Episode Transcript
[00:00:06] Speaker A: All right, welcome to the Real Estate Chicago style podcast. I'm your host, Joe Smozzle. Really excited to have Leon Walker, founder and CEO of DL3 Realty, with me. Leon, thanks for joining the show, man.
[00:00:17] Speaker B: My pleasure. Excited to do this.
[00:00:18] Speaker A: Yeah, thanks for being willing to do so. So your bio in preparation for this made me feel like a real underachiever, so thanks for that. Graduated from Michigan in your undergrad.
[00:00:29] Speaker B: Go blue.
[00:00:31] Speaker A: No comment.
Then you went to University of Chicago law school, licensed attorney, and then also went to booth at University of Chicago.
DL3 recently celebrated their 25th year in business. I think you're on 26 now, but 25th is a bigger milestone, I guess.
Created over 3,000 jobs in the neighborhood, have another 10,000 jobs in the pipeline on projects that'll be delivered in the next decade. And it's incredibly impactful work in the city.
So I'm really excited to chat with you today.
Before we get into it, we're doing some rapid fire questions. So just kind of get it flowing, get the juices flowing a little bit here. So what's your favorite under the radar Chicago restaurant?
[00:01:13] Speaker B: Under the radar.
[00:01:14] Speaker A: Under the radar. You can't say Gibson's. You know, I don't want to hear Gibsons. I want to hear Lou Malnati. Something that people are sleeping on.
[00:01:20] Speaker B: Antique Taco.
[00:01:22] Speaker A: Antique Taco is awesome.
[00:01:24] Speaker B: Antique Taco.
Rick Ortiz and his wife have a great restaurant. It's a farm to table. They have one in Bridgeport and one in Wicker Park. They had one downtown for a while, and my wife and I, we love going there. When we come back in town from traveling, we have to stop at Antique Taco on the way home sometimes.
[00:01:45] Speaker A: Love that.
[00:01:45] Speaker B: Yeah.
[00:01:47] Speaker A: All right, what are three traits that come to mind as somebody. If you're hiring somebody from your team or if you're thinking about a service provider in a project you're working on, what are three traits that you think are must haves for somebody that you want to work with?
[00:02:00] Speaker B: Must haves.
So I would say integrity, that's really important to us is that you have an honesty and a commitment to doing the work, and we can trust you.
[00:02:20] Speaker A: Creativity, I like that too.
[00:02:23] Speaker B: The deals we do require a lot of creativity. And if you just have only one way of seeing the world, and like we always say, if you are hammer, then every problem looks like a nail.
So we're trying to avoid those types of folks on our team.
We want to look around, above, under. Sometimes we have to break through, but we're often looking for the Most creative solutions.
And then what's also very important to me is professionalism.
We talked a little bit earlier about how I came up in the business working with what was then LaSalle Partners and Citigroup and always having ties and jackets and.
And we really learned the business as a professional.
And not just a trade, but really a professional.
[00:03:15] Speaker A: I like those good answers. And I think as a developer, I talked to a partner of mine this morning. You talk about the first part of integrity, and it's such a small world and it's easy to be easy to work with when everything's going well, but in a large scale development like what you're doing, not everything goes well all the time. So having partners that you know, that you can trust and that you can work through a problem with is important. And I think creativity is massively important too, because you have to know so much and you have to be able to problem solve through the deal. Different, you know, you're doing these projects that take years different, you know, different cycles in the market, even. So, good answers. All right, who's an up and coming Chicago real estate person that you think deserves some recognition?
[00:03:58] Speaker B: Wow. We've got some great talent in the city, but I would have to say my team, you know, Alex and Andrew, and I've got two great developers on our team that have been living and breathing our venture development model.
They're fiercely committed to the neighborhoods they live in, the neighborhoods raising families here in Chicago. They both have advanced degrees.
And Andrew on the residential investment side and Alex on the commercial investment side are really sort of at the center and core of what we're doing. And they both have a big heart and a high capacity for the work and it makes a difference for us. Yeah.
[00:04:39] Speaker A: Yeah. Awesome.
All right, last one and then we can start rambling as much as we want.
I've been thinking a lot about efficiency of my day, so this is partly a selfish question, but are there any applications, tools, strategies that you use to organize your day, organize your schedule? Obviously you have a lot going on all the time.
[00:04:58] Speaker B: Yeah, well, I mean, we have all the customary tools for everything from great project management, property management, all the Microsoft suite. But I think really the biggest thing that's come in is AI.
So now we have that integrated throughout everything that we're doing and it's providing additional sort of insights and the way it can digest voluminous amounts of information and spit out summaries, you got to double check it.
But it certainly is a helpful tool that's come in and as we're getting more into agents and things like that. The higher levels of using the AI tools, that's becoming a real critical mission critical piece of the business.
But no, I mean, it's important to have good technology. We've always invested in technology, so that's important in terms of strategies and systems. I'd say the way that we really coordinate and have people come together.
