Business
BE SURE TO SEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE. Eve Picker: [00:00:16] Hi there, thanks so much for joining me today for the latest episode of Impact Real Estate Investing. Eve: [00:00:23] My guest today is Adam Sgrenci, the founder of the Center for Infrastructure and Society. As a start-up Center's work has evolved over the last year into an organization focused primarily on human capital. While affordable housing is still at the top of the list, instead of just helping to build more affordable housing, Adam leads conversations on how to build human capital. Conversations that encourage communities to plan their own destinies through co-design, co-creation, co-production and co-ownership. Eve: [00:01:10] Be sure to go to evepicker.com to find out more about Adam on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change. Eve: [00:01:42] Hello, Adam. Thanks so much for joining me today. Adam Sgrenci: [00:01:45] Thanks, Eve. It's a pleasure to be here with you. Eve: [00:01:48] Oh, good. So, I was sniffing around on your website. I saw the following statement: We design and launch large scale housing projects that address the global housing shortage. And that's the mission statement on the home page of your organization, Center for Infrastructure and Society. And I was wondering if you could just tell us a little about that mission statement. Adam: [00:02:13] I'd love to. And of course, it's going to come with a caveat, because in the world that we live in today, things move fast, and things continue to evolve. And so, for us, I might even add a, an updated version of that, which is still similar. So, what we're sort of, kind of rebranding ourselves right now and saying that we're essentially regenerative design and development organization, which means something similar. We accelerate the positive impact on local economy, local society and local environment through regenerative housing projects. Eve: [00:02:56] OK, so slightly different, pretty much the same idea, though, still housing, right? Adam: [00:03:01] Right, absolutely. It's housing and just to be clear, you know, housing is a part of a large eco system of infrastructure. That's where that the broader approach is starting to take shape. But, you know, as we as we talk today, I'll be glad to share, you know, how we learned and how we've grown. Eve: [00:03:19] Tell me a little bit about the Center for Infrastructure and Society. I think it's a pretty new organization by the sound of it. Adam: [00:03:26] Absolutely. Yeah, I know the sound is resonating well because as we continue to grow, we, you know, we start to learn more about all the opportunity that's out there in the housing space. And this is something that I believe Small Change understands very well. This path essentially started for me 10, 15 years ago as a young carpenter coming up, building homes, as a contractor, then as a project manager. You know, you start to see some of the vulnerabilities that exist from the housing development real estate sector. And for me, one of the biggest things that was sort of a glaring vulnerability was the focus on human capital investment. Adam: [00:04:08] So, I'm talking about workforce development. So, this has a direct relationship with skilled labor shortage and the global housing crisis. And so, my ascent here into trying to roll out with, which ultimately became the Center for Infrastructure and Society, was the need to bring this understanding of construction, of infrastructure and development to this place of, of empowerment. Those were sort of the two worlds throughout my career that I was always interested in. And so, that ultimately led me to creating a new organization that initially started by guiding mass housing builders in underbuilt environments on the things that, and by the way I'm am based in Silicon Valley, so here in Silicon Valley, it's very common to hear conversations about you know workflow and KPI and, you know, career trajectory. Eve: [00:05:09] Sure. Adam: [00:05:10] So, where does that, yeah, and where does that sit and how is that situated within the context of the typical trades-person or the overall real estate space? That was the initial foray that that Center for Infrastructure and Society took into the world. Eve: [00:05:27] Maybe you can explain a project that you're currently working on. Adam: [00:05:31] Sure, love to. For example, back in October, I took a series of trips. I was in Nigeria and I was in India and all I was really doing was taking that consultancy approach to working with builders to kind of help analyze training in the workforce and how all of these things can sort of be brought in-house. Well, we've seen the rise of the con tech in the prop tech companies over the last, say, five or six years especially, in the real estate space. And so, what they were sharing with the world was, look, we can vertically integrate all of this. Design, engineering, but everything down to manufacturing the product. So my kind of approach was to work with some people that I knew that were already working in mass housing in some of these places and start to inquire about what it is that they're looking for and what the, you know, where are the vulnerabilities that they've identified to their own growth. And to solving their own local housing crisis. And so what that evolved into was digging in to KPIs and workflow and how you might be able to bring manufacturing in-house to vertically integrate, similar to some of the larger companies in the world. Adam: [00:06:55] We actually started to take a step back and look at, like, what we call in regeneration, you know, the whole ecosystem. So, right now in Nigeria, for example, we're working with a mass housing builder to help them, who already has some of these technologies in-house, so they're not stick building or they're not building with block, they are actually already using panel systems, which is great. So, they're manufacturing that, so they've reduced some aspects of