Alicia Glen:

You can't spend your whole life running around screaming about diversity and empowering women if you're not going to put your own money where your mouth is. I was like, "You know what? This is it, man. I'm going to build a company that is owned, run, operated, and really guided by the principles that diversity matters."

Nancy Lashine:

Hello and thanks for tuning into Real Estate Capital. I'm your host, Nancy Lashine of Park Madison Partners. Park Madison is a capital solutions and advisory firm serving the global institutional real estate business. Capital is the 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 have been their biggest successes and lessons learned throughout their careers?

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. I'm excited to be speaking today with Alicia Glen, who has made her mark as a woman who can get hard things done and who was brave beyond most mere mortals to take on really big challenges. Alicia has cycled between the private and public sectors several times throughout her career and has proven herself to be equally adept at both.

Before founding MSquared, she was New York City deputy mayor and a well-regarded expert in impact investing, urban development, infrastructure, finance, and housing policy. During her tenure as deputy mayor, Alicia oversaw the largest housing plan in the nation, which led to the development and financing of over 125,000 affordable housing units. Before taking on this challenge, Alicia was head of the Urban Investment Group at Goldman Sachs, spearheading more than $5 billion of mixed-use development in cities across the country through equity, debt, and tax investment vehicles.

We often hear discussions about doing well by doing good, and in that regard, Alicia is investing her time and career to pursue her passion. Alicia founded MSquared as a real estate impact platform focusing on creating mixed-income, mixed-use projects that promote affordability, sustainability, and diversity. With a background so closely entwined with politics and public policy, Alicia has a lot of strong opinions and isn't afraid to share them. That must be one of the reasons why we are such good friends. I think you'll find this a really fun conversation, and I hope you enjoyed as much as I did. We begin with Alicia and I discussing our shared affection for a former New York congresswoman.

Alicia, it has been a long time in scheduling, and I am super excited to talk to you today. You are a longtime friend, and I hold you dear, a self-described urbanist, someone committed to making cities better for places for all of us to live. As a fellow new Yorker, I would say there's probably never been a better time than now for smart and thoughtful planning about cities. I just know personally, having been to over the post-pandemic, so many US major cities that just seem sad and the homeless population, the lack of life downtown, there are just a lot of issues that have to be solved. It feels a little bit like a back to the '70s moment in some ways where there just seemed like a very bleak and overwhelming issues, but you have done more than anyone I know, really, to help solve the affordable housing issues, certainly in New York City, and now taking it more to a national stage.

You've also glided from private sector to public sector and back again. I think you're on your third iteration, lawyer, assistant commissioner for Housing Finance in New York City, Goldman Sachs, $5 billion of mixed-use projects, deputy mayor of New York, and then you spent a lot of time, you could have written your ticket of thinking about what to do next. So one of the things I'd really love to talk about in this podcast is why you decided to form MSquared and how that is evolving.

So to get going, and oh, by the way, I had no idea that we shared a common person in our history who was instrumental, which I only learned about in researching a little bit for this. I worked when I was in college on the Hill for my congresswoman, and her name was Bella Abzug.

Alicia Glen:

Oh, you're kidding me.

Nancy Lashine:

No kidding.

Alicia Glen:

That's amazing. Well, it is incredibly small place, and we may get to this, but one of the things, one of the last things I did when I was deputy mayor was have the honor of convincing everybody, and it wasn't that easy, and you'll, I'm sure, be horrified by this, convincing the right stakeholders that we could name the park that's in Hudson Yards Bella Abzug Park, and I thought what could be more fitting in some ways given that the West Side was her territory, and also a little bit of irony that an enormous new part of New York City that was developed pretty much exclusively by men. I was going to put my thumbprint on that. That legacy would survive. So yes, Bella was a great hero for all of us, and now there's a park named after her in a part of a city that people didn't even know would ever exist.

Nancy Lashine:

This is absolutely not what I was planning to talk about, but we could spend the entire podcast to talk about how to be effective in a political venue. When I worked on the Hill for Bella, she was a junior, a freshman congresswoman, and nobody would even take my meetings of the other congressmen. It was such a shocker to me because I came out of an all-girls school here in New York City at Hunter, and I just thought my bubble was the world. So it was fascinating. Her style did not bode well in the 1970s in Washington. It's a little bit easier today. Obviously, there are-

Alicia Glen:

Maybe her style in the '70s was what was necessary to get noticed, and now things are not ... They're obviously better numerically, but let's be honest, people, I think, women are still struggling as to what is the right voice, what is the right style. More styles are acceptable, but at the end of the day, and I'm sure we'll talk about this, you do have to pound your fist a lot. It's still a huge uphill battle for us all to be just even given the opportunity to make the case on the merits without having to start at a place of disadvantage.

Nancy Lashine:

Well, we are taping this on the day when Nikki Haley came in third in the Iowa caucus after DeSantis, which shocked me that she didn't come in first, but she came in third. So to your point, it's interesting.

Alicia Glen:

Things haven't changed that much. Then just to wrap this loop up, my daughter went to Hunter K through 12. So there it is, one of my daughters there.

