Breaking Down Barriers for BIPOC Developers: A Financier’s Perspective
The Community Preservation Corp.’s Lawrence Hammond on how minority developers can overcome unique challenges.
There are many unique challenges that developers of color face, but some organizations have found ways to lend a hand. The Community Preservation Corp, a nonprofit multifamily lender and investor, has created an initiative—known as ACCESS, short for Acquiring Capital and Capacity for Economic Stability and Sustainability—to provide financial resources and generate opportunities for BIPOC entrepreneurs. Indirectly, this program benefits underserved communities.
We talked to Lawrence Hammond, senior vice president with CPC & director of ACCESS, about the program’s success and how it helps BIPOC developers break historical barriers within the industry.
Why did you choose to focus on supporting BIPOC developers?
Hammond: Our intentional focus on BIPOC developers stems from the historic racial discriminatory policies that created barriers to accessing financial resources for developers of color within the real estate industry. It is crucially and fundamentally important to provide both knowledge and experience and financial capital resources intended to create an equitable field of play for BIPOC development opportunities.
READ ALSO: How Inclusion Drives Multifamily Success
What are some of the pivotal hurdles these developers still face?
Hammond: The inherent barriers BIPOC developers still face result from inequitable access to financial capital. Often, these developers are required to partner with a majority of white developers due to liquidity and guarantee constraints imposed by financial institutions, which dilutes their profitability on development opportunities. This is a key reason why BIPOC companies are not able to build capacity, scale their businesses and grow.
Over the past few years, there have been several initiatives promoting inclusion and visibility. Is it easier for BIPOC developers to find a seat at the table now than it was a decade ago?
Hammond: A groundswell of opportunities to make meaningful change has occurred because of the tragic murder of George Floyd in 2020. It was an inflection point in our nation’s history, at a very charged moment in time, that forced an overall awareness in the general public of the disparities that plague the BIPOC community.
However, there is still much work to be accomplished for a problem that has existed for decades, and one might say for centuries. Although the more recent initiatives have garnered unprecedented support from corporate, governmental and philanthropic entities, these efforts have experienced some pushback from political forces. I believe these initiatives have provided more access to resources and more importantly, have allowed for additional voices to be added to ongoing conversations about racial equity and social justice.
On the financing side, one of these initiatives is the ACCESS program. Tell us more about its components and offerings.
Hammond: Human, knowledge and financial resources in the form of technical assistance and financial capital products are key support resources offered to ACCESS clients. The ACCESS initiative comes alongside our existing products and investments and wherever possible, stretch our credit parameters to close projects. This may involve leveraging DSC or LTV when we receive appraisals that may undervalue a project.
Because we understand historical inequities, we also understand the importance of reimagining how we assess risk, which means we must stretch our credit parameters to ensure we are lending equitably. We approach each capital need with a tailored approach to ensure products and services are meeting the developer’s needs.
And in what way does this initiative offer technical assistance and capacity-building opportunities to BIPOC developers?
Hammond: CPC is known for its hands-on technical assistance provided by our originators. Our initiative augments the efforts of our originators by providing training with a specialized housing consultant as a value-added component. The value of having access to a housing consultant provides the capacity-building assistance many novice and emerging developers need to be successful.
Additionally, through its strong relationships with government partners, CPC has been instrumental in the creation of subsidy programs strategically focused on bringing capital resources into projects in many under-resourced disinvested communities throughout New York.
READ ALSO: Architect Roundtable: Paving the Way for BIPOC Designers to Succeed
How else is ACCESS creating positive change across the industry?
Hammond: Through our policy efforts, we have been successful in bringing forth enhancements to the lending policies and practices both internally and externally with our government partners.
We currently serve as facility manager for the MBE Guaranty Facility created by the City of New York and Goldman Sachs. This $50 million guaranty facility will provide MBE developers with a “back-stop guaranty,” enabling them to independently provide the guarantees required to secure construction financing to develop affordable housing projects in New York City.
The ACCESS team is also involved in advancing racial equity in lending by participating in collaborative-working affinity groups with a national presence.
Can you share some success stories or notable achievements from BIPOC developers who received support through this program?
Hammond: Since the beginning of the ACCESS initiative, CPC has financed 42 construction projects with 38 BIPOC-led developers. Through outreach, we have also convened BIPOC Developer Summits in Buffalo, Rochester and Syracuse where we’ve partnered with the cities and NYS HCR to host these events with panel discussions and presentations to inform emerging developers on the programs, practices, and policies to help expand their knowledge and business.
We are proud of a project financed during the outset of the ACCESS initiative that is located in Poughkeepsie, N.Y., with Garfield and Shereen Salmon, a husband-and-wife BIPOC development team. They were denied financing from seven different lenders for various unjustified reasons. Ultimately, they were introduced to CPC and the ACCESS program through a local government contact and were able to obtain construction financing from our lending team resulting in the successful completion of their five-unit plus ground-floor commercial space residential building.
In addition to renovating the rental units, they were able to turn the commercial space into a restaurant that they run. Garfield is a trained chef whose dream was to open his establishment. Not only were they able to achieve the construction financing, but they were able to achieve more leverage on their permanent loan resulting in higher loan proceeds which could be utilized for their next development opportunity. In doing so, we were able to help them create access to building generational wealth that they can pass on to their children.
READ ALSO: Paving the Way for Equitable Solutions in Affordable Housing
How have the past few years been for CPC and what are the achievements you’re most proud of?
Hammond: Since the inception of the ACCESS initiative, utilizing CPC’s balance sheet investment of $40 million has enabled us to leverage over $500 million in debt and equity investments for BIPOC-led development opportunities.
A tremendous success has been the launching of the CPC ACCESS Incubator Training program providing free technical training for both novice and emerging BIPOC developers. In the past 18 months, 101 graduates have completed the program with another 75 participants scheduled to graduate in May 2024.
CPC has been able to offer financing opportunities for a dozen graduates with several more in the development pipeline. This training has been beneficial for the novice tier of developers often overlooked in their development journey. Our goal is to help build the next generation of BIPOC developers.
In what way has your experience with CPC and your previous employers shaped your current role?
Hammond: I have an extensive career in community development financing spanning over four decades, allowing me to concentrate on supporting the endeavors of entrepreneurs within underserved and disadvantaged communities. The Community Preservation Corp. and its mission of creating and preserving affordable housing within low-income communities, which tend to be communities of color, aligns with my aspirations of being an empowerment strategist.
Do you have any advice for young BIPOC developers who are just beginning to navigate the multifamily industry?
Hammond: It is vitally important to obtain the prerequisite development knowledge and experience achieved through technical assistance and training equipping a developer with a skill set broadening their capacity in achieving successful outcomes. It’s important to know what you don’t know and build upon the intangible aspects of being a developer in a highly competitive environment. Development is not intuitive and requires the capacity to take calculated risks, which often aren’t easily quantified. Creating lasting relationships with lenders and government partners is critically important for developers looking to operate in the affordable housing market.
What are your goals and aspirations for the ACCESS initiative, and CPC in general, when it comes to supporting BIPOC developers and communities?
Hammond: We have been extremely successful in utilizing our initial capital investment with this initiative. However, it is important to leverage our existing relationships for a capital-raising endeavor. We are seeking ways to measure success as we convey our “proof of concept,” which will support our ability to raise additional capital.
We also want to provide additional training for graduates of our CPC Incubator Training program, with more in-depth knowledge sharing augmented with products supporting the needs of BIPOC developers and the communities they serve. Flexible and patient capital resources are critical pieces to an emerging developer’s financing strategy.
