’t help, the Newburgh politics, but Newburgh also is much larger, geographically, than Beacon – the downtown.

Eve Picker: Yes. It’s huge.

Sadie McKeown: So, you need more to have an impact, right? So, that was a challenge. And it’s where there is the largest concentration of poverty in Orange County. Beacon didn’t have the largest concentration of poverty, even though it had a concentration. Poughkeepsie did. This is going to sound wrong, but there was less competition for poor people in Beacon than there is in Newburgh, where poor people tend to migrate. So, you have to address that, also. In addressing that, you can’t just address that with good housing, or with storefronts, and restaurants. You have to address that with jobs, and transportation-

Eve Picker: Yes.

Sadie McKeown: -and true economic revitalization. I think that that’s even harder to do than housing. Physical infrastructure; making improvements to the multifamily building; the historic, beautiful multifamily building site that’s there is really important, and that’s one piece. But you need to be able to provide income for the residents that are going to live there, and opportunity.

Sadie McKeown: That’s so much harder to get that. It’s easy to change the physical infrastructure of your place, but to change the economic environment is that much harder; and if you don’t even have political leadership that can get to the low-hanging fruit of the physical change, it’s really going to be hard to get to the economic change. I think Newburgh has struggled a little bit more …

Sadie McKeown: In Beacon, you had Duchess County, which had lost IBM and lost a ton of jobs. The county was very focused on diversifying their labor force and making broad change so that they weren’t relying on one entity to support them, which was IBM, before IBM left Duchess County. So, you had a county-wide effort to change, and Beacon got to participate in that.

Sadie McKeown: That wasn’t the case in Orange County because Orange County didn’t suffer the same economic devastation when one employer left. Newburgh didn’t have anything to grab on to, or to get help with. They were sort of on their own. So, over the last 30 years, you haven’t seen that much change in Newburgh, but … There’s always a ‘but’ when you’re talking about Newburgh.

Eve Picker: Yes.

Sadie McKeown: It does feel like things are really starting to happen-

Eve Picker: Well, when you talk about employers, that has really shifted in the last five- even in the last five years. More and more people are working remotely. I run a virtual company. I have people, really, all over the world for my company. It’s really quite manageable and quite enjoyable because we have the technology to be able to talk, like we’re talking on Zoom, now; in many other ways … It’s very simple. So, as people move towards the remote employment, the likelihood of a more remote place being occupied goes up a little bit, right?

Sadie McKeown: I couldn’t agree more. I think Newburgh is well-positioned for that kind of opportunity, because if you need to get to the city, you can go over the bridge for a meeting, once a week, or something, but you can be extraordinarily productive, remotely. There could be small hubs of WeWork spaces or Regus offices that employ people so that they can come together in collaborative spaces. You don’t have to be in New York City anymore to work for a company that’s located in New York City, and I think Newburgh is well-positioned for that, but [crosstalk]

Eve Picker: -that actually may be one of the things that helps the affordable housing crisis – the fact that people can work from a more affordable place is a really good thing [crosstalk]

Sadie McKeown: Absolutely, and the fact that they don’t have to spend money commuting helps their affordability.

Eve Picker: That’s right.

Sadie McKeown: Remote working is one part of the solution.

Eve Picker: Years ago, there was a foundation here in Pittsburgh, where I live, that tried to start a … They actually did a survey on the civic skills of elected officials, and what they understood about placemaking, and housing, and all of these things. The scores were extremely poor. So, one wonders whether elected officials shouldn’t go to some sort of school that might help them a little bit. They’re elected based on personality, and charm and really may not have the right skill set to help the community.

Sadie McKeown: Yeah, I agree with that. I live in a small village, just north of New York City, on the Hudson River, south of Beacon. I feel very blessed to live in the village that I live in. We’ve had the same mayor for 20 years, but we have a very forward-thinking agenda in- I live in Tarrytown, New York.

Sadie McKeown: We did a comprehensive plan, where we brought in the people from the village, and we got feedback on what our priorities are. Then, instead of having that sit on the shelf, we created a comprehensive-plan-management committee to look at what came out of that plan and make sure that we followed up on it. A village like Tarrytown has a part-time mayor, and one village administrator, who has an assistant, and that’s kind of it. You have your village engineer, and your administrative people, but you don’t- there’s not a lot of people that can really move that agenda forward.

