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US Black and Latino Real Estate Developers Struggle to Get Funding



Out of roughly 112,000 real estate development companies in the United States, about 111,000 of them are white owned. Those numbers are bad, but at the top of the market, they’re even worse: Of 383 top-tier developers that generate more than $50 million in revenue annually, one is Latino; none is Black, according to a new report.

Economists, social-impact strategists, and social entrepreneurs spent the last year studying the for-profit real estate development industry, trying to understand the stark representation crisis. Their report focuses on Black and Latino developers, because the theme of these groups’ lack of access to capital emerged in preceding qualitative research. They hope to look closer at other underrepresented developer groups, like women and Asian Americans, in the future, one of the report’s authors said.

The dearth of diversity at the top matters because that’s where developers can have the most impact on communities and drive the most economic growth. The lack of representation begins with lack of capital, as Black and Latino people hoping to break into real estate development often can’t even access the seed money to get started.

“A lot of times, developers, myself included, start out raising money from friends and family,” said Cecily King, 35, a structural engineer turned developer based in New Jersey and Detroit, who founded Kipling Development, which focuses on multifamily residential properties across income levels. “In order to raise money from friends and family, you have to have friends and family that have money and knowledge of investing and a desire to invest in real estate.”


A racial wealth gap means that many aspiring Black and Latino developers don’t have such investment-savvy friends and family with discretionary dollars: The median net worth for white families is $188,200, compared to $24,100 for Black families, and $36,200 for Latino families. Nearly three-quarters of white families own a home, but fewer than half of Black and Latino families do.

“Most people in our community don’t have an uncle or a friend that could bring that to the table up front,” said A. Donahue Baker, 50, a developer based in central New Jersey. “So that automatically reduces the number of minority applicants available.”

A Black man with a receding hairline, a salt-and-pepper beard and a big smile, is standing on a street in a construction site wearing a light blue shirt and a dark blue thermal vest. Behind him, and slightly out of focus in the picture, are buildings and pieces of orange construction equipment like cranes and front-end loaders.
Victor MacFarlane, one of the most successful developers in the country, stands at the Baltimore Peninsula construction site. He said the lack of access to capital is driving the developer representation crisis.Matt Ryb

Victor MacFarlane’s eponymous company is currently codeveloping the proposed $1.6 billion Angels Landing, a high-rise, residential, commercial, hotel and retail development in downtown Los Angeles. Mr. MacFarlane, 71, began his real estate career more than 40 years ago at Aetna Life & Casualty Company. Holding a law degree and master’s degree in business, he initially funded his first development project in the 1980s, a 208-unit market-rate apartment community in Denver, with all of his savings from a commission-based job with a real estate syndicator, creative bond financing for the equity, and a construction loan from a Savings and Loan. He went on to found MacFarlane Partners in 1987.

He’s now one of the most successful developers in the country, known by name from city to city. With his decades of experience in the industry, Mr. MacFarlane is troubled that lack of capital remains a barrier for would-be developers. “I happen to know for a fact that there are a lot that are trying but aren’t being successful,” he said. “A lot of that is around capital and inaccessibility of capital.”

Don Peebles, 63, another top developer with decades of experience, whose Peebles Corporation is codeveloping Angels Landing with MacFarlane Partners, points to stark numbers. “There is $82 trillion currently invested in venture capital and private equity,” he said. “Of that $82 trillion, less than 1.3 percent of that money is invested in firms run, owned or founded by women and people of color combined. So that means 98.7 percent of all venture capital and private equity goes to white men.”

When Mr. Peebles set out to start a fund for women and minority developers in 2020 and 2021, he had trouble finding investors. “They kept coming up with excuse after excuse because no one really wants to make a change,” he said. “We’d get some good lip service, but then they would say it’s too risky to back minority developers.” Ultimately, Mr. Peebles gave up on the fund.

