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Speaker 6: On the other side, my graduates from my school being
Speaker 6: forced back drop b drop, Mike drop back drop drop.
Speaker 7: I got my hands on a book called The People's Principles,
Speaker 7: which was written by Don Peebles. Don Peebles, billionaire black
Speaker 7: developer from DC. That's where he started, then moved on
Speaker 7: to Miami and went to Vegas and uh now it's
Speaker 7: based in New York and I read this book really
Speaker 7: was inspired by the really technical things that he said
Speaker 7: within it. It's like, this is how I became what
Speaker 7: I became. And I was like, oh, this is great. Okay,
Speaker 7: well I'm follow a similar path, but just do it
Speaker 7: my way. So on twenty seventeen, I twenty sixteen, I
Speaker 7: got my first low income housing tax credit. So affordable
Speaker 7: housing developments in the past were financed through Section eight.
Speaker 7: So if you think about a Section eight property Brinnie
Speaker 7: Green's in Chicago. You know some of these really large
Speaker 7: berry farms in DC, really large complexes three four hundred
Speaker 7: units and really just clusters of poverty. That's how they
Speaker 7: were financing them. But now they use a tool called
Speaker 7: Section forty two i RS Code.
Speaker 4: Which is a tax credit.
Speaker 7: So we are given a tax credit that we sell
Speaker 7: to an investor and use that to finance the project.
Speaker 3: Can you can you explain that a little bit, because yeah,
Speaker 3: we section eight. I think most people know what Section
Speaker 3: eight is, right, where it's like it's government and they
Speaker 3: subsidized housing, right, and but Section A you don't have
Speaker 3: to live in the projects like you can have a house.
Speaker 7: So there's two different types. There's Section eight project based vouchures.
Speaker 7: So projects got the Section eight assistance, but then they
Speaker 7: were also like people based box where you can take
Speaker 7: that you.
Speaker 3: Go into like a house, and they pay the landlord.
Speaker 3: So what's the new way?
Speaker 7: Section forty two is the primary tool for affordable housing.
Speaker 7: There's still some Section eight, there's still some vouchures, but
Speaker 7: Section forty two just really high level. If you think
Speaker 7: about a building, and you think about developing a building,
Speaker 7: it may cost forty million dollars to develop.
Speaker 4: A building, right.
Speaker 7: Typically, in order to fund that building, you need rents
Speaker 7: that'll pay you enough to then get a bank to
Speaker 7: give you a loan, so you need a construction loan,
Speaker 7: and then you need perman and financing.
Speaker 4: So in order to.
Speaker 7: Get the construction loan, one of the threshold items is, hey,
Speaker 7: how much is the loan to value of this projected property?
Speaker 4: So if your.
Speaker 7: Value based on rents being at fifteen hundred dollars a month,
Speaker 7: it equates to forty million dollars.
Speaker 4: You can then build.
Speaker 5: Who's doing the assessment of how much each one is worth?
Speaker 4: Each unit? The market kind of determines that.
Speaker 7: So drilling deeper into that, let's say fifteen hundred perer
Speaker 7: equates to forty million dollars. Let's say now you're in
Speaker 7: an area that rents can only be seven hundred and
Speaker 7: fifty dollars per People still need to lo but we
Speaker 7: still need additional housing in order to build that. The
Speaker 7: government created a tax credit that subsidized developers for the difference.
Speaker 7: So if the seven fifty gives me twenty million, I
Speaker 7: effectively are gonna get I'm gonna get twenty million in
Speaker 7: a tax credit to then make it balance and make
Speaker 7: it work.
Speaker 3: They so they'll pay you the developer, they pay the project,
Speaker 3: the project. They pay them, not you personally, but they
Speaker 3: fund the project and.
Speaker 7: They allocate a tax credit to the developer to sell
Speaker 7: on behalf of the project.
Speaker 2: So they paid that the person paid seven hundred and
Speaker 2: one thousand dollar if it was seventeen hundred and one
Speaker 2: thousand dollars, is being paid.
Speaker 4: Through through the tax credit upfront.
Speaker 7: And in exchange for the tax credit, you have to
Speaker 7: restrict the rents for a certain amount of time fifteen years,
Speaker 7: thirty years, et cetera. And the rent to like market based. Yeah,
Speaker 7: so it's based on the area median income. So that's
Speaker 7: really like how they determine it, and they have different thresholds.
Speaker 7: So a thirty percent unit is like very low in
Speaker 7: a fifty percent unit and a sixty percent unit is what.
Speaker 4: We will call workforce or affordable housing.
Speaker 7: And then you have eighty percent units as well that
Speaker 7: can be financed through this tax credit. And that's based
Speaker 7: on So take DC one hundred thousand dollars area media
Speaker 7: income in DC, UH fifty percent unit is fifty thousand dollars.
Speaker 7: If a person makes fifty thousand dollars in DC, they
Speaker 7: can qualify for affordable housing. Under this threshold. You take
Speaker 7: thirty percent of that income divided by twelve months. That's
Speaker 7: how you come out to the rent amount that you
Speaker 7: can pay. Okay, So okay, yeah, so it's a little deep. Sorry, No,
Speaker 7: that's that's right, up eyo, that's what we do. That's
Speaker 7: the whole it's right, a lot of numbers right in
Speaker 7: line with our content. So you meet, you meet down
Speaker 7: people's right, Yeah, and how does that go?
Speaker 4: Yeah?
Speaker 7: So twenty seventeen, I jumped out. He was speaking at
Speaker 7: a conference in DC, and I was like, I have
Speaker 7: to meet this guy.
Speaker 4: So I still by the door, very to niceous.
Speaker 7: Sid I'm an ambitious guy by nature, a type personality.
Speaker 7: If I want time, I'm gonna go get it. And
Speaker 7: I wanted to meet him, so I went introduced myself.
Speaker 7: I just received that tax credit. That's why I wanted
Speaker 7: to get a story. Just receive the tax credit. I
Speaker 7: was about to develop my first project. Hey, don what's up.
Speaker 7: I'm branded. I got my first project in. I got
Speaker 7: a couple more in my pipeline. Would love to connect.
Speaker 7: And he was impressed by what I was doing because
Speaker 7: my age I think I was twenty six twenty seven
Speaker 7: at the time, and his first project I was twenty seven.
