The Accidental Real Estate Developer

A background on what accidentally led me to the world of Detroit real estate. That’s where I discovered the hidden ways this powerful industry profoundly affects our everyday lives.

It was an eye-opener observing the differences in attitude as I moved from San Francisco back to my hometown of Detroit in 2008 to help take care of my ailing parents. I went from a place where failure was embraced and encouraged to one where it was viewed as a mark of shame. People on the west coast seemed to value a bold willingness to take chances and try new things. In Detroit, people were much more set in their ways and had very little appetite for risk and unconventional thinking. As an optimist, I found the city of Detroit fascinating. It was a place with major systemic problems – but to me, that also equated to interesting opportunities.

A Primer on Detroit

Before the United States had Silicon Valley as a center of innovation and industry, we had the Motor City. During the 1930s and ‘40s, thanks largely to the automotive industry, a tremendous amount of wealth was created in the Detroit area as people from all over the world flocked to the region in search of work. As the automobile grew into the primary transportation method to move both people and goods, Detroit became instrumental in building modern-day America. The auto manufacturing trade, combined with the city’s exploding music scene (known as Motown), put Detroit on the map as a global beacon of economic and cultural activity. 

This triumphant time in the city’s history, however, was followed by more than 50 years of economic and social decline. The implosion of the American manufacturing sector led to major factory closures and rampant unemployment. As crime, race issues, and large-scale disinvestment spread throughout the city, buildings fell into disrepair and many packed their bags and left town. No other major American city has seen such an extreme rise and fall over the past century.

The Detroit Opportunity

As I moved back to Detroit in 2008, during the height of yet another economic collapse, the city had more problems than ever. The issue that capitulated my attention and imagination was the loss of talent. Largely due to the dearth of competitive professional opportunities with attractive career ladders, talented young people stopped coming to Detroit. They were finding work and putting down roots outside of Michigan. If this trend continued, I realized, Detroit would be on track to lose an entire generation. And if you lose a generation, you lose a community.

But even as talent was fleeing the region, I noticed the city still had many things going for it:

• It boasts world-class architecture and large-scale infrastructure (the population in the city of Detroit peaked around 1.8 million people in 1950 and was hovering around 700,000 in 2008).
• It has several premier universities producing top tier talent.
• The region is home to more than four million people within a 45-minute drive of the city and some of the wealthiest zip codes in the country. 
• It’s completely surrounded by fresh water.
• In 2008, real estate values were at or near 10% of replacement cost.

These statistics, combined with the trend of Millennials wanting to live in cities and walkable environments, captured my imagination. It was just the type of opportunity I was seeking, one that was:

1. full of meaning
2. required a long-term, intentional approach 
3. had a compelling economic story 

How could we make Detroit a place where young, talented people wanted to be?

Over the next decade, I dedicated my career to finding the answer to that question. There were no clear-cut paths forward, but I knew I had to take the following steps: 

Step 1: Strengthen the Community

I founded CommunityNEXT in 2009 as an initiative to attract and retain talent to the city of Detroit. And over the following three-year period the team launched more than 15 programs including rent subsidies, digital media conferences, free office space, no-interest loans and grants for entrepreneurs, and intramural sports leagues. CommunityNext was extremely successful not because of the recognition and awards, but because young people started coming back to the city. These community-building efforts emphasized to me the importance of physical space in our lives. People need places to congregate, share ideas, be creative, and create meaningful work and relationships.

I realized if we wanted to attract and retain young talent and position Detroit as a place to be over the next 50 to 100 years, improving our physical spaces was a critical component. 

We had plenty of empty buildings and vacant commercial space at the time, but very few real estate owners were focused on investing in the activities people were engaging in within the walls of the buildings. They saw their job as just providing the walls, not dealing with the programs that actually brought people together within those walls. They were in the business of buying and renting boxes. 

As I lived and worked in the city for a few years I started to see a unique opportunity in commercial real estate (commercial real estate essentially consists of all buildings other than individual homes). Real estate in Detroit was highly distressed at this time, but there were several compelling factors:

• The city of Detroit was in the process of going through the largest municipal bankruptcy in the history of the United States.
• There were a large number of public, private, and philanthropic organizations working together and heavily investing in key infrastructure projects throughout the city.
• Several private corporations were moving thousands of well-paying jobs to the city.

