Oct 16, 2019
BE SURE TOSEE THE SHOWNOTES AND LISTEN TO THIS EPISODE HERE.
Eve Picker: Hey, everyone, this is Eve Picker, and if youlisten to this podcast series, you're going to learn how to makesome change. Thanks so much for joining me today for the latestepisode of Impact Real Estate Investing.
Eve Picker:
Hi there. Thanks so much for joining me today for the latestepisode of Impact Real Estate Investing. My guest today isLaura Callanan, The founding partner of Upstart Co-Labs.Upstartbelieves that creative people solve problems. It isdisrupting how creativity is funded by connecting impact investingto the creative economy. One way the creative economy drivesimpact is in communities.
Laura brings a powerful background to UpstartCo-Lab. Just a few of her many past roles include serving assenior deputy chairman of the National Endowment of the Arts;consultant with McKinsey & Company’s Social Sector Office andassociate director at the Rockefeller Foundation
Be sure to go to evepicker dot com to find out moreabout Laura on the shownotes page for this episode. And be sure tosign up for my newsletter so you can access information aboutimpact real estate investing and get the latest news about theexciting projects on my crowdfunding platform, SmallChange.
Eve Picker: Besure to go to EvePicker.com to find out more about Laura on theShow Notes page for this episode and be sure to sign up for mynewsletter so you can access information about impact real estateinvesting and get the latest news about the exciting projects on mycrowdfunding platform, Small Change.
Eve Picker: Hi,Laura. It's really a pleasure to have you here. Thank you forjoining me. I've come to know you through your most recententerprise, Upstart Co-Lab, where you're a founding partner. I'mwondering if you could just tell us a little bit about Upstart'smission and goals?
Laura Callanan: So Upstart Co-Lab is a field builder, acatalyst, a connector. We are connecting impact investing to thecreative economy. We know that creative people solve problems. Likeall entrepreneurs, they need capital to do it. Most creativeentrepreneurs are very socially minded. Artists care about thehuman condition and that extends to the work they do through anenterprise model. So, the capital that fits them best is socialcapital, impact capital. Upstart Co-Lab is trying to unleash moreof that impact investment capital for the creativeeconomy.
Eve Picker: That's great. How do you propose to accomplishthat? I know you have a few different strategies you've beenworking on, but I'd love to hear more.
Laura Callanan: Well, from the beginning, we realized that whatwe were doing for the creative sector, in a lot of ways, followedon from what leaders had done around gender lens investing, so wewent to the mothers of gender lens investing, and we said, "How didyou do it? How did you take this idea, and, in a pretty shortperiod of time, it really infused the notion of gender lensthroughout the impact investing space?" They said it was athree-part recipe: make the case, build the coalition, and bringinvestable products to market. So, that's what we've tried todo.
Laura Callanan: We have undertaken research to get facts, andcase studies, and examples in hand to be able to really articulatethe opportunity for investors and the demand for capital in thecreative sector to really represent that case. We have shared whatwe've learned through the research published on our website,through opinion pieces in the Financial Times and otherpublications, in conference panels and keynote talks. We've beentrying to get these ideas out into the world. That's how we've donethe first step.
Laura Callanan: Building the coalition, we have been workingwith strategic partners from the very beginning. We've taken anapproach of being small, nimble, spunky; trying to take our ideasand work with much larger, older, better-established partners toget the idea of the potential for the creative economy to makechange and do good, infused into the work of community development- finance institutions, impact platforms, like CapShift, and SmallChange, your own platform, and work with partners who can help usmake these changes happen quickly.
Laura Callanan: We've also been building relationships on theinvestor side. Through a number of conversations in small and largemeetings, we've really started to build this community of impactinvestors who recognize the power of art, and design, and culture,and heritage, and creativity to drive change. We have recentlyre-oriented our approach to what we're calling Upstart 2.0, andwe're really going to focus on building a member community of theambassadors, the evangelists who - as donor-advised funds, asprivate foundations, as endowed cultural institutions - want totake these ideas back to their peer group.
Laura Callanan: Then, the third step - bring investableproducts to market - our greatest example of that to date is workthat we did with the Local Initiative Support Corporation (LISC) tolaunch a New York City Inclusive Creative Economy Fund. This isworking with the oldest and largest national community developmentfinance institutions, harnessing the power of their AA rating;harnessing their ability to underwrite and manage loans to realestate projects - in this case, affordable workspace formulti-tenant creative economy businesses.
