Jonathan F.P.  Rose, Founder & President of Jonathan Rose Companies and Scott J. Alter, Principal & Co-Founder of Standard Communities

[Music] Join Willie Walker, Walker & Dunlopps Chairman and CEO as we bring you fresh perspectives about leadership, business, the economy and commercial real estate. Willie hosts a diverse network of leaders as they share wisdom that cuts across industry lines. His guests are experts in their fields. From leading economists and CEOs to Harvard and Yale professors and everything in between, our one goal is simple, providing you with unique insights, unparalleled data and real-time market analyses. Welcome everyone to what I use a very very special both discussion as well as corporate webcast. Jonathan Rhodes, Scott Alter. I can call Jonathan a luminary in the real estate and affordable housing space. Scott you're too young for me to call you a luminary, but you're you're you're quickly becoming a titan. So I guess that's I've got a luminary and a titan with me on stage. Let me give a little bit of a background on how this all came about and then we'll dive into the discussion. So Nathan Taft was someone that many people in this room knew and considered to be not only one of the most talented but one of the most I would call gifted people in our industry as it relates to a combination of personality and smarts and capability and Nathan was somebody who I just super super enjoyed spending time with and as everyone in this room knows and many watching this on the Walker webcast know Nathan tragically died earlier this year and to commemorate Nathan. Jonathan and Scott got together and said let's create the Nathan Taft award to remember him and to celebrate someone in the affordable housing industry who embodies the spirit of Nathan and the way that Nathan went about doing what he did and the moment I heard them announce that I immediately reached out to the two of them and said let's do something in Chicago at the conference which sheds light on this great gift, this great award on Nathan and what he was to the industry and let's also then have a conversation on affordable housing and where the industry sits today and what these two incredibly talented investors and owners and developers of properties see going on. So to that Jonathan and to Scott thank you both. Jonathan I can start with you because Nathan worked with you talk for a moment about Nathan and then this award and what you and Scott were hopeful in achieving by establishing it. So thank you and thank you for hosting this. As we all know Nathan was this incredibly compassionate mission focused purposeful person who was in this industry to make the award a better place and he was also really good as you said he was a master what he did at the same time and I really loved the affordable housing industry and I and those qualities of people who there are some people who were just in a further money but there are many many people who are in it to make the world a better place through through business through social entrepreneurship and we felt that Nathan really exemplified that but he he also exemplified perfect trust he was completely honest there was not a bit of deceit in him and he had a way of working which built in amazing relationships because people knew they could just trust him and that he was there for purpose and we thought those qualities which are within this industry should be we should shine a light on them and so it was really Scott who came up with the idea of the award and I he's a he was a moment one of the interesting things about it that I find to be so beautiful is that Nathan was a friend but he was also a competitor and so you know the idea that you came up with the idea for this being someone who was a long standing friend but at the end of the day like if I jumped out and decided to create an award against you know for for a seal of one of my competitor firms that seems like quite something so well first of all William really honored and thrilled to be here with you today it's I you are a friend and a mentor and a great great advocate for housing real estate and finance and so I'm thrilled to be here on the Walker webcast Nathan Nathan's memorial which was in Columbus Circle this beautiful room really impacted me and certainly he impacted me for when I first met him I think somewhere in the mountains in Montana but but also just over the years of spending time with him just he was clearly just a great person and that started there and then when that's tragedy happened it really directly impacted me for so many reasons just we all work so hard we put in so many hours and we are away from our families for some of those things and we do want to do the right thing we really do want to help the residents in our communities we want to create a better place for the communities that we that we own and operate but also it is a sacrifice in ways and so you know to see the way his family responded in the memorial and what they did just what they talked about me Nathan was part of an amazing family and I think that it was just so impactful to me that I just they thought it was really important to commemorate him and also my mom passed away at a young macho young age and any chance I get to hear her about her her voice or her impact on the world is just so vital for me and makes me feel good and sad but it makes me feel good and so I really wanted this award to be something that's for his family it's not even about the industry man I'm so glad it can be to give you know to give to raise up people who are mentors or leaders who have great character but it's also for his family and so part of this award is that every year we are going to send a letter to his family to his kids to his wife and make sure they know that he made an impact in the time he was away from them it's really quite something and you are announcing the initial recipient of it today here yes yes and and what's that is it just the two of you who sit around and say this or people applying for it how are you going to go about just finding who wins this award on an annual basis we really wanted it to be independent I think you know we as you said competitors, friends developers we wanted this to be an independent award so we really gave that provenance to A.J.F. to them to decide who's going to be we certainly together set out the criteria of who should be the award at E and who who exemplifies all the great characteristics that Nathan had but we are independent from that so we really wanted to be something specific to what we set out so they selected the winner it's great hearing Scott talk about Nathan and the loss of your mom and