Sadie McKeown: So, you really need volunteers. I’m a volunteer in the village, on the housing committee, and on the comp-planning committee. You really need volunteers that care about a place to come forward and participate in its development and in what it becomes. I think that politicians need to do more of that. There’s also a program in Hudson Valley called the Land Use Leadership Alliance, which is run through Pace University’s law school, where they bring in all of the planning and zoning people from the various towns in the Hudson Valley, once a year, for a six-, or eight-part educational series-

Eve Picker: Oh, that’s great.

Sadie McKeown: -yeah, teaching them about placemaking, about zoning, about architecture, about financing, so that when they’re sitting behind a table evaluating whether or not a project should be approved, or a library should be extended, or whatever it is, they have a perspective and a sense of how that impacts the whole community and what it takes to get a development done, or to raise funds for a library, or a park, or whatever it is.

Sadie McKeown: I completely agree with you, the education … There are mayors that go through the LULA program, and there are trustees, and all of the people that make decisions at the local level participate, and they participate with each other, so there’s different people from different towns. It’s actually a really cool thing [crosstalk]

Eve Picker: It is very cool-

Sadie McKeown: Yeah, I’ve been a speaker at it, and I’ve sat in on a number of their sessions. It’s actually a very enlightened way to bring people together in a non-threatening environment that’s not political at all, where they don’t care about anything other than learning how to do best for the place that they live.

Eve Picker: You’re working all over New York State like this. Is this the only example like this? You said you look at five things, when you evaluate- five criteria, when you evaluate whether to work somewhere, in order to invest in a project. Of those five criteria, what most frequently lets you down?

Sadie McKeown: Well-

Eve Picker: Or is it all over the place?

Sadie McKeown: It’s all over the place. It really depends. If we are in a city just outside of New York City – in the suburban ring – Lower Westchester County, you have great economics, typically great physical infrastructure, social; there’s population density. What you really need there is good politics and also good development infrastructure.

Sadie McKeown: In New Rochelle, New York, which is just north of the Bronx, in Westchester County, we had the good fortune of being brought in. New Rochelle was developed- one of the first cities developed outside of New York, a hundred-plus years ago, and it was like a summer community for people that lived in Manhattan. So, it was the first Bloomingdale’s outside of New York City, and the Main Street was thriving with merchants and everything else. It was really quite a wonderful city. Then, fell on hard times. The offices went to office parks in Westchester County; stores, and large stores, in particular, went to malls. Downtowns, like New Rochelle – which made no sense that they fell on hard times because of their proximity to New York City – fell on hard times.

Sadie McKeown: When we were called in to look at the financing for this Bloomingdale’s building, which had been vacant for 25 years … We were pulled in by the director of their Business Improvement District, a guy named Ralph Dibart, who we knew; he had been involved when Soho became Soho, and he had been involved in some other cities, so we knew him well.

Sadie McKeown: We came in, and we looked at the Bloomingdale’s building. They couldn’t get financing. We said, “Well, why can’t you get financing?” They said, “Well, the banks won’t do it because there are no comps.” I laughed and said, “That’s the best thing about this project. There are no comps in the immediate area, but there are lots of comps …” because the woman that bought it wanted to develop loft housing. She stole a design from Chelsea, New York, and was going to do the exact same thing on Main Street, in New Rochelle. Instead of it costing, at the time – this was the early 2000s – instead of it costing $850,000, she was going to charge $225,000. From my perspective, we had great comps because everybody wants to live in Chelsea, they just can’t afford to.

Eve Picker: Right.

Sadie McKeown: If you wanted to be in that style of housing, it didn’t exist in New Rochelle. That was a place where our lens of turning risk on its head really made sense. She built that project. She bought the building, and built out, and sold that project in 22 months. Incredible.

Eve Picker: I did a similar thing in downtown Pittsburgh, at a time … I built eight lofts in downtown, in a vacant building, at a time when the bank actually said to me, “Aww, honey, no one’s going to live down here.” I sold them all before I finished construction.

Sadie McKeown: Exactly.

Eve Picker: People really- they want something more than cookie-cutter options for how to live. They deserve more. So, yeah, it’s frustrating when banks, or lending institutions don’t really see those innovative opportunities.

Sadie McKeown: Agreed. What was really, really cool about New Rochelle is that was our watershed deal. That was the first one that we did that put us on the map, if you will. Then, because Ralph Dibart was there, the president of CPC, at the time, said to me, “You can do this big deal, Sadie, but look around …” and when we looked up and down Main Street, it was really small buildings. He said, “These guys have been hanging in here, in New Rochelle, owning their buildings, keeping their businesses alive, and they’re the ones that are really struggling. We have to create a program that meets everybody’s needs, not just the bigger deals.”