Speaker 7: He was awarded his first project at twenty seven as well,
Speaker 7: so I was on that path. It's like, okay, yeah,
Speaker 7: this is the only black billionaire doing what I'm doing.
Speaker 4: I need to meet him.
Speaker 7: So we met, had a phone call about a month later,
Speaker 7: and the biggest takeaway I took from that phone call
Speaker 7: was he said, work on larger deals. So at that
Speaker 7: time I did was twelve and a half million. I
Speaker 7: had another deal that was about fourteen million, and I
Speaker 7: had another deal that was like seven million. The fourteen
Speaker 7: million dollar deal was a market rate unit. There wasn't
Speaker 7: an affordable Housit development. I actually never went through. I'll
Speaker 7: talk on that too, but I need to raise about
Speaker 7: one and a half from equity investors in order to
Speaker 7: finance the project. And you just, you know, go out
Speaker 7: to folks, get one hundred thousand here, two fifty there,
Speaker 7: you know, et cetera, et cetera. And he pretty much
Speaker 7: just put it in perspective for me. He said, I
Speaker 7: just raised five hundred million dollars in New York and
Speaker 7: this is the easiest money I ever raised. Because institutional capital,
Speaker 7: the demand on that is so it's so much, it's
Speaker 7: so much less than the demand on every day individuals
Speaker 7: and investments. Because you can invest in stocks, you can
Speaker 7: invest in bonds, you can invest in a different real
Speaker 7: estate project, you can invest in your kids college fund.
Speaker 7: Individuals have so many options. But institutional capital needs places
Speaker 7: to put this money. So he told me to work
Speaker 7: on larger deals. And I said, about three months later,
Speaker 7: I moved to DC.
Speaker 3: That reminds me of three stories. So I'll take it
Speaker 3: one by one. Well, first off, you know how one
Speaker 3: of the people that really got done people's into the game,
Speaker 3: Barry and Barry for sure, you know that legend DC
Speaker 3: legend rest in peace. So that's one story. The second
Speaker 3: story is that that also that what you said reminds me.
Speaker 3: I watched the interview with Magic Johnson and Maverick Carter
Speaker 3: to shout out to both of them, and Magic told
Speaker 3: Maverick he said, the same amount of time that it
Speaker 3: takes to do a deal for one million, it takes
Speaker 3: to do one hundred million, So do one hundred million
Speaker 3: because it's the same energy, same energy. It's not like
Speaker 3: it's not you have to do additional energy. It's the
Speaker 3: same energy output. It's just you're focusing your energy on
Speaker 3: the small guy level. You can focus your energy on
Speaker 3: big or you can focus your in this on small.
Speaker 3: The third one was Byron Allen. He was on a
Speaker 3: breakfast club and he just said what you said as
Speaker 3: far as like what especially in institutions, a lot of
Speaker 3: times they have a problem where they have to they
Speaker 3: have to spend money. They have to they have to
Speaker 3: spend money.
Speaker 4: They raised it, they haven't exactly.
Speaker 3: They're looking for. They have whole teams devoted to look
Speaker 3: for opportunities, which means they have whole teams devote to
Speaker 3: look to say where can I give money away to
Speaker 3: different deals and how can I position this because I
Speaker 3: have five hundred million dollars, so it was just.
Speaker 7: Five hundred So it's real. Raise your hand please, So
Speaker 7: you have to understand the key to that. You have
Speaker 7: to understand that language. It's a language of finance. That's
Speaker 7: the way I look at it. It's no different from
Speaker 7: English verse Spanish. We all know English, some people know Spanish,
Speaker 7: some people know finance.
Speaker 4: It's just a language.
Speaker 7: And if you understand the language, and if you understand
Speaker 7: what they are saying and what they are looking for,
Speaker 7: you can make it work.
Speaker 4: So how did you?
Speaker 3: I'm interested to notice because you started in the game
Speaker 3: very young, twenty early twenties and twenty three, you know,
Speaker 3: humble beginnings, like your family was in real estate. So
Speaker 3: how do you get your first deal? How do you
Speaker 3: learn the language? How do you get your first deal
Speaker 3: in real estate as a developer? Like how does that?
Speaker 3: He walked me through that process, like your very first deal, Like,
Speaker 3: how does that happen?
Speaker 7: So my first deal was actually a four unit investment.
Speaker 7: It was a real estate investment type. Okay, it was
Speaker 7: a hud home on the north west side of Milwaukee
Speaker 7: by Hoole. Yeah, I just sold it about a year
Speaker 7: and a half ago. So I bought that when I
Speaker 7: was twenty three. So let me rewind FJA three and
Speaker 7: a half percent down. It was only eighty five thousand
Speaker 7: dollars and I sold it for like one sixty n
Speaker 7: So that was like, well played, it's different. You know,
Speaker 7: it makes sense. So that was my entry entry point.
Speaker 7: But rewinding. So once I finished the Acre program, I'm like, Okay,
Speaker 7: this real estate thing is cool. I think I want
Speaker 7: to figure out how to be a developer. I spent
Speaker 7: a lot of time trying to put the pieces of
Speaker 7: the puzzles together. So I started going to events. I
Speaker 7: went to a ton of conferences, a ton of seminars, gallas,
Speaker 7: all types of things. I was just searching for people
Speaker 7: and information and knowledge. And I equated it to like
Speaker 7: putting together a puzzle. Right, It's like, if this is
Speaker 7: the real estate puzzle, how do I find the pieces
Speaker 7: and then how do I put them together?
Speaker 4: I met a guy by the name of Keith Broaden.
Speaker 8: No.
Speaker 7: First, I went to a uh An Awards bank will
Speaker 7: called the Mandy Awards' Community Development Awards in the city
Speaker 7: of Milwaukee. I'm actually up for I'm a finalist of
Speaker 7: a Real Estate Awards. Okay too, So congratulations, thank you.
Speaker 3: I'm sure you win.
Speaker 7: Yeah, I appreciated this episode were put over the finish line.
Speaker 4: So yeah.
Speaker 7: I went to this awards banquet and I met a
Speaker 7: gentleman by the name of Wayman Winston Waymon Winston was
Speaker 7: the executive director of WEEDA. WEEDA is the housing authority
Speaker 7: that administers the long time housing tax credits. So I
Speaker 7: was like, yeah, I want to be a developer, et cetera,
Speaker 7: et ceter He was like, well, if you want to
Speaker 7: be a developer, come to this conference.
