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Show Summary
In this episode of the Real Estate Pros podcast, host Michelle Kesil interviews Michael McLean, an impact developer and consultant. Michael discusses his unique approach to community-centric development, emphasizing the importance of understanding community needs before financial considerations. He shares insights from his successful Mural Park project in Chicago, which aims to bring jobs back to the local community. Michael also highlights the significance of location, climate migration trends in the Great Lakes region, and innovative funding strategies, including partnerships with smaller investors. The conversation concludes with Michael’s thoughts on project management and his openness to connecting with new partners.
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Michael McLean Jr (00:00)
most developers and real estate investors start with the money, right? They start with a spreadsheet and they analyze the money of a potential project and they solidify that idea and then they go and they try and find a place to force that down, right? So they…start on the wrong side of the pyramid as we say. Where it’s the money, then it’s the product type, then you know it’s the construction and management, then it’s the resident and then it’s the community all the way up at the top. And by the time they get all the way up that pyramid, there’s nothing left for the resident and the community. We start the, we turn it upside down and the communities are based
the resident or the user, the office user, the retail user is the next most important thing, right? And then the product type and then the money, right? So the interesting thing is, is if it’s an inverse pyramid, the money grows as you start with a proper base. as you, if you start the wrong way with the money being the importance, the whole thing shrinks to nothing.
Michelle Kesil (02:46)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil, and today I’m joined by someone I’m looking forward to chatting with, Michael McLean, who is an impact developer and consultant focused on unique opportunistic investments that build wealth while building community. So excited to have you here today, Michael.Michael McLean Jr (03:08)
Hi, thank you for having me.Michelle Kesil (03:09)
Of course I think our listeners are going to take something away from how you’re approaching your unique community development. So let’s dive in. First off, for those who are not yet familiar with you and your work, can you share what your main focus is?Michael McLean Jr (03:24)
So we are primarily developers, value add developers and municipal consultants. So we do a lot of ground up development. We do a lot of building renovations and adaptive reuses. More recently, we’ve started helping municipalities, institutions figure out what to do creatively with their underutilized or unutilized assets. And there are a lot of them out there.And right now it’s pretty critical that they figure out a solution because a lot of traditional funding sources municipalities lived on are dwindling. And it’s a pretty unique little aspect of our business that’s been growing recently. But we’re headquartered in Chicago. We’re generally Chicago-centric, Midwest-centric and stretch through New York where I was born and raised and have partners and family.
who are doing similar work in the New York metro and upstate region. So it’s really the Great Lakes stretch, the old Rust Belt is where we focus.
Michelle Kesil (04:21)
Awesome. And how did you get started as a developer and decide to have your specific focus with the community aspect?Michael McLean Jr (04:30)
I got started as a developer because my father is a subcontractor and has been my whole life and he and my mom agreed to let me work for him so that I could learn the value of an education and not go into construction and development and it completely backfired on them. I fell in love with it. I’ve been doing it since I was in undergrad working with him in construction and then growing that into real estate along with my twin brother andWe’ve been doing it ever since. I’m 49 years old. I’m about to 30 years in this business. It’s kind of crazy to think about, but it’s something that I’ve just loved to do and never looked for anything else.
Michelle Kesil (05:59)
Awesome. And you mentioned that you do things a bit differently with more of the community led focus. Can you expand on what that looks like?Michael McLean Jr (06:09)
Yeah, somost developers and real estate investors start with the money, right? They start with a spreadsheet and they analyze the money of a potential project and they solidify that idea and then they go and they try and find a place to force that down, right? So they…
start on the wrong side of the pyramid as we say. Where it’s the money, then it’s the product type, then you know it’s the construction and management, then it’s the resident and then it’s the community all the way up at the top. And by the time they get all the way up that pyramid, there’s nothing left for the resident and the community. We start the, we turn it upside down and the communities are based
the resident or the user, the office user, the retail user is the next most important thing, right? And then the product type and then the money, right? So the interesting thing is, is if it’s an inverse pyramid, the money grows as you start with a proper base. as you, if you start the wrong way with the money being the importance, the whole thing shrinks to nothing.