It's really important to me that we have a weekly team meeting, for example. You know, even, you know, we've been in the office since August of 2020.
[00:06:14] Speaker A: Same. Yeah, yeah.
[00:06:17] Speaker B: It was different coming downtown then, but it was.
[00:06:20] Speaker A: Yeah, I was thinking of that. I parked down here. Cause I need my car quick after this. And I parked on the top floor, it's full. And I go to the restaurant, grab a quick sandwich before we did this. It's full.
[00:06:30] Speaker B: Yeah.
[00:06:31] Speaker A: And I'm like, so all this rhetoric around downtown being dead, you can miss me with that. But it's very true at that time. Like, I think that you probably, your team probably got even more cohesive during that time because it was different. A lot of people were doing zooms and working from home and a lot of people from their team moved out of state or whatever. So having having somebody in one room, in one office is irreplaceable in this business. Especially for your people coming up that need to learn that culture.
[00:06:57] Speaker B: You know, I was really big in saying that you cannot sell real estate from your kitchen table.
[00:07:02] Speaker A: Yeah, it's true.
[00:07:04] Speaker B: This is a people, it's a physical asset.
And then, you know, beyond that, just the team coming together, we call it deal task force. And so every Wednesday you're able to, you know, we bring the entire team from accounting and property management and the deal makers and developers and, you know, all the C suite folks, general counsel, and everybody comes together so you get to hear what people are working on, you get to learn. There are teachable moments. You know, I get to share out at those meetings. And you know, it's really important to be able to understand what may be challenging one of your teammates. Because, you know, I have a philosophy that, you know, we're a SEAL team. I mean, we're a high value, highly trained, highly motivated team that goes after, you know, high value targets, you know, so I love that.
[00:07:53] Speaker A: Yeah.
[00:07:54] Speaker B: So, you know, we're in it and we are not doing this alone. You're not alone. And that weekly meeting reinforces that notion.
[00:08:03] Speaker A: Yeah, I think your answer's telling in that we've got being in tune with technology and AI and employing those systems to be more efficient. But then you also have the oldest school way of being a team, just sitting down in a conference room, and let's all go through this.
Let's figure out how we can help each other through this problem.
Very telling answer in that.
[00:08:25] Speaker B: Yeah. I mean, sometimes it's creative answers. We have a creative director, we got marketing, we have pr, we have all of that sort of comes together around the project.
[00:08:37] Speaker A: I don't mean to interrupt you, but if you have the legal side and the creative side just exchanging emails, they're not going to get on the same page. But when the legal side knows what the creative side is trying to accomplish and vice versa, you can get to something that still accomplishes the creative effect and follows the legal framework that you need to stay within. Of course. Right.
[00:08:57] Speaker B: I mean, I think I'm the last generation that's comfortable with both analog and digital.
[00:09:03] Speaker A: Yeah.
[00:09:04] Speaker B: You know, and so, you know, I'm as comfortable with a pen and a piece of paper and, you know, either reading or annotating and marking up a document as reading it on screen.
[00:09:14] Speaker A: Yeah.
[00:09:14] Speaker B: You know, and the newer generation, you know, even my kids, you know, they're just graduating college, they want to do everything on the screen.
[00:09:20] Speaker A: Yeah. Yeah.
[00:09:21] Speaker B: You know, and I think there's something tactile, something, you know, sort of that you, you know, putting it in your hands, you know, and just understanding, you know, a binder that's 2 inches thick on a project, you know, so I'm with you.
[00:09:34] Speaker A: I think also just the.
The exercise of slowing down is very productive. You know, if you. If you have an important document that you need to annotate or if you're trying to do some deep thinking. I always find it hard to do on a computer or, like, I know a lot of people do deep thinking with AI and, like, and I've done that, and there's places for it and stuff, but I just find the speed of the work sometimes gets out of hand. When you're trying to do everything on a screen and sometimes just taking us, like, just downshifting a little bit and saying, all right, I got to work through this and I have to think about this as opposed to just trying to fire it out as soon as I can, I think that's constructive, too. Yes.
[00:10:13] Speaker B: And we try to bring that intentionally into how we work as a team. Yeah.
[00:10:17] Speaker A: All right. Right on.
Those were kind of rapid fire, but it was my fault.
[00:10:24] Speaker B: We can riff, man.
[00:10:25] Speaker A: Show there's no sponsor, so any. So let's start about let's kind of start from the start. Tell me about growing up. Where'd you grow up?
Were you exposed to real estate growing up, or did you have this entrepreneurial bug growing up?
[00:10:40] Speaker B: Yeah, it's, you know, so I grew up on the south side, son of two public school teachers. And, you know, they became entrepreneurs early on in 1969, when they decided to found a business in order to satisfy a need that they had, which was to find a place to put me so they could go to work every day.
[00:11:03] Speaker A: Right, Daycare. Okay, there you go.
[00:11:05] Speaker B: So it wasn't formal back then.
The childcare industry was nascent. It wasn't really well formed and you had only part day programs for very wealthy folks.