wanting to remember those that have an impact on our lives Jonathan before we came up on stage we were talking about the fact that both of us have had the honor and the privilege of meeting the Dalai Lama and then you mentioned to me as we were walking up here that you're focused on trying to bring spiritual education to the to the business world and to the MBA world first of all are you going to go back and focus on bringing that to Yale and Penn two places where you went to school or you're going to share with some other institutions where Scott and I might have gone to school and what's the intent there behind teaching spirituality at the MBA level I did put a plug in for Cornell you know Scott and I just as a quick aside we did we did a wonderful wonderful thing at Cornell at their annual real estate conference in New York what was it three four weeks ago and Scott got to turn the tables on me and one of the things that I really loved about that was that he knew he was going to be on this stage with me and that I could get back at him if he asked me anything and that it didn't go well so I now got him on the other end of the receiving end for you don't fight Jonathan go ahead great so by the way this is part of a whole larger body of work that I do outside of the real estate is although some ways intersects 25 years ago my wife and I were given a monastery in our north of New York City in garrison New York and we created something called the garrison institute that doesn't a lot and our mission came was given to us by his Holendus the Dalai Lomedy came three times to hold his own private events there so this has come out of a broader base of work the current economic system is producing very good results for a few but not very good results for the world so we have climate change and biodiversity loss income inequality racism still persists and and many other issues in which this current system is exacerbating rather than helping solve business can be an amazing force for good and this industry is really exemplifies that but that's not always what is taught in business school and business school and if you go to pre-1980 the Many businesses felt a deep sense of multi-stakeholder responsibility to their communities, to their employees, and the business schools were the force that really promoted the idea of a shareholder, primacy that shareholders are the only thing that mattered. And that became the main curriculum in many business schools in the '80s and '90s. And so it struck us that if we're going to create a more compassionate version of economics and begin to solve some of these great issues, the business schools are the leverage point for this transformation. It happens that since 2005, I've been working with this incredible professor at the Harvard Business School. Harvard Business School had a relationship with it because it's written many case studies on our work and I teach a class there every year. Anyway, Rebecca Henderson, this extraordinary professor, has herself come to-- she's been a leading thinker about purpose and business. I also have an affiliation with the Syed Business School at Oxford, which also has been through the Skoll Center of Social Entrepreneurship they've been doing deep work on the sense of purpose. Out of what we discovered is that there are many, many professors at business schools all over the world who are trying to integrate a deeper sense of purpose, spiritual practices into opening up the minds of their students to a more compassionate way of working and then combining that with a rigorous education. All of us need people who can do performance, handle kind of complex financing, keep projects on time on budget. Like there are real hard skills we need in the world, but those also need to be matched with extraordinary soft skills and a deep sense of relationality and love and compassion for the world. And if we can put those two things together, then we could really unleash businesses of force for good to help solve these issues. So the first thing we've been doing is actually mapping who is doing this work around the world. We're finding that in many business schools, there are amazing professors who seek this, but feel like they're alone. So the first thing we're doing is building a network of mutual support amongst them. Then we'll see what happens from there. Does-- as I hear you talk about that Jonathan, it makes me think about there seems to be a real bifurcation in the world we live in today between sort of the business side of things and the social side of things. And very few have been able to sort of marry those two things together the way that you and Scott have in your work. I know as I listen to you sort of talk about taking over the monastery, working with the Dalai Lama. A lot of viewers, a lot of listeners are sort of like, oh, he's like some softy who thinks about all this social importance of this stuff and not the incredibly capable person you are as a business person that has been so successful at playing on both sides of the aisle. What's the key to being able to straddle those two? Because our world seems to be trying to bifurcate those two and push them aside. I want to come to you in a second on that, Scott, but how do you meld those two together and hold them together the way that you have at the Jonathan Rose companies? So first of all, it's an illusion that they're separate. They are integrated. So we have one of our values that Jonathan Rose companies is excellence with kindness. I mean, we think that excellence means you got to be tough and kindness means you got to be soft. But to me, kindness means that you're purposed the reason why you're being excellent, the reason why you're being disciplined, the reason why you're doing the work is to make the world a better place. But if you want to do the work at scale, we need to track capital, all kinds of capital. And to track the capital, you've got to pay it back or pay return. I mean, so do you think the new mayor of New York understands that? You know, I'm going to get to that in a minute. But here's the key. The key is that deep spiritual practice actually helps people become more relational. It actually helps people see reality more clearly beyond their biases and premises that they bring to things. These are skills that actually should help make us be better at using business to make the world a better place. I don't see them as in conflict at all. I see them as integrated. Scott. I think that at standard community-- and I think Walker and Dome Up is well. And you and I have talked about this at length. It is so important to be a company that is relational. I mean, we are