Laura Callanan: We've found this to be really exciting, becausewe set out to raise $5 million of impact capital for the New YorkCity Inclusive Creative Economy Fund. We closed the fund afterabout six months, having raised $6.2 million [cross talk] allFoundation that capital is fully deployed. We're talking with LISCnow about what a $100 million National Inclusive Creative EconomyFund could be [cross talk] That's been our approach: make the case,build the coalition, and bring investable products to market tomake it easier for investors to deploy their capital.
Eve Picker: Ithink you must be a very focused person not to get distracted,because that's ... You make it sound easy, but it's pretty big. I'mvery familiar with LISC; one of our would-be issuers on SmallChange actually tried to use that program. She didn't end up beingable to buy the building, but it was that program that would havemade it possible for her. That's pretty great. How do you thinkthat LISC might expand that? Are you talking to them aboutexpansion?
Laura Callanan: As I said, the national fund is in the works,so let's just wait and see when that's ready to beannounced.
Eve Picker: Okay, very good. I have to backtrack a littlebit and say, why is all of this important to you,personally?
Laura Callanan: I majored in theater in college. I started mycareer working in the arts. My husband, my late husband, was aplaywright and a novelist. So, in my personal life, I've always hada connection to creative people and the work that they do. I guess,now about eight or nine years ago, I had a lunch with a guy namedJim Howden, a founding artistic director of an off-Broadway theatrecompany in New York, Signature Theatre Company. And I at thatpoint, I'd known Jim for about 20 years. I had known him from thevery first days at the very beginning of his founding SignatureTheatre Company.
Laura Callanan: We were having a lunch, and catching up, and hewas talking to me about the $70 million Signature Theatre Companyhad raised in a public-private partnership to create a newthree-theatre complex in West 42nd Street in the Times Square area.He was talking about how that new space would allow SignatureTheatre to expand their programming. He reiterated the commitmentto be sure that every ticket for every play was affordably pricedat about $25. He was just describing all of the vision and what wasgoing to happen next.
Laura Callanan: The architect on the project was Frank Gehry.They were designing a 7,500-square-foot open lobby space that wouldbe a community center ... A community green in the middle of Hell'sKitchen was how Jim talked about it. He was just describing all ofthese plans. I knew where this company had started. The budget fortheir first year with $30,000. They were in a borrowed space waydowntown. Things had not always been smooth and easy. They had madea commitment to equity and access from the early days. I knew thatit had not been a smooth trajectory, but here was Jim talking aboutwhat was happening next.
Laura Callanan: It was at a moment that I was working atMcKinsey & Company in the social sector office. I was in the middleof an engagement with the school foundation, so I was thinking alot about social entrepreneurship. I heard these words coming outof my mouth. I said, "Jim, you're what they call a socialentrepreneur, but nobody calls you that because you're working inthe arts and you don't call yourself that because you're working inthe arts. But take it from me. I am a highly paid McKinseyconsultant. I know this stuff, and this is what youare."
Laura Callanan: I left the lunch really scratching my head andthinking, if this guy were not a friend, would I put him in thesame group as Muhammad Yunus, Wangari Maathai, Paul Farmer, WendyKopp, all of these card-carrying social entrepreneurs? If Jim isobjectively a social entrepreneur of that caliber, is he theexception that proves the rule? Is there nobody else in the artswho could be called a social entrepreneur, or is there this wholeoverlooked cohort of talented, socially oriented, potentiallyhugely successful leaders who, for some reason, have not benefitedfrom the grants, the networks, the incubators, the accelerators,the impact capital that other social entrepreneurs have accessto?
Laura Callanan: I thought about this for a while. A few yearslater, in my role as the senior deputy chairman of the NationalEndowment for the Arts, I started to explore what it would take toclose this gap for creative people who've decided to move beyondthe studio, beyond the theatre, beyond the concert hall, and towork in their communities and to work as every bit of a socialentrepreneur. That's the background and how we got started withUpstart Co-Lab.
Eve Picker: That's pretty fabulous. So, I suppose thequestion is - what's the end goal for Upstart Co-Lab? What does itlook like when you've succeeded?