But they were committed to preparing young kids to succeed in school. And so I was one of the first class to go through the program Developmental institute. And by 1980, we were building our first building from the ground up. Borrowed our first million dollars. I got my first hard hat as a preteen. So I really learned the business.
You know, kitchen table, 71st and Stony Island. And that's where it's right before you get on the skyway ramp to go to go east to Michigan or Indiana. And yeah, they had a real teacher's mindset and believe that we could do well by doing good.
That is part of the ethos that I infuse into our strategy today.
And once that seed is inside of you, it becomes part of your character and part of how you do business.
[00:12:17] Speaker A: What are some. What are some lessons you learned just by osmosis from your folks when. When you saw them? Because public school teachers are, you know, that that's kind of a different schedule in a lot of ways, different lifestyle sometimes than being entrepreneurs. So I'm sure there was kind of a transition period. I don't know if you were young enough at that point to fully appreciate it all, but I'm sure you can look in hindsight, and there are some things that you probably just soaked in from them about the hours or the stress of being an entrepreneur.
[00:12:46] Speaker B: Well, yeah, there's no doubt about that. I mean, the time that was invested in growing the business, sacrifices had to be made. Even personally, being a latchkey kid growing up, you didn't. Where are your parents? There at work. They're working late into the evening, early morning. So having a strong work ethic, you know, and having a mission and a goal behind what you're trying to achieve is, you know, something I really, you know, continue to hold dear. You know, the work is not Just to, you know, just endure to our own benefit. But it's also a more global perspective about how we can motivate, inspire, and get others to think about doing some good work, investing in their communities they grew up in. You know, we've had a brain drain, you know, from our neighborhoods. And that brain drain is part and parcel of why things are the way they are. And if you go to the great schools that I've been to, the experiences I've had, very few of us come back to the neighborhoods they grew up in as kids to do anything impactful or meaningful. You know, that was a chapter or a story that you left behind. But if you, I think, you know, one is we want to create value in those neighborhoods, show that there's value to be achieved there.
Not only, you know, value, economic value, but value in the people and the places.
[00:14:12] Speaker A: Yeah, I love that. And we're gonna.
Siri loved it too. I guess sitting on my phone, it
[00:14:20] Speaker B: keeps the street going.
[00:14:21] Speaker A: We're talking about that. Yeah, the phone rings every episode. So that was not even that.
So before we talk about kind of the ethos of the business and I want to talk more about this. Do well by doing good because you're certainly exemplifying that at a high level.
I think there's a lot of fast forwarding in hearing a real estate story of a successful person today. People will look at you today, but Deal three didn't start at this scale of the business. So I understand that you had a progression from working at Citigroup and JL or SAL Partners. Jll and so you worked corporate job and then you also transitioned into being an entrepreneur about 25, 26 years ago. Right. With the inception of DL3. So can you take us back to maybe your mindset of when you launched DL3? Because you went from, I'm assuming, having a probably a career arc that was like you could look at and, and see pretty clearly is what the progression would be whether you kept practicing law or whether you continued to work at Citigroup or LaSalle Partners. But you took a big risk at that point and the business was you had to get some deals done, you had to do a couple deals before you were known like you're known today. So long winded way of saying, take us back to the start of DL3. What was going through your mind when you decided to go out on your own and do this?
[00:15:44] Speaker B: Yeah, I was on my way to Singapore when I got the news that my dad was ill and passing at the young age. Of 60.
And so we have these forks in the road in our lives and we've got to decide which path to take.
And I could have continued on in corporate. I just made partner, a very young junior partner in this firm, but now created a merger with another, with a global firm to become the largest real estate services firm in the world. And so, you know, next assignment was to go to Singapore with my then boss who was like, leon, let's go run the Asian theater. And you're how old at this point?
30 maybe? Okay, yeah, yeah, yeah. And so it was.
That was still very attractive, you know, particularly. I was single. I was ready to explore the world.
But it took a life change event, you know, and when you have that and you have a parent, a father that you admired and had a strong personality in his own right, you know, pass away, you know, so young, you know, it changes you a bit. And you feel.
I felt, you know, compelled, something, a spark was lit inside me to say, you know, let's come back and see what we can do at home.
We had 150, 160 staff persons at the time in a business, you know, we had a thousand kids and families that we were responsible for.
So we had a, you know, it was a large small business, you know, but we had real estate holdings that my parents had started acquiring on the south side in the 70s. So, you know, I wrote about this in Cranes, you know, and talking about, you know, how do you make this transition?
And I really wanted to and still want to, you know, inspire those from our neighborhoods to get involved in this work. But development is capital intensive.
And if you haven't had the benefit of, there's no formal training really. You know, there are some schools that have real estate programs now and.
But it's not development per se. And understand, how do you take a project from concept to key?
And so it's being there with my dad as he was building a building, going to the architect's office, going to the job site. I wish we had all the technology and great pictures to have, but I think it's more of an organic learning experience, but then also making sure that I wanted to do it in the neighborhoods we grew up in as a kid.
