Black developers seek more capital and opportunities in real estate

Adelicia Caree

Despite more than 15 years as a residential real estate developer, Buwa Binitie says he has grown accustomed to regularly fielding queries about his expertise. “Those questions come when a lender might be underwriting you, or maybe there are brokers who are marketing the deal and don’t know you. Questions […]

Despite more than 15 years as a residential real estate developer, Buwa Binitie says he has grown accustomed to regularly fielding queries about his expertise.

“Those questions come when a lender might be underwriting you, or maybe there are brokers who are marketing the deal and don’t know you. Questions like ‘Where’s your capital coming from, who’s behind you, who owns your company?’ ” says Binitie, who is Black and is the managing principal of Dantes Partners, a real estate development firm in D.C. “Me and my peers call them ‘unnecessary questions.’ We feel our White peers don’t get them at all.”

Binitie — whose company built the Hodge in D.C.’s Shaw neighborhood and Delta Towers in the H Street corridor, both affordable senior housing developments — is far from alone in his experiences. In the Washington area and around the country, the development community is almost exclusively White. In an industry characterized by huge sums of money, Black developers say they face major hurdles in accessing capital, connecting with influential networks and expanding their businesses.

But in the wake of George Floyd’s killing in Minneapolis last May and the subsequent Black Lives Matter protests, developers of color say the industry seems to be experiencing a shift: Some lenders, investors, municipalities, development partners and others in the commercial real estate world are recognizing how homogenous the field has been and are taking steps to address it.

“I’m feeling a little bit of a difference,” says Binitie. He is echoed by other Black developers, who say they have been fielding some new business opportunities and offers of collaboration from lenders and White-led development companies over the past nine months. “[Lenders and investors are] making a significant effort to produce capital specifically for Black and Brown real estate developers,” Binitie says.

But whether this is a permanent change remains to be seen, he cautions. “Is this going to be continuous? Or is it a one-time thing so they can say, ‘We provided the capital, and are now going back to our normal course of business?’ ”

A woman walks down a pedestrian area of CityCenterDC, a high-end office, retail and residential development on the site of the city’s old convention center. (Michael Robinson Chavez/The Washington Post)

The Southwest Waterfront seen across Washington Channel from Ohio Drive in 2017. (Benjamin C Tankersley for The Washington Post)

A condominium at 3525 14th St. NW. (Benjamin C Tankersley for The Washington Post)

TOP: A woman walks down a pedestrian area of CityCenterDC, a high-end office, retail and residential development on the site of the city’s old convention center. (Michael Robinson Chavez/The Washington Post) BOTTOM LEFT: The Southwest Waterfront seen across Washington Channel from Ohio Drive in 2017. (Benjamin C Tankersley for The Washington Post) BOTTOM RIGHT: A condominium at 3525 14th St. NW. (Benjamin C Tankersley for The Washington Post)

Access to capital

Over the past decade, D.C. neighborhoods have experienced astounding growth. Some, like the Wharf, 14th Street and CityCenter, have been dramatically transformed. Developers have played a key role in that growth, determining what the new buildings would look like, how upscale the condos and apartments would be, and whether existing residents and businesses would be accommodated.

But the lack of diversity among developers has often translated into a lack of diversity in the product, observers say, with real estate projects overwhelmingly targeted to middle- and upper-income groups.

Statistics for developers are difficult to come by, but Urban Land Institute (ULI), a national real estate and land use industry association, says 5 percent of its members identify as Black or African American.

The Washington Post spoke with more than 15 Black people working in real estate development about their experiences. The developers, many of whom have been in the industry for years and hold degrees from Ivy League universities, agreed that their opportunities have been limited by racism, institutional bias and a lack of connection to powerful networks.

“It’s a fraternity environment in this niche filled with so much wealth,” says Anthea Martin, a senior vice president at Bellwether Enterprise, a mission-driven mortgage bank that aims to increase the supply of affordable housing. “This limits the money that minorities can tap into.”

“It’s multiples more difficult to get loans,” says Diarra McKinney, a D.C. native who runs Rosewood Strategies, a company that has constructed multifamily buildings in the D.C. neighborhoods of Takoma and Ivy City. Before starting his business, McKinney says he worked for White-led companies. “Banks would say, ‘Oh, we love you guys!’ and they’ll have a term sheet in a day. For [me and other Black developers], we might have significantly more experience than many of those companies, but we still get all kinds of questions.”

As McKinney points out, the loans do usually come through. “It’s not the 1950s,” he says. “I can go through the process and get a loan offer. But the terms are not the same; the interest rate will be much higher. And you don’t know why that is. It’s all behind the scenes.”

Developers also need equity, in the form of investments from friends, family or private firms, to close their deals. And that can be even harder for Black developers to procure than bank credit. The asset management industry, which includes institutional investors and private equity groups, is overwhelmingly White. And family and friends, even well-off ones, simply may not have the extra funds to invest in a real estate project.

“I think more than anything, it’s a function of the wealth disparities in this country,” says Curtis Doucette, a managing partner of Iris Development, which has renovated several apartment complexes in and near New Orleans, and is building a $19 million mixed-use, multifamily development there. “We have far less net worth in the Black community. We’re less likely to have it ourselves, our families are less likely to have it, our networks are less likely to have it.”

Doucette, who has been in the real estate business for 18 years, has partnered with White developers and says the contrast was like night and day. “It was a different socioeconomic environment. It was amazing to me to see how willing people were to put hundreds of thousands of dollars into a project.”