The small group of Black and Latino developers who manage to pierce the ceiling at the top of the market often outperform their white counterparts in terms of typical transaction size, the study found. And on the lower end — developers that make up to $350,000 annually in revenue — Black and Latino developers also surpass their white peers in terms of average revenue.

These achievements counter a narrative that the lack of representation in the industry can be attributed to an inability to develop projects successfully, said Laura Maher, head of external engagement at the Siegel Family Endowment, which funded the report that was written by the Initiative for a Competitive Inner City (ICIC), an organization focused on using research to propel “inclusive economic prosperity,” and Grove Impact, a social-impact consulting group.

The report’s researchers “anticipated that argument, they looked into it, and they debunked it,” Ms. Maher said.

The minority developers get, I believe, are vetted a lot more than nonminority deals,” he said. “So just under that premise, if you vet those deals a little more, what you have is a stronger project. You have a project that’s going to be more profitable, a project that potentially will breeze through whatever zoning or any municipal hurdles that may exist.”

A certified public accountant, Mr. Baker became a developer after seeing the power of real estate in his high-net-worth clients’ portfolios. With experience completing more than 30 affordable housing developments, including the Allen Young Apartments, a 107-unit project in Plainfield, N.J., and current work developing one of the first Passive Houses in the state, Mr. Baker has seen how developers of color get stuck.

To get funding for a project from a lending institution, not only does a developer need to to bring at least 20 to 30 percent equity, they have to show they have experience with such projects. Since a lot of Black and Latino developers don’t have large-development experience, they cannot get the financial backing — or the experience.

Oscar Sol, 44, co-founder of Green Mills Group, a Florida-focused development company, which built the $18 million 119-unit Forest Ridge community in Hernando, Fla., said that it took him a decade working for a large developer to master the “unique financing tool for affordable housing.”

Mr. Sol was lucky to get that training. It’s common for developers to only need small staffs, so “the opportunity to get in with a developer, unless they are massive, it’s not really there that much,” said Edmundo Gonzalez, 52, a developer in Jacksonville, Fla., who recently completed Villa Callisa, an 11-unit, luxury, waterfront townhome community in St. Augustine. This leaves many aspiring developers taking circuitous routes to enter the industry, often parlaying their knowledge and relationships from adjacent fields. Mr. Gonzalez has seen engineering, architecture, and construction be “great places to learn the business from the periphery” and “get your feet wet.” “If you are entrepreneurial and business minded in nature, and you want to make money, development is honestly where you go in all those fields,” he said. This path leads to fewer Black and Latino developers, because architecture and engineering also have very low representation.

For Mr. Gonzalez, the best way to get his foot in the development door was through a Master’s program in real estate development at Columbia University. In his class of about 40 or 50, he recalls there being four Latino students and no Black ones.

After seeing developers come into his community without respect for the residents, Mr. Tillman was motivated to enter the industry and take a different approach that focuses on equitable community real estate development.Nancy Andrews for The New York Times

Affordable housing is often the path Black and Latino developers have to take to break into the industry because it requires less capital to get started. But its potential profits are limited, and experience in affordable housing doesn’t necessarily translate to the minimum qualifications that a lending institution will require for more lucrative projects.

Just as homes in Black and Latino neighborhoods appraise for less, so too do developers’ projects in such areas. A development in Newark may be valued at half as much as in a predominately white area 30 miles away, Mr. Baker explained. “That’s significant because the costs are the same,” he said. This can “greatly affect the overall profitability of a project.”

Still, many Black and Latino developers are eager to build and shape communities where the residents look like them, sometimes even the communities they come from.

Derrick Tillman, 42, grew up in Pittsburgh in Section 8 housing that he described as “substandard.” He recalls his mother and younger brothers being displaced when a new owner came in and doubled the rent. And the same thing happened to him in his first apartment.

“Just seeing developers kind of come into our community and not really respect or honor those that were there, I knew there was a better way,” he said.

In 2006, Mr. Tillman co-founded Bridging the Gap Development, which focuses on equitable community real estate development, like his company’s 36-unit Miller Street Apartments, an affordable housing project in the Hill District, a predominantly Black neighborhood of Pittsburgh.