Nancy Lashine:

Really, really informative period of my life and I can't say enough good things about that school.

Alicia Glen:

There it is.

Nancy Lashine:

So you left as deputy mayor of New York City in 2019. So maybe you could just contrast for us what shape the city was in then now compared to today at the beginning of 2024. How do you see the changes?

Alicia Glen:

I think that part of the challenge here with talking about a little bit of what was the city like when I was there and what is the city like now is that there is no way that anybody could disaggregate the impact of COVID. Had there not been COVID, my answer, I'm, sure would be very different because I would've hoped, and I still believe in many ways, that a lot of the structural changes that we and the de Blasio administration have put into place, and a lot of the work that had been done in the prior administration and really the prior decades to transform New York City into this incredibly vibrant, diverse economy with, again, the most diverse and talented population on the planet.

All of those attributes, I would say in 2019 when I left, were really beginning to bear fruit. So what you had was a very conscious decision. Again, we'll start with diversifying the economy away from purely a financial sector and Wall Street driven economic base, which was really what the city had relied on for several decades. After the end of any manufacturing and more traditional professional services, we became heavily, heavily dependent on the financial services sector. The decision to really promote a diversification of the economy was very much bearing free as New York City became, I would argue, even more popular for the tech industry because of the kind of tech that we were doing, what I used to call hype in tech.

So it was biotech, fashion tech, FinTech, thinking about cyber security, thinking about all of the amazing industries that were part of New York's past and putting them or becoming more techie really, again, was putting New York City into this extraordinary place to be part of the tech revolution, but not in that more narrow software driven way. Obviously that all culminated in what was at the time I thought one of the great victories, and then we could talk about that Amazon's decision to come to New York City. Also, I worked on creating the new campus for Google. We did the Facebook deal really thinking about technology.

The other thing that I think New York City was very much, again, on the road in addition to diversifying the economy, again, and I would put media and entertainment. When I was deputy mayor, we had surpassed California in terms of the number of shows that were being shot in New York, the demand for studio space. We began to invest very heavily in the creative economy, which had always been a backbone, but we hadn't made a lot of actual investments and capital investments, and we did with the made in New York studios and expanding studio space.

I think the decision also to really enhance and grow our transportation network by launching the ferry system, by making real improvements, even though it took forever, but a conscious decision of a city to invest in the Second Avenue Subway, the number seven line to Hudson Yards, to thinking about multimodal transportation. I had done the first unsubsidized bike sharing deal in the country when I was at Goldman Sachs. We did City Bike. Really just the diversification of our transportation system, again, massively exciting work that, again, was going to continue to grow had we not had the challenges that we'll talk about.

The third piece, of course, was housing. Massive change in the way in which we were moving into a very, very pro-development, pro production, really tying growth in neighborhoods across the five boroughs to two key pieces, one that with growth should come a commensurate increase in affordable housing and really changing the rules of the road so that as the city grows, it grows in a more equitable fashion and that people embrace growth and don't hate growth. They see growth as a synonym for gentrification. So completely changing the rules of the road in terms of growth, being pro-growth and pro-affordable housing, and also really thinking about how we would continue again to be a city that could capitalize on the fact that everybody talked about how busy and crowded it is, but at the end of the day, density is really our friend, and we were really, I think, on a very clear path to building live, work, play communities that could handle more density and take advantage of transportation and all the resources that we were putting into our capital plan in general.

So man, I thought I went out in this incredibly happy place of thinking, "Wow, it's all coming together." The but for would be nobody could have predicted that less than a year later we would be on the brink of something that I think everybody would argue was both unforeseeable and also just the impact in New York in particular was just extraordinary. I think that that set us back, if you will, in some ways, but I also think it has created, I hope, a better understanding of community and what it means to be a city and to rely upon people and to appreciate the things that New York has and to appreciate walkability and open spaces and this network of social service providers and medical providers and the creative arts. People then used to think, "My God, wow, there are all these actors in New York City and now they couldn't work for years."

Just in the discourse, I think they out of COVID, in addition to the human tragedy, came, I hope, the beginnings of maybe a better collective sense of what it means to be a New Yorker and why that's so important. I feel really positive about the future of New York. I think a lot of those pieces that we put into place can and will continue, and I think we're at a real tipping point back into happy days.

Nancy Lashine:

So what would you say to someone like Professor Stijn Van Nieuwerburgh from Columbia? Also your alma mater. He was on 60 Minutes this weekend talking about the doom loop.

Alicia Glen:

Oh, please. You know what? That's bad news. People shouldn't even talk about stuff like that. It's not true, but okay, what I didn't have the opportunity to hear is exact.

Nancy Lashine:

Well, you've heard the doom loop scenario that as people separate their need to work in offices and, in fact, separate for many different types of professions, their need to actually physically be in their place of work, that can cause a downward spiral for tax revenue, for population, for business and everything that's involved.

