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Sara Myerson on Mixed-Income Mixed-Use, Intention & Placemaking
4 Plays3 days ago
Sara is the Managing Director of Investments at MSquared, a New York-based, women-owned real estate impact platform focused on creating mixed-income, mixed-use projects that promote affordability, sustainability, and diversity. With a Master in Urban Planning from Harvard University, she brings over 15 years of development, design, finance and public-private partnership experience, all with a focus on emerging and transforming urban markets. Although only two of the top 25 development firms in the country are run by a woman, none by a person of color, and less than 5% of real estate investment firms are led by women and people of color, Sara is breaking this mold, bravely and creatively setting a new bar for pairing economic opportunity with social impact. Sara breaks down a range of projects, from transforming an entire city block in Upper Manhattan’s Inwood neighborhood to designing new types of ownership to close wealth gaps in Los Angeles’ Crenshaw corridor, and shares how she aligns properties with purpose.
Learn more about MSquared at buildmsquared.com.
Thank you for listening and if you want to know more about Lady of Record visit Instagram @ladyofrecord and ladyofrecord.com.
All information provided is for informational purposes only. It should not be relied upon as investment advice or recommendations and should not be considered specific real estate, legal, investment, financial or tax advice. Investing entails risk, including the possible loss of principal, and past performance is not predictive of future results.
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Transcript
Introduction to Lady of Record Podcast
00:00:00
Speaker
Welcome to Lady of Record, the podcast. I'm Georgie Paul, founder of Lady of Record. Join me as I interview incredible women who are boldly owning their financial security and impacting communities through real estate.
00:00:18
Speaker
I hope you
Sarah Meyerson's Real Estate Background
00:00:19
Speaker
enjoy. Today's guest is Sarah Meyerson.
00:00:38
Speaker
Sarah is the Managing Director of Investments at M Squared, a New York-based, women-owned, real estate impact platform focused on creating mixed-income, mixed-use projects that promote affordability, sustainability, and diversity.
00:00:56
Speaker
Sarah oversees the sourcing and execution of investments and brings over 15 years of development, design, finance, and public-private partnership experience, all with a focus on emerging and transforming urban markets.
00:01:13
Speaker
She began her career at Goldman Sachs working in the Urban Investment Group and Investment Banking Division and has since held a wide range of roles, including Director of Planning for the Boston Planning and Development Agency, where she oversaw Boston's land use planning, zoning, and urban design, leading its first citywide planning initiative in 50 years, Imagine Boston 2030.
00:01:41
Speaker
as well as Vice President at Suffolk Capital, Executive Director of the Office of Olympic Planning, and Chief of Staff and Director of Policy at Preservation of Affordable Housing.
00:01:55
Speaker
She holds a Master in Urban Planning from Harvard University and a BA from Middlebury College and sits on the Urban Land Institute's Boston Advisory Board and Public-Private Partnership Council.
00:02:10
Speaker
Sarah is bravely and creatively redefining and setting a new bar for real estate investors and developers to align economic opportunity with social impact, and I'm honored to speak with her today.
00:02:26
Speaker
Sarah, welcome to the podcast.
Real Estate's Role in Community Building
00:02:29
Speaker
Thank you so much for having me. I'm excited to join you today. I like to begin each conversation with a question. What about real estate creates a spark within you?
00:02:40
Speaker
but It's such a great question. um And I thought a lot about it in preparation for this podcast. You know, for me, real estate is the essence of place and all of our lives happen in places. That's where we create memories. It's where we create opportunities for ourselves and for others.
00:02:57
Speaker
It's where we build community. It's how we interact as humanity. And so I think for me, um Being involved in an industry that helps to create those spaces where we where we experience life is just a really exciting prospect.
00:03:12
Speaker
um From early on, I always loved the built environment. um And before I even know what that term really meant, but low, like, to architecture and buildings and experiencing cities...
00:03:23
Speaker
um And, you know, I think that that is a spark early on, continued to influence me and come back around to how I think about, you know, what is the legacy I hope to leave with my career? And how do I, you know, hope to leave but a little bit of me um in the in the places that um that we build and build
Focus on Mixed-Income Communities
00:03:42
Speaker
community?
00:03:42
Speaker
I couldn't agree more. And with that in mind, I want to dive right into your approach at N Squared because it truly stands out as different in the space and And I really want to jump into something that I think is top of mind for so many people right now, which is affordability, um given that more than half of American households are rent burdened.
00:04:06
Speaker
How do you define a mixed income, mixed use project? And why do you see it as a formula for addressing affordability while at the same time driving positive impact for both investors and communities?
00:04:20
Speaker
I think that the housing crisis we're facing right now is one of the most pressing crises of our time. um If people don't have ah feeling of stable shelter at its most basic level, it really prevents you from from having opportunities, stability in your life, and really ah taking care of those that you love and you're hoping to create stability for.
00:04:47
Speaker
At M Squared, we are a woman-owned, impact-oriented real estate platform. um And what we are focused on is exactly what you were saying. So mixed income, mixed-use communities.
00:04:59
Speaker
ah We are particularly focused on housing creation, so building and developing new housing, um all with a focus on rental housing stock.
