Latest / Earn Your Leisure / How to Scale Affordable Housing Development as a Small Team

Transcript

How to Scale Affordable Housing Development as a Small Team · Earn Your Leisure

• 0:00
  Speaker 1: So you said last time, Like in order for a
• 0:02
  Speaker 1: developer to really get into the game, most time you
• 0:05
  Speaker 1: have to like work under like a JV with an
• 0:07
  Speaker 1: established developer. Absolutely, So at what point can you branch
• 0:12
  Speaker 1: out on your own and not.
• 0:14
  Speaker 2: Have to ride.
• 0:16
  Speaker 1: With another person in the car.
• 0:19
  Speaker 2: From a tax credit type perspective, so community development, let's
• 0:23
  Speaker 2: break out community development and commercial real estate. Commercial real estate,
• 0:26
  Speaker 2: if you have money, you can go tomorrow, you know,
• 0:31
  Speaker 2: like a billionaire can literally go and hire development consultants
• 0:34
  Speaker 2: and just put up a development if you wanted to.
• 0:37
  Speaker 2: So you can do that with no problem. Community development
• 0:39
  Speaker 2: tax credit I wouldn't recommend it because the retires are
• 0:42
  Speaker 2: probably not gonna be what you want them to be,
• 0:44
  Speaker 2: and they don't have the same vested interest in them.
• 0:46
  Speaker 2: You don't know what's going on. You probably can lose
• 0:48
  Speaker 2: your money, but you can do it. From a community
• 0:50
  Speaker 2: development perspective, when you're trying to develop these communities and
• 0:53
  Speaker 2: tax credit deals and affordable housing. A HECK is the
• 0:58
  Speaker 2: governing council of all tax credit equity investors. They set
• 1:02
  Speaker 2: a standard that was a million dollars of liquidity and
• 1:06
  Speaker 2: five million of network. So that's really the starting to finish. Again,
• 1:10
  Speaker 2: if you do work to develop to be able to
• 1:15
  Speaker 2: get the tax credit equity investor to allow you to
• 1:17
  Speaker 2: be the developer, you have.
• 1:18
  Speaker 1: A million dollars in liquid and five.
• 1:21
  Speaker 2: That's pretty much the standard. But as deals get larger,
• 1:24
  Speaker 2: if you're doing a fifty plus million dollar deal, they
• 1:26
  Speaker 2: gonna want to see a little bit more, and typically
• 1:28
  Speaker 2: they want to see the experience. But like that is
• 1:30
  Speaker 2: if there was a benchmark, that would be it. And
• 1:33
  Speaker 2: most of the time when we start now million dollars
• 1:35
  Speaker 2: of cash and or a five million net worth is
• 1:37
  Speaker 2: not really there for folks. So you got a JV
• 1:40
  Speaker 2: and partner like what he was planning on the last
• 1:41
  Speaker 2: episode to be able to get to that point. So
• 1:44
  Speaker 2: now like I'm there, I'm doing like Harvard District GUS
• 1:47
  Speaker 2: on my own. I'm bringing in a good friend of
• 1:49
  Speaker 2: mine who's been doing my development consult Michael mm and
• 1:52
  Speaker 2: we're just gonna partner on it. I stand it on
• 1:56
  Speaker 2: my own and everything, but he's a brother that I
• 1:58
  Speaker 2: really trust in respect. Was like, now let's just do
• 2:01
  Speaker 2: this together. So it's not like I needed him at all,
• 2:03
  Speaker 2: and frankly, he doesn't need me, but it makes sense
• 2:05
  Speaker 2: for us to like share, divide and conquer that. To
• 2:09
  Speaker 2: answer your question earlier about like, how do you know
• 2:11
  Speaker 2: when it's too much? Right now, I mean it's only
• 2:16
  Speaker 2: I just hired my first person a couple months ago.
• 2:19
  Speaker 2: It's been me this whole time, full time. That's why
• 2:22
  Speaker 2: I don't put off this content. I'll just be working
• 2:24
  Speaker 2: literally like I'm a staff of I've been a staff
• 2:27
  Speaker 2: of one. I had people assisting, and even the person
• 2:31
  Speaker 2: that are hired, she's been helping for like two years
• 2:34
  Speaker 2: or so, but full time, it's just me and one
• 2:36
  Speaker 2: other person right now. I didn't know that. Yeah, wow,
• 2:40
  Speaker 2: I am. I am primarily doing the work. It's not
• 2:45
  Speaker 2: like I'm having team members do it. Like I'm at
• 2:47
  Speaker 2: these community meetings. I'm meeting with the folks. I'm putting
• 2:50
  Speaker 2: together the financial models. I'm looking at the construction plans
• 2:53
  Speaker 2: like I'm doing it.
