Jack: Welcome back everybody to the OZExpo Podcast. I'm your host, Jack Heald, and I am here today with Eddie Lorin, who is the cofounder of Alliant Strategic Funds. Eddie, welcome to the show. It's good to have ya.
Eddie: A pleasure to be here.
Jack: So, I've done a little bit of research on you and one thing continues to stand out and that is that you seem to have almost a career-long focus on what we would call impact investing. Tell us about Alliant Strategic Funds, what your goals are as we get into the impact investing side of it.
Eddie: Sure. I am a long-time affordable housing preservationist. For 20 or 25 years I've been buying blight and making light. We take neglected properties, breathe new life into them and make them into thriving communities that are affordable. We take a lot of pride in that. Joined forces a few years back with a company called Alliant, which is one of the largest tax credits syndicators in the country for low- income housing tax credits. And we formed Alliance Strategic to buy, preserve and build affordable and workforce housing as the ultimate impact investment.
Short of feeding the world, clothing the world, there's nothing more impactful than housing the world and housing them in a meaningful way. So if you give people dignity and respect, they tend to stay, pay and refer their friends. It's a very simple business model, yet it's a very powerful, and every day I wake up, I know I'm making a difference. And that really is truly the way to make a profit with a purpose.
Jack: So where does that passion come from? What's the drive there?
Eddie: My background: at 10 months-old, my father died, and we had four boys and a single mom. And she worked day and night to make us good human beings as well as to make a living. I remember counting $2.12 cents for a treat to go to Jack-in-the-Box. And you know, it was not an easy childhood. I had a quest and a drive to have a more dignified life. Not that I didn't have a lot of love and respect, but you know, the old adage you can get poor, but you gotta be clean.
The ultimate thing for me was to, how do I give back and make sure that other people who didn't have as much opportunity as even I did, can have the respect and dignity of the good life.
And I got into the housing business and affordable housing specifically. And I found that unfortunately most of our residents are single moms and I can relate every time and I find myself talking to them and seeing what they want, what they need. So, we go in and create A amenities for BNC residents, you know, A meaning luxury living opportunities.
So, the resort style pool, state-of-the-art fitness centers, social areas, outdoor kitchens, all the things that are really expensive, like kind of like swab does with theirs. For less than half the price, you know, $3,000 rents we're at, we're at $1,000 rents and giving them the same dignity and respect and the same amenities. But the drive comes from really making a difference in this world. And I think we can do it in a relatively inexpensive way without over-improving yet giving people value. So it's value for our shareholders and value for our residents, most importantly.
Jack: I have a suspicion that you tell this story a lot because you tell it very well. What specifically do the single moms say to you? What are some of these stories that you're hearing and, and how did you come up with the types of solutions that really meet their needs?
Eddie: Well, you just find out what they do for a living, first of all, and how many kids they have and where the kids go to school and what are their challenges every day. And they say we need afterschool programming. So we have a nonprofit foundation called HAPI Foundation, a healthy apartment property initiative. And we do health and wellness programming and afterschool homework.
And so, we try to get local churches, synagogues, YMCAs, Boys and Girls Clubs to come in and help sponsor because we always have a really nice club house and that's the center of the community. And in many properties, they sit vacant and we want to make them thriving areas for people to come in and hang out and learn. So we tend to see that the most important thing people want is -- besides a clean, safe place to live and of course they want some security and they want lighting and all those basics -- but they also want to feel a sense of community.
Eddie: And we do that by giving them real value through programming.
Eddie: Because you know, the worst thing is social isolation.
Eddie: You can bring people together. You can change their environment. You can change someone's life.
Jack: As I listened to you speak, it occurs to me that you've got probably a fairly significant stack of talents and abilities that makes you pretty rare in this regard. A lot of folks can start out as developers and get into the finance side or start in the finance side and get into the development side. But what I'm hearing is, more than just building buildings, I'm hearing somebody who seems to have a skill for building communities.
Eddie: Well, that's what we're all thriving for. A sense of belonging and awareness. And again, social isolation is one of the worst killers next to smoking.
Jack: So, when did you first figure out you had this particular skillset to do this?
Eddie: Well, you know, it's 30 years to be an overnight success, right? As time goes on, you see what works, what doesn't make mistakes. It's not always easy.
Eddie: You can't, you can lead a horse to water, and you can't make them drink sometimes. So it becomes very frustrating when you provide all these opportunities for people and they just don't want to buy in. So you find yourself being happy with a very few. If you have 200 units, maybe 500 people live under your roofs. And if you get engagement from 20 people, you're supposed to be happy. And I'm like, really? But that's the way the world works. You can't make them drink.
Jack: Well that was one of the questions I was going to ask you. I actually had written it down. What changes can you as the developer make to improve the communities? What are the things that actually make a difference? So, I'm fascinated with this nonprofit. What'd you call it?
