Malcolm Johnson:

But anywhere where there is a thriving and diverse workforce that, unfortunately, is not able to afford to purchase a single-family home in those expensive markets, there you have renters by necessity. Most developers find it cost prohibitive to build affordable housing brand new, because it costs almost as much as it does to build luxury. And so we're preserving workforce housing in spaces where it's sorely needed.

Nancy Lashine:

Hello, and thanks for tuning into Real Estate Capital. I'm your host, Nancy Lashine of Park Madison Partners. Capital is a lifeblood of the real estate industry, but the decisions on where and how it's allocated are driven by people and personalities. Who are they? What motivates them? What can we learn from their experiences? On this show, we introduce you to some of the real estate industry's most influential thought leaders and decision makers, and we talk about what is important to them, how they make critical decisions, who has influenced them, and a lot more. Our guest on this episode is Malcolm Johnson, CEO of Langdon Park Capital. I expect you will fall in love with Malcolm during this podcast just as I did. I met Malcolm when he was in a mock competition for a Emerging Manager Capital against some formidable opponents. And after hearing him, you won't be surprised that he won, hands down.

Langdon Park focuses on generating strong returns while also creating lasting social impact, and a strategy of affordable and workforce housing in historically Black and Latino communities. Like many people in the real estate industry, Malcolm's career path has been anything but linear. After playing college football at Notre Dame, Malcolm played in the NFL for the Cincinnati Bengals, the New York Jets and the Pittsburgh Steelers. After completing his MBA, Malcolm spent 15 years in real estate investment banking and commercial lending, first at Bank of America and later at JP Morgan. And while at JP Morgan, Malcolm led the firm's efforts to build a new platform focused on investing in affordable and workforce housing projects across the US. Our conversation starts with Malcolm discussing his brief, but formative NFL career. Let's start with how you started Langdon Park, how you got here. So you grew up in Washington DC and you went to Notre Dame, and somewhere along there you became a professional football player.

Malcolm Johnson:

Yeah, it's a funny way that life works when you're really intentional. So yes, I did grow up in Northeast Washington DC. Family was focused on athletics, but it was not the primary focus. My mom's a pediatrician and my dad, at the time, was an entrepreneur, and they were both University of Pennsylvania graduates, and they were very intentional about raising my brothers and I in a large, mostly Black city that was conscious, politically aware, and they were super focused on us getting the best academic opportunities that we could. But as it turned out, I'm big. My dad's even bigger. He was a college athlete. And in high school I became a pretty good football player. And so by the time I was a senior, I had opportunities to go to some of the best schools in the country that also had really good football programs. Notre Dame was a top choice. And then I got there and realized all of my peers on the football team were probably going to go to the NFL. And so I said-

Nancy Lashine:

Wow,

Malcolm Johnson:

... "Well, I'm here. I can compete, and yes, I'm here to be a student as well, but this is something that I love." And so although I was a business major at Notre Dame, most of my focus, outside of class, was on getting to the National Football League. And so I played in the NFL from 1999 to 2003. And that was a dream come true, but it was really just a stepping stone. I look back now, and at the time I wished I could have played for 15 years. I think now how fortunate I was to play at all. And really, it's a blessing that I played for such a short period of time because I segued without a lot of the pain that a lot of athletes have to go through after-

Nancy Lashine:

Pain, physical pain or-

Malcolm Johnson:

And emotional pain.

Nancy Lashine:

... just the anguish of... Yeah.

Malcolm Johnson:

If you liken it to someone, maybe in our business. Imagine being a finance expert at the top of your craft, working at whatever firm you think is the best in the business. And you do that, all the work that it takes to get there. You reach whatever level of success you set out to reach, and then six or eight years into it, somebody says, "We got somebody who's younger and cheaper, and now you got to retire. And not just from this firm, but from the industry." So you start over and you got to go figure something else out. That's what it's like to go be a pro athlete.

Nancy Lashine:

So when you start though, as a pro athlete, because I know, we've talked about this, I've had a background in dance, don't you start knowing that it's a short career, a relatively short career, or are you just so focused you just don't think about that?

Malcolm Johnson:

I would say the latter. The latter. And it's one of those professions that you have to have such so much irrational optimism just to make it there. To think about the end really defies everything that got you there in the first place. And so there's a very prescribed method to get to the pros. Obviously it's challenging, but excel in high school, go to a top university, be an excellent player there. There's a draft, you go make a team, now you're on a team. But that's the prescriptive way to get to the NFL. There's really not a prescriptive way to transition from that life to something else, which, again, I was fortunate because it ended when I was 25. And at that point, a lot of young people are still trying to figure out what the next career is going to look like. So I was pretty fortunate in that regard.

Nancy Lashine:

I have to ask you one other question about that. What's it feel like to be traded?

Malcolm Johnson:

Well, I was cut. I was cut and then re-signed with another team. The first time it happened, I was midway through my second year in the league. I started with Pittsburgh, and halfway through that season, there were injuries elsewhere on the team. They needed to sign another player. I was the last man on the roster. I got cut. The next day, the New York Jets signed me.

