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In this episode of the developers, we had a privilege of tag teaming,
Gregory Reeves and Leslie Smallwood, co-founders of the Philadelphia based
Mosaic development partners.
Let's join in on this incredible interview to learn how they got started.
Leslie and I talked about this for some years that, you know, it'd be great to
share our experiences in our journey, essentially, and what we've come through
because we literally started from nothing.
Yep.
Greg, I still remember your story when we were at the happy hour.
Yeah.
And you're telling me when you left the corporate world, you went all in and
things didn't go as planned.
Right?
That would be an understatement.
So that still resonates with me.
I planned to eat, that wasn't happening.
I was like, you know what?
I'm not eating, like literally my kids aren't eating.
My wife's not eating.
That was my experience going from the pharmaceutical industry, right?
And Leslie and I met at the Goldenberg group.
I don't know if you know that, Steve, we were both in the same group.
Yeah, I thought you were there too.
Yeah, well, Ken was a close friend of mine.
I had known him for many years, but I didn't know what he did for a living.
In fact, our kids grew up together and I was in the pharmaceutical industry,
had traveled the world, frankly, and Ken talked me out of not staying in
the pharmaceutical industry, frankly, and told me that I should stay in the
pharmaceutical industry, frankly, and told me that I should stay at home
and be closer to my family because I wasn't at that time.
I was really never home.
And I said, well, what would I do?
He's like, well, you should come work for me.
And I said, I didn't even know you worked.
I never saw the guy in anything other than sandals.
I'm serious.
And Leslie will attest to it.
He never came to work in a shirt that was ironed.
I mean, it was a disheveled mess.
And if you didn't know that he was Ken Goldenberg, you would think
he was a homeless guy.
But then he drove me around one day and showed me all of the real estate
that he owned and I was shocked.
And I didn't even know you could own real estate like that.
You know, he took me to a Lowe's shopping center and a Home Depot.
And he's like, I own this.
I'm like, well, how do you own Lowe's?
He's like, well, they rent from me.
I said, how does Lowe's rent from you?
So how does that work?
I didn't know. I was in the front.
And so he's like, well, why don't you join and figure it out?
And I'm learning business.
And I joined and that's how I met Leslie.
Yeah, it's an interesting thing, because it's not an industry that you can kind of
learn your way into in school.
For example, there's not there's not a course you can really take to be a real
estate developer.
It's a business that is largely that has largely been driven
by wealthy friends and family.
Right. So when you see, you know, the Trump organization, the Durst
organization, those are those are the family
legacies that have been built up over years of wealth.
Right. And some of them have turned into large corporations.
Right. And now you have REITs and you've had REITs that have been large
investment portfolios that are focused on whether it's apartment,
whether it's shopping center related.
It could be now it's there's there's office REITs.
There are REITs that are only designed to support like Amazon warehouse.
Right. So so those are the real estate industry classes.
And what Leslie and I found in Goldenberg was that nobody looked like us were a
part of it.
And so when we talked to Ken about getting and having him really support more
black developers and said, well, I have to do it.
You know, like what else do I need to do?
And I thought, well, that's interesting because we were longtime friends and it
kind of slapped me in the face to be funny because I knew him on a personal
level and I know him from business level.
And I thought, well, this guy doesn't really want us to succeed in this way.
And about two months later, he actually brought one of his black male friends in
to help him start a real estate business.
And this is after Leslie and I approached him about helping us start one.
He said no to us and yes to a guy that knew nothing.
So so, you know, over time, we just started getting more frustrated because we
reached out. We were able to get a couple of people of color to be able to be part
of the real estate infrastructure at Goldberg Group.
So we were a guy named Ken Lawrence, who is now a county commissioner, but he was
a consultant. We were able to get him hired.
Yeah. Melanie Shaw.
We got her as a consultant hired.
That's that's my Alexa.
We got a couple of attorneys, African-American attorneys, to come into his
ecosystem where they could be a part of the development world.
But nothing beyond that.
I mean, we were really pushing to get engineers, construction companies,
architects, and we were getting no traction.
And and I remember going to a holiday party and you think about Philadelphia.
I don't know if you all know Philly, but, you know, we had Gladstein there,
Westings Company Tower Investments.
We had Ken's company.
Dranoff was there.
PMC, you know, like the Brandywine, the top five or six developers.
And one of the guys came up to me and he's like, man, isn't this great?
I'm like, well, it's great. He's like, we can control all of the city.
And it just, again, kind of scrapped me in the face because, you know,
I said to Leslie, you know, somebody makes a comment like that.
They have no regard for the fact that nobody looks like he was participating in this.
And so we just decided collectively we wanted to go and try it on our own
and build our own business that had a different mindset about inclusion.
And we from the very beginning, we knew we wanted people and businesses of color
to participate. This is back in 2008.
And we also knew that we needed to work in neighborhoods that were being collected
because we saw significant investment going in certain neighborhoods
and zero investment going in others.
So we frankly went after the two most difficult aspirations when we started our company.
But we believe that that was the real gap that existed based on our experiences
working with all of these large developers in Philadelphia.
So Leslie and I started Mosaic.
There were actually four of us when we started.
And Leslie and I were the only ones to actually quit our jobs, though.
So you can imagine when we started talking about what our interests would be.
Everybody wanted to split 25 percent, 25 percent, 25 percent, 25 percent.
25 percent, 25 percent, right. Four people.
We said, but Leslie and I, those that quit our jobs, we're still working.
That was that work.
So we said, well, you know, we're not we're not good enough to leave our work.
I said, well, I did.
And and that was the conversation I had with you, and I went all in.
And this is what I have a wife, you see three kids, right?
And kids ready to one of them, you know, not far from
from a couple of years away from going to college.
And so it was a huge risk to take.
And so Leslie and I decided that it was best that the two of us just go in alone.
And we started really working on fundamentals in 2008.
Steve, I don't know if you remember, but it was a terrible time
in Philadelphia for real estate development.
