Rethink Real Estate. For Good.

Gentrification

Jumpstart desegregation.

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

Women building collective muscle.

Libby Seifel‘s life is built around big causes. She has spent much of it professionally focused on affordable housing and much of it personally focused on women. Libby’s interest in housing came about when she lived through gentrification in her own neighborhood in Boston. There she saw her own godmother pushed out of her apartment into distressed public housing, and that convinced her that mixed-income housing was a far better solution. She went on to get degrees at MIT in Planning and Urban Studies and became the founding Executive Director of Tent City Corporation, a nonprofit developer of a ULI (Urban Land Institute) award winning, mixed-income housing development in downtown Boston.

Since the 1990s, Libby has run her own consulting firm, advising public and private clients on projects where sustainability and social equity are pursued in equal measure alongside strong financial returns. And she has worked in every part of the Bay Area: Transbay Transit District, Mission Bay, Mission Rock and Hunters Point Shipyard, as well as South San Francisco’s Oyster Point, Mountain View’s North Bayshore and Novato’s Hamilton Field.

When she started out in the 1980s, she says mixed-income housing and sustainable development were considered somewhat of an “oddball” concept. Now she says, they’re widely accepted as good planning. Libby is also the founder of the Women’s Development Collaborative – a network of women leaders doing transformative real estate developments. After more than 30 years in the industry, Libby notes that she is no longer the only woman in the room, and that some of the biggest new projects in the Bay Area are being driven by women.

Insights and Inspirations

  • Libby hopes that Women’s Development Collaborative will become a place where women build collective muscle.
  • If you want change, you need to become involved, or start the process yourself.
  • It can’t be said enough. Women need to support women in every field. Things have gotten better, but we are not there yet. And education and the sharing of our learned experiences with other women is critical.

Information and Links

  • The Women’s Development Collaborative is a network of women leaders who inspire, promote and support women who lead transformative real estate developments.
  • The ULI San Francisco Housing the Bay is a multi-year initiative to find new solutions to overcome the Bay Area’s housing challenges and ensure more people have access to housing that is safe, healthy, sustainable and affordable.
  • Two amazing projects Libby has worked on: The redevelopment of Mission Bay and the Transbay Transit Center District, which have both created mixed income, transit oriented neighborhoods in the heart of San Francisco.
Read the podcast transcript here

Eve Picker: [00:00:15] 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: [00:01:29] Today, I’m talking with Libby Seifel. Libby’s life is built around big causes. She has spent much of it professionally focused on affordable housing and much of it personally focused on women. Libby’s interest in housing came about when she lived through gentrification in her own neighborhood in Boston. There she saw her own godmother pushed out of her apartment into distressed public housing, and that convinced her that mixed income housing was a far better solution. She went on to get degrees at MIT in Planning and Urban Studies and became the founding Executive Director of Tent City Corporation, a non-profit developer of a ULI, award winning, mixed income housing development in downtown Boston. At that time, mixed income housing and sustainable development were considered somewhat of an oddball concept, says Libby. Now they’re widely accepted as good planning. And then she founded her own firm. She was the only woman in the room when she started her career. Today, that has changed a little, but not nearly enough for Libby, who has founded a quickly growing women’s development collaborative to support women developers. I’m a member of the Women’s Development Collaborative, so I’ve seen firsthand the strength of Libby’s focus. 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: [00:03:32] Libby, I’m really happy to talk with you today. Thanks for joining me.

Libby Seifel: [00:03:38] Thank you.

Eve: [00:03:39] So I’ve known you for quite some time. I was trying to remember how long that was, but I just couldn’t. It’s been a long time. But still, I was really surprised when I read your resume and you’ve done so much and there’s probably more that you haven’t talked about, which I’m hoping we’re going to talk about today. But I wanted to start with a quote I read that you were going to be a doctor and and I’m wondering what happened.

Libby: [00:04:07] That’s interesting story. So, I think what happened was that I got really, really interested in urban planning and I was actually talking with somebody about this recently that I had the great fortune of having Lewis Mumford as one of my professors, my freshman year in college. And I was coincidentally reading The City and History, which is his famous book. And he was such a wonderful storyteller and really conveyor of what was going on in the earlier part of the 20th century with respect to thinking about what cities could be and how they could be. And so he looked at it both historically and as a visionary, and he was very dedicated to sustainable development. About having development that was holistic, where people could walk to, walk in their communities to the grocery store where they could live together.

Eve: [00:05:16] And that was before this was the thing, right?

Libby: [00:05:18] This was before it was a thing. This was, yeah, it was. I mean, there’s, we can talk about the criticism and there are pieces about the movement that he was part of that was very white focused. So I want to just say that up front. And I understand and and that but this sort of it was kind of the city beautiful, but it was really more country beautiful movement. He lived for it pretty much his whole life after he moved out of New York City, in Amenia, New York, which is an absolutely beautiful part of New York. And if you’ve never driven up the Hudson Valley, it is absolutely exquisite. And Amenia is off the Hudson Valley inland. And it’s a beautiful farming community near the border of Connecticut and on, coincidentally, a rail line that goes into New York City.

Eve: [00:06:11] I’ve been on that train. It’s fabulous.

Libby: [00:06:13] You’ve been on that train. So you know what I’m what I’m talking about. So, and my uncle’s an architect, so my mother never wanted me to be an architect or an urban planner, which is what I am now. She wanted me to be a doctor and specifically she wanted me to be an ophthalmologist. So I was like, no, but I love visual arts and I love visual science. And I actually studied that. So alongside of studying urban planning, I studied neurophysiology and urban, just a lot of urban studies. And and I prepared to be a doctor. And I finally convinced my mom that if I got a master’s in urban planning alongside of my undergraduate degree, I’d be so much more competitive to be a doctor. So, so that’s the funny story. But on a more serious note, I was able to study with Dr. Land at Polaroid on visual art and visual science. And I have a very deep appreciation for the arts and colors in particular. And I like the idea of creating a colorful world where we all can participate and be part of this. You know, it’s the utopic view, but my life is really dedicated to making the world a better place. That’s what I try to do.

Eve: [00:07:41] That’s wonderful.

Libby: [00:07:41] And I think Lewis Mumford and people like him are just very inspirational to us in this field.

Eve: [00:07:50] You were lucky.

Libby: [00:07:50] And I wouldn’t really be here without him. And then actually the other clincher to all of this was that – it’s a story that kind of leads into my career – is that I moved to Boston, I went to school in Cambridge at MIT, and I moved to Boston with my college roommate, who’s now still a very good friend of mine and a real estate developer and investor. And we moved into the South End neighborhood of Boston, which is a really incredible neighborhood now. And then when we moved in there, it was a neighborhood very much in transition and it was a neighborhood very affected by urban renewal. And these were the times when wholesale displacement of people occurred, where they were moved out of their homes. Where a vibrant neighborhood that had been very colorful and dynamic, was changed through urban renewal, and the community had been promised development as part of their protests against urban renewal. They had formed a tent city in protest to say we did not want to be moved. And a group of folks reenacted this tent city event, this demonstration, and I was coincidentally in college at the time and was at a studio that was dedicated to working on studying this site called Tent City, which was the site where this protest had occurred. And so I took the studio and I was forever transformed. I got very involved with the community. I was living there. We really wanted to make this housing happen. We wanted it as mixed income housing. We wanted it to be a resource for the people who have been displaced in the community. And we wanted it to be a place where people of all income levels could live together in a great, absolutely great site in Boston, right next to that Back Bay Station, which ultimately got built. I mean, that’s part of my whole history, but ultimately got built with that vision and that dedication of that group of people totally transformed my life.

Eve: [00:10:14] And that also got a ULI award, right?

Libby: [00:10:17] It did. It did. It got a ULI award. And it is great to visit. It’s right next to Copley Place. There’s a whole story about Copley Place. We could talk about later if you wanted, but it’s next door to Copley Place. It’s next door to Back Bay Station, which is where the Amtrak station is and the light rail. And it’s also next door to the moved underground railway that used to be an elevated railway, a streetcar through Boston, through the South End in a southern part of the South End which was then put into an underground tunnel. And on top of it is the most amazing set of community gardens.