It was clear to me that Detroit was gaining momentum and I felt developing space for people to congregate and small businesses to grow was a critical need in the city at that time. It was an opportunity that intrigued me both intellectually and spiritually, so I went “all in” at a time when others thought I was crazy. 

Step 2: Develop a Small Business Ecosystem

I co-founded Town Partners with Kyle Polk in 2012 with the thesis that Detroit needed a private-led real estate development group with impact and economic development as its core focus. We realized most developers, investors, and building owners view and treat their buildings as empty boxes needing to be filled with tenants. Kyle and I wanted to build a small business ecosystem. If we could curate and promote the right mix of businesses, we reasoned, we could shrink local supply chains and create jobs with attractive career ladders for local Detroiters. We had a dream of establishing Detroit’s version of the Brooklyn Navy Yard. We wanted to focus on the activity going on inside the walls of the buildings we owned, not just the walls themselves. You can read more on Town’s guiding principles – https://www.thetownpartners.com/philosophy. 

As two guys in our late 20s, Kyle and I did not have many peers doing similar work in Detroit at the time. All of the other developers were largely in their 50s and 60s. We were in our 20s. It felt like there was no fresh blood and entrepreneurial thinking in this world at all. Everyone was stuck in the old way of financing deals and running buildings. We set out to try something completely unorthodox and help create the market for other young developers like us to put their imprint on the future of the city. So, we started buying buildings in two specific neighborhoods in downtown Detroit.

At first, the real estate market was in such bad shape that there wasn’t any traditional financing available (i.e., banks lending money). One of the first buildings we bought and developed required seven different layers of financing. These deals were scrappy, time intensive, and required a fair amount of creativity. That’s the only way we could get anything done. At that time in Detroit you were able to buy buildings at 10% of replacement cost. That means you could purchase a building for just 10% of what it would cost to build the same building from scratch today. These market conditions created a once-in-a-generation opportunity for us to:

1. be creative with how we looked at developing physical space;
2. offer relatively affordable places for people to live, work, and play; and
3. have the ability for it to make sense from an investment perspective over the long run.

It was the perfect backdrop for true impact investing. An opportunity where creating meaningful social change can lead to outsized financial returns. 

So, how did my gamble turn out?

Through a lot of hard work, a network of helpful mentors and advisors, many sleepless nights, and a fair amount of luck, I was fortunate enough to build a portfolio from scratch to more than 25 commercial properties over a three-year period. To say it was a wild ride with extreme lows and even more extreme highs is an understatement as our portfolio increased 5x in less than seven years. But what society views as an entrepreneur success story I look at as somewhat of a failure. Making money wasn’t the sole measure of success I was chasing. My goal was to use real estate as a medium to attract and retain talent and small businesses to the city of Detroit. The vision was to create small business clusters in two specific neighborhoods to develop more localized supply chains and create jobs with career ladders for local Detroiters. It was really about creating opportunities and wealth for the broader communities in which I was investing. That didn’t happen at the scale I had hoped for. 

Let’s Dig Deeper

My goal is to use this on-the-ground commercial real estate experience during such a unique time to help readers understand some significant issues I see with the real estate market and how it is affecting society. Real estate is the infrastructure of our lives. It is inextricably linked to the most foundational needs of the human condition—the actual land we live on, the buildings we work in, the places where we spend our time and our money. It should be viewed and treated like infrastructure—long-term, low-risk investments in things that support the basic needs of society— no different than an airport or a toll road. But, today we treat it no different than trading stock. This has created a system that has hollowed out the souls of our communities and significantly contributed to the anxiety and instability that are endemic to American life. 

 Reporting on the crippling problem of income inequality, the housing affordability crisis, and the lack of opportunity for the majority of citizens doesn’t examine why these things are happening. Many of the root causes to these systemic problems are directly linked to how the commercial real estate market functions. It is an industry that is driven by short-term thinking and a profound misalignment of values between property owners and the people who live or work there.

I have spent nearly two years writing a series of essays breaking down how the commercial real estate market functions, why it is wreaking havoc on our neighborhoods and communities, and offer a host of ideas and strategies to create better systems. I hope that by shedding light on these topics I can get people thinking about how we might collectively change our approach, mindset, and systems to fix these issues. Because in order to change anything we have to first understand how the current system works.

By creating new and different ways to develop and manage the built environment, we can ultimately construct a healthier, happier, and stronger society for a larger percentage of the population.

Be great,

Jordan