that supply chain. Though we are recognizing that one of the things that development tends to ignore, at least conventional development and I know in many of your projects, you guys do this as well, and it's the partnerships with local community. It's co-designing with people who are actually going to live in these places so that when the project is over, at least when it's installed, now there's a foundation for perhaps social enterprise for those folks that are living in the new community. There is, you know, maintenance programs to keep these projects standing strong and looking great. So, that's one project that we're doing in Nigeria. It's advising a mass housing builder to... Eve: [00:08:10] The co-designing thing. you know, I was at a co-creation conference last week and have to admit I found a pretty overwhelming because, you know, there's a lot of people involved who had everything from absolutely no skill, no understanding of the real estate space to people who've had quite a lot of experience. That's really difficult community engagement to do. Adam: [00:08:37] Absolutely. Eve: [00:08:37] So, when you're in a place like Nigeria with a company that maybe wants to introduce co-designing, is what I thought I heard you say, how do you go about doing that? Adam: [00:08:48] That's a great question. Ultimately, for us, it comes down to having a model and a framework for the discussion because that helps guide everyone into at least a direction. We start out with workshops and you know, where you might consider a town hall as an opportunity to explore relationships in the community, town halls tend to be a kind of space that is just as, let's say, conflict ridden as the typical fragmentation of our, of our industry, where everyone's sort of protecting their own idea. And so, with a model in place, we've got a four-part model. And so, it's broken down into benefit capital, regenerative technology, community engagement and strategic partnership. And so, we sort of give some context and background and we kind of set the stage for the conversation. If it's initial conversation versus, even if it's you know, we've been doing this now for two weeks or three weeks with a specific group, we're at least all coming from a similar perspective and that helps keep us focused on what you very astutely observed, that it's actually quite overwhelming. We're talking about an ecosystem, right? Who's in the ecosystem? It's governments and it's corporations and it's labor unions and it's non-profit organizations. And yeah, to your point, very correct. Eve: [00:10:23] So you have a structure that you've thought through that can sort of help guide people and companies to some sort of commonality, by the sound of it. Adam: [00:10:33] Absolutely. That has helped us at least get us to a point where we're all able to, you know, align on next steps. Eve: [00:10:43] Right, interesting. That's a pretty difficult job you're tackling there. Adam: [00:10:49] Yeah, hence the sort of rethinking of how we work. You know it happened in Nigeria, honestly, when I was interviewing and, you know, just doing assessments and talking to different builders and, you know, the reason that I had traveled there was because there was an interest for this vertically integrated approach to running businesses and having business models that didn't depend on too many suppliers, and, especially in other parts of the world, or even it happens here in the US, there's always an opportunity for details to get lost and things to happen on development projects. Eve: [00:11:28] That's for sure. Adam: [00:11:29] And so, what we realized early on was, our clients didn't only want the advisory, but they also wanted access to finance. They wanted to be able to grow. They wanted access to stronger relationships. And so that also helped influence us on how we present a model. My partner, Peter Coughlan, has been working in the world of regeneration. Prior to working with me on infrastructure specifically, he had started to develop a similar model in regenerating oceans and regenerating the coral reef and in soils. Adam: [00:12:11] And that, he found, was, while very interesting and obviously much needed, it was hard for investors to get behind that and understand where the return on investment was coming or how it was coming. So, we partnered up when he noticed how focused on infrastructure I was and recognizing that infrastructure is actually quite bankable. Why is it that we have such a mature real estate development system? Anywhere in the world, you can go and these, and this is something that you know probably much better than I, it's because infrastructure is easy to see a return on. It's what's the next step after that right? How do we care for these properties that are built and how do we care for the lives of the people that are living within them? Eve: [00:12:59] Yeah, how do you make sure the infrastructure that's built is appropriate for them as well, right? Adam: [00:13:04] Absolutely. Eve: [00:13:05] Yeah. Interesting. So, you’re a start-up and you're evolving quickly by the sounds of it, which is great. Start-ups need to be flexible or they're doomed, I think. Adam: [00:13:16] Yep, yep. Eve: [00:13:18] I mean, if you were to talk about your big, hairy, audacious goals for the next five years, what would they be? Adam: [00:13:24] That's exciting, yeah. To go from working from the workforce development advocate role to now, where we want to be our own fund, has actually happened very quickly. But that's ultimately where we're going because we recognize that, and I think a lot of other organizations that are in the regeneration space and in the social impacts space, recognize how important it is to be able to fund the projects and the partners that you're starting to work with. Adam: [00:13:57] And so until we get there, we are advisors and we're connecting great projects to great investors. But in order to do that and because it's the world of regeneration and those are the funds that