Eve: [00:10:57] Yes, I’ve been in them. They’re stunning.

Libby: [00:10:58] You’ve been in them. And the walkway…

Eve: [00:11:01] That was the Big Dig, right?

Libby: [00:11:02] Yeah, well, it’s not the Big Dig, but the Big Dig is amazing. The Big Dig is over by the waterfront of Boston. This is actually in the Back Bay, South End, part of Boston. It’s the orange line. And you wouldn’t know because you’re going underneath it if you’re riding it. But it is on top of it. There are these amazing community gardens.

Eve: [00:11:25] The gardens are gorgeous.

Libby: [00:11:27] Yeah.

Eve: [00:11:27] Including, you know, community vegetable gardens.

Libby: [00:11:31] Exactly and each neighborhood block actually participated in the design of each garden and walkway at the end of their block. Another mentor and person that got me into this was Ken Kirkmeyer, who lived in the South End, who was the President of Tent City Task Force. And he was actually the project manager that spearheaded this project and worked with the neighbors to create this marvelous place to walk the South End corridor.

Eve: [00:12:04] So Boston and all that really formed your professional path. And where did that lead you? Where are you now?

Libby: [00:12:12] So I now live in San Francisco, across the country.

Eve: [00:12:18] Very different.

Libby: [00:12:20] Yes. But I think sister cities. We’re on the water. We have a long history of progressive politics. Though, it’s quite different out here than it is in Boston and a very, very strong set of values when it comes to preserving history, to recognize the importance of neighborhoods and community and thoughtfulness about design. A lot of architects and designers. In fact, when I when I was making the decision to leave Boston and come out here, I can’t tell you how many people told me not to come because there’s way too many planners out here, urban planners and architects and real estate economists. And it was going to be very hard to move, unfortunately, chose the time to move, which was one of the recessionary times we had across the industry. But it all worked out and I love it here. It’s a beautiful city and the Bay Area is an absolutely lovely place to be. And there are so many challenges and I thrive on challenges. So there are so many urban challenges in the Bay Area to work on.

Eve: [00:13:34] What sort of challenges? What do you work on?

Libby: [00:13:36] Well, first, you know, like in Boston, but even worse, the cost of housing is just phenomenal out here and out of reach of so many people. And it exacerbates the haves and the have nots. So that’s a big challenge that I work on a lot, both as a volunteer and in my profession. It’s also that we have we have to be very conscious of sea level rise, much of the Bay area is on water, as it makes sense, we’re on the bay. We’re on the ocean, San Francisco straddles the Pacific Ocean and the San Francisco Bay. And so, we’re virtually surrounded by water on three sides. And we have the possibility of our downtown in San Francisco being underwater in the not-too-distant future. The history of San Francisco, like Boston, there’s a lot of the city is on fill. We have natural hills that we took down, many of them to build fill, and we filled in a lot of the areas that when you come to visit San Francisco and you’re walking around that land used to be either marshland or ocean, very deep ocean or bay. So actually bay, not ocean, but through the ocean, water intrudes. So that’s a big challenge. We also have earthquakes. Just to keep things interesting. So that shakes us up every once in a while. And we’re at risk of an earthquake, particularly in the East Bay, happening again. So we have to be very conscious of resilience in so many ways. So that makes our our life challenging. And we have we have it’s an absolute blessing and a curse. As many people say, we have the most amazing set of folks in technology. I mean, many of whom are M.I.T. alums and Stanford alums who have formed this tech corridor and biotech corridor that we have all through the through the Bay Area Peninsula and Silicon Valley, which is absolutely amazing and makes our economy incredibly strong and robust. And California’s incredibly strong and robust. But alongside of that, it ends up pushing up the price of land and the price of development so it can make it very hard for small businesses to be successful. Sometimes small retail businesses, the rents can get very expensive. That can make it more difficult for them. So, we have a lot of challenges.

Eve: [00:16:18] So how does that like, how does that color the work that you do? You now have your own company, right? And you do consulting work? And is it mostly around affordable housing or what challenges do you confront in that work?

Libby: [00:16:33] Great question. So, I do a lot more than affordable housing work, but my passion and heart is around affordable housing. I just want to say on one of my volunteer efforts, because I want people to know about this, I’m the co-chair of the Utilized San Francisco Housing the Bay Steering Committee, and we are dedicated to promoting and producing more housing in the Bay Area through our work. And we have an upcoming summit that’s happening June 2nd, 3rd and 4th. This will be our fourth summit that we’ve had where we bring together a very diverse group of speakers from around the world and the United States to talk about the Bay Area’s housing situation, but also more generally, the housing situation across the United States and what are great strategies and tools and best practices that we can use to improve our housing situation. Which includes building all types of housing for all types of people. It’s very invigorating to be part of the housing the Bay effort. And this summit always inspires me every year to do more. And in my practice, I work with a lot of cities and developers that are dedicated to building affordable housing and mixed income housing, which is even tougher to do. Tent City was able to hit the timing right with the funding and the commitment by the city to make that mixed income housing development happen. And it had a unique location, but it’s been it’s very difficult to get the funding together and the financing that is necessary to do mixed income housing at scale. We do have a strong inclusionary housing set of regulations, but here in many cities in the Bay Area, so we do a lot of work and inclusionary housing, which means that a portion of housing is restricted for occupancy or dedicated to occupancy by persons of usually very low, low and moderate income, which is HUD speak is federal housing agency speak for people that earn typically less than the rest of us or about the same.

Eve: [00:19:05] Critical for the function of the city, right?

Libby: [00:19:08]  Right.

Eve: [00:19:09] Often service workers and …

Libby: [00:19:11] Essential workers, yep.

Eve: [00:19:12] And people who keep places going.

Libby: [00:19:15] Yep, exactly.

Eve: [00:19:17] If they live too far out, then those places are not going to work anymore.

Libby: [00:19:20] Exactly. Exactly. And trying to figure out how to do this with the private market. So I work a lot on the private market side. I’m the number cruncher behind the scenes and the strategist trying to work on these projects. And so, we’re constantly trying to thread the needle to figure out how can we keep the private market still building housing while including housing for more people of a greater and more diverse set of backgrounds and incomes?

Eve: [00:19:54] Yeah, it’s a really big challenge.

Libby: [00:19:58] It’s really big.

Eve: [00:20:00] Well, I want to shift gears a little bit, because I also know about another one of your passions, which is also very close to my heart. And that is how to increase the visibility of women in the real estate industry, in particular real estate developers. And so I’ve kind of watched you over the years put together a little group that’s become the Women’s Development Collaborative, and it isn’t so little anymore. And I wanted to talk about that. Where did this come from? Why did you start it?

Libby: [00:20:35] That’s a great question. I guess I mentioned the Urban Land Institute or ULI earlier, and I’ve been a member of ULI now for, realizing it’s been three decades or more. It’s an organization that’s dedicated to advancing development across the world, globally, and since I’ve been involved for so many years. When I first got involved, I was often the youngest person in the room and many of these national conferences, and I was often the only woman or one of the few women. And it was very important to me to find, I guess, soul sisters or wise women in this industry. It had been a struggle in my career at different I know, right, to be the only woman. And it was definitely…

Eve: [00:21:31] I was the only woman developer in Pittsburgh for quite a while. So, I …

Libby: [00:21:35] Yeah. You were? Well, and Eve, I don’t know if you remember this, but how we met was we were at a conference for the Women Presidents Organization in San Francisco.

Eve: [00:21:47] Yes.

Libby: [00:21:47] Many, many years ago, and you and I both were involved in that. And that’s an organization that’s dedicated to women entrepreneurs and building capacity. It’s a peer-based group. It actually also inspired the Women’s Development Collaborative. So it’s worth talking about for a minute in case anybody on the line, a woman entrepreneur, it’s a great group.

Eve: [00:22:09] It’s a great group.