Speaker 4: This is the developers conference. It's going to be all developers.
Speaker 7: There's going to be lenders, there's gonna be architects, syndicators,
Speaker 7: anyone that plays in this arena in the state of
Speaker 7: Wisconsin will be here at the conference. Conference was like
Speaker 7: a couple of hundred dollars I didn't have. It ended
Speaker 7: up getting sponsored somehow. I think I like figured out
Speaker 7: a way to finesse my way up here. So you know,
Speaker 7: I threw on a suit. I had a little nappy
Speaker 7: frow at the time. I mean, I just was meeting
Speaker 7: everyone I could meet, and I ran into this gentleman
Speaker 7: who I just.
Speaker 4: Saw a few weeks ago, Keith brought next.
Speaker 7: He was working at Great Lakes Capital, which is now
Speaker 7: costing their their syndication firm. They raised funds and then
Speaker 7: they minister. They pretty much purchased the tax credits on
Speaker 7: behalf of investors, and he gave me my first pro former.
Speaker 7: So a performer is essentially an Excel document that pretty
Speaker 7: much is the business plan for real estate development.
Speaker 4: And what that does.
Speaker 7: It allows you to understand how much this will cost
Speaker 7: to build and how it will perform over the next
Speaker 7: fifteen to thirty years. So he gave me this performer,
Speaker 7: and I had no clue what it was. I wasn't
Speaker 7: really a finance I was an economics major, but I
Speaker 7: wasn't a math or finance guy really. So I was
Speaker 7: just diving in and I tried to figure it out.
Speaker 7: So I would like google every term.
Speaker 4: You know. Google university is a thing, YouTube university is a thing.
Speaker 5: You know.
Speaker 4: I was googling every single term trying to understan.
Speaker 3: You know what else today eyl university.
Speaker 4: We'll talk about that later on. That's the thing you
Speaker 4: need it. It's a real ting, okay, but even better
Speaker 4: you know, by us.
Speaker 7: So yeah, I was just googling all of the terms
Speaker 7: within this document, and I just started to work in it.
Speaker 4: So I was working at the bank at the time.
Speaker 7: I was working at P and C Bank as a
Speaker 7: personal banker and making twenty three thousand dollars a year,
Speaker 7: and I was like, man, I can't this is my life, Like,
Speaker 7: I'm not about to just be wearing these nice suits,
Speaker 7: getting up at six in the morning and getting home
Speaker 7: at six pm doing this for the rest of my life.
Speaker 4: I can't do it.
Speaker 7: So I would then get off work and then go
Speaker 7: back to work from seven to midnight, seven to one,
Speaker 7: seven to two. Every single day. I was in that
Speaker 7: pro form of working for years, educating, educating myself in
Speaker 7: that no articles, pub no press, no publication, no payments,
Speaker 7: every single day I was working. So what then happened
Speaker 7: was I realized that I was only making about fifteen
Speaker 7: hundred after taxes per month. And then I came across
Speaker 7: this four unit that was eighty five thousand dollars in Milwaukee.
Speaker 7: In Milwaukee, so I put three and a half percent down.
Speaker 7: I was written out there. I think the rents were
Speaker 7: about six hundred apiece, maybe six twenty five, you know,
Speaker 7: do the math on that twenty four my mortgage was
Speaker 7: about one thousand, so I was clearing fourteen just off
Speaker 7: of this when I was only clearing fifteen at the bank.
Speaker 7: I quit my job the moment I bought the four unit.
Speaker 7: I couldn't quit before because I needed to show the
Speaker 7: income to bout a four unit. But once once I
Speaker 7: was closed, I quit. I was out of there. That
Speaker 7: then gave me the freedom to dig deeper into this
Speaker 7: real estate thing.
Speaker 4: Now you spend in the entire time, all my time,
Speaker 4: energy and effort was going towards real estate development. Specifically.
Speaker 7: I knew investing was cool, but I wanted to figure
Speaker 7: out how to be a developer.
Speaker 4: Because the fees associated with it are great.
Speaker 7: You know, just to break it down, for real developer
Speaker 7: doesn't get a forty million dollar payment or anything like that.
Speaker 7: But you on the market right side, you made he
Speaker 7: three to six percent of the total costs. So if
Speaker 7: you're working on a one hundred million dollar, dude, do
Speaker 7: the math. On the affordable side, you get about ten
Speaker 7: to fifteen percent percent really on the total project costs.
Speaker 3: So you so so so if you do a forty
Speaker 3: million dollar deal, you get ten percent. That's four million
Speaker 3: dollars correct.
Speaker 4: Yeah, yes, ten to ten to fifteen percent.
Speaker 5: He took the ladder.
Speaker 3: Somewhere don't load for me, don't load somewhere around lower
Speaker 3: respected respect.
Speaker 7: So so so to that point it was like, okay,
Speaker 7: let me figure out how to do this development thing.
Speaker 7: I worked in his model. Boom boom boom bo. I
Speaker 7: saw the number. So I'm like, oh, they're making some
Speaker 7: real life money in this thing. So figured it out.
Speaker 7: So I start working. I met with him again, showed
Speaker 7: him and it was terrible. He helped me met a
Speaker 7: consultant that does development consultant and she was actually a
Speaker 7: CPA as well, CHARLENEA Brown basedide Atlanta. She helped me
Speaker 7: hone my skills when it came to my performer, my model.
Speaker 7: So what we did was just I would I would
Speaker 7: try to work in it. I would send it to her,
Speaker 7: she would edit it, send it back, and eventually I
Speaker 7: got good. It's like okay, yeah, I know how to
Speaker 7: do a project. So then I started looking for a project.
Speaker 7: So are you doing this on a platform? What's the
Speaker 7: exale microsoftic sale? I was on my computer. You could
Speaker 7: huntre it out a computer from best Buy, downloaded sale
Speaker 7: and you working.
Speaker 4: That's it. That's it. You don't need any anything else.
Speaker 7: So I'm just teaching myself all the language, teaching myself
Speaker 7: how to do things.
Speaker 4: So I started swinging at projects and I was missing.
Speaker 4: But it was one.
Speaker 7: It was a city on RFP request for a proposal,
Speaker 7: very similar to the one that I just wanted Madison.
Speaker 4: That one.
Speaker 7: I ended up pitching it to a developer and I'm like, yo,
Speaker 7: let's co develop this project. Here's my model for it.