transactional businesses. We have to operate in transactions. That's what we do. That's how we make money. But I think if we're good companies, we are relational. We are friendly. We are kind. And actually, our core values are sweat the details. We move with urgency and act with kindness. And we talk a lot about-- it's really important that we are a company that's relational. But also, at end, also, that relational integration allows for a sense of purpose, too. And we are lucky in our industry. We really can do good things, make money, provide investors, return, and also provide a sense of purpose for our team, for the people that we work with day to day, perhaps out of our team. And in turn, potentially, if we're really good for the residents and really be able to show that what we're doing is maybe making the residents live just a little bit better. And that is a sense of purpose that really allows for happiness. I think that's like a core pillar. And so all of it ties together. Yeah. So can we get to your question? Yeah. Maybe. So what I appreciate about him is, I think he's got a deep sense of social mission. I wish, by the way, he had more of environmental mission, too. I think those things are deeply integrated. But he has a deep sense of social mission and that he really wants to serve all of New York and make it a better place. There are amazing models for how to do this that I'm not sure he's aware of that I'd love to help him find. And the rest we're going to see. So interestingly, Enterprise just put out a report that in New York City, over 50% of the tax credit projects currently lose money. That's going to destroy particularly the smaller owners and the smaller not-for-profits. Enterprise West Coast put out the same report in San Francisco, also 50% more than 50% of the tax credit deals lose money. So if he really wants to serve low income and working class people and he really wants to help solve their problems, he has to walk up to the underlying conditions as to why these projects are losing money and trying to solve those. And I hope that he will have the wisdom to do that. Does he understand the affordable housing industry well enough and how the sort of sausage gets made or is he going to bring people in that will allow him to get to the root cause? Because clearly, I mean, it's one thing to talk about rent control. It's another thing to really understand where the capital comes from, how you make money, what you need to do as it relates to housing assistance, et cetera. I mean, does he understand housing deeply enough? I've never personally met him. Although I have actually created a 10-point plan for what I feel New York City should do going forward. And I've reached out to him. I've not heard back. I know any other people in the affordable housing industry, like people like Ron Molls and stuff was actually met with him. Yeah. And my sense is that not only does he not understand this industry, but most people don't know that. I'm not sure many politicians understand this industry. He appears to be making good appointments. And the key is my sense is there'll be a year of learning and that I hope he's a good learner. Scott? I think it's pretty clear he has no idea what he's going on within affordable housing. And I think that he, even further, I think the things that he talks about, he really doesn't-- he can't control. The state is the governor of a lot of that, the policy that is creating the problems we have in the city. And he does have seat legislature experience. But when you look at what he wants to do, it really goes in the face of what he says is going to be better for the people. So both of you invest across the country. Are there certain states or cities that really get this and others that don't, that you're right now saying, I want to put additional dollars in you and I were just talking about the fact of Denver. And Mike Johnson is the mayor of Denver versus San Francisco or Tucson, Arizona. You both are across the country and both have the opportunity to invest capital with both the mission behind it. By the end of the day for the returns that you're trying to get done, you just closed your most recent fund, your sixth fund raised over $600 million in that fund, have incredible investors into that fund. If you had to sit there and say, here are the states at the top of the list or the cities at the top of the list and those at the bottom, is it related to Rio or footprint today? Can you give us some insight? into that Jonathan. So first of all, we continually do this assessment and it's a multifactor assessment. So number one, I actually begin with a climate assessment because as you all know, insurance is a big cost and availability of insurance is a big cost and there are places where it's becoming extremely difficult to get insurance now. Half of insurance is about climate risk and the other half is about liability risk. And so we look at both those sides and there are states that are better in locations within states that are better and worse for climate and liability risk. We then look at government policies so rent control policies. There's a series of things which can either support affordable housing. For example, California has a wonderful real estate tax abatement for housing that's affordable to less than 80% AMI. We would love to invest in Nashville and in this and Chattanooga. There's some great cities in Tennessee but that's state for business real estate tax abatement. So we again then look for a range of public policies, of the action policies, rent control policies, tax abatement policies. Our company is very green and we spend a lot of effort reducing the climate impacts of our projects. We're looking for local or utility programs that will support those things. We deep we believe in being areas with job growth because essentially all of our work is related to area meeting income and we want to be in places where we're rising area meeting income. So we're trying to project where job growth may go. So we're looking at all those factors to try and figure out where to buy. Currently in 16 states and but the proportion that we're in those varies. So for example in New York City, we still think it makes sense to do project based section eight deals there but I'm not sure it makes sense right now to be doing tax credit deals. So the hold on for a second there's got I want to come to you but then jump down there just Jonathan on you said you want growth and a lot of this. So let's try and bifurcate between urban gateway cities and Sunbelt. Because Sunbelt's been where all the growth has been but the tax policies as you just pointed out don't necessary play