It's when the economy crashed
and it's when really everything shut down.
We started the business in July of 2008.
And by October, nothing had moved.
Like you couldn't get anything done.
And so we spent the next few months talking to lenders.
You know, we talked to TRF.
We talked with you named the bank.
They take us out to lunch.
You know, really wonderful lunch.
We did that for about 18 months, but just absolutely no traction.
It was always a no.
And so we were certainly disillusioned.
But what we did, I think that was smart.
Was that we started creating our own milestones of success.
So the one thing I remember from the pharmaceutical industry was
value was always measured in pharmaceutical industry
and your ability to build a pipeline.
And and so the real estate industry is really no different.
People look at you not based on project you have,
but the pipeline that you have and the projects you've done.
And so Leslie and I early on focused on how do we do that?
We focused on how do we build a pipeline with absolutely no money, right?
Which is a tall task.
But it's also it's also a requirement
for companies of color because we don't come from families of wealth.
So we have to think about what is the way to do that.
One of the first things we did
was we went to the school district of Philadelphia.
They had a number of properties at that time that were for sale.
If you know Edison High School, the former Edison High School on on
on Lehigh Avenue, 7th and Lehigh.
That property was for sale for, I think, two point seven million dollars.
It was a full city block.
It it is a curving and and I'm sorry, I'm
I don't know your name.
Victoria, Victoria.
OK, Kevin and Victoria.
Edison High School has an incredible history.
It used to be an all male high school.
It was around for over 100 years and it educated some of Philly's top
male athletes, elected officials.
Ken Frazier from Merck went to Edison High.
He ended up becoming the CEO of Merck.
You had some Olympians that were there.
Teddy Pentagrass went to Edison High.
So really, some known people were there.
Edison High was also known because more people that went to Edison High
died in Vietnam than any other high school in the country.
So 64 high school graduates from Edison went to Vietnam and died.
And and so that was the history that the neighborhood remembered.
So Leslie and I said, well, let's try and buy this property.
Well, we didn't have any money.
And so it was the asking price was two and two point seven million.
And we said, well, it's a bad economy.
Nobody's building anything.
Let's just give them a price we think we can afford.
And so the school district wanted to get it off their books because
it was a five hundred thousand square foot building
where there was significant vandalism.
There's a lot of drugs going on in that building.
You know, any time you went in, you have to go in with police escorts.
I mean, there was significant meth methadone activity.
There was heroin activity.
I mean, it was a drug haven because it was such a big empty building.
And so we offered them six hundred thousand dollars for the property.
And they didn't know what we were going to do with it because it took up
the whole city black.
We were our plan was we knew we needed to tear down
a building, a community shopping center.
But they accepted the offer.
And then Leslie and I got scared because we're like, OK,
so they're they're asking two points seven million.
We offer six hundred.
They they accept six hundred.
We didn't have six hundred thousand.
So now that now.
All right. So we so I mean, just we started thinking.
Leslie's like, oh, you know what?
Let's ask them for a loan.
Let's ask them to help us out.
And so we went back to the school district and I said, well, what do you guys need?
We said, well, we don't have the six hundred thousand,
but we have an idea. We think we'll work.
We believe this needs to be a grocery store.
It was a food desert.
We're going to we're going to tear this building down.
We're going to put a grocery store here.
And we just don't have all the elements together to make it work.
They said, well, what do you have?
We said, we have we can come up with twenty five thousand dollars.
And so they said, OK, they accepted that as a down payment,
but they said they had to get it off their books.
So they took the twenty five thousand, sold us the property and then kept it on.
And then. Well, they sold it to us, but we had a lease back situation.
So we're not for their books, but they didn't transfer ownership to us
until we were able to get the whole deal.
So for twenty five thousand dollars, we got a two point seven million dollar
asset just because we we refused to say no to this thing.
And we're trying anything we can to have a lifeline. Right.
But we knew once they accepted the six hundred thousand, that was milestone one.
Once they accepted the twenty five thousand, that was milestone two.
The next thing we had to do was get a grocery store to say,
if we tore everything down, they would come there.
So we we took that approach and we just started saying to ourselves,
if we think traditionally, we're not going to be able to make it.
We have to we have to come up with some new ideas and continue to build a pipeline.
Same thing happened with our student housing development attempt in diamond.
I don't know if you know Diamond Green, Steve. Yes.
Three hundred and fifty bed student housing development.
It was the first it was the largest modular building
constructed in the city of Philadelphia in 2012.
And we were able to build it.
One hundred and twenty eight thousand square feet.
We built it in nine months, broke ground and opened in nine months,
which is pretty phenomenal.
We haven't been able to do that since or before. So.
But what we did there was we actually partnered with a CDC
to work on that property and have the CDC become a part of the project.
They own 22 percent of the project.
And we brought a development partner in to help finance it.
And actually, that's that we still own that project that's been operating now.
It's been doing great up until COVID.
You can imagine COVID, you know, the different product types
have different success measures.
That's that was some of the issues that we worked with.
But really, the example I was making early on was to get started.
We had to do some really pretty incredible things.
We had to take risks that we that you would ordinarily think weren't possible.
But then we had to maneuver, constantly maneuver to keep
the ability for us to grow our pipeline.
So our investment basis is don't lose money.
We're not doing anything for charity.
Because you can't take that mindset.
These projects are way too hard to to be successful.
But if you think it's going to break even or potentially lose money,
it's going to lose money.
And so we we are very careful about ensuring that, at least on paper,
these projects can sustain themselves once they're built.
We're not looking to add any additional assistance
after after they're open and operating.
The assistance we look for is in the very beginning.
We've used you mentioned market tax credits.
We've done for new market tax credit deals.
We've done every we've done a light tech deal
for a veterans housing project that we did at Edison Square.
That was our third phase over there.
But but our goal is really wealth building and not just for us,
but for all of the communities, people who we work with.
So when you think about that value creation, real estate,
and it's different from house flipping because house flipping, you can go in,
you can take an existing structure, you can add value to it and sell it.
