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This is the Real Estate Shop, where each episode will bring you a top industry expert to share their

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current programs or projects that are making an impact in our communities today. Be sure to check

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us out on Spotify and Apple podcasts. Welcome to the Real Estate Shop. Today's guest is none other

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than Ken Lombard, CEO of Bridge Housing Corporation, one of the leading affordable housing groups in

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the country, celebrating its 40th year in business. Ken, thanks for joining us today.

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Thank you for inviting me. I appreciate this. Great. Glad to have you. Just jumping right in,

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taking a look and going back to your LinkedIn profile, the first experience listed, for which

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I know and recognize you from, is president and co-founder of Magic Johnson Enterprises.

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Can you take us back to the beginning of your work experience and where did you land in the

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industry out of college? You know, right out of college, I actually went to work for IBM.

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I didn't go into real estate directly. It was kind of a sideline for me. I was interested

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invested in redoing, you know, doing rehabs on boarded up houses initially. But so it always had

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been a passion, but I started at IBM and then a customer of mine who was in the real estate

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syndication businesses was my first step outside of IBM into the real estate business. That's where

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we apartments, industrial hotels, and we actually went out and syndicated those with various

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investor groups. Excellent. And then at some point, I think you founded Magic Johnson Enterprises.

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Yeah, in 92, we have been talking about it. I noted that Ervin was interested in getting

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into the business side of it. I had a relationship that I had with Sony Theaters and Lowe's Theaters

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at the time, and we started that relationship off with Magic Johnson Theater. So that eventually

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branched into the real estate side, which was our first fund with Victor McFarland,

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then our next fund with the Canyon Group. Starbucks became a big part of that company

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portfolio too. Got it. Yeah, I remember being in Prince George's County at the time and Magic

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Johnson opened up right there, not too far from where I was at the time. So that was my familiarity

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with it. I remember a conversation I had with you years back regarding a development site in LA.

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At the time, you mentioned the gang shut down the site and demanded jobs. Before talking about the

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leadership positions you have had, can we discuss what it was like in LA and maybe still in LA

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when developing in our communities? Well, developing in the communities, in particular,

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that was Baldwin Hills project. At the time, it was pretty complicated. It was coming after the

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riots and the gangs had decided that they were going to go around the various construction projects

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and in their mind, do a good thing like forcing diversity and hiring of minority

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residents in the area. And at that particular time, the mall was owned by a gentleman by the

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name of Alexander Hagan who had been in the business a long time, a long time ally of Tom

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Bradley who was mayor for many years out here in LA. And he had his own way of dealing with things

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which was not quite going to fit what we needed at that time. So he had meetings with the gangs and

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they didn't quite, he thought he could kind of threaten to call the police and take an approach

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that frankly didn't go anywhere and they came down and they shut down the site at that particular

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time. Fortunately, we were able to convince the contractor that we were going to resolve this.

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So the next morning, I got down there at the site with some of my security and

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about 35 gang members showed up and they were committed to keep the site shut down but we

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convinced them that if hiring and getting jobs was what their agenda was versus a shakedown,

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then we could sit and have a conversation and be inclusive and figure out how we could include them

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in the project. And fortunately, we were able to do that and we had probably close to two dozen

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gang members that actually ended up working on that site.

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Excellent. Well, Steve just mentioned that you have some dealings with Irving Johnson and I know

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you've done some work with Victor McFarlane and Capri. How did you, through your career journey,

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how did you position yourself into these leadership positions?

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You know, I've always tried to position myself as not bringing a whole lot of ego into the equation.

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So, I mean, everybody has an ego. Everybody has their expectations in terms of what they want to

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do to be successful. But I prided myself on being able to work with high-powered individuals and

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you mentioned Victor and others, but even people like Howard Schultz and others, I think,

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even people like Howard Schultz and people like that, that are very high-powered executives. But

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to me, it's just, I focus in on doing my job. I focus in on providing that adding value where I

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can. And as much as anything in the various positions that I've had of leadership, I'm

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very protective of whatever the brand may be. So, I'm always one to try to make sure whoever that

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executive is, I understand their pain points, understand their points of sensitivity, and making

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sure that under my Y-suit, there are no surprises. And so, communication is always key and finding

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the right level of communication that that particular executive may be comfortable with.