• 2:54
  Speaker 3: When you broke down the financial model by square foot
• 2:56
  Speaker 3: the last time we spoke, I was I mean that
• 2:58
  Speaker 3: blew me away and I'm out looking at you going
• 3:01
  Speaker 3: from one hundred and forty unit development to now in
• 3:04
  Speaker 3: Birmingham where we got eleven.
• 3:06
  Speaker 2: Hundred mixed unit. Yeah, talk about scaling that?
• 3:10
  Speaker 3: What that looks like for you since you're i mean
• 3:12
  Speaker 3: talking about just being the sole person doing for sure.
• 3:15
  Speaker 2: So partnerships, that's another key one. I knew. I felt
• 3:22
  Speaker 2: the market was changing. I didn't know it would be
• 3:24
  Speaker 2: this starting turn of the interest rates, but I knew
• 3:27
  Speaker 2: like we've been on the wave, like OA hit boom
• 3:30
  Speaker 2: really from twenty ten to like twenty one twenty two.
• 3:34
  Speaker 2: That was a run that real estate hasn't seen. Real
• 3:38
  Speaker 2: estate is cyclical. It goes up and it goes down.
• 3:39
  Speaker 2: It's literally like this all the time. So I'm like, yo,
• 3:42
  Speaker 2: it's time that it's gonna go down. So I intentionally
• 3:44
  Speaker 2: didn't do any new developments. I was just working on
• 3:47
  Speaker 2: the construction of fourteen oh two eighteen eighty seven. I'm
• 3:50
  Speaker 2: gonna tell us I have right now three projects little
• 3:56
  Speaker 2: around a little over three hundred units under construction right
• 3:59
  Speaker 2: now in Wisconsin. So I was like, let me just
• 4:01
  Speaker 2: focus on that. But simultaneously I was looking for how
• 4:04
  Speaker 2: do I plan for the future where my time right
• 4:08
  Speaker 2: now may not yield this return, but my time later will.
• 4:12
  Speaker 2: So I started to reach out to that. I built
• 4:16
  Speaker 2: a partnership with Integral and Egbert and their team, and
• 4:18
  Speaker 2: I started looking at master plan developments. So that's what
• 4:21
  Speaker 2: I was talking about before. I didn't really get hit
• 4:24
  Speaker 2: by the recession much because all of my stuff was
• 4:27
  Speaker 2: already kind of out the ground. It's just being built.
• 4:29
  Speaker 2: All my finance and is in order. I put a
• 4:31
  Speaker 2: pause on anything new. But as I was pausing, I
• 4:35
  Speaker 2: was working on this larger term stuff. So I ended
• 4:37
  Speaker 2: up getting eleven hundred units awarded that we're developing with
• 4:41
  Speaker 2: Smithfield Court that's in Birmingham, and we just received the
• 4:44
  Speaker 2: fifty million dollar grant on that, and I also got
• 4:47
  Speaker 2: about nine hundred units awards. Thank you, thank you. Yeah,
• 4:50
  Speaker 2: so that's about three three hundred with the market race
• 4:54
  Speaker 2: stuf about threehundred fifty million in just the eleven hundred,
• 4:58
  Speaker 2: and then I have nine one hundred units at tom
• 5:01
  Speaker 2: Brown in Birmingham that I'm developing as well. The way
• 5:05
  Speaker 2: you can do that is, like I looked at capacity,
• 5:08
  Speaker 2: We're doing the fifty million dollars broken out into seven deals.
• 5:12
  Speaker 2: I'm doing a deal a year for the next seven years.
• 5:15
  Speaker 2: And when I talked about the funding, gas right, Okay,
• 5:17
  Speaker 2: you have the loan, you have the tax for the equity,
• 5:20
  Speaker 2: but then you have to feel the rest the fifty
• 5:22
  Speaker 2: million dollars is the gap filler for the rest. So
• 5:25
  Speaker 2: I have a pre pre funded seven deal run based
• 5:32
  Speaker 2: on fifty million dollars of a grant that was awarded
• 5:35
  Speaker 2: from a federal government. So for me, that was capacity,
• 5:38
  Speaker 2: Like I don't need to do seven eight deals right
• 5:40
  Speaker 2: now because I'm a small team. But if I could
• 5:43
  Speaker 2: build seven, eight, nine, ten deals on my pipeline over
• 5:46
  Speaker 2: however much time, that was the key. So I'm doing
• 5:49
  Speaker 2: seven marked seven affordable deals for Birmingham and Smithfield with
• 5:54
  Speaker 2: two market ray deals and then the other one. I
• 5:56
  Speaker 2: have about seven phases, so every year I'm going to
• 5:58
  Speaker 2: do really who deals a year in Birmingham.