we're targeting, so social impacting yes, regenerative impact funding. There's not a lot of projects that are at least considered regenerative and so, there are a handful of organizations that are trying to help these projects become regenerative. And I say that from a collaborative perspective, right? So, I recognize that there is a competitive way of looking at this in a collaborative way and honestly, we're talking about things like skilled labor shortage or the housing crisis. Rather than be competitive, we'd much rather be collaborative and so, we spoke to a fantastic organization called Metabolic based out of the Netherlands just earlier this week, and they're much further along than we are, at least from the, you know, the regenerative acceleration perspective. And it was just great. Yeah, go ahead. Eve: [00:15:08] Explain to me what regenerative means here, the way you're using it. Adam: [00:15:13] I've been using it and I've been writing some articles about it and trying to campaign these ideas, at least in a way that my clients, which were all like builders, so it would resonate with them. And so, I was using the term as regenerative housing. So, a regenerative housing project is a housing project that produces positive impact on local economy, environment and society. So, what does that mean? So that means that, let's say we build a development and there are 60 homes in it. Maybe they're multi use, maybe they're multifamily but it's the housing project. And so, one of the ways that we can have positive impact on the environment, and many of your listeners are probably very familiar with sustainable building practices, so essentially using materials that don't hurt the Earth any more than it already has, right? So, using lighting that doesn't use as much electricity or, you know, using insulation that doesn't, you know, overuse energy as well. There are great technologies that can be used that actually rebuild. So, for example, there's concrete that can be used that actually sequesters carbon from the air, right? You can have a micro-grid in a development that produces enough energy for the whole development. These are just examples. But that would be positive impact on the environment. Adam: [00:16:45] In the same way, you'd have positive impact on society. So, you can have positive impact on society by using a housing project as a means of training local folks who had not known how to do any of these tasks to build this project prior to the project. Now this society walks away with a positive impact. Now they had training and they've been up skilled. And likewise, I had mentioned maintenance before. Maintenance is huge. And I think for a lot of builders and developers, it's not always, or at least it hasn't traditionally been, a part of the conversation. It was like, build as much as you can, build the best product you can, but then pass the keys over to the new tenant or the new owner and go after the next one. Eve: [00:17:32] Or a property manager. Adam: [00:17:33] Or a property manager. Absolutely. So, what we're proposing is, for example, every housing project should also come with creating a new market. So, a new market for home maintenance, let's say, or perhaps there is a social, you know, an incubator for social enterprise that was created for housing projects. Yeah. Eve: [00:17:54] We can think of buildings and real estate as things that can just spawn all sorts of other good things if we just are thoughtful about it, right? Adam: [00:18:05] Absolutely. Yeah, that's the idea. Eve: [00:18:07] I think I heard you say you want to build your own fund as well. Is that right? Adam: [00:18:12] Yeah. And I am not a finance person. I'm not an investor. And so, for me to say something like that is pretty ambitious. Fortunately, I'm surrounding myself with some smart folks who understand that world. But I very much come from the, you know, the operations side of things and the strategy side for builders. You know, like I said, when I first met our current client who's based in Nigeria now, they first said Adam, you know, one of the biggest things we need is, is access to money. And that was like, yeah, no, that makes sense. And so, who knows where that'll take us? Eve: [00:18:49] Well, it took me to Small Change because I was pretty much in the same. But maybe it's not about access to money, it's about access to the right money or money that understands these projects. Adam: [00:18:59] Oh, yes. Very good point. Eve: [00:19:01] That's a little bit harder, right? Adam: [00:19:03] Absolutely. You know, like I mentioned, I'm in the Silicon Valley and here the D.C. culture is pretty strong. It's, it's very pervasive and it is sort of how people just think in general, you know, what a successful investment is or what a smart investment is. How quickly can you grow your users? And when it comes to development, especially social impact, you can't really take that lens. So, you're right, you need a different category of investment or socially minded investors. Eve: [00:19:38] That's right. OK, so what's your background? You touched on it. I'm wondering how you got to this place. Adam: [00:19:47] You know, I was a student of economics and geology and local economic policy, economic development policy as an undergrad. After school, I taught English and traveled and got into construction much later. I did social service, you know, social, I did case management after 9/11 in New York. Eve: [00:20:09] It's all coming together now, right? Adam: [00:20:13] Exactly. And so know, I grew up in a family of builders. My father's and electrician, grandfather a carpenter, you know, there'd always been that understanding. And I, I missed out on it as a young person, although I was always around it. And so, yeah, after college and while I was in grad school, after I was doing social work, I took a job as a carpenter's apprentice and it, it really took off. The Bay Area, as you must know, is a great place to be in the trades because there's a huge demand