This is the real estate shop where each episode will bring you a top industry
expert to share their current programs or projects that are making an impact in
our communities today.
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In this episode of the developers, we had the privilege of tag team at
Ernst Valley, co-manager of SAA EBI based out of Baltimore and Adrian
Washington from neighborhood development corporation based in Washington, DC.
Let's join in.
Morning everyone.
So, you know, we have an opportunity here to talk to two distinguished
developers, Adrian Washington and Ernst Valley.
I would love to just understand how did you guys get into the business and how
did you develop your firms?
Thanks.
I'll tell you my story.
And it's really, I think it's probably an unconventional path.
I went, you know, unlike Ernst, I went to undergrad.
I got out, I worked in corporate America.
I got my MBA.
I worked in management consulting.
And I had absolutely zero, I wouldn't say zero interest in real estate, but you
know, no professional relationship to it.
And so I'd say that's by the time I was 30.
I mean, I really, you know, I had no idea I'd be end up where I am today.
And it really came to real estate as almost like a, by a hobby.
I had bought an old brownstone in Washington, DC and fell in love with the
process of, of, of neighborhood change of the physical aspect of taking care of
the physical aspect of taking like an asset and taking it from something that
was not useful to something that was beautiful and functional and, and created,
you know, value, both neighborhood value and economic value.
And I was in consulting.
I'm like, I hated that.
I was like, you know, what am I going to do?
And I was like, I would, you know, be, you know, going flying, you know, out,
you know, out of town and coming back at like seven at night, be up at
midnight, sanding floors and things like that.
And so I was like, this is what I want to do.
This was my passion.
And so I really ended up just turning a hobby, working on my own house
into a career that's, you know, lasted, you know, for decades now.
Wow.
So how did you all build or develop the teams and also maybe overcome some of
those initial challenges by having to post your own guarantees?
How were you able to overcome those early challenges?
I'll start with your second question.
I'm still posting personal guarantees.
I don't know if someone knows how to get over that obstacle.
It's funny.
I was just literally, I was just, uh, I had negotiated a loan and I got the
term sheet like, you know, a couple of weeks ago and like, there was no
personal guarantee on it and I was like, yes, this is great, you know?
And I was really happy and I signed and got off and then the loan officer came
back like literally like yesterday in the email and said, Oh, I've got the,
well, you know, I've got one little thing.
We need a personal guarantee.
Can I get your personal financial statement?
So, uh, I have not gotten over that.
I love to hear stories of people.
I mean, not every loan I do is personal guaranteed, but, uh, almost all of them are.
So, um, I love to hear stories of people who have overcome that.
I mean, in terms of, in terms of putting together a team, I think that real
estate development is, is not kind of, at least in my experience, kind of like a
very kind of, you know, organized business progression where you can project,
you know, like, you know, this year, my sales are going to be X and then next
year they're going to be 1.5 X.
You can kind of forecast out.
It's very episodic.
It's very entrepreneurial.
So typically what I find is that developers, you know, they're working on projects.
They get very busy.
They get more or less confident depending on the environment and their portfolios.
And they get to a point, they try to keep things lean, but you get to a point where,
you know, either you, you say, we just can't do it.
We're just bursting at the seams, or you get to the point where, you know, I see
opportunity, you know, I want to go into this new market or there's this new
product type and need this expertise.
And then you make that, you know, move.
And what I've tried to do over the years is, you know, not be so reactionary is
to start kind of looking for talent, like way before you need it.
And so, you know, right now we kind of constantly kind of keep job postings
open and people will respond and they'll say, you know, actual job was filled,
but, you know, you have an interesting resume.
Let me talk to you or, you know, you'll do events and that's been tough during
the COVID years, but I mean, you know, prior to that and hopefully going forward.
Now, you know, you go to events, you meet people and you just take
little notes to yourself.
You say, oh, this, you know, this person, you know, it seems kind of interesting
of a background, you know, that, that me keep an eye on them.
Let me like, maybe do a coffee with them.
And even if you don't sort of need that hiring person right now, you know, you
never know someone could leave, you know, someone's moving out of town.
You need to fill that position.
Or like I said, you've got an opportunity, maybe you land a deal and you need
expertise in like new markets, tax credits.
You're like, oh, you know, well, Lisa, I remember talking to her a couple
of years ago, you know, does Newark's tax credits, you know, let me check them out.
So you really got to just be, you know, opportunistic, flexible, and, and
you need to look ahead.