Speaker 7: Would you guys be willing to split the developer fee
Speaker 7: and the ownership? The model is what's what's the model
Speaker 7: is another name for the proformer?
Speaker 4: My bad?
Speaker 3: What's the performer?
Speaker 7: The performer is the business plan for real estate development
Speaker 7: in the Excel.
Speaker 2: In my mind, I'm thinking developer, performer, and model are
Speaker 2: They're the same thing.
Speaker 4: So I'm using them interchangeably.
Speaker 3: So it's like, it's like the blueprint.
Speaker 7: It's the blueprint, the financial blueprint, financial blueprint for real
Speaker 7: estate development.
Speaker 2: How does developer do the physical blueprint as well? Or
Speaker 2: that's going to be somebody down the.
Speaker 7: Line with we outsource some Some development shops can have
Speaker 7: an architectural person on and but I outsource it.
Speaker 3: So all right, So you you study, you learn, you
Speaker 3: learn how to make a financial blueprint for a project
Speaker 3: like this is my vision is financially how it makes sense?
Speaker 3: For sure, you don't have any experience. So you go
Speaker 3: to another established developer.
Speaker 4: They've done it all.
Speaker 3: They've done it already. You say, I already have the blueprint.
Speaker 3: Let's work together, and this week is split.
Speaker 4: Yeah.
Speaker 7: So so now I'm creating value. That's the key to
Speaker 7: get any partnership. You have to create value for the
Speaker 7: other person. It's not about what you want, is what
Speaker 7: they want and how can you give it for them?
Speaker 4: That's fact, right.
Speaker 7: So it's like, okay, I mean, I'm gonna give youall
Speaker 7: a real number. So I think that project was let's
Speaker 7: say ten million dollars. It was a ten million dollars deal.
Speaker 7: The fee on nine was twelve percent, so we was
Speaker 7: at one point two and I'm like, all right, well,
Speaker 7: can we go fifty to fifty on it? All right,
Speaker 7: let's have let's take a risk, let's apply for it.
Speaker 7: See if we get it. If so, let's figger it out.
Speaker 7: If not, cool, keep it pushing. So I pitched it
Speaker 7: and at that point I knew it's like, wait, a minute.
Speaker 7: I just created six hundred thousand dollars just from my
Speaker 7: mind with a developer that does this for real, so I.
Speaker 4: Cannot do it.
Speaker 7: I was probably like twenty four, twenty five maybe, so
Speaker 7: that was the first time I actually knew. Shortly thereafter
Speaker 7: I actually took a job. It was very intentional.
Speaker 5: So at twenty four you got the six hundred.
Speaker 4: Nah, that never went through.
Speaker 7: It never word, that never worked out, but they agreed
Speaker 7: to it. But they agreed to it, and that's all
Speaker 7: I needed to know that I can do possible. It
Speaker 7: was possible at that point. I'm a developer. Now, you
Speaker 7: ain't nobody taking this from me. So I ended up
Speaker 7: getting a job surely there. I didn't get that money
Speaker 7: was running low. Yeah, I had the you know, four
Speaker 7: unit things like that.
Speaker 4: That was fine.
Speaker 7: But I got a job working at a CDFI, A
Speaker 7: real job, A real job, yeah, real job. What's a
Speaker 7: cd A cd OFFI is a community development financial institution.
Speaker 3: Oh yeah, we we just learned about that.
Speaker 4: Yeah, sorry about I'm slow.
Speaker 3: I'm a slow learner.
Speaker 5: Yeah, I think I heard there was a young lady.
Speaker 2: There was a young lady here who was talking just
Speaker 2: about the CDFIs, right, so bright.
Speaker 4: Woman, Yeah, shout out to the bright woman.
Speaker 7: Uh so yeah, I worked. I ended up getting a job.
Speaker 7: It was actually half time for two CDFIs. I was
Speaker 7: the only person in the country to do this. But
Speaker 7: I worked for Ford Community Investments. They were a mission
Speaker 7: based community lender that provided loans to small businesses and
Speaker 7: then a community reinvestment fund. They were a national nonprofit
Speaker 7: that did this same thing in a different way. So
Speaker 7: one was a state based focused on Wisconsin, other one
Speaker 7: was national, also targeting Milwaukee. So I worked at home.
Speaker 7: I worked remotely, so I was really more of a
Speaker 7: contractor for real. I worked remotely from home for both
Speaker 7: of these companies, really going out doing technical assistance with
Speaker 7: businesses and understanding what the gaps were that why aren't
Speaker 7: we giving this money out like I had access to.
Speaker 7: One of them was from fifty thousand to five million
Speaker 7: dollars in lending. That was my lending capacity personally, I
Speaker 7: can give that out to businesses.
Speaker 4: So I was like, oh, this is great.
Speaker 7: It was very much so aligned with my vision and
Speaker 7: my mission, and I was able to sit in on
Speaker 7: the credit committees of these different companies. So when it
Speaker 7: came to like applying for loans and applying for some
Speaker 7: of these things. I knew exactly what they were looking
Speaker 7: for because I was sitting in there, so I worked
Speaker 7: there for two years.
Speaker 5: What type of clientele or clients.
Speaker 7: To what you're seeing primarily business for Community Reinvestment CRF.
Speaker 7: It was business clients. So I was looking at bars,
Speaker 7: I was looking at pubs, I was looking at cleaning companies,
Speaker 7: I was looking at It was a full gamut. And
Speaker 7: the Ford Community Investments it was more so real estate
Speaker 7: bass for real so.
Speaker 3: Use on the inside of the of the institution, and
Speaker 3: you knew what they were looking for to lend money.
Speaker 3: You used that when you left.
Speaker 8: This episode is brought to you by P and C Bank.
Speaker 8: A lot of people think podcasts about work are boring,
Speaker 8: and sure they definitely can be, But understanding of professionals
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Speaker 3: To get them to lend you money because you already
Speaker 3: know what they're looking for.
Speaker 4: It didn't really work out that way. It didn't idea
Speaker 4: that was the idea.
Speaker 7: But now I know how all of the groups worked
Speaker 7: the same, So yeah, I used that same tactic to
Speaker 7: get all of the rest of it.
Speaker 3: What were they looking for, like what made you attractive?
Speaker 3: Not you. I'm just saying, like, we'll make somebody attractive
Speaker 3: to somebody.