Nancy Lashine:

Wow. Okay.

Malcolm Johnson:

So there were 31 other teams-

Nancy Lashine:

So one sleepless night and you're back?

Malcolm Johnson:

Kind of sort of, but imagine you're working for Goldman Sachs in New York, you think you're on the right track, something happens, and then the very next day, JP Morgan in San Francisco says, "Hey, we'll hire you, you have to fly out tomorrow and we need you on the desk the day after that." That's basically how that worked. But again, it was, without question, a dream come true, and still a big part of me is all the things that it took to get to that level. But I'm really glad that I transitioned when I was much younger. It was a lot easier then.

Nancy Lashine:

So you, at 25, trying to figure out what your next chapter is, and then what happened?

Malcolm Johnson:

The first thing I did was distance myself from the sport. I really didn't dismount from sports the way I wanted to. And very few guys get to, very few guys get a long story career. You retire, like Derek Jeter, with one team, you know you're riding off into the hall of fame sunset. Often, I think I can still play, it's just nobody called me. And then I figure out after a year or two that I'm retired. So I wanted to get away from all of that, and a very traditional path would have been coaching, sports analyst, maybe an agent. Instead, I wanted to immerse myself in business. And again, I majored in business at Notre Dame, but I'd never done an internship on Wall Street. I hadn't done anything in finance outside of my classwork.

So I knew I needed a technical skillset. The first step, I actually took a job at the University of Pittsburgh in their athletic department, but it was a business related role. And from there I decided business school was necessary because so many of the superiors in that department had MBAs, because those athletic departments are really run like corporations. So that's when I started to think about getting an MBA and going to a school that would really provide me with this quantitative analysis base. So I chose Carnegie Mellon, and that was a segue. But again, so many of my classmates were kind of same age, pivoting from a career as an engineer, a data scientist, into finance. So I was really amongst people who were going through similar career transitions, just from different types of careers.

Nancy Lashine:

Right. And then you ended up at JP Morgan? Was that the next step?

Malcolm Johnson:

The first stop was Bank of America.

Nancy Lashine:

Okay.

Malcolm Johnson:

So I graduated from Carnegie Mellon. Nancy, so much of success is just having really good fortune.

Nancy Lashine:

Yeah, better to be lucky than smart? Even better to be both, of course.

Malcolm Johnson:

So I went to Carnegie Mellon whose namesake is a guy named David Tepper. And he also owns a National Football League team. And one of his favorite sayings is, "I'd rather be lucky than smart because luck works a hundred percent of the time," which is absolutely true. Asking [inaudible 00:08:58] a lot of whether if that's true or not. But I graduated from Carnegie Mellon in 2006, and the market was as hot as could possibly be. Every financial institution was recruiting MBAs. And so I was lucky. I was in that wave. I joined B of A in... I guess it would be closest to a management training program.

And I was scheduled to do a rotation over the course of 18 months throughout every line of business in the bank. But as it happened, Nancy, the very first rotation again, this was spring of 2006, was in commercial real estate. My wife is from Southern California. We'd been together my entire time in college. We got married right after my rookie year in the league. So we were together and she'd been really, really good about not complaining about living in a bunch of cold weather cities. So when it came down to a job opportunity in New York, DC or LA, and Bank of America's opportunity was in southern California, it was a no-brainer. But I joined the bank and immediately went into their real estate group, and immediately figured out I really didn't know anything. That was... That's like most people who start.

Nancy Lashine:

None of us did when we started.

Malcolm Johnson:

And so I had to apply all the things I did as a football player, showing up early, leaving late, doing extra stuff. I actually took every real estate course that was offered at UCLA extension at night so I could just learn the language. And about five months in to that rotation, the senior manager who ran the group came to me and said, "Well, we're so busy, we're doing so much volume." They did mostly project finance, a lot of construction lending and acquisition financing for Class A properties across all four asset classes. And he said, "We're hiring another banker, but you show up early and you leave late. It looks like you really love this work. If you're okay with coming out of the rotation, we won't hire another banker and we'll just put you into the role and I'll help you as a mentor." And that was, again, another stroke of good fortune. So this was, again, six months into the role. And at that point, I think I needed to see some career success.

Nancy Lashine:

I that's called making your own luck, but...

Malcolm Johnson:

Which you always need a door to be opened. And I was at a point where I needed to see some career success. After playing for three NFL teams in four years, I wanted to have a win. And again, I was very eager to go figure out what the next phase of my life was going to be like. And I felt like I'd found it, at least the beginnings of it. And so I said, yes. My wife was thrilled because that meant we didn't have to go do another rotation that would have taken us to Charlotte, North Carolina where B of A is headquartered. So I joined the real estate group at B of A, full-time. And again, as fate would have it, less than a year and a half later, the GFC hits. And if you remember, B of A was right in the midst of all of that. The bank, TARP was affecting all of the large financial institutions, and B of A had taken on Countrywide. They were ultimately asked to take on Merrill Lynch, but B of A was among-

Nancy Lashine:

Countrywide's based in LA too, right?