Eddie:H-A-P-I. hapiups.org. And it's just health and wellness programming for affordable communities.
Jack: Is this programming that you bring to all your developments?
Eddie: Well, you know, it's all budget-constrained and we need outside investment because the investors of ours, they need to return. You could eat up the entire cash on cash return by doing the program.
Eddie: So, it's a fine line. Everything's always a fine line. I wish I had unlimited funds.
Jack: Well, yeah. I've got a fun question to ask you later on in that regard. Another phrase that I ran into that is very timely as I was doing my research on you was crowdfunding. Relatively new phenomena in terms of fundraising. What are you doing in the crowdfunding arena and is there crossover into the Opportunity Zone?
Eddie: There is, but you know, the term the pioneer gets the arrow. I have many arrows in my back from that. Unfortunately, I launched impact housing REIT and it was one of the failures of my life. And I'm not afraid to tell people that. Way too early. I don't think the average person we did an Reg A plus, which means for nonaccredited investors.
Eddie: I unfortunately think it's just way too early. But one day will come when the average investor can invest on the Internet without having to go through their advisor, or having to be accredited. You know, there's hundreds of millions of dollars that can make an impact that have been reserved for only the wealthy. So now anyone and everyone, regardless of income level or wealth, can invest through this Reg A plus opportunity. But again, it's the early adopters. We didn't reach our minimum and you know, there's a certain minimum we have to raise…
Eddie: … to make it work. But the brand is still ours. I think one day the market will catch up, the millennials are going to start inheriting a lot of the money and they're going to demand profit with a purpose, money with their meaning. So, you know, it's, it's one of those things where you try things and you fail and you move on.
Jack: You know, stories are what drive things. Like those stores were grabbed on. Grab the hearts of people. You talked about the amenities that you can add to these communities. But you also talked about lessons learned. What are some of the things that you've tried in the past that you thought would work that didn't?
Eddie: Well, that was the big one. I just thought it was so obvious that democratizing the opportunity for people to invest directly around the middle man was just going to take off like wildfire. And, you know, crowdfunding is doing well, but it's still on the accredited worlds and nonaccredited haven't bought in.
I remember saying, I'll never do banking online. Are you kidding? I'm not going to address that. We can't live without our online banking portals. So eventually it'll trickle down and the next generation will have more power to do so. So that's one thing I've tried and failed. And you know, we've tried to implement a lot of different things and if people don't buy in, it's disappointing.
But you move on, you know. So I remember putting a full-court basketball in Dallas. You know, saying, “Oh my God, this is going to be great.” It's called Lit. It's got security cameras everywhere. Everyone will respect it. Well, a month later, one of the hoops was down and it was just a mess. We got him on film, but they got arrested and were back out on the streets again. So, there's a lot of things in this demographic that sometimes get frustrating and you it's disappointing, but you got to keep trying.
Jack: How do you deal with disappointment?
Eddie: You gotta have equanimity in your mind in your soul, in your spirit.
Eddie: You got say it is never as good or as bad as you think.
Jack: Right? So how do you do that?
Eddie: My wife and I go to a class, that's our empty nest class called Mussar. It's character traits and Hebrew and the Jewish heritage, which I never heard of. But there's 18 traits that you try to live by every day and patience and silence. All of these different traits. People can look up, M-U-S-S-A-R if they're interested. And you just try to keep centered, keep balanced and keep calm because you get excited about things and you get disappointed. But that's better to try and fail than fail to try.
Jack: Well now, and this is where I'm going to be a little different than the normal podcast host. So, talk about the role of silence in your life and in your work.
Eddie: Well, I've been dealing with the politicians a lot lately because I'm in Southern California and I'm doing the first project called NOAH: Naturally Occurring Affordable Housing to buy an existing property to deem it affordable, will be cooked before all the properties that are old become unaffordable.
Eddie: So, the entire system is set up to build new, which is three-times the cost of buying existing. It's kind of pretty much common sense, but they don't know what to do with it. So I'd been three years on the same 50 units here in L.A., which in that time frame we could have bought thousands of units and helped thousands of low income and homeless people. But these politicians are not, either they don't have a motivation or they don't have a way to help. But silence, I've had to bite my tongue so many times. It's so frustrating because I know it's right and I know it's obvious but it doesn't seem to matter unless you can get through to people in a different way. And we're trying to figure out what that way is.
Jack: I had Breton Messing on the show recently. He used to be the deputy, one of the deputy mayors of L.A. and he made a comment about the government process. He said, one of the things he learned as being part of the government there in L.A. was that the system was set up basically to prevent changes. That, and he said we should take comfort in that cause if you're afraid that somebody is going to and come in and really screw things up, will the system is designed to prevent both bad things and good things from happening. It takes a lot of efforts.