Speaker 7: Honestly, it's a huge gap. So I thought that I
Speaker 7: would be given out a ton of money. But and
Speaker 7: I had access to the capitol, but I couldn't give
Speaker 7: it out. What they were looking for. It was a disconnect.
Speaker 7: It's like our people are here and their money is here.
Speaker 7: And I felt like it was my duty to kind
Speaker 7: of like bridge that gap. But that gap so they
Speaker 7: were looking for honestly, pretty traditional things, you know. It's
Speaker 7: like reserves, some serve some you know may or may
Speaker 7: not do a startup, so you might have to have
Speaker 7: some income. Collateral is the biggest thing in our community.
Speaker 7: That was that's the biggest gap. We don't have collateral.
Speaker 7: If you think about history, a lot of businesses were
Speaker 7: funded because people owned real estate. Right you were able
Speaker 7: to get business loans because you can put your house up. Millennials,
Speaker 7: we I'm a millennium houses you know, So that that
Speaker 7: that is a challenge. That is a shift in the
Speaker 7: marketplace that I don't think has been identified yet. So
Speaker 7: we all of our people are like, yo, we don't
Speaker 7: have any money. We don't have any money. We don't
Speaker 7: have any money. There's such an access to capital gap,
Speaker 7: which there is. But on the other side, they're streaming, Oh,
Speaker 7: we have so much money and we can't deploy it.
Speaker 7: That's what happens every single time you talk to anyone
Speaker 7: in that industry, and that's what they're going to tell you.
Speaker 3: All right, all right that so now we're going to
Speaker 3: go into the next seven. We're going to talk about
Speaker 3: like your journey into developing, like how you find a deal,
Speaker 3: like all of the one O one on on the
Speaker 3: on the whole, yeah, the whole on the whole deal.
Speaker 3: That next, all right, so now we now we're going
Speaker 3: to ask a few questions that I think people will
Speaker 3: be interested in as far as you know. One thing
Speaker 3: with Eyls, we like we talk about different topics that
Speaker 3: nobody really knows, is like you don't really have an
Speaker 3: education on this stuff. So as a real estate developer, right,
Speaker 3: so you you do the financial blueprint, but now you
Speaker 3: actually have to develop it. But development costs a lot
Speaker 3: of money to scale these projects, right, So how like,
Speaker 3: how does that part of it work as far as
Speaker 3: the construction aspect of it and actually developed it because.
Speaker 2: In my mind I'm thinking of development. Yeah, you're making
Speaker 2: the financial blueprint, but I'm like, you're not even seeing
Speaker 2: a physical output before you start or do you know,
Speaker 2: like what you.
Speaker 5: Want this space to look like going in?
Speaker 4: Yeah? You create?
Speaker 7: You created, So the developer isn't want to creates division
Speaker 7: in his mind, Very similar to a director of a movie, righty,
Speaker 7: Like they don't they don't. They're not the actor, they're
Speaker 7: not the and they're not the scriptwriter oftentimes, but they
Speaker 7: bring it all to fruition and this is the way
Speaker 7: that it needs to go.
Speaker 4: So a developer, let's rewind a little bit.
Speaker 7: Real estate development is a business process that takes land
Speaker 7: and you put real estate on it.
Speaker 4: So very simple. There go a little deeper.
Speaker 7: So I'm a commercial real estate developer, so I'm pretty
Speaker 7: much doing that at just a larger scale. And there's
Speaker 7: different sections of it, right, So I guess let's say
Speaker 7: break it.
Speaker 4: Down into three phases.
Speaker 7: There's a pre development phase where you do the design
Speaker 7: and you get the financials in order and you talk
Speaker 7: through some of those things. The second phase is the
Speaker 7: construction phase. To your point, that's when you go and
Speaker 7: you're actually building the project and you're managing the budget
Speaker 7: to make sure that this is on time and on budget,
Speaker 7: because if the cost of your development is more than
Speaker 7: what you anticipated, then when the recession hit, that's kind
Speaker 7: of what happened, Like you saw buildings that were halfway
Speaker 7: developed and people stepped away because there was not an
Speaker 7: enough money to continue to the project, complete the project.
Speaker 7: And then the last phase is operation. It's a pre development, construction,
Speaker 7: and operation. A developer pretty much runs that entire phase
Speaker 7: from beginning to end. So let's break them down. Pre
Speaker 7: development phase you have I typically start off with zoning
Speaker 7: and entitlement. It's like, okay, I have a piece of
Speaker 7: land here. How large is it? Let's say it's an
Speaker 7: acre of land. Okay, based on this acre, what is
Speaker 7: its zone for? What can I do here? My base
Speaker 7: is typically multifamily, so it's like, okay, how many units
Speaker 7: can I put on here? Let's say you know an
Speaker 7: acre is forty three thousand square feet depending on where
Speaker 7: you are. They based zoning off of Florida area ratio.
Speaker 7: Set this thing called FAR. So let's say it's two
Speaker 7: times FAR, so you can put if it's an FR
Speaker 7: of two, you can put a eight six thousand square
Speaker 7: foot building on this parcel. And then you reverse engineer
Speaker 7: how many units you can fit there, So eighty two
Speaker 7: thousand score fee. Depending on the unit side, If they're
Speaker 7: wanting two bedrooms, you may be able to get ninety units.
Speaker 7: If they're you know, three and four bedrooms, you may
Speaker 7: be able to get sixty units. And then based on
Speaker 7: the program, you create a vision around what is attainable
Speaker 7: for the site. So I start with the zoning and
Speaker 7: it's like, okay, yeah, what can I do? And then
Speaker 7: based on the zoning, I create a financial model and
Speaker 7: dig a little deeper in. And that's when I reach
Speaker 7: out to consultants to do some of the other work.
Speaker 7: It's like, hey, architects, I want to put seventy units
Speaker 7: right here?
Speaker 4: Can I do that? What does that look like? You know?
Speaker 7: Can I do underground parking here? Can I have surface parking?
Speaker 7: How many stars can I fit? And that kind of
Speaker 7: changes the iteration of that financial model that I was
Speaker 7: working on.
Speaker 4: Okay, let me change itself a little.
Speaker 5: How long does that First, that preprocess take.
Speaker 7: For you no time for real at this point, a
Speaker 7: couple of hours, a couple hours, wow.
Speaker 3: So's and then the third second, third one is the
Speaker 3: actual development, right construction.