Malcolm Johnson:

That's right. In Calabasas, which is just north of the city. So really rough time to take on a home lending business, which... History always looks a lot more sensical when you've got now close to 15 years of perspective on it. There's nothing wrong with the home lending business. If you aren't properly qualifying your borrowers, then you would potentially have a lot of challenges with the home lending business. Be that as it may, those were external factors that led to a lot of challenges, at not just B of A, but other banks had to deal with. And those external factors affected the real estate group. But what it meant for me was that there were lots and lots of opportunities to now learn what led to problem loans.

And I was the junior guy on the team. I wasn't responsible for having originated any other problem loans. B of A, like a lot of big banks, tended to bank the top quartile of the market. So most of the clients that we covered, even if their loans were challenged, the clients were going to make it to the other side. So we wanted to work with those clients. That was great for me to get real life interface with a CFO, a director of capital markets, in some cases a CEO of these firms. And that was a great learning experience, probably more learning than I would have had if the market has stayed as hot as it was. So I was at B of A up until 2012, and that's when JP Morgan reached out and asked me to come start the group, that I essentially left at B of A, but on the West Coast. So again, a great opportunity.

Nancy Lashine:

So the JP Morgan opportunity was a lending...

Malcolm Johnson:

That's right.

Nancy Lashine:

Banking and lending to corporate clients?

Malcolm Johnson:

And the real benefit to me, from a career perspective, was twofold. One, it was a chance to step into a leadership role relatively early in my career in this space. And two, JP Morgan had a little bit of a different focus in terms of how they approached the market. So it wasn't just focused on lending, it was providing all types of banking services to, again, best in class real estate sponsors. There I got a chance to cover a lot more institutional fund managers, folks who were raising capital from sovereign wealth funds and endowments and pensions, and they would come to us to help finance whatever projects they were buying inside those funds. But that was where I got the first taste of what institutional real estate actually looks like. And I got to do it as a leader of the group with a tremendous-

Nancy Lashine:

At the ripe old age of 30 something.

Malcolm Johnson:

I was, let's see-

Nancy Lashine:

32 or 33.

Malcolm Johnson:

... 2012. I was in my early thirties, which doesn't feel like that long ago. But it was a great experience with a really well run institution. And from afar, at first, I got to see how one of the best CEOs in financial services has led and done so well, and that's Jamie Dimon. And ultimately I got to work a lot closer with him. But that was a really pivotal moment in my real estate and finance career. But all along I had some idea that ultimately I would step out and build a firm on my own.

Nancy Lashine:

Your dad's an entrepreneur, you just had the itch, the desire to do it? Affordable housing, was that something that just became apparent to you that there was a great need and it was a passion? Or... How did it come about?

Malcolm Johnson:

It was a combination of things. One, just wanted to be intentional. And so taking a step back. Most of what I did, at both banks where I worked, was dealing with Class A properties, really large, really large transactions, type of things you read about in the Financial Times or the New York Times, the Washington Post, but they weren't necessarily focused on communities that were underserved, which is where I spent a lot of my personal time as a volunteer and a community leader. And I harken back to my parents' example. So again, my mom's a pediatrician, but she was very intentional about choosing. So after she graduated from Penn, she then went to Columbia for med school, but instead of practicing here in the city, she moved our family down to the DC area because she wanted to practice in West Baltimore so she could treat underserved communities, mostly Black patients. In West Baltimore is where she started her practice. My dad was an insurance agent and he provided a really necessary financial service, mostly to Black families in DC. My mom became an entrepreneur later in life when she opened her own private practice.

And my dad then followed his passion later in life when he transitioned from working in the insurance business to being a high school teacher in DC public schools. So I had that example to think about in terms of what does intention look like when you combine that with your technical skillset? And I had this technical skillset from working at this great institution, but I wanted to work much more closely with the types of communities that I grew up in. And so 2020 presented the best possible opportunity to do just that. So all along I had this idea, how can I get closer to working in communities that have not had access to capital, but it needs to be a real business. This is the bank training in terms of revenue has to outpace expenses, and you have to have some kind of profit in order to attract investors. And ultimately, 2020 presented this opportunity to, not just build a business that did just that, but to attract institutional capital that would be really supportive.

And so I left JP Morgan, having learned a ton and built real relationships. In fact, one of our first investors, our founding investor, in fact, was a former JP Morgan client that I gotten to know extremely well. Their leadership team got to see me perform up close and personal as their banker, and so they believed in me and my ability to attract really good talent. They themselves, obviously, are in the real estate space, so they understood the thesis of investing in places where there is more demand than supply, but what we do is really unique to our leadership team. And so that's why they said it's better for you to run this business and for us to support it with capital, and maybe some thoughts around infrastructure and that sort of thing. But you have the best ideas on where to deploy this capital and how best to serve the needs of the Black and Latino families who live in your buildings. And that was the beginnings of Langdon Park Capital.

Nancy Lashine:

So tell us what Langdon Park Capital does. You buy existing housing and you fix the units up. Do you change the use? Do you change the service that's offered to the tenancy? What is it that you're offering?