[00:18:32] Speaker A: Yeah.
[00:18:33] Speaker B: So when I came back, I married, you know, these, you know, this professional experience, this training, some resources that we had with the opportunity that was presented, you know, on these corridors, these major commercial corridors that I grew up on, you know, as a kid. And I mean, we're talking, you know, whether it's stony Island Cottage Grove, you know, western Ashland, Halstead, you know, these are major thoroughfares that all had, you know, businesses that were thriving at one time. We can get into it and talk about, you know, how history really is an important thing to understand and learn when you're doing revitalization work.
[00:19:13] Speaker A: Yeah.
[00:19:14] Speaker B: And I believe it's important for anyone that does development 100%.
[00:19:18] Speaker A: Right. I think maybe the most.
Children's education and childcare is probably among the most close to home businesses for some of those neighborhoods. Right. So, you know, it's one thing that your family had a business that was entrenched in the neighborhood is another thing that was so impactful to people's lives at that point. And kudos for you for stepping in and kind of grabbing the reins and keeping it going. Because you think, I mean, you affect a lot of lives today. And I don't say that in a cavalier manner, but like back then also you have, you said 150 employees and 1,000 kids that would have been scrambling for what else are we going to do? It's also cool to see that that's what your dad's work was and the
[00:20:01] Speaker B: impact of your dad's work and my mom.
[00:20:02] Speaker A: Your parents. Yeah.
[00:20:03] Speaker B: Excuse me, co founders.
And the thing about it is that what you learn through structuring business transactions.
We borrowed our first million dollars in 1979, 1980. Interest. The prime was 21.
You know, I mean I tell kids when I'm talking Google it and how you got deals done, you know, people, you know, taking back paper and all kinds of creative solutions to it, you know, just helped me, it helped prepare me for what was to come in the south side when we started doing the work there.
But I married the professional sort of experience and the access and the relationships really with the passion for making a difference and changing things. And so we start, we always were focused on national tenants credit tenants first deal, you know, that we came out with in 05 down the Roseland community where we brought the first national bank to that community like over 50 years.
[00:21:18] Speaker A: 50 years.
[00:21:19] Speaker B: 50 years hard. I mean these are decade long disinvestment issues in many of these communities, which started obviously in the 60s. And you know, you had white flight from the neighborhoods and then you get into the 70s and 80s and you had, you know, black middle class flight from these neighborhoods and businesses and industry closing. And so once you have that vicious cycle take hold, you know, in a neighborhood, you have to really have.
What I've come to call is, you know, this impulse of inertia, this large sort of catalytic project in order to reverse that vicious cycle and create the virtuous cycle.
[00:21:59] Speaker A: Compounding of that works both ways. You know, you saw the compounding of the kind of economic erosion of these neighborhoods. And then what you're doing now has a compounding effect. The other direction, where something like you're doing can be a catalyzing effect. You'd be a huge shot in the arm from an area that hasn't seen development for decades.
[00:22:17] Speaker B: That's right.
But you have to also have to have scale and you have to have focus.
[00:22:22] Speaker A: Yeah.
[00:22:22] Speaker B: And so, you know, we started just looking at the assets that we already had in our portfolio. We had a small portfolio of real estate, most of it was to support the education business, but there were also other parcels and just started looking at how to turn those assets into something different that wasn't education.
And that's how we began.
[00:22:49] Speaker A: So the first project that you did, the development on in 05, the bank.
[00:22:53] Speaker B: Well, actually it was a three tenant retail center.
We converted an old A and P that we had converted to a facility for children and then we converted it back to a retail center.
And as part of that we brought at that time was Washington Mutual, which was expanding. It was funny because WAMBU was actually a client of JLL when I left,
[00:23:19] Speaker A: a huge real estate lender before they,
[00:23:21] Speaker B: you know, they hit the wall.
And now it's a chase today. So it's still, you know, in these communities that we are actively engaged in, you're finding that it's not just a desert for food or a desert for pharmacy, but desert for financial services and healthcare and other things.
[00:23:41] Speaker A: Is there anything that comes to mind in that first redevelopment that you wish you could go back and either something that you could tell your younger self everything's going to be okay, or a lesson that's has stuck with you since you did that.
[00:23:52] Speaker B: Well, now if you make a mistake you made.
Yeah. I mean, you know, there are things that, you know, I learned, you know, how important relationships are, you know, and like I said, people think that the venture development thesis and framework that we're operating under now, this was not an epiphany in the middle of the night.
[00:24:12] Speaker A: Yeah.
[00:24:12] Speaker B: This was an evolution of thought over time which we, you know, I with the team brought into a white paper and a ted talk in 2016, almost 10 years ago now.
And again, that was the teacher saying, we want to share what we're doing with others and to encourage others to pick it up, not just in Chicago, but around the country because we believe so much that there's value that's untapped in our communities and if we can, you know, activate that, we all benefit from it.