to your favor. But they've got the growth drivers behind them versus some of the urban gateway cities that don't quite have the growth dynamics to them but they've got the tax policy that plays to your business strategy. How do you bifurcate between those two? So I have some other criteria which is I've been avoiding this south. We were quite active for a while in Santa Fe and Albuquerque we're getting out of those markets but we're a long range investors and I just don't understand why people want to be in cities where there's over 100 degrees of heat, yeah, 100 days a year of over 100 degrees of heat of which is a good chunk of the southwest. I understand those cities are growing in that works but that ultimately end the water crisis that is hitting those areas just doesn't quite work for me. So you look at a place more like the Carolina's where I think you're seeing the growth and some positive. The dynamics for those places seem to be. By the way we've not been we've only done one deal in North Carolina and I'd like to do a lot more but those feel like places that with the factors could geel together. So have you purposely avoided places like Phoenix? I mean you just said you're getting out of it. So never invested in Phoenix. One of the things by the way we shop our insurance globally. The Lloyd's market as well as in the United States and when I meet in Churras and say we've never invested in Texas and Florida they go you guys are smart. There's another reason why I've never invested in Texas and Florida. I've been in this industry for a long time and every time there's been a major recession in the past I've seen it's been the New Yorkers who've been holding the bags in Texas. The Texas of Florida did very well selling to New Yorkers and so they're very they've been in the past cyclical markets and I have avoid I try to avoid more cyclical markets. The interesting only because I mean you think about I remember sitting with David Nethercut when he was running EQR and we were talking about Dallas and the other cut said to me I don't like Dallas because there's just kind of urban sprawl everywhere and therefore there's a single family home that competes with an apartment building every other day and so we've sort of stayed away from Dallas and then EQR saw that Dallas had growth dynamics to it that you just couldn't avoid any longer and now EQR is one of the largest donors in Dallas that there is and is bought up a whole ton. Interesting that you have I would put forth the discipline but then also the optionality to look at other markets rather than if you will chasing that demand driver that's in those markets because the demand driver in those markets is unavoidable. And I love Austin but look what happened to Austin. I mean it's 27% vacancy right now so the and there's more than enough I mean if people want to invest in Phoenix and Texas that they should and I bet you they're going to do great and if we choose not to go to a market doesn't mean it's the wrong move it may just be we have to make some choices. So Sky you and Jeff have been buying some pretty sizeable portfolios where you're sort of rather than if you will rifle shooting you're kind of taking a shotgun out and spreading the pattern a little bit more and therefore I would assume a little bit I don't want to say less discerning because you're clearly discerning about where you go but you're buying the portfolios rather than saying I like you know I like well Charlotte over Santa Fe how are you and Jeff looking at that as you're looking at the portfolios you're buying and where you want to be and where you don't want to be. So I mean the affordable housing industry that we are in now the tax credit world the LI Tech World it's it's about 40 years old right 1986 was the tax reform act and that is really when kicked it off and what we're seeing and the reason we're buying portfolios which really are not necessarily that we are specifically focused on the location of them and certainly want to understand that but I think in the situation where we are in there we're afforded 40 years into an industry that when I started almost 20 years ago and Jeff and I started it was really a little sub sector of multi-family just like sort of even student housing or manufactured housing and now they're their own industries I mean the AHF we're all here now it's a big it's it's own affordable housing is its own industry it's not really a sub sector multi-family and so as the as the industry started to mature and the early adopters of the tax credit are generations and started to generation out and without the right C session plans they are willing to sort of sell their portfolios and we see a big opportunity in in buying portfolios because because there's that sort of coming together and so but I do I mean it's specifically on markets I do agree that the carliners are a market we've we've actually invested heavily in Florida actually has been a market we've invested heavily in and we continue to believe in California and some of the gay wee cities but what you're right I mean I think we are sort of rifle shotting and saying as a whole we need more affordable housing and we need to be able to do you know to to bring more capital to the industry so those are things we look at and and as you think about the portfolios that standard is buying beyond the structuring of if you will buying well where are you differentiating on the value you're providing once you buy these assets well I think we look at we look at a few things I mean we're buying properties we're paying portfolios that are fee simple general partnership interests really in a way there's some like heavily structured products that we're buying in and so we're we also are looking very much at the growth dynamics in the markets that were the portfolios that we're buying and and we're just looking in one by one of you know what is what are the opportunities so we still we still think that there's a big way that the portfolios can be a growth driver of our business. Jonathan Scott mentioned the tax reform act of 86 you started in 89 the Jonathan Rose companies you were clearly one of the pioneers in saying this is an area that needs focus needs a if you will a differentiated product and as you said previously you're in 16 states today are we doing enough do you think about light tech light tech is the federal government saying that they'll forego 12 to 14 billion dollars of tax revenue a year in exchange for somewhere between 70 and 90 thousand units so if you go back to 86 it's a total of I think 3.6 million units have been developed due to light tech over that 40 year period we're doing enough