Malcolm Johnson:

Okay, so first of all, you're obviously a natural placement agent because you just described us to a T. And sometimes just that very succinct description is what an investor really needs to understand the business and get more interested. But yes, we are a real estate investment manager. We focus on making sustainable and profitable investments in Black and Latino communities. And that is manifested itself in our first few investments in workforce housing. So we purchased existing buildings in high density, high cost, high growth submarkets. Los Angeles has been a target for us. That's where our firm is headquartered. Washington DC, and the greater metropolitan area's also a target.

We would love to buy assets in Northern California and Oakland and the East Bay Area. But anywhere where there is a thriving and diverse workforce. And when I say diverse, I'm talking now about LA, which has hospitality, technology, service industry, defense, DC has the federal government technology, e-commerce, those sorts of businesses, and a workforce that unfortunately is not able to afford to purchase a single family home in those expensive markets. There you have renters by necessity. Most developers find it cost prohibitive to build affordable housing brand new, because it costs almost as much as it does to build luxury. And so we're preserving workforce housing in spaces where it's sorely needed.

Nancy Lashine:

I'm going to ask a question from the perspective of a real estate investor. There are so many groups that buy multifamily properties, many of whom call it workforce housing, many of whom manage the properties themselves. What is it about an asset that makes Langdon Park buy it, and why are you different than the many other groups out there?

Malcolm Johnson:

Yeah, that's a great question, and I do think there needs to be more attention and more capital in this space. Because it is so necessary. There's very thorough, statistical analyses done by a number of prominent groups. I'm a board member at the Ziman Center for Real Estate, which is UCLA's Real Estate School, and they do a fantastic job of producing reports every quarter, with the focus on acute need for affordable housing in Southern California specifically, and then across the nation as well. So there needs to be more solutions in what we can provide. However, our specialty and our niche is in looking at Black and Latino communities, places where there may be other social challenges, whether it's lower performing schools, challenges with safety, lack of access to proper healthcare, lack of access to healthy grocers.

And finding ways to bring those sorts of nonprofit partners to bear at the assets that we own, and really having a cultural competency to decipher what works for this particular community. So it's one of those... Our business is built on impact and it's mission-driven, but our profitability really lies in our management team's ability to go identify what makes this community in Prince George's County, Maryland, one, unique? What are some of the challenges that our team is best suited to help this community address head on? What will matter to a resident here? Is it a fitness center that looks like an Equinox, or is it after school programming, because you work until six 30 and your kids need a healthy outlet from 3:30 to 6:30 when you get home? Those are the sorts of things that we look at. But I welcome the opportunity for lots and lots of institutional investors to work in this space because ultimately it helps provide a solution to a very acute problem.

Nancy Lashine:

Does just again, I mean obviously doing well by doing good, does it lead to more occupancy and higher rents in your asset, or is this really more of just a social benefit as you see it?

Malcolm Johnson:

Combination. Combination. Without doubt, we do have to raise rents because our operating expenses go up, especially at the early stages of us doing the work at an investment. But when we increase rents, it's not to a point that allows folks who earn under 120% of area median income to still be able to afford to live there. And that's the major key. We can push rents and still maintain affordability for that group that qualifies as workforce. So that's the real focus for us. But along the way, there's a social benefit. You've got now quality housing for a teacher, a retail store manager, someone who's studying to become a firefighter. Those sorts of employees are critical to have strong communities, and they typically need places to live that are rental, and that's what we provide.

Nancy Lashine:

So how do you run a business, as you're getting started, that literally is geographically spread 3000 miles?

Malcolm Johnson:

Another really good question. As you know, real estate is a very local business, and I spent the last, now 18 years of my real estate career working in Southern California. One of the benefits of being at, again, a large institution, multinational institution with the broad footprint, was that I got to see real estate and major markets while leading a team in Southern California. But make no mistake about it, it's still a very, you have to understand what the difference between Southern Prince George's County and Northern Prince George's County and Montgomery County and Northern Virginia is.

So as we thought about expanding our business there, although I'm from DC, my family still lives in the area, I've done deals in DC as a banker, we had to have a team on the ground in Dc. Our largest asset is in Prince, George's County, which is just outside the Capitol Beltway. So our head of acquisitions, who's been in DC now for close to 18 years herself, sits in Washington DC. Our senior associate, who's from the area, sits in Washington DC supporting her. So that's really our presence in that region, and just giving away a little bit of our secret sauce, I think our biggest growth opportunities are in that region over the next two to three years as well, in terms of adjustment activity.

Nancy Lashine:

What have been some of the really big challenges that you've managed to overcome in the first few years of Langdon Park?

Malcolm Johnson:

Well, that story's still being written, and every day we have to work really hard to make those challenges into opportunities. But without question, when you're new, there's still some part of the business that you always have to prove, not just to yourself, but just as importantly to investors. And so we were really fortunate because we had Institutional Capital supporting us from the start, two very dedicated investors said yes to the thesis, and really said yes to me and our team. But along that same path, we now have to demonstrate to new investors that we can operate these. For one, we can source opportunities. It's an old adage. Capital is much easier to find in good deals. So trying to source really good opportunities is something we have to talk to investors about almost every day.