00:05:10
Speaker
um We do acquire as well um and do do acquisitions, and I can touch on that kind of later on. But the essence of who we are is we focused on new housing creation and mixed income asset class.
00:05:24
Speaker
We really think bringing things mixed income. So for us, what that means, it means that there are... um apartments within our buildings that are affordable or attainable to households at a range of different incomes.
00:05:39
Speaker
What that means can vary depending on the specific project and strategies that we use to get it financed. But to to make it most simply, you know, we strive to have a certain percentage of the building um ranging from kind of 20 to 50 percent of the building set at rent levels that are attainable for workforce jobs.
00:05:59
Speaker
So we're thinking essential employees, essential workers, the the teachers, the um EMTs, police officers, ah those in the service industry that help make our communities whole.
00:06:11
Speaker
yeah We really want to make sure that those who are involved in those essential jobs for communities can live in the places where they work. um And then the other portion of our buildings are Our market rate or unrestricted housing. And the thought there is really we hope that our buildings themselves are representative of the cities in which they're located or the urban areas in which they're located.
00:06:34
Speaker
And you have this kind of mini community that reflects the diversity of incomes and jobs in an urban area. At the at the building level and then can create a better and more sustainable ecosystem in the urban area as well.
00:06:48
Speaker
I think the essence of it came from the idea that that essential workers shouldn't have to travel in to where their jobs are. They should be able to live in close proximity to their jobs. um And so we are trying to make sure that we're creating housing that's affordable for the full spectrum of people who are kind of in close proximity and and and employed within that, call it 15 minute community.
00:07:12
Speaker
um We think that that that's at at its core is what we need for that social sustainability um as a society. Sometimes there's not necessarily the understanding between the two of how you can also do good, but also create business and you economic opportunity in the process.
00:07:28
Speaker
And I think you are really different in that way. And many of us at M-Squared kind of have our roots in early days of impact-oriented investing. So thinking about investing with a value mandate as well or multiple bottom lines as it kind of evolved um into the the way people would discuss this this concept of of doing ah well financially while also doing well based upon a value um a set of values that you're trying to operate in in your investment decisions.
00:07:57
Speaker
um You know, i think money talks. And so what we have focused on is we've raised third party capital at M Squared. We are an investment manager um and invest and deploy um through traditional structures of real estate private equity funds um into projects. we are investing for both a financial return as well as a um overall objective of creating that mixed income housing.
00:08:24
Speaker
Many people think about kind of these two bifurcated worlds, right? This affordable housing that has to have full um subsidization, you whether that be from the federal government or local government, but is is really a subsidized asset class. And then market rate, which has private capital flowing into it and generates financial returns for those investors.
00:08:46
Speaker
We really seek to blend the two. And so in our projects, we have we have those units that are set at certain rents and that are more affordable. Often that unlocks um different advantageous financing financing mechanisms for us.
00:09:00
Speaker
um That could be subsidies um in terms of grants. It could be tax credits that we unlock or have available to us to help finance those projects.
00:09:11
Speaker
also can be things that enhance our operations. So many of our projects benefit from ah real estate property tax abatements in exchange for having that affordability. we then have the market rate side. And that really is able to generate more of a financial return.
00:09:27
Speaker
To a certain extent, it may cross-subsidize some of that affordability. But we as a whole are still looking to generate strong risk-adjusted financial returns for our investors. ah So we are very much, first and foremost, ten financially driven and are looking at those investment metrics of what are our yield on costs? What do we think the internal rate of return will be on this investment or the the equity multiple so that we are delivering strong financial returns for our investors and showing them that private capital ah doesn't have to be public subsidy, but the private capital can be part of the solution for the housing crisis.
00:10:02
Speaker
um Talk a lot about risk-adjusted returns. I think that that's something that's so key to understanding how mixed in the mixed-income asset class works.
00:10:13
Speaker
um So if you're developing and then leasing up a luxury multifamily building, you're taking a ton of risk on it being that you're going to be able to achieve rents that have never been achieved in a market before. And you're going to be able to find people who are setting a new threshold for what they'll pay to rent in your building.
00:10:33
Speaker
For us, we know for those affordable units, there are so many people eager to be in those units and who are going to rent those up very quickly. The risk of getting heads on beds like into those units is very, very low.
00:10:49
Speaker
And so you from a risk-adjusted standpoint, we know we're going to absorb those units. We know that you're going to have those units be stickier. People aren't going to vacate as much. You're not as going to have as much of those friction costs of having to release apartments.
00:11:03
Speaker
um And that really helps bring down the risk profile of these projects. And I think also it shows investors that um there's an opportunity to create housing that's a little bit less risky.
00:11:15
Speaker
um Perhaps that means its returns are a little bit lower than the hundred than what you might strive for if you were doing 100% market rate, but it's also more predictable. um And and so a steadier stream of returns.
00:11:28
Speaker
I think it goes to show that you can diversify even within one project itself and create that security for
Women-led Investments in Real Estate
00:11:35
Speaker
yourself. Hearing you explain this brings up another point, um which is that research shows that women and minority fund managers are more likely to direct capital toward women and minorities, creating a multiplier effect.