[00:24:50] Speaker A: Yeah. How are things different for you as a black owned development firm? Maybe when you were starting or even, you know, answer it as today?
[00:24:59] Speaker B: Well, yeah, I mean, listen, the industry is less than 2%, you know, represented by black or brown. And women are not as prevalent in our business either. Right.
It's a capital intensive business and that tends to by its very nature limit the amount of participation.
But for me, I've always.
We weren't even considering ourselves an MBE firm for decades really. We just got into that more recently as it became important to, to message that to people that there is diversity in the field and as others wanted to learn.
And I get those calls a lot from emerging talent and developers who say, hey, you're an inspiration.
How? What? And I start talking to them. It's really exciting right now to even see some of our professional athletes, entertainers, others looking to come back and invest in their neighborhoods. Right.
But this venture development model that we've been following has five factors and even our DL3 sort of moniker and name indicates a more technical approach to how we do this. So it's not just wildcatting looking for things. There is a strategy.
[00:26:32] Speaker A: What's DL3 mean?
[00:26:34] Speaker B: Data level three.
And so it's.
There are three different levels of data security and communication between two transacting parties. And the third level is always the most robust sharing of information.
We've taken that and adopted that and said listen, we're not just going because it's financially rewarding or viable. That's one prong, but it's not the only one. It also has to be an asset that we are creating that engages local residents and existing businesses in that community. Right. So that's what we call impact beyond the four walls of the building.
And then the third one is that it has to have longevity. Right. So it's not a flash in the pan. We're really focused on developing and investing at scale so that you have that long term community asset that can catalyze and be gravitational pull for additional investment.
[00:27:36] Speaker A: Because if you do one of those in a vacuum, it doesn't have nearly the same effect as doing enough to
[00:27:41] Speaker B: actually not with our approach.
[00:27:42] Speaker A: It's not bad.
[00:27:43] Speaker B: Of course it's not bad. I mean some people just want to
[00:27:45] Speaker A: pursue attribution, but it doesn't affect, it doesn't affect change at the scale that Your goal.
[00:27:49] Speaker B: Yeah. And, you know, it also gives people some rigor.
[00:27:53] Speaker A: Yeah.
[00:27:53] Speaker B: You know, because discipline, you know, so that, you know, we get a lot of inbound and you have to be able, you know, to, you know, to really triage that inbound and what is really fitting, what, you know, what we can bring to the table, what we do well and, you know, what is needed.
[00:28:17] Speaker A: You're a great guest because you just gave me this segue into the next thing I was planning about asking anyway. Really, I could just sum it up by saying, you know, do well, by doing good. But I'm going to read a couple lines from your website, Bob.
DL3 Realty Advisors works closely with municipalities, anchor institutions, and Fortune 500 companies to execute projects that are sensitive to a neighborhood's character while creating economic opportunities for local businesses and residents. DL3's projects are more than just brick and mortar. They're designed to provide a stimulus that ultimately lifts economic prospects and the quality of life in urban communities.
So it's clear, and you talked about this, you know, I think the way that you started in the business and where you saw your, your folks really affect change in the neighborhood, it's clear that your mission as a developer is far beyond financial profitability. But you also have to have that as a business that's going to have longevity and be able to, you know, hire people and do projects at this scale. So do you find that the financial profitability and the desire to do projects that have a profound positive social impact are those things that conflict with each other or how do you.
[00:29:32] Speaker B: It's a balance of the tension, Right. There is tension between these two notions, but the approach and the framework allows you to balance that.
And so we are a for profit business, so we have to make a profit. And. But we believe that you can look at profit in terms of short term, midterm and long term. And so when you're thinking about the profit, you're just lining it up with the impact. And so sometimes impact may be initially what's most prevalent and what you're seeing, but it still has to pencil. It still has to make sense. But in terms of outsized profit, you can actually still earn those because not only have you created the conditions for additional investment, sometimes we're a victim of our own success. Other people profit off of it more than we do, which is fine. But we want to be able to make sure we share in that upside potential that we're creating in a neighborhood or a place.
And that requires commitment because people always, for years, I'VE had requests to go to other cities, right.
And they'll say, leon, just come. We'll pick you up. I mean, I'm talking about mayors and heads of department of planning. Just come, we'll pick you up at the airport, we'll take you around, we'll show you opportunities.
And what I say is, and I have done some thought leadership and some consulting and advisory work in other markets. But. But in order to do this really well, what we're talking about, to create this balance, it does take, you know, a lot of intense, you know, sort of engagement and involvement with the transactions, the people. You know, there are relationships that matter in these neighborhoods, whether it's downtown or out in the community.
[00:31:31] Speaker A: Well, Chicago's better for you sticking here. So I appreciate your focus on Chicago. But you know, something that.