Laura Callanan: When we've succeeded, every impact investmentadvisor on their website, next to talking about how they can helptheir clients invest in community development, and environmentalsustainability, and by using a gender lens, they'll also have anice tab, a nice page, that talks about all of the ways that theirclients can invest in the creative economy. We want to see this beas much of a theme, as much of a focus for impact investors as allof the other things that are already grabbing attention andinvestment dollars.
Laura Callanan: Our goal is to integrate this into the thinkingof all impact investors and, frankly, to welcome a whole set ofpotential impact investors who've been sitting on the sidelines upto this point. By our calculation, more than $58 billion sits inthe endowments of our museums, performing arts centers, libraries,or just endowed foundations, schools like Juilliard andRISD.
Laura Callanan: These are institutions that are, at the moment,under some pressure for taking small donations from folks connectedwith opioids, tobacco, fossil fuels, and weapons. There's been alot in the headlines in recent months about cultural institutionsdeclining contributions from these tainted sources. But theconversation stopped a bit short, and folks have not yet recognizedthat these are institutions controlling billions and billions ofdollars and, unless they have taken active steps, are likelyinvested in, and earning returns from tobacco, and fossil fuels,and weapons, and private prisons, and some of these otherthings.
Laura Callanan: The future that we hope we're building throughUpstart is one where all impact investors have more access to thegreat opportunities happening in sustainable food, ethical fashion,social-impact media, and other parts of the creative economy, andthat artists, art lovers, arts institutions, who are investing, areable to learn about and are welcomed into a larger conversationabout socially responsible investing through the door of thecreative economy.
Eve Picker: Besure to go to EvePicker.com and sign up for my free educationalnewsletter about impact real estate investing. You'll be among thefirst to hear about new projects you can invest in. That'sEvePicker.com. Thanks so much.
Eve Picker: It's really a shift in thinking, isn't it?You're an early pioneer in thinking that the creative arts aresocial impact, and you really have to wait until that idea takeshold with the masses. That's a pretty hard road-
Laura Callanan: Introducing any new idea takes some time, andsome patience, and some moral fortitude. We're trying to bring allof that to our work.
Eve Picker: Yeah, that's pretty wonderful. That brings usto real estate, which is really my interest and the interest onthis show. You talked about investment in creative enterprises.What do those enterprises look like?
Laura Callanan: Let me describe one where real estate is areally core component. It's interesting because it's actually inthe social-impact media space. When you hear social-impact mediaand you think about film and TV, music, video games, things likethat, you think about content. That seems to be the furthest thing-as far as away as possible from real estate. But actually, realestate can play a crucial role.
Laura Callanan: I'm speaking to you today from the HudsonValley of New York. One of my neighbors is the actor-director MaryStuart Masterson. She is an example of a creative person who isalso very much a social entrepreneur. She is launching a film andTV studio here in the Hudson Valley called Upriver Studios. She isdoing it, in part, because she would like to be able to work whereshe lives, when she acts, and directs, and produces. But she alsounderstands that film and TV can be a significant economic driverfor a region.
Laura Callanan: There's a tax credit in this region of New Yorkstate, as in the rest of the state, and other places around thecountry, that incents producers to bring their projects here. Oneof the obligations to qualify for the tax credit is that yourproject needs to spend two days shooting on a certified soundstagein the geography, or the tax credit doesn't apply toyou.
Laura Callanan: Mary Stuart, and her business partner, BethDavenport, are launching Upriver Studios, a women-led New YorkState benefit corporation that will be environmentally friendly.They're looking at solar power, and a green roof, and some otherfeatures like that, as well as environmentally friendly on-setpractices.
Laura Callanan: It's a hoteling model. They will have thestate-of-the-art facility, and producers, directors, projects willcome in; rent the space. It's very fit for purpose. It's aspecialized space. There is sound attenuation; there are loadingdocks. There are high ceilings. There's shop space. There are allof these things that are very particular to what it takes to film aTV series.