Alicia Glen:

Well, I think there's two things that are basically wrong with it, and I would take issue with this. Number one, it's an incredibly privileged, bizarre view of the world and working people. First of all, it assumes that everybody can work from home and work in an industry where you don't have to be living and working and breathing with each other. I don't know what he would say to the 700,000 municipal and state workers who every day have to get out of bed and clean the streets and go to hospitals and run the subway. So first of all, I think it's incredibly privileged and annoying and really doesn't recognize that most people in the world have jobs, they actually have to do things and can't just talk on the computer all day about whatever it is we all talk about, cap rates and doom loops. That's number one.

Number two, and this I think more directly address his point, there is no way that people who are under 30, and I guess the technical definition of a Gen Z person is under 26 as my daughters always remind me all the time that one's a Gen Z and one's not. I'm telling you right now that people are not going to divorce their work life or they will want to have a divorce and a separation between their home life and their work life. I think you're already seeing that. I do not believe that there is an entire 25-year generation of human beings who are not going to be working in the office not want to be in vibrant downtowns. I think that the data already is suggesting, and you see it in terms of both office rates, but also the number of people who are actually coming to the office, the swipes per day, but also the companies that are actually surviving and thriving in our economy are companies that are more in-person than not in-person and that are able to recruit the talent to do it.

I don't know any, and maybe you do, I don't know any kids in their 20s to 30s who actively want to work in a virtually only company. Quite the contrary. Part of what is now an attraction for employers, for young people is a hybrid model. I think that some version of a hybrid model will probably be with us for quite a while, but that is not a doom loop. That's a shift, and it certainly doesn't call for the end of the CBD as we know it, but contrary, right?

Nancy Lashine:

I hear you. I do know a few who would be very happy to be virtual forever, but I agree, it's certainly not the norm. So I don't disagree with your point.

Alicia Glen:

Well, [inaudible 00:15:54] forever it was. I think that forever is a weird thing for a 24-year-old to say.

Nancy Lashine:

Well, that's true too.

Alicia Glen:

A 24-year-old doesn't have two screaming children at home.

Nancy Lashine:

Let's hope not.

Alicia Glen:

So when they have two screaming children, they're 32, let's hope, but when they're 32 and 33 and 34, I think that you're going to have a very interesting also gender divide on these issues because I think that for women to succeed professionally as they have children, you need to get out of the house both for the soft power that happens when you have interactions with your male colleagues, but also because your children will only drive you nuts. I have great children, but they drove me nuts and they continue to drive me nuts. I think that it'll look very different as those people enter their childbearing years.

Nancy Lashine:

Do you think we should have them on in the next podcast for a rebuttal? No, just kidding. So tell me what your thoughts are. I walked past the Roosevelt Hotel on a pretty regular basis, and you think about if you were in a position of being deputy mayor with the asylum seekers and dealing with what Mayor Adams is currently dealing with. He talked about having a $12 billion hole in the budget because these are folks who have to be fed and they can't work. The federal government will not let the work. They want to work, many of them, but they can't.

Alicia Glen:

Oh, yeah. I think we have to operate under the premise that the folks who are coming to the United States are coming, A, for very legitimate reasons about what's going on in their home countries, but B, that they are absolutely coming here to work and to contribute to the economy. I think that the statistics bear that out. I think that nobody who actually has a brain in their head would suggest that people are coming here so they can be on the dole. That's a ludicrous thing. So what you do have is a very unusual and hard situation where folks who ... It's a legitimate humanitarian crisis in the sense that we understand that in the vernacular political economy, but you don't have a national response that's allowing those folks to be integrated into society in a much faster way than you would want to.

So we're in a very weird, I would say, bridging environment, if you will, where the obligation of the city and New Yorkers and any progressive, thoughtful humanitarian person, we should be figuring out a better way to house those folks and get them transitioned into the workforce that make sure their kids are being taken care of and integrated into the school system, which by the way, the irony, of course, is because the population of the school system is down for the first time in many years. We have a lot of capacity in the schools and we have extraordinary wealth of multi-language teachers and multi-language places for these kids to go. I do not believe that any of the immigrant families who are coming up to the region are going to be a drain on the economy or a drain on the city.

I think that regionally it should be a credo. When you look at the raw numbers of unemployment, the demand, certainly we have the capacity to take the kids into the school systems, and with minimum wage rising and if people dispersed across the region, and if we could continue to build housing and workforce housing, I think this is really a bridging problem.

Nancy Lashine:

Governor Hochul has been pretty aggressive about the affordable housing program. Do you think much will get done?

Alicia Glen:

Well, I've talked a lot about this. I think it's a very challenging time right now. She was very, very, I really thought it was amazing, very ballsy, very gutsy last year to put a lot of, for housers, really radical ideas out there. The notion of having production targets is pretty unusual, and obviously, there are a lot of political backlash from the suburban counties where NIMBYism is still the norm. A lot of that's wrapped up in race and class issues and challenges around what's going on with broader Democratic and Republican politics, but the fact that the state was going to take the lead on a lot of housing issues, it's very unusual. Historically, the city has been the place where housing policy is generated, and then we would go up there and work out a deal with the legislature. So I give her huge kudos.