That struck me when you were answering that question, you know, and maybe didn't even occur to me at surface level until you started talking, is kind of the. The staying power of these developments. So it's not just, you know, that you develop it. It's a splashy development, and it kind of creates this, you know, this igniting factor or whatever in the neighborhood. It has to. It has to be viable for the long term, both for the profitability of it, but also for the social impact of it. And I think that that's an example for other people who are thinking about doing projects in those neighborhoods is these have been successful for a long time at this point. I mean, some of your projects have really seen different cycles in the market. They've seen different tenancy, and they maintain viability, they maintain profitability. So they don't. It's not just the initial effect that it has, it's the effect that it has, hopefully in perpetuity.
[00:32:26] Speaker B: Right? Yeah. And so for us, you know, like, again, venture development, five factors, what we look at is the historically successful location. Right. And this is where I'm a hobbyist historian.
Kids sometimes say, I gathered that about you when you were.
[00:32:43] Speaker A: A couple weeks ago. I could tell what would you be
[00:32:46] Speaker B: doing if you weren't doing this.
And other than playing music, I would probably be a history professor. Right.
[00:32:52] Speaker A: Your buddy's book is on my coffee table now, too. Southern Exposure. It's on the coffee table. Some people came over and released it.
[00:32:58] Speaker B: Yeah. Lee Bay is terrific Chicagoan, but who really lifts up stories and history that we should all know.
But yeah, that historically successful location is a key component. And people say, why? Well, you have infrastructure that you don't have to replicate. You have muscle Memory from people going to a certain location, that's important.
And so that's one critical component. The next one is anchor institution investment close by. And so you have to have long term durable anchor institution investment. We believe that we sort of complement that really. And so that could be universities, it could be, you know, downtown we have so many great anchors, but in neighborhoods it could be a large employer, maybe a museum of some sort.
We're still looking at small sports stadiums. I mean, I think sports stadiums are now evolving to be more seven day a week type developments as opposed to just an episodic event driven business.
But we've evolved. We thought what an anchor meant, the size and scale of an anchor. We initially thought, hey, 250 million, half a billion dollars is an anchor. We're thinking larger now because, you know, we've seen those anchors, you know, have some challenges, right, with their sustainability, but really developing, expanding the footprint of some kind of anchor that's already there. The third thing is available land, readily available, actually, readily available land or buildings. And a lot of times people, you know, will say, hey, we have to displace someone or you know, tear something down where people are already, you know, doing an activity. We don't do that. We're not looking for that kind of change. We're looking for opportunities where there's available land readily available, not tied up in some process, by the way, because it can take you years to unlock value in land.
So we need to be readily available. You need buildings that are dilapidated or beyond their useful life that we can now reposition. And those are the big three. Now those three things you can actually identify by looking at Google Maps now, right? Historically successful location where there's anchor, institution investment and available land or buildings. It's the next two that really sort of nuance this framework and that is you have to also identify early green shoots, we call it early activities that give you some confidence that the market is moving in the right direction in that location. And then the final one is deliberate leadership. You know, you need to be able to engage with somebody that is able to coalesce and surface the community's concerns and that you can actively work with to resolve or address them.
[00:36:00] Speaker A: Especially in a city like Chicago, right?
[00:36:02] Speaker B: Yes.
[00:36:03] Speaker A: Where we've got wards that can kind of function so differently from one to the next. And you know, the mapping that you're trying to follow and it's, and it's
[00:36:12] Speaker B: always, not always the person you might think, it's not, you know, sometimes it's not the elected Official or the pastor. It's someone on the block that really holds sway, and it takes you time to be on the ground to identify those folks.
[00:36:26] Speaker A: Yeah, yeah. One of the reasons it was initiative for the podcast in general was just providing, like, some positivity around the idea of real estate developers, real estate people in general in the city, and how, you know, we can get a lot further if we're working in concert with our elected officials, as opposed to just arguing about things that are not fair or how we see things. I think being empathetic to what a particular ward or what about a particular neighborhood of the city is trying to accomplish and seeing how you can fit business into that objective is a really powerful thing, as opposed to, like, you know, butting heads at every community meeting about it, you know, and you can't make everybody happy.
But the idea of, like, I think just unfortunately some of the political environment has made it hard to do development and affect some change in the neighborhood.
[00:37:17] Speaker B: It's gotten more difficult in some ways because extreme voices get louder.
And part and parcel of what this is is oftentimes a sharing.
And so it's not just as we talked about earlier, you know, there's a listening part of it, understanding, but there's also a sharing of new information, knowledge, and current trends. You know, when I first started this work, everyone in the neighborhood wanted a.
An Old Navy and a Red Lobster.
[00:37:45] Speaker A: Yes.
[00:37:48] Speaker B: And I was like, okay, but, you know, how do we build to that success? Right. You know, what does that look like, that process look like, in order for, you know, Gap or Old Navy to consider this location?
[00:37:59] Speaker A: Yeah.
[00:38:00] Speaker B: And so that's when we started understanding that, you know, we had to do, operate at scale, you know, and, you know, it's really important, I mean, you know, to do the infill work around us, but what we specialize in doing is the work at scale such that we create, you know, sort of the.
