This is the Real Estate Shop, where each episode will bring you a top industry expert to share their
current programs or projects that are making an impact in our communities today. Be sure to check
us out on Spotify and Apple podcasts. Welcome to the Real Estate Shop. Today's guest is none other
than Ken Lombard, CEO of Bridge Housing Corporation, one of the leading affordable housing groups in
the country, celebrating its 40th year in business. Ken, thanks for joining us today.
Thank you for inviting me. I appreciate this. Great. Glad to have you. Just jumping right in,
taking a look and going back to your LinkedIn profile, the first experience listed, for which
I know and recognize you from, is president and co-founder of Magic Johnson Enterprises.
Can you take us back to the beginning of your work experience and where did you land in the
industry out of college? You know, right out of college, I actually went to work for IBM.
I didn't go into real estate directly. It was kind of a sideline for me. I was interested
invested in redoing, you know, doing rehabs on boarded up houses initially. But so it always had
been a passion, but I started at IBM and then a customer of mine who was in the real estate
syndication businesses was my first step outside of IBM into the real estate business. That's where
we apartments, industrial hotels, and we actually went out and syndicated those with various
investor groups. Excellent. And then at some point, I think you founded Magic Johnson Enterprises.
Yeah, in 92, we have been talking about it. I noted that Ervin was interested in getting
into the business side of it. I had a relationship that I had with Sony Theaters and Lowe's Theaters
at the time, and we started that relationship off with Magic Johnson Theater. So that eventually
branched into the real estate side, which was our first fund with Victor McFarland,
then our next fund with the Canyon Group. Starbucks became a big part of that company
portfolio too. Got it. Yeah, I remember being in Prince George's County at the time and Magic
Johnson opened up right there, not too far from where I was at the time. So that was my familiarity
with it. I remember a conversation I had with you years back regarding a development site in LA.
At the time, you mentioned the gang shut down the site and demanded jobs. Before talking about the
leadership positions you have had, can we discuss what it was like in LA and maybe still in LA
when developing in our communities? Well, developing in the communities, in particular,
that was Baldwin Hills project. At the time, it was pretty complicated. It was coming after the
riots and the gangs had decided that they were going to go around the various construction projects
and in their mind, do a good thing like forcing diversity and hiring of minority
residents in the area. And at that particular time, the mall was owned by a gentleman by the
name of Alexander Hagan who had been in the business a long time, a long time ally of Tom
Bradley who was mayor for many years out here in LA. And he had his own way of dealing with things
which was not quite going to fit what we needed at that time. So he had meetings with the gangs and
they didn't quite, he thought he could kind of threaten to call the police and take an approach
that frankly didn't go anywhere and they came down and they shut down the site at that particular
time. Fortunately, we were able to convince the contractor that we were going to resolve this.
So the next morning, I got down there at the site with some of my security and
about 35 gang members showed up and they were committed to keep the site shut down but we
convinced them that if hiring and getting jobs was what their agenda was versus a shakedown,
then we could sit and have a conversation and be inclusive and figure out how we could include them
in the project. And fortunately, we were able to do that and we had probably close to two dozen
gang members that actually ended up working on that site.
Excellent. Well, Steve just mentioned that you have some dealings with Irving Johnson and I know
you've done some work with Victor McFarlane and Capri. How did you, through your career journey,
how did you position yourself into these leadership positions?
You know, I've always tried to position myself as not bringing a whole lot of ego into the equation.
So, I mean, everybody has an ego. Everybody has their expectations in terms of what they want to
do to be successful. But I prided myself on being able to work with high-powered individuals and
you mentioned Victor and others, but even people like Howard Schultz and others, I think,
even people like Howard Schultz and people like that, that are very high-powered executives. But
to me, it's just, I focus in on doing my job. I focus in on providing that adding value where I
can. And as much as anything in the various positions that I've had of leadership, I'm
very protective of whatever the brand may be. So, I'm always one to try to make sure whoever that
executive is, I understand their pain points, understand their points of sensitivity, and making
sure that under my Y-suit, there are no surprises. And so, communication is always key and finding
the right level of communication that that particular executive may be comfortable with.
But providing as much information and as much transparency as possible, that kind of translates
into loyalty and commitment. And that's really what I've tried to lead with.
And now, our past guest, we've talked about some of the challenges they've had to start their
venture. Some of the things that have come up has been access to capital and having to do,
having to form joint ventures to expand their organization. From where you've said and where
you've come from, what are some of the challenges you've had to face with some of these entities
that were mentioned? Capital has always been an issue for a very long time. I think from the
beginning of my career, even now, but I think there's no substitute for time and experience.
And what I've always believed is that raising capital is probably 70 to 80% relationships
and 20 to 30% everything else. And so, I've tried to build a reputation of, you know, you do what
you say you're going to do, you deliver, and be in a position where people can trust you.