Sadie McKeown: So, working alongside of Ralph, we created a facade-improvement program. We created a technical-assistance grant program, where we could … Because, when they zoned for Bloomingdale’s, they did blanket zoning for the entire Business Improvement District; as-of-right residential above the stores. But the store owner said, “That’s great, and I have my store here, and I own the building, and I have vacant office space upstairs, but I don’t know what I can do with it, and I don’t want to spend money to find out.” So, CPC did technical-assistance grants to bring in an engineer to say, “Okay, you have X number of square feet; you can do three loft-style apartments; they’ll be this big, and …”

Sadie McKeown: Then, as the loan officer, I could say, “Okay, so the rent for those three apartments will be X, and the rent from your store is Y, so we can leverage this much money in private financing; give you a construction loan to go ahead and renovate that empty office space and turn it into beautiful lofts.” That happened, and that was really cool, but it was really Ralph, and I, together, over pizza, or coffee, or Indian food, talking about what would it take to get the facades to improve, the lofts to be developed? How could we work with the smaller owners?

Sadie McKeown: What was great about Ralph was he knew who was serious and had capacity to do it, and he knew who was a little too nutty, so he kept- he protected me from the nuts, because you can get … You can get into a deal with a nut, and it could take … Three years later, you’d come out, and your head is spinning. Not that they’re not wonderful and creative people. They’re just … Even I can’t bank them. So, it was great to have … That’s that development infrastructure piece.

Sadie McKeown: That, alongside of really good politics, you end up with real good boots on the ground, which is a thing that we talk about at CPC. In order to know your neighborhoods, you’ve got to have boots on the ground. I spent 20 years as a loan officer at CPC. I was boots on the ground, and I walked every block in the neighborhoods that I was in, and I knew them really well. I knew who owned what, and I knew where the opportunities were and where the problems were. Having that development partner, that infrastructure, I think, was really important.

Sadie McKeown: So, New Rochelle’s another success story. We’ve done great things in Syracuse, and Rochester, and Buffalo. Those are the larger cities, and now, we’re starting to see activity in some of the smaller-tier cities, like Utica, and Binghamton, and that’s really cool, too. We have a great governor that has dedicated a lot of resources to housing; has a real interest in developing Upstate New York, and economic development.

Sadie McKeown: What we do is we look at where the resources are and how we can follow the money, if you will, to make things happen in conjunction with whatever resources are available in a place. A deal came to our mortgage committee the other day in Buffalo, and it was yet another vacant former industrial building, and it was a brownfield site. I laughed, and I said to the loan officer in Buffalo, “It’s follow the contamination,” because it’s such a great resource, and there aren’t that many resources, so you have to go where there are resources-

Eve Picker: Yeah, no, that’s right. That’s right … Well, anyway, it’s wonderful to hear you’re so excited about this job after being there for such a long time.

Sadie McKeown: Yeah. Oh, I love my job [crosstalk] very, very lucky.

Eve Picker: Very lucky, yeah. So, just talking a little bit more broadly, I’m just wondering if you think socially responsible real estate is necessary today, in today’s development landscape?

Sadie McKeown: Absolutely. I think it’s necessary in every day, in every year, and, to the extent that we haven’t done it, we should have been doing it. We certainly should do it going forward. I’m a little curious if your definition of socially responsible real estate is similar to mine, so why don’t you tell me what yours is?

Eve Picker: Well, we have a definition on Small Change, which is kind of pretty broad and a little agnostic. I think socially responsible could mean an ugly building that’s converted into a business incubator for startups in an under-served building. It could equally well, also, be a net-zero passive modular house that is built on a long-vacant site in a good neighborhood that is expensive.

Eve Picker: It’s not always … I mean, I know everyone talks about affordable housing, affordable housing, but I think, for me, impact in real estate can mean a variety of things. I think it’s a level of thoughtfulness, so that you just don’t spend money doing a deal for the deal’s sake, but you add some value to the community you’re in. Does that make sense?

Sadie McKeown: Absolutely makes sense, and it is definitely very consistent with my definition. I would say, at CPC, we really do do that. As it relates to sustainability, and passive house, and net-zero, we’ve been pushing to try to get the first mortgage market to incorporate energy performance of a building into their underwriting, so that they’re recognizing how much less expensive it is to operate those properties, so that we can leverage additional net operating income, and-

Eve Picker: That’s fantastic because that’s really been missing.