Laura Callanan: The advantage of this, for the community, is acouple-fold. First of all, every TV series generates between 150and 200 production-crew jobs. We all think about the actors, andthe writers, and the directors who are behind some of our favoriteprograms, but in fact, they're the minority of people working onthe show. There are all of the electricians, and the grips, and thesound folks, and the hair and makeup folks. You look at all thosenames that run on the credits at the end of a movie or at the endof a TV show [cross talk]
Eve Picker: -Yeah, pretty long list.
Laura Callanan: -150 to 200 people. These are quality jobs.Most of them are union jobs. They pay between $75,000, and $250,000dollars a year. They have excellent health benefits. To bring thissort of work to this region creates a real opportunity for folks towork in those jobs. There's a sister nonprofit to Upriver Studios,called Stockade Works, that is training the 21st century productioncrew to be ready to take those jobs.
Laura Callanan: There's also an economic multiplier benefit.There's also a tourism benefit. People like to go to the place thatthey learn about on their favorite TV show. So, the real estate iscrucial to all the rest of this working; to the training programpaying off; for the graduates of the training program to have aplace to work; to attract folks to come, in partnership with thetax credit; provide the access to the sound stages that will makepeople really want to come to this region. That's an example ofreal estate, as I said, connected to a content-focused industry -TV and film.
Eve Picker: So,that's a pretty sexy use. While you're speaking, I'm thinking thatalso, I think, restaurants are creative.
Laura Callanan: Absolutely. We are working right now on a deepdive around sustainable food, as it pertains to the creativeeconomy. Obviously, there's a big focus, within impact investing,on food and agriculture. We're not looking at the crop. We'relooking at what it is on your plate. As I was thinking about itearlier today, we're not focused on the milk, but we are focused onthe cheese, right?
Eve Picker: Yes, yeah ...
Laura Callanan: So, the cheese factory is an example. We're notfocused on the groceries as much as we are the recipes. Thoserecipes get turned into delicious dishes in kitchens ... We see alot of community kitchens and commercial kitchens that can supportmultiple small-scale entrepreneurs. So, absolutely. Then, therestaurant, as an experience - the setting, the location, theambiance, the type of building that it's in - it's all part ofthinking about food and eating as a form of culture and community,not just nutrition.
Eve Picker: So,I'm realizing we're actually talking to someone who may be aneighbor of yours about a restaurant idea, which is really immersedin the community. They would like to open the door for investmentat a very small amount - $250 per investor - because they reallywant to involve the community. That's another interesting way tolook at it. From what I understand, creative enterprises seep intoa lot of different things. I have to remind myself from time totime what a creative enterprise is; probably, Small Change is acreative enterprise, because I'm trained as an architect. Doarchitects count, Laura?
Laura Callanan: We see that a lot of creative people arecreative in many ways. They get trained as architects, or painters,or actors, and they decide to start different enterprises. We don'ttalk about creativity as a skill set or a mindset. We focus oncreativity from an industry perspective. We think that's the waythat investors can understand best. We had to do a lot of thinkingearly on about how we were going to scope our focus, because you'reright, people can be creative in many fields. But in terms of thetype of work we're trying to support and that we're trying to getimpact investors to pay attention to - food, fashion, media, othertypes of creative businesses, and the sorts of real estate projectsthat we're describing here that make it possible for those creativeactivities to take place.
Eve Picker: That makes a lot of sense. This is a generalquestion I usually ask - do you think socially responsible realestate is necessary in today's development landscape? I don't knowhow much you know or are involved in just real estate development.Do you have thoughts about that?
Laura Callanan: Well, it's something that people who thinkabout arts and the creative sector can't overlook, because, as I'msure you think about often, creative people are pioneers indifferent ways, not just in terms of the work they do, but wherethey choose to live and do their work; often looking for affordableplaces to be to give themselves the flexibility and the capacity toexperiment and take risks.
Laura Callanan: Increasingly, we see examples where creativepeople are in neighborhoods that are ripe for gentrification. Therecan be confused conversations about the role that the presence ofcreative people plays in stimulating or contributing to thatgentrification. Obviously, I believe that gentrification is aproblem that lands on the doorstep of the asset owners and thedevelopers, not the residents and the renters in a neighborhood.The creatives are frequently, like other residents, in a rentercapacity.