And you can't ever be afraid to say if it's something that's too much, you know, that I
need to hold off on that versus trying to gather whatever, do that particular deal and then find
and then find yourself underperforming. So, for me, the challenges have been very similar to
a lot that you've heard from others. But I've worked hard at trying to understand, making sure
how important the quality of the project is. All projects don't work. Making sure that that
particular project fits the criteria of whoever the investor may be that I'm talking to. And,
you know, you can't spend a whole lot of your time as you continue to walk down
access and capital trail, trying to convince people that this particular project, which may not be in
meet their criteria, is something they ought to think about. The homework is figuring out which
of these capital sources are interested in the type of project that you have and then trying to
marry the two together. That is when the relationship kicks in. That's where your credibility kicks in.
Look, in my 20s and 30s, it's a lot tougher than it is when I'm in my 60s. And where you have a
track record and people can trust you and know that if you bring in a project to them,
you bring some credibility to the table when you're having those discussions.
Got it. Serenade Growth Properties is a name which I was not familiar with. Can you tell us
the various roles you played in that company, a publicly traded REIT? Yeah. So Serenade was
a company that Eddie Lampert started. And it was, it's still in play now. Eddie had, obviously,
was the owner of Sears. And he took 266 of those properties and formed a publicly traded REIT.
There was a gentleman by the name of Ben Schall, who I became friends with and still friends to
this day, who was appointed CEO. And my initial approach and involvement with them was Ben asked
me to join their board. So I joined their board from day one when we took it public. And then
as time went, it became clear that Ben was interested in having someone serve as CEO. So
he and I had a great relationship. We were very loyal and committed to each other. And I had gained
the respect of the board. So I stepped off the board at that particular time and took on the
CEO position until I left. Got it. Apparently, you're president and CEO of Bridge Housing
Corporation, another iconic industry leader in the affordable housing business, celebrating
40 years this year. Can you share how you became the leader of this organization and its mission?
You know, I feel like I've been fortunate in my career, throughout my career, to have exceptional
opportunities. And most of the time, we've done it all the time, I never have had to go out and
seek those opportunities. And in this particular case, it was, you know, I had left heritage,
I was trying to decide, is it was a time to consider retiring? I set up a few things just to,
if that's what the direction I was going to go. And then I got a call from a friend, a long time
friend of mine, Darrell Carter, who used to, was one of the co-founders of Capri. Darryl was on
the board and he was on the search committee and he began to talk to me about the opportunity.
And, you know, very few times in my career have I been able to combine, you know, doing good with
doing well. And as you, as I, even at the time of search, our offices in Brentwood, and you could see
how the whole homeless crisis, lack of affordability, how it was impacting just communities
across the country, let alone in Brentwood. So no one was exempt from it. And so he, you know,
I got convinced, I got passionate about the need for affordable housing. Aside from the fact that
it's probably, you know, of all the real estate segments that there are out there right now,
it's probably the hottest segment going, because there's such a huge need. And that, you know,
we're all trying to figure out how we can develop and provide quality affordable housing at a level
where not only is it scalable, but is it that it's going to address the needs that are currently
out there. So you've got millions of people that fall into this category of a need of an affordable
option, a quality option to live. And so that piqued my interest. And fortunately, the rest of
the board agreed with Darrell that I was going to be the right choice. And, you know, I did not have
experience in the affordable side of business. I spent my entire career on the market rate side,
but being able to come in and actually understand how even from a deal structure perspective, what
makes the most sense, have the appropriate discipline in setting up the underwriting
criteria that you need. These are all the things that I think have been missing on the affordable
side of the business. And in developing that underwriting criteria, being able to go out and
raise capital to be able to do it maybe a little different than what's been done in the past where
you have a lot of soft debt that still ends up providing challenges and obstacles to the project,
especially when you start cash flowing. These are all the things that I think, fortunately, the Bridge
Housing Board recognized they needed a different way of thinking about this. And I was fortunate
enough for them to slight me. I think of a footprint does Bridge have in terms of geography
and how does that translate to number of units? So we are currently geographically from Seattle
to San Diego, so we're primarily west coast based. Bridge has been around, in fact, we're celebrating
our 40th year, which was mentioned earlier. And we currently have about 14,000 units up and down
the west coast and about a little over 125, 126 buildings. So we're continuing on that path.