Libby: [00:22:09] But what was incredibly funny was there’s this entire ballroom, one of San Francisco’s largest ballrooms, with tables all across it on a Saturday morning with signs on it of like, you know, are you in consumer affairs? Are you in you know? I don’t know. Do you do retail product, apparel, whatever? But all across the room, everything. There was one table in real estate, and it was at the table. You and I, we were the only ones at the table.

Eve: [00:22:40] And it’s really not a whole lot different today, Libby. What really scares me.

Libby: [00:22:49] It’s true. It’s true. So, I mean, it’s better, we’re working very hard at ULI. So the origin story of the Women’s Development Collaborative goes back to these times. And ULI, which still often continue but have gotten better because a number of women that were part of this informal network of wise women, soul sisters that came together to meet on a regular basis at the spring and fall meetings of ULI, which are national meetings when we get together across the country. And we would meet, whether it was for dinner or breakfast or whatever, and we would share ideas about development and best practices and what we were doing. And one of my mentors, she said to me, well, you need to we need to do something more than this. Like these women’s receptions in these gatherings are fine, but we need to actually make a difference. We need to improve leadership. And so a number of us got together and helped form what’s now called the Women’s Leadership Initiative, or WLI within ULI, which is dedicated to advancing women’s leadership in the entire real estate industry. And that’s been phenomenal and that’s gone on since 2012. And again, anyone in the real estate industry should follow that because WLI is wonderful. But at the same time, there we had this niche group that was really focused on development and we recognize that development itself, which is part of the entire landscape of real estate, that you needed support and nurturing and showcasing. And so we started to alongside of the WLI activities, I continue to organize with a lot of other women, events around this spring and fall meetings where we would showcase women developers. We’d go tour their projects, we hear from them, we learn from them. And it’s just been so inspiring to see these projects.

Eve: [00:25:02] It really has been.

Libby: [00:25:03] And then we had to go virtual because there was no Toronto meeting. And so now we’re online. So, you can find us at the Women’s Development Collaborative online. And we are really trying to build our presence across the United States and Canada. We have a number of women involved from Canada to really promote and advance women’s success, leadership, innovation and collaboration and building transformative developments.

Eve: [00:25:35] I need to tell you, like I I was also a member of ULI for many years, and then I stopped my membership because I really didn’t feel like I belonged there, for a couple of reasons. One was the whole woman thing. But also, I was working on quirky, small interstitial urban projects. And when I was a member of ULI just there was there was nothing there was no one talking about that. So I stopped attending. And actually, when you started inviting me to the Women’s Development Collaborative meetings was when I decided to join again because I finally felt like there was sort of a space emerging for developers like myself. That and the small-scale development group, which has been also pretty wonderful to see emerge. But I think…

Libby: [00:26:28] Yes, yes.

Eve: [00:26:29] Times are very different, but it is incredibly inspiring what you’re doing and you have a lot of stick-to-it-ness. And it’s also very frustrating to see how slowly things have changed. I mean, what do you think about that, for women? It’s very slow.

Libby: [00:26:43] Yeah, it is really slow, but it is it is getting better bit by bit. You know, it is, I was looking at some data and it is it is improving, but it is very, very hard. And it’s I think that, you know, I, I think that a couple of things that we have to think about and think about deeply, which is that in addition particularly to the history of African-Americans in the United States and their inability to first secure and hold property or even keep property right after the civil war. Property was actually stolen away from them, it was often stolen away back from Native Americans as well. So, we have had a history in our country of not respecting and honoring property for persons of color. But at the same time, when we think about the history and it’s not just of the United States it’s of the world, women were not allowed to own property. And it also varied state by state. And I believe it still does. And a lot of states that there are different rules that make it very hard for women to hold property or to transact. So it’s not just discrimination in the sense of how you show up. Like if you’re a woman, you’re obviously different as you enter a room, but it’s also the rules by which we play. So getting through the those rules…

Eve: [00:28:21] Not just the rules, but the culture that those rules perpetuate,

Libby: [00:28:25] Yeah, and the culture.

Eve: [00:28:25] Because even if there are no rules there, you know, I have to say I, I own a small portfolio of buildings and I have two female bankers to thank for it. Without them, I would not own that portfolio of buildings, which is really an extraordinary thing to say, right?

Libby: [00:28:44] It is. It is. And, you know, that’s part of what WDC is trying to work on. I mean, we have we have a lot of ambitions and it’s and it’s hard to even figure out what to prioritize because there’s so many challenges. But alongside of really promoting women developers, we want to expand women in the workforce and the development supply chain for developments because of exactly what you said, that we need more women bankers. We need more women equity investors. I mean, that’s something we want to talk about, right? That that women just aren’t investing as much as men.

Eve: [00:29:24] Oh yeah, women investors. Why do women not invest? I don’t understand.

Libby: [00:29:32] Well, and I think it’s I think there’s a history of this. Like I think there’s an education process. I mean, that’s partly what WDC is a big part of our mission is to educate. But I’m now recognizing it’s not just educating and building up women developers like educating ourselves about each other or, you know, the service providers, introducing them to women developers. It’s also about educating the broader community. I was listening to your podcast with Stephanie Gripne and I absolutely loved the conversation that you had about the fact that in essence, you know, part of this is a perception issue that if we think about it, everyone is an investor, as Stephanie said. She said when we make a choice to buy, she used buy milk. That was her analogy. When we buy milk, we make a conscious choice whether we’re realizing that it’s conscious or not, that we’re using milk. We’re choosing a type of milk that’s sold by a certain company. And we may be choosing it based on price, but we may be choosing it based on the fact that we recognize the farms or the farms where it came from. Or in these days, we might be making a choice not to buy cow milk. We might be buying almond milk or soy milk, and we may be looking at how that was grown. So we have to, I think women are the biggest consumers in our country. So struck by this, after I listened to that podcast, that we are the ones that we lead the buying. If you look at all the consumer surveys, women are the buyers in our society. We are the retail shoppers. We love to shop. We do comparison shopping, et cetera, et cetera. We need to learn as women how to do the same thing with real estate investment. We need to get educated about it, it’s it’s a much different world than buying milk, but at the same time it is it is how the milk is, where the milk sits right in our society, these buildings.

Eve: [00:31:49] What’s interesting to me, if I think about researching where milk comes from, so I can make an informed decision, that makes my brain hurt compared to understanding a real estate project and what I might invest in. So I think it’s partly what you’re trained in, what you learn, how you’re educated. It’s not I don’t think it’s harder to do. It’s just different.

Libby: [00:32:12] Yeah, yeah, yeah. No, you’re absolutely right. It’s it’s not harder to do. It’s just different. But we’re not educated in it. I mean, I don’t know how you feel about this, but I never learned really what I do today. Like when I was in school, they didn’t teach me what I what I practice right now. I learned real estate by reading books, honestly.

Eve: [00:32:39] Oh. How did I learn Securities Law? Yes, yeah.

Libby: [00:32:46] Yeah, exactly. Like reading books so and getting educated in it. And now I mean I’m grateful. I’m able to teach, I’m teaching now at UC Berkeley. I’m a lecturer part time, but I just absolutely love being able to teach. And what I recognize is I teach public private partnerships, which is a lot of my work is how to get the public in the private sector to work together, whether it’s on a deal that the public sector is sponsoring or whether it’s just a deal a private developer wants to do. And they need the support of the public sector, which is pretty much every project ever.

Eve: [00:33:24] Yes, that’s right.

Libby: [00:33:26] Especially in the Bay Area. If you don’t have public support, you’re not going to get your project. And what I recognize is there are so there are so few classes that actually teach people how to do this and how to do it well or how to do real estate development and how to do it well. Luckily, ULI has offers a lot. And as you said, the you know, the small scale development council, that they focus on that and have some great trainings through ULI. But it is not something that is taught to the average person. It’s not like we go to school and we learn about how buildings are built.

Eve: [00:34:03] Right.

Libby: [00:34:03] And so I think we have to start to educate the general population and in our case with the women’s development, collaborative women in particular, and including women in our field, because what I’m even finding out is through the WDC, I’ve been asking women like, do you invest in real estate? And the answer is often is pretty much no, we don’t we don’t know. We don’t know how to do it. We don’t understand it. So that’s a mission for someone in our and where…

Eve: [00:34:39] I can sense a class coming along that you and I can conduct.