Laura Callanan: We spend a lot of time looking at academicresearch and other reports about how the presence of artists andcreatives in a neighborhood is not the precipitating factor forgentrification, but actually occurs after the gentrification hasbegun. We think a lot about what different paradigms could be thatwould enable residents in a neighborhood to benefit as theneighborhood strengthens; how they can be rewarded for being goodneighbors, for sweeping their stoops, for keeping their sidewalksclean - all that stuff that makes the neighborhood inviting andhabitable - and what the system could look like - where the folkswho are responsible for growing the value of the real estate assetsin a community can actually benefit, even if they're not theowners, themselves.
Eve Picker: Yeah, I do think that there is also a piece ofthis that government is responsible for, because if there's an openfree market, then it's very difficult to control, but there areways to control gentrification that benefit everyone, if you thinkabout it early enough. I'm wondering, are there any current trendsin arts innovation that interest you?
Laura Callanan: We don't think about arts innovation,specifically. We're thinking about that larger creative economy;we're thinking about the role that industry plays [crosstalk]
Eve Picker: -that's Upstart Co-Lab, but I'm just wonderingif there's anything that fascinates you.
Laura Callanan: Anything that fascinates me ... I'm intriguedby our hunger for experience, and this is something where creativepeople are playing a role. I'm sure that you're familiar with MeowWolf, the phenomenon that started in Santa Fe that's spreading toDenver, and Las Vegas, and Phoenix, and Chicago, and Washington,and on, and on, and on.
Laura Callanan: This is something where artists have cometogether. They transformed - in the Santa Fe example - an abandonedbowling alley. They turned it into this funhouse; this art gallery;this community space. It's a place that attracts folks of all ages.All economic, demographic, sociological backgrounds, come, and walkthrough, and participate in Meow Wolf and find itintriguing.
Laura Callanan: The appetite for these types of immersiveexperiences, I think, is a reflection of our very isolated,tech-enhanced daily life. I love it that creative people - whetherit's through a food experience, whether it's through an artexperience, a music experience - that they are at the heart of whatpeople choose to do when they leave their laptop.
Eve Picker: Yes. I think probably Starbucks was one of thefirst companies that realized this and created an experience out ofcoffee, right?
Laura Callanan: Exactly.
Eve Picker: What should those of us who are not in thecreative world be following? What of these trends do you think ismost important for the future of our cities?
Laura Callanan: There's an important role in the creativefuture for diversity, equity, and inclusion. Put aside the moraland ethical imperative. There's just an imperative in terms ofwhat's going to come out- what's going to generate the mostintriguing content, the most relevant experience, the mostinteresting food, or fashion.
Laura Callanan: As you know, heterogeneous groups of peoplehave been shown to solve harder problems, better and faster. If youthink of both challenges and opportunities as problems to besolved, the more engaged the broader set of actors can be incontributing to imagining what comes next, the better the resultswill be. From a serious point of view, it's a more effectivesolution. From a more lighthearted point of view, it's thatbeautiful, delicious, joyful, wonderment experience,right?
Eve Picker: Yes.
Laura Callanan: That having a variety of perspectives, avariety of experiences, a variety of backgrounds, a variety ofskills brought together to imagine what's next will get us the bestresult.
Eve Picker: Yeah, I think you're probably right about that.It's just very hard getting there, isn't it?
Laura Callanan: It depends. If you hang out with enoughcreative people, it can make you ridiculously optimistic, so...
Eve Picker: That's what I need to do, then ... Because youhave a very different point of view than many of the people I'vetalked to, who are developers, or work in the securities world, orare really focused on the built environment. You have sort of amore expanded view, I think. How do you think we need to thinkabout our cities and neighborhoods so that we build better placesfor everyone? You may have just answered that.
Laura Callanan: Well, we think that the creative people andcreative organizations, meaning arts- and design-typeorganizations, have some lessons that are useful to the rest of theeconomy. We've started to articulate values for an inclusive,creative economy. I can just share them with you because our hopeis that we can transform; we can improve; we can strengthen theentire economy by sharing some of these lessons from the creativeeconomy.
Eve Picker: Yeah, that would be great.
Laura Callanan: These are things that we've touched on already,but one is an orientation that's open and experimental. So,openness and experimentation, I think, is crucial. It will help usto keep pace in our rapidly changing world. Continuous improvement,radical new approaches, that's what we need. Incremental change isinsufficient given the dynamism, the complexity of the world thatwe're in. Sometimes, small improvements are just simply inadequate,and you need something that's much more bold.