Value-wise, Bridge is structured as a nonprofit, but we have a valuation of that portfolio of about
$3 billion. Our expectation for growth is that we'll take that 14,000, 15,000 unit number up to over
20 and just continue to look at both the ground up side of it, which is a little more challenging
today's environment. Also acquisition of mixed income properties that we can put the restrictions
on from a rent perspective so they qualify as affordable. That's going to be a key part of our
strategy going forward. Since they're trying to figure out how to scale their business,
from a mom and pop or three or five person shop and something larger, what do you think makes
a Bridge unique and stand out? And maybe tell us about how you've managed a large geography over
time. You know, what makes Bridge's platform is extraordinary in that any time you have a company,
let alone a nonprofit that's been around for 40 years, and has been able to assemble a portfolio
like this, it's very fortunate for me to be able to come in and run it. Now, what we've got to do
now if we're going to be around for 40 years, what does sustainability look like? What does
what growth strategy is going to work? And that's the part that we're addressing right now where we
can actually look at all aspects of how transactions are coming together and decide which ones work for
us. Also looking at just going across the enterprise and making the right types of decisions
regarding efficiency. So, not being afraid to pop the hood up on every department that we have here
and figure out where we can improve the efficiency overall. Because you have an environment that's
constantly changing. So, we have the, let's say the ground up development side of it, which
most groups like us are really dependent on those developers fees to continue to provide revenue to
the organization. Well, we're in the same position that market rate apartments are and developers are.
You got high interest rates, you got extremely high construction costs, all of which are
kind of forcing you to take another look at what makes the most sense. And in the case of some
affordable housing and some of the markets on the west coast, you're seeing per door costs that are
an upwards of a million dollars a door. And, you know, an unwillingness on our part to kind of
continue to go into that structure and not be as comfortable with the terms around soft debt as
they may be currently being offered. And that usually translates into a project that you're not
going to do. And you got to come up with another approach on strategy that for us right now is
acquisition. But acquisition also entails you've got to be in a position where you can raise capital
and have the appropriate capital to be able to execute on that. But fortunately, you know, we've
got backing from Morgan Stanley. We were one of the first groups, non-profit groups in the
non-profit groups in particular, to access their GO bonds. So we got 100 million dollars in GO bonds.
They also provided us with a debt facility to the tune of 250 million. And it's that type of
approach that has enabled us to stay competitive. And, you know, we look forward to even our next
step, which is actually going out and raising, you know, our own fund, which an equity fund that
we're expecting some time of Q1, Q2 next year. Excellent. Can I just mention something a lot of
listeners won't know if they're junior in this space, GO bonds. Do you mind just expanding on that?
You know, GO bonds are another, just another form of bond that, you know, is issued by the government
that we frankly, right now it's great. We look like geniuses. They were priced in an interest
rate environment that was probably half of where it is right now. So we're in a pretty good position
and it's got the flexibility of being an instrument that we don't, once we, if we put it into a project
and return it, we can reinvest it in another project. So that's the beauty of it. It's got a
lot of flexibility on it. So, and we're continuing to, I mean, the key here is having a group like
Morgan Stanley that believes in what Bridge is doing. Even with the transition of a new CEO
coming in, like myself, they spent the time to get to know me and the strategy that we had going
forward, how we were going to pull together, just even looking at the various, the current,
the existing portfolio, what we're going to do with that. These are all the things that they sat
and we talked about and they got comfortable with us, which is why we're able to move to the next
level with them, with the fund that they have through NNEF. So we're very pleased with that
relationship. Excellent. Besides development and acquisitions, what other services does Bridge
provide? So, I mean, everyone who's in the affordable business understands that you,
this is not as easy as building an apartment complex and opening up your doors, going through
your lease up, but you have tenants that are in need of various services, whether it's
assisting with finding jobs, whether it's childcare, these are all the types of things that,
and we're not on the extreme side where we're providing mental health type of services, but
if you're in that space, that's another part of what you have to do to have a successful project.
So we also, we have items like our scholarship funds that we raised money for, we just recently
had a celebration, we raised another million dollars towards that. That's where we provide
the tenants with scholarships and whatever their vocation may be. So we're very proud of that.
We've actually provided about $3.5 million in scholarships to various tenants through our
buildings up and down the West Coast. So we're very committed on the services side. We work with the
various agencies because they also participate in that and provide funding for that, but it's not,
we don't, there isn't a project that we do that we're not providing services.
Got it. Have you guys gotten to the point? I know when I was with Michael, they kind of spun off
their services separate 501C3. Do you guys do services specific to Bridge or have you got it
to a point where third party, I just know in the industry. We outsource our services. So
I have a department inside of Bridge that oversees that, but the actual providing of the services
while we'll select the organization that we want to administer the services, it's all outsourced.
It's a great way to do it. I know you really can't even get an award of tax credits without
having the supportive services attached to it anymore. So developers I'm looking at are
finding various ways to try to solve that. Either they hire somebody or some of the larger ones are
starting their own services. Yeah, we just found it was more efficient. That's what they do.
They're in the business of it. And so, and in a lot of cases, that's a lot easier to get reimbursed
from the various agencies or whatever the fees may be. So yeah. Yeah. I know you mentioned some
of the challenges about the high interest rate, the high construction costs and affordability.