Right. You have your crew.
But when you're doing development, you have to think early on.
So there's the land cost.
Then there's professional services.
So you've got to pay an architect who had a minimum today is the architects
were working for somewhere around two hundred fifty dollars an hour,
up to five hundred dollars an hour.
We have legal services.
We have civil engineering, structural engineering.
And then you're paying a general contractor their fee
plus whatever bond requirement it is.
And you have to make money above all of that and above your investors.
So so the project has to be so good
for everybody in that network to be able to be profitable.
But you can't go in with the mindset of losing money.
You just can't because you will.
I mean, that's the reality.
You think you're going to break even or you want to be a charity.
You should be a charity.
But this business is not built for that.
It's not it doesn't work.
And it's and they don't create sustainable models.
The one thing that's been the investment strategy that we've tried to get
is investors to look because we're working in more more
more more disparaged communities.
We've been we've tried to find an investor who's willing to take lower returns
somewhere in the eight to 10 percent range.
Haven't found them yet. Not 13 years.
But we have found as more investors willing to invest at a higher return.
But we haven't found investors willing to invest at a lower return.
But they they actually keep you honest.
I mean, when you bring in that that equity investor,
they're reminding you every day that they're there to make money.
And I think it's healthy in a way that it forces you to really think about
how you're building your investment model, because that's what we're all doing.
Is we're building not just buildings, but we're building investment models.
We're building each time we build one.
It is a separate investment structure.
It's got a new set of investors.
It's got a new address. It's got a new lender.
So every time it's the setting up a separate business and your model
has to be one that you find that works.
Our model works because we do use a lot of new market tax credits.
We have used light tech, not that much.
We are looking at how do we build modulely
because we know that modular construction done correctly
really does level the playing field in terms of driving
higher quality housing at a lower, consistent price.
But the key is finding a whole team that understands modular
development so you can get the level of quality that you want out of it
and that it's designed correctly.
So we've been looking at every aspect of
what the cost structure is for real estate
from the very beginning, from architects to engineers to construction type
all the way through to the investment type to the return profile.
And we're building a model around that to try and really minimize
the overall cost of the project so we can maximize either
not necessarily investment to our investors,
but maybe we can provide more affordable offerings to our tenants.
So if we have a
we do almost exclusively mixed income developments.
We don't do just market rate. We don't believe in it.
We believe that there's every building should have a mix of people,
a mix of communities of income levels, whether you're a doctor,
or a garbage worker, or a student.
You ought to be able to live in the same space and the space
ought to be of a quality that everybody lives there.
But the financing around that is more complicated.
You know, it's much more desirable for developers
to build just a market rate building that is a luxury building
and to capture that network of people who are willing to pay a premium
and then your performance looks a lot better.
It's just not the decision we made about building our model.
We don't want to do that.
We don't believe that people need us in that space.
So that's where the complexity comes in for us is building that level.
Yeah, that's a great segue.
One of the questions we had was like, how do you go about
generally financing your developments?
But even more importantly, you know, when you guys went in,
a big part of financing is the personal guarantees.
So we know when you guys were back to Edison High School
and kind of progressed, how did that get you guys in the guarantee?
Totally. Yeah, I mean, we were willing to give our personal guarantees
and we did, but nobody cared.
So they're like, oh, this is your guarantee.
You can keep it.
That's the number one question we get from us, how do we get over that?
How do we get over that personal guarantee?
This is for that, please sit down here and grab a seat.
Leslie's right here. She's coming around and saying, OK, OK.
Hi. Hey, Leslie, how you doing?
Oh, I'm good.
Oh, great.
Greg is doing a great job.
Oh, look, I knew I left you in good hands.
I don't need to say anything.
You know, I was.
Yeah, I'm leaving you in good hands.
I don't need to be a part of this.
I'm not trying my personal guarantees.
And you know, how do we deal with power?
We're dealing with the whole guarantee structure.
It's like a number one question to get inspired developers like, well,
that's just getting roadblock, you know, and for developers that it's talking to.
We have kind of say, well, you know, how did you guys evolve around that?
Yeah, it continues to be an issue.
Absolutely.
You know, the problem with it is we we got around it by forming
joint venture partnerships with high net worth developers.
So there are there are two issues that less is going to call it.
There are two issues that you're going to be faced with.
You know what? Yeah.
One is is track record, which is a big one.
And the other is the other is financing and the whole issue around guarantees.
You know, it's interesting, Steve, is most of the people we deal with
aren't required to provide personal guarantees.
They are only we're required to buy.
But so one of the things that is not funny, how that works
is people that can most guarantee a project don't have to people
that can guarantee the project.
After that, that's credit, right?
That's the way credit works, which is the fundamental problem
that we believe is discriminatory in its basis. Right. No question.
So so I mean, Leslie,
it's a little bit of a issue we're dealing with every day.
Absolutely. I mean, and that's why we had to like we said,
we had to partner with high worth individuals.
But the minute you have to do that, you know, you have to give up,
you know, a good portion of your project, because I remember
when we started the company, one someone said, that's cash is king.
Right. Cash is king.
And it won't. So, you know, and they say they leverage that they hold
that over your over your head.
So that's why we were talking to the city now.
And we're talking to people's how can they make a difference for black developers?
Create this mechanism for credit enhancement so that we don't have to do this.
Create this, you know, fund of money that can offer letters of credit.
Anything that's going to really bolster up
black developers, balance sheets that all system
because it's always going to be an impediment because we're so far behind
and playing catch up that there's it's it's it's it's nearly impossible.
You know, I will say Fulton Bank.
I don't know if he's talking about Fulton Bank.
They haven't gotten it.
We're just getting to the finance part.
But OK, because I will be on a commercial for Fulton Bank.
They have been fabulous.
TRF was great to us, too.
I mean, they got started.
The reinvestment was great.
Right.
They're specifically but they're supposed to be, though.
Right. And they're CDFI.
Right. I'm thankful.
I'm grateful.