Yeah, I'm taking notes actually.
It's, it's, it's interesting because we tend to want to stay lean rather than.
Be bursting at the seams because you can't really get hurt when you're
lean, right?
And you could get hurt if you're bursting at the seams, because just
watching other people that have gone and they, you know, you don't really need
a hundred people to have a development company, five to 10, 15, really great
people, but then I also agree you have to stay ahead because then a big project
comes and you don't want to be scrambling for that big project.
But we, we tend to stay lean and, and, you know, it does make sense to, um,
constantly look out for talent.
And on the personal guarantee front, the best we've been able to do is get down
to like 25% of their outstanding loan.
We would personally guarantee.
And that's for like a fully stabilized product.
And until you get there, uh, you're on the hook for, for it.
And so I don't know any other way.
And so you have to have liquidity and you have to have a balance sheet.
Uh, that's the biggest thing about, uh, development before, um, you can kind
of scale, you need to get to a point where you have that balance sheet.
And, you know, you also need equity as opposed to debt, because equity can
be added to your, your balance sheet, essentially.
And I don't know how many people will have that conversation that, you know,
pretty much say, look, you gotta go get a joint venture partner, cause you
don't have the liquidity and you don't have the balance sheet.
You know, guess what?
You're just not going to get it done, but, um, that's just folks trying
to break into the business.
It's not easy.
So you all been in business for a while.
What projects have you done?
And do you have any particular ones that are your favorites?
Well, I'll start.
I mean, we've done, we were just counting all the day, we've done 47 projects.
So that that's quite a bit.
And, uh, you know, it's, when you talk about what your favorites, it's
kind of like your children, you know, not that I have 47.
47 children, but, you know, it's like you, they're all, you know,
hopefully projects that you, there's something in me like, and that, you
know, you may like one for, you know, more reasons than another, but that,
you know, hopefully you've chosen your projects well and, you know, you
look back and you're very happy.
Cause I think that's really what drives people be developers is that sense of
creation of looking back and, uh, saying, you know, I did that.
Like I'm sitting here in my office, which is a building that we did.
I'm looking across the street and another building we did.
And, you know, those are just senses of accomplishments that you don't
get in a lot of other fields.
And so I like that.
I mean, I would say in terms of favorites, like I said, there's none that are
favorites, but there are certain ones that were kind of milestones for me.
I mean, I remember kind of the first.
Like double digit condo project we did on a project at Chapin street.
I remember like looking at the building across the street, which was at the
time, the largest condo building we did and an old industrial warehouse.
And so our first kind of like real loft style type of thing.
I remember like the first.
For the housing project that we did.
So I think there are kind of like milestones along the way, but I think
every project I look at, at something, you know, like one had great design.
One had a really great, you know, creative kind of capital stack.
Another was kind of, you know, I really liked the design, you know, the
units were really laid out.
Another was, you know, maybe the commercial tenant that we brought in
was somebody really unique and we helped them build their dreams.
So you find sort of different elements of every project that is something that
you, you know, that hopefully you're happy about.
I would agree.
The first are always the best, you know, like my first row house.
I remember every detail about that project, the first multifamily, you know.
So the first are the ones that you remember.
And then you really try to create for yourself, you know, a value system.
Like when I develop, these are the things that I'm going to do.
And these are the things that we value in our buildings.
And, you know, we really focus on the people and we really focus on urban
areas and neighborhoods that have, you know, typically been ignored and not
invested in.
And we find that racism has a lot to do with a neighborhood that doesn't get
investment.
It's because, you know, the market doesn't like who lives there, not
necessarily because the project itself doesn't work.
We were able to do a project behind Penn Station in Baltimore City.
And so think about Penn Station in like New York or Penn Station anywhere, you
would want that piece of property.
But in Baltimore, you know, we were rookie developers, but we got this
project because we valued the people that was in that community.
And, you know, and we're finding that all over the place.
We're doing a project in Richmond, California, and they, and it's right
next to Amtrak and the BART train in the Bay Area.
And no one values it as much.
And it's because of the people.
And so, you know, I like the projects, but I like what they stand for, the
fact that we're trying not to gentrify people of color out of these really
valuable communities.
And when you talk about your pipeline, aren't you just mention a project in
Baltimore City and another one in California?
How do you choose what markets are going to go into and how do you
present opportunity?
How do you look at it?
We're not really a place-based developer.