Nancy Lashine:

By the way, sitting in this seat, it doesn't always feel that way, but sure.

Malcolm Johnson:

Yeah, I know, and a lot of days, I feel like I'm sitting in your seat too. We have not hired a placement agent to work on our behalf as of yet. But proving that we can source opportunities but then operate them well, and we have to demonstrate that over and over and over again. In the last year and a half, and I wish it wasn't this way, the idea of impact investing has become so politicized. Hopefully, when I just described how and why we're able to achieve profitability by investing in these submarkets, it's a no-brainer that you need to have a diverse team with some level of cultural competency working on those investments. We didn't check the box when we decided on what our leadership team would look like, what our asset managers would look like.

We have to have folks with diverse perspectives that mirror that of the families who live in our properties, and that's what drives profitability to our business. But a lot of what I'm now having to do is explain to investors exactly how we achieve profits, whereas... And I think that's always necessary. I would say three and a half years ago, when I launched the business, there was less scrutiny, as crazy as that sounds, a lot of investors were searching for, "I need impact in my portfolio. Anything that sounds like it, we have to have it. We're not going to do a lot of digging as to is there real impact here? How is it being achieved? Who's the team that's actually driving it?"

So now I've got to do a lot of that, in addition to something that you know really well, because you are a founder, managing a business, literally managing your team and making sure they have all the resources to succeed, making sure your team feels loved, even in the face of a challenging market. Sometimes you can't see success if it's not right in front of you. So I have to be chief cheerleader a lot of days. That's one of the things that I definitely took from my sports days. Somebody said this, and it's really true. I don't know if you're a football fan, but on a football team, there are two people that can never have a bad day, the head coach and a starting quarterback. And that's really true in business as well.

Nancy Lashine:

Yeah.

Malcolm Johnson:

It's really difficult for the CEO to walk into the office and have a bad day. So that's one of the things that I have to think about very consciously every day that I'm with my team.

Nancy Lashine:

That's interesting. It does, after a while, become axiomatic. Right? You just know that's part of your job.

Malcolm Johnson:

That's right.

Nancy Lashine:

And if you're going to cross the threshold... Which is why COVID was such a challenge, because when all you do is see your team on Zoom or on the phone, it's a little different separating, "Okay, now I'm at work, and my job is to be the leader, the coach, the cheerleader."

Malcolm Johnson:

That's right.

Nancy Lashine:

It was, I think, a particularly hard challenge for a lot of leaders during COVID.

Malcolm Johnson:

Yeah. One of the things I'm finding now, and you can probably relate, because I'm sure you spend a lot of time with clients on the road in front of investors, is that obviously a lot of my time is spent out of the office. I'd say more of my time is spent out of the office than in the office, and we do have physical offices. Our headquarters is in Los Angeles, and we have a physical office in Washington DC as well. But our folks who don't travel as much still need to see me. And so I'm very conscious of that. I'm in the office literally every day that I'm in LA.

Saturdays, Sundays I come in. And I noticed, three or four months ago, that one of our really junior people was starting to come in on Saturdays and Sundays, and it clicked to me that he was probably doing some of that because he wanted to make sure he was getting the appropriate amount of face time with me. I finally had to tell him, you're not expected to be here for seven hours on Sundays like I am. I'm able to manage my schedule. I can still be at my son's basketball game. I can come before, go to the game, come back to the office. But that's been a big challenge trying to manage the human interaction.

Nancy Lashine:

But he might be the person you tap to come out of the rotation to lead the team.

Malcolm Johnson:

That's right. Every member of the team is a very valuable person. That is for true... That's for sure. When you got a five-person, team, everyone is absolutely mission-critical.

Nancy Lashine:

Yeah, yeah. But there is a lot... It sounds very old-fashioned today, but there's a lot to be said about just showing up.

Malcolm Johnson:

That's right. Again, I didn't expect to talk about sports as much, but I had a coach in college, who's now in the college football Hall of Fame, and every single day, every day we would go out to practice and the very first thing he said as we stepped onto the practice field, "Great day to work, man." And that's just a reminder that this is practice. The next two and a half hours is about to be really hard, but it's a great day to work. It's a great day to work. And so to your point, a big part of success is just showing up.

Nancy Lashine:

Yeah, absolutely.

Malcolm Johnson:

Absolutely.

Nancy Lashine:

And that's a great lesson for our founder too. So what's the next... When you think about... I guess the question I was thinking about actually that I wanted to ask you is, it's really... Transaction volumes are way down. Everybody's having a hard time buying real estate these days, because it's really hard to make the numbers work with interest rates where they are, and prices have still not moved commensurate with interest rates. How are you buying finding deals that pencil today for what you're looking for?

Malcolm Johnson:

Yeah, really good question. And this is also the benefit of being a founder who is economically invested, not just in the firm, but in each of our deals.

Nancy Lashine:

Sure.