But they're a little different than Fulton Bank.
Right. But lastly, let's be clear.
Not all CDFI is created the same year.
No, we've had good experiences with CDFIs and we've had bad experiences.
Yes. Yes. We've been through all of them.
We've dealt with all of the lenders.
Wells Fargo, US Bank, PNC, Fulton Bank, TRF.
List. I mean, we've had loans or loan circumstances with every one of these folks.
And we can give you the list of who's who's really trying to help the cause and who's not.
Right. Fulton Bank arises to the top.
To Leslie's point, there's no question they have.
Just their willingness to really be creative, think outside the box, be flexible.
And know where we are.
Meet us where we are rather than have us meet them where they are.
That's excellent.
Excellent. Yes, it is.
That's well said.
Yeah. Yeah.
And so so but I don't think you get around having somebody that's high net worth early on.
Particularly if you don't have a track record.
That's the other issue is you can't even just partner with somebody with liquidity.
You need to partner with somebody with liquidity who's done it before.
That's that's part of it. That's part of what you have to do.
Yeah, especially early on, because Greg, you probably mentioned,
you know, we both met at the Goldenberg Group and we thought that we're going to be able to
kind of point to that experience and use that to really build our company.
That didn't happen. They're like, that was there.
That was no good. That was not now.
You all did. Yeah, they're like, you all did that with his money.
Yeah, I heard the story about that.
Oh, my gosh.
Unbelievable. Yeah.
Unbelievable.
So you guys have been involved with quite a few projects in Philadelphia.
Yeah. Yeah.
Share a few details on some of the some stuff you've done or you have in the pipeline.
Yeah, I mean, we we have done about one hundred and twenty million dollars in
direct cost business in the neighborhoods.
What we're most proud of is that we haven't focused on Center City to to create
the model that we've created.
We've gone directly into the neighborhoods, invested in neighborhoods that everybody else has neglected.
And I won't say everybody, because there are a number of black developers that have tried to gain traction and doing it.
We've actually had success doing it.
And we've been in like we've been in Fair Hill, Germantown,
Strawberry Mansion, Brewery Town,
Sharpswood, Blumberg, we're in West Philly now.
We're in another part of Germantown.
We're in North Philly.
We're moving into Tioga.
We have a project there.
I mean, we're in neighborhoods where there's significant blight and refining solutions.
And that's what we believe to be our skill set.
What we've also recognized is if we can develop there, we can develop anywhere.
So, you know, the other neighborhoods are not that tough.
We now have developers that are coming to us to do developments in Center City with them and a number of significant developments.
So right now we have a large project under construction.
Leslie, if you want to talk about Sharpswood, Sharpswood Ridge.
Yeah. So that was a project actually that we started in 2017.
2017. It's in partnership with the Philadelphia Housing Authority.
It's at 20th and Ridge.
It's literally right across the street of Jefferson Street.
And that's where PHA built their new headquarters.
And that was all really to anchor that corridor, the Ridge Avenue corridor there and to play a part in a larger neighborhood master plan that PHA put together.
They also are the recipient of a choice, a 30 million dollar choice grant for that neighborhood master plan.
So what they brought us in to do, and it was kind of interesting.
We were brought in to do the other side of Ridge Avenue, kind of a walkable individual, yeah, individual row homes and CMX2 structures that were partially occupied,
primarily not occupied, which was a lot more difficult to to really make something happen because it wasn't like a large consolidated site that everyone could say, oh, you know, build something large here.
But we were still making traction. We were really securing interest of tenants, getting LLIs.
And they had hired another developer, not of color, to develop the shopping center.
And it was just lagging. It really, I guess they just weren't giving it the type of attention that it really deserved.
So their time expired under contract with the housing authority.
And they looked at us and said, you know what, you've got like three executed LLIs.
Do you think you can bring those tenants from your side of the street that you're working on and bring them in to the shopping center?
And can you help us finish a grocery market deal?
And we're looking at their life.
We did.
We're going to give you our tenants.
No, that's right. That's exactly right.
They did say that the time was expiring or or just had recently expired on the other side.
So we did negotiate the deal to then become the developer for the shopping center.
Now, it immediately became a very large project at that point.
So just for resources, we asked and actually PHA thought that we needed to ask because it was such a large project to bring in another developer.
So we asked Shift to join us on that project.
So we are partnering with Shift on that. And that's a 52.
Well, now it's it's probably it's really more like a 54 million dollar project.
Yeah. All of the increase of the material cost that has been has incurred over the last six months.
We have been right in the midst of it. But at the end of the day, it's probably a 54 million dollar project.
It's a supermarket. It's an additional 50,000 square feet of other retail, which urgent care.
We have Santander that wins to go. We've got a restaurant coming and then about 8000 square feet more space that we are now leasing.
But wanted to wait until there was some some real prods construction going on on the site.
So that's a very complicated capital stack. And you know what those are.
We have a hundred units a thousand.
I'm sorry. Yeah. Yes. Thank you, Greg.
So complicated capital stack. We've got twenty eight point five million dollars of new market tax credit allocation on it.
We've got a RACP two allocations of RACP grants, that multimodal grants.
We've got subordinate debt from PIDC. We've got Fulton in the fold.
Capital One is our new market tax credit investor.
We had to create a condo structure to make it work.
We have a brown lease with the housing authority. So it was one of the most complicated deals that you could imagine.
The legal fees alone were over a million dollars.
Easily. And then we had then we had the audacity to even create more complexly by doing the crowdfund.
That's the other thing that we decided. And Leslie and I were trying because again, our whole model is.
Keep in mind, too, everything that we do is designed that we're not just doing this for Mosaic, but you know,
in all of our projects moving forward, anywhere from 50 to 100 percent of our professional services are either African-American or women owned businesses.
I mean, we are we are identifying those key companies and bringing them with us in everything that we're doing.
The one thing that we found from financing standpoint is very difficult to get African-American investment and community investment.
And Leslie was able to we had had multiple meetings, I think two years worth of meetings to try and get local folks to invest.