Eddie: Yeah. But meanwhile we need 7 million units to be built, now in the state of California and growing.
Jack: That's where I wanted to go. Talk to us. Talk to us about the metrics. Give us the numbers behind this drive for affordable housing and impact investing.
Eddie: Well, if incomes have stagnated and rents have risen by 60% in the last five years, that's a recipe for disaster. What’s happening and fueling that is what's called CEQA California Environmental Quality Act. One person can object to any development that's called NIMBY, Not In My Backyard.
Eddie: And these have so much power to stop a development and we need volume and product. We need so many things and so many solutions. Here's the siren, sorry.
Jack: That's okay.
Eddie: We must commit ourselves to building hundreds of thousands of units quickly. And without change, without up zoning the city council just went 12 to zero, unanimous against within a half a mile up zoning with no hierarchy, no light limit for affordable housing within these new metro stations. Now how do you make any sense of that? That's just pure stupidity. Well, they're going to continue to think about it and talk about it and put it on the next agenda.
Well, every month that goes by, rents go up and more people will have one foot on a banana peel and then they're homeless or very close to being homeless. You got people paying 50%, 60% of their income on housing alone. Add to that transportation. You're at 70%. How are you supposed to feed a family? How are you supposed to go out every once in a while and pay for the occasional tire that blows? I mean people are so strapped and there's no relief from above. And that's what has to happen. And until it happens, there's no commitment to that.
Jack: Oh man. So let's circle back around to Opportunity Zone, but let's talk about the reporting side. You brought that up about reporting to the government and that's been something that I've definitely been interested in. The whole goal of this program is to drive investment into the areas that need it the most. But how are we going to measure the success of it? Talk about your work there.
Eddie: Well, I'm on two coalitions. One’s EIG, which is a nonprofit in DC that was author of the bill. I'm also on the accounting firm Novagradec and we have subcommittees on impact reporting and generalize reporting and affordable housing. That's what I'm involved in. So on the reporting side, we need to make sure that we explain exactly what our goals are for these developments. And what social return in terms of how many affordable units, how many workforce housing units. And I define workforce housing as 80 to 120% of AMI, the missing middle, which is equally as important as low-income housing.
Eddie: Because people are making $50,000 a year and they still can't afford it.
Eddie: They need a place to live. So part of the whole structures, how many housing units, who you're supplying, what is the programming that you're able to accomplish?
And so, this needs to be in a form that's reported to the IRS and treasury and we got to make sure that that's a really important component. But we've already just been hung out for the second round of regulations. And it doesn't include reporting yet, but you know, it's taken a long time to solidify this legislation.
So finally, were comfortable enough to launch our PPM and our fund. Now we're about to go out because the second tranche of regulations are out and that was a relief. And so, reporting will be in subsequent rounds of regulations, but we feel we can go forward and trying to make a difference here.
So, is the new fund, is this a blind fund or is it deal-specific? Well, we have tons of deals lined up already for the fund, but it's technically blind.
Jack: Talk about the early years. I see that you went to UCLA. How did you get into UCLA? I mean, I'm not talking about the technicalities, just what was the story.
Eddie: The last of the dumshitz. I could never get in today? Oh, the story was, mother was in ICU dying and she died when I was 17 years old. The day of the prom was her funeral.
Eddie: And I had just gotten in, so thankfully she knew that I got into UCLA and then it was time to go off to college. So it was a long, lonely time. It was a hard time to be an orphan going and putting myself through school. But I had an incredible experience there. It's a great university and I met a ton of good people and good friends.
And you know, thankfully those three brothers I told you about are still in my life and very involved, they were involved then and, and they're involved now we're very close and that's what life's about is keeping family close and having people that you've shared experiences with.
Eddie: And call each other at a moment's notice for whatever you need. But yet getting myself through UCLA was not easy, but I did it. And then I got into the real estate business. I'm a Jewish guy, as you heard before. And I worked for one of the Jewish mafia in Beverly Hills -- one of the godfathers of real estate here -- and it led to other opportunities and led me to where I am today.
Jack: So, did you go into go into school with the idea of getting into real estate? How'd you, how'd you make that move?
Eddie: I was a psych major.
Jack: Oh really?
Eddie: Wow. That tells you where my mind was. It was not easy, but you know, I got through it. I always knew that real estate was something I wanted to do. It seemed like most of the wealth and difference of people I respected were in the business.
Eddie: And you know, there's a lot of dirt bags in the business and I want it to be the good guy. I remember walking on campus in a daze and all those classes, and some of them were interesting and some of them were therapy like this.