Sadie McKeown: Yeah, it has been missing. It’s been a real battle; a labor of love. We really believe in passive-house principles, and net-zero, and decarbonization, electrification because it makes housing more affordable, it makes it more resilient in the era of climate change, and it makes it a better living environment – better tenant outcomes, more tenant comfort. It’s a much healthier environment for a tenant to live in, so for all of those people-

Eve Picker: -by the same token, housing that is close to transit is also pretty meaningful in the affordability game, right?

Sadie McKeown: Definitely.

Eve Picker: If someone lives somewhere, where they’re close to some sort of transit hub, and they don’t have to buy a car, and they don’t have to drive their car to work, that’s pretty meaningful, and that should also count in that [crosstalk]

Sadie McKeown: It absolutely does, and it totally counts … Transit-oriented development, downtown revitalization, those are all things that we also focus on. Then, we do a lot of what we call ‘Big A’ subsidized affordable, like bread-and-butter government-subsidized, affordable housing for very, very poor people. We do homeless housing, supportive housing. We do all of that really good, deep, deep mission-based stuff.

Sadie McKeown: That’s all really wonderful, but we also do … When we’re talking about downtowns, we try to do integrated housing so that it’s not just mixed with retail and office, if that’s appropriate, but that the incomes are mixed. We look very broadly at housing, and how it gets built, and constructed. We’re very concerned about the rising costs of constructing housing, because there’s not a rising subsidy pooled [crosstalk] alongside of it to offset those rising costs.

Sadie McKeown: So, to your point about modular, we are very interested in modular approaches that drive down the cost – the hard cost of construction, shorten the amount of time it takes to build, so that you’re shortening your overall development time frame, and the ability to try to build some of that passive, or net-zero, so that you’re delivering boxes to the site that are really the highest quality relative to their sustainability.

Sadie McKeown: If you can do that, and you can work with a municipality to get your approvals and to create a routine program, there are ways to integrate affordability into a building with maybe just a tax abatement, and maybe if you’re buying land from a municipality for a dollar. Those two things, you can integrate 30-, 40-percent affordability into a market-rate project without capital subsidy. That’s something else that we’re very, very focused on because there’s just not a lot of capital subsidy available.

Sadie McKeown: We will work alongside of any program. I mentioned brownfield tax credits before; historic tax credits. We’re doing a deal in South Carolina that has textile credits. My idea has been, [crosstalk] with the Low-Income Housing Tax Credit, we should add a boost for anybody that’s going to make their building net-zero, or passive, or electrified and give them a little bit of extra credit to try to raise additional capital to make that building- to maximize its energy efficiency, its resiliency, and sustainability. We’re always thinking about how to do things differently; not just doing the same thing over, and over again. I think that’s consistent with your-

Eve Picker: It’d be wonderful. Are there any current trends in real estate that you think are the most important for the future of our cities?

Sadie McKeown: Well, when you look at the nexus of climate change, and the affordable housing crisis, I think that that will be a trend, depending on politics, of course. We were headed in that direction under the last administration, with President Obama, where we were in the Paris agreement. I’ve been to The Netherlands, where they take this very seriously. There are lots of creative ways for capitalism to go to work, making housing more affordable, and addressing climate crisis.

Sadie McKeown: I often want very much for the different departments of governments to collaborate on how to solve problems together, so the housing affordability, and sustainability, and the climate crisis really cross over. I really feel like the resources available to make housing more resilient … Also, healthcare is another one. There’s some really cool stuff happening in places like Connecticut around hospitals and healthcare providers participating in affordable housing.

Sadie McKeown: I think we’re starting to see a trend, where it’s not just a silo of, “We all do nine-percent tax credits, and let’s just keep doing them.” I think people, because of the looming affordable housing crisis, are starting to get out of the box, which I think is very exciting-

Eve Picker: Yeah, no, I agree. I think it’s very exciting. Very exciting.

Sadie McKeown: One of the things that I think about all the time, people talk about infrastructure in this country, and they think roads and bridges. When I think about infrastructure, I think about money, and financing, and I think about financing being the infrastructure that underpins everything. If you can influence how things are financed, you can touch everything. You can touch every physical building in the country, because, not everyone, but the majority have financing. So, that’s sort of [crosstalk]

Eve Picker: -that plays into a question I have to ask – do you think that crowdfunding has a role in that?

Sadie McKeown: I just love crowdfunding, and I love your approach, and I love your concept. I had the great privilege of listening to speak those few weeks ago [crosstalk]

Eve Picker: Oh, thank you.