00:11:49
Speaker
And again, to me, M squared is really the ultimate example of this. Your website shares that only two of the top 25 development firms in the country are run by a woman, none by a person of color, and less than 5% of real estate investment firms are led by women and people of color.
00:12:12
Speaker
Given that you are one of the few breaking this mold, can you share how you are targeting and deepening the impact of your capital when it comes to the people aspect of your business?
00:12:23
Speaker
We think that those who are building um the places that we live our lives should be reflective of how diverse our communities are. um And, you know, I think we we are, as I mentioned, we so we are a WBE, a women owned business um that's operating as both the investment um manager as well as a developer. So we really stand out um in the industry. um Even the composition of our firm is extremely unique. There's 15 of us now and 14 are women.
00:12:55
Speaker
So it is a very female heavy presence. um And I think that some of that is, you know, we do approach ah the work we do a little bit differently.
00:13:06
Speaker
um And I think, you know we having all spent a significant amount of time in ah finance, real estate finance um and the public sector.
00:13:17
Speaker
have seen how difficult it can be ah for women and um and ah minorities to develop ah projects or invest. um But I'll really speak about kind of development side and where we're trying to direct capital.
00:13:31
Speaker
You know, one of the things it often and it's who's sitting at the table. It's who people's networks are. i guess subtle things about business where people gravitate to their networks and their gra their networks may look more like them than not um really can be a hindrance, especially for developers who are looking for capital for early stage capital or to gain traction um with their own track record as they move on from larger firms.
00:13:56
Speaker
So I think one thing that we're doing um very proactively is thinking about the networks that we operate in and making sure that we are encouraging those in those networks to explore opportunities to um grow their pipeline, grow their businesses.
00:14:14
Speaker
We also think it's incredibly important to give credit to emerging developers for the track record that they've developed at larger firms. um They, you know, we look at our partners when we're looking for partners to invest with and look at the experience they have from their previous firms um as really a testament to the work that they're going to be able to do on their own.
00:14:36
Speaker
um And I think that that is a ah perhaps just a little bit of a ah a subtle difference early on in our process. that ah enables some of those developers to ah get more of a foot in the door and have longer conversations with us.
00:14:50
Speaker
um And I think we also ah really kind of span two worlds where many of us came from institutional finance backgrounds. ah we Many of our investors are institutional investors. And so we...
00:15:04
Speaker
seek very often to find really strong partners to partner with who haven't tapped into the institutional capital world yet, but we think are ready to. And we help to create that bridge for them.
00:15:16
Speaker
So I think often about a um ah partner that we have ah based in the Seattle metro area. The company is called Coase. And the woman who runs Coase has a amazing track record with her team.
00:15:32
Speaker
um And so ka Kathy has an incredibly strong track record with her team in the Pacific Northwest, has developed a number of really wonderful properties that are all targeting that essential workforce that I spoke to earlier.
00:15:45
Speaker
um But to date, she's really relied on, ah you know, the friends and family country club style fundraising that we're used to in kind of smaller scale real estate. We think she was really ready for that to break into the institutional world. and And we've partnered with her to date on two deals, about to do our third with her, um and um have had the opportunity to introduce her to other partners of ours who have become lenders for her.
00:16:11
Speaker
um and it really helped her to continue to see the prospect of growing her business. um And so I think that some of it is really just oh developing those strong relationships and nurturing them over time as we work together.
00:16:23
Speaker
And see what the potential is for her her to grow her business and us to also continue to grow with her and invest in multiple projects with her. um So it's incredibly important for us to really build those relationships and continue to find ways to help ah those companies grow as we are so ourselves at M Squared are growing.
00:16:41
Speaker
And I think... You know, i come back around to intentionality. We're intentional in how we're trying to do it. and sometimes it just takes that little bit of a step to be intentional about those decisions to make a difference. The intentionality. i I couldn't agree more with that, Sarah. And I'm so inspired hearing you share this information because that's really essentially how Lady of Record came to be is as well, is coming from more of an institutional, global firm type of background, but being intentional and being able to apply that access, that education, that pipeline to people that are historically unrepresented in the space and understanding that in order for them to get started and in order for us to start changing what looks like
00:17:27
Speaker
normal in the industry, you do have to take a chance on on someone and being able to feel like they have you as a partner and have that relationship. I think it's It's creating this whole new ecosystem, whole new network, and being in the weeds with them on the deals, which I think is also where rubber meets the road is, you know, the education and the access is one part, absolutely. But it really comes down to who's in the deal with you, who's getting it done, because that's where I think the change really happens. I think just on that point, you know, and it's a lot of what you guys are doing with with Lady of Record, i think so often women frustrated
00:18:03
Speaker
fearful of taking that step in the real estate space because they are, maybe they haven't done it before, they haven't seen mentors do it before, or they they're fearful of what they don't know.
00:18:15
Speaker
And so often we see um our male counterparts, ah you know, i they behave differently in some of these spaces where they're more willing to kind of fake it till you make it, for lack of a better word, which is sometimes what you have to do to get that initial experience.