Libby: [00:34:43] Exactly. I’m so excited about this. I really want to do this, Eve this spring or summer. I want to do a class in how to invest in real estate and why. It’s like how to invest in real estate and why should we care and why should we do it. And I think it’s critical.

Eve: [00:35:01] Yeah, it’s also something else about real estate, you know, that I think over the last few decades, everyone’s been trained to think about quick returns. And real estate isn’t that. You just have to think about the long haul.

Libby: [00:35:19] Right.

Eve: [00:35:20] And I’m always stunned when I hear from people saying I invested there and they’re going to give me my money back in six months. Can I do that in real estate? And I’m like, no, what can you do in six months in real estate? It’s, it’s a different thought process.

Libby: [00:35:38] It’s absolutely a different thought process. And I also think that the real estate is much more long term in the investment horizon that many capital providers, meaning institutional and private investment capital, which is what fuels a lot of real estate development in the United States and across the world. It is usually focused on five-to-seven-year time horizons. And in terms of equity investment, a lot of the money that is coming in. So, their preference is that they can make their money back, they can get their money back and a return within a five-to-seven-year horizon. And that puts you on the one hand, it puts a certain discipline in the market, but it also means that it goes at counter purposes for, you know, the idea of patient capital, because buildings are they’re going to I mean, if we build them well, they should last for a very long time, if not forever, like they do in Europe. And some buildings have a lifetime. Kind of you think at a minimum of 50 years, if we’re doing a good job, that should be the minimum life and hopefully it’s much longer than that. So the time horizons have to be much longer. But as you said, you know, in many consumer markets, it’s a much shorter time horizon, six months or a year. It is just not it’s not realistic in real estate.

Eve: [00:37:15] Tell me, how much has WDC grown since you started it? How many members how many of your meetings and what do you do now that it’s covid-19.

Libby: [00:37:28] Right. Right. So so first of all, we are very much still a start-up organization. We’re reaching out to anyone that’s interested in joining, please Google Women’s Development Collaborative and reach out. Our organization has about I guess we have 400 to 500 women on our email list and our LinkedIn group now I think it’s around 300 people. So it’s still very much a growing group. Our meetings are intentionally intimate and small, usually 30 to 40, maybe 50 people, 50 women. We are intentionally keeping this focused on women. We are trying to think about how do we bring in men as allies, because that’s critical, particularly as we start to think about some of our next goals of what we want to do as an organization. But the goal of WDC is to really build our capacity and to create a safe space for us to as women, to be able to provide advice and guidance to other women and to be open about our deals and what we’re what we’re experiencing and to provide advice. So that’s the scale we’re at. And I think to myself, how big do we really want to be? Do we want to be another ULI? What is the scale that we really want to be at, and I and I think it’s a, it’s a question that we have to ponder as the group of us, because I think we cherish having the ability to know one another and to get to know one another. So, we want to keep that part of WDC alive because it’s so important to all of us.

Eve: [00:39:22] So this year, programming is changed because of the, at least last year, because of the pandemic.

Libby: [00:39:27] Yes.

Eve: [00:39:28] And I thought as I watched it, it was sort of an amazing opportunity. To move this group along a bit fast and not be reliant on ULI meetings twice a year and the people who can afford to show up there.

Libby: [00:39:42] Yes, yes, that’s true. It is. That is one thing about being online that we can provide better access to, just across the country and people can access it. We will definitely keep an online program, even if we could hopefully go back to meeting in person, maybe even as early as this fall in Chicago at ULI. But what we what we have right now are a series of programs that we’ve been evolving. You do such an amazing job at Small Change in branding. I’ve learned so much from you about this.

Eve: [00:40:23] Thank you.

Libby: [00:40:24] And really, it’s incredible. And one of the programs that we have very much inspired by you and this podcast, though I didn’t even know when I when I was first thinking about it, I didn’t even realize you were on this podcast quest. And then when I started talking with you, you actually agreed to be the first person to participate. And it’s called In Conversation with Developer. So, it was in conversation with the developer, Eve Picker. And we’ve done a series of these. And each conversation is just so fascinating like this. Your podcast about how did the women make the decisions they did to be developers, who has provided them support along their way, etc. So those have been really, really inspiring. We also have these project forums that are dedicated to helping women developer and emerging developer present the challenges that she’s facing regarding her development project and receive advice from a panel of seasoned professionals to help her overcome these challenges. And thankfully, Eve, you also participated on one of those project forums as well, were you able to be part of a panel to provide advice? We call it kind of instead of a shark tank. It’s a guppy tank. It’s a place it’s a safe space where people can feel comfortable and really get honest advice about how to move forward. So, we’ve had several of those. We’ve we’re doing three this year. We’ve had three already last year in the year before. So, we’re building our program there. So, if anyone out there is an emerging developer, that’s an option for you to consider. And then I’m just going to do one other program. We have a number of others. But the other one I want to talk about is the investment forum, because this is where tying to our discussion earlier, we are really trying to build our collective muscle to invest in and advance successful development partnerships. And that investment forum is featuring conversations with women developers and investors about how deals are done. And it’s actually a learning experience for developers and potential investors. So that’s what we’re dedicated on. And that’s the program where I really want us to collaborate on thinking about how. How can we get more women in the investment world?

Eve: [00:43:03] Yes, that’s critical. So what are some potential strategies you’re thinking about for promoting investment or encouraging women to invest?

Libby: [00:43:16] So we’ve been working on an investment framework that’s a gender lens framework for how we could evaluate investments in women led developments. And that’s been a process. We’ve been very informed by the Small Change metrics and thinking about how crowdfunding could be a potential tool to encourage investment in women led developments. But we also realized that we needed to define what we meant by women led development, and we needed to think about the whole ecosystem, like I talked about earlier, about all the women that could contribute to it. So we’re focusing right now on WDC taking on four dimensions of activities to empower women developers to expand economic opportunity, which means expanding women in the workforce and the development supply chain, as we talked about earlier, expanding access to capital. So building on the same theme. So, both getting women, individual women investors to invest in real estate, but also just to promote investment more broadly from men and women and institutional corporations in development. And then we want to make sure that these developments benefit women and communities, and so we’ve come up with a set of principles and you and I speak. There’s a lot of 10 principles books. So, we have 10 principles of transformative development that benefit women and communities. And we’re using these four criteria, these four activities, as a way to measure women developers and their development to provide recommendations. So the screening process to provide recommendations to women and to men about developments that they may invest in. So, four lenses are women in leadership in development, women in the supply chain and workforce, women capital providers and benefiting women and communities. And out of these criteria, we developed 10 questions. We spent a long time actually refining these 10 questions that really it was more like 15. We refined it went through a number of rounds. And what’s really been great is we had this whole community of women developers who’ve beta tested this scoring process a lot. And you were one of them. So, thank you so much, Eve.

Eve: [00:45:53] It’s great.

Libby: [00:45:54] Women from around the country and we learned a lot through this beta testing. And we think we have an investment framework that can work alongside of the Small Change index and other crowdfunding platform.

Eve: [00:46:09] And other ESG indices, right? Like…

Libby: [00:46:13] Yes.

Eve: [00:46:13] It’s a very particular woman-centric real estate lens. It’s great.

Libby: [00:46:20] Yeah. And so what we’re hoping to do, our next step is that we are really trying to work on the strategies that are going to enable us as a small organization, you know, where can we make impact first and how can we make impact first? But our hope is to actually encourage some individual investment and crowdfunding investment in specific real estate developments that will be placed through this investment framework lens. That’s our first goal.

Eve: [00:46:52] It’s pretty big.

Libby: [00:46:54] It’s a big goal. It’s a really big goal.

Eve: [00:46:56] It’s a very big goal. So, I have to wrap up and I just have one final question for you, and that is, what are you most excited about right now?

