The Economic Case For Broader Representation In Commercial Real Estate

Too Diverse and Young to Lead?

I was 24 years old when I was asked to lead housing research for Goldman Sachs. Eighteen months later, I was asked to co-lead the Firmwide Black Network for the Global Investment Research department, a diverse affinity group that was there to support Black employees of the firm. I was proud to do this work, but I also felt a little out of place.

As a 26-year-old I was one of the senior most Black people, globally, in a department of almost 1,000 people. Something felt odd about that though. Goldman Sachs and many other large firms have sought to “diversify,” “even the playing field”, and “support under (fill in the blank) community members” in multiple waves since the late 1960s or earlier. If their diversity efforts weren’t new, then why could I look across Wall Street and find few, if any, other Black senior research analysts across the globe within any age group? Why were my Indian or Latino compatriots likely to think and feel the same way?

What’s The Case for Diversity in Commercial Real Estate?

Now as the CEO of a mission-driven private equity firm investing in real estate, healthcare, and the financial services sectors, I still assess the true value in diversity. What’s the case for broader representation in business? What about in commercial real estate…would the broader commercial real estate industry really benefit from greater diversity in the leadership of development companies?

My first, and biased, answer is “of course!” But the analytical me wants to prove it. How much could the value of commercial real estate rise if diverse-led development firms went from the prototypical 2% representation to 20%?

The analytical “yes” to the diversity question requires an elimination of the zero-sum thought process. If one believes that growth from 2% “minority” representation to 20% means that 18% of the existing developers need to be kicked out of the industry, they should throw that idea in the garbage. The value of commercial real estate has reached higher peaks every cycle in calculable history. The value of real estate, while significantly more volatile than it was 40 years ago, has created more value each cycle.

Bottom line, a greater share of diversity need not be exclusionary toward existing participants in the industry. In fact, to answer “yes” to the diversity question analytically one would have to envision a scenario where more diversity in commercial real estate actually leads to more overall economic growth that grows the pie more than any one group’s proverbial slice.

To me the bigger pie is the holy grail of diversity in business. No one is interested in their cheese being moved, not from White to Black, from Midwest manufacturing to production in China or any other derivation of what feels like harm to one’s own potential future. So how do we grow the pie?

The Baker Tilly Approach: Developing Diverse Developers

Two months ago, I joined a successful diverse real estate developer, Nawal Noor, and a host of capital providers in a virtual event where we evaluated proposals from up-and-coming entrepreneurs in the commercial real estate industry. Baker Tilly’s real estate advisory practice hosted the innovative rapid think-tank, where underrepresented entrepreneurs pitched their commercial real estate and affordable housing projects.

Out of the many presentations we listened to, two stood out: Que El-Amin’s “Community Within the Corridor” project in Milwaukee, and Re: Land Group’s “Community of Opportunity” being driven by Christopher Posey and James Beckett and their pioneering, community-led redevelopment in Louisville, Kentucky’s Park Hill neighborhood. These entrepreneurs showed innovative concepts, community impact, and powerful visions.

“Having people of color, people who can empathize with you and share their experiences, makes a huge impact,” said Posey. “Having a reputable, international organization like Baker Tilly working beside you is paramount. It levels the playing field.

The event was part of Baker Tilly’s conscientious effort to “level the playing field” in commercial real estate called “DevelUP.”

“DevelUP is designed to assist underrepresented and emerging developers with capacity and wealth building by connecting them with the resources they need for success,” said Baker Tilly’s program lead for underrepresented developer services, Matt Paschall. Whether it’s access to capital, social capital or helping them navigate the many steps necessary to bring a project to successful completion. Our purpose is to help build the next generation of community and industry change agents.

The first DevelUP event, which preceded the innovative competition, was an affordable housing workshop in Milwaukee last spring. More than a hundred diverse entrepreneurs, allies, and community development professionals learned about affordable housing, how to scale their businesses, and ways to build a diverse team. They also explored how to gain access to capital and made valuable connections with lenders, equity investors, and co-developers.

It’s no overstatement to say the commercial real estate industry is highly complex. Significant projects are built on existing relationships. And it’s no secret that success in this industry correlates with who you know. That’s why it’s absolutely essential that seasoned business leaders of all backgrounds lean in and help others grow in the field — especially those in demographics that haven’t yet been deeply represented.

If it is true that underestimated demographics (let’s say people of color for the sake of conversation) are going to help their communities more than others, then their inclusion in larger commercial real estate projects should grow their communities’ economic productivity. If their communities grow the size of the overall pie of commercial real estate grows as well without economic harm to anyone. This, to me, is the heavenly scenario. Win-win-win and win again.

Omicelo Cares: The Real Estate Co-Powerment Series

Here in Pittsburgh, we have a different initiative with similar goals called the Real Estate Co-Powerment Series. The Real Estate Co-Powerment Series, powered by Omicelo Cares in collaboration with Neighborhood Allies, is an education platform designed to demystify the real estate development process. Through in-class instruction, coaching, and mentorship, the goal is to demonstrate how community members, organizations, and small businesses can take part in and benefit from their own neighborhood revitalization.

Omicelo Cares attracts a significant number of diverse entrepreneurs who range from beginners to professionals with years of experience. The program attracts community-based organizers, homeowners, small business owners, and anyone else interested in understanding the real estate investment process. A significant part of the course involves learning how to get active real estate development projects across the finish line.

It’s an eye-opening experience, especially for people who previously hadn’t seen a clear path to becoming successful real estate developers.

“I was in the midst of a very difficult personal situation as a lady carpenter, but I knew there was more,” said Tenika Chavis, one of over 250 graduates from Omicelo Cares’ Real Estate Co-Powerment Series. “When I took the class, I owned nothing, but today I own real estate in multiple countries, I help other women do what I have done, and Omicelo Cares has helped me the entire way.”

And There Are Others Doing This Work Too

Fortunately, we’re not the only ones trying to diversify the field. Over the last decade, we’ve seen other initiatives help grow underrepresented entrepreneurs, including:

• The nonprofit Real Estate Associate Program (Project REAP), based in New York and Boston, was designed to help minorities gain access to professional connections in the field.

• Among professional associations, the Commercial Real Estate Development Association (NAIOP) and PrologisPLD
have partnered to provide scholarships for rising CRE professionals, creating a pipeline of women and minorities for careers in development and operations.

• Higher education institutions like the 9-month Associates in Commercial Real Estate (ACRE) training program (supported by Marquette University, the Milwaukee School of Engineering, and the University of Wisconsin-Milwaukee) have a goal of supporting diversity in the commercial real estate industry.

What do these initiatives have in common? An emphasis on networking, access, and education. Ultimately, it’s all about building relationships. As mentors, we offer advice, connections, and lessons learned, and our relationships continue with the entrepreneurs well beyond our initial meetings.

What’s Next…A Mindset Shift?

As the year closes out, I remain optimistic. We are in the midst of an eerie phase of diversity in the boardroom that goes something like this: “George Floyd was a while ago, but ESG and DEI are getting very important overall.” There is a reasonable chance in the upcoming year that more executives move from the deficit mindset of diversity (more diversity equals less for me) to the bigger pie mindset of diversity (more diversity equals a bigger pie for all of us) and see clearly that we can all win more from diverse collaboration.