Moving Ground - Real Estate Development

In 1974, landscape architect Ernest Edwards wanted to buy and develop land in a white area of southern New Jersey. “I knew they wouldn’t look kindly on a Black builder, so I hired a white engineer and a white lawyer to act in my place,” he says. When the locals found out and blocked his efforts, the engineer took him to Lawnside, N.J., where a builder had abandoned a project because of water seepage. Edwards figured out the problem, bought 83 lots for $125,000—which were really worth $600,000—fixed the leak and built homes in a development called Warwick Hills.

Since then, Edwards has been a principal on such projects as The Gallery II Shopping Mall and J.C. Penney Department Store in Philadelphia; The Golden Nugget Hotel/Casino Warehouse and Harrah’s Marina Expansion Project in Atlantic City, N.J.; and Stenton Arms Apartments (a rehab project) and Cecil B. Moore Homes in Philadelphia. In 1998, he established American Real Estate Development Inc., or AREDI, in southern New Jersey, one of the area’s biggest African-American-owned builders today. On April 26, he broke ground on his latest project, The Woods at River Run, in Lawnside, N.J., a complex of 26 one-family homes starting at $460,000 each that are being marketed solely to people of color.

Real estate development is booming in the United States and Blacks are making a serious move on the market, especially in the New York tristate area. According to Plunkett Research, a Houston provider of industry analysis, trends and statistics, 2003 saw $217 billion in public construction and infrastructure, $453 billion in private residential construction and $212 billion in private commercial construction—a total of $882 billion—nationwide. On the residential side, 121.3 million properties, including 82.3 million single-family homes and 30 million apartments, were built, while 1.37 million single-family homes and about a third of a million multifamily homes and apartments were started.

Those numbers do not translate into easy pickings for Blacks. “The hardest thing for most Blacks in this business is getting up-front capital,” says Edwards.

Breaking In
Kwame Jackson, who spun his stint on the TV reality show The Apprentice into a $3 billion real estate deal, says breaking into the tightly knit community of real estate developers is one of the major challenges Blacks face. “The challenges are similar to those in any industry in which there is no critical mass of African-Americans: the battle to infiltrate [the good ol’ boys’ network], to exceed the low expectations of those industry veterans who would prefer to preserve the status quo, and to quickly learn the lessons that your counterparts have learned or been taught over generations,” he says.

Jackson’s firm, Legacy Development Partners LLC, partnered with other local minority developers to form the Rosewood City Group and develop Rosewood, a mixed-use property in Maryland for Blacks. “The idea of building a live, work and play community, located 10 miles from the nation’s capital in the most affluent Black county in the nation which will be an employment center and destination location for a county on the rise, has resonated with so many people,” says Jackson, who is a member of the Real Estate Executive Council, which encourages and facilitates the entry of African-Americans into commercial real estate through educational programs and internships with major firms in the industry.

The name “Rosewood” honors the thriving African-American community that was burned to the ground in a race riot in the 1920s, he says. The Group hopes to break ground in 2006, with 10-15 years thereafter for the build out.

Even with his 30-year track record, Edwards found it difficult to get The Woods under way. “We needed $500,000 to buy the land. Then there are the building costs, the taxes, the legal fees and the interest on the loan, among other expenses. There’s at least two years before a return. So you have all this money going out and none coming in. There aren’t many African-American businesses that can do that,” he says.

Edwards secured $4.25 million in seed financing for The Woods from Community Preservation Corp., which provides loans in nontraditional markets to rehabilitate communities in New Jersey.

Then there is the politics. “You have to get the okay on three governmental levels—regional, city and state. It pays to have lots of friends. That’s all I will say on that,” Edwards notes.

Banks pressure minority developers to partner with white firms, says Cicero Wilson, president of Mid Bronx Desperadoes (MBD), which developed New Horizon Retail Center, a Bronx mall that houses such chain stores as Pathmark, Athlete’s Foot, Blockbuster Video, Petland and Radio Shack.

“The banks are comfortable with white firms, whether they’re leasing or construction firms. When they are getting ready to do the deal, they’re looking at who’s sitting at the table that they’re comfortable with,” Wilson says. “We found that they expect us to work in partnership with the white firms. But our goal is to bring in African-American construction firms and leasing agents, and we’re able to do that only when we’re sitting at the top of the table.”

Staying in the Community
Eugene Webb, chairman of Harlem’s Webb & Brooker Inc., is among one of the longest reigning Black developers on the East Coast. “Others left but we stayed,” boasts Webb, whose firm is one of the leasing agents for the 585,000-square-foot, $190 million-plus Harlem Park complex being built at 125th Street and Park Avenue by the Marriott Corp. and 1800 Park Ave. LLC.

Community revitalization is a lucrative opportunity for minorities. MBD, a product of the activism of the 1970s, was launched as MBD Community Housing Corp. in 1974 in the then-rundown Bronx area of Crotona Park East, when a coalition of volunteers banded together to save the community from arson, disinvestment, abandonment and population loss. The coalition worked with the local police and fire departments and churches to establish a community self-help program. “MBD reached out to the area’s Community Board and government officials to develop a revitalization plan to restore necessary public services, renovate abandoned buildings and develop new housing to repopulate our neighborhood,” says Wilson.

MBD’s current portfolio boasts commercial, affordable housing and community revitalization projects. It includes more than 2,300 units of housing—one-, two- and multifamily homes with total development costs of more than $200 million; the 134,000-square-foot, $30.7 million New Horizons retail center; a Cineplex, in pre-development stage, that will include a family restaurant; the new 50-unit Ernestine Wilson Plaza housing scheme; renovation of two parks; and a 40,000-square-foot community rock garden with a waterfall. “We also have another $120 million in new housing projects that include affordable condos,” says Wilson.

The Nonprofit Sector
With its focus on community development in Harlem, Abyssinian Development Corp., headed by president and CEO Sheena Wright, looms large on the nonprofit side of real estate development. Prodded by the Rev. Dr. Calvin O. Butts III, pastor of Harlem’s famed Abyssinian Baptist Church, to rebuild their community “brick by brick and block by block,” parishioners in 1989 formed ADC in the basement of the church with a $50,000 grant.

Its first project was the construction of Abyssinian House, a transitional shelter for homeless families, under a contract with the City of New York. Next came Abyssinian Towers for senior citizens; the Thurgood Marshall Academy for Learning and Social Change, at the time the first school facility built in Harlem in 50 years; a partnership to develop the Pathmark Supermarket on 125th Street; another partnership to develop Harlem Center, an $85 million mixed-use retail and commercial complex on 125th Street; and the Renaissance Homes program to develop brownstones.

To date, ADC has a consolidated budget of nearly $7 million and has leveraged more than $300 million in investments in the community.

Optimistic Outlook
Demand for affordable housing, mixed-use and residential communities where Blacks are comfortable creates a market that is crying out for Black expertise. Financing companies are beginning to get the picture, says Wilson of MDB.

“The banks are now beginning to recognize that when it comes to marketing and leasing, minority companies understand their own market and that’s the bottom line. When you come into our market, our professionals have an advantage because they understand the psychology of the market. So I am positive about the future,” he says.

Blacks should also get the picture, he says. “There are a lot of minority professionals who should recognize their own expertise and consider doing their own thing. Although we partnered with a white firm [on the New Horizons project], they reached out to a Black leasing consultant who worked with them hand in hand. They could not do it alone,” he says.

By Ann Brown