Libby: [00:47:08] It’s so many things that I’m working on, but I think what I’m most excited about with WDC and my work generally is just the number of wonderful young and emerging women developers and and women who want to be developers. There is this community of women that are both really younger and older. It’s women who’ve been in their careers in real estate for a number of years. For example, a woman architect who’s decided that she wants to be a developer after having been leading her practice for a number of years and is actually her first project, is going to be building a building for herself and her community of professionals that she works with. So the building will be bigger than just her architectural practice. It will include others in it as well. And then younger women developers who are starting out, who are really interested in changing the world and in leading development companies. And it’s very exciting to talk to them and hear what they’re doing and how they’re going about it and trying to support them. We have another colleague that you and I know who is developing is working on a mixed use project in her community that is going to be transformative for that community, be a place where people can gather. And whereas she says one plus one can equal much more than that. And that’s Molly McCabe, who you’ve also interviewed here in your podcast.

Eve: [00:48:50] Yes.

Libby: [00:48:51] So I just thought that constantly inspires me to have to just have that sense that there is this community and this future of women in development that we can encourage and build upon, which is fabulous.

Eve: [00:49:06] Well, thank you so much for your time, Libby. I have really enjoyed our conversation and I’m going to be seeing a lot more of you.

Libby: [00:49:14] Yes, I’m looking forward to it. Thank you so much, Eve.

Eve: [00:49:32] That was Libby Seifel, Libby’s career has been one built from her heart. First, she worked on affordable housing concepts that were ground-breaking at the time, having witnessed firsthand how crushing gentrification and displacement can be. And now she is focused on the small number of women in the room. She has puzzled over the years, as have many of us, why there are so few women who take the leap into real estate investment and development. She intends for the Women’s Development Collaborative to be a safe place for women who are testing the waters to land. A place where they will be supported by their peers as they emerge as women developers. Please share this podcast so that more women learn about Libby and the Women’s Development Collaborative. 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 Seifel Consulting/Libby Seifel

Between renting and home ownership.

Home ownership has traditionally been considered a part of the American dream, providing economic benefits such as wealth accumulation, access to credit and a built-in saving system. Home ownership also provides housing security and a connection to place. But many Americans may never own a home. The challenges for first-time home buyers, skewed worse for minorities, include coming up with a down-payment, overcoming regulatory burdens and obtaining adequate credit.

The alternative to home ownership is renting a house or apartment, which has a lower barrier to entry. Renting provides more flexibility by allowing tenants to move without penalty at the end of a lease. On the flip side, it decreases housing security. A landlord might suddenly decide to sell, causing tenants to have to vacate. Or gentrification could cause rents to increase until they become unaffordable. And saving money without the advantage of a mortgage can be daunting.

Max Levine’s organization, NICO (Neighborhood Investment Company), wants to create a new housing typology – something halfway between renting and home ownership. Modeled as a B-Corp, NICO has launched what they believe is the world’s first neighborhood REIT (real estate investment trust) in Echo Park, Los Angeles.

Echo Park, like many other neighborhoods today, has experienced a significant amount of gentrification. This means that many members of the community are excluded from home ownership. NICO wants to help them to build wealth and belonging and let them participate as primary financial stakeholders. Using a REIT structure and applying it at the local level allows every day people to have a financial stake in their own neighbourhood.

Shares in NICO sell for as little as $100 and stakeholders can choose to make either a one-time investment or a long-term commitment through monthly payments. Open to both locals and non-locals, the REIT offers two classes of shares with some additional benefits attached to those for local shareholders. In addition, each of the tenants in the buildings owned by NICO have been given $1,000 worth of shares. 

Listen in to my conversation with Max Levine as we unpack this interesting new model.

Image courtesy of Max Levine/NICO Benefit Corp.

The third way.

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

Hello, Neighbor.

Max Levine’s organization, NICO (Neighborhood Investment Company), has a mission “to localize wealth creation and broaden access to neighborhood equity.” The Los Angeles neighborhood Max lives in, Echo Park, has an income average of $40,000, whereas the average home is valued at $900,000 – an enormous discrepancy. Max and his business partner, John Chaffetz, began exploring the gap between home ownership and renting, testing financial models of what might fall in between. They ended up with the innovative idea of a neighborhood REIT (real estate investment trust) that would allow members of a local community, property owners and tenants, to literally invest in the place that they live by buying shares of local properties owned by an investment trust. Their first effort is NICO Echo Park, with an initial portfolio of three rent-stabilized apartment buildings.

NICO, not surprisingly modeled as a B-Corp, aims instead to create both societal benefit as well as modest financial growth. By taking the REIT structure and applying it at the local level, stakeholders who want to have a financial stake in their neighborhood can buy shares, starting at only $100. They can make a one-time token investment or make monthly investments to build up a deeper, long-term commitment. In addition, NICO has given each of the tenants in their buildings $1,000 worth of shares. 

Though now in LA, Max spent his working career mostly in New York City, as a financial analyst and later as CFO at Storage Deluxe, a self-storage giant, with a stint working on their subsidiary, UOVO Fine Art Storage. He even took an entrepreneurial break to open a delicatessen in Brooklyn. He is also a member of Top Tier Impact, a small, global community of investors, entrepreneurs and experts whose goal is to “accelerate mainstream adoption of impact and sustainability as the way of investing and running companies.”

Insights and Inspirations

  • Home is neighborhood. It’s a unit of organization.
  • With NICO, Max wants to create a new housing typology, located between renting and home ownership.
  • There’s a lot of love in neighborhoods. And that’s super-exciting!
  • The relationship between residents and property owners, or landlords and tenants, needs to be radically reframed. 

Information and Links

  • Max has been listening to the amazing music and programming from their friends at Dublab, and which has helped keep their spirits high during the last year.
  • He and his team are super-proud of the work that Helen Leung and the team at LA Mas have done to help coordinate the Northeast LA Community Response to the Covid-19 emergency. Helen is a board member of NICO Echo Park, Benefit Corp.
  • Max also wanted to highlight the work of Women’s Center for Creative Work, which has also inspired them. 
Read the podcast transcript here

Eve Picker: [00:00:11] Hi there, thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Max Levine, founder of NICO. A few years ago, Max noticed a very big gap between traditional home ownership and renting, and he wondered what might fall in between. At the same time, he wanted to explore how to create localized wealth and neighborhood equity, and he found the solution to his quest at his own back door. In Echo Park, the neighborhood he lives in, a highly diverse neighborhood, incomes average forty thousand dollars, yet the average home sells for nine hundred thousand. Max took a huge leap in order to bridge that gap by creating NICO, a neighborhood investment company, or REIT through NICO locals can literally invest in the place that they live in by buying shares of local properties owned by NICO. But Max doesn’t want to stop there. Listen in to hear more. And be sure to go to EvePicker.com to read the show notes page for this episode. You can sign up for my newsletter so you can get access to information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change.

Eve: [00:01:50] Hello, Max, thanks so much for joining me today.

Max Levine: [00:01:53] Yeah, thank you so much for having me. It’s great to be here with you.

Eve: [00:01:57] So, I’m really fascinated to hear, because like me you’ve plunged into the fintech crowdfunding world to solve a problem. And I think your NICO is sort of a version of Small Change, although a little bit different as we’re going to discover. So, it’s really nice to interview someone in the same industry.

Max: [00:02:15] Absolutely. Great to connect with you.

Eve: [00:02:19] First, I wanted to ask you what problem you’re trying to solve.

Max: [00:02:21] NICO really started, NICO stands for the “neighborhood investment company” and we really started, really with an observation of just how broken housing in this country is. And initially, we sort of were focused on thinking about, you know on one hand, you have traditional home-ownership which is held up, you know, sort of the American dream and this example of what Americans should aspire to, sort of the responsible thing. But it’s so out of reach for so many people. And, you know, on the other hand, you have renting, which is more accessible, lower barrier to entry, certainly more flexible. And for us, you know, housing as being this sort of, I’ll use the word “choice,” but it’s not really a choice for so many people because homeownership is still out of reach.

Eve: [00:03:13] Yeh, that’s right.