Juan Zabala is an emerging developer in the Washington metro area, but he also received support to develop a project in Reading, Pa., his hometown.Kenny Holston/The New York Times

In Reading, Pa., one of the country’s poorest cities, Juan Zabala, 34, an emerging developer, rehabilitated a mixed-use property that now has a Black-owned nail tech business on the commercial level and two housing units above that each rents below $1,000 a month. Prepandemic, the site hosted an incubator Mr. Zabala created for small businesses, rap clubs for young people, community discussion nights and job training.

When Mr. Zabala decided to buy the property, he had trouble getting a loan to purchase and rehab it. Pedro Peguero, 61, of Long Island, the then-owner who had bought the property as an investment in 2005, took a “leap of faith” with Mr. Zabala and helped him to finance the purchase, using creative financing, taking out a loan himself for the balance that Mr. Zabala’s lenders wouldn’t cover, and having Mr. Zabala pay him.

“We’re from the same area, same Dominican Republic, same struggles. He had almost like the same story. He looked like a young me at the time,” Mr. Peguero said, explaining why he was willing to take a chance on Mr. Zabala. “I’m like, wow, this guy’s really a go-getter, so why not?”

Black and Latino developers are more likely to understand and address the needs of their communities, and they’re more likely to drive economic growth within them, according to the report. The study pointed to research that “Black- and Hispanic-owned businesses are more likely to hire Black and Hispanic employees than are white-owned businesses” and concludes that having more diverse developers would lead to more diversity in the “broader real estate industry.”

Many Black and Latino developers have been seeking out friendly locales, places like Newark, that welcome minority developers. Mr. Baker said he “can level the playing field” when bidding for projects in such areas, because developers of color often understand the Black and Latino communities where they’re hoping to build, and their proposals show it. For example, in a large apartment building project, Mr. Baker thought to add a community center where children can play basketball and hang out. “It’s not just putting up houses,” he said.

To alter the demographics of developers, and ultimately who gets to mold cities and communities, a few welcoming municipalities won’t cut it.

As an immediate next step to address the gaps in developer representation, the report’s authors built a directory that provides an easy way to find Black- and Latino-owned development companies around the country. It also offers a map feature that shows how different parts of the country compare in their developer representation.

That’s a start, and the report itself is a major step toward some progress, said Katy Knight, president and executive director of the Siegel Family Endowment. It’s hard to gather data on real estate developers, so this area has been understudied, and the report’s findings are the first to define the problems concretely, so that policy, institutions, and philanthropists can start to address them, she said.

Ms. Knight said the report provides “hard data for the people who are only moved by those sort of numbers.”

The report’s authors looked for local and national solutions, suggesting that the Community Reinvestment Act, a 1977 law that aimed to thwart redlining and ensure that banks are meeting credit needs across their communities, be updated so that there’s more transparency around the racial and ethnic breakdown of those who are applying for business loans and receiving them.

To get more capital directly into Black and Latino developers’ hands, lending institutions could adjust their minimum qualifications. Mr. Wial suggests that banks not rely as heavily on credit scores and instead expand to looking at other indicators of creditworthiness. And Mr. MacFarlane recommends considering lowering capital requirements and assessing an applicant’s talent rather than just their organization’s experience.

Some Black and Latino developers use joint ventures with other, often white, developers as a way around the minimum-qualifications barrier. They collaborate with developers with more experience and capital to get in on larger projects. The structure can work to get a foot in the door, but isn’t always ideal, as majority developers sometimes exploit the Black and Latino developers who they know need them. Mr. Tillman said that he has seen cases where Black developers are doing most or all of the work but having to give up a disproportionate share of the developer fee. They have little leverage to negotiate for more.

Without changes to who can get capital, and transparency around who’s getting it, developer demographics will likely stay the same, the report warned.

Major structural shifts are necessary, developers and researchers said.