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But providing as much information and as much transparency as possible, that kind of translates

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into loyalty and commitment. And that's really what I've tried to lead with.

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And now, our past guest, we've talked about some of the challenges they've had to start their

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venture. Some of the things that have come up has been access to capital and having to do,

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having to form joint ventures to expand their organization. From where you've said and where

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you've come from, what are some of the challenges you've had to face with some of these entities

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that were mentioned? Capital has always been an issue for a very long time. I think from the

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beginning of my career, even now, but I think there's no substitute for time and experience.

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And what I've always believed is that raising capital is probably 70 to 80% relationships

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and 20 to 30% everything else. And so, I've tried to build a reputation of, you know, you do what

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you say you're going to do, you deliver, and be in a position where people can trust you.

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And you can't ever be afraid to say if it's something that's too much, you know, that I

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need to hold off on that versus trying to gather whatever, do that particular deal and then find

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and then find yourself underperforming. So, for me, the challenges have been very similar to

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a lot that you've heard from others. But I've worked hard at trying to understand, making sure

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how important the quality of the project is. All projects don't work. Making sure that that

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particular project fits the criteria of whoever the investor may be that I'm talking to. And,

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you know, you can't spend a whole lot of your time as you continue to walk down

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access and capital trail, trying to convince people that this particular project, which may not be in

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meet their criteria, is something they ought to think about. The homework is figuring out which

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of these capital sources are interested in the type of project that you have and then trying to

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marry the two together. That is when the relationship kicks in. That's where your credibility kicks in.

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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

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track record and people can trust you and know that if you bring in a project to them,

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you bring some credibility to the table when you're having those discussions.

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Got it. Serenade Growth Properties is a name which I was not familiar with. Can you tell us

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the various roles you played in that company, a publicly traded REIT? Yeah. So Serenade was

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a company that Eddie Lampert started. And it was, it's still in play now. Eddie had, obviously,

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was the owner of Sears. And he took 266 of those properties and formed a publicly traded REIT.

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There was a gentleman by the name of Ben Schall, who I became friends with and still friends to

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this day, who was appointed CEO. And my initial approach and involvement with them was Ben asked

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me to join their board. So I joined their board from day one when we took it public. And then

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as time went, it became clear that Ben was interested in having someone serve as CEO. So

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he and I had a great relationship. We were very loyal and committed to each other. And I had gained

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the respect of the board. So I stepped off the board at that particular time and took on the

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CEO position until I left. Got it. Apparently, you're president and CEO of Bridge Housing

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Corporation, another iconic industry leader in the affordable housing business, celebrating

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40 years this year. Can you share how you became the leader of this organization and its mission?

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You know, I feel like I've been fortunate in my career, throughout my career, to have exceptional

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opportunities. And most of the time, we've done it all the time, I never have had to go out and

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seek those opportunities. And in this particular case, it was, you know, I had left heritage,

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I was trying to decide, is it was a time to consider retiring? I set up a few things just to,

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if that's what the direction I was going to go. And then I got a call from a friend, a long time

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friend of mine, Darrell Carter, who used to, was one of the co-founders of Capri. Darryl was on

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the board and he was on the search committee and he began to talk to me about the opportunity.