Max: [00:03:13] But there’s these two options, right? And so initially we start to think about how could we play a role in creating the third option that sits in between traditional homeownership and renting, one that confers some of the benefits of traditional homeownership, you know, the opportunity for wealth creation and connection to place and sort of putting down roots. And on the other hand, you know, was sort of flexible and more accessible the way that renting is. And so, that was sort of the first observation is, you know, if you were going to design a housing system for today’s world to reflect the realities of the real economy today, our thesis is the system would probably not look too similar to the system we have in place. And our, you know, vision is to try and create, you know, really a new product that is more in line with the way the economy is working today and specifically around access to capital and opportunities for wealth creation for folks.

Eve: [00:04:10] Right, Yeh, I always think of rental as not providing comfortable stability.

Max: [00:04:16] Yeh.

Eve: [00:04:16] For example, when places gentrify you can’t be certain that your home won’t be taken away from you, which is troubling.

Max: [00:04:23] Yeah, correct. Right. And I would say it’s even deeper than that. You know, I think that’s a big element. Housing stability and security is a big element of it. I mean, even the word, right? Even the words “landlord” and “tenant”.

Eve: [00:04:36] Um hmm.

Max: [00:04:36] And those are words that are rooted in medieval servitude. Right? That whole paradigm and the whole way that that relationship is set out is one that is, you know, not rooted generally in equity or respect. Right? And so, I think there’s also sort of an element where that relationship between, you know, residents and property owners or landlords and tenants, needs to be radically reframed. And I think housing stability and security is a big part of the outcome of what that could look like. But I think there are other ones as well. For instance, I think there’s a real bias against renting as an option. I think it’s viewed as being ‘less than’ homeownership.

Eve: [00:05:22] Right.

Max: [00:05:22] And I think that narrative that exists really broadly needs to change because the reality is, you know, renting is. If it evolves a bit, I think has the potential to be a better option than homeownership for a lot of folks.

Eve: [00:05:37] Yes. yup.

Max: [00:05:38] And that’s part of the future that we’re trying to build through our product.

[00:05:42] And I would say the other, you know, sort of big thing that we’re trying to solve for is, you know, when you ask people where they live, where home is, you know, nine out of 10 times they’ll say, I live in Echo Park or I live in Inwood or I live in Greenpoint. They’ll sort of lead with the neighborhood, right? For us at NICO. The neighborhood as a unit of organization, to us, is sort of the most important of social organization that we have, right? Because it’s larger than your family unit, but it’s still close enough and personal enough that you develop really meaningful connections with folks in your community, whether they’re neighbors or small business owners or organizations that you support or volunteer with. And so, for us in thinking about how to create a new housing typology in between renting and homeownership, it was really important to think about how we could sort of give the appropriate place and the appropriate role to the neighborhood. And NICO, which is the neighborhood investment company, is really sort of come out of both of those lines of inquiry.

Eve: [00:06:54] That’s interesting. So, how does NICO work?

Max: [00:06:58] We have launched what we believe is the world’s first neighborhood “real estate investment trust” or neighborhood REIT. And what that means is that, you know, we’re a real estate investment company that owns a portfolio of income-producing properties and potentially other real estate-related investments, within a specific neighborhood. And so, the first neighborhood REIT is here in Echo Park, in Los Angeles. It’s called NICO Echo Park Benefit Corp. And it’s a company that has a share structure that owns portfolio property. Today, we own three rent-stabilized multifamily apartment buildings, one of which is a mixed-use building with some retail on Sunset Boulevard. And people can invest into the REIT through our website, mynico.com, and become shareholders in the company that owns this portfolio of property. And our vision with this and our, you know, what we’re trying to sort of build is we want to create an opportunity for thousands of people within a community, many of whom, in the case of Echo Park, most of whom are excluded from being homeowners, we want to create a way for them to be able to build wealth, build belonging and sort of participate as primary financial stakeholders in their neighborhood through a responsibly managed, impact-focused, neighborhood investment company. And that’s what it is.

Eve: [00:08:29] So, why Echo Park?

Max: [00:08:32] There’s a lot of reasons why Echo Park, but I don’t think that this concept is limited to Echo Park. I think some of the dynamics that are playing out in Echo Park and have played at in Echo Park are playing out in communities all over the country. Some of these reasons are sort of specific to Echo Park and some, I think, are speaking to the broader dynamic that we see in communities like Echo Park all over the country. So, the first thing I would say is that Echo Park is an incredible dynamic beloved neighborhood. Dodger Stadium is here. There’s an incredible music and creative community that’s been here for a long time. And, you know, people who live in Echo Park choose to live there because they love what this community is about, and it is speaking to them and it’s the place that they want to call home. So, there’s a lot of neighborhood love here. At the same time, you know, the median household income in Echo Park is approximately forty thousand dollars a year. The average home price is over nine hundred thousand dollars, and, you know, about seventy five percent of the households in the neighborhood are renter households, right? And so, that speaks to this huge gap where homeownership is really out of reach for a lot of folks, right?

Eve: [00:09:51] Yes.

Max: [00:09:52] And there’s a lot of love and there’s, you know, a desire to be more secure, qnd being a resident of this community and, you know, Echo Park has experienced significant amount of gentrification. It’s a neighborhood that has experienced a lot of change over the last 20 years, I would say, you know, maybe especially over the last 10 years. And that dynamic creates, which we primarily view through a lens of inclusion or exclusion, right? Who is benefiting, who is accruing benefit from this change, who is being harmed by the change? And so, this dynamic where people love their neighborhood, they’re excluded from being homeowners because it’s just too out of reach, and the neighborhood is changing in a way that feels kind of out of control. You know, we want to create a way that over time, and this isn’t something that can be sort of solved in six months or a year or even five years, but we think over 10 years or 15 years or 20 years, if you have a way for many more people, radically more people within the community to be able to build wealth in a fair, flexible, incremental way, we think that that could drive some very, very special outcomes relative to the current paradigm, if those people are able to build wealth through investing in their community.

Eve: [00:11:12] So, can anyone invest, or do you restrict investment to locals or people who live in Echo Park?

Max: [00:11:19] Yeah, so investment is open to local people and to non-local people. Within the REIT, we have two classes of shares. We have a class of local shares, Class L shares and a class of non-local shares. And so, it’s open to both groups, though the local shareholders have some benefits on some concrete terms of the offering, like the redemption plan, which is how people would request to get their money out. Or, and also, and you know I’d love to talk a little bit more about this, we’re a benefit corporation. You know, sort of at our, at a DNA level for our company, we have a legal responsibility to balance financial returns to our shareholders with social and environmental impact of our business on stakeholders, right? So, on a group of people beyond just our shareholders. And our local shareholders are one of the key stakeholder groups that we will count on to help inform specifically our non-financial objectives and our non-financial measurement and performance.

Eve: [00:12:19] Right. So, what percentage of your investors actually live in the neighborhood, to date? I know that might change, but I’d be interested to know that.

Max: [00:12:28] We launched the offering, and I should say the offering itself is a Reg A+ offering, which means that NICO Echo Park is a public, non-listed REIT. So, we’re regulated by the SEC, you know, there’s a lot of sort of robust reporting, audited financials, all sorts of stuff like that.

Eve: [00:12:49] Oh, I know it well.

Max: [00:12:50] Yeh. And what that allows us to do is, whereas many real estate investments, most real estate investments are only open to, you know, what the government calls accredited investors, which is another way of saying rich people, By being a public company, and using this type of offering, we’re open to both accredited investors and non-accredited investors or non-wealthy people. And so, we’ve set our investment minimum at one hundred dollars, which is very low for this type of offering. And our, you know, objective in that is to make sure that as many people as want to, within the community and nationally, have the opportunity to support this model and participate in this model. We haven’t publicly disclosed the breakdown between local and non-local investors, so far. I think that we’ll probably do that on our supplemental filing. That’ll be coming up pretty soon. So, I’m going to sort of hold on answering that question. It’s a significant portion of the investors who’ve come through the offering.

Eve: [00:13:52] Yeh, yeh. Well, that’s really good to hear. That’s what I hope will happen. So, when when someone invests 100 dollars, what do they get?