I think the one thing I've said, and I've said it to her team is, "It was a lot to put on the table in your first session as governor." Again, you only have so much political capital and you have to be very strategic about it. She also, again, didn't have the strongest partner with the city of New York because Mayor Adams, unlike Mayor de Blasio, did not make housing a centerpiece of his campaign and his agenda. It's very difficult to do these large scale broad-based housing initiatives without making it either number one or number two on your list. Again, these are enormous political capital issues in addition to the capital issues.

So I think that what we'll say, and they've already been working, we've all been working very collectively on this is trimming down the agenda, but you're really focused on the things that, again, historically the city has been able to really take the lead on so they can partner together. Whereas again, in an election year like 2024, trying to change the politics of housing in these suburban counties is probably not the best tactics, but life is long and there's 2025 and 2026. So I think 2024, I feel more optimistic than many that a deal on some of the fundamental pieces can be reached and we can at least get the engine cranking again in New York, and hopefully that will coincide with, and you'll know at this more than I will even, but cranking to coordinate with what is, again, hopefully becoming a better credit environment, a better interest rate environment and the ability to start producing housing again.

Nancy Lashine:

Well, we look forward to that moment, for sure-

Alicia Glen:

We're trying.

Nancy Lashine:

... with more of a national perspective. Do you see cities that seem to be doing it right or programs that are really working well? Who would you hold out as a role model? Obviously, every situation is bespoke, but who's doing a lot of things right?

Alicia Glen:

I hate to poopoo other cities because part of the work that I'm doing now I love so much, which is going to other cities and working with them on some of these more innovative approaches to mixed income housing and trying to put your sum on the scale so that the market just doesn't run away from you. I do think that, sadly, partially because of COVID and partially because of some broader political issues, I have not seen that many cities actively doing anything that much different. Meaning, in order to really change the game, you have to have a framework that is pro density that comes with either really mandatory, affordable or workforce housing or incentives that are strong enough to really create it.

What I have seen is a lot of thinking, a lot of talking, a lot of debate, at least getting into the ether in cities. Like I was in Austin this weekend and Austin spent a lot of time thinking about how do we create a framework where all of this development is not just 100% market rate, and yet they got really twisted up in their land use code.

Nancy Lashine:

There is no public transportation. It's a disaster.

Alicia Glen:

There is no public transportation, and then they got twisted up in that because you have to map growth to public transportation. So what happens is then the state legislature or solidly Republican, every single time the city of Austin tries to do something, basically the Republicans run up to the state capitol and they can basically override any local law. They do not have home rule there. It's very complicated. So what I have seen, and again, you see this in California, right? Endless fits and starts. Are we finally going to figure out how to do TOD development? Are we really going to create more land for mixed income housing?

Again, some of these initiatives, you'll see tiny pieces of this agenda beginning to move. We're actually doing two deals in LA, the first time I think we've been able to look at a deal in California in the past four or five years because LA did create a much easier, fast track tax exemption and permitting process for mixed income housing. Still fairly limited in the way it's used.

Nancy Lashine:

Is it for the Olympics or is it-

Alicia Glen:

It's not for the Olympics, but I wondered to what extent, again, that could help in terms of people getting their head around what does smart and solicit growth look like in cities that are now trying to future-proof themselves and make themselves the kinds of diverse, exciting environments that talent wants to continue to be in.

Nancy Lashine:

We started to touch on it. Tell us, you could have written your ticket in 2019 when you left the city as deputy mayor, and I know you thought about a lot of different things. Why did you choose to launch MSquared?

Alicia Glen:

I think it was really maybe three reasons. One was having been deputy mayor and really worked at such extraordinary scale, $100 billion capital budget, $100 million expense budget, running the housing authority, and just everything is just enormous. The great thing about those jobs is even a little shift here and there can create really interesting impacts. Similarly, I'd worked at Goldman Sachs, one of the premier financial institutions in the globe where the resources were just extraordinary and trying to steer the ship a little bit left or right or whatever the right angles would be could have extremely exciting outcomes.

At the end of the day, Goldman Sachs doesn't get up every morning and think about, "Oh, my God, how am I going to build more inclusive cities in a better world, notwithstanding their PR?" They are fundamentally an institution that is focused on other things. So I thought, "Well, scale I've done. I can't really think of where else I'm going to do something at scale. Maybe what I need to do is get a little more focused on the thing that I really, really love and devote my energy to that."

I think the answer was, and we talked about this, there was no other development or investment platform in the United States that was exclusively focused on developing interesting mixed income and mixed use projects and communities. Not that there weren't instances, and many instances of people who have financed those projects or dipped their toe into that or found themselves in the middle of an interesting project, but it wasn't their entire thesis. It wasn't what they did. They did it as part of their broader platform or because they got dragged into it kicking and screaming, let's be honest.