“The system,” Mr. Tillman explained, “wasn’t designed for us in the first place.”


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Commercial real estate is in trouble. Why you should be paying attention – CNN



A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

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Economists are growing concerned about the $20 trillion commercial real estate (CRE) industry.

After decades of thriving growth bolstered by low interest rates and easy credit, commercial real estate has hit a wall.


Office and retail property valuations have been falling since the pandemic brought about lower occupancy rates and changes in where people work and how they shop. The Fed’s efforts to fight inflation by raising interest rates have also hurt the credit-dependent industry.

Recent banking stress will likely add to those woes. Lending to commercial real estate developers and managers largely comes from small and mid-sized banks, where the pressure on liquidity has been most severe. About 80% of all bank loans for commercial properties come from regional banks, according to Goldman Sachs economists.

“I do think you will see banks pull back on commercial real estate commitments more rapidly in a world [where] they’re more focused on liquidity,” wrote Goldman Sachs Research’s Richard Ramsden in a note on Friday. “And I do think that is going to be something that will be important to watch over the coming months and quarters.”

Recently, short-sellers have stepped up their bets against commercial landlords, indicating that they think the market will continue to fall as regional banks limit access to credit. Real estate is the most shorted industry globally and the third most in the United States, according to S&P Global.

So just how big of a deal is this threat to the economy? Before the Bell spoke with Xander Snyder, senior commercial real estate economist at First American, to find out.

This interview has been edited for clarity and length.

Before the Bell: Why should retail investors pay attention to what’s going on in commercial real estate right now?

Xander Snyder: Banks have a lot of exposure to commercial real estate. That impacts banking stability. So the health of the market has an impact on the larger economy, even if you’re not interested in commercial real estate for commercial real estate’s sake.

How bad are things right now?

Price growth is slowing and for some asset classes it’s starting to decline. Office properties have been more challenged than others for obvious reasons.

Now private lending to the industry is starting to slow as well — bank lending was beginning to dry up over a month before the Silicon Valley Bank failure even happened. Credit was getting scarce for all commercial real estate and a fresh bank failure on top of that only exacerbates that trend.

How do you expect banking turmoil to make things worse?

I think more regulatory scrutiny is coming for smaller banks, which tend to have a larger concentration of commercial real estate loans. That means small and medium-sized banks are going to tighten lending standards even more, making it more difficult to get loans.

Does the possibility of a looming recession play into this?

As credit becomes scarcer and more expensive, it’s hard to know exactly what buildings are worth. You get this gap opening up between sellers and buyers: Sellers want to get late 2021 prices and buyers are saying ‘we don’t know what things are worth so we’ll give you this lowball offer.’ That was already happening and the result of that price differential was bringing deal activity down.

There’s no broad agreement on asset valuations. Economic uncertainty will exacerbate that trend. And if you’re a bank, it’s a lot more difficult to lend against the value of a building if you don’t know what the value of the building really is.

So how worried should we be?

A lot of people hear commercial real estate and they think it’s all the same thing and the trends are they’re all the same but they’re not. The underlying fundamentals of multifamily and industrial assets remain relatively stable on a national level.

It’s different for office and retail properties. There’s been a fundamental shift in how we use office space and that has changed demand. That’s something you should have your eye on, especially as low-interest office loans come due. We’re running into a situation where office-owners have to refinance at a higher rate and only 50% of the building is being used. That doesn’t translate to good cash flow metrics for the lender.

I think retail also faces challenges. A lot of people are still sitting on excess pandemic savings that are beginning to be spent down and the Fed is certainly trying to nudge unemployment up a little bit. So I imagine that both of those things will impact retail spending and therefore impact retail as an asset class.

Economists forecast recession and elevated inflation

Stagflation, the combination of high inflation and a weakening economy, could make a comeback. The majority of economists expect a recession sometime this year and forecast that inflation will remain above 4%, according to The National Association for Business Economics’ latest survey, released Monday.