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And, you know, very few times in my career have I been able to combine, you know, doing good with

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doing well. And as you, as I, even at the time of search, our offices in Brentwood, and you could see

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how the whole homeless crisis, lack of affordability, how it was impacting just communities

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across the country, let alone in Brentwood. So no one was exempt from it. And so he, you know,

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I got convinced, I got passionate about the need for affordable housing. Aside from the fact that

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it's probably, you know, of all the real estate segments that there are out there right now,

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it's probably the hottest segment going, because there's such a huge need. And that, you know,

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we're all trying to figure out how we can develop and provide quality affordable housing at a level

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where not only is it scalable, but is it that it's going to address the needs that are currently

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out there. So you've got millions of people that fall into this category of a need of an affordable

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option, a quality option to live. And so that piqued my interest. And fortunately, the rest of

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the board agreed with Darrell that I was going to be the right choice. And, you know, I did not have

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experience in the affordable side of business. I spent my entire career on the market rate side,

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but being able to come in and actually understand how even from a deal structure perspective, what

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makes the most sense, have the appropriate discipline in setting up the underwriting

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criteria that you need. These are all the things that I think have been missing on the affordable

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side of the business. And in developing that underwriting criteria, being able to go out and

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raise capital to be able to do it maybe a little different than what's been done in the past where

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you have a lot of soft debt that still ends up providing challenges and obstacles to the project,

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especially when you start cash flowing. These are all the things that I think, fortunately, the Bridge

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Housing Board recognized they needed a different way of thinking about this. And I was fortunate

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enough for them to slight me. I think of a footprint does Bridge have in terms of geography

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and how does that translate to number of units? So we are currently geographically from Seattle

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to San Diego, so we're primarily west coast based. Bridge has been around, in fact, we're celebrating

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our 40th year, which was mentioned earlier. And we currently have about 14,000 units up and down

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the west coast and about a little over 125, 126 buildings. So we're continuing on that path.

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Value-wise, Bridge is structured as a nonprofit, but we have a valuation of that portfolio of about

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$3 billion. Our expectation for growth is that we'll take that 14,000, 15,000 unit number up to over

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20 and just continue to look at both the ground up side of it, which is a little more challenging

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today's environment. Also acquisition of mixed income properties that we can put the restrictions

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on from a rent perspective so they qualify as affordable. That's going to be a key part of our

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strategy going forward. Since they're trying to figure out how to scale their business,

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from a mom and pop or three or five person shop and something larger, what do you think makes

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a Bridge unique and stand out? And maybe tell us about how you've managed a large geography over

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time. You know, what makes Bridge's platform is extraordinary in that any time you have a company,

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let alone a nonprofit that's been around for 40 years, and has been able to assemble a portfolio

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like this, it's very fortunate for me to be able to come in and run it. Now, what we've got to do

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now if we're going to be around for 40 years, what does sustainability look like? What does

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what growth strategy is going to work? And that's the part that we're addressing right now where we

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can actually look at all aspects of how transactions are coming together and decide which ones work for

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us. Also looking at just going across the enterprise and making the right types of decisions

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regarding efficiency. So, not being afraid to pop the hood up on every department that we have here

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and figure out where we can improve the efficiency overall. Because you have an environment that's

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constantly changing. So, we have the, let's say the ground up development side of it, which

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most groups like us are really dependent on those developers fees to continue to provide revenue to

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the organization. Well, we're in the same position that market rate apartments are and developers are.

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You got high interest rates, you got extremely high construction costs, all of which are

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kind of forcing you to take another look at what makes the most sense. And in the case of some

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affordable housing and some of the markets on the west coast, you're seeing per door costs that are

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an upwards of a million dollars a door. And, you know, an unwillingness on our part to kind of

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continue to go into that structure and not be as comfortable with the terms around soft debt as

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they may be currently being offered. And that usually translates into a project that you're not

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going to do. And you got to come up with another approach on strategy that for us right now is

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acquisition. But acquisition also entails you've got to be in a position where you can raise capital

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and have the appropriate capital to be able to execute on that. But fortunately, you know, we've

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got backing from Morgan Stanley. We were one of the first groups, non-profit groups in the

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non-profit groups in particular, to access their GO bonds. So we got 100 million dollars in GO bonds.