Sadie McKeown: -and what I love most about the crowdfunding is that it opens the door for many, many, many more investors and people that live in places to invest in the place that they live. Right now, most people just have an opportunity to invest in their 401(k). They’re not thinking about investing, so they just participate in their 401(k) at their job or whatever.

Sadie McKeown: I think people are starting to realize there’s more to investing, and I think crowdfunding gives people an opportunity to participate in investing in a different way. Your platform really reaches deep into the community. When people are making a $100, or a $200, or a $2,000, or a $5,000 investment, they’re not really that interested in how much money they’re getting back, as if they were investing $50,000, or $100,000, or $1 million. It would be all about the economic return.

Sadie McKeown: When you drive down size of the investment, the returns are much more focused on the change that you’re making with that investment in that community. That’s one of the things I love about even the name of your company, Small Change, because you’re putting in small change, and you’re making small change, but small change, over, and over again, ends up with a huge impact-

Eve Picker: One can only hope!

Sadie McKeown: I think there’s absolutely a place for crowdfunding far more broadly in this country and in real estate.

Eve Picker: Great. I’m going to ask you three sign-off questions that I ask everyone. I’m just always interested to hear what people have to say. What do you think is the key factor that makes a real estate project impactful to you?

Sadie McKeown: I think that the thing that makes a real estate project most impactful is that it made someone’s life better, and there are so many people that can be impacted by one small real estate development. So, if you appropriately and responsibly renovate a building in a place, and you restore it to its historic integrity, and you put really nice apartments that have a beautiful place to live, the people that live there, particularly in neighborhoods that CPC is in, have a better place to live. They didn’t have an option to live that well before, and you made their lives better.

Sadie McKeown: So many times, when we go to our ribbon-cuttings, the tenants will come to the ribbon and cry about how happy they are-

Eve Picker: Oh, that’s wonderful.

Sadie McKeown: -to have such a lovely place to live affordably. So, I think their lives are impacted. But then, just the everyday lives of the people that drive by that building – they feel better. It’s not vacant anymore. It’s vibrant. Something’s going on there. Then it happens that the next building gets invested in, and the next building. So, you really make change, and you impact- you improve people’s lives. People, meaning the individuals that live there, but also people, meaning the communities that surround the real estate deals that you do.

Eve Picker: Yeah. Okay. This is a hard one, but if you were to pick one thing in real estate development in the U.S. that you’d like to see improved, what would that be?

Sadie McKeown: It is a hard one because I have so many thoughts on this. I’m going to go somewhere, which kind of sounds a little bit weird, but I’m going to go to the building code-

Eve Picker: Oh, I’ve heard lots of these, so it’s not weird [crosstalk] thinking about building codes.

Sadie McKeown: I think that if you could change the code and make the code require the right elements of place, and housing, and resiliency, and sustainability, and address … You can address so many things through the building code. I was in in Pennsylvania – Pennsylvania Housing Finance Authority – a couple weeks ago, talking to them about their passive-house initiatives and all the cool things that they’re doing. One of the people said that Pennsylvania didn’t have a building code 20-25 years ago, and that was really shocking to me [crosstalk]

Eve Picker: No, they did. They [crosstalk]

Sadie McKeown: -not a state code that impacted [crosstalk]

Eve Picker: -maybe not a state. They were local; they were locally managed, that’s correct, yeah.

Sadie McKeown: Yes, and so-

Eve Picker: But they were all slightly different. Yeah.

Sadie McKeown: But to have … See, if you can start with a code that keeps everyone consistent, then all of the programs that grow up around real estate have to obey the code, and they can all be more uniform and more efficient. So, it’s almost like the roots of the tree and then, the tree grows stronger because the roots are the same. It’s a unique one for me. I could have gone to all kinds of things, but I, particularly with my sustainability and my climate-change hat on … Change the code, and you can change the way people fundamentally address those issues in real estate.

Eve Picker: Well, thank you very much for your time. I’ve really enjoyed talking to you, and then, I plan to keep talking to you, Sadie. So, thanks for your time this afternoon.

Sadie McKeown: Oh, my pleasure, and I look forward to the ongoing conversation. Thank you, Eve.

Eve Picker: That was Sadie McKeown. That was a fascinating conversation about the impact that personality, will, and politics can have on place. Political infrastructure is just one of the five criteria that CPC uses before they decide to invest in a place. In addition, they review physical infrastructure – what are the buildings like? Social infrastructure – is there a ‘there’ there? Economic infrastructure, and development infrastructure.

Eve Picker: 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, Sadie, for sharing your thoughts with me. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.