It appears as though the fog has lifted since last month’s survey, which showed a significant divergence among respondents about where they think the US economy is heading in 2023.

“Panelists generally agree on the outlook for inflation and the consequences of rate hikes from the Federal Reserve,” said NABE Policy Survey Chair Mervin Jebaraj. “More than seven in ten panelists believe that growth in the consumer price index (CPI) will remain above 4% through the end of 2023, and more than two-thirds are not confident that the Fed will be able to bring inflation down to its 2% goal within the next two years without inducing a recession.”

Still, more than half of NABE Policy Survey panelists expect a recession at some point in 2023. But only 5% believe the United States is currently in one. That’s nearly four times lower than the 19% who believed the US was in a recession in August. 

Banking turmoil brings us ‘closer right now’ to recession: Fed President Kashkari

The recent meltdown in the banking industry could tip the US into recession said Federal Reserve Bank of Minneapolis President Neel Kashkari.

“It definitely brings us closer right now,” he said during a CBS Face the Nation interview this weekend

“What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch. And then that credit crunch, just as you said, would then slow down the economy,” he added.

While Kashkari said that the financial system is “resilient” and “strong” he said that there are still “fundamental issues, regulatory issues facing our banking system.”

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Build Rentals/Apartments: Ownership is a Privilege and Not A Right



The availability of apartments and units that can be rented is staggeringly low. Because vacancy is so tight, competition in the open market has intensified, lifting rental prices along the way. In Canada, rent for a two-bedroom unit rose 5.6% in 2022. Some of the highest rental prices were recorded in Ottawa-Gatineau at 9.1%, Toronto at 6.5%, and Calgary at 6%.

Less housing stocks, higher prices. The marketplace and our elected officials all knew this would happen. Real Estate Agencies and land developers all but jumped for joy at the prospect of selling homes that sold for $350,000 a few years ago, and are now selling for 3X the amount. Bidding wars drive prices higher and higher. Developers who make a home at @$195,000 cost sell these homes as affordable within the 650-1M range.

So much for independent home units. What about apartment buildings? Are they being built? In Quebec they are but not in the # needed. Europeans are comfortable with renting an apartment for decades, but not so in the rest of Canada. Status, and keeping up with the “joneses” have been all the rage. First-time home buyers will spend decades gathering enough funds to make an initial deposit if the bank so allows it. Why do developers not build rental units/apartments? Well, developers would need to look upon such builds as long-term investments, waiting some time to get back their costs and make some profit. Building other types of homes guarantee them immediate compensation, gratifying their profiteering.

Why do regional, City, and Provincial Governments prefer housing builds of larger houses? The revenue they make of course. Even Premier Ford’s push to have 50,000 houses built in a few years centers upon individual homes being sold, not rented(aftermarket). Has our economic system forgotten the small fry, the average Canadian who does not make a salary over $100,000 annually? Yes, it has, and the reason for this forgetfulness is that the wealthy and mid-level middle class hold greater influence on these elected officials. They are the same people, while the dirty unwashed working stiff has very little in common with real estate agents, developers, and elected officials too. A true class system with regard to housing exists in Ontario and Canada. Are the New Democrats crying out loud for reforming this system? No, they are not. They want to represent the higher-ups. those with excess revenue and economic purchasing power.


Rental Units are Needed Stupids. A housing revolution is needed not just in Ontario but across this land. Why won’t the government put its hands into the direct building of these units? They have the funds, and the regulations to make sure these units are made appropriately and in a timely manner. The very power of the elite, real estate, and developers lobby will always sway our elected officials away from competing with these financial aggressors. In 2016 548 formers members of a government in Canada registered as lobbyists, often representing the wishes of those who once were their suppliers(developers). What am I saying? Perhaps many of our elected representatives have been padding their pocketbooks and ensuring their future careers in well-paid jobs. Corruption? Find out how much an MPP or MP was worth when they started their position, and after 4-5 years what are they worth???