And California has dropped to a 16 year low. If you look at all these things, what gives you hope
that there's still a lane here? I think that's a good question. I think that's a good question.
For affordable housing, we'll give you optimism. You know, I think if you've been in real estate,
as long as I have you recognize that a lot of this is cyclical. Yeah. You know, we're going through
a tough cycle right now with, you know, where you do have interest rate and construction costs. But
my hope is, is that just like every other cycle we've been through, we'll see interest rates
coming back down to earth. So you'll see construction costs getting under control
on the construction side. The big hope is that modular construction becomes a real option. And
you have a company that essentially rears its head above the others. Because right now they all feel
pretty much in the startup type of mode and they're not having the effectiveness, but that's another
area of hope. And as much as anything, while there is hope, there is a commitment to recognize
that we don't really have an option to not try to tackle this problem and to not continue to try to
provide quality housing that's affordable. Because if we don't, then this crisis will become worse.
It will become deeper. And I just don't see this as one of those that the problem is too big to
walk away from. Yeah, I totally agree. And I know you mentioned construction costs. And one
of the things that we find is we all want to be good citizens in terms of reducing the carbon
emissions. But a lot of these QAPs are now requiring passive house, net zero, all of the
higher level of certifications with respect to green, which great stuff to do, but it adds on to
the costs. We're already dealing with restricted rents. So that's another little twist that we're
dealing with. One of the great things I just saw about you all is you got an $8 million
unrestricted donation from the Mackenzie Scott Philanthropic Organization. What impact will that
have for you? That is going to be a tremendous help to us. Just the mere fact that we got selected,
anyone who understands her process, which enough accolades cannot be
appointed in her direction for the commitment that she has to affordable housing. I mean, look,
Bridge is extremely appreciative of being selected, but that's what we were. We were selected. We did
not solicit it. She has a very quiet process that she goes about. They do their diligence.
They come, they ask you a few questions. But essentially you're in a position where
you either get the call or you don't. And in our case, we were fortunate we got the call.
But she's been a very strong contributor towards trying to help companies like Bridge solve the
affordable crisis. My hope is that others like Mackenzie will follow her lead. But in the
meantime, I have to tell you it was a huge help to Bridge. That's really excellent.
For the benefit of our audience, whether they are emerging developers looking to bring it to the
game or just folks trying to get in on the finance side of the business, what piece of advice would
you share based on your extraordinary career for some folks who are just trying to start out?
You know, there's always been the need for balance. Because look, as an entrepreneur, you have big
dreams and you have projects that you want to take on. And you have, you know, you feel invincible
at times because you're going to take on projects that you find yourself way over your skis. And
you know, all of a sudden you realize, oh, wait a minute, I got to go find the capital for it. And
you don't have everything lined up. And I just think that there's a huge need for just trying
to find the right balance and approach to getting projects that you know you can execute on. Because
it's those first few projects that you do that are going to build your track record. And it doesn't
mean that, you know, I'm not suggesting you pick the size that makes the most sense to you. You
don't go around trying to get control of a project and worry about where your capital is going to
come from after the fact. I mean, that's some of the mistakes that I see that are out there right
now. And it's unfortunate. But the barriers of entry have always been the same. They're the same
today as they were when Victor and I and others that have been in this business for a long time
first got into this business. But if you look at each of us, there's a commitment to execute.
And there's a commitment to have a lot of discipline around your approach and around
your performance. So that would be the advice I give the young entrepreneurs. Still dream,
but make sure you're really committed to execution. That's as important as the dream itself.
That makes the dream happen or not. So that's what I that that would be the advice I give.
Great. Yeah, it's memorable. If you were to do it all again, would you do anything differently?
Oh, gosh, that's that's a good question. I you know, I've been really fortunate in my career.
I think that I've had great opportunities. I've been close and connected at the hip with some
very extraordinary entrepreneurs, whether it's Victor, or whether it's even the relationship
I have with Michael Melkin and others who have been extremely helpful to me. So if anything,
it's just, it's I'm hard pressed to try to think of something that I would, that I do today that
that's different. I'm, you know, fortunately, I've got a great family, great wife and kids and
and success, you know, it's been been good to me, I have good life. And look, you know,
I'm not Robert Smith. You know, I look up to those guys. And, you know, at the time, it was,
you know, the early days, we were all working hard, but you know, you just try to find your niche and
be comfortable, be happy, take care of your family. And don't worry about being the biggest guy on
the block. That's not that's never been my goal. So
I said, Well, it's been a real pleasure having you stop by the real estate shop. We look forward to
celebrating your victories coming up and no doubt you're going to continue having with with Bridge.
No, I appreciate you both. It's been a good conversation and good luck to you on
your podcasts. And I really had a great time talking to you today.
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