So we don't say we're only DC and I've got friends that only develop in DC.
And now they're trying to branch out in other places.
We go to different markets because I, you know, I truly believe that you have
to be in different markets because development is such a, you know, you can
get held up for six years, 10 years on certain projects.
And so if you're not in different markets that don't have the same
politics as the other market, you're going to find it very hard to get
into the same market, you're going to find it very hard to have longevity.
Right.
And like, if, if you get the wrong administration in the market that you
say is your market, well, that's four or five years that you're not developing
anything.
But the chances of not having the wrong administration of continuing to get
your projects done in multiple markets.
So that's one reason we're in different markets.
The other reason is because we want to be in urban markets and we want to kind
of approach out there, especially in communities of color and there's
communities of color in all the markets that we're in.
Awesome.
Adrian, how do you look at your opportunities and your pipeline?
We are sort of that, that developer that sort of locally focused.
I mean, we've done up, you know, through our first 15 years, I say all of our
projects were in DC that we've expanded a bit beyond that.
We're doing some projects in Maryland now, and I definitely get the
advantages that, that Ernst you're talking about.
What we tried to do is diversify.
I mean, we do a lot of public private partnerships, like, you know, like I
think most black developers do, but we also do sort of market rate that, you
know, aren't, you know, involving, you know, the public sector.
So that gives us some kind of flexibility.
We do different product types.
We do, you know, for sale, we do rental, we do affordable, we do market rate,
we do commercial.
So it gives some diversity, but I mean, I'm definitely hearing what Ernst say.
I would like to be in other markets.
It's something we've talked about for a while.
Just seems like something we just never get around to doing it.
And so it's, I think it is a way to diversify.
I think it's, it's a way to kind of also have more fun, add more variety.
I mean, I think that you can kind of work in the same markets and, and
particularly if you're dealing with government officials, even though
administrations change, you're dealing with sort of the same structures.
And, you know, I think it'd be fun to, you know, go and, and other places and,
you know, I go and visit them and I talk to other developers there.
And I do kind of pick up like a different perspective and, and sort of like a
refresh, and I think they'd like to do that.
So maybe, you know, next year is the year we actually get around to really doing that.
Awesome.
And with all this, you know, development going on in your portfolios, how do you
manage your personal life and the sidebar that Ernst, as you grew from
Baltimore to other markets, like how did you set your organization up to be
successful in those markets and also how do you kind of like convince your wife,
you know, about this vision that you have to be a coast to coast?
Yeah, I don't know if I've convinced her yet.
You know, I travel a lot and, you know, you just have to set certain boundaries.
And so for me, I don't travel on the weekends.
So Friday, Saturday and Sunday, you know, I tend to put the phone away and I, and
I'm really present when I am with my kids those days and I try to coach and I try
to be at all the lacrosse games, the soccer games, and it's really their days.
Right.
And so Friday night is always pizza night.
We watch a movie and then we start Saturday together and we spend the whole day.
So by the time Sunday night rolls around, they're kind of sick of having me around
and I can get back to traveling again.
But, you know, you really have to have these different compartments.
And when you're with family, you have to be really intentional because, you know,
kids grow up fast and then you also have to leave space to have a real relationship
with your partner, your spouse.
And so, you know, making sure that, you know, we have the Netflix thing that we do
together and like those things are really important as well.
And, you know, at the end of the day, setting up our company, a lot of our company is
really either based in our office in Miami or our office here in Baltimore.
So they don't do as much traveling.
Maybe they'll go for requisition.
So they do more like once a month traveling.
It's really, you know, I do a lot of, you know, every week type of traveling to
maintain relationships and, you know, this business is about relationships.
And so you don't want to just go to folks when you need something from them.
And so you want to be present and you want to maintain great relationships.
And I would also say an argument for Mr. Washington to be in different markets is
the knowledge that he has a lot of these secondary and tertiary markets.
They don't have black and brown developers that have that kind of knowledge.
So in terms of joint venturing and partnering with folks in other markets, it's
what we need so that we can change the entire, because I always look at it as
the effective majority in any city in America is really women, minorities, and
immigrants, and we get treated like second class citizens in all of these cities.
And if we had the mentorship and we had the partnerships that allowed us to get
into development and build great development companies, I think our cities
would be better off.
So that's one argument for having Mr. Washington travel and do projects with
folks like me in different markets.
Okay.
Well, no, that's great food for thought.
I hadn't thought about it that way, but I think that's great.