00:18:29
Speaker
Yeah. And rather than apologizing for ah you know a track record you don't have or apologizing for experience that you don't have, you know one thing I really encourage women to do in this space is to surround themselves with a network that has that experience.
00:18:44
Speaker
And so you might not have it, but you know someone who does. And that's going to help you when you need to answer that question or when you have that challenge on a project or when you need just a little bit more of the conviction to make that step forward in an investment decision. Yeah.
00:18:58
Speaker
And I do really think that women can support other women in doing this. um And I think that's so crucial to us, you know, continuing to be more successful in the real estate space. um You know, we lag behind other pieces of the financial sector in terms of that gender parity within those senior roles. And I think networks can be a huge part of helping us continue to push that forward.
00:19:20
Speaker
I'm so glad you brought this up, Sarah. And building on your ability to create change at a systemic level in that way, How do you personally own your authenticity as an investor, as a developer, when you are the only woman in the room or you are going up against a pretty tough situation? How do you tune into that? It's always challenging if you're um kind of feel that you stand out for some reason as the only woman in the room. um I would I'd be lying to say that that's not something that you know continues to be a challenge at times.
00:19:52
Speaker
um But I think that one thing I try to really own is ah confidence and conviction in the work that I've done to date and in the ah work that I've seen my peers do, um who I've continued to grow within this industry. And I have a strong network of women in various roles at other um other firms that work.
00:20:17
Speaker
that i know I can pick up a phone a call and and ask them about their experience on a certain negotiation or their experience on a certain type of project. And i really hold those relationships incredibly dear because they are, ah and think, crucial um as we try to continue to make a name for ourselves.
00:20:34
Speaker
um It also helps, frankly, and you know, a place like M Squared is unique in that we have kind of a firm of of women supporting other women, which is which is really wonderful. I think that a key thing we talk about a lot at Emma Squared is the value that comes from how we approach a project differently and the value that we can create in doing that.
00:20:56
Speaker
And sometimes it's subtle things. It's, you know, when we look at a floor plan for a unit, we might see something in the practicality of how a layout is done or the need for there to be additional ah storage for it to operate in tighter square footage that That really adds value, helps these units lease up.
00:21:16
Speaker
um And it's just us bringing a different eye or a different lived experience to the work that we're doing. um So much of what we see in real estate and how we're shaping real estate comes from our lived experiences because it's about the places that we live and operate day to day.
00:21:33
Speaker
um And I think knowing that it's okay and perhaps even better to have a fresh perspective on certain um ways to create those spaces can be really valuable.
00:21:45
Speaker
And I think that that holds whether you're doing a large 250-unit multifamily building or a small income, your first income property. But you're seeing something about how you would maximize value in a certain space or how you would differentiate a space that others may really benefit from and appreciate.
00:22:04
Speaker
A tiny example of that. um We have a project in Dallas um and that we developed with a female-led developer down there. um And one thing that was really important for her was thinking about this secure access from the parking garage to the corridors for each building. And she really wanted to make sure that if you were parking your car at night, you could get into your corridor without having to go through a dark hallway or an elevator bank.
00:22:31
Speaker
Because for her, that would make a huge difference on feeling safe coming home at night by yourself, um particularly a woman who may live by herself coming home to her apartment. um And so we we developed that parking garage to have direct access at each level of the building um through a lit corridor so that it wasn't, you know, going into ah an empty or hidden corridor in the in the parking garage.
00:22:55
Speaker
And it's something that makes a difference for our residents that they notice there and they they feel that there is a security in how they're accessing their home um the that is appealing to them. And so I think those small things that you see in real estate can really benefit from having a different perspective. And so rather than shying away from it, own that, believe in that authenticity and how you can create how that's going to create value for a project.
00:23:22
Speaker
It's interesting you bring up conviction. That's something that's come up on this podcast before. And it really is, i think, leaning into that conviction and trusting yourself in that way and really fighting for that.
00:23:34
Speaker
And i think the example of your Dallas project is perfect. um Just having someone who is thinking differently and how that can completely change your the smallest detail of a physical space, but is huge in someone's personal life and how the two translate from one to another. And in leading with that and hearing you talk about Dallas, I do really want to dive into a couple of your projects, which I'm so excited to hear the details on.
00:24:02
Speaker
um The first is Miramar, where you transformed a full city block in Upper Manhattan's Inwood neighborhood. Can you share what you've built there and what it was like to source and execute an opportunity of that magnitude and maybe walk us through a little bit of the strategy and also the numbers behind the
Case Study: The Miramar Project
00:24:23
Speaker
deal?
00:24:23
Speaker
So the Miramar Project is a nearly 700-unit project um in Upper Manhattan, as you mentioned. none It's ah in the Inwood neighborhood um in Upper Manhattan. And it was actually...
00:24:35
Speaker
ah boldly One of the first projects that um M Squared took on um after we were founded in 2020. um M Squared partnered ah with two other developers on the project, and we are we are both a developer and an investor in the project. We partnered with L&M and Taconic, who are two known names in the multifamily, mixed ah mixing income multifamily development space, ah particularly in Manhattan.