Laura Callanan: You get that by being curious and having thislearning orientation. Artists, designers, very much are built thatway, and I think that's a general approach that can benefit alltypes of businesses, all sorts of real estate projects,governments, philanthropy. I think everyone benefits from thatapproach. That's the first value that we think the creatives canshare with the rest of the economy.
Laura Callanan: The second one - diversity and inclusion -we've already talked about; the capacity to solve problems betterand faster that comes when you've got diverse perspectives on thetask. It's not just that it's the ethically right thing to do. It'sthat there's business value. There is a strategic advantage toapproaching it in this way. Creativity simply can't be optimized ifyou don't have both diversity and inclusion at play.
Laura Callanan: The last idea is one around tradition andinnovation and recognizing that communities have both - I'll callit - knowledge and wisdom. With that, they're able to learn fromthe past experience and apply that to what's coming up next in thefuture. You know that creative people are always reacting to whatcame before. They might be building off of it. They might berejecting it outright and trying to do something very different,but creative work is always in context, and it's in context withwhat has preceded it.
Laura Callanan: The long-term thinking, the sense ofstewardship that social-sector leaders and impact investors hold, Ithink, is very compatible with the way creatives do their work. Ithink creative take it even a step further; having a really deeprespect and awareness of prior tradition, but not being restrainedby that or being held back by that; using that actually as a launchpad to innovation.
Laura Callanan: Those are the three ideas that we think arecrucial. Creatives just know this in their bones to be open andexperimenting, to welcome in diverse perspectives and be veryinclusive of various voices and to connect to tradition andinnovation. We think that those are ideas and lessons that canstrengthen the entire economy.
Eve Picker: I'mvery honored that you asked to partner with Small Change and thatwe're now highlighting creative economy projects on our site. I'mjust wondering what you think equity crowdfunding- how you think itcan play a role in building these special creative economy projectsand communities?
Laura Callanan: I think it's crucial as a way for projects likeUpriver Studios that I mentioned a minute ago, or a Meow Wolf, thatstarted in one community and is now expanding to the next six or socommunities around the country. I think it's important for theseorganizations, these enterprises, to engage the communities thatthey're in, in an active way.
Laura Callanan: This is a way to signal that it's not justbuilding something for a small group of employees or a small groupof investors. If you are a Mary Stuart Masterson and you'relaunching something that you hope is going to really boost theeconomy of the Hudson River Valley, this is a way to say, "And you,my neighbor, can have a stake in this. You can benefit as we growthis thing together," whether or not your $250 dollars, your $1,000dollars, whatever the small bite size might be of investment that'sfacilitated through Small Change ... It's a really clearcommunication to local folks that this is for them and that they'rewelcome.
Laura Callanan: I think it's a really strong indicator forlarger-scale investors who want to test the morals and theintentions of a real estate developer. It gives them a reallystrong indication. If the developer is going to take the time andengage with the local community and allow them to participatethrough a crowdfunding structure, then they're serious aboutboosting the local community. If they can't be bothered, I thinkthat is a real question mark about the intention of thedeveloper.
Eve Picker: That also extends to planning departments andzoning hearings. If you can bring along a crowd of people who aresupporting the project, that's a very strong statement, I think, inmany ways-
Laura Callanan: Absolutely.
Eve Picker: Where do you think the future of impactinvesting lies? I ask this because I'm afraid it's still just aword that people use. I have yet to really believe that people willtake a lesser return because a project is socially responsible.Perhaps that's coming, but still hard to believe.
Laura Callanan: Well, I would disabuse you or anyone listeningto this podcast that impact investing is asking people to take alesser return. I know that 25 years ago, when I started to get intothe impact investing space - when the space was very new and impactinvesting was not the term it went by - that there were a fewearly, less sophisticated, less professionally managed investmentopportunities, and that might have been the story back in the1990s.