I thought, "Shit, this would be so cool. This would be a niche boutique idea where all we're going to do. Every single deal we're going to do is going to be an example of our thesis and our belief system around why building mixed income, mixed use communities and cities is the right thing to do." So that was number one, and number two or I guess it would be three because part of it was scale, part of it was going more narrow and really focusing on it. The third thing, and I know that we certainly talked about this, is you can talk about diversity and, "Oh, wow, Bella Abzug was 1970 and now there's 25% women in Congress." You can talk about that until cows come home, but I think this is still a true statement, and you will correct me if I'm wrong. Real estate investment and development is still the most male-dominated industry in the United States, more so than astrophysics, somebody told me the other day. I know more women astrophysicists than I do women who actively invest capital and develop buildings in the United States.

Nancy Lashine:

Well, I can't say that I've seen a comprehensive survey comparing all industries, but for women-

Alicia Glen:

I'm not going crazy.

Nancy Lashine:

... women in the real estate investment business is certainly less than 5%.

Alicia Glen:

For sure, and I think the number ... Even when you talk about that, then it's like you narrow it down even more and it's like, "Well, what are they really doing? Are they in the credit business?" Whatever. It's an absolute outrage and you can't spend your whole life running around screaming about diversity and empowering women and being a maverick and a change agent and all this other stuff if you're not going to put your own money where your mouth is. I was like, "You know what? I'm in my early fifties. This is it, man. If you're going to do it, you got to do it now. I'm going to build a company that is owned, run, operated, and really guided by the principles that diversity matters, that we can be successful, that cities ..."

I always say, imagine if the world had been built by women instead of men. Just what does that even look like? Forget her story, but what would a she builder look like? Why is every book about Robert Moses? Who's Roberta Moses? What are we doing here? So I thought, "This is it. I'm just going to ..."

Nancy Lashine:

Well, there's the Barbie movie. I mean, come on.

Alicia Glen:

By the way, Barbie Rocks.

Nancy Lashine:

She does rock. I love that movie.

Alicia Glen:

[inaudible 00:28:10]

Nancy Lashine:

Tell me, so you obviously are an expert in New York and done so much in New York, but you chose to make this a national platform and you're in Seattle. You're from Seattle to LA to New York to Texas. It's quite spread out. How has that worked for you and are you continuing to do that or how are you thinking about that?

Alicia Glen:

I think in many ways it sounds crazy. How could a little company that's a startup that's based in New York City where most of the people who work here are also New Yorkers or are based here? We do have a couple of people outside of New York, but I think that because what we're trying to do is in fact so unique, deploy capital in projects that are truly a different mix of incomes and a different way of thinking through the capital stack, thinking about public-private partnerships, thinking about how to leverage public resources, some of which are national, some of which are local and state.

In order to do that work and to be serious about it and actually stick to your investment thesis, ironically, we couldn't just stay in New York City. We really do have to try to do our work with developers and partners across the country who are also struggling to find the right capital partner to take the risk to do something different. It's both what makes it incredibly hard because you have to learn a lot about all those different markets and learn the players. On the other hand, it's also what makes it so impactful and exciting because many of the techniques or the financial engineering and the challenges of understanding literally how you build a mixed income building to how you think about lease up risk, how you think about what kinds of retail you would use, anything, any of the typical real estate factors, but doing that in places where you really are a first mover or amongst the first movers and trying to work with people who've never been able to find a capital partner who gets it is really cool.

Nancy Lashine:

So explain just in a little more detail for everybody beyond actively building a mixed income building and building mixed use so that there would be living and retail in the same physical space. What is it that's so different about what you're doing?

Alicia Glen:

I think that what's basically different is that when people think about, even when they use the word mixed income in the United States, which is I guess becoming more of a term of art, what that really means is that developers are taking advantage of or doing some affordable housing in their projects, either to meet the requirements of a financing program like tax exempt bonds or because the local jurisdiction has said in order to build a building here, you must do 15 or 20% of the units in your building for people who are low income.

What we are saying is that in addition to whatever requirements there might be, we want to have a project that has income bands that are not just necessarily for low income people because we know that the affordability crisis is much faster than just those who we think of as or are in fact deemed low income. We know that most moderate and middle income Americans right now are red burdened and finding it increasingly difficult to find housing. We also know that there are other ways in which you can build a capital stack to take advantage of, let's say for example, a local real estate tax exemption in order to create that band of units for let's say folks for moderate income or put more low income folks in the building, whatever.

Each problem can be different, but it requires capital that understands how to work with a local jurisdiction to structure it, and also capital that understands that as a result of doing more mixed income housing, more whether it's low, more moderate, et cetera, that your risk adjusted return looks a little bit different. I will give you a concrete example.

In Dallas, for example, we are financing the first ground up project that is 50% market rate and 50% for people below I think it's 80% of AMI, which people think of as moderate income housing. Dallas, as you know, is a market that over the past five to 10 years has been exploding. The year-over-year rent growth has been unbelievable hovering in the 10 to 15% even during bad years. So increasingly, Dallas has become an unaffordable place.