00:25:02
Speaker
um And in partnering that with them, i think what that enabled us to do early on in our life as a company was to ah really highlight and leverage our strengths internally And then surround ourselves with other firms that had um this had other strengths within the real estate space.
00:25:22
Speaker
And so um we, as a smaller company at the time we did this at M Squared, did not have in-house construction expertise, ah had been around a number of development projects before.
00:25:35
Speaker
ah But the L&M team has is vertically integrated and um did perform the construction. So we had that component of the of the team that was rounded up there.
00:25:45
Speaker
At M Squared, we really focused on the um sourcing and execution of the financing strategy, um which was really leveraging a lot of our expertise And then Taconic, who actually um and was involved early on in the project and, and you know, as the Inwood neighborhood was ah rezoned and and involved in the project, um are really leveraging their multifamily experience and will be property managing the project as well. So you really have all of those different elements coming together and really um creating a really strong team to execute on such a large project.
00:26:20
Speaker
And the project itself, but you know, we're very, very proud of what's been ah delivered in the neighborhood. It's a really dynamic project um from both the, you know, the size of it, but also the programming of it.
00:26:36
Speaker
So one unique element of it um is a ah is a mixed use component, which is ah not a partnership with the nonprofit community. People's Theater ah to operate a nonprofit theater in the ground floor space of the building. And so you have kind of a cultural anchor to the building. There will be neighborhoods serving ah retail adjacent to that.
00:26:58
Speaker
And then on top of that, you have a mixed income um profile of the multifamily ah spaces within the building, all within in eight ah ah beautiful ah class a classy, highly amenetized building.
00:27:12
Speaker
um The project is beginning to deliver now. and So we are starting lease up this summer um and are really it incredibly excited about how that's progressing. It stays, but construction will be completed on the building by the end of the year. And it's really a unique mixing of incomes. So we have a a really broad range. We have 40% of the building that's affordable.
00:27:34
Speaker
between 40 to 80 percent of AMI. It's pretty deeply affordable in New York City. um And then we have a middle income component that's at 120 percent of AMI. So those are people who are making six figures, but where it's still housing is increasingly unattainable in the New York City market.
00:27:52
Speaker
And then you have the market rate component as well. um And so to have that mixing of incomes, that really kind of dynamic intentionality within kind of how we're thinking about creating a mixed income community.
00:28:03
Speaker
And I can say community because I do really think with 700 units, you're really thinking about a little, a little you know, microcosm of of ah of an urban neighborhood right there.
00:28:14
Speaker
All, you know, in close proximity to the subway, 30 minutes to get to Midtown, unmatched in terms of its kind of ah proximity to really exciting things. You have public parks over um along the river. you really have this really dynamic area and community. And so yeah we have been incredibly excited from the very beginning to be involved in this type of a project in the Inwood neighborhood.
00:28:37
Speaker
And to be able to showcase what we really believe is um you know, a true M-squared project where you have a mix of uses, you have a mixing of incomes, and it's all really located within um an area of high opportunity.
00:28:51
Speaker
Hearing you say this, Sarah, is is incredible because you're helping even me realize what we're doing here with Lady of Record even is kind of making our own mixed-use, mixed-income ecosystem, like you're saying, where we help first-time homebuyers, we help seasoned investors, we help retail with purpose get into that community as well. And like you're saying, when all of that blends together into a community...
00:29:15
Speaker
The impact that comes along from that is so beneficial and transformative. And one thing I'm curious about, too, as far as the sourcing goes, because 700 units is obviously and a very large scale project.
00:29:30
Speaker
Did you have to assemble different parcels? Was it tough getting the ground for this? How did that process work? It is on ah on a couple of different parcels. There's some long-term ground leases that were negotiated. ah it definitely was an assemblage that is that that was challenging over time um and adds complexity.
00:29:49
Speaker
On top of that, it's not a simple debt and equity financing structure. We have a lot of different sources in this project. So we have low-income housing tax credits that we syndicated and brought that equity into the project.
00:30:04
Speaker
There's brownfield tax credits that were syndicated and brought into the project as a source. um Then there's more traditional, just equity. um There's some grant financing that helped to pay for more of that community's cultural space on the ground floor. And it also happens to be located in an opportunity zone, which was incredibly important for um our equity investor on the project. So it really was a number of different financial mechanisms that all had to come together to unlock the potential on the site.
00:30:35
Speaker
So once you went through the challenge of assembling the site in a newly resumed neighborhood, we then had to go through the challenge of piecing together that financing. And I think, you know, ah that is illustrative of how challenging it can be to deliver these types of communities ah But it's possible.
00:30:52
Speaker
um And it really is possible if you can layer in all of those different so ah financing sources together. Yeah. The ability to pull those different levers and make it come together on one cohesive project is incredible, especially in a city like New York. um You're clearly not stopping there. um Jumping coast over here um to Los Angeles is I want to talk about another one of your projects, the Clark on 54th in Crenshaw, again here in LA.
Innovative Ownership Models in L.A.
00:31:22
Speaker
And what's most inspiring to me about this opportunity is the way that you considered new creative types of ownership. So not just the different financing, but also ownership itself and structured the opportunity to enable greater wealth creation for everyone involved, including the original owners of the land that you are developing on.
