The Collective Challenges Philly CRE To Get Serious About Impact Investing, Racial Equity
Commercial real estate in Philadelphia, as in the rest of the country, is well aware of its poor track record on inclusiveness when it comes to people of color. Yet it is not every day it comes face to face with those demanding change.
That is exactly what happened when founding members of The Collective, the combined nonprofit trade group and impact investment firm launched this year by and for Black Philadelphians, took the stage at Bisnow's Philly 2022 Forecast event at the Wanamaker Building on Dec. 2.
Proceedings got off to a frank start.
“We have never done well in terms of growing Black businesses here in Philadelphia," The Collective founder Sandra Dungee Glenn said during the group's fireside chat, which led the event.
The discrepancy between the Black population of Philadelphia and Black representation in the city's commercial real estate industry is glaring, but perhaps a more pressing issue is the lack of support those already in the industry have received, members of The Collective said at the event.
The city of Philadelphia has used its projects to grow the number and scale of real estate companies owned by minorities in the city, but private capital has not held up its end of the bargain, Dungee Glenn said. When The Collective was formed, she expected one of its earliest missions would be training developers, but that hasn't been the case.
“The developers we work with are not new developers ... but they’ve been forced to use their own balance sheets,” said Karine Blanc, the investment director for The Collective Investment Group, the initiative's capital arm.
The Collective didn't ask for help or to attempt to rally support. Instead, it presented its fund as an investment product that could be an opportunity for established capital sources in Philadelphia to put their promises of improving racial equity into practice.
"We will deliver market-rate returns on time within a social impact framework, using our own impact metrics going into deals, and can really measure the impact of projects on the back end," Beltraith Capital Chairman and The Collective principal Steve Sanders said. "So it’s really cutting edge, and we’re not surprised it’s happening in Philadelphia.”
Programs aiming to pair smaller, minority-owned contractors and developers with larger-scale, White-owned companies are commonplace, but they can wind up feeling condescending, while rarely being on the sort of scale that could make a difference, Smith + Roller and The Collective principal Tayyib Smith said.
“I’m not into remedial programs or anything that puts us in the backseat so we can ride along with a fourth-generation real estate company," Smith said. "I want equity in everything I do.”
Philly neighborhoods that have seen the most development success this century have often been the product of individual developers amassing enough land to control how multiple projects interact with each other. In one of the few examples where a Black-owned firm has been able to assemble such land, TPP Capital Group is soon to break ground on Healthy Town, a wellness-focused, mixed-use development district in the majority-Black, impoverished Nicetown-Tioga neighborhood.
The fact that Healthy Town has advanced to this stage in a neighborhood long overlooked by the broader commercial real estate industry speaks to how much more effective neighborhood growth initiatives can be when put in the hands of those with a more personal connection to and knowledge of such a community, The Collective's representatives said.
“We believe it needs to be in the hands of people who have the cultural competence to understand the needs of the community," Dungee Glenn said, noting that when the federal opportunity zone program was announced back in 2017, it was touted by many as a potential tool for neighborhood revitalization. "But when it came to positively impacting Black communities, we didn’t hear many ideas about how to do that.”
Even those programs in place, like Philadelphia's attempted initiative to dispose of city-owned, vacant lots to developers for affordable housing, have failed to gain any traction. Smith has spent tens of thousands of dollars preparing for one such project but has not received the land in the three years since he first won a city-issued request for proposals.
“I don’t think there’s anyone in the Planning Department, my office or City Council that can explain why we can’t get that land out of the Land Bank, even after spending $60K to $75K of hard capital," Smith said.
As if to prove the value of putting Black developers face to face with the city's power brokers, fellow panelist and Philadelphia Director of Planning and Development Anne Fadullon chalked up the delays to constantly shifting land use policies but invited Smith to reach back out to her office and get things moving again.
“What Tayyib describes has been a nightmare, and it’s because every single year, the rules change," Fadullon said. “It’s hardest on smaller, undercapitalized developers and in neighborhoods that have experienced historical disinvestment.”
In conversations with Bisnow after the event, members of The Collective expressed optimism that attendees were receptive to the message they were sending.
"I saw lightbulbs going on [in the crowd]," Sanders said. "It's clear this discussion needed to take place."
As many platitudes as representatives for The Collective have heard about getting more seats at the table, the effect of simply giving diverse voices a platform to themselves is more deeply felt, members of the group said.
“As a Black woman coming into these spaces, people don’t really know why I’m here, and there’s really not much engagement," Dungee Glenn said. "Whereas after, with me being a panelist, they’re like, ‘Oh, now I want to know you.’ And that’s just human of people.”
That said, there were no illusions among the panelists that some sort of decisive blow was struck in the fight against structural racism in both the city and the commercial real estate industry. The Collective will be watching to see how many connections they made at the event will turn into something more.
“The dialogue after the event, whether this afternoon or the next couple of days, opens up when you bring these different constituencies together," Sanders said. "So what happens over the next three to six months as a result of that dialogue? The world can see how you move from ideas to results.”