We were able to work with the city of Dallas and convinced them that instead of just subsidizing 100% low income housing, what actually makes sense in terms of really building a more inclusive Dallas is to do market rate and moderate income housing. We were able to work with them to get a local tax exemption, real estate tax exemption for 75 years, 100% tax exemption. Why were we able to do that? Because they know we're not full of shit. We know what we're doing. We know why this matters. This was a woman developer who was doing something very different in a neighborhood that was gentrifying, and that cities like Dallas, they want to get ahead of what this crisis is, need to try new models, and that we had the capital. We were still investing the typical amount of equity that you would see in any other real estate deal because we had capital that we believed the risk-adjusted return on that investment made sense. That is not usual.

Nancy Lashine:

Can you make these deals work without those kinds of subsidies, either in real estate tax abatement or some other government subsidy?

Alicia Glen:

I'd say the answer to that is no, but there isn't a single multifamily developer in America that isn't also getting some form of subsidy. I think people use the word subsidy in a very interesting way. In that Texas deal, we're not getting any subsidy, we're getting tax expenditure, it's off balance financing, which by the way is no different than the US government subsidizing related when they do an 80/20 in Hudson Yards. It's tax expenditure.

So I think that what's happened is that people really, they use almost derogatory idea. You need subsidy to make your deals work, well, so does related and all the other big developers because they're using tax and some financing, which is a humongous subsidy that is held by the federal government on their tax expenditure report, which is actually fascinating. If you really want to nerd out, you can read the US government's tax expenditure report. I know it would long day in hell if I am the only person in the world who reads a tax expenditure report, but I think it's important to understand that, and everybody knows, obviously, in real estate that the biggest subsidy in the world is mortgage interest asset.

Nancy Lashine:

Well, yeah, but do you need incremental subsidies to make these deals work?

Alicia Glen:

It depends. It depends on the markets because in some places like in Seattle and here in New York, to some extent, the market, the market in these jurisdictions has become so frothy. If you believe as I do, I think there's a lot of empirical evidence to suggest this, that by having lower moderate income or middle income people in your buildings, you're not depressing the market rents. You're actually having almost like an internal cross subsidy. Now, if you did it 100% market rate, would you make a 22? Maybe. If you do it the way we do it and you make a 15, we would argue you made a 15, you de-risk the project because you only have to lease up half of your building to market rate exposure. By the way, if we're not all investing some of our capital in buildings that will allow cities to grow actively and house people, what's the point? What are we all talking about? Impact this, ESG, sustainability, blah, blah, blah. To me, this is like urban infrastructure with a better return.

Nancy Lashine:

So you started underwriting these deals before the spike in interest rates. Interest rates were probably half of where they are today.

Alicia Glen:

Correct.

Nancy Lashine:

How has that changed the calculus of what you're able to do?

Alicia Glen:

I would say it's been brutal. Anybody who says differently is way too happy or lying. It's been really hard. It means a couple of different things. Projects are much harder to put together. You do sometimes need to try to convince the public sector to throw some actual subsidy in the deal, which, by the way, I don't think is inappropriate, and there's so much money that obviously was trickling down through the various infrastructure, bills, et cetera. Real estate, as you know, is more than just a sticks and bricks of the building. A project we're doing in Philadelphia, we're able to avail ourselves of money from the US Department of Transportation to do a lot of the streets and swords and infrastructure work, which occurred to the benefit not just only of our project, but also to the neighborhood in general.

So you do have to get even one more degree of difficulty or one more degree of creativity, look for different pockets, different places where you can make a compelling case at the public investing in this project in a more direct way as a good use of public money.

I think the other thing we've seen, and this is good, is I think we've been able to get some deals done that other people haven't been because our affordability mix does allow. Even more so in the past month or two, the GSCs are supporting this work. So people can get into the Freddie channel, the family channel. Freddie, in particular right now, has a product out that's very helpful for people like us because it's a product that doesn't require you to have tax credits in the deal, but does require you to have affordable housing. So it's really great for MSquared.

Rates are still not great, but you can get it. And if you can't get it forward, then you can't get a construction loan. So we are closing deals now using the fact that the GSCs are really weighing in to support multifamily mixed income development. So if you're just a pure play market rate player now, it's much more brutal. Again, we all sit there and look at the curve. We're feeling a little better, but I think federal infrastructure money, the GSC support for the states and localities that still have a fair amount of recovery money in their coffers, and they are beginning to think a little bit more out of the box and thinking that housing is an interesting investment for them, that hasn't always been the case outside of New York City. Municipalities haven't always thought of housing as part their mandate. They think of it as a federal issue.

So we're doing a deal in Indiana, I can't believe it. These problems are everywhere, and local government has to be responsive to the people on the street who are saying, "I'm a regular person who has a job and I'm paying 60% of my take home pay, live in a two-bedroom." That's a real problem.

Nancy Lashine:

What would you like to share or what have you found about the availability of equity capital from the private sector for what you're doing?