We started out. We thought it would be a small amount. We said, well, what they said, what are you looking for?
We're like, we're going to start small at about seventy five thousand dollars for investment.
And everybody left. Nobody came back. Then we had the next meeting.
We're like, OK, we're going to try fifty this time because now we'll get people.
Nobody came back. Twenty five and ten and five. We got no takers.
So I mean, zero takers. This is 10 meetings in. I got to talk with, I don't know, five, six hundred people, Steve, that we're trying.
No takers at five thousand dollars invested. And Leslie's like, well, I did this thing.
It's a crowd fund and and it allows non accredited investors to go in next to accredited investors.
We actually don't have a problem getting people to invest half a million to a million dollars in our projects each.
They just never look like us. So but Leslie found this community crowd from where you could invest as little as five hundred dollars
and get the same return as if you're investing five hundred thousand.
So we decided to include that in all of our projects.
We started with our Germantown project and now that Sharjahood project we have it and we're doing it.
Frankly, Leslie's working on it now at the Navy Yard.
So it's going to be a citywide investment model for as little as it might be a thousand.
I think Leslie, what do you think? It might be a thousand, but it's still going to be a very achievable amount.
So, yeah, yeah, yeah. We're working that out now.
Let's hear about the Navy Yard project before I jump on to the next one, because I mean, being from a product here,
the Navy Yard has always been there and now they've got it to the point where if you tell me it's almost going to be a city within a city.
It will be. What's going on there? I love to hear about it.
Oh, my gosh. We are in the throes. We're like drinking water through a fire hose on that project.
We're designing the first phase. So the Navy Yard is a multi-phase multi-year project where we sign an agreement with PIDC.
When did we sign it? March? March. We were awarded the project last July.
It took us until March to actually negotiate and sign the agreement. So it tells you how long this stuff takes.
I see. Right. Yeah. That's the sign of the agreement. Now, the agreement is a two point six billion dollar project.
So we are the co-development lead along with a group called Ensemble Development Ensemble Investments.
They're out of Long Beach, California. Good group of people.
The big big time hotel developers around mostly in California and Phoenix.
And I think they have some some property in Vegas, but they came to Philadelphia.
They built the Marriott Courtyard in in the Navy Yard. That was how they first got into the space.
And then when Liberty Property Trust sold their company ensemble by all of their buildings at the Navy.
So they own about three hundred and fifty million dollars worth of assets that the Navy Yard already.
And they called us and asked us to partner with them on this project on the Navy Yard project.
So we went we went against thirty five companies. They shortlisted it to five.
The five companies were I think Gullbane and Zaire Lynch were partnered.
We were partnered with Zaire. Yeah. We were partnered with with Ensemble.
Trammell Crowe was a part of it.
Heinz out of Texas. Heinz Hoffman. Hoffman did the wharf. Right.
Hoffman was partnered with Gattuso who is a big who is the president of Liberty Property Trust.
So they're the guys that did the war from the D.C. Wharf.
So we ended up being selected out of those folks.
And now we're working on our first base which is about four hundred eighty million dollars for space.
It is six hundred and twenty apartments to lab buildings two hundred and thirty to one hundred and fifty thousand square foot lab buildings.
A six hundred and fifty car parking garage and a four or five star hotel that we're all that are all in design right now as we speak.
We plan to break ground early next year on on the whole development.
But each building will start in sequence. We're not going to start all six buildings at once.
But we plan to have them all done by 2024. And that will be the first phase of development.
We hired Moody. So just to let you know as a part of that project we're very concerned.
And and part of our ethos was to bring in African-American and women development team.
And on all of that project we have over 50 percent participation of African-American and women on special services.
So for example we scoured the city looking for African-American architects.
I don't know if you know Kelly Maiello. They're probably the largest in the city.
Emanuel Kelly he worked on for example I think the last project he had was the convention center.
But he's a 20 person shop and he just isn't big enough to do the work we're talking about.
So we actually went out to Ohio and found a group called Leslie Moody.
Moody Nolan. Moody Nolan. I don't know if you all know Moody Nolan but they're the largest African-American architecture firm in the country.
And they just won the 2021 AIA award. So we brought them in and they're the architect of record on the project.
We also brought in Rodriguez. Do you know Lou Rodriguez? I've heard of Lou yeah.
He's a civil engineer in Philadelphia. Latino brother. We've known him for a long time.
He Pinone had had the Navy Yard exclusively for the last 20 years.
They're now sharing those responsibilities with Rodriguez.
So the project moving forward they're about 50-50 on that project.
We brought in all women on landscape architects. We brought in 20 firms that are minority and women owned.
MEP, landscape architecture, etc. that are working right now.
In fact, in the first four months of this year, we spent nearly eight million dollars on minority and women owned firms.
So if you think about procurement and the issue around procurement in Philadelphia,
you'd be hard pressed to find a company that spent eight million dollars on minority and women owned businesses.
We've done it in the first four months.
We're expecting our average spent on women and minority owned businesses with the majority needs to be for minority, not women,
to be somewhere in the neighborhood of 50 million dollars a year for the next 15 years.
So that's part of what we're doing. It's more than just what we're building.
It's who we're building it with and who gets to use those services once it's built.
That's what's most important to us. So we're excited that we're actually a part of the team so that we can keep that front and forward.
Fortunately, Ensemble has really accepted and adopted and embraced all of that.
But we're always challenging every conversation.
We're bringing it to even the majority firms that we are using. We're like, well, what does your personnel look like?
Is it diverse? That's something that you need to think about also.
So we're challenging everybody, which is important.
Yeah. Well, we tell literally everybody if you don't change course, we're not working with you.
So, I mean, we're and I think the key for us is that if you're in a place where you have influence and you don't use it, shame on you.
And so we're just at a point where we're not willing to to really take anybody's approach for granted because we believe our approach is the right way to go.
So, you know, we had we had a conversation with the first organization.