not absolutely not enough and by the way it not enough in the affordable world we're not doing enough in the first time home buyer world we're not doing enough we're there are many many sectors in which the housing world is behind the demographic demand and and just the life cycle demand in the United States interestingly and the good news is that as you know there is tremendous bipartisan support for more housing and that every time. time that for example the project-based section 8 budget goes through the budget. For example, even in this current budget, it's got unanimity of complete, you know, the unanimous support from Democrats and Republicans as that 2026 bill moves through Congress. Where I think we're now lacking is innovative vision so that the local housing tax credit was conceived of by Jim Rouse and a few other people. Nobody thought of such a thing before. So we need now to think of a bunch of things that we haven't thought up before. They can dramatically scale up housing access in the United States. Like what? So there's a lot of work talking about zoning and obviously if we can unleash more zoning and more density, if you can build twice as much on a piece of land, we're going to get more housing product. So there's not one silver bullet, so. And are we increasingly acting more and more like Europe in the sense of saying, hey, we're rich. We like the way it's been in our ancestors' world. Let's not increase density. Let's hold on to things. I guess the issue is I hear this about zoning and I understand the point, but we as a society don't seem to want to make those changes. Well, interestingly for example, the City of Copenhagen, which was pretty down in the dumps 30 years ago, has done a whole bunch of urban renewal in a whole series of up zoning taking port areas and old industrial areas that are no longer used and significantly upzone them so that there's a whole lot more density there. They also have, by the way, I know the president has gotten a lot of grief about this idea of a 50 year self-amortizing loan. So in Denmark, one of the ways they fund affordable housing is they give these 2%, 50 to 75 years self-amortizing mortgages to not for profits to be able to build affordable housing. So there, I actually think a long-term amortization is a very good tool. If you can combine that with, so anyway, we need increased density and we just have to have the will to do that. We're seeing with the in-been movement, it's beginning to shift. We all know that it could take decades to get approval to build housing in San Francisco. We have a project in San Francisco that because of SB 35 and its affordable housing has a 90 day approval period and it's in a thriving prosperous community. So zoning is one area. Finance is an essential area that we have to solve and we can solve it. We can build a lot more housing with 2 or 3% money than we can with 6% money. And I think this is something where the federal government can step in and make these resources available. And then we have the cost of construction, which is another issue that we have to solve. There's tremendous benefit in manufacturing but we haven't really seen it on the cost side. On the part for a second, interest rates and the federal government can move interest rates because they're clearly trying to move the short end of the curve but we'll see how successful they are moving the long end of the curve which is really the rate that is important to the two of you. But as it relates to Fannie Freddy and HOD and their role in providing debt capital for affordable housing, is there anything more that you think they can be doing? Because I can list here a number of different things that they are both doing and that FHFA has Fannie and Freddy focused on from an affordability standpoint, HOD clearly with the default product and other things. Is there anything else as it relates to the application of it? Forget rates for a second but the application of it. Is there anything else that you think should happen? I can actually turn that back to you because you're the finance minister. Well, you know, I mean look, we clearly, we clearly, one of the things that I find about Fannie and Freddy up until now and the current director of FHFA seems to be trying to pull them off of that. But because they have their affordable housing goals, it's the one thing in conservatorship they know they have to go after every year. It's not necessarily revenue growth, it's not necessarily bottom line growth. There is a return hurdle that they have on their capital. But when they wake up on January 1st, the first thing they have to do is go do their affordable housing goals. And it's the one thing that has made it so that in past years, Fannie and Freddy on January 1st say, let's go hit that affordable housing goal and then we can look more broadly at the overall market what we're doing. And so if you have a brass in glass, non affordable product that needs to be financed on January 15th, good luck really, that you're not going to get great competitive pricing from Fannie or Freddy. And then as you move through the year, once they've gotten to their affordable housing goals, then they'll kind of rotate and say, okay, great, now we can do that brass in glass deal. They need to be looking at their annual lending, I think in a more holistic view. But that says to me that they think affordable out of the gates every single moment. So I'm not sure how much further out on that continuum they could get. Go ahead Scott. >> So I think there's a lot to be said. I mean, I can certainly talk about federal housing policy, but let's just stay on the debt financing. At standard, we are constantly accessing various financing structures that are not Fannie, Freddy or HUD. And I think one of the things that we're seeing more and more is insurance capital really marrying up well with affordable housing and the idea of reading a product. And so we've certainly access to the realization markets. We've used the public finance markets quite a bit over the years, in creating almost 3,000 units of middle income housing in California and working closely with California housing authorities. There is so much that you can do in affordable housing and I think doesn't get fully access. So the conventional Fannie, Freddy, HUD, great question. They are doing what they can do. I think they could actually work closely with insurance companies and that could really actually bring down the cost of capital additionally. So we are doing that without the help of Fannie, Freddy and HUD. And I think that there's opportunity there. The classic situation is affordable housing is really bond like, right? So