Malcolm Johnson:

I'm not incentivized for us to go make bad investments. And so in 2022, when we were presented with better investment opportunities, with much more reasonable financing alternatives, and we allotted capital to deploy, we were able to find good deals. In 2023, we didn't make a single acquisition. So we've been stuck at 150 million in AUM for the last 18 months now. But that's because we opted not to overpay for transactions. And truthfully, the investment community is really savvy, and it's hard, even if you're an established manager, to go and track capital for investments that don't seem to make sense. But as a new manager, we are absolutely required to show real returns, real returns, and so we have to be prudent. But I do think the market is starting to thaw. And the next step, to answer your question, we think about partnerships.

We've been really active with a handful, one in particular, but with a handful of best-in-class operators in our space, who like the idea of having Langdon Park Capital as a sharpshooter in some of the submarkets where we've already purchased assets. They've got the much bigger infrastructure. In some cases they've already raised billions of dollars, but they themselves are having trouble deploying it. So we're thinking about doing some creative things like Co-GPing deals. With those sorts of sponsors, it allows us to make our balance sheet stretch further. We can rely on the expertise we've already started to build and demonstrate, but real estate's a business of partnerships and relationships anyway, so that's not necessarily unique to the business, but in our space, that's where we have a real competitive advantage.

Nancy Lashine:

Oh, I love that idea for you. And presumably through promotes and things, you can help improve the returns to your early capital partners. So...

Malcolm Johnson:

Absolutely.

Nancy Lashine:

That's a great idea.

Malcolm Johnson:

That's right.

Nancy Lashine:

Because there is so much dry powder, and there's a lot of interest in doing something, really helping to solve the affordable housing crisis. It's just very hard to make the numbers pencil, and it doesn't feel like rates are really going to cooperate in the short term.

Malcolm Johnson:

Which actually gives us an opportunity to see some of the deals get back to real estate fundamentals. You have to be a good operator. In the space where we deploy capital, being a good operator is a real key. You have to be willing to listen to residents and provide the services that matter for their lives. You have to think long and hard about what expenses are, what capital improvements are worth doing today versus three or four years from now once you've got cash flow improved. So we have to be good operators. But I think that actually thins the crowd, and it allows us to operate in a space where others now can't, just because rates have moved 300 basis points.

Nancy Lashine:

Do you have someone on your team who's really focused on testing and looking for the best new technologies? Because in multifamily there's so many new technologies to help manage costs and expenses?

Malcolm Johnson:

So good question. First and foremost, one of the things that we've done every single year, and this dates back to the first six months of the company, is make sure we hire really smart interns. I graduated from college in 1998. My very first email account I got in 1997. And I didn't actually-

Nancy Lashine:

Was that MySpace or something?

Malcolm Johnson:

I never used, I never used MySpace, but I remember checking email once a week when a professor would send an email saying, "New syllabus has been published, check your email one time a week." Okay, fast-forward to 2003, I'm retired from football, and now the world has moved. I spent those, what's that? 1998 to 2003, I spent that entire time, locker room culture, not necessarily using technology in the same way that most folks in the business world do. And so I had to relearn that. Now, fast-forward to 2024, so I've got 20 plus years in the business space, but it's been many, many years since I've been in the classroom. And so we've always been focused on having people who are getting the benefit of today's technology in real time inside of our company. So University of Chicago, University of Notre Dame, Northwestern University, University of Iowa. And I'm getting to the punchline. With one exception, every one of our interns has also either been a student athlete or had some experience as a pro athlete, because I'm a big believer in being able to work in a team.

So you asked a question about technology, we actually lean on our younger people to help guide us to the best source of technologies. The operations manager, most recently, his most recent business school graduate, she actually got an executive MBA after spending close to 15 years in banking. But she's helped guide us to some best in class tools for compliance training, some best in class tools for how to manage our operating accounts, which was really important early last year as we saw regional banks have a lot of challenges. So that's where we lean when it comes to how do we take advantage of new technology? There's a ton that I don't know, my three kids remind me of that every day, which is why I like to have young talent. We actually have our intern getting started with the company in June of this year. So what's that? Two and a half months from now.

Nancy Lashine:

It's a great use of interns. It is a real challenge for smaller businesses like mine as well, to figure out how to be best in class on technology, and obviously resource constrained, you have to use it smartly.

Malcolm Johnson:

Yeah, that's right. That's right. And there still needs to be a human element to, is this technology best applied for our business? I know it might make things more efficient for a business, but is it best applied for our business? Who's actually interpreting the data that this technology provides us?

Nancy Lashine:

But judge, even collecting rent from your tenants, there's so many new systems to do that.

Malcolm Johnson:

That's right.

Nancy Lashine:

So figuring all that out.

Malcolm Johnson:

We've been fortunate in that regard because my background is at obviously large financial institutions, and we found really good partners at some of those financial institutions, JP Morgan among them, who've actually provided us with access to best in class technology around something you just described, collecting rents, how to manage our own operating account, visibility into our cash position. All that's obviously critical for any business, but especially for a new business like ours. And so we lean into those partners and the capabilities that those companies have.

Nancy Lashine:

So how do you think about the growth curve of Langdon Park?