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They also provided us with a debt facility to the tune of 250 million. And it's that type of

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approach that has enabled us to stay competitive. And, you know, we look forward to even our next

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step, which is actually going out and raising, you know, our own fund, which an equity fund that

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we're expecting some time of Q1, Q2 next year. Excellent. Can I just mention something a lot of

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listeners won't know if they're junior in this space, GO bonds. Do you mind just expanding on that?

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You know, GO bonds are another, just another form of bond that, you know, is issued by the government

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that we frankly, right now it's great. We look like geniuses. They were priced in an interest

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rate environment that was probably half of where it is right now. So we're in a pretty good position

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and it's got the flexibility of being an instrument that we don't, once we, if we put it into a project

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and return it, we can reinvest it in another project. So that's the beauty of it. It's got a

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lot of flexibility on it. So, and we're continuing to, I mean, the key here is having a group like

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Morgan Stanley that believes in what Bridge is doing. Even with the transition of a new CEO

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coming in, like myself, they spent the time to get to know me and the strategy that we had going

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forward, how we were going to pull together, just even looking at the various, the current,

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the existing portfolio, what we're going to do with that. These are all the things that they sat

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and we talked about and they got comfortable with us, which is why we're able to move to the next

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level with them, with the fund that they have through NNEF. So we're very pleased with that

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relationship. Excellent. Besides development and acquisitions, what other services does Bridge

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provide? So, I mean, everyone who's in the affordable business understands that you,

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this is not as easy as building an apartment complex and opening up your doors, going through

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your lease up, but you have tenants that are in need of various services, whether it's

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assisting with finding jobs, whether it's childcare, these are all the types of things that,

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and we're not on the extreme side where we're providing mental health type of services, but

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if you're in that space, that's another part of what you have to do to have a successful project.

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So we also, we have items like our scholarship funds that we raised money for, we just recently

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had a celebration, we raised another million dollars towards that. That's where we provide

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the tenants with scholarships and whatever their vocation may be. So we're very proud of that.

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We've actually provided about $3.5 million in scholarships to various tenants through our

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buildings up and down the West Coast. So we're very committed on the services side. We work with the

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various agencies because they also participate in that and provide funding for that, but it's not,

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we don't, there isn't a project that we do that we're not providing services.

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Got it. Have you guys gotten to the point? I know when I was with Michael, they kind of spun off

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their services separate 501C3. Do you guys do services specific to Bridge or have you got it

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to a point where third party, I just know in the industry. We outsource our services. So

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I have a department inside of Bridge that oversees that, but the actual providing of the services

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while we'll select the organization that we want to administer the services, it's all outsourced.

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It's a great way to do it. I know you really can't even get an award of tax credits without

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having the supportive services attached to it anymore. So developers I'm looking at are

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finding various ways to try to solve that. Either they hire somebody or some of the larger ones are

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starting their own services. Yeah, we just found it was more efficient. That's what they do.

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They're in the business of it. And so, and in a lot of cases, that's a lot easier to get reimbursed

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from the various agencies or whatever the fees may be. So yeah. Yeah. I know you mentioned some

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of the challenges about the high interest rate, the high construction costs and affordability.

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And California has dropped to a 16 year low. If you look at all these things, what gives you hope

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that there's still a lane here? I think that's a good question. I think that's a good question.

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For affordable housing, we'll give you optimism. You know, I think if you've been in real estate,

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as long as I have you recognize that a lot of this is cyclical. Yeah. You know, we're going through

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a tough cycle right now with, you know, where you do have interest rate and construction costs. But

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my hope is, is that just like every other cycle we've been through, we'll see interest rates

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coming back down to earth. So you'll see construction costs getting under control

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on the construction side. The big hope is that modular construction becomes a real option. And

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you have a company that essentially rears its head above the others. Because right now they all feel

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pretty much in the startup type of mode and they're not having the effectiveness, but that's another

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area of hope. And as much as anything, while there is hope, there is a commitment to recognize

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that we don't really have an option to not try to tackle this problem and to not continue to try to

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provide quality housing that's affordable. Because if we don't, then this crisis will become worse.