for housing and construction and there's actually quite a low supply of skilled workers here, at least skilled construction work. Eve: [00:20:56] I think that's true everywhere. So, you know, I've been a contractor myself and finding good anything is really difficult. Adam: [00:21:04] Yeah, I actually had worked for a prop tech company just a couple years ago that was based in Toronto, and I helped them launch their San Francisco office. And what they had noticed right away, though, was still quite a difference between quality of responsiveness by contractors and subcontractors here in the Bay Area, you know, the demand is so high, people don't even have to be that responsive. And yet the rates are so high that you don't have to try that hard to, you know, report on the progress of your work or have any kind of budget update for people, because you there's too much work. Eve: [00:21:45] Wow. Yeah, that's kind of a sad statement. Adam: [00:21:48] It is a statement. And I certainly any local carpenters that are in the Bay Area listening to me don't get offended. But I mean, it's just a simple fact. There's so much work. Eve: [00:22:00] Do you think socially responsible real estate is necessary in today's development landscape? Adam: [00:22:06] I mean, I think so. If we're hoping to reduce the kind of vulnerabilities that we're all quite aware of now, you know, all being in shelter-in-place for the last couple of months, every one of the clients that I work with here in the Bay Area has been rethinking strategy. So, one of the assumptions, or one of the conclusions that people are coming to is that, the general like extractive approach of just producing as many products as possible and getting as much volume of work done as possible is not...you know, because once things shut down or, you know, once there's another market shock, you know, if your only tool is to, is volume, well, then you've got, you're little bit vulnerable. But if you are building relationships and are able to leverage those relationships to activities, you're likely going to be in a just more resilient place. And that's, that's where the social impact piece really needs to be a part of people's business models. Eve: [00:23:08] Yeah, I do agree. So then, are there any current trends in housing development that interest you the most, or you think might have the most legs for rapidly filling the current affordable housing need? Adam: [00:23:22] Well, there's two I would say. I love seeing the new technologies and the companies that are bringing the vertically integrated solution to the market. It makes them more agile and they're certainly able to bring a sense of client experience to the whole pipeline and the whole process. The other piece, though, is what I mentioned earlier about the need for projects to never really end. And so, you had mentioned property management and the more and more we see builders working with, or developing their own in-house property management, or even their own in-house development arms, that lifecycle really shouldn't be ending when the project is done. And we're starting to see that happening. There's a great company out of San Mateo called VEEV. And, you know, they're their own investor, they're their own builder, and they're their own clients. So, they'll never not own these homes. Or if they do it, maybe it's a co-ownership approach. They're always going to be caring for these places. Adam: [00:24:29] And so, there's new models to ownership that are also happening. There's a great organization called EBPREC, East Bay Permanent Residents, or Real Estate Collective, I think they're called, and they're trying to force the conversation about what homeownership means. And is it possible to have land without landlords? And so, these are signals, I think, that the trends towards long-term ownership of the project by, let's say, a builder or a developer and real ownership by people as opposed to just affordable housing that is ultimately just cheaper housing, is certainly a healthier way. And the conversation around resiliency, that's, those make me feel pretty positive. Eve: [00:25:15] Yeah, I think I'm hearing a theme here. Everything co. Co-designing, co-creation, co-ownership. Yeah, that's definitely a pretty strong trend at the moment. And then like, we touched on investment and I'm just wondering if you've had thoughts about how we might incentivize investors to invest first and foremost in impactful projects and housing. Adam: [00:25:41] So I think that if we're talking about encouraging traditional investors, conventional investors to consider social impact investment in housing, is that kind of where you're going with your comment? Eve: [00:25:56] There's a difference between an investor just wanting a return and an investor who cares about the triple bottom line and impact and that their dollars are making a difference. I think the first group is still much larger than the second group, right? And for you, your fund to be successful, you need to find investors who care as much as you do. Adam: [00:26:20] So, there are probably two ways that those kinds of investors might be motivated and encouraged. One is, unfortunately, scenarios like the current pandemic and other market shocks. But even prior to that, I've heard of investors who just say: Oh, you know what? We were going to invest this project when we thought the market was telling us this. But now the market is telling us something else. So, we're actually not going to fund your company anymore or we're not going to fund this initiative, which we've been guiding you on for so many years. And that's traditional economics and I think the more and more they recognize that market shocks continue to present themselves, they should probably realize that these external forces are sending a message that maybe the quick return is not wise and it's more about the long return. And so that's one there's the external influence of the market shock. Adam: [00:27:19] And I think the other is