Malcolm Johnson:

Well, first and foremost, it's how do we think about building our team and making sure we have the right partners? The opportunities in the market will continue to present themselves. The cost of capital is really expensive right now, and investors can find opportunities that mirror what you would get in Core Plus investing, which, at the heart of what we do, those are the types of returns that you should be able to expect. Right now, investors are saying they want value add, they want value add, and maybe even opportunistic returns. And so we've got to do things like, well, if we invest as a Co-GP, we can push those returns close to mid-teens, and that fits, and that will change as the cost of capital becomes less expensive. But we have to have the right team in place.

And so as we speak, we're talking to an individual about joining us in an asset management/acquisitions capacity with the emphasis being asset management at the start, because we've got existing assets and we need to continue to operate those really, really well. Having that to hang our hat on, will help us attract capital, win the market for investments in real estate shifts, which it will. I feel optimistic if we've got a really good thesis around office space, we aren't in office thankfully right now, but at some point... We're sitting here in your gorgeous office watching construction right across the street on a million square foot office facility. People will come back to offices. There's always going to be a need for housing. Where we invest is a necessary space in the real estate ecosystem. It's just that it's expensive right now. So the growth trajectory will be positive. But first and foremost, we have to make sure we've got the right team in place and we have to have the right partners to help us get to the other side.

Nancy Lashine:

And what's your capital strategy for growth?

Malcolm Johnson:

So without question, it's continuing to manage what we own today and make sure that those assets perform well, so that our existing investors are happy with us. There's a fee stream that obviously comes from asset management, but we will judiciously use our balance sheet to invest in new opportunities. Again, I've been very encouraged when talking to potential partners. The capital is not the challenge. So finding ways to deploy capital, which today, for us, is limited, but I'd say even if you were... Go pick a name, JP, Morgan, Blackstone, KKR, Goldman, they don't have endless balance sheet capacity, although it might seem like that if you're at our vantage point. They have to be judicious with how they deploy capital, and so do we. Every firm has to think about how do we judiciously deploy capital in today's market environment? For us, it's just we're doing it with a smaller denominator today, but I want to make sure we build this discipline today so that in 10 years when we've got a much larger denominator, we still got the same methodology.

Nancy Lashine:

You going to stay in southern California, do you think?

Malcolm Johnson:

As long as the weather stays the way it is? Absolutely. Absolutely. And I'm fortunate, I get to travel to the East Coast, which is where my roots are, pretty frequently. My daughter's in school on the East Coast, so I see her when I'm here for work pretty often.

Nancy Lashine:

Wait, when you said you had kids, I just assumed they were little and...

Malcolm Johnson:

No. Only in my heart. Only in my heart. We've got a junior in college-

Nancy Lashine:

Oh, no way.

Malcolm Johnson:

... we've got an 18-year-old who's away at boarding school, and we have a 10-year-old who's still home with us.

Nancy Lashine:

Wow.

Malcolm Johnson:

But yeah. Life comes at you fast.

Nancy Lashine:

Well, they're lucky. They're lucky. They're lucky kids. Malcolm, this is great. I'll ask you a bunch of rapid fire questions unless there's something you want to turn the tables for a second and ask me anything.

Malcolm Johnson:

Yeah, I would love to hear, we chatted a little bit before we started formally. I'd love to hear your thoughts on two things. One, building a team and going from first step to now you're an established entity, and how you think about managing your team. And second, how you approach client interaction in a tough market, how you approach messaging around investments in a tough market. So first question is building a team from zero to now we're a steady state. And then two, how you deal with tough markets and talking to clients and facing external partners.

Nancy Lashine:

Yeah, well, those are both such critical, critical components of running a business well. I have to tell you learned a huge amount about building a team because... Maybe sports gave you better background, but I really did not know how to hire people, and I didn't know how to manage people at all, and I never really had any formal training for that. So I learned by making a ton of mistakes and recognizing the mistakes, obviously. But ultimately it was surrounding myself and creating a team with complementary skills. Because I think at some moment in, time when we're kids, if you have the confidence to start a business, you think you can do it all. And so, one of the, probably the most important thing I've learned is my limitations, and all the things I'm not the best person to do. So I've learned how to hire people who can then help hire people. And to create... To me... To me, the most interesting organizations are as flat as they possibly can be.

You want people to feel responsibility. You want them to feel authority. You want them to own their decisions. Because I think if you are around talented, smart, motivated people, that's how you'll get the best... And that's the environment I always wanted to be in. So it's really about figuring out how to give people enough rope so that they could hang themselves, but enough guidance so that they don't. And it's worked really, really well for this firm. Ultimately, we went from this amoeba organization to an organization that has some structure, but it's not so formal that nobody feels that they can't talk to anybody. And we do have lots and lots of communication. I think that's the other piece of it is... Team meetings, once a week, and then subsets of those meetings on a regular basis. Have an agenda for your meetings. Don't let them drag on too long. Everybody's got their own style. We try to rotate at the team meetings so that the younger people lead the meetings. Everybody gets that experience.