I know you probably know them. They have Penn's Landing, which is another two billion dollar project.
And they asked us about they're looking for a 20 percent minority investor and developers part of their team.
And the first thing, Leslie and I said to them is that, you know, we may not be the right team for you because if we come in and work with you, we're not we're not a pass to the group.
Like, we're going to insist that you bring in black architects and black engineers and and Latino engineers and women on businesses.
And they've got to be a part of this design team or it's not going to work.
I said, you just you have to know that up front. We're not because we will fight.
So, you know, you have to do that.
And right. And so by creating that system, that's what really starts to force the man. That's what we're seeing is forcing the man for for many businesses.
Excellent.
I think we did. I think we talked about eight developers now.
What is your internal development company looks like and what type of traits go after some of the folks you bring on board.
So it's the question is so timely because we are right at that. We're talking about it every day.
Oh, my gosh. Where we know that we need to hire additional people and have already started to.
But we started to really structure the org chart and we don't want to get too large. Right.
But we also know we have way too much work and too much in our in our pipeline, our portfolio to not bring on additional people.
I mean, one of the things that is very important to us is bringing in folks younger than we are that they can really get exposure, they can grow and they can advance themselves in the career and their career.
So we are we have brought it on. And the other thing that's important to us is just like majority firms, they are able to bring on their daughters and their sons and they can continue to build legacy.
Right. We want to do that at all as all as they are. So Greg has a couple of his sons that work with us, my goddaughter.
She works for us. And we just said today, I said, they're so worthy. They all have master's degrees.
They're incredibly they're incredibly talented. They really are. They really are.
Our three kids are the most educated group. No question. No, no. It's it's wonderful. Right.
And we're creating a path for them if they elect to go in that direction. But it's important that we have been able to create it if that's something that they want to do.
But, you know, one has their master's in construction management, another one in master's in finance, another one in master's in urban development.
So it's very they're all very appropriate and relevant degrees for what we're doing.
But we're also needing a first. Right now they are. They're not going to stay.
Because that's all I've been very thrifty. We've been very thrifty and frugal, but we are also recognizing that that is no longer the market. Like there's some of the salaries we're hearing are daunting.
They're insane. And and here's the thing. This is the dilemma that African-American and businesses are going to face. Ninety six percent of African-American owned businesses, solo operators, right?
The sole entrepreneurs. This is across all industries. And the biggest way to ensure failure is to own a business by yourself.
And so what we realize is that we needed to be more than one person owning a business. We were always careful about growing it because we didn't have the money.
Right. We didn't want to go out of this. And so Leslie and I had come up with all of these creative ways of staying afloat among all of them being as thrifty as you can possibly be.
I don't know anybody that could have a dollar spread further than we can. We do. We'll do our own designs if we have to. We'll wait a couple of months to get an architect in and we'll do the designs ourselves.
We'll run all the financials. We'll make sure it works. And then we'll think about getting an architect. But because that money spent is money gone.
And so so when you start dealing with majority firms that have full staffs, they don't think that way. They just spend the money. But because they have so much more capital available to them to do that.
But you can't grow this business without people. You just can't do it. And so as what you have to think about is what are the skills.
One thing that Leslie and I did is we didn't kind of build this business on friendship really was built on skill sets. Right. We have compatible and comparable skill sets and we kind of do what we do in our space.
And we're looking for people. And whenever we have the conversation, we don't ask who we like. We ask what their skills are. And those skills don't have to be fully developed in real estate.
But do they have a good financial background? Do they know how to work with Excel? If they do that, we can have them working with us in this space. You know, do they understand community? Do they know how to work with communities?
You know, are they good community organizers, community developments? Do they write well? Writing well becomes a very important skill in this industry.
Leslie and I found that out the hard way because we started submitting a bunch of stuff. We had people do it and they can't write. We have to rewrite the whole thing.
So, you know, you start looking for we start we want young people because we can't find seasoned people of color to get into our space. So we're basically organically growing it.
But we're doing it around specific skills that we think we can develop into into something.
And the main thing is just right. I mean, we say that also. But anything else, you're smart. Right. Smart.
We don't care what background you came from. It doesn't matter. None of us came from real estate. Right. Well, that's the beauty of real estate.
But you got to be smart. Yep.
On a similar front, how do you kind of foster and grow your external relationships? Are you on boards or how do you source your deals currently?
You know, we never did that sourcing deals. Yeah. Yeah. We always try to stand with the radar. Yes, indeed. Yes, we did.
And the reason why is we thought people could take them take the deals from us because they always people if we had a good deal, somebody would want money to get it.
Yeah. So we we primarily kept those hidden. It wasn't until we had success that actually these boards started reaching out to us and asking us to participate.
Leslie sits on a couple of boards. I sit on a couple of boards. But that hasn't been the way that we built our business.
No, I was going to say that's not how we started even now. Yeah.
We have been we've tried to stay quiet, frankly, you know, just put our heads down, put the work in.
We've met. I mean, I'm not a big fan of networking. I think it's nonsense. I think it's helpful.
So it's not nonsense. No, it's not. It works. It works. It does.
I found to be a relationship business. You just work.
You just network differently. Great. That's all. Like now that you're on the Chester Economic Development Council for you're doing a lot of networking with your board members.
You just don't like having to go to social events. Right. Right.
Yeah, I don't want to I don't want to just sit around and talk to people.
I mean, you're still old school and pick up a phone and call people and that's networking. You just do it differently. But you network a lot.
And maybe you're right. Right. Right. Right. Right. Never. Never mind.
Greg, you talked a little bit about modular housing. You might just expand in that. What's your what's your company's.
We are all in on modular. See, think about every industry you know.
Think about the automotive industry. Think about clothing manufacturers. Think about everything that's made.
It's all made unless you're getting cheap labor in a third world country.
It's all made in a factory by some robotic element. Right.
The only exception to that is real estate development where they're making it the same way they made it 100 years ago.
And all you're doing all they're doing is charging you more for it.