No, I definitely agree with you, you know, in terms of setting boundaries and,
you know, being, you know, intentional about it.
I mean, you know, my kids have, you know, passed a point where, you know, they
need dad around that much, but, you know, I think that, you know, being an
entrepreneur is really tough and you work like long hours and work late
to the night, but I think the, you know, the advantage is, is that, you know, you
have some schedule flexibility.
So when my kids were younger, I mean, I was there for their sporting events and
their plays and things like that.
I mean, you know, if I, you know, had to leave the office at three to get to, you
know, the soccer game by four, you know, I did it.
And then, you know, I was there.
And then, you know, when they went to bed, then, you know, I worked a couple
hours and did my emails then, but you're right.
I, you know, I turned off my phone and focused on it.
And I think they, you know, kids really appreciate it.
I mean, they don't always, you know, come up and say, oh, you know, you're
a great dad and I'm glad you're here, but, you know, they're glad you're there.
And so I'm definitely glad I had those experiences.
And I feel like I was very much there for my kids and probably not as much
there for my wife as she would say if she were on this podcast, but now the
kids are older, I'm spending more time with her as well.
So it's, you know, you got to balance it.
As an entrepreneur, you get super passionate about what you're doing.
You want to build it.
You want to be there.
It's, you know, it's like, you know, that intoxicating.
And so you do have to just, you know, put your phone in your pocket, turn it off,
be there, and then go back later on.
Yeah.
It's a real balance.
Yeah.
Based on what you guys have done, which is considerable, where would you both like
to be in terms of yourself and your firms, like say within the next five years?
I mean, I certainly have goals.
I mean, just from a personal perspective, I'm getting to the point in my life where,
you know, I'm not ready to hang it up or retire anything, but I definitely want to,
you know, be more of a, you know, sort of a thought leader, more of a visionary.
That's hands on.
I've been certainly transitioning towards that over the years.
And so five years now, I certainly hope that that transition is complete where,
you know, I'm just, you know, relationships, you know, sending a vision where I have a
super capable team that's handling all the day to day stuff.
And I'm not really thinking about that.
So that's, that's my personal ambition as terms of a company.
You know, I do want to, you know, be in other markets.
I want to, you know, we're in the process of raising our first
institutional equity fund.
So our goal is a hundred million dollars, I certainly expect to have that done in a
lot less than five years.
And, you know, it'd be the position where, you know, we are, you know, we're a player
and that we are, you know, you know, financially stable and, you know, can
commit our own money and that.
And then also then to, you know, complete our transition, you know, into being a,
you know, a mission driven company.
I mean, you've always been a mission driven company, but when you start out in small,
you're trying to make payroll.
I mean, you're trying to keep the lights on, you're trying not to go broke.
And I think, you know, you have to, you know, over time, get out of that mindset
and say, okay, you know, you know, you always, you know, you're an entrepreneur.
You always want to be like more successful, but there comes a point you have to say,
you know, I've, I've, I've been successful, you know, I've, I'm, you know, I'm not
like the biggest company in the world, but I've been successful and now I can shift
my attention to being more mission driven, to, you know, help people in communities.
You know, like Ernst said, be like a mentor to the next generation of black developers
and spend more time doing that.
So I certainly want to have a lot more of my focus on that part of the mission and a
lot less my focus on like the nuts and bolts of running a company.
Yeah.
And we're still in like the building phase.
We're just about 3000 units and, you know, it would be great, you know, when, when,
when we had like a hundred units, it was like, let's get to a thousand units.
And then you get to a thousand units and it's like, can we do two now with a three,
you know, in the next five years, we'd like to get over 5,000 units.
And, and, and, and maybe, you know, get to 10 because the way capital works in some
of these large projects, you know, before, if we did a hundred unit project, that was
great.
Now, you know, if it's 250, 500, so we could probably get to 5,000 to 10,000 units in
the next five years.
And then it's really once, once in five years, we want to start to redefine what
success means to us.
And on our side is how do we raise capital so we can invest equity in that, in that
next generation?
Like how do we develop a bench and how do we normalize people that look like the
folks on this panel, women, minorities, and immigrants?
How do we normalize us being in development?
And so I really define that as having equity that can be invested in folks at
really small levels, because, you know, if you come out of school, even if you have a
master's in real estate from like Columbia or Cornell, you're not ready to do what
Mr. Washington does, right?
You got to show me you can do that first row house.