Speaker 7: Second one is constructed, so we're not even in construction yet.
Speaker 7: So that's that's early, early, initial, just pre pre and
Speaker 7: then what you do is like okay, I think I'm
Speaker 7: onto something, and then you go get the site under control,
Speaker 7: so you reach out to the land owner.
Speaker 4: Is it available, is it private? Is it public?
Speaker 7: Is it If it's public land, sometime they have RFPs
Speaker 7: And that's what I was awarded with the forty one million.
Speaker 7: I was awarded that land to now.
Speaker 5: Develop it by the state or the city.
Speaker 7: That was city owned, but sometimes it's state owned, sometimes
Speaker 7: it's city, sometime it's county.
Speaker 4: It varies.
Speaker 7: So that was public, that's a public private partnership in
Speaker 7: that way, but sometimes it's private. So when it's private land,
Speaker 7: that's when you it's a little more difficult.
Speaker 4: Ah, yeah, it's a little more difficult.
Speaker 7: Because people value their land the way that they value
Speaker 7: their land. It's no different from a property. If you
Speaker 7: own a home, you may feel like your home is
Speaker 7: worth five hundred thousand dollars. The appraisal may say your
Speaker 7: home is worth two hundred or one hundred. So when
Speaker 7: you go to that individual and say, hey, this is
Speaker 7: my plan for this site, y'all have to have some
Speaker 7: level of common ground to make sure that this works,
Speaker 7: because if they want five times your number, it's not
Speaker 7: feasible you move on. That vision can't come to fruition
Speaker 7: because this is not a roadblock. And then once once
Speaker 7: you then okay, yeah, I think this will work around
Speaker 7: this price.
Speaker 4: I'll give you X for it. You want X for it? Okay.
Speaker 7: What's the timing in DC? I mean typically you gotta
Speaker 7: have a thirty day close, sixty day close, like a
Speaker 7: quick no contingencies, no nothing. In Wisconsin, I could you know,
Speaker 7: sometimes do a year and a half without having to
Speaker 7: close on the financing. And by close, I mean actually
Speaker 7: pay for the land. You pay for the land typically
Speaker 7: when your financial at construction start. So when you close
Speaker 7: on all your finances, I got every all my ducks
Speaker 7: in a row. It all comes to the table at
Speaker 7: the same time and it goes out to the various parties,
Speaker 7: one of those parties being the land owner. They could
Speaker 7: walk away. I now purchase it. I now can start construction,
Speaker 7: which is now phase two.
Speaker 2: So when you're in that phase and you try to
Speaker 2: get the land, what's the bidding process?
Speaker 5: Right?
Speaker 2: So you wore a rewarded, a warded all warded the land.
Speaker 5: What kind of explained what that means. But what's the
Speaker 5: process of bidding for it?
Speaker 4: Yeap too. So on the private side, no process. It's
Speaker 4: just one to one Can I buy this from you
Speaker 4: or no?
Speaker 7: And I've been told no because of my age and
Speaker 7: my color before, to be honest.
Speaker 4: But on the public side.
Speaker 7: They typically put out a list of priorities that they want.
Speaker 7: The most recent one, my eighty nine unit was a
Speaker 7: public public partnership and they just want to redevelopment of
Speaker 7: a blighted site. It was half a mile away from
Speaker 7: where I was raised and I wanted to develop it.
Speaker 7: So I put eighty nine units with Befoda Bahausan in
Speaker 7: my hood. That's what I did, and they agree with
Speaker 7: my plan. It wasn't very competitive and that was that,
Speaker 7: But there are other ones like the one in Madison
Speaker 7: and a just one. It was very very competitive. They
Speaker 7: had multiple rounds of RFPs. What's the RFP again, request
Speaker 7: for a proposal. So that's when the city says, hey,
Speaker 7: these these are our priorities for this site.
Speaker 4: We own in site. We don't want to own the site.
Speaker 7: Cities often don't want to own sites because they want
Speaker 7: to benefit from the tax revenue from it.
Speaker 4: It's not in their best interest to pay the upkeep.
Speaker 7: It's a lot of risk associated with owning land, so
Speaker 7: cities often try to partner and sell and you know,
Speaker 7: do things like that. So that this priority specifically, they
Speaker 7: wanted a grocery store. The site right next door is
Speaker 7: a Pick and Save Roundings was just acquired by Kroger
Speaker 7: and they're shutting that Picking Save down, So now this
Speaker 7: area is about to be a food desert. So the
Speaker 7: city was like, okay, in order for us to preserve
Speaker 7: some level of grocery in this area, we need to
Speaker 7: put out an RFP. So that was their number one priority,
Speaker 7: a grocery store. Second was affordable housing and some level
Speaker 7: of housing and density. So I put together the best
Speaker 7: plan to bring that grocery store in the quickest amount
Speaker 7: of time.
Speaker 3: So, all right, they need a grocery store. They're identified,
Speaker 3: they need a grocery store, won't they just reach out
Speaker 3: the grocery stores directly, Why didn't they developer?
Speaker 4: They did.
Speaker 7: Grocery stores often don't develop their own land either, they
Speaker 7: least you know, so a developer developer, developer manages that process.
Speaker 4: Businesses don't typically manage that process. You know.
Speaker 7: If you think about Apple, Apple isn't going to like
Speaker 7: build their own headquarters. They're going to hire some consultants
Speaker 7: or a developer to build it for them. So that's
Speaker 7: an RFP can be in that way too. So that said,
Speaker 7: it's of interest for them to align themselves with a
Speaker 7: developer who has the capacity to do this because it's
Speaker 7: not something that just easily can be done, got it.
Speaker 4: They can't just do it.
Speaker 3: So phase two, the construction phase can talk about that.
Speaker 7: Yeah, construction, So each each phase is a little less risky.
Speaker 7: So pre development FA is a ton of risk. I
Speaker 7: rewind a little bit, then I go into it. It's
Speaker 7: a ton of risk because you're paying a ton of
Speaker 7: consultants to do work. You're doing environmental assessments a phase
Speaker 7: one in a phase two ten that could be ten
Speaker 7: thousand dollars between the two.
Speaker 5: Environmental assess that when they checking the dirt to see.