So you're building a house and you're paying not only all the architects, engineers, all the people to get it permitted.
Now you've got to pay the plumber, the laborer, the electrician, the carpenter, the masonry, the roofer, you know, and then the person supervise.
Right. And then the finance people above that. And Leslie and I always believe there's got to be a more efficient way to do this.
Right. And the efficiency comes when you have a factory built product.
You can actually design it correctly, build it in actually comfortable conditions.
You don't have weather as your enemy when you're building a modular box.
And if you can develop a box that is like a Honda Accord, you're building the same type of thing over and over again.
You can actually get really great economic efficiencies.
And so that's what we find. We're trying to really master building these boxes that bring great economies to scale.
And we want to do it in a factory setting.
Leslie and I also observed that when we went to modular factories, we actually saw women working in there.
They were working as plumber. They were working.
So so what was interesting is the climate had something to do with gender in this industry and that if we can create a better climate for women,
maybe that's the way to get women in.
And if we were able to get modular manufacturing in Philadelphia rather than the outskirts of Pennsylvania,
that's how we can get more people of color in manufacturing and in construction.
And so that's really where our focus is now is how do we take a modular format, bring it into a place that's diverse and get more women,
people of color to actually work in that industry and drive more affordable pricing around the whole housing model.
So we think we can do that. We've been working on that for a year and a half, two years.
We've done three or four modular buildings.
Yeah, I was going to say we bought modular coming right out the box.
Our first project was designed modularly. So, but now we see that 2010.
Yeah, 2010. We've been building modular since 2010.
But now we see systemically how it can add to both women and minorities getting in the industry.
That it's a direct line to get them skills in the industry where the unions wouldn't get them in.
So we have another way to do it. So we're big, big fans of that.
Yeah.
We think that it will be the next phase. We're actually, we were awarded the tiny home development.
I don't know if you were aware of that for today, but I didn't know you guys got that.
Yeah, there was a, Melissa, can you explain what happened with the homeless camp encampment?
Yeah, I mean, I'm sure you were aware of the one that was on the parkway,
but then there was also another encampment on our site, actually, at 20th and Ridge.
And they were there because it was proximate to PHA's headquarters.
So from that came negotiations with the organizations to find them housing.
And one of the, well, there's two projects right now that are on the books
that are really addressing the concerns that they had been discussing and negotiating.
One is in the Northeast, which is more a transitional homeless facility.
And then the one that we were awarded in West Philadelphia, yes.
But the one that we were awarded in West Philadelphia is for people transitioning permanently out of homelessness.
So they are actually full apartments, just smaller, and that's why they're calling them tiny homes.
They're less than 700 square feet for two bedrooms and about 400 square feet for single unit apartments.
So that's 375. OK, OK. Thanks.
So, yeah, so that's what we're doing. We were awarded that earlier this year.
Yeah, we're unleashed for us to really get going.
I think it was March that we were unleashed. So we are.
Yeah, we're doing that in West Philly. Those are being placed in West Philly.
And we're doing 20 of those units as and it will be the first done in Philadelphia.
And we plan on building them modulately. So what we'd like to do is master that.
How do we master the tiny home, the tiny space development in a manufactured environment?
That's our goal. That's excellent.
And we don't think that it has to be limited to the homeless community.
There are there are millennials that are very cost conscious that want to keep that, you know,
disposable income to do other things, but you want to live by themselves.
And this could give them an opportunity or live in a community.
Right. So if you have a development where you have multiple kind of cottage,
you know, kind of a village of these tiny homes, they could also be for millennials.
And say a community garden that goes with it. Right.
We can build these homes and either rent them or buy them.
But the rental rate, you know, say they're renting this for six hundred dollars a month.
Right. And they have their own space. It's brand new.
It's in the community and gives them the ability to to have real disposable income
where the cost of real estate isn't overburdening your life.
But now you also have an environment where the community where you can participate in other community activities.
That's what we'd like this to morph into.
In terms of how we create the space.
We had a question kind of morphed in and started talking to developers and, you know,
considering like some of the folks who were aspiring to be developers, this was really false.
You know, this perfect question for you all.
How do you work in your personal life when I mean, I used to work for Michael's.
I used to go to the job before the authorities.
And I think I kind of neglected the whole thing.
I didn't have balance. But how do you all feel?
But look, I was less than you had to go. I'm a failure.
I admit I can tell you at Merck, I was a failure.
I was a failure. I had incredible success there, but I failed at my thing.
And that is a fact. And so but when I met Leslie and she was at the Goldenberg Group,
she would have her daughter in the office when she was in the office.
Most of the time she wasn't. She wouldn't even come in.
She was one of those early adopters like, you know, if there was a Zoom call, I don't think I would have ever met less.
Leslie was all about her daughter from the moment I met her.
And I admired that more than anything else that I knew about her.
And I said that person I need to pick.
And when we started this company, that was the one rule we had is that family will always come first.
So whenever we're on a call with anybody and her daughter calls or my son calls, we let people know, oh, that's my daughter.
That's my son. I got to go. Or I'll be right back.
We don't care who it is. We really don't.
So I feel like I have the best family balance I've ever had in my life
because we started this company with that mindset that that is going to be what's first.
Yeah, we do. And we live by it.
We live by it.
Now, I will say that. Oh, yeah, our kids absolutely know it.
But I will say our spouses are wonderful because we work all the time, though.
All the time.
So I mean, we will stop. We will be interrupter and we'll carve out the appropriate time to do stuff with our families.
But other than that, we're constantly working and we're constantly thinking.
We're constantly strategizing. And he and I are on the phone all the time.
Oh, my gosh. Oh, my gosh. It's awful.
But what we do is whenever our child needs something, we're there for them.
Oh, absolutely. We don't miss child events.
We don't have that demand of anybody who works with us.
If they say they've got something for their kid, we're like, we get it.
We wouldn't sacrifice our time for you if our kid has a priority.
If your kid has a priority and you're dealing with us, you've got a problem.
That's how you do it.
