How Brookfield, Westfield And A-Rod Are Trying To Break Down CRE's Barriers To Entry
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Anisha Pednekar couldn't imagine a career in real estate. She didn’t see many women or people of color in the business and didn’t think landing a mentor would be easy. She believes some communities, like those in the Bronx where she went to school, often see developers as the bad guys.
"Thinking about real estate, the first thing that comes to your mind is ‘developers are gentrifiers and they're changing places for the worse,’” she said. “And they're kicking people of color, minorities, out of the places they live so that they can’t afford to live there anymore.”
Last year, Pednekar met Cedric Bobo at a summer program at Harvard Business School for students from underrepresented backgrounds. Bobo runs Project Destined, a nonprofit that provides real estate training for young people in underserved communities. The encounter immediately changed her employment trajectory.
Pednekar signed on for the spring 2019 program in the Bronx with Project Destined. A graduate of Fordham University now working as an analyst at Brooklyn-based real estate investment firm Merit Hill Capital, the experience gave her skills and confidence to handle the technical exam for her new job, she said.
It also recast her view of real estate as a world in which she could take part. Her job, she said, is a dream come true.
"The industry isn't bad. You just don't have the knowledge to be in it, or the contacts, or the people to teach you how to be in it,” said Pednekar, 22, who is now teaching a real estate fundamentals class at Project Destined. She will be presenting the mock development pitch she worked on at Bisnow’s New York State of the Market Oct. 30.
Commercial real estate has long been a largely white, male-dominated industry with a high barrier to entry that has often meant companies and properties are handed down from generation to generation.
Project Destined, which launched in Detroit in 2016 and is now operating in four U.S. cities and London, aims to offer young people the training they need to break into the industry. The goal of the program — which provides online courses, offers training from industry members and puts students into teams to compete against each other on mock development deal pitches — is to demystify the world of development and generate a new pool of real estate talent.
With developers increasingly under pressure to tread carefully into the communities where they are building, some of the industry’s biggest names — Brookfield, Westfield, Cortland, Walker & Dunlop and former Yankee great Alex Rodriguez’s A-Rod Corp. among them — are backing the program with both financial support and executives’ time.
After early success in the Bronx, Project Destined has expanded across the boroughs and is joining with local colleges to offer the program for school credit. Brookfield, which first supported the program last year as part of the company’s foray into the South Bronx, was so thrilled with the success, it is now partnering with Project Destined in Los Angeles, Baltimore and London.
Bobo said for developers building in emerging communities like the South Bronx, one of the biggest obstacles they face is the reaction when locals hear new buildings are going up in their neighborhood.
“There is a ton of fear. Developers are investing capital, and what you immediately think is, ‘Well, how am I going to get left out?’” said Bobo, a former investment banker. “We take real projects in your neighborhood, and we teach you how to be a part of that … [And] we are able to work with partners like Brookfield and say, 'You also don't have to be afraid of the community.'"
Being part of the program pays dividends, Brookfield Senior Associate Charlie Howe said. His company, which is building a massive mixed-used development with 1,300 units in the Mott Haven section of the South Bronx, happened upon Project Destined by chance last year, and quickly got on board for the spring 2019 semester.
“If you're a member of the community, you are just seeing this and hearing [about this project] and you don't really understand what's going on,” he said.
Brookfield’s involvement with Project Destined, he said, offered a chance for employees to share their skills, to take part in some meaningful engagement and right the wrongs of past builders. Infamously, Somerset Partners hosted a Bronx is Burning-themed party in 2015 to drum up interest in its project. Brookfield paid Somerset and its partners $165M last year to take over the development.
“There are instances in Mott Haven in the past where developers have been less than fully sensitive, so we want to try to reset that relationship,” Howe said.
This spring, students worked alongside Brookfield executives who volunteered their time each Saturday to guide and teach them the ins and outs of the business. The program involved a lot of “sweat equity” from Brookfield, Howe said, adding that the executives who volunteered their time became very personally invested.
Students were put into teams and pitched mock development ideas for the area around Brookfield’s development. The grand finale winner, judged by a panel including Rodriguez, Bronx Borough President Ruben Diaz and Brookfield Chairman Ric Clark, was a multifamily project with ground-floor retail.
The group of 10 students won $10K in cash as their prize, various bits of swag and “bragging rights,” said Eduardo Iriarte, an 11th-grader who lives in Mott Haven and goes to the Laboratory School of Finance and Technology.
“I had basically no knowledge about real estate,” he said. “I went from only knowing real estate as buildings, landlords and collecting rents to knowing what a cap rate is, CapEx, core, value-add, all these different terms and applying this knowledge to an actual deal.”
Iriarte said he now wants to go into business and is participating in the fall program, preparing a mock pitch on a deal in Brooklyn.
“We talk about gentrification sometimes. There’s that negative view of that … Most of the anger and the negativity comes from not knowing what’s going on,” Iriarte said. “With real estate you see change happening … I want to make sure I’m one of the front-runners.”
Asmir Nikocevic, a student at The City University of New York’s Lehman College and a Bronx local, said he has felt empowered by the program.
"Many landlords throughout the Bronx, they don’t really improve the buildings and they kind of take advantage of the tenants," Nikocevic said. "[I’m considering] becoming a real estate investor in the Bronx and changing the whole real estate game by providing everything that they're not.”
For Bobo, an understanding of two worlds — growing up in rapidly changing community and participating in the realm of investment and private equity — has given him a unique perspective on providing training for these young people.
Born in Mississippi and raised in Memphis, Bobo was supported by a single mother and went on to study engineering at University of Tennessee, he said. While studying abroad at Oxford, he played rugby with some people who were working at Goldman Sachs, which led him to Wall Street.
He worked at the Carlyle Group for a decade. After seeing a movie about Detroit, he thought real estate could be a good way to empower young people and launched Project Destined there in 2016. He had made enough money to look after his family, he said, and wanted to do something more meaningful.
The following year, he met Rodriguez backstage at a Jennifer Lopez concert — she and Rodriguez are engaged — and A-Rod suggested bringing the program to Miami. The former third baseman and shortstop hit 696 home runs in his baseball career, and he has bought about 15,000 apartments in his new line of work.
Project Destined then partnered with the same Boys and Girls Club of America where Rodriguez had learned to play baseball, Bobo said.
“People see folks like Alex every day ... But people don't see Ric Clark,” Bobo said, adding that professional sports is often considered the only way to make money in some communities. “You've got to convey to them, you can also have a great lifestyle in private equity and real estate.”
Rodriguez suggested they take the program to the Bronx, home of the Yankees, where Project Destined launched with Here to Here, a nonprofit backed by the Dimon Foundation.
After a pilot run, Brookfield came on board. The heft of an organization like Brookfield, Bobo said, means other major companies will see the value.
Along with the nonprofit, Project Destined offers the program for a fee, meaning anyone can pay to take the course. Similar to the Toms shoe brand's one-for-one business model, every time a purchase is made, a free class is provided to a student for free.
While the program has the ability to make real, meaningful change in communities, it will also help companies develop a new pipeline of talent from areas that have not traditionally fed into these companies. Already, he said, major companies are taking on students as summer interns.
“We're building a new generation of real estate talent,” he said. “You hire in your mind who you think is available. Sometimes [people] don't think out of the box because no one shows you what's available out of the box. Our whole job is to show you what's available and demystify this talent.”