Speaker 7: Check yeah, and all that well, yeah, so environmental, that's
Speaker 7: one where they're seeing if it's contaminated, has it been
Speaker 7: a you know, was this a gas station historically? Is
Speaker 7: this up to code because you don't want those sols
Speaker 7: to rise and people get sick and die and all
Speaker 7: that stuff. So you pay for environmental consultants. You pay
Speaker 7: for civil consultants which put together the design of the
Speaker 7: building and make sure this is secure. Okay, architects design it,
Speaker 7: but the civil engineers are saying this will be sturdy
Speaker 7: for X amount of time, we won't have settlement, et cetera.
Speaker 7: And then you hire geotechnical consultants to test the soil
Speaker 7: and to see is a soil okay, you know stuff
Speaker 7: like that, so the soil is more so like for settlement,
Speaker 7: civil is self structure, jevity and things like that. So
Speaker 7: all of those people you've got to hire prior to
Speaker 7: getting to construction. Who's that the developer is so yeah,
Speaker 7: the great quest walk is uh yeah, but you can
Speaker 7: you can get once you have a plan together, you
Speaker 7: can get loans. In theory they can get loans. We
Speaker 7: can't get loans really, they can get loans. So I
Speaker 7: partner with the people that can get the loans and
Speaker 7: try to I'll go into that in a second. But
Speaker 7: you pay for all of these consultants, even architects. All
Speaker 7: the architectural designs are pretty renderings and all that slice. Yeah,
Speaker 7: you know that's a couple hundred thousand easy. So before
Speaker 7: you get to construction.
Speaker 3: Are any of these RFPs or like, dude, does it
Speaker 3: ever come into play with the was it MWB minority
Speaker 3: women business? Is it? Because are they like? Do they
Speaker 3: have to have a certain amount of developments that are
Speaker 3: developed by minority developers?
Speaker 4: Is that case? Minority developers is not a thing.
Speaker 3: It's not a thing.
Speaker 7: It's not a minority contractors is a thing. Okay, I
Speaker 7: know the developers is not a thing. So I have
Speaker 7: to in my development counterparts. Yeah, that has I'm an
Speaker 7: anomaly for real. So I have to hire minority women
Speaker 7: veterans and my colleagues have to do the same. My
Speaker 7: counterparts do same. We have to hire them the construction workers.
Speaker 7: Make sure that all of the people that are part
Speaker 7: of his team may be twenty twenty of the total
Speaker 7: the money that.
Speaker 4: Is allocated to the budget has to go towards these groups.
Speaker 7: But there's no structure for me as a developer and
Speaker 7: being black to benefit from that, why not, that's where
Speaker 7: the most money is.
Speaker 3: Has it ever been proposed or no, I've never heard
Speaker 3: of it.
Speaker 4: I'm sure it has.
Speaker 7: Historic Black developers aren't a thing, A lot of them. No,
Speaker 7: it's not a thing because historically banks. We all know
Speaker 7: about red lining. We all know about that. There's a
Speaker 7: book called The Color of Law. Talk about this before,
Speaker 7: but for people that don't know, color a law documented
Speaker 7: the government's effect on communities and the intentionality of segregation.
Speaker 7: So what they did was if a white developer even
Speaker 7: was developing something that allowed a black person to live
Speaker 7: in it, HUD would not ensure it, so the bank
Speaker 7: would not give along. So that was for a white developer.
Speaker 7: So imagine a black developer trying to develop something for
Speaker 7: black people. It wasn't possible. So the marrion Berries of
Speaker 7: the world, and just like H. J. Russell in Atlanta,
Speaker 7: the mayor of Atlanta, the mayor of d C, reached
Speaker 7: out and used their political connections to bring these two
Speaker 7: people up. H J. Russell in Atlanta down peoples in
Speaker 7: d C in order to create an economic engine in
Speaker 7: our community that allowed for growth in a way that
Speaker 7: does not exist. So again that's just not a thing
Speaker 7: at all, and hopefully it can become a thing. But
Speaker 7: there's not enough black developers. I mean, I'm at conferences
Speaker 7: all the time. I go to real estate meet ups
Speaker 7: and everything like that. But oftentimes most most folks are
Speaker 7: investors because it's all we know. Most of the developers
Speaker 7: I know aren't. They don't look like me. Sout out
Speaker 7: to keV Kevin Noule. It's a big bro mind. He's
Speaker 7: killing it in Milwaukee right now, absolutely killing it. He's
Speaker 7: a black developer that is doing his thing. A couple
Speaker 7: of folks out here in DC as well. Dr McKinney
Speaker 7: I really respect. Don Peebles's son is actually doing development
Speaker 7: out of DC as well. So there's some black developers
Speaker 7: like bubbling up.
Speaker 3: But yeah, it's just not How important is political political
Speaker 3: collections connections.
Speaker 7: Depends on where you are. I was saying Wisconsin not
Speaker 7: as much. Wisconsin is a very objective state. If you
Speaker 7: are doing if you are checking these boxes, you can
Speaker 7: move forward in a place like other places. It's not
Speaker 7: that objective. It's a little more subjective. Yeah, yeah, so yeah, I.
Speaker 4: Think we were talking about the construction part.
Speaker 7: Real quick. So you start off trying to predevelopment risk.
Speaker 7: You pay for all of these consultants a couple hundred thousand,
Speaker 7: and then at the closing table. So the benefit of
Speaker 7: getting to the closing table is that all that risk
Speaker 7: is wiped away, so it's all a part of the
Speaker 7: development budget, although you're paying for it before it happens.
Speaker 7: You get refunded once all your money comes in, So
Speaker 7: the three hundred thousand that you had out, the million
Speaker 7: dollars that you had out, all comes back right there.
Speaker 7: So that's a great day. And then what happens in
Speaker 7: the construction phase. You have to mitigate that risk because
Speaker 7: you know people may not come to work, or the
Speaker 7: cost of something may be more expensive, or the design
Speaker 7: wasn't you have to change the design up and.
Speaker 4: Things like that.
Speaker 7: So you have to look out for all of those
Speaker 7: things before you get under construction because when that construction
Speaker 7: budget gets blown up, it's a real thing. And the
Speaker 7: first thing that goes at that point is is your
Speaker 7: developer fee.
Speaker 4: We have to pay for that.
Speaker 7: So we got to mitigate that risk because you can
Speaker 7: get a project done and not make nothing to that point.