Alicia Glen:

I think it is really, really hard. I think that there's a lot, and I've talked about this, there's a lot in the zeitgeist over the past decade or so about equity for impact, ESG equity, social impact, sustainability, the whole ESG world having changed, and I think in a positive way from just a public markets, do no harm, don't invest in guns, don't invest in coal to a more active alternatives business. There is more capital going into it, but it is still a joke. It is a comma on a comma on a comma on a comma of a decimal point. The amount of capital that's actually going into proactive strategies that are directly trying to address problems as opposed to going into projects where you can then say, "Oh, and by the way, this is a sustainable project." I think that we really need to continue to differentiate what people mean when they say they're doing impact or doing sustainability or promoting diversity.

So I think that it has been, it's a lot of talk and not enough walk. I also think that, and I hate to say this because it sounds either very, very egomaniacal or pathetic, but the whole issue around diversity in the industry is, again, a lot of hogwash. A person with my resume who had different genitals would've been able to raise 10 times as much money as I raised, and that is absolutely true. It is absolutely true, and that's what makes me crazy when people are like, "Oh, it must be so great because you guys are a WBE. You can raise so much money because everybody wants to give money to women managers." I'm like, "Really? Because I don't have their phone number. Please send me their number."

Nancy Lashine:

Yeah, it's very hard. Raising money is super hard.

Alicia Glen:

It's really, really hard. I don't take back what I said notwithstanding how difficult it has been to raise capital, and I do think that the playing field is not level at all. I think it is also something that we're very proud of that we were able to raise north of 200 million in what I think and you would, this is your business, Nancy, for a first time fund, which, again, it's so funny to be a first time fund when you used to work allocating lots of money to be able to raise north of $200 million. I think-

Nancy Lashine:

Well, from fabulous names, terrific investors.

Alicia Glen:

And terrific investors.

Nancy Lashine:

And high quality investors.

Alicia Glen:

Yeah, high quality, and I think that, I think it's a testament. Again, I'll also suggest, as you say, this is really hard, but the perseverance, being able to find those people who are thoughtful enough and open enough to listening to this pitch. Again, I think we need more of that, but I do think it's fair to say that it's been hard, but it hasn't been fruitless, and that's why we're in business, and hopefully, again, that universe of people will continue to expand if we keep pounding the pavement and pounding our fist on the table.

Nancy Lashine:

It's just the beginning.

Alicia Glen:

That's hope.

Nancy Lashine:

So we talked a lot about this before you started, so this is really personal curiosity. If you knew then in 2020, 2019 what you know now, what would you have done differently?

Alicia Glen:

The only thing I would've done differently is I would've told myself, "This is going to take longer than you think." I naively assumed, and I go back to that combination of my own resume and having seen people who had literally the exact same job that I had both in financial institutions and in government, and saw their ability to raise capital and to start their business and to be courted by people. I saw that. I saw, wow, okay, in a couple of years, this is going to be great, I think I would've realized, I should have realized that that was a little bit naive, that the combination of actually being a woman and also trying to do something, actually do something that is different as opposed to just talk about something and make it sound different, I did not really realize just how hard it is. I'm not casting aspersion on this, but for big allocators and big LPs, I thought, "Wow. There's trillions of dollars out there. Just give me a billion." I was like, "Oh, whatever."

I did not understand how hard it is to convince people to look at the world differently and to put some of their money behind those ideas. I thought that I was at a moment. I still think hopefully this moment is or in this moment in some ways, where big money does want to put some of their money into different ways of doing things because people do realize that the status quo isn't working. I just didn't realize how long it was going to take people to get there, and I hope that now since we built the business, and I did have the crazy hot-button sense of humor to keep going, that this is our moment where more people will actually start wanting to work with folks like us.

Nancy Lashine:

Never underestimate the power of group think and how hard change is, especially for big institutions.

Alicia Glen:

I should have listened to you, but then, I don't know, maybe I would've just become a yoga teacher and then we wouldn't be talking about this and [inaudible 00:44:31]

Nancy Lashine:

No, or you'd be working for a household name, but you could still teach yoga, and I hope you do on the side. Maybe not this year.

Alicia Glen:

Well, we'll be a household name. Well, we're going to be a household name in a couple of years because I want every single smart woman and person of color who feels like they don't like where they work or don't think the work they do is actually that different to want to be like, "Oh, I'd like to work at a place like MSquared," because you can do really interesting work, make good money, take risk, and work with incredibly smart, motivated people, and capital gets it. It doesn't have to put all their money into it, just some of it.

Nancy Lashine:

Well, the really good news is I think we now have a generation that is very open to that idea and wants to, in fact, do good and do well, and that's very important to people. So I'm sure that you will be a household name. Let me actually switch gears for one second because you're doing something else that is really interesting that I'd just like to share with people, the Gateway program.

Alicia Glen:

Sure. Well, that goes back to, I did allude to it earlier about this interesting moment in time about infrastructure and the federal government. Obviously, I don't have to hide my politics. I think you're looking to match what my politics are, but after decades and decades and decades of stopping and starting, I'm really lucky to be the chair of the Gateway Development Commission. The Gateway program is the largest infrastructure project in America that is finally, it's a real go, $36 billion to build tunnels and upgrade our track systems along the Northeast Corridor here, where we're building the first, a tunnel that ... How many times have you guys all ... Everybody gone through that tunnel either down to Washington or New Jersey Transit. Has 80,000 riders a day on that train and that system. That tunnel was built in the 1910s.