Not only the pathway and the opportunity, but we lift up and shine light on what could be impossible.
[00:38:26] Speaker A: Perfect segue to the Thrive brand, right?
[00:38:28] Speaker B: Yeah.
[00:38:29] Speaker A: I think that when you're talking about or when I was reading about, I was familiar with the Thrive brand, but in preparation for this, got more so. But I feel like what you just described is accomplished by those projects. Do you want to talk a little bit about what the mission is of those projects, the. The first couple that you've seen come to fruition and the impact that they've had?
[00:38:52] Speaker B: Yeah, I mean, that's an evolution also. Right. And so when I came out of corporate real estate. You know, I was, you know, really focused on driving corporate investment into communities and navigating that investment. You know, people always say, you know, how do you, you know, get Starbucks or Chipotle to make a commitment here? How do you, you know, get Oak street or Jewel Osco or whatever? How do you get these retailers, you know, these major brands to make commitments in neighborhoods and communities that they haven't, you know, before Blue Cross, Blue Shield, Discover, now Capital One. I mean, and so all of these, you know, it takes the ability to not only communicate at a community level, but also at a corporate level. Right. And so you have to be able to translate sometimes the opportunity not only to the corporate decision makers, but also to the community so they see the value in what you're doing.
[00:39:50] Speaker A: Well, and also those openings are so much more than it as an amenity to the neighborhood. Not to discount that, because it's great to have those amenities, and especially when you talk about a grocery store like Jewel.
But it also is this, like, vote of confidence where if somebody's thinking about opening their own coffee shop and they see Starbucks do it in the neighborhood and have a line on the drive through and have a line at the pickup counter, it's confidence inspiring as an entrepreneur that might be in the neighborhood to open something up and to see that it can be viable and you can do it here. You don't have to go to Bucktown or whatever.
[00:40:25] Speaker B: Oh, wow. You know, let me unpack that a little bit. There's so much there.
So the confidence is the end state. Right? But how do we get there? So that's how we got into housing, you know. And so I say, you know, retail, everybody wants retail. You know, now we're. Housing is the challenge of the day. But at one time it was retail. You know, retail, you know, sort of services, goods, jobs, all those things.
And, you know, but retail needs bodies to serve. And so, like, you know, I explain to our team all the time, you know, you think that we're in the stick and brick business business.
We're actually in the people business, the demographic business, right? And so we're looking at how bodies move in and out of spaces. You know, how do they live, how do they, you know, how do they play, how do they learn, how do they, you know, come together, you know, and so once you think about it like that, it's really the movement of bodies in and out of physical spaces, right? And so if you. If your retail needs more body, more stomachs to feed, more feet to Put shoes on, more backs to put clothes on, you know, then you gotta have that density to drive that. Right? And so that's how we got into housing because, you know, we were starting some pioneering retail developments and we were waiting on other partners to deliver on the housing and the promise of housing, and it never came. And we said, well, hey, we know how to do some of the most complicated real estate transactions that anybody does, really, quite frankly, whether it's new market tax credits, tiffs and bonds and all the things that can help address a financial feasibility gap. And so it's when you learn how to structure deals with various stakeholders in different interests, whether it's private equity, government or philanthropic stakeholders.
I said we can do housing whether it's tax credit or other. And we started that process and that started in 2018, 19, really starting to learn the business in a real meaningful way. And then how did we want to deliver that housing? We wanted to deliver that housing not in isolation, but as part of a follow on investment strategy where we already had made a commitment as a place making strategy.
And so we focused on three neighborhoods initially, Inglewood, Woodlawn and South Shore for the housing product of Thrive.
And you know, in all three of those neighborhoods we've delivered housing, family housing, the first that those communities have seen in 40 or 50 years. It's a draw, you know, jaw dropping, you know, statement to make. How do you actually, you know, want communities to thrive, to grow, to be welcoming to families, working families. If you haven't offered new product in, you know, five decades,
[00:43:36] Speaker A: it's, it's mind boggling. Think of, you know, 40 or 50 years. But I think one of the beauties of housing, you know, going back to the staying power of it as you walk around apartments in the neighborhoods, these buildings have been around and been operating substantially the same in some cases for a hundred years. And you know, preferences change. Of course, many might want to, you know, you have a bigger open kitchen versus, you know, of course, but it's still viable housing. It's not, it's not obsolescent.
And I think that that's a powerful thing when you're building housing, but you're doing it also. Like Thrive Exchange, I read has a large healthcare component to it too, where I think, I read that 15,000 patients come and get treatment there on an annual basis.
A hundred health care jobs just at Thrive Exchange. So you're really kind of creating a whole ecosystem is what I'm hearing. The housing, the retail, the services to make these neighborhoods more livable. For people, I mean, you could just leave it. And then when you talk about the impact.
I think that I was talking to Linda before, like the notion of a food desert.
This is a crazy two words to say in combination with each other. Food desert. There's no grocery stores, you know, so you've clearly created a much more well rounded community with what you're doing. And have you seen some of those, like, have you seen the area around it start to experience some new development? Like talk about the.