There is one area where Black developers are better represented: affordable housing. Most affordable housing is built with some amount of government subsidy; although it can be difficult and time-consuming to procure, it lowers the barrier to entry by reducing a developer’s dependence on private financing.

“The African American developers that I know, they’re in that niche,” says Martin at Bellwether Enterprise. “Most multifamily developers don’t want to play in that space where the deals are perceived as more of a hassle to finance and manage” and where the returns tend to be significantly lower.

Bo Menkiti, left, of Menkiti Group, and Buwa Binitie, of Dantes Partners, in front of Capitol Vista in Mount Vernon Triangle. (Bill O’Leary/The Washington Post)

The developers, along with two other Black-led companies, built Capitol Vista, an affordable-housing development. (Bill O’Leary/The Washington Post)

LEFT: Bo Menkiti, left, of Menkiti Group, and Buwa Binitie, of Dantes Partners, in front of Capitol Vista in Mount Vernon Triangle. (Bill O’Leary/The Washington Post) RIGHT: The developers, along with two other Black-led companies, built Capitol Vista, an affordable-housing development. (Bill O’Leary/The Washington Post)

But others say Black developers are not in the sector just out of necessity. “Minority developers are doing affordable housing because they grew up in those communities. They see that the need is there,” says Adeola Adejobi, a New York lawyer who runs the Diversity in Commercial Real Estate Conference. “When you’re looking at a deal from that lens, you’re bringing a different perspective.”

It is a perspective that is arguably a little more people-centered. Many African American developers find ways to benefit Black communities with their projects, for example. Cecily King, who runs Kipling Development in Detroit, is developing a mixed-income condo building in an upscale community; it will allow low-income residents to own property in an area with good schools and rising home values. And that, King says, could be life-changing for a family.

“It’s still a business at the end of the day,” she says. “But the perspective you bring to the table [as a Black person] opens your eyes to what the opportunities can be.”

Bree Jones, who runs Parity Homes in Baltimore, says she has experienced the microaggressions familiar to African Americans in the development field and has struggled to find financing for her project. She has a plan to redevelop 96 abandoned rowhouses in west Baltimore and sell them at affordable rates to local residents. (Open Society Institute Baltimore)

New initiatives on the horizon

Bree Jones is another developer who is hoping to do good while doing well. Her company, Parity Homes, has a plan to redevelop 96 abandoned rowhouses in west Baltimore and sell them at affordable rates to local residents. “Development without displacement,” she says.

Jones says she has experienced the microaggressions familiar to African Americans in the field and has struggled to find financing for her project. But a year ago, after months of networking and conference-hopping, she met an investor whose company had a social impact wing. The investor, she says, immediately understood the value of her plan.

“They wanted it to work — they believed in me inherently,” Jones says. The subsequent funding, $1.5 million in equity, is one of the last pieces she needed to begin the project.

Black real estate developers have long collaborated to build networks and pull each other up, and that is continuing. But today, a growing number of initiatives are helping to bring in new capital and new connections — and much of that seems to be the result of the country’s intensified focus on racial equity since last summer.

For example, Enterprise Community Partners, a national nonprofit lender, has recently launched a $3.5 billion program to support developers of color who are creating and preserving affordable homes. Capital Impact, another nonprofit financial institution, started a program in D.C. and Detroit to give a select cohort of minority developers access to mentors, training and, in some cases, funding. And a few big banks have recently earmarked funds for minority developers.

D.C.’s Office of the Deputy Mayor for Planning and Economic Development established an initiative that gives minority-run companies priority access to city-led redevelopment projects. “We’ve had a conversation since the beginning of 2019 about how we can make housing in the city more equitable,” says John Falcicchio, who leads the department. “This is a giant leap forward.”

New York City recently announced a similar initiative.

But to really address the discrepancy, developers say a multifaceted approach is needed — one that nurtures the talent pipeline at all levels. After all, at this point, “There are not that many [Black-led] development firms that have the capacity to meaningfully participate,” says Bo Menkiti, founder and CEO of the Menkiti Group in D.C. Together with Dantes Partners and two other Black-led companies, Menkiti’s firm also built Capitol Vista, an affordable-housing development in Mount Vernon Triangle.

Helping smaller minority companies grow so they can eventually take on major projects themselves might require an uptick in partnerships with established firms, or the creation of mentorship initiatives.

Some new programs are focusing on young people. “A lot of Black kids don’t know what development is,” says Mark Marshall, director of real estate at the Denver-based Urban Land Conservancy. Marshall partners with Urban Land Institute’s Colorado group to mentor and train young adults who might be interested in the field, a program that ULI is replicating in chapters around the country.

ULI’s leaders say they are taking the industry’s racial discrepancies seriously. “Since the murder of George Floyd, [racial equity] has become a top priority for everyone at ULI,” says Gwyneth Jones Cote, the president of ULI Americas.

This year, the organization’s annual Emerging Trends survey showed that 70 percent of members who responded believe the real estate industry can help address systemic racism.

That’s why this shift is so significant, industry insiders say.

“I’ve had conversations that I definitely didn’t have more than six months ago with people in the industry who want to know what they’re missing,” says King, the Detroit developer.

“Outside of the industry, I’ve seen people have interest in investing in communities of color to right the wrongs they’re now aware of,” she adds. But “how long will it last? That’s the challenge right now.”

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