00:31:44
Speaker
Can you explain how this project came to life, how you came up with this idea, how you executed it, and being that it is a very new model, what some of those challenges were and how you kind of worked through those to make this reality?
00:31:59
Speaker
This really, i i think, illustrates the spectrum of what we're really trying to do at M Squared. So you have a very large urban project with ah um the Miramar um in in Inwood, and we're going...
00:32:13
Speaker
Completely switching scales, switching coasts, looking at a 48-unit project um in Crenshaw in Los Angeles. um But this project really, I think, is ah such a great illustrative example of how community-led redevelopment and transformation can be done.
00:32:33
Speaker
um And so in Crenshaw, you have um the neighborhood really um at ah a transition point and a cusp as it has new transit running through the neighborhood. And so you have the K line connecting the neighborhood to LAX and to West l a um And we were approached by a development team um that had come together, ah a woman developer,
00:33:00
Speaker
who had built a career in multifamily and mixed-use projects in Los Angeles, and a um a family that was a long-term landowner um and was really looking to be part of the change in the neighborhood. And they as a legacy to their family, um they were looking for to be um part of a multifamily redevelopment of the land that they owned.
00:33:26
Speaker
So those two would come together and approach us with the project, um looking for a way to unlock feasibility and get it financed and get it in the ground.
00:33:37
Speaker
And we worked them worked with them um for a number of months on a structure and and connecting them to um different financing sources and lenders to try to put this all together.
00:33:50
Speaker
Ultimately, we at M Squared invested in the project out of our um our fund ah that we manage. And so we are the LP equity investor in the project. um The partnership is ah between the WBE ah female developer and the family um is the day-to-day managing member general partner ah invested in the project.
00:34:13
Speaker
um And they contributed the land to the project. And that's really a huge component of the equity that they have it contributed into the project. But on top of that, they have um you know they they also have additional equity that they put in And then we found an ah impact-oriented lender. LISC is the lender on this project.
00:34:34
Speaker
um And pulled together a number of other public, private, and philanthropic initiatives to round out the capital stack. I think the real difference here is the idea that the long-term landowner ah would, and and it really took from their side, I think, a lot ah a lot of guts and determination, but to be part of that project, transforming the site as opposed to um letting others be part of it. And I think, for you know, as they speak to it, it was so important for their family's legacy
00:35:08
Speaker
to create something in the Crenshaw neighborhood. And we were really excited to be part of that creation with them. The project will be, it's also mixed income. it will be affordable. um About 20% of the units will be affordable, 50% pretty deeply affordable.
00:35:23
Speaker
ah you know, significantly below what the what the average income is um in the neighborhood. And then the rest will be market rate. We'll have a small um ground floor commercial space ah where we're looking at partnering with other local um kind of homegrown initiatives. um The Destination Crenshaw Project, which is very focused on ah local serving retail, um will likely be a be a partner as we look to activate that space.
00:35:48
Speaker
I have been fortunate enough to see the Clark on 54th in person and rising from the ground, and I can't wait to see it come to fruition in the neighborhood. I think it's going to transform what's possible on a number of different levels, and not just here in Los Angeles, but I think what you're doing with M Squared and the way that you're building your networks and partnerships with others and really collaborating amazing.
00:36:13
Speaker
Changing what people see as possible with real estate. And I think, again, goes back to this to me is, again, the perfect example of endeavoring to close the various wealth gaps, which both M Squared and Lady of Record share it as part of their purpose.
00:36:30
Speaker
And I hope that this really inspires others to consider similar models and really do the work that it takes to get to these more creative structures rather than just settling for what's easy.
00:36:43
Speaker
And I think, like you said, the original landowners having the bravery to make that choice and be part of it in that way, because it's also new from that end as well.
00:36:53
Speaker
So I think it takes everybody saying we want to see something different and we're committed to helping each other get there and doing it with intentionality, going back to some of your earlier points.
00:37:04
Speaker
I think one thing that's been so exciting about the Clark on 54th project is that so often people are fearful of change in neighborhoods, whether that be, you know, they're fearful of of the change or the gentrification of it not being um an inclusive change for those who have long called the neighborhood home.
00:37:23
Speaker
And everything that we are looking to do with the Clark is actually, um Really do something different ah that that really is for the community. And even in the type of units that the that the team wanted to build, they really wanted to build units where those who are being priced out of home ownership in the neighborhood, but wanted to come back to the neighborhood they grew up in could have a great multifamily option there.
00:37:46
Speaker
um And so really, I think that it that was done in a way that was really um by the community for the community as it was as it's going through some of this transformation and change, um as opposed to being, um you know, ah standing in opposition to change. It's really kind of doing it a way that embraces it and shapes it.
00:38:05
Speaker
um And I think that that is, you know, our. ah Neighborhood change can be incredibly challenging and can be can feel really disruptive. um But I was really inspired by the team that they were coming at it from a different perspective where they really wanted to view it as something that's hopeful.
00:38:20
Speaker
um And even on the site itself, you you mentioned you've seen it, but we have some pictures. but There's kind of a gravity sign in the back that says hope. And I think it's so reflective of what that what this redevelopment means to me.