Max: [00:13:59] Anyone who invests into the offering becomes a shareholder in the company that ultimately owns the portfolio properties. And so, you know, people who become shareholders, they own shares in NICO Echo Park Benefit Corp. And what accrues to them are, you know, sort of the pro-rata profit and appreciation that we expect to generate as long-term owners of these properties. And I’ll also say that, you know, one question that comes up a lot is people want to know whether investing in this means they own a specific unit or a specific property. You know, the answer to that is, is no. They become a shareholder in the whole portfolio and the portfolio, you know, we expect to grow it pretty substantially over time. So, it’s not just investing into the properties that we own today. It’s also investing into the company that will own additional real estate assets within the neighborhood, as we grow it.

Eve: [00:14:56] So, they’re really in it with you. And that’s a pretty big responsibility for you, I imagine. That’s how it feels.

Max: [00:15:02] We view it as a big responsibility, you know. And I would say the big responsibility is sort of two-fold, I should say, at least two-fold. One is, when you take investor capital, you know, they’re trusting you to make decisions on their behalf, you know,  and be stewards of that capital. So, I’d say that’s one level of responsibility that we view. And I would say the other, you know, sort of major level is this approach to neighborhood investment through a benefit corporation structure, through a neighborhood REIT, this is really the first of its kind, right? In a lot of ways. And so, you know, we have a responsibility to be incredibly thoughtful and understand, you know, the context that we’re coming into and, you know, in the neighborhoods where we’ll be active in pursuing this model, and I think we’ve set a very high bar for ourselves, right? We’ve set …

Eve: [00:15:55] Yes.

Max: [00:15:55] … a bar where, you know, we are trying to balance financial returns to our shareholders. And we believe that the market-oriented solutions are an important part of, you know, what moving through this pain that so many people are in around housing in their community. We think more market-oriented solutions are a big part of that solve, and that balancing, you know, it’s going to take some time to get right, right? And I think that we have sort of designed our, our impact framework and our product in a way that is intended to evolve with stakeholder input over time, right? So, we aren’t making a claim that, hey, this is what it is and we’re going to get it exactly right. I think we built it in a way that gives it space to evolve into what it needs to be in response to, you know, stakeholder input and feedback and sort of our community over time. And balancing all those things will be a challenge, you know, but that’s the challenge that we’ve signed up for and that’s the future that we’re trying to create.

Eve: [00:16:57] Yeah, I mean, we have non-accredited investors as well on Small Change and I sometimes think that one needs to feel even more responsible for 100 dollars when it comes from someone who doesn’t have a lot more. It’s maybe more meaningful.

Max: [00:17:13] Yeah

Eve: [00:17:13] I don’t really know how to put it, but that 100 dollars is a stretch for a lot of people. And so, there’s this extra feeling of responsibility around it.

Max: [00:17:23] Yeah, we certainly feel that way.

Eve: [00:17:26] You know, under a Regulation A+ offering, you can, at the moment, raise up to 50 million dollars. Is that right or is it 50 million a year? I can’t remember.

Max: [00:17:34] It’s 50 million per year. Yeh, we can raise up to 50 million per year.

Eve: [00:17:38] And, is that what you hope to raise?

Max: [00:17:41] Yeah, so, you know, to date, we’ve raised, prior to launching the offering, raised about 30 million dollars of real estate, debt and equity capital. We used that to acquire the seed assets. Since launching the offering, we’ve added to that. And I wouldn’t say it’s my expectation that we’re going to raise 50 million dollars, you know, in the first year or two, because I think the nature of the problem that we’re trying to solve, or the problem that we’re trying to be part of solving is, you know, that folks who have been excluded from wealth creation, they don’t have 50 million bucks sitting around, right?

Eve: [00:18:17] Yeh. And it takes a lot of education. I think real estate investment is difficult and requires a lot of education as well. So, it is, it’s hard. Yeh.

Max: [00:18:29] Yes. I would say we hope to make really good use of the offering, but our priority is less about how much money we bring into the offering and more about how many people, specifically how many local investors, are participating in the model. That’s really our, you know, sort of North Star for the next couple of years.

Eve: [00:18:50] So, how long will this offering, or this REIT remain open?

Max: [00:18:55] So, again, I have to be a little careful about what I say with securities law. So, I don’t want to sound evasive. My understanding is that we can keep it open on a rolling, permanent or semi-permanent basis, subject to renewing some of the paperwork. So it’s out intention to basically keep it open.

Eve: [00:19:14] Ok, that’s pretty exciting. So, can you tell me a little bit more about the buildings in the IT and how you’re hoping to expand your portfolio? I heard you say that some or all of them are rent stabilized. Can you expand on that a little bit?

Max: [00:19:31] All of the buildings that we own today are rent stabilized. We’re not limited at the REIT to only investing in rent stabilized buildings, but we like that asset class. We like that type of building a lot. When I say rent stabilized, I’m talking about in the city of Los Angeles, there’s a rent stabilization ordinance, which is a very broad program. Any multifamily buildings, which I think is two or more units that were built prior to 1979, are part of this program, as a default. So, it covers, you  know, a significant portion of the multifamily housing stock in the city of Los Angeles. And, you know, what that program currently does is basically puts very strong protections in place for existing tenants, right? And so, the amount that property owners can raise rents on existing tenants is capped at a rate set by the city, for example, and it’s more regulated than market units. So, we really like, you know, those protections. And, you know, we are, as I mentioned earlier, we’re sort of trying to reframe this relationship between, you know, residents and property owners where landlords and tenants, in industry speak, and we love the fact that we can invest in assets where strong protections for tenants are built into the asset price. We sort of love that as an asset class. The buildings themselves, there are three buildings that are all in core Echo Park. We have one at 1650 Echo Park, I have one at 1416 Echo Park, which is a block off the intersection of Echo Park and Sunset. And then we have a property at 1461 Sunset, which is a few blocks down Sunset from Echo Park. So, they’re very proximately located, the portfolio totals 80 residential units and four retail stores, all of which are occupied by locally owned small businesses. And, you know, we are targeting future investments that are rent stabilized, some that are, you know, maybe retail investments, some non-rent stabilized properties, mixed-use properties. And, you know, our investment parameter is sort of, its geographic, like it’s not limited to Echo Park. So, the way the offering describes our investment parameters are, you know, Echo Park, Silver Lake and proximate communities. So, that gives us a bit of room to look …

Eve: [00:21:54] Ok.

Max: [00:21:54] … beyond core Echo Park, though our initial portfolio is very concentrated, you know, historically significant, you know. All of the assets were built in the 19 …. I want to say the 1920s, approximately, though if we’ve got any history buffs on here, there might be, you know, 10 years plus or minus on that. But they’re all sort of very recognizable buildings that have been part of the community for a long time. And, you know, part of what that, coupled with the protections under the RSO program does, it means that the buildings are occupied by a really socio-economically diverse set of residents. And that also is, you know, important to the type of product and community and inclusion that we’re trying to build through our product.

Eve: [00:22:38] So, we have a rent stabilized building. Is it hard to make enough money to cover the expenses? And how do you cope with that? You know, you have pretty lofty goals here in keeping costs reined in is … hard.

Max: [00:22:52] I would say that all of the assets, you know, like asset prices, just, this is more broadly than our building, but asset prices really reflect expected future returns, right. And so all of the properties are comfortably covering their expenses, comfortably covering their debt service. They’re all conservatively financed with long-term fixed-rate debt capital. And the portfolio has been highly occupied since we acquired it. So, you know, we continue to manage to a high level of occupancy. And the pricing of the assets and the way these types of assets are priced and valued is reflective of the protections that are in place. And so, they’re all doing great on a property level.

Eve: [00:23:36] So, I have to say, it’s a lot, and kudos to you. You actually, three companies in one. Real estate development, management company and a crowdfunding platform. And that’s a lot.

Max: [00:23:48] Well, I would say that we’re not really a real estate developer. So, you know, we won’t do, as we’re currently set up now and under the terms of the offering, you know, we’re really not set up to do ground up development or to do even substantial renovations.