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It will become deeper. And I just don't see this as one of those that the problem is too big to

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walk away from. Yeah, I totally agree. And I know you mentioned construction costs. And one

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of the things that we find is we all want to be good citizens in terms of reducing the carbon

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emissions. But a lot of these QAPs are now requiring passive house, net zero, all of the

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higher level of certifications with respect to green, which great stuff to do, but it adds on to

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the costs. We're already dealing with restricted rents. So that's another little twist that we're

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dealing with. One of the great things I just saw about you all is you got an $8 million

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unrestricted donation from the Mackenzie Scott Philanthropic Organization. What impact will that

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have for you? That is going to be a tremendous help to us. Just the mere fact that we got selected,

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anyone who understands her process, which enough accolades cannot be

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appointed in her direction for the commitment that she has to affordable housing. I mean, look,

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Bridge is extremely appreciative of being selected, but that's what we were. We were selected. We did

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not solicit it. She has a very quiet process that she goes about. They do their diligence.

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They come, they ask you a few questions. But essentially you're in a position where

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you either get the call or you don't. And in our case, we were fortunate we got the call.

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But she's been a very strong contributor towards trying to help companies like Bridge solve the

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affordable crisis. My hope is that others like Mackenzie will follow her lead. But in the

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meantime, I have to tell you it was a huge help to Bridge. That's really excellent.

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For the benefit of our audience, whether they are emerging developers looking to bring it to the

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game or just folks trying to get in on the finance side of the business, what piece of advice would

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you share based on your extraordinary career for some folks who are just trying to start out?

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You know, there's always been the need for balance. Because look, as an entrepreneur, you have big

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dreams and you have projects that you want to take on. And you have, you know, you feel invincible

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at times because you're going to take on projects that you find yourself way over your skis. And

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you know, all of a sudden you realize, oh, wait a minute, I got to go find the capital for it. And

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you don't have everything lined up. And I just think that there's a huge need for just trying

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to find the right balance and approach to getting projects that you know you can execute on. Because

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it's those first few projects that you do that are going to build your track record. And it doesn't

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mean that, you know, I'm not suggesting you pick the size that makes the most sense to you. You

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don't go around trying to get control of a project and worry about where your capital is going to

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come from after the fact. I mean, that's some of the mistakes that I see that are out there right

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now. And it's unfortunate. But the barriers of entry have always been the same. They're the same

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today as they were when Victor and I and others that have been in this business for a long time

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first got into this business. But if you look at each of us, there's a commitment to execute.

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And there's a commitment to have a lot of discipline around your approach and around

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your performance. So that would be the advice I give the young entrepreneurs. Still dream,

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but make sure you're really committed to execution. That's as important as the dream itself.

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That makes the dream happen or not. So that's what I that that would be the advice I give.

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Great. Yeah, it's memorable. If you were to do it all again, would you do anything differently?

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Oh, gosh, that's that's a good question. I you know, I've been really fortunate in my career.

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I think that I've had great opportunities. I've been close and connected at the hip with some

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very extraordinary entrepreneurs, whether it's Victor, or whether it's even the relationship

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I have with Michael Melkin and others who have been extremely helpful to me. So if anything,

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it's just, it's I'm hard pressed to try to think of something that I would, that I do today that

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that's different. I'm, you know, fortunately, I've got a great family, great wife and kids and

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and success, you know, it's been been good to me, I have good life. And look, you know,

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I'm not Robert Smith. You know, I look up to those guys. And, you know, at the time, it was,

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you know, the early days, we were all working hard, but you know, you just try to find your niche and

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be comfortable, be happy, take care of your family. And don't worry about being the biggest guy on

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the block. That's not that's never been my goal. So

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I said, Well, it's been a real pleasure having you stop by the real estate shop. We look forward to

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celebrating your victories coming up and no doubt you're going to continue having with with Bridge.

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No, I appreciate you both. It's been a good conversation and good luck to you on

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your podcasts. And I really had a great time talking to you today.

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The day the shop content they can't get anywhere else.