And we don't and we don't micromanage. We always say, if you want to be up at 10 o'clock at night doing your work because you know you have something to do with your daughter or your son in the middle of the day, fine.
It's all about production. It's all about getting the outcomes and getting it done.
So how you do it, it's up to you.
We're not that good at all. We're outcome driven.
If you can get some if you're that skilled that you can get work done ethically, we're not trying to break any laws here.
You can get any work done in four hours and it takes somebody else four weeks.
We don't care.
From an entrepreneurial standpoint, what would you rather have?
That's what we measure you on is how good are you? Can you get it done fast? And if you're dealing with that free time, you need to go play basketball and do it. You need to go do it.
We don't care.
Yeah. Yeah. This next question I had to throw in just for you guys, Steve, I know Leslie Collective.
But since the George Floyd incident, how have things changed or have changed for black and brown developers?
If I should carry out that, if at all a lot of talk.
I don't know if we've seen.
I don't think we've seen the effect yet.
Like Greg said, it's a lot of talk.
I think that there's initiatives out there that people are trying.
I know I've had a lot of conversations with the Commerce Department and PIDC and PRA.
You see the accelerator fund that they've created and the recovery fund money that's coming in.
The city wants to do something to help black and brown businesses and black and brown developers.
I think that there's a heightened sensitivity to it, which is causing a lot more discussion and at least thought being put forth to more creative approaches.
Now, where it takes us is still yet to be seen.
But I think at least more attention is being given to it.
What I will say is it's involved in people that thought that, for example, PIDC has been great.
In the same way that Fulton has been wonderful to us, so has PIDC.
And they, in the way that Leslie and I have insisted on inclusion and diversity in our business model, they're requiring it.
And I think they feel emboldened to stand up to it.
And an organization like them, where they may not have taken such a strong position, is taking a stronger position than what we've seen in the past.
I sit on the board in Chester County, an economic development council.
It's a group that's largely conservative. It's 90% white.
And we're having serious conversations about equity and inclusion in that county.
And so when I say a lot of talk, some of that talk is actually meaningful.
Because if we were before the George Floyd incident, there would be no talk.
There was no discussion. Exactly.
And I don't think it's just George Floyd. I think it's George Floyd in the combination of what happened with the virus.
Because the reality is that the George Floyd incidents have been happening for years.
That wasn't new. What was new is that it happened in a framework where we were all watching the same movie.
So for the first time, you didn't have the distractions of kids out playing sports or moms at work or some kids at school or everybody sitting at home watching that happen.
And it was almost impossible to reconcile during COVID that it was anything but—
In me, the spirit doesn't provide the right word—anything but dehumanized.
And if you couldn't get to that point and recognize that, there's clearly a problem with you.
And I think that's what that incident did in combination with us being at home because of COVID.
I don't think it was the incident of love.
Last couple of points.
Is it something COVID, Kervin?
Yeah. Last question that we have. If you were to do it all again, would you do anything differently?
I would have had more money.
That's exactly what I was going to say. But you know what? We just didn't have it, right?
So that would have been a nicer way to do it.
Whatever we had, we spent. Let's put it that way. Every penny we had.
I will say this, that the journey has been gratifying overall. It has been the hardest thing I've ever done.
And I would imagine, Leslie, it was the hardest thing you've ever done.
And there were so many times that we know others would have quit and did quit along our journey.
We've seen people give up, start to give up and get out. And we had, we think, a harder road and we just didn't give up.
And the resiliency of never giving up is something to behold when you look at what you're capable of doing.
And it's that that I honor more than anything. Is that, you know, just the resiliency that we've had over these 13 years to get to where we are today.
And the opportunity that it gives us for the next 13 years, I think, are pretty incredible.
But that is, that's the lesson in all of this is the journey.
And I would add one thing, because you mentioned that a lot of our businesses are sole proprietors.
I do think that it has it has served us well, that it was two of us that were able to really start the business and persevere persevere through the trials.
Because when one was discouraged, the other one was strong, you know, and vice versa.
And because we all had our moment, you know, we both had moments like, wow, this is rough.
This is rough. Not only our moments, but our thousands of moments.
Well, because we had children going to college and having major life moments, you know, that we still had to we had to accommodate for and it was tough.
Yeah. Yeah. Yeah. Her doesn't stay in the past like other people have the rich uncles in the family.
Like, I really didn't know. Yeah.
And look, we have people that are now working for us who watched our journey and weren't willing to step in with us because it was too hard.
And we understood it. Yeah. So so it's it's it's a journey that is not for the meek.
Yeah. For sure. For sure.
I tell people like that. But was that everybody would be doing it now. Exactly. Exactly.
You're right. But there's nothing when we talk about being able to spend the time with our children and our families to be able to get up every day and literally do what we want to do.
That's what we saw in real estate. That's what I saw in Ken Goldberg.
Twenty years ago, but this was a guy that got up every day and did what he wanted.
And I thought, gosh, what does that feeling feel like?
I didn't know. Right. I didn't know that feeling. But I know it now. Yeah.
Now, that's an excellent start.
And our goal is to become the largest African American developer in the East Coast.
We hope to build to 10 billion dollars of assets under management the next 10 years. That's where we go.
But to do that, we can't work on small stuff.
Yeah. Everybody improves with that platform. And with that platform, what we can do is now be a catalyst for other black and brown developers.
So when we had to joint venture partner, we had to joint venture with a predominantly white developer. There weren't any predominantly black developers who we can rely upon for credit worthiness or for any potential guarantees.
But if the younger developers coming up are looking for that platform, we would want to be part of that platform where they can join venture with us.
And I want to share with them our model about a different way of doing it, not just getting the project done, but getting it done with black, black, black and brown architectural firms, black and women, law firms, Hispanic engineering firms.
I mean, that's our model. So it's not just a mosaic on it. You have to think what comes with it.
I got a jump onto a 430. So it's been great guys. Appreciate it guys. Thank you.
Another day at the shop. Content they can't get anywhere else.