2024 Winter Issue of Urban Land - 58

We often hear from our developers that sometimes
debt capital is there, but it may not be [at] the rates
and terms that are useful for our developers.
- JEFF MOSLEY, CAPITAL IMPACT PARTNERS EQUITABLE
DEVELOPMENT INITIATIVE
a low interest rate as equity or be structured
as a soft loan from cash flows, or as
predevelopment capital, " says Rachal. " These
are terms that are not available, but [they are]
most needed. " Of the trillions of dollars in
private equity capital available in the market
for real estate investment, less than 1.7% goes
to Black, brown, or women developers, he
notes.
Jeff Mosley, director of Capital Impact
Partners National Equitable Development
Initiative, points out that many communities
of color have been systemically undervalued,
and that although equity capital is hard to
get, often even the debt capital comes with
issues. " We often hear from our developers
that sometimes the debt capital is there, but it
may not be [at] the rates and terms that are
useful for our developers. "
Furthermore, although post-pandemic
accessibility to funding sources for diverse
real estate developers increased in the shortterm,
it falls significantly short of the need
and has not addressed the systemic barriers
that prevent developers from accessing capital
which was already in the market, particularly
for equity, says Nisbeth of 9th & Clinton.
Different risk assessment rules
Black developers are also wary of their
risks being unfairly assessed. " Our loans are
always put through the wringer and heavily
scrutinized and evaluated, and reevaluated,
and then re-evaluated again, " says Derrick
Tillman of Bridging the Gap Development
in Pittsburgh. Knowing that such risk will
be assessed differently, means that these
developers face the pressure of having to
present an almost perfect deal, he adds.
This aspect of the process is
counterintuitive, because most minority
business enterprises don't come from
58
URBAN LAND WINTER 202 4
generational wealth, so the required guaranty
and strong balance sheets don't meet
the guarantee or net worth requirements.
Tillman says that instead of building a
reserve or having a separate fund to meet
those guidelines, diverse developers get
overassessed and steered toward more
programs, when what they really need is
access to capital to help bridge the gap.
Collins served as the managing director
of a private equity group. The questions he
gets asked today differ from what he was
asked then, he says, and he credits that shift
to the infrastructure he now has behind him.
Sometimes, getting equity in your corner to
underwrite deals can be difficult, because
there are so many risks-associated and
unmitigated risks-and your equity pool
starts to dwindle. If you don't already have a
relationship with equity, gaining one is going
to be much more difficult, because you have
to get their buy-in for lenders to trust you.
" It's really about how they like you and if they
believe you can manage their money in the
right format, " he says.
Nisbeth doesn't think risks are necessarily
assessed differently, so to speak. She
maintains, instead, that the market has created
measurements of risk which are rooted in
class and race and, thus, is unsure whether
data supports such perceived risk. Nisbeth
says, " I also do not know if the market has
any incentive to change this [reality]. The
current measurement of risk benefits those
who have made the rule. More data may help. "
Low-income housing stigma
Another issue involves all diverse developers
being pigeonholed into one type of
development. Collins explains that, just
because you're a person of color, it doesn't
always mean you're exclusively focused on
2024 Winter Issue of Urban Land

Table of Contents for the Digital Edition of 2024 Winter Issue of Urban Land