Speaker 7: My first project, sixty unit, a fortable housing development twelve
Speaker 7: point six million dollars. I made thirty thousand dollars on Wow,
Speaker 7: three and a half years worth of work. I made
Speaker 7: thirty thousand dollars.
Speaker 4: That was it.
Speaker 3: What kind of insurance do you have to have to
Speaker 3: be protected.
Speaker 4: During construction just as a development?
Speaker 3: I'm like anything you said like you're on the hook, right,
Speaker 3: So I guess you don't want to have to always
Speaker 3: come out of your pocket if something happens to risky tech.
Speaker 3: So there's no insurance.
Speaker 7: No, it's not a thing now, it's just a risky tech.
Speaker 7: So that deal twelve and a half million. My original
Speaker 7: development partner. So this is my first project, this one
Speaker 7: I got in twenty sixteen. My original development partners were
Speaker 7: fully integrated firms. So they did They did development, construction,
Speaker 7: and property management.
Speaker 4: They did it all.
Speaker 7: So I'm like, okay, bet let me partner with these guys,
Speaker 7: let me learn from their different entities. Is all one stop,
Speaker 7: and then we're gonna do it. Uh, moving forward. Once
Speaker 7: we got the award, their board wasn't as comfortable with
Speaker 7: their original terms we agree to. So now you know,
Speaker 7: based on so you have to make guarantees. You make
Speaker 7: financial guarantees. For construction. I guarantee that this will be built,
Speaker 7: even on my own die.
Speaker 4: And you have.
Speaker 7: To spread the risk across a development profile and share
Speaker 7: that with partners. If they're making all the guarantees, they're
Speaker 7: taking all the money. So that's why we get boxed
Speaker 7: out too. Black folks typically don't have the capital to
Speaker 7: say yeah, so.
Speaker 4: We can't make guarantee.
Speaker 3: Yeah, yeah, I like you said that because I have
Speaker 3: a friend who appliented well, who's a developer in New York.
Speaker 4: He's black.
Speaker 3: He always tells me about these personal guarantees that he
Speaker 3: has to put up of like all this money and properties,
Speaker 3: like whenever time they're doing a deal, and it's like
Speaker 3: him and his partner they got through these personal lines
Speaker 3: of guarantees and all that stuff.
Speaker 4: Personal guarantee, personal guarantee.
Speaker 7: And if you don't have the bare minimum for the
Speaker 7: projects that I'm working on, you need a million dollars
Speaker 7: of liquidity like cash and five million dollars in networks
Speaker 7: to start the conversation. That's going to eliminate a lot
Speaker 7: of us. That's why you don't see black developers. That's
Speaker 7: the primary reason why you don't see black developers, because
Speaker 7: you can't get a game, and then when you start
Speaker 7: to you get righted.
Speaker 4: It's like, okay, well you got.
Speaker 7: An idea, you got a concept I want, you can
Speaker 7: get teen and then we just get used as brokers
Speaker 7: to find sites and so they can make more money.
Speaker 7: But I wasn't on that. I'm not on that. So
Speaker 7: I get the majority of my fees at this point,
Speaker 7: at least fifty one percent. I'm gonna get standing on it.
Speaker 4: I'm moving on that.
Speaker 3: That's not so you say upon partnerships, So you partner
Speaker 3: with a lot of people, Yeah, I have to. So
Speaker 3: for a young cat or you're not even young cat,
Speaker 3: anybody just in general, because like you said, it's a
Speaker 3: lot of barriers to get in. Is that the best
Speaker 3: way to go about it is to kind of find
Speaker 3: somebody already that's successful and kind of work with them.
Speaker 4: Yeah. I mean I get reached out to you all
Speaker 4: the time.
Speaker 7: I definitely I want to support everybody, but realistically I
Speaker 7: just can't. It's capacity thing. So that said, I think
Speaker 7: the best way is to create value. You have to
Speaker 7: create value. If you're not creating value, then you're just there.
Speaker 7: If if you want to work with me, just like
Speaker 7: if I want to work with them. Is it worth
Speaker 7: my time to work with you?
Speaker 4: Not?
Speaker 3: If you bring anything to bring, I could do it
Speaker 3: on my own. I tell people that all the time,
Speaker 3: you gotta it gotta be mutual, and it can't because
Speaker 3: that's more of a charity thing, right, It's like you
Speaker 3: through so much chat as the time and a place
Speaker 3: for that, you know, mentorship, charity. It's not a business partnership.
Speaker 3: Business partnership has it doesn't have to be equal, but
Speaker 3: you have to bring something.
Speaker 4: You got to bring some value.
Speaker 7: Yeah, So if you can create value in real estate
Speaker 7: the way that I did it, I created the financial model,
Speaker 7: I created the vision, and I got the land in
Speaker 7: the contract. That's what that was my control. So if
Speaker 7: I pitched it to anybody, they can't just go get
Speaker 7: this land.
Speaker 4: I already got it. So now it's like I have leverage.
Speaker 7: So if you, as a developer want to or aspiring
Speaker 7: developer want to take that strap, I'll get some land
Speaker 7: on the contract. Put a financial plan that makes sense.
Speaker 7: I talked about language earlier. Showed me the language. This
Speaker 7: is the language that we speak right here. When you
Speaker 7: start speaking that language, we can partner with no problem.
Speaker 6: My graduates from my school being force back drop drop
Speaker 6: Mike drop backdrop.
Speaker 9: An illegal alien from Guatemala charged with raping a child
Speaker 9: in Massachusetts. An MS thirteen gang member from Al Salvador
Speaker 9: accused of murdering a Texas man of Venezuelan charged with
Speaker 9: filming and selling child pornography in Michigan. These are just
Speaker 9: some of the heinous migrant criminals caught because of President
Speaker 9: Donald J. Trump's leadership. I'm Christine Noman, the United States
Speaker 9: Secretary of Homeland Security. Under President Trump, attempted illegal border
Speaker 9: crossings are at the lowest levels ever recorded, and over
Speaker 9: one hundred thousand illegal aliens have been arrested. If you
Speaker 9: are here illegally, your next you will be fined nearly
Speaker 9: one thousand dollars a day, imprisoned, and deported. You will
Speaker 9: never return. But if you register using our CBP home
Speaker 9: app and leave now, you could be allowed to return legally.
Speaker 9: Do what's right. Leave now. Under President Trump, America's laws,
Speaker 9: border and families will be protected.
Speaker 5: Sponsored by the United States Department of Homeland Security,