you can just sort of place out the cash flows and try to figure out ways to finance it in more creative ways and that's really worked well for us. Have you, Jonathan, you mentioned construction loans. Obviously the HUD D4 product is a great product. But also, they're not doing enough of it. And the conventional market has been a challenging market to actually get construction loans from over the past couple of years as the banks have been dealing with exposure to that. Anything that Scott mentioned in life insurance companies is a great one. On the construction side of things, would you like to see Fannie and Freddy get into the construction lending space? Or would you like to see life insurance companies go backwards if you will in the stack or in the timing and say that they'll start putting out capital on construction loans? Number one, I'd take it all. Number two, in terms of the D4, you get a 90% non-recourse loan, a fantastic loan, but it takes forever. And so if everybody else can figure out how to lend in 30, 60 days, they should be able to really upgrade those systems so they can be able to get it done fast. That's number one. And number two, we have to solve the Davis-Bacon problem because it's just adding cost. And I believe in paying fair wages and there must be a way to ensure fair wages without Davis-Bacon. And so if HUD could process an issue alone in 30 or 60 days, a construct D4 and get rid of Davis-Bacon or have a different set of labor of the problem of Davis-Bacon is not just the cost. It's many, many contractors just don't want to be in the whole compliance regime. It's very, very burdensome, Davis-Bacon reporting, et cetera. And so if we could unleash that product with some modifications, and this probably is the administration that could do it. This is very clearly the administration that could do it. I purposely didn't jump in after that because I wanted to let that comment sit in about you saying we should do something about Davis-Bacon. Because I think that someone with your track records, someone with your focus on both making a difference in the communities as well as your environmental focus, and then saying, "But, Davis-Bacon is holding back more supply in the affordable housing space, is a message that needs to be sent understood." All right, so I'm going to give you an example. We completed about a year ago in partnership with the LNM and the Cache Network of a 706 unit building in East Harlem called Sendero Verde. It is the largest passive-house affordable housing project in the world. Supergreen has a fantastic charter school with Harlem Children's Zone. The Hazzalca is amazing. Things in it. 32 stories tall. And it cost us $550,000 in total development cost to build. We just completed a four-story low-rise, less green project with not all the community facilities in San Francisco. And it cost us a million to build a unit literally twice as much. So why would it cost twice as much in San Francisco, Davis-Bacon, and essentially Union-required construction? In New York, the New York City is long understood that to get affordable housing built, we need to get every unit we can for a dollar. And contractors are paying very fair wages in New York, but they are not. his bacon. And one of the reasons why I was not enthusiastic about Cuomo as a potential mayor is because Cuomo has consistently been trying to force the affordable housing industry to be more unionized, which is simply going to take us to San Francisco costs. Fascinating. You got anything you want to add to that before I-- before I-- because I find this issue to be so fundamental and so important to getting the capital to be able to build the supply. And you get to sort of these extremes where it's okay, let's just go to rent control because we can't seem to fit it on the supply side of things. And anytime I hear someone who talks about rents going up at a rate that they is unsustainable and they say, well, then rent control is the solve to that. They just don't understand the economics behind it all. And it has to be on the supply side. So I just want to point one more thing. In the 1970s, early '80s, the Bronx burned and we lost as a city at least 500,000 affordable housing units in the South Bronx and low reside in Harlem and in Brooklyn, et cetera. And we lost them because we were at a time in which there was a high inflation labor cost went up, insurance cost went up, energy cost went up, and it just raised to end up. We're seeing all the taxes went up. We're seeing all those things happen right now. But because there was rent control, there were two factors. One was because there was rent control, rent couldn't equalize it. And the second thing is New York City lost 900,000 jobs, manufactured jobs in that same period due to secular trends of offshore. So we're now in a period where just rates are high, they're coming down a little bit, but not enough. Energy rates are absolutely going to be going up. Our tax rates are going up. Insurance is undeniable that it's going up and will continue to go off. And so we've already learned the lesson that controlling the income. We already said that half the tax credit projects are losing money. There's no rent, there's no insurance control costs. The utility control costs. So you can see what's coming. And one of my goals is for, by the way, there's some amazing new mayors. All the new mayors just got elected in Seattle. There's a new mayor in San Francisco. There's a new mayor in Denver. The amazing crop of new mayors who are innovative and want to make the world a better place. And we have one now in New York. And part of them is just to understand the fundamental issues that are at play so that they can then harness those to make a better world versus to create the waves of abandonment that we've seen in the past. Scott, Jonathan talked about their huge assets and that are there in what is it, 111th Street? That has 600 and some odd units. Is there a size that it gets too big in the affordable housing space to managing it? Well, so we don't typically operate in these major cities. We operate around them. I think that just to highlight what you guys were talking about with Davis Bacon, I mean, I think we really look in markets where we want a free market. And we were, I was talking earlier about how we can bring financing costs down through various creative structures. We don't want the government to be providing housing finance to us directly dollars. We want policy that's put in place with a clear playing field and we can then operate within it. And so, you know, if you're setting up things like rent control in Davis, Bacon and putting restrictions on