Eddie: Right now, others were more technical, scientific. And you know, I learned my cirrus stats and I was just bouncing around. The first two years, I really was undeclared. And then I said, well, how am I going to get out again four years? I can't afford more than this. It turned out that I hadn't taken everything I needed as a prerequisite for psychology. So, I did my last two years were 11 psych classes and that was it.
Jack: You accidentally did all the prerequisites?
Eddie: When I tell you I was lost, I was really lost.
Jack: Well, who among us had a clue what he was doing at 17? God knows I didn't. Oh my. So I wanna take this in a slightly different direction now and find out a little bit more about how you're wired, outside of your obvious passion for making life better for people like you were when you were growing up. What’s a fun weekend for you?
Eddie: Ah, well I have a daughter at USC and another daughter at Tulane. So I'm right in the heart of those tuitions.
Jack: Oh, I'm sorry. You must have misunderstood me. I asked you about fun.
Eddie: No, but fun for me is to be able to go downtown L.A. and go take my daughter to dinner with my wife and hang out with their friends and just kind of be on campus experiencing that. I also enjoy, hopefully it'll warm up a bit, and we can lay in the backyard and just chill and listen to the waterfall and have some Zen. Because my weeks are pretty crazy.
Eddie: You know, going out to dinner with very dear friends. In fact, a fraternity brother from UCLA -- we're going out to dinner tonight -- and his wife. So these are just basics, just like to live life and experience life with with good people. And you know, hopefully at the end we can look back and say we made a difference.
Jack: Yeah, I'd be satisfied with what you've done. Okay. So, here's my favorite question. Honestly, I think you might have already answered it, but I hadn't asked it in this way, and you might enjoy it. You get to be King of the World for one day and you get to solve one problem. What's that problem?
Eddie: I would make all the politicians in the world make and change policies so we can help the underclass, the underdog. And I would just change the level of funding sources, the priorities of spending, so that everyone has a fair shot and at least has a roof over their head, basic health care, food and clothing. And that would be amazing to do because so many people are $100 to $300 away from making it or not every month. It’s our obligation to be able to support them. Assuming they're working, you know, the people that aren't working in our mentally ill, they, I'm not proposing that that's a different issue...
Eddie: ..for mental health professionals to solve, but the people that are working hard every day and just can't make it. I think that we need to help.
Jack: Do you have insight into the kinds of numbers that we're talking about? I know that bad analysis often occurs around this issue. We look at the workforce as if it is economically static. In other words, somebody who's poor is always going to be poor or somebody who's wealthy is always going to be wealthy. I'm actually looking for what are the real numbers in terms of the entire workforce. What percentage of the workforce is stuck at the bottom, not in the bottom, but is eventually going to move out, but what percent is stuck at the bottom
Eddie: Well smarter people than I, know the exact answer to that. But my hunch is it's only getting worse.
Jack: Well. I think that's a good place to leave our audience with some deep thoughts and some profound feelings. This has been one of my favorite conversations, Eddie. It really has, your again, your passion is so obvious and that's what makes my job so much fun as I get to talk to people like this who care so deeply and are putting their, their feelings, their emotions about a situation to work to make the world a better place. Any last words for us before we sign off?
Eddie: Sure. My goal and it hopefully we'll look back on this and say, I got this accomplished in my life. I want a safe harbor for affordable housing, for existing properties in the Opportunity Zone. There are so many properties that are not going to get rehab because of this a hundred percent of cap x rule. And if we can get a safe harbor and make that 10 or 20%, that only need to be rehabbed based on your basis, I think that will go a long way to what we call taking blight and making light in these communities. And stop not only building new, which could potentially displace people, right? But if we can make the preservation of affordable housing in the zones work, it could be absolutely wonderful for all parties involved. So that's my goal.
Jack: So, this is where I would normally sign off, but that's a deep response there. If folks want to get more involved with making a difference at that level. How do you suggest they act? What's the next thing to do?
Eddie: Well, not only email us at alliancestrategic.com and join our efforts and we'd love to have you invest with us, but really send letters to your congress people. I know people say that, but we really need to pepper these politicians with “do the right thing and don't worry about votes.” Just do the right thing and the votes will follow. And there's an organization called eig.org, the premier. You know, John La Tierra is the premier champion of this kind of stuff and I'm working with them to try to get the safe harbor done. So if people want to send an email to EIG or send it to your congressperson or all of the above, I guess that it's the best they can. That's good.
Jack: And I will remind our listeners that all the contact information, the things that Eddie has talked about here will be available in printed version at our podcast website. Well, Eddie, this has been a terrific conversation. I am so appreciative that I've had the opportunity to meet you and I hope to stay in contact. on behalf of the OZExpo Podcast, I am Jack Heald. Thanks for listening and we will talk to you next time.Announcer: This podcast is for informational purposes only and does not constitute legal tax or investment advice. For specific recommendations, please consult with your financial, legal, or tax professional.
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