00:38:31
Speaker
Because it really was is coming from a perspective of, you know, let's be hopeful and believe in the possibility um in real estate. And I think to me that's really exciting. And to be doing it in a mixed income model like this shows that it can ah can again be about...
00:38:47
Speaker
doing something that's a value aligned that also is can be financially beneficial. um And to think, you know, i think so often we view these um types of real estate in two barbells, right, where it's either completely profit driven or it's philanthropic and CDFI and 100% affordable, all of those things. And I think there's a way to do both.
00:39:08
Speaker
um and And at, you know, at our core at M Squared and me and my career, are like that's really, That's what it's about. If we're going to create great spaces, we have to do both. We have to have the value alignment, but we have to make sure private capital still wants to do it because private capital is ah is part of what shapes our neighborhoods and our places. What I think about, too, hearing you say this is, for example, having local retail be able to be part of a Class A building so that It fits the people living in the space. It fits the existing neighborhood. And it's not a repetition of other Class A projects around the city and other neighborhoods that just simply are not a fit for this one. And it really gives a chance for some of these more local operators to experience that level of quality and being able to grow their business with that level of quality.
00:39:59
Speaker
But doing it In a way that, again, is authentic to them and doesn't take away from that, but adds to it, enhances that and really sets them up for that success and security in the process. Yeah. i And I think, you know, as we look at those at those who are renting in urban areas, as we're looking at um some of the the buildings that we develop.
00:40:21
Speaker
they really appreciate the local serving retail. They feel like that's a ah key part of the creation of place that they want to be part of. And I think that um we've we've seen, it it is certainly, it is challenging um to find retail tenants in certain places. Retail is a very challenging business.
00:40:39
Speaker
um And it feels like it's more so challenging every year. It doesn't get easier. And not every building can be filled with you know, a huge range of retail spaces, but there can be combinations. There can be community space. There can be some retail space there. You know, there's a lot of ways to think about that programming coming together. And, you know, one thing we do is, um you know, we try when possible to focus less on maximizing the revenue of the retail space and more on um underwriting revenue levels that we think are important for the
00:41:13
Speaker
overall building and the place that we're trying to create. So really trying to match that up so that the placemaking is matched alongside the type of tenant, what the type of tenant we want can't afford to pay in
Sustainable Building Practices
00:41:25
Speaker
those spaces.
00:41:25
Speaker
I want to also talk about how you think about sustainability when you design these projects and when you underwrite and how that impacts your decisions. um Going back to your website again, you highlight that buildings generate 40% of U.S. carbon emissions and are responsible for almost 30% of energy consumption.
00:41:45
Speaker
um how How are you building with this in mind? So think the first thing that we focus on um with all of our projects at M Squared is really location. And we think location is a key part of building sustainably.
00:41:57
Speaker
We need to be building in the right spaces to then be living more sustainable lives. And so we we look almost exclusively at transit-oriented development locations, so areas that are in close proximity to public transportation options.
00:42:15
Speaker
Those may look different in different cities. So in New York City, you know, you have the subway, you have bus, you have city bike, you have other things. um and but, you know, ah some of our projects, even in places where there's less public transportation, like suburban Seattle, are built right adjacent to a new light rail stop so that they can really take advantage of that light rail and go directly into the urban core.
00:42:41
Speaker
So I think the number one thing we look at is the location of our buildings and really thinking about that. That location also means that we want to be building in, um you know, and and looking at the long term climate threats and challenges to those places. So really thinking about Thinking about flooding, thinking about um the ah risk of um other severe weather events and what that would mean for those who are living there and making sure we're building appropriately in the event that there are those those threats.
00:43:14
Speaker
We also strive to meet codes, especially in jurisdictions. Well, we always meet the code, but we really are looking at places where they're stretching what what is required um and looking at building all electric wherever possible so that we can um attach into a cleaner grid as we have um overall change in how we are consuming um energy and the in this country. Yeah.
00:43:41
Speaker
And some of the other things we do may be more minor. um So some of those other things that we do are more focused on, um you know, can we think about a green roof? Can we add solar? um How do we future-proof our project to make sure that it has the right um capacity for more EV charging in the future? You know, perhaps ah the demand for that's low today, but it might be much higher five years from now. So how do we make sure future-proofing and creating the opportunity for that?
00:44:09
Speaker
um So I think, you know, not to overuse the word in this, but again, intentionality in some of those decisions um and that intentionality being not just ah materials that we're using for building or the type of building that we're building, but also where we're building it.
00:44:24
Speaker
I really appreciate you sharing that spectrum, because I think so often people probably think that in order to incorporate sustainability into their designs or real estate decisions, that it is more sustainable.
00:44:35
Speaker
technical and expensive as opposed to something as simple as thinking about location and what that can mean. So I really appreciate that you brought those two elements. And one thing that I'd like to also kind of shift gears into that we've already touched on a little bit today um is taking, again, more of that institutional level experience and bringing down the basics to individuals, because I think the same can be applied no matter the type of deal, the city, the size of the opportunity.