Laura Callanan: I would say that we have Goldman Sachs,BlackRock, UBS, Morgan Stanley - all these large names, thesepremier financial institutions, participating in the sociallyresponsible and impact investing sector, not because they and theirclients are expecting to make less money. We can have a wholeseparate conversation about the whys and wherefores for this. Wecan talk about the risk management component of introducing social,responsible ESG factors into decision-making, but I would hate foranyone to hear this conversation and walk away thinking thatthey're going to lose money by engaging in impact [crosstalk]
Eve Picker: Idon't think lose money but let me just pose the question a bitdifferently in what I see, and that is, in particular, affordablehousing. As a real estate developer, when you work in anunderserved neighborhood, it is very hard to get projects to pencilout; very, very difficult. That's why there are so many subsidiesaround affordable housing projects, and that's why it's slow tobuild them fast enough.
Eve Picker: Ifyou want to keep a project- an asset like that affordable for thenext 15 or 30 years, it's not an asset that will increase in value.It's a difficult thing to invest in. Absolutely, investors in thosetypes of projects will have to take a lesser return than if theyinvested in a more traditional real estate project. There's a realdifferentiation there, and I would love to have this conversationwith you-
Laura Callanan: No, that suggests that each investment's lookedat in isolation, and an investor is looking at their totalportfolio. There should be some things that are lower risk andcommensurate return, and here are some things that are going to behigher risk and commensurate return.
Laura Callanan: When we were talking with investors about theNew York City, the LISC New York City Inclusive Creative EconomyFund, we were talking to them about an eight-year note with fullrecourse to a AA-rated issuer that was paying 2.75 percent annualinterest. As I talk to you today, in September of 2019, and we sitwith an inverted yield curve, the 2.75 interest on a seven-,eight-year investment from a AA-rated issuer is looking awfullygood. So, a lower-risk commensurate-return opportunity, which has aplace in everybody's portfolio.
Eve Picker: Isee it- I'm not seeing it yet in my world, but I hope to see it. Ithink there's still a lot of people who don't think that way ...Maybe we can convince them. There's just some sign-off questionsthat I'd like to ask.
Laura Callanan: Sure.
Eve Picker: What would be the key factor that makes a realestate project impactful to you?
Laura Callanan: Well, the community orientation, clearly, issomething that we would probably both agree on. I see that- it'snot a surprise to me that a lot of the creative economy real estateprojects that I'm aware of are deeply focused on their role intheir community, whether it's Meow Wolf, Upriver Studios ... Wehaven't yet talked about Greenbelt Hospitality, which is launchingout of Phoenix. These are examples where the entrepreneurs behindthe projects all are really thoughtful about their community, andreal estate is core to what these businesses are all about. Thebusinesses can't succeed if the community is not engaged. I thinkthat that's fundamental.
Eve Picker: Yeah, I agree. If you're looking at the realestate landscape in the U.S., which you see every day, if therewere one thing that you could change to make it better, what wouldthat be?
Laura Callanan: Well, I think there's got to be a regulatorysolution to the gentrification question. Obviously, improvingcommunities is a good thing. The only reason that we have a termlike gentrification that conjures up something that's really,really bad is because when the community improves, there arewinners and losers. I think there needs to be a regulatory fact ora solution that comes into play to close that gap, because thenotion of keeping communities where they are already and notallowing them to strengthen is not an alternative. It's not asolution to the issue.
Eve Picker: Yeah, I totally agree with you. Thank you very,very much. Thanks for spending the time with us. I really enjoyedthe conversation, and I'm going to continue having conversationswith you off the air, okay?
Laura Callanan: My pleasure. Thanks, Eve.
Eve Picker: Thank you. Bye-bye. That was Laura Callanan ofUpstart Co-Lab. She shared some powerful concepts with me. First,that strategy and focus are key to accomplish big goals, like thegoals that Upstart Co-Lab has. Second, that creative endeavors canbring every bit as much to the economy as any other enterprise.Third, that artists, by nature, are suited to communitydevelopment. Art is built on tradition, whether it embraces it ornot. Expect to hear more about creative economy investmentopportunities in the next few years, because that is what Laura isdetermined to do.
Eve Picker: Youcan find out more about impact real estate investing and access theshow notes for today's episode at my website, EvePicker.com. Whileyou're there, sign up for my newsletter to find out more about howto make money in real estate while building better cities. Thankyou so much for spending your time with me today, and thank you,Laura, for sharing your thoughts with me. We'll talk again soon,but for now, this is Eve Picker signing off to go make somechange.
