DC Developer Bo Menkiti On His Neighborhood Development Philosophy
Real estate executive sees potential in workforce housing and opportunity zones in the nation’s capital as well as just outside of Boston.
Bo Menkiti, founder and CEO of Washington, D.C.-based Menkiti Group, credits much of his success as a commercial real estate developer to his days as a two-sport college athlete at Harvard University.
Menkiti, who played hockey and baseball for the Ivy League school in the late 1990s, said life lessons from both sports propelled his work ethic into the business world. He was part of a Harvard baseball team that reached three straight NCAA Tournaments, but said his experience on the ice as a goaltender for the The Harvard Crimson served as especially valuable preparation for life as a real estate executive.
“Being a goalie in hockey is similar to leading a business in that you’re the last line of defense, but a goalie can never win the game,” Menkiti said. “You’re in this position where you can try and back people up and make sure everybody’s okay, but, ultimately, you’re counting on your team to win the day.”
The Menkiti Group has developed more than 2 million square feet and manages 1.5 million square feet of assets in D.C. and Worcester, Mass. The firm has invested more than $225 million, including $185 million in emerging neighborhoods throughout the nation’s capital, according to the company.
Some of Menkiti’s chief projects include the 788,000-square-foot Bond Bread Factory development near Howard University and the two-phase MLK Gateway designed to revitalize D.C’s Anacostia neighborhood.
Menkiti, a Somerville, Mass., native, spoke to Commercial Observer about the impetus behind launching his real estate firm, efforts to strengthen underserved neighborhoods, and the role opportunity zone equity can play in financing future developments.
His comments have been edited for clarity and length.
Commercial Observer: What was the impetus behind founding your own firm and have you always had that entrepreneurial spirit?
Bo Menkiti: I think I always had an entrepreneurial spirit. In college I ran a cleaning business and that’s how I paid my way through college. I was a bartender, and then I ran a nonprofit for a summer program for college students in these housing developments in Boston and this is where I first really saw the power of the built environment and the way people live.
I hired 15 college students to go live in the Mission Main housing development in Boston and run a summer program for kids. At that time this housing development was like 30 percent occupied and it was totally deteriorating. It was the first time experiencing how challenging the physical space was.
You previously told CO that your turn to real estate came when you were working at the nonprofit College Summit, and your elderly neighbor in Columbia Heights died. How did that change things for you?
It got me thinking that I thought I was changing the world and I wasn’t even present for the person on the other side of my little flimsy row house wall.
I started looking around, saying, “Well, what kind of impact could you have in the place where you’re living? What could this neighborhood use?” I said, “There’s a bunch of vacant houses and I should fix them up.” I didn’t know anything about real estate and I said, “I’m going to get a real estate license,” because somehow in my mind that was going to teach you how to fix houses, which it doesn’t [laughs].
I ended up selling six houses during this really brief time and I said, “Wow, you could make a lot of money from brokerage and you could take that cash and reinvest it in these neighborhoods and you can make a difference.” And so that’s kind of how it started with this idea that you could connect the activity of brokerage and the cash generation of that with investing in and making an impact in neighborhoods.
Certainly one project that is going to have a major impact in a largely underserved area of D.C. is your MLK Gateway project, for which you just launched the second phase. Speak about the significance of this development and also the role that the public sector has played in bringing it to fruition.
Our macro investment philosophy and strategy has been that you want to focus on cities that have strong macroeconomic and demographic fundamentals and D.C. obviously does. Within those cities you want to look for neighborhoods that are on the other side of perception, on the other side of some metaphorical dividing line.
And, if you think about historically in this country, the way infrastructure and physical space has been used, it oftentimes divides people, a lot of times based on race or class. In this case, with D.C., we’ve always had east of the Anacostia River, and for the longest time we’ve had concentrated poverty and lack of economic opportunities.
Anacostia is a neighborhood that had really come to represent everything that was forgotten east of the river and people that had not been invested in. This opportunity to create both a physical gateway and a mental gateway to this neighborhood was really important.
Tell me more about how the project came to be.
I met a guy named Antoine Ford, who owned a cybersecurity company called Enlightened, and he had actually grown up in Carver Terrace, a housing project in D.C. and had gone on to have a very, very successful career. We were talking one night and he was telling me how he wants to make a difference in the city. And I said, “Well, you know, if you really care about that why don’t you move from your downtown on Connecticut and K Street and move your offices to Anacostia and make a difference?” I got him looped into the project and put together a vision for MLK Gateway I. Then we were able to acquire some adjacent properties and some things across the street, and that gave us the opportunity for MLK II.
MLK I has a new headquarters for Enlightened. The second phase of it is going to have the new headquarters for the D.C. Department of Housing and Community Development. The mayor has had a very intentional strategy of locating some of the agencies east of the river as economic drivers and that’s going to be a big piece of the second phase, which is under construction. We also acquired a small strip center near it, and put a new barbecue restaurant in there and a dental clinic; and have built something called the Anacostia House, which will be launching soon and is a small, nonprofit and small business kind of incubator space that was built all by people in the community.