And so that's why we developed this Equal Fund to level the playing field and create
a gateway for people who have gone out and gotten the degrees.
But now how do we, you know, put you through training day in Denzel style?
And I'm like,
all over again, would you do anything differently?
I do.
I mean, you got to sort of split that question in two.
I mean, I have no regrets.
I'm very happy, very blessed with both professionally and personally.
So I have zero regrets about anything I did, because whenever you unravel,
wherever you say, if I did this, then this wouldn't happen.
So I have no regrets.
But I mean, if I was to advise someone, you know, like, how do you get into
development?
I mean, I think there are, you know, I do it way differently than I did.
I mean, I bootstrapped my way up.
I mean, I got into a field where I knew absolutely zero about and just dove in
and made every mistake in the book and, you know, got lucky, you know, and, you
know, there are dozens of mistakes I made that could have, like, you know, killed
a dream and just got lucky and worked hard and had, you know, good people
around me.
So it's good.
But I mean, if I was to advise someone young, one of the developer, I mean, I
would say, you know, go, I'd say go work for large developer first.
I mean, it's something I didn't do, you know, but I think there are just so many
kind of like best in class people like a JBG or Heinz or, you know, like a
Hoffman kind of folks like that.
I'd go work, I would have go work there two or three years, see how that works.
You know, maybe you like it.
Maybe like, you know, you're on the path there and that's environment for you.
That's great.
But if not, I then transitioned to, you know, more entrepreneurial
environment, you know, like maybe, you know, my firm or Ernst or Spore, you
know, to, you know, to see how more entrepreneurial environment does it.
Like, how do you do without all those resources?
How do you do with all that, without that kind of, you know, national brand
name, see how someone else do it.
And then again, at that point assess where you are.
So to say, Hey, you know, this is a place is great.
It's a, you know, I feel like home here.
I feel like I can really move up and be a principal in this firm.
It's great.
But then if you have that point where you still don't feel that way, then
you're prepared to start your own thing.
And then, you know, you've got that resume, that track record, that training
of how the big boys do it.
You've kind of looked over the shoulder of someone like us and see, okay,
there's an entrepreneur does it.
And then you're prepared to go out.
And, you know, I think, you know, I could have started at a sort of much
higher level if I had done that and, you know, avoided a lot of pitfalls.
And I think it would have been a, a smoother experience, frankly.
So, you know, I don't have, like I said, I don't have regrets of what I've
done, but I mean, I think that there are a lot of ways you can avoid, you
know, mistakes that you make if you just sort of start out and say, and I
know how it is when you're young, you know, I got to get started like right
now, you know, it's like, damn, you know, I'm 30 and I haven't, you know,
started my business yet.
And you look back when 30 is a long way in the rear view mirror and you're
like, you know, you got plenty of time to do all that stuff.
So, you know, don't have to be in such a rush.
I think that's really great advice.
I mean, I don't regret anything, but being a little bit more patient, I
would be a little bit more patient with certain things because I was that
22-year-old, 23-year-old thinking that, you know, the sky is falling and I
need to do things more and more and more.
And you kind of rush through.
But then, you know, part of it is those pitfalls help to find you, right?
They, if you get through them, they help kind of strengthen your whole
approach and, you know, you become better for it.
But you don't necessarily have to go through those things if you're a
little bit more patient and you get more mentored.
I wish I was more mentored because I was, I just started doing it on my own
and, you know, made a lot of mistakes.
But small mistakes don't kill you.
Yes.
There we go.
I've made small mistakes, medium mistakes, and big mistakes.
But you're right.
Those experiences form you and they make you tougher.
And, you know, it's a two-sided coin because if you don't have that kind
of ambition to do foolish things, then, you know, maybe, you know, you
never do it.
But it is a different perspective.
I was talking to one of my younger employees yesterday and, you know, he
said, well, I got a birthday coming up.
And I was like, oh, okay.
Well, you know, and he said, well, he's turning 29 like next week.
And he's like, yeah, man, I'm like starting to worry that I have all these
things I wanted to accomplish and I haven't done it yet.
I'm like, you know, dude, you know, twice as old as you.
You got plenty of time to get stuff done.
So it's, you know, just slow down and appreciate what you got right now.
Absolutely.
It's the moment, right?
Yeah.
So we appreciate it, guys.
Thanks for your advice.
I think this was all good.
Appreciate the gift of time.
Another day at the shop.
And we'll see you next time.
Bye.