Atlanta has a rich history of successful Black-led real estate firms, like the 70-year old H.J. Russell & Company. Some former employees of the late Herman Russell went on to become major developers in their own right, like Egbert Perry with The Integral Group and the late Noel Khalil of Columbia Residential. Another Russell alum, commercial real estate broker T. Dallas Smith, founded his eponymous company, with clients including Microsoft.
But despite their breakthroughs, most big real estate developers in Atlanta and elsewhere are white. Black developers represent only 0.4% of real estate developers in the United States, according to a recent report, though the country is about 12% Black.
Making the industry more representative of the U.S. is a difficult task that will require private companies and public officials to increase access to capital and facilitate relationships for upcoming Black real estate developers, experts say.
The Wells Fargo Foundation established a $40 million initiative last June called Growing Diverse Housing Developers (GDHD). Its aim is to increase racial equity in real estate and boost the supply of affordable homes in the U.S. There are 27 developers enrolled and Dunn’s company and five others are Atlanta-based.
“There’s a significant wealth gap between Black and white Americans in this country and it’s been widening for decades,” Dunn said.
“By promoting or supporting Black developers, you can help address this disparity and promote economic empowerment and generational wealth in the Black community,” he said. “… Having more diverse developers, that can lead to more equitable development practices and investment in these historically marginalized neighborhoods.”
Dunn started in real estate in the early 2000s when he bought a single-family rental property in East Atlanta after graduating from Georgia Tech, an investment that taught him the importance of affordable housing because he saw the struggles and vulnerability of families that are low- and moderate-income.
Before becoming a full-time developer, Dunn worked as a civil engineer. He invested his engineering salary into his business because it was tough to access capital.
Dunn founded Atlantica in 2010 with his brother. They’ve owned and managed nearly 1,000 housing units, but the Forest Park townhomes are the brothers’ first newly developed project. The units are slated to be finished this year.
The homes will be affordable rentals, going to households that make up to 80% of the area median income. That means that a family of four in the metro that earns up to $77,000 per year is eligible for the new homes.
But building affordable housing means there is a cap to how much a developer can profit, so ideally the loans backing the build are more favorable. This is one of the ways the Wells Fargo program is helping developers.
“We want to increase racial equity in real estate development, ultimately creating a more inclusive housing ecosystem,” said Bill Daley, vice chairman of Public Affairs at Wells Fargo.
Wells Fargo partnered with four Community Development Financial Institutions (CDFIs). One of them, the Reinvestment Fund, is financing Dunn’s townhome project.
“These CDFIs are giving us that same access to capital that many very sophisticated institutional investors get, which is requesting of the lender specifically what you want,” Dunn said. Many smaller developers are often relegated to very rigid loan products, not ones that they can tailor to what their project needs, he said.
Dunn was able to get a loan to build the townhomes from the Reinvestment Fund in February with an interest rate that was around 2 percentage points lower than the prevailing interest rates from conventional lenders, which Dunn said was “very, very helpful to us.”
The GDHD developers are also receiving grants for administrative and business operations to increase their capacity, according to Khaliff Davis, Atlanta-based managing director of structured finance for Reinvestment Fund.
‘They drop this’
Perry, chairman of The Integral Group, faced the same issues with funding when he first started out. Over the past 30 years, Integral has developed hundreds of acres of land and produced more than 10,000 units of housing, retail, office space and more.
But for Integral’s very first project, Perry said he had to accept a bad deal just to be able to pay for it, despite having more than a decade of experience as a top executive of H.J. Russell.
“We did all the work, got control of the site, did the pre-development, planned the site, designed the buildings, got all the way, two weeks away, from closing on the transaction and the lender said — notwithstanding that we had a term sheet that didn’t have this condition — the lender said I need a guarantee from an entity that’s worth at least X dollars,” Perry told The Atlanta Journal-Constitution. He had already been working on the project for more than a year at this point.
“Then boom, in the last minute, they drop this,” he said. Perry had to scramble to find someone else. A major bank did eventually agree to finance the development, but only if Perry gave them 51% ownership of the project. He said he had no other option but to agree to their terms.
It’s these hard-learned lessons that Perry and the senior leaders of Integral have now turned into a new mentorship program for up-and-coming Black real estate developers, called the Integral Collaborative. It launched in April.
“If you’ve been in it for 30 years, you have seen a lot of stuff that you’ll never learn in a textbook,” Perry said. “If we don’t make it easier or pass on our learnings to a next generation … then shame on us.”
Three developers from Milwaukee, Houston and Jackson, Mississippi, make up the first cohort of the Collaborative. Integral is working with two other organizations, Berkadia and Reinvestment Fund, to provide a pre-development fund where developers can get up to $750,000 in early capital, normally called “friends and family” money.
“They can’t even get in the game if they can’t get those dollars,” Perry said.
The developers also have weekly meetings with Integral leaders mentoring them in the nitty gritty of development, from accounting to design to eventually scaling their business.
The Collaborative is also facilitating relationships. Once a developer goes through the program, there is the possibility that they become a partner with Integral on future joint ventures, giving them the backing of a major institutional player.
The city of Atlanta, meanwhile, like many governments, has long used contracting to boost minority businesses. Invest Atlanta, the city’s economic development arm, is working on redeveloping a few major projects, including a 890,000-square-foot building at 2 Peachtree Street, which will include affordable housing.
The city recently issued a request to qualified developers and investors outlining its vision and priorities for the project. Respondents who provide opportunities for women- and minority-owned businesses will be prioritized.
The organization also considers diversity of a developer’s team when they are deciding on awarding projects.
“We think for the best team, having diversity within your team is important. And I would say all types of diversity is important — in terms of age, ethnicity, focus — all of these will be important to be able to provide the best products and best ideas,” said Eloisa Klementich, CEO of Invest Atlanta.
For Dunn, having the support to grow Atlantica is about more than just his business, it’s about the communities they are in.
“By having more Black developers, you’re able to impact the communities that these Black developers serve,” Dunn said. “We need to support them and we need more of them to help really build these communities around metro Atlanta and around the country.”
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