You used some opportunity zone equity for this project. Is this a tool you think that can be viable for commercial real estate going forward?
The opportunity zone program has often been used for its tax advantages, but it provides a tremendous opportunity to focus capital on areas and on projects that might not normally be focused on. Both MLK I and MLK II have extremely complex financing. There are at least four layers in the capital stack. They have new market tax credits. There’s opportunity zone equity. There’s this neighborhood prosperity fund, which is basically a grant program from the district for some of the retail tenants, and then there’s traditional debt.
In this case, opportunity zone equity was able to play a really catalytic role in filling a gap and ensuring that over time you could get private capital. MLK I was one of the first projects in the country to use new market tax credits and opportunity zones and municipal funding. I think it really can be a demonstration of the potential of how the opportunity zone program can be used in highly impactful projects. And, for MLK II, leveraging the district lease as a catalyst opportunity and equity was really helpful. There are also new market tax credits in that deal.
These are very challenging deals to put together. There’s a lot more opportunity zone equity in the second phase of the project because you can then leverage the district lease to create this longer-term vision of the return for your investors.
Another big project of yours is the Bond Bread Factory development near Howard University. Talk about the importance of this project and its potential for linking the neighborhood more to a very vibrant university.
Bond Bread is just a really cool project because it has such a connection to history. Without spending half your time on our history lesson, it’s in the Shaw neighborhood, which was named after Colonel Robert Gould Shaw, who was the commander of the 54th Massachusetts, which was the first African-American Army regiment.
If you think about the history of U Street, when the district implemented racial codes and sundown laws in the Jim Crow area, they forced all the Black businesses to locate around Howard University because it was the only safe place for them to locate. It was the relocation of middle-class African-American people and businesses to U Street that created the conditions and the vibrant culture that later created U Street, sort of this Black Broadway. It was where Duke Ellington and jazz and Howard Theater sort of came from. And so this was an example in history of Howard University playing an integral role in the surroundings to facilitate how things develop.
Over the past few years, U Street has become one of the hottest young, professional, yuppie places to live. So you have this really interesting intersection of this very old, local neighborhood, a starkly Black institution, and a very highly gentrifying community all coming together.
Bringing together all those people and creating a place where they can interact and engage one another and enjoy what’s a great neighborhood becomes really a great opportunity and challenge of a project like this. So we’re really honored that Howard selected us to take the lead on this project.
You’re involved with a number of neighborhood redevelopment projects in the D.C. region. For these developments to be successful, how important is it for local leaders to try and boost the region’s affordable housing stock?
From a policy standpoint the City Council has been very aggressive, as has our mayor in trying to find ways to fund affordable housing. We know we have a significant affordable housing crisis in our city, but the challenge is that a lot of the policy is really focused at the bottom level of the housing spectrum.
I always say that D.C. has ended up with a barbell housing market. You can live in D.C if you are qualified for varying deeply affordable housing, or if you’re really, really wealthy; and that’s actually not good for the long-term health of the city. In the name of preventing people from being displaced, we basically displaced all the working people and the middle class from D.C.
I think there’s a huge opportunity in our region for workforce housing and this will be people making 60 percent to 120 percent of area median income. That’s sort of been overlooked, and things have been put in place to kind of disincentivize the creation of that type of housing.
Let’s turn from D.C. to another city you’re very active in, Worcester, Mass. First off, how did you first start getting involved with Worcester and also speak about some of the real estate opportunities there, given its close proximity to Boston while also having a big college presence?
Worcester has such potential, but it’s always been kind of like the ugly stepchild of Boston and so it has this gritty, sort of like, pride to it that is really cool.
We got involved with Worcester because my late father bought a building there and so I came up there and got to know the people in Worcester. Later, the economic development team from Worcester came to D.C. for a conference and we showed them some stuff we were doing and they said, “Wow, this is what we need.” They had long had a plan for this neighborhood called the theater district, the area around Hanover Theatre, which is one of the top theaters in America. It has a quarter of a million people go through it every year. It’s lit 200 nights a year. We bought a half-million square feet right around this little area, so we’ve been very dedicated to that.
We believe that the macroeconomic conditions and demographic conditions in Worcester are very strong and that there are these pockets of neighborhoods where thoughtful and focused investment in the capital and good development can create a sense of place and space that can empower and build off the great things that Worcester has.
Lastly, how do you see the commercial real estate environment shaping up in 2022 and where are the biggest opportunities?
Looking at 2022, it’s going to be an interesting time. You’ll start to see further evolution around how the pandemic has affected the different elements of our industry. I think we’re going to see increasing calls for diversity and youth in the industry and how it evolves.
And it’s very flush right now; there’s a lot of capital seeking deals, but it’s in very structured ways. I think what you’re seeing is the traditional institutional money looking for ways that it can morph and it can reach different pockets. And the reality is that there’s value in a lot of these neighborhoods that are right under our noses in our major cities. If we can figure out how to unlock that value, that becomes a priority from a financial standpoint for investors, but also on a social standpoint for communities and for industry, and that’s where we like to play.
Andrew Coen can be reached at email@example.com.