Investing in High-Barrier Cities
00:45:07
Speaker
Um, But what I'd really be curious to get your take on as well is, given your focus on major urban urban markets, what your perspective is on purchasing in cities like Los Angeles or New York, where the barrier to entry is so much higher and it does come with inherent challenges. um As a broker here in LA, this is something I face with my clients at Lady of Record every single day. And It can be so tempting to go into a market that's more affordable or somewhere like that, but maybe you don't know anything about that market.
00:45:40
Speaker
And that can also come with its own set of risks. And so how, when you're looking at different locations and where to invest, where to develop and build, How do you evaluate different locations? And again, what's kind of your take on knowing when it's worth stretching in the ones that are more challenging like L.A. or New York?
00:45:58
Speaker
So I think one thing that makes um those more challenging markets, be that ah a New York, a Los Angeles, or my home market, Boston, um is that there also are, as challenging as it is, that creates a barrier to entry.
00:46:12
Speaker
And remember that real estate is, there's a scarcity to it. And so if you have strong conviction about ah location ah neighborhood a neighborhood, place that you know well, there is a scarcity to the land that's there and to how much of the built environment can be in that location. Right.
00:46:29
Speaker
um And so I do think that investing where you know can be perhaps one of the best things you can do because you are going to know some of those ah idiosyncrasies of a certain block or of a certain street.
00:46:44
Speaker
And, um you know, I think I imagine all the times we've we've gone up and down a set of blocks, right, or or a street. And we know, you know, this one's particularly attractive because the sun hits a certain way at a certain time of day that just makes sense.
00:46:57
Speaker
it feel magical um and in your space. Well, that has value. And knowing that and knowing those little small um components of it, I think are a huge part of creating a portfolio of investments.
00:47:12
Speaker
um So when you're trying to build a so you know, come into the industry and build a investment portfolio in the real estate space, I think it's important to listen to those instincts you have. And those instincts are often driven by the places you know.
00:47:28
Speaker
That happens on the small scale. It can happen on a large scale, too. Our investment committee this weekend was evaluating a project that's located ah within blocks from where one of our investment committee members grew up.
00:47:41
Speaker
And I think that perspective that she shared in terms of understanding those blocks and how one block differs from the next and what it would be like to live there is actually a huge part of us making an investment decision about other people wanting to live there.
00:47:55
Speaker
um So listen to those instincts and listen to your gut feelings on those small differences in place. And if you're investing in somewhere that's new, go there.
00:48:06
Speaker
Be there in person. Real estate is one of those investment classes that you really do have to touch. It's a tangible asset. And it's important to touch that those tangible elements of it.
00:48:17
Speaker
um You know, in COVID, we I think we're reluctant sometimes to get on planes and go to sites and we tried to do things from afar. And I've been reminded time and time again, as I've gotten ah back on more planes and gone to more sites, how crucially important it is to see and feel the real estate if you're going to invest in it.
00:48:36
Speaker
um So I really can't stress that the importance enough. um There's only so much any of us can see whether we're looking at small decisions like, you know, and we're scrolling, doom scrolling on Trulia or Zillow, which I do all the time and always think about kind of my own personal real estate portfolio.
00:48:51
Speaker
But you have to get there in person to really understand it. Not many jobs or investment types. force you to get out in person in that way. you know, buying a stock or something like that can sometimes be limited to what's behind your screen. Whereas I think going back to where we started this podcast,
00:49:09
Speaker
Having your legacy, your impact on a physical, tangible product that is part of the fabric of a city, i think is something that makes real estate, again, whether you're doing this at an institutional level, building 700 units in Manhattan, or as personal as, you know, a home on the block that you grew up on and turning that into something.
00:49:32
Speaker
i think that in-person element is so crucial, but also so enjoyable and can really be engaging when you're looking to create impact with your financial decisions. Absolutely. Yeah.
Empowering Women through Financial Knowledge
00:49:44
Speaker
Sarah, thank you so much for sharing your story, your experience, your ideas. This conversation has been eye-opening to the possibilities of, again, aligning economic opportunity with social impact. And i really appreciate you sharing your personal passion behind the two and really showing how that can happen. And I think what you've shared here today are real actionable tools that anyone listening can really start applying this mindset and strategy to their decisions.
00:50:16
Speaker
To close, I like to end each conversation with the same question, which is what is your vision for the future of women's financial security? I hope um that women feel excited about learning new things ah that can enhance their financial security.
00:50:36
Speaker
I think that the idea of... knowledge is power and that learning things can make us feel that much more ready to confront the next challenge or be prepared for the unknown is um is a critical element.
00:50:52
Speaker
And so when I speak with my daughter about financial security all the time, I encourage her, world's constantly evolving. The world is constantly changing. Let's not be fearful about that. like use Let's learn as much as we can and try to make smart, informed decisions.
00:51:10
Speaker
um And that sometimes means taking risks, but you can do those take those risks in an informed way as opposed to it feeling like a scary way. And so really using knowledge, knowledge from your network, knowledge from others to um to help support strong decision making, I think is crucial as we all think about the the opportunities for women to have ah financial empowerment.
00:51:32
Speaker
Sarah, thank you so much. Thank you so much.
00:51:45
Speaker
you