So that's the way we've grown the team. Talking to clients, look, at the end of the day, being direct and transparent has always worked for me. I think everybody has their own style. I've learned a lot from people who grew up in the South and are not direct. And I've often listened to their language and to their messaging and went, "Oh, that's another way to say it." But I am a real New Yorker, and I just say it as I see it. But I definitely think it's important to be respectful of different styles and to be savvy about what someone can and can't hear. So I know that, even with investors, we will often say, "Well, this person will match up better with this investor," or within an organization, we'll match people up just from a personality standpoint, because they can communicate better, they feel more comfortable, they can hear each other better. So we're all just people, right? Bad news, this is almost a cliché, but deliver bad news first and directly and as soon as you can.

Having said that, you don't have to deliver every piece of news that's not what the client wants to hear, because if it's not on the essential path of... Let's say... I've had clients, for example, who are thinking about doing something, but they haven't decided yet, and they then go talk to their investors about it. But their investors... It's not like they talk to their investors every day. So it takes on an importance for the investor, and then they end up not doing it. And you've just created a problem where you didn't have to have one. And I've seen that happen as well. So it's really assessing what's real, what's important. People need to know performance. People need to know facts. Understanding when you talk about things that you're directionally thinking about, I think, is a little bit more art than prescriptive, if that makes sense.

Malcolm Johnson:

It does. It does. Wise words, wise words.

Nancy Lashine:

I don't know. It's just things that I've seen.

Malcolm Johnson:

And navigated successfully, obviously.

Nancy Lashine:

Well, I'm also... At different stages in your firm's life, your relationships have different levels of importance. Obviously, when you're a small firm and you have a handful of investors, every one of those relationships is critical. And tell me how you spend your time, I'll tell you what's important to you. So you really need to make sure you're feeding those relationships, and that your investors, your clients are getting what they want and need from you. As the firm gets bigger, you will have more people carrying on those relationships. And you may be talking to someone who's not the CEO of the firm because it wasn't quite as big a bet, but could be at a different level at the firm, and you need to match those people up accordingly, so it changes over time.

Malcolm Johnson:

That's right. Being dynamic. Being dynamic is a key for... Or the ability to respond to a dynamic environment, I guess is a better way to put it, is a key to being successful in this role.

Nancy Lashine:

Yeah. And look, I think at the end of the day, it's really about reading people. Sometimes I think I'm good at it, and sometimes I know I'm not. So, being a little bit humble too.

Malcolm Johnson:

That's right. That's right. Humility is something that we all have to learn, whether it's forced, because we weren't or because we had success, thankfully, due to some humility,

Nancy Lashine:

Nobody's only had success. If they have, you know they're not being straight with you.

Malcolm Johnson:

That's right. That's right.

Nancy Lashine:

If you could have dinner, Malcolm, with anybody dead or alive tomorrow night, who would it be?

Malcolm Johnson:

Without question. My namesake, Malcolm X. True American success story, lived his life as a lifelong learner, had many different phases as a grown adult. And I think we can all learn from a lot of the ways he lived. And unfortunately, he died far too young, but he was still morphing and growing as a leader up until the very end.

Nancy Lashine:

What would you ask him?

Malcolm Johnson:

I'd ask him his perspective on humanity. Ask him for his perspective on humanity. He was a religious man, and that perspective started to change later in his life as he became more learned and saw more of the world. But I think we all need to, especially... Our businesses... And I don't want to make this just about business, but our business is so much about connecting with people who may come from different spaces, but you have to find common ground. You have to be able to articulate not just your business strategy, but who your team is. How you're able to get to that and without some perspective into humanity, is really challenging to make those relationships. At the end of it all, you do need a relationship to get someone to entrust you with capital. That is-

Nancy Lashine:

For sure.

Malcolm Johnson:

... mission-critical. So I'd like to ask him about his perspective on humanity, I guess.

Nancy Lashine:

Wow, you just reminded me of how we first met, which I should just share for those who are listening to the podcast. I was a judge on this panel at the Grosvenor Capital Markets Emerging Manager Conference, and we had a bunch of emerging managers present your strategy, and then we had to vote on who we would fund. And Langdon Park, hands down, after you presented, was the winner. And so you've obviously figured out a lot about how to articulate what you're doing and communicate well, even on first impression. So that was our first meeting and continue to really appreciate.

Malcolm Johnson:

I still owe you a huge thanks for participating in that event. And then the big vote of confidence in the time afterwards.

Nancy Lashine:

Well, obviously, well-deserved. So wishing you continued success, I'm really excited to see what Langdon Park becomes and does, and what you do. And we'll continue the conversation.

Malcolm Johnson:

Absolutely. Let's keep going. Let's keep going. Thank you, Nancy.

Nancy Lashine:

Sounds good. Thanks.

Malcolm Johnson:

Okay.

Nancy Lashine:

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We've put a lot of thought and effort into this show, and making sure we bring you insights from real estate leaders that you don't normally find in the mainstream media. So if you're enjoying this show, please remember to follow it on your favorite podcasting app so you never miss an episode. We'd also love for you to share it with others or give us a review on Apple Podcasts so others can find us. Thanks again for tuning in. For more information about our firm, please visit our website at parkmadisonpartners.com.