[00:45:03] Speaker B: Well, I mean, listen, you know, we saw potential at 79th and Exchange, you know, years before Quantum or advocate or all the development is happening on the former U.S. steel site. We knew that that site was, couldn't sit fallow forever. I mean, 400 plus acres along the lakefront. At some point something's going to work. But a lot of things had been tried and had failed and you know, what they're actually taking now is an approach that we have taken before, particularly in working with our public partners, is that when you have a large tract of land like that, you know, in a location historic, I mean, you know, you had steel mills, 8, 10,000 jobs working there. Yeah. So, you know, it was successful for what it was, but now you have to transition that into something new. And what most people try to do is they try to come and eat the whole cake at one time.
What I like about what's moving there is that they are dividing it and doing what we call a master plan.
[00:46:03] Speaker A: Eating an elephant kind of.
[00:46:05] Speaker B: Yeah, right.
[00:46:06] Speaker A: Yeah, yeah. Because otherwise it was so specific before where unless you have a real specific industry like that, it's hard to solve for the. And then it seems too big and everybody throws their hands up, you know,
[00:46:17] Speaker B: all kinds of issues. But Thrive Exchange is a, is a multi pronged redevelopment, revitalization strategy to address an intersection. Right.
And so it is, you know, really taking, I think Woodlawn in some ways really took venture development, our thesis there to a really, you know, sort of, you know, everyone was saying, why are you, do you want to get involved in the Obama Presidential Center? I said, no, we're going to do the work to really make the Obama Presidential center, you know, achieve some of its mission and goals. So we've invested over $100 million in Woodlawn alone, you know, with partners. We brought in the first grocery store there in over four decades. You know.
Yep. We health center serving 35,000 unique patients. I mean, you can't believe it, but Woodlawn sits in the shadow of University of Chicago, is still a Primary health care desert, you know, it's what they call a medically underserved area.
[00:47:12] Speaker A: Yeah.
[00:47:12] Speaker B: And so because you don't have primary care doctors. And so the need for that primary care was important. We built housing there, we have retail, we even have an office concept that's still working its way through pre development.
So you know, it's a multi pronged approach. We're doing the same thing in South Shore. A multi pronged approach. Retail, you got health care. These are the anchors of a community. Right. And off of that others can start to come and invest.
[00:47:42] Speaker A: And basic human necessities and healthcare and food and housing, I mean really like impactful work. So I might know the answer. But what would you, you know, you see some headlines or LinkedIn posts or whatever about when people will compare the price per unit it costs to develop one of the southwest projects versus market rate housing. In some cases it's two times or more to do some of those projects. What would you say to the critics of those that say, well, the resources could be spread out more and to build more housing?
[00:48:14] Speaker B: Yeah, I mean, you know, the challenge is that you need to make an apples to apples comparison.
[00:48:19] Speaker A: Yeah.
[00:48:20] Speaker B: So when you're comparing 50 units to 300 units, is that really a fair comparison?
[00:48:25] Speaker A: Different construction style, different, you know, different elevator systems.
[00:48:29] Speaker B: Well, think about this. Usually the roof is about the same size.
[00:48:32] Speaker A: Yeah.
[00:48:33] Speaker B: Okay, so the five unit, I mean the 50 unit building goes up five floors or whatever and then you've got 25, 30 floors over here. Right. The roof is the same size. You know, it's about the same size. You're going up vertically, you might add one elevator at best. Right.
So what I'm saying is the architect has a fee you pay for the 50 unit building, but it's not 6x to do the 300 unit building. So there's economies of scale. And so when you compare it on a per unit basis, it tells a different story. Which you should really be looking at is cost per square foot.
[00:49:10] Speaker A: Well, also you're building like there's a medical center within this apartment building too. It's not apples to apples that way. The other thing about it is like they're not building, people are not building market rate housing in those neighborhoods at scale yet. And so the only way to get that shot in the arm and get it started is to do projects like this that can show that there's a need and can show the impact that it can have too. Right.
[00:49:33] Speaker B: I mean it's, there's, there. Are we in a in a, in an environment where we have limited resources. Right. We can talk about what should be the priorities. You know some are focused on single family homes for example, but they still can't figure out the appraisal gap. So if it costs you 400,000 to deliver the home, right. The single family or the two flat or whatever, you know, but you can only get it appraised in neighborhoods at 250, 300, where is the gap financing? It's the same thing. So when we're talking about multifamily housing we're trying to accomplish more than just the housing. Right. Because housing is also an economic development platform.
[00:50:18] Speaker A: Sure, sure.
[00:50:19] Speaker B: And what I mean by that is that housing activates the street. It brings the pocketbooks, the stomachs, the backs, the feet that need to be addressed in the neighborhood in terms of retail. Right.
And then it also creates the environment for other things to follow on.
[00:50:38] Speaker A: Yeah, agreed.
Stay tuned for part two of the interview with DL3 Realty.