And that’s not to say that the typical development model isn’t successful. It is obviously successful. But it is not necessarily resilient. And it is not adding regenerative factors to our communities to fully improve them and improve the appreciation and long-term value of the assets. So it’s a little bit different approach. We get to know communities first.
And when then we decide how we can be a beneficial part of it, we have lots of inside knowledge by that point because we become a stakeholder in the community and we’re able to design and develop much more resilient, effective projects that can live through pandemics and recessions and government changes and all the rest of it because they’re anchored in the real fundamentals of the community, not just how much I think I can sell it for at the end of the day.
Michelle Kesil (08:12)
Absolutely. Can you maybe give an example of one of these projects that you have implemented?Michael McLean Jr (08:18)
Yeah,yeah, we have a project called Mural Park. It’s a class A loft office conversion project in a neighborhood called Pilsen in Chicago. It’s historically Hispanic community that was employed by the lumber industry on the south side of Chicago. Now the lumber industry left many years ago and the community struggled to reestablish itself as an employment base.
And the result was generations of struggle, crime and poverty, but also an entrepreneurial spirit that lifted it back up. And we were invited by friends who grew up there to come and spend some time in the neighborhood. There wasn’t much development going on. There was almost no office or anything commercial other than small.
local businesses, but those were thriving. So we did get to know it and we found out by one of the you know bigger non anti-development groups that we were getting to know that 12,000 out of 13,000 people in this community had to leave every day to go to work.
And as a sociologist, I recognize that that’s the core fundamental problem that’s causing the historic businesses, the bakeries, the shops to go out of business is because all of these dollars are now going to the loop, the South Loop, other neighborhoods because they’re commuting there. So we said, well, let’s focus not on residential, but focus on bringing jobs back to the community so more people can walk to work.
And we ended up getting some significant support around the neighborhood and ultimately developed two 100,000 square foot loft office buildings that are over 100 years old, but now they’re Class A. And during the pandemic, we signed 150,000 square feet of office leases, right, during the pandemic. I’m talking about 2020, right? And
the building was thriving. Now we are now hitting some speed bumps with
The new administration in Washington who cut a lot of funding for not-for-profits, who were very attracted to the neighborhood because the people that worked for them lived there and the people they serviced lived there, releasing has slowed. But because of the resiliency that was created through the community engagement, we now have other focus groups of tenants that are popping up, lawyers, immigration lawyers,
service entities that want to now
closer to their clients and get out of the loop and the core business district, which isn’t offering them or their clients any anything special, anything good, especially since these cities have not really recovered their lifestyle since the pandemic. We’re starting to, but we still haven’t gotten there. So the project continues to show its resiliency, continues to succeed and attract different tenants because it’s aligned with the community that
developed in it.
Michelle Kesil (12:06)
Yeah, absolutely. That’s incredible that you were able to build in that way. What do you feel are some of the main keys that have allowed your business to be able to grow and to run smoothly?Michael McLean Jr (12:21)
So one of the things that we’re just very disciplined in is location. As I indicated earlier, we only develop in locations that we really get to know.Right. So we know the community really well. We know the dynamics. We know the fundamentals. We know the locations and where where’s Main Street. Where is the corner of Maine and Maine. Where is that perfect location for what’s needed in this community. Right. So we can align the needs and the location and the community input to have a celebrated and successful project. That’s really it really gives us an advantage long term rather. and
And
there’s nothing wrong with the bigger guys that do you know student housing and they will go anywhere and everywhere and plunk down a student housing apartment building as long as there’s more than 30,000 kids in the college right? There’s nothing wrong with that model. It works and it’s repeatable.
it’s not necessarily regenerative. And we see struggles in the student housing markets now because of overbuilding and misplacement and self-storage constantly goes up and down and up and down. And these more commodity markets where everybody’s building the same thing in Austin and Atlanta where they really can’t sustain the markets. We don’t have that issue.
Because we’re not competing in markets where everybody’s trying to build the same thing for the same institutional partners.