• 6:01
  Speaker 3: So that Secretary Fudge is who the person who were
• 6:05
  Speaker 3: secretary for us? I mean, if people don't know she's
• 6:07
  Speaker 3: ahead of her, she is. So how did you develop
• 6:10
  Speaker 3: a relationship with her? Where you on her radar? Did
• 6:12
  Speaker 3: somebody introduce you? Because relationships are important, we always talk
• 6:15
  Speaker 3: about that. When did that relationship develop?
• 6:18
  Speaker 2: You know, what's interesting new people around. But I didn't
• 6:21
  Speaker 2: meet her until the day she brought the war Wow.
• 6:24
  Speaker 2: I didn't meet her until that day she brought her
• 6:26
  Speaker 2: fifty million dollar check and we met then prior to that,
• 6:31
  Speaker 2: who does know her? Randall Woofin Mayor Woofin out of Birmingham,
• 6:36
  Speaker 2: he knows her, you know. So it's relationships. Like you said,
• 6:39
  Speaker 2: If the mayor knows her and the councilwoman knows her
• 6:44
  Speaker 2: and we are all aligned in this development together, I mean,
• 6:48
  Speaker 2: this is what we are pushing for. At that point,
• 6:50
  Speaker 2: I didn't need to know her because they knew her,
• 6:52
  Speaker 2: you know. And I will say, we put together one
• 6:54
  Speaker 2: of the best proposals they've probably ever seen. It's super
• 6:59
  Speaker 2: unique to get that choice. Neighborhood grant was it's been
• 7:03
  Speaker 2: around for some years. It really was Hope six first.
• 7:06
  Speaker 2: So Egbert is a pioneer of Hope six Hood asked
• 7:09
  Speaker 2: him consulting on the model, et cetera. Now we have this,
• 7:13
  Speaker 2: it's broken out into three tiers, housing, neighborhood, and people.
• 7:19
  Speaker 2: Those three tiers are super important to hood because it's
• 7:22
  Speaker 2: not just about housing like you were saying earlier, like
• 7:24
  Speaker 2: we need food, we need shelter. We're doing we're moving
• 7:27
  Speaker 2: the library, putting that into the development. We are also
• 7:30
  Speaker 2: doing a social innovation campus that the city is going
• 7:33
  Speaker 2: to run and govern in our senior building that's one
• 7:35
  Speaker 2: hundred and one units that we just applied for tax credits.
• 7:37
  Speaker 2: On the lower level was an early childhre education center,
• 7:41
  Speaker 2: So we have one hundred and one seniors that will
• 7:43
  Speaker 2: now volunteer with the kids. So the kids will be
• 7:45
  Speaker 2: teaching the seniors and the seniors to be teaching the
• 7:47
  Speaker 2: kids like they are models within models. It's not about
• 7:50
  Speaker 2: the buildings, it's about, you know, the broader play. But
• 7:53
  Speaker 2: Hud realized that the applicant was the Housing con thority
• 7:57
  Speaker 2: to get Birmingham District one hundred percent Black LID. The
• 8:00
  Speaker 2: co applicant is the City of Birmingham one hundred percent
• 8:02
  Speaker 2: Black LAD. The Housing Leads is a partnership between Real
• 8:06
  Speaker 2: Enterprises and the Integral Group one hundred percent Black Lader owned.
• 8:10
  Speaker 2: The Scent Project is running the people side one hundred
• 8:12
  Speaker 2: percent Black LAD, which is a subsidiary of Integral in
• 8:15
  Speaker 2: the neighborhood again is the City of Birmingham. First time
• 8:17
  Speaker 2: we've ever seen one of these really really large scale
• 8:20
  Speaker 2: developments be one hundred percent black which I think tells
• 8:24
  Speaker 2: a story. So that might have been why Secretary for
• 8:27
  Speaker 2: as you.
• 8:28
  Speaker 3: Were saying, I'm thinking the common thing we saw this
• 8:29
  Speaker 3: happen in Milwaukee, and we've seen it happen in Birmingham.
• 8:32
  Speaker 2: We had the opportunity to sit down with Mayoefin.
• 8:34
  Speaker 3: And he was telling us like we were in Atlanta,
• 8:37
  Speaker 3: but we flew over and he was like, look, everything
• 8:40
  Speaker 3: that they
• 8:40
  Speaker 2: Have, we can have here and we can control it.