Nancy Lashine:

Oh, please don't tell me that because on the 3:00.

Alicia Glen:

This is really about talking about, thinking about long-term growth. The Northeast Corridor counter 22% of the United States GDP, and we're heavily relying on an old creaky tunnel, which went down during super storm Sandy. So long way of saying a capacity issue and a resiliency issue and really thinking about intercity rail, the regional growth, and how important the Northeast Corridor is, finally, with President Biden's support and Senator Schumer, obviously being the majority leader, we've broken ground on both sides of the Hudson on the first phases of this. So for me, it's been fascinating.

Nancy Lashine:

So what is your role?

Alicia Glen:

So the Gateway Development Commission is the governing body that oversees and is the developer of this asset, and they're responsible for delivering the program, which is, again, about a $32 billion program. In addition to the tunnels, it's some bridges and other work financed 50 to 60% by the federal government, and then the balance of the money is coming from the state of New York and the state of New Jersey, as well as some contribution by Amtrak, an enormous commitment by the taxpayers of the region that we think, again, is really good ROI because the New York City economy is absolutely dependent upon the ability of folks to come in from New Jersey. That's our largest housing market and where our workforce is increasingly living.

In terms of the ability to be a world-class city and region, I don't have to tell you. How many times are you in Europe or in Asia and you can actually get on a train and get to where you're going? Usually within the timeframe you're supposed to be going there.

Nancy Lashine:

And it's clean and nice.

Alicia Glen:

And it's clean and nice. So this is incredibly important. It also goes very much to the broader issue of developing the Penn Station neighborhood and really, again, continuing to understand the relationship between public transit and public infrastructure investment and how that supports real estate markets, job markets, and economies, so that we think about this holistically, and we're really lucky that Amtrak Joe is our president. This never would've gotten done if we didn't have him.

Nancy Lashine:

Well, I have to say that it's such a game changer being able to come into Grand Central from the Long Island Railroad, and it's so pleasant. It is a whole different experience of being in New York City.

Alicia Glen:

I hope that Americans begin to understand that the problem with infrastructure, it's not sexy because it goes well beyond anybody's individual term and office. So you almost had to create folks like you and me and the civic body, if you will, who are pushing for those kinds of long-dated improvements that, again, the positive externalities are hard to even capture mentally.

Nancy Lashine:

We could do this all afternoon, and I would love it, and I hope we continue at some other point, but I know as a podcast we're going to have to wrap up. I'm going to ask you a couple of quick questions.

Alicia Glen:

Sure.

Nancy Lashine:

What's next for you?

Alicia Glen:

What's next for me is, as I said, try to make MSquared a household name and not just MSquared to household name, but to almost have other people who want to be like MSquared because if we're going to do this work, we need to really grow it at scale. So for me, the idea is not just raising this fund and more funds and adding other work to my work, but hopefully also proving out, again, that for private equity, real estate investors, for developers doing this work is, again, lucrative and sustainable. This is not just like, "Oh, she went off and did this harebrained thing for five years and then shut down shop." This for me is really a big chapter, and I think that hopefully I can stay involved as I was able to do, have a public face by working on projects like Gateway, like Governor's Island, being really involved in some of the larger projects in America that are really defining about urban environments, but also running a great company and mentoring the next generation of women who will take it over. So that's what's next. I think what's next is what is, just more, just more.

Nancy Lashine:

More, more, more, more. All right. Last question. If you could have dinner with anybody, dead or alive?

Alicia Glen:

Oh, God

Nancy Lashine:

I know it's a terrible question. I think about it a lot.

Alicia Glen:

Oh, my God. Well, this is a very trade answer, but I actually think there's something very true about this and people will probably giggle, but I would really love to have dinner with Madonna.

Nancy Lashine:

Madonna.

Alicia Glen:

I do. I'll tell you what, there is a person who has been in this business and reinvented herself and fought like crazy to have a seat at the table in an industry that also was all men. She was totally outrageous. She was often discarded and thought of as either just a cheap pop star or a porn star or not talented or couldn't dance or didn't do this. She actually is an incredibly smart businesswoman who has managed to reinvent herself, stay relevant, and I think really inspired women in a way that I don't think we entirely understand. I think she's one tough cookie, and I would love to have dinner with her.

Nancy Lashine:

Were it not for Madonna, we wouldn't have Taylor.

Alicia Glen:

There it is. You see what I'm saying?

Nancy Lashine:

There you go. There you go.

Alicia Glen:

Would you like to hang out with Madonna? She probably doesn't eat that much, but it'd be really fun to have dinner.

Nancy Lashine:

I would, as long as she was being open and honest.

Alicia Glen:

Exactly. Exactly.

Nancy Lashine:

You're the best, Alicia. Thank you so much for doing this. Thank you.

Alicia Glen:

Thank you.

Nancy Lashine:

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We 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 the 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 Podcast so others can find us. Thanks again for tuning in. For more information about our firm, please visit our website at parkmadisonpartners.com.