Two interesting articles in the Globe’s business pages today about two different real estate developers. One of them is trying to make Massachusetts an easier place for non-wealthy people to live. The other is trying to, well, make a pile of money.
Exhibit A: Magic Johnson (that’s right, the guy who played against Larry Bird in some of the greatest basketball games of all time).
Johnson’s Canyon-Johnson Urban Funds has become the majority financier of a project to redevelop an old factory in Charlestown into 146 units of so-called “workforce” housing — units the developers said will be priced so middle-income families and workers can afford them.
The condos will sell from under $200,000 at the “very affordable” level to market-rate units starting in the low-$300,000-range. About 10 percent of the units will be reserved for lower-income buyers who qualify under government affordable housing standards….
“Our job is not regentrification, but we are also not in the low-income business,” [Magic’s partner Bobby] Turner said. “What Magic and I believe is that you can make money by marketing to urban-workforce communities. This community has been dramatically overlooked.
Exhibit B: New York’s Goldman Properties and Texas’s Archon Group.
Artists in 10 buildings in the Fort Point section of Boston that are slated to be redeveloped said the new owners have repeatedly failed to give them new leases or relocations to comparable space….
Goldman, which has redeveloped urban buildings in New York’s SoHo and in Florida’s South Beach, plans to turn the two Summer Street buildings into 88 luxury condos, including five glass penthouse residences on top. Those conversions are the first steps in a plan to turn 10 of the brick-and-beam warehouses around Summer and A streets into a hip community of homes, restaurants, shops, and galleries.
You know what? Boston has enough “hip communities” that feature “glass penthouse residences.” What it doesn’t have enough of is places where ordinary people can afford to live. I used to root as hard as I could for Larry Bird back in the good old days when the Celtics-Lakers rivalry meant something. Today, though, I’m rooting for Magic.
I’d choose Magic’s plan over the luxury condos, but $200,000 for a condo is NOT “very affordable” for a huge chunk of the population. As Magic’s partner says, they’re “not int he low-income business” and they’re trying to make money. So I’m glad they’re not profiteering, but I see no reason to give them particular praise.
Magic opened a movie theater in the middle of Harlem about 10 years ago. Apparently, there wasn’t a movie theater within miles. Even though I was staying in Brooklyn, I took the train all the way up to black Harlem to go see a movie in his theater, just to check it out. The only noticible difference between his theater and any other theater was that he did a 2 minute video before the movie started. Pretty simple: * Need some cash? Come work for me. * Wearing (gang) colors? Not in my theater. Leave now; we’ll give you a refund. * Inappropriate behavior will not be tolerated.
<
p>
Did he open the theater to make money? Sure.
<
p>
But, there are profitable locations for movie theaters everywhere. Why’d he choose Harlem? He observed that giving kids something to do — in the unbearably hot summer months and in the rather cold winters — helps keep them out of trouble. He also observed that giving kids employment opportunities does the same thing. He also observed that a movie theater might help the local economy, so that the neighborhood might end up with more cafes, coffee shops, and small retail/clothing stores, and fewer pawn shops and corner markets, or just abandoned storefronts.
<
p>
He’s trying to make money, but he’s taking on more risk and making less money than he could be making by investing in underfunded neighborhoods with potential. I think those decisions are indeed worthy of praise.
Magic partnered with a theater chain they put up the expertise and he put up the cash. Then with his insights they “catered” to the clientele ie Grape Soda was preferred over Coke, and this clientele did not go out to dinner then a movie… they ate at the movies so there were more finger foods (chicken wings etc)served… it became the highest grossing concessions stand of this cahin in the country. Magic was “warned” that there would be vandalism… still today there is not even graffitti…
<
p>
Good Business… is just that Good Business.
<
p>
It was Magic confidence in Harlem that lead other chains to finally follow suit GAP, Starbuck etc… did you know that there was not even a full chain grocery store in Harlem for over 30 years… poor people actually have to pay more than rich people for ordinary products.
<
p>
Also, Magic just got his hand slapped in New York/New Jersey for another development that did not provide lower income housing… so it seems he is getting back to his roots.
The theater project sounds great. And if I read about how Magic is going to offer jobs to the community through this project or something like that, I’ll be glad. But this laudable project is in New York city. Not that relelvant to a business venture in Boston.
<
p>
I mean, Magic has also done laudable HIV awareness work, and was an incredible basketball player. The question isn’t whether he’s a good guy. The question is whether this project is all that impressive. And if we’re thrilled simply that someone simply isn’t gouging people, I worry about our standards.
I don’t think it’s a bad project. Am I super-duper impressed? No. But I don’t need to be… if there were more projects like this and less projects like the other example, we’d quickly have more affordable housing in Boston.
I think the two situations are very similar. He’s trying to find a business model that isn’t cherrypicking the biggest profits (a theater in Manhattan, luxury condos in MA), but instead find a way to run a profitable business that allows for currently underserved but lower income/wealth folks to participate in the local economy.
<
p>
The movie tickets aren’t free, and neither is his housing. Both have the effect of allowing a local economy to grow stronger in a place thats been overlooked. And while they are not “in the business” of providing low income housing, 14 or 15 units will be low income housing. They’re not buying their way out of the requirement the way so many developers do. Is $200k cheap? Nah. The movie ticket in Harlem wasn’t either. Still, its better than what was there, and its bringing more people to the table. That’s progress, and MJ is making it happen.
Just not as much as the other guys are.
<
p>
The thing is, government cannot solve the housing problem alone – and the housing problem extends well beyond the very poor. Massachusetts isn’t losing population because the very poor can’t afford to live here. It’s losing population because almost no one can afford to live here. The private sector has to get involved in solving that problem, and I think Magic’s efforts are highly praiseworthy.
However, considering that the average household income in Boston is around $41-42K, that translates into being able to handle an mortgage somewhere in the 160K range if the household doesn’t have any debt. If you can put down 20%, like they used to do back in the Stone Age, you end up with something like a $1,100 monthly payment.
<
p>
Building housing for the average household in Boston is a start at building affordable housing. I can’t knock Magic for having a price point that starts there when a lot of developers think that 300K is affordable housing. I hope Magic makes a mint off his housing and shows the local developers that there is another way to build in Boston other than to simply build expensive condos.
You wrote” “Exhibit A: Magic Johnson (that’s right, the guy who played against Larry Bird in some of the greatest basketball games of all time).”
<
p>
Without resorting to Google or any other resource, please list the greatest basketball games of all time that pitted Magic against Larry. You can’t because you really have no idea of what you are talking about. Plus ça change, plus c’est la même chose. How fitting.