funding that you're providing, we tend to shy away. We're tending to go into markets where they're putting legislation, California's state level, legislation, North Carolina, South Carolina state level, even Florida legislation. And with that, we can then go and find creative structures, bring as much capital to bear to the table as we can. That's cheap and be able to provide upgrades to, you know, desperately new upgrades to housing and preserve housing. So, and also, I want to add, we'll constantly bring in federal dollars, right? So using the Section 8 program, I think in order to really solve and create more housing, it has to start at the federal level because that's where the real money is. But the states and the local authorities have ways that they can do property tax reform, they can do zoning changes. So, it has to be all integrated, right? I think you can't just say federal government provide funding. That needs to start there. I mean, if you really look at the housing booms that have occurred over the last hundred years, it's been because the federal government has stepped in and said, "Work giving you all sorts of funding." But then you have to go to the states and to the local cities and even just those sort of local jurisdictions and say, provide a level playing field for the affordable housing industry and we'll bring federal dollars to your markets. I mean, that's one of the things we go into new market. We're in 22 states. We go into a new market. We're constantly saying, "Look at what the other states are doing. This is things that you can bring to your state and we'll help bring federal dollars so that you can leverage those federal dollars and be in a public-private partnership." So we are almost never bringing public financing, public capital to a project, but we are working with the public programs that exist. So John has been talked about a couple of states that he likes and a couple others that he might not be putting dollars into. Do you and Jeff have similar view as it relates to where you're liking to buy right now versus others that you would avoid? Actually, not exactly. I mean, I think we have avoided Texas over the years. We've been wrong for many years, but then sometimes you're right. So it is a cyclical market. We look at growth drivers. We look at local policy. So we are heavily investing in the car line as we are still heavily investing in California, Florida. We've gone back to the Gateway States, the cities that we already are in, the Boston areas, Philadelphia, and we still meet the growth drivers are there now. The supply didn't come online the same way. So we see those markets as good. Even some of the Midwest states, we've just bought a big project and are heavily investing in Cincinnati. So there are certain markets that we think are really poised for growth, but also they're set up in the right way. So they set up programs that exist that we can then work within and bring federal dollars to the table. Then a concern about the Trump administration pulling back on housing assistance program and the funding at either the project level or at the individual level. I've spent a lot of time, and Jeff and I have spent a lot of time in Washington talking to various housing policy people. I mean, one of the things that is clear is it is a bipartisan issue. They're not sure which exactly how to do it, but what we've seen consistently is one on one party takes control. They add to the programs or create new programs. So the one big beautiful bill did a bunch of really good things. One, they doubled the amount of tax credits that we can use as an industry. And two, they made permanent the opportunity zone laws, which proved to be a really great driver of housing and growth. And so, you know, I mean, he definitely had some theories out there and put out a budget that said, well, we're going to throw all budget authority down to the states and the states are going to figure it out. But there's no evidence that that will happen. And in talking to people on the hill, that's not something that he's really focused on. I think he has bigger things he's focused on. I wouldn't go back to your question about size, because it's an interesting one. And it's not one that I've, that your question has caused me to think about some things that I hadn't well, as I looked at the most of your assets are sort of between a hundred and two hundred units. If I said the typical asset that you own, it's 165 units or something. And probably because that's what the world built. And smaller than a hundred is really inefficient. The hundred, 150 or 200 is really the easiest to manage, et cetera. But I wouldn't expand on your question. So as a society, we are seeing a lot of malaise now. We're seeing a lot of mental health issues. We're seeing a sense that we are no longer a nation of opportunity. In many ways, we're seeing a decline in even the aspiration the will to move forward. And a lot of the social issues that come from this show up at our properties in the, not just ours, but in the affordable housing world. We focus a lot on bringing social health and education services to our residents with resident service coordinators and partnerships, et cetera. And we have made in some cases remarkable transformations of the culture of the communities that that we own. And that has had both positive economic benefits and social benefits and quality of life benefits. But really most importantly, it's been transformational for the families to be able to live there. When I think about scale now, it's become clear to me that that gets harder and harder the bigger the project is, that it just, and I think all of us in this affordable housing world, when we particularly those in the acquisitions, when we take over older properties, there's new rules to be put in in elevators to fix and new windows to realize a whole bunch of physical things we need to do. And sometimes there's social cultural that enhancements we can also bring. your question is provoked me to see, there's also an efficiency side, there's a size probably in which that happens best. Do you have a view on that side? Well, I tend to agree that when you get larger, it's harder. I mean, one of the things that we really try to focus on is that we want the residents to feel that this is a property, the community that they live in, they own, right? I think if they feel, and I do think that a social component is so important at the properties, and what we do at Standard is we do housing. So we can bring partners if it's on, and we can do resident service creators, and we certainly bring as much capital to the table to help with programming. But