campaigning and education and conversation. And I use the co word there so, I think you'll probably recognize again with my trend here, but. Eve: [00:27:32] A couple more co's, right? Adam: [00:27:33] It's, it's honestly, though, it forces us to recognize that there is an ecosystem where a lot of interdependencies exist. Everything from air to water to power to shelter to education and health and wellbeing. And how all of these depend on each other actually presents, I would think, great opportunities for investors because we no longer have to rely on the network effects of one product. Rather, you can rely on the natural interdependent effects of the larger ecosystem. But again, that comes through co-design and collaboration. Eve: [00:28:18] Yeah, that's right. Adam: [00:28:19] How do you get an investor to, to be open to that. It will probably take some time. Eve: [00:28:24] Yes, yeah. So, I'm going to go back to the beginning where we were talking about housing and just ask you a couple wrap-up questions. And one is, you know, the big one. Where do you think, I think I know the answer, but where do you think the future of affordable housing really lies? I mean, we have a huge problem to solve and I just got a lot bigger, unexpectedly. Adam: [00:28:46] Yeah, I know. And I'm glad you mentioned that, because I've also seen people, you know, online kind of touting that the pandemic hasn't affected housing and that, you know, where the strongest, most resilient industry. And so, I'm glad you brought that up. I think when we talk about affordable housing, what we often see in, Oakland is an example but there, I'm sure there are plenty of other examples out your way and in other parts of the country that you're aware of, while, yes, affordable housing is important, the way in which affordable housing is happening in the mainstream tends to still be quite extractive. And so, that approach is, OK, I'm going to put out an RFP and I'm going to, you know, maybe as a city government, and I'm going to receive a bunch of proposals. I'm going to look for the cheapest or I'm going to look for the one with the best return and we're going to go along with that project. And then you get a whole bunch of people protesting or you don't get re-elected as mayor or city council because you backed a, you know, an affordable housing developer who ended up actually just building something for entry level tech professionals. Adam: [00:30:02] And so, I guess that would be one of the key factors there for, you know, what's to come. How open are some of the local governments to rethinking what affordable housing really means? It means accessibility to housing. And one suggestion is using a model similar to ours. There are other models out there that are great, but aligning the investor with the technology that's being used, with the community that it's supposed to be serving, with partners who are going to be involved and looking for, it's not a zero sum game, you're looking for a win-win all the way around. Eve: [00:30:45] That's had work but worthwhile, right? Adam: [00:30:48] Right, that's what makes it worthwhile, I think. Eve: [00:30:50] So then, final question. What's next for you and for the Center as things evolve. Adam: [00:30:57] Gosh. Well, call me next week and you might get a different answer. No, I hope not, because I am getting a little bit of, there is some fatigue with the rethinking but it's all a part of the process, I guess. I think over the next year, there are five projects that we're on right now. India, Nepal, Nigeria, Venezuela and California. There are five projects that are in a very initial stage of building the model and bringing everybody together and looking at the investor relationships. And so, within the next year, you know, we would love to be actually moving forward with the introduction of the social enterprises, the locally informed and locally co-produced campaigning of education around the regenerative projects in these places. And obviously, the building of the. The building tends to be the shortest segment of a project in a regenerative project. And so, we certainly would love to see that. Adam: [00:32:03] And at the same time, we're exploring this idea of what we're calling a regenerative core, or a re-gen core of a youth program that can be brought into universities, high schools, where we can spark this similar conversation about how might you be able to get involved in a social enterprise start-up in your community that helps bring more access to housing? You know, that's on the agenda for this next year. And along the way, we'll be gathering lots of data and hopefully using that data to influence great next steps along the way. Eve: [00:32:48] Well, it sounds like you'll be really busy. And thank you very much for joining me. I'll be really interested to see some of the outcomes soon. Adam: [00:32:57] I would love to, to keep in touch with you, Eve and the work that Small Change is doing, I'm so impressed with, seen some of your old videos and speaking in different places around the world and the projects that are coming up. So, I do hope to stay in touch with you guys as well. Eve: [00:33:15] Well, that would be fabulous. Thank you so much. Adam: [00:33:18] All right. My pleasure. Have a wonderful day. Eve: [00:33:34] That was Adam Sgrenci. Adam is building a new organization focused on human capital. Instead of just figuring out how to build more affordable housing, the conversations he leads are meant to encourage communities to plan their own destinies through co-design, co-creation, co-production and co-ownership. You can find out more about impact real estate investing and access the show notes for today's episode at my website evepicker.com. While you're there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Eve: [00:34:18] Thank you so much for spending your time with me today. And thank you, Adam, for sharing your thoughts. We'll talk again soon but for now, this is Eve Picker signing off to go make some change.