David Dishy Pushes Affordable Housing in a New Direction With LMXD

Commercial Observer sat down with Dishy in March to discuss what he’s working on, what distinguishes LMXD, and how high interest rates and the absence of New York state’s 421a development incentive (which expired last June) is affecting L+M’s ability to build.

The interview has been edited for length and clarity.

Commercial Observer: Tell me about what you’re doing in your new role.
David Dishy: LMXD is continuing a fairly strong tradition in the L+M universe of mixed-income, mixed-use projects. We’ve got Essex Crossing [on the Lower East Side] as an example that comes up a lot as a classic sort of mixed-income, affordable and market-rate, mixed-use. And that’s something we’re doing in New York and probably doing in four or five other cities now.

So, for example, Goldman Sachs Urban Investment Group, we’ve done a lot with them over the years, where we’re building projects, making investments and sort of combining kind of traditional real estate investment objectives with the affordable housing DNA of L+M. And combining those two things into what’s now often referred to as social impact investment.

But it’s really about mixed communities in an area that supports market investment as well as affordable housing. Part of the beauty of it is you’re able to create affordable units in areas that are also sort of market viable, which is good for the world in terms of the general benefits of mixed-income communities. That involves complicated housing finance, programmatic stuff that’s historically happened in New York a fair amount and increasingly in other markets, both in terms of financial structure and also open-mindedness to the prospect of having mixed-
income projects and mixed-income communities.

So is LMXD trying to access other kinds of private capital?

In terms of LMXD versus L+M, the basic distinction is projects that involve investment — basically real estate equity investment. You’re an investor, you’re putting money in; like you expected return on that money, kind of traditional private market investment, social impact, whatever it may be. And then you’re putting it into a project that could be an all-market, pure, private, non-affordable project. What we’re trying to do is take those projects and create mixed-income opportunities within those projects.

In the traditional affordable space, right, there’s no investment. There’s not — quote, unquote — private investment, right? The vast majority of L+M affordable projects are subsidized capital subsidy, 100 percent affordable projects, and they’re not investment-driven in the traditional real estate sense. And, so, when you hear about social impact stuff, or stuff that, “Oh, Alicia’s doing,” that’s social impact capital saying “OK, I want to invest in a project in the traditional sense, but also achieve interesting mixed-use, mixed-income objectives.”

On that note, why don’t you tell me a little bit about what sort of projects LMXD is working on?

Right now, we’ve got a bunch of stuff going on. I’ll give you different categories: the stuff that’s in planning; stuff that’s in construction right now. We’ve got probably like 1,600 units.

We are partners on a project in Inwood with Alicia Glen and her team and Taconic. We are partners on a project in Long Island City, the Jasper, mixed-income. We are building the National Black Theatre on 125th and Fifth. Those are sort of ongoing activities.

We are finishing up the Stella in New Rochelle. We are basically in about six cities. We have stuff in New Haven, New Rochelle, multiple boroughs in New York, Newark, Washington, D.C. And we’re actually now just really focusing on starting some stuff in Philadelphia, which is exciting. It’s a former public housing authority site in Philadelphia that’ll be a mixed-income project. We’re also partners with M Squared [Alicia Glen’s firm] on that. And so those things are under construction. We are kind of teeing up for the next round of stuff that you might have looked at in the past — Newark Museum of Art in Newark, New Jersey Performing Arts Center.

We just opened an Urby project in Newark, with Rutgers, which is beautiful and is in lease-up now. On the complete other side of the universe, we’re partners with Lendlease at something called Claremont Hall, which is at the Union Theological Seminary. It’s a high-end condo project on 120th street, but it’s also a new academic space and faculty housing.

They’re all larger-scale stuff — they often involve a cultural piece, or a civic piece. Other than just creating residences and homes — which are incredibly important — the DNA of LMXD is about trying to create a sense of place and create a product, create a project, that people in the neighborhood feel good and excited about and are supportive of, and, in some respects, sort of enhancing the quality of life. So a cultural anchor is a great part of that, right? The People’s Theatre Project, for example, is going to be in our project up in Inwood. That’s an incredible institution that’s going to be sort of a really beloved and important thing. Or the National Black Theatre or Newark Museum.

What other specific projects are you working on?
In New Haven, we’re working north of where Yale is, in what used to be called Science Park, and that’s going to be a mixed-income, multi-phase project with [Twining Properties’] Alex Twining. We’ve got a life science building there, and we’re doing residential stuff. We’re working with the State of Connecticut and New Haven in building a new park. Part of our issue is if you have enough scale it gives you the opportunity to sort of make valuable civic contributions.

Aren’t you doing a big project in Downtown New Rochelle?
Yeah, we built something called the Stella. We have two projects in New Rochelle that have been incredibly well received. It’s been really nice and, I think, to New Rochelle’s credit, they set out to attract investment, attract new housing — kind of build it on the strength of the downtown that is incredibly well transit-served, beautiful, near the water, all those things. And it’s been really successful. I mean, there’s been several thousand units in development, and there’s more going on. We have another project, 25 Maple, that’s fully leased at this point. And I think people love it, and we’re looking at the next phase of Stella, which includes building Anderson Park with the city. We’re trying to do some programming — movies on the weekends and activity connected to downtown New Rochelle’s … I don’t want to say “renaissance” because it’s overused.

I feel like rising interest rates have put such a damper on both investment sales and people’s ability to start and move forward with construction. What have the implications been for LMXD?
The implications are literally every day is generally kind of a day of like, “What’s the bad news today?” I mean, that’s how our days generally run right now. Part of the benefit realistically of having L+M as both a builder and as a developer is a lot of that stress is also connected to sort of supply chain issues and cost escalations. Therefore, having L+M that’s thinking through how to build most cost effectively and in a thoughtful way in conjunction with the development is part of our special sauce. We’re able to navigate that, hopefully, in a way that’s good for our investors and good for our projects, and kind of can help us get stuff built in a way that, if you don’t have expertise in-house, you’re a little bit more anxious about making that jump because there’s so much uncertainty right now on the interest rate and construction sides.

As a follow-up to the interest rate question, are you concerned about the 421a expiration and your ability to do more projects in New York City, at least in the near future? Or do you have a sense that it’s going to come back?
It’s particularly a problem if you believe in the value of mixed-income communities, meaning bringing affordable into areas that are otherwise market-oriented areas, sort of combining that outcome, which is sort of what we’re about. Not having 421a available essentially just ends that conversation. People will argue about the efficiency of affordability, production, and all sorts of things around the edges. But the fundamental fact that you’ve taken away the program that was most successful in creating mixed-income projects, in mixed neighborhoods, and that’s not feasible right now, is obviously a problem.

At some point, obviously, we hope that something will come along to replace it. Until that happens, you’re living right now on the fumes of the wave of activity, like the ones I was talking about, that got in the ground before 421a expired. So people are like, “Oh, it looks like a lot of construction.” It doesn’t feel apparent that the demise of the program, the expiration of the program, is that problematic because you see a lot of cranes. But it is a problem because starting now, absent the extension or reissuance of the program, you’ve got a problem.

It’s why we’re so active in other cities. You look across the pipeline, we have several thousand units in our pipeline, probably 4,000 or 5,000 units. A lot of that is outside of New York right now in part because we don’t have a viable next pipeline of New York City-based mixed-income projects, which is not great. Obviously, selfishly not great for us, but, really, more importantly, I think, for the city as a public policy matter. It’s a challenge. There’s a lot going on right now in Albany, but I think folks are coming to realize that fostering investment, mixed development and supply generation is certainly an important part of the affordability equation. It’s not the only part of it, but it’s an important part of it.