there's also a mental health crisis in our country, and that's not, you know, that's not where we're not going to be able to just solve that alone. There's a few things that need to happen, and certainly in certain markets, when you go to the sort of the southeast, you see institutional poverty, and when you get too large, you can't create that sense of community. So I do agree with that. But if we can sort of provide drivers of economic growth where there's potential for some sort of prosperity, that's huge, but I mean, that's not the industry we are. So if we can partner with that industry, that's usually helpful. And one of the things that Tefinite are doing is we've created a private equity fund that is investing in healthcare industry businesses that can help the residents or residents with properties similar to ours. And so we want to be able to do that, but that really can't be in the housing industry. We in the housing need to focus on housing, and what we're good at. And so, I mean, it's so important, I mean, sure, if you come home from a long day, and you have a little bit of a, you have some sort of leak or something, it's the last thing you want to deal with. And so what we talk about at our company is how do we make sure that when someone comes home from their day, that they just get to enjoy their family, they can just enjoy whatever it is they want to do, and that's what we can do for housing to provide a clean, safe, dignified place to live. - Both of you are focused on the continuation space. Is there something more that needs to be done to make it so that units, properties that were designated as affordable were main affordable? - So first of all, one of the interesting things is depreciation, I always thought depreciation, and one of my young days, I thought depreciation was this fantastic benefit. Now I know that depreciation is real, and that when properties are 30, 40, 50 years old, they need new everything. Not just roofs and elevators and boilers, but they need new wiring and plumbing, and they fire alarm systems, and we could go on and on with what they need. So as a nation, and the expansion, the 4% is a wonderful tool. It's not going to preserve everything needs to be preserved, but it's a tool. We are seeing that states aren't, have such a new product, the man that they're not allocating so far, not allocating enough, we think the preservation, we think a lot more needs to be allocated to preservation, and maybe there need to be other tools for preservation too. But older buildings, they need a lot of tender love and care and investment. - One of the things that Jonathan, Rose, and companies in Jonathan and Nathan in particular did such a great job that was bringing institutional attention and capital to this industry where it just was not as much, but I think over the years now we are seeing substantial capital come into our industry, and that is subsidizing some of the lack of tax credits that can go into acquisition and renovation, preservation of housing. So yeah, I mean, I think it's coming, I think the industry as a whole is doing a good job of attracting capital, and we'll see that continue to, capital flows continue to come to this industry. - So I'm almost out of time. Jonathan, usually I would have asked this question from the beginning, but I wanted to get it in, which is that before you started the Jonathan Rose companies in '89, you actually were in the recording industry and had a record label. I'm assuming, given that you almost started your career focusing on that, that music is still a big part of your life. - Music is absolutely a big part of my life. - What was the last concert you went to? - So the last concert I went to was on, better to tell you about two separate things. So the very last, so I have an amazing band, and we play this conjunction of jazz blues and Indian rogues, influenced by an amazing guitar player named John McLaughlin in the early '70s, and through to the guitar player and I've been playing together for 50 years, but this is a really, really fine band, and a subset of ours actually played on Saturday night at the Garrison Institute, but on Thursdays, I've also been very involved in jazz, and in the world of jazz and helped create jazz at Lincoln Center with Winton Marcel, so not much of other amazing people. And on Thursday night, Winton wrote an amazing violin concerto for his wife, who's an extraordinary classical violinist, and there's a performance at the New York Philharmonic, and there's recordings of this piece, it is just extraordinary, anyway, it's so live-i-l-in in orchestra. - It sounds like you have access to some pretty unique both artists and performances, but if you were given, if you said, I'm gonna drop everything and go to listen to one performer, performer in the next year, who would it be? I gotta think about it. I gotta think, I'm gonna answer that a different way. He's like, I go down the street and listen to Winton Marcel's play, I mean, it's kind of tough to go beyond that. - But I will tell you something, which is that, when I travel, I work. I mean, I work day and night. When I go to a city, it's like, I'm there full force, and I broke that pattern two weeks ago, I had to come to Chicago, and I saw the David Byrne was on tour, at least to be the talking heads, I'm playing here in Chicago, so that Wednesday night instead of having more business data as I went and heard David Byrne, and that was pretty great. - That's really great. So Scott, you're an avid skier, you and I have spent many, many times in very, very remote places. Where's the 2026 ski stop that's outside of the typical alter travel schedule? - We are going to Lack Austria. I'm really excited to experience the Alps and with my family, with the kids, so let them get a different experience than the US. But I'm also looking forward to British Columbia and watching you filming you, or are you filming me going down the mountain? - That's great. Thank you both. Thank you for the Nathan Taft Award. It will be a super, super meaningful ad to this industry, the way that two of you designed it, the way you've given it, a way, if you will, to allow them to determine who's going to win it, I think, we'll make it. So it continues to go long beyond the two of you or involvement in this industry. It was wonderful. Our thoughts to Nathan's family for the loss of their beloved father and spouse and family member. And thank you both for all you do in the affordable housing industry. I greatly appreciate both of you taking the time to do this, talk, and thank you to everyone who joined us today. - Thank you, Willie. - Thank you. (audience applauding) (upbeat music)