Eve: [00:24:03] Well, real estate owner, then, which is different than property manager.

Max: [00:24:07] That’s true. Yes. So, we’re really an asset manager, a property manager. And then we have, you know, the offering and the sort of capabilities that go with managing that type of property.

Eve: [00:24:17] Yeh. So, how do you hope to scale?

Max: [00:24:22] Yeh, so we have ambitious goals for this company, and I would say that, you know, we hope to be doing sort of regular acquisitions into NICO Echo Park over the next number of years. I’m not sure exactly what that looks like from a number of units or a capital investment standpoint, but we believe that this neighborhood, you know, has the opportunity to grow pretty substantially and to grow our impact and grow, you know, the model. And then, you know, separate apart from that, we’re actually in a in sort of a fourth line of business, which is, we have a non-real estate owning sponsor company, which actually owns sort of the functions that you outlined before. And through our structure, you know, we seek and expect to be launching additional neighborhood REITS in other neighborhoods around the country, probably starting next year.

Eve: [00:25:15] Wow. Okay, big goals. So, what’s the biggest challenge you’ve had?

Max: [00:25:22] It’s a great question. I mean, running a company through a pandemic has certainly been challenging …

Eve: [00:25:28] Oh yeh.

Max: [00:25:28] ,,, Having a team that is, you know, very much in sort of the formation phase and, you know, team building phase have to go remote and get to know each other over Zoom, you know. We have team members who have not met in person. People who have joined our team since the pandemic started. And so, I think that’s a challenge. And I think the other, I would say the sort of more macro challenge is that what we’re doing is a bit counterintuitive, right? It’s on a populist level, it’s a bit counterintuitive. And so, what I mean by that is to say that the relationship that we are trying to realign, you know, at its core is really kind of the relationship between investment capital and what motivates it and how it defines success, with people in communities like Echo Park who’ve had a pretty negative relationship with investment capital, right? Because they’ve been excluded from it. And it’s come in and I think the perception, which I believe is largely, you know, accurate, is that when capital comes in it typically means that there is risk to me as a long-time resident. Risk to me and risk to my neighbors as long-term residents. And so, I think that trying to start to solve some of these issues through being an investment company, I think that’s a bit of a barrier for people to get over. And I think that’s pretty fair and pretty deserved. But, you know, our model is such that we’re really sort of taking that on, and, you know, I think the great sort of untold story of gentrification and neighborhood change is that real estate, you know, really was not an institutional mainstream institutional asset class 20, 25 years ago, right? And now it is.

Eve: [00:27:19] Yes.

Max: [00:27:19] It’s a big part of the allocation. And so, I don’t think that capital is the only sort of factor. I think the housing shortages is also one. And I think, you know, there’s a lot of other ones. But, you know, the pressure that that huge, organized flow of capital has put on, you know, neighborhoods like Echo Park is really hard to understate. And so, to our view, to NICO’s view and to our theory of change, until that powerful, large flow of investment capital can be realigned to actually be viewed as a tool and a resource for stabilizing communities, and including folks who are previously excluded in the wealth that’s created through that investment, we’re not going to be able to really solve, you know, these issues at a level, right? And so, I think it’s a bit of a counterintuitive move for people who are used to viewing investment capital or a company or an investment company in a specific way, which is this feels like a threat to me and my neighbors, into something where this offering and this way of being can actually help to stabilize this community and help to drive the types of outcomes that are important to me, you know, in my own community.

Eve: [00:28:41] Yeah.

Max: [00:28:41] I think that’s sort of a lot to get your head around. And we understand that that will take time. And where the rubber hits the road is sort of our actions and the way that we’re managing this portfolio and balancing our various priorities. You know, are we doing that in a way that is genuine and, you know, sort of worthy of people’s trust, right? And that’ll take some time to to earn that, and that’s part of our journey here.

Eve: [00:29:08] Yes, yeh. You know, just shifting gears a little bit, are there any other current trends or innovations in real estate that you think are really important to the future of cities or be a future of housing?

Max: [00:29:21] I think that the sort of renewed focus now on the equity or dis-equity that’s built into the public realm, and also into the sort of planning process …

Eve: [00:29:32] Yes, yeh. I’ve been watching that. It’s interesting.

Max: [00:29:35] I think that conversation is super-exciting and has the opportunity to really reframe how people and how communities are able to have agency in terms of what happens within their community. I think public projects, public space projects, development projects, you know, we’re certainly seeing and starting to feel within the sort of the real estate industry the pressure that comes with that, you know. And I think there’s a genuine attempt by, you know, more and more private sector actors to take that seriously, and to legitimately and earnestly try and figure out how to be engaged with the community and to, beyond just sort of the tokenism of, hey, we’ll throw in a garden, have a couple of feedback meetings or something like that, like I think there’s sort of the start of a groundswell of, you know, we need to build equity into how we think about …

Eve: [00:30:35] Right.

[00:30:35] … development in the public realm. I think that’s super-interesting and very important. And I hope we can play a role in that. And then I think things like technology that is helping to create more efficient, less expensive, quicker ways to actually generate, you know, new housing. You know, there’s no path out of this housing crisis that doesn’t come with building a lot more housing. That’s not the business that we’re in. But I think that construction is super-painful, and it’s sort of in the Stone Age, right? In terms of how that process actually works on a deal level. And so, I think anything that makes that process, you know, more transparent, more noble and less risky, more scalable, will help to create a lot more housing. So, I’m very excited about that.

Eve: [00:31:22] Yeh.

Max: [00:31:22] And I would also say that the sort of, you know, more broadly, shift in focus by institutions and family offices and, you know, other sort of sources of that mainstream real estate investment capital toward strategies that are legitimately ESG strategies or impact strategies, I think that is super-exciting and very important. And for us, we always come back to what is that relationship between capital and what capital is seeking to do, and how is that aligned with the financial and non-financial impact of communities and people in communities, right? And so, I think that shift in awareness and that shift in priority towards strategies that are legitimately focused on ESG and impact, I think that’s a great first step in starting to reframe that relationship at scale.

Eve: [00:32:18] Yeah, because in the end, without shifting capital, not much is going to happen.

Max: [00:32:25] Right. And if you think about affordable housing as a, as an example of this, like, we’re pro affordable housing, you know, but the structural limitation of subsidized affordable housing …

Eve: [00:32:38] It’s huge.

Max: [00:32:38] … is that it requires a subsidy, right? And so, like, the subsidy that it requires is limited. Right? And therefore, there’s only so many tax credits that go out every year.

Eve: [00:32:50] And it’s time consuming. It doesn’t let you produce affordable housing fast, which we need to do.

Max: [00:32:56] Yeah, exactly. And so, we come to this place and NICO is really built around this theory of change, that until market forces of capital, right? Until market rate capital, which is a huge, you know, effectively it’s an infinite pool when you think about how the capital gets recycled, until the priorities of that change, and until the structures around that change to be focused on delivering financial returns and acknowledging the non-financial impact that that capital has. Until that happens, the scale of any potential solutions that count on subsidy or philanthropy, which is a form of subsidy, it’s, the scale of that potential impact is just limited when you look at the scale of the market.

Eve: [00:33:44] Yup.

Max: [00:33:44] So, we’re excited to start to see that shift a little bit.

Eve: [00:33:49] Well, this is something that’s been really interesting, and I’ve really enjoyed learning about NICO, and I’m especially looking forward to see what comes next. So, thank you very much for joining me.

Max: [00:33:59] Great. Thank you so much, Eve. And thank you also for all the work you’ve done over the years with Small Change, with impact real estate. We’re huge fans of it and very appreciative for your leadership in our nascent industry.

Eve: [00:34:24] That was Max Levine. His life is focused on building equity through real estate. With NICO, he’s working to bridge the gap between those who own assets and those who don’t. If you live in Echo Park, you can invest in Echo Park, and what you invest in will ensure that the neighborhood remains available to everyone. For everyone. NICO’s first three buildings are rent stabilized. It’s a very big goal and Max is chipping away at it.

Eve: [00:35:05] 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, Max, 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 Max Levine/NICO Benefit Corp.