Only the average Canadian, worker, student, or elderly who cares about their children’s future, can force this issue before the politicians in Ottawa, Toronto, and through out Canada. Protests like those that happened in Ottawa last spring could really change the way our representatives represent us. A wee Revolution we need indeed.

Housing and shelter are human rights. Right? So get off your couch and gather with like-minded neighbors to demand real affordable housing, and build nonprofit apartments too.

Steven Kaszab
Bradford, Ontario

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Homebuyers move swiftly to ‘lock in a good deal now’: Mortgage rates continue to melt as economists dream of a real estate ‘rebound’ in spring



Homebuyers move swiftly to 'lock in a good deal now': Mortgage rates continue to melt as economists dream of a real estate 'rebound' in spring
Homebuyers move swiftly to ‘lock in a good deal now’: Mortgage rates continue to melt as economists dream of a real estate ‘rebound’ in spring

Mortgage rates are still falling as the Fed announced another quarter-point rate hike on Wednesday — and indicated increases may be nearing their long-awaited end.

In the meanwhile, the homebuyer front is seeing “improved purchase demand and stabilizing home prices,” says Freddie Mac chief economist Sam Khater.

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“If mortgage rates continue to slide over the next few weeks, look for a continued rebound during the first weeks of the spring homebuying season.”

Khater and other experts are anticipating more buyers will return to the market as rates become more affordable. However, that doesn’t mean housing prices are going to subside anytime soon.


30-year fixed-rate mortgages

The average 30-year fixed rate slid further to 6.42% this week, compared to last week’s average of 6.60%.

A year ago at this time, a 30-year home loan averaged 4.42%.

“With rates below 6.5%, more Americans can purchase the median-price home by putting 18% down without being cost-burdened,” says Nadia Evangelou, senior economist for the National Association of Realtors (NAR).

Evangelou anticipates the housing market to rebound even faster than expected if mortgage rates continue their decline this spring.

15-year fixed-rate mortgage rate trend

The average rate on a 15-year home loan tumbled from 5.90% to 5.68% this week. This time a year ago, the 15-year fixed-rate averaged 3.63%.

Hannah Jones, economic research analyst at, notes that despite the Fed’s softened stance on additional rate hikes, the federal funds rate will still remain fairly high — “meaning that a higher interest rate environment is here to stay for the time being, including for home loans.”

Jones says that while buyer demand is increasing due to slightly lower financing costs, many Americans are still grappling with affordability challenges.

“At the current price and mortgage rate level, the typical housing payment on a median-priced home is still 36.4% higher than one year ago.”


U.S. home sales pick up in February

There was an unexpected uptick in new home sales in February, inching 1.1% from January to an annual pace of 640,000 new home sales, reports This is still 19% lower compared to the housing market a year ago, but sales may continue to rise as mortgage rates fall.

“Higher mortgage rates are the new normal, which leaves home shoppers measuring their willingness to participate in the market with each change in rates,” writes Jones.

She adds that sales activity is becoming increasingly concentrated toward new homes that haven’t been started yet — making up about 23% of new home sales in February, compared to 17% in January — suggesting that “buyers are looking to lock in a good deal now, before construction has started.”

Although lower mortgage rates signal increased affordability, the median new home sale price climbed to $438,200 last month — 2.5% higher than the same period last year.

“As long as the housing market remains undersupplied, buyer competition will put upward pressure on prices,” explains Jones.

Mortgage applications continue to rise

Demand for mortgages rose 3% from last week, according to the Mortgage Bankers Association (MBA).

Homeowners have also been more encouraged to refinance — thanks to lower rates — with the refinance index climbing 5% since the week prior.

“Both purchase and refinance applications increased for the third week in a row as borrowers took the opportunity to act, even though overall application volume remains at relatively low levels,” says Joel Kan, vice president and deputy chief economist at the MBA.

Kan notes that mortgage rates haven’t plunged as drastically as Treasury rates due to increased volatility in the mortgage-backed securities market.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.


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