Michelle Kesil (13:46)
Yeah, absolutely. That’s a good differentiator. And what are you most focusing on solving or scaling to next?Michael McLean Jr (13:56)
So we are really focused on the Great Lakes. We really believe that climate migrationis a real thing that people are underestimating. Economists and demographers are saying, oh, it will gradually kind of slowly go up. But that’s not the way real demographic shifts work. If you look at it really in history, they happen in waves, like big waves. And we’ve got cities that want to grow. Milwaukee’s calling for a million more residents.
right Cincinnati, Cleveland, Columbus, Ohio are all upzoning all their properties to spark major development. Rochester, Syracuse, and Buffalo are the hottest housing market in the country right now.
people have recognized a higher quality of life, a lower cost of living, and the ability to work remotely or within their communities that really work well for their lifestyles. And younger generations are very different than older generations in their desire to experience the best possible lifestyle while they’re in a location and the ability to move around from that location and go to other places to experience high quality of life.
So that’s really where we believe the Great Lakes come in.
There aren’t the natural disasters. There aren’t the economic hardships, you know where cost of living is way out of whack with wages. right? We have the infrastructure, the transportation, the water, seasonal weather. It all works, right? Because it was all built 100 years ago to work for 200 years. and So that’s really what we’re excited about. And we’ve got developments going all the
through the Northeast, from Chicago to Cleveland ⁓ to Rochester. We’re now looking in Providence, Rhode Island. We’re active in downstate New York where my brother’s headquartered on Long Island and Westchester. So it’s that strip that really gets us excited because the communities are there, the desire is there, the quality of life is there.
and the employment is there. The fundamentals, the true fundamentals of real estate are there and it’s not just for the wealthier classes that can afford the highest rents. It’s for lots of different people that all can get what they need out of it.
Michelle Kesil (17:00)
Yeah, absolutely. And that’s important to support those infrastructures. And are you partnering with investors on these projects or what does that look like?Michael McLean Jr (17:10)
So we’ve done billions of dollars worth of development with big institutional capital.⁓ big investment banks and whatnot. ⁓ And some of the projects that we do are large enough that we need that. So they’re, you know, $100 million projects. We need big institutional capital behind us, but we prefer to work with smaller groups, family offices, high net worth individuals. We’ve crowdfunded a few times. We’re looking at tokenization as a long-term, you know, kind of research project where we can,
and anchor ⁓ a token to real assets, real real estate, which allows us to then spread that to tenants and allow renters to start gaining some equity through being good residents and good neighbors and start to experiment a bunch with modern era cutting edge type of finance.
But we’re constantly on the lookout for new partners and new investors and we’ve crowd sourced and we’ve created our own funds. And each location does have its own nuances of attracting people. When you say Cleveland to a big bank out of New York, they don’t get too excited.
you say Rochester, New York, which is only a couple, three hours from Manhattan, right? They don’t get too excited. They just, they want the sure bet. Everybody else is in the market. I’m going to be in the market. I’m going to sell my competitor. I’m going to buy from my competitor, know, kind of markets. We’re not in those types of markets generally. And even Chicago, you know, for a number of years now has suffered politically, a reputation of crime and taxes primarily, and has a severe
lack of institutional players. What this does is it provides a lack of competition. So there’s no capital being deployed, but there’s still great fundamentals and great demand. So when you have a demand outweighing supply, you have big returns, right? Building new construction to 10 caps, right? And I don’t care what the interest rates are. You can build an apartment building it with 10 cap. You’re making money, right? Like, especially when you look at long-term wealth
accumulation. So that’s really where we’re going.
We are super flexible with the way we fund things. We are really always excited to get to know new partners and really help incorporate their visions because many investors have ideas and opinions. Otherwise, they wouldn’t have money to be investing. right? uh But real estate doesn’t allow for much participation a lot of the time. But we like to meet investors that can be accretive to the process.
that are in Cleveland, are, when we’re building in Cleveland, right, that are in Chicago and we’re building in Chicago. No one knows Chicago like Chicagoans, right? Nobody loves Chicago like Chicagoans. And it’s the best opportunity to really partner with and align the development, the investment, and the invest store with the community so that you have a perfect alignment.
And you don’t if something does stumble in the economy or whatever that you don’t have just the bottom fall out. Right. Everybody is still aligned if you set it up at the beginning of the day. Right. So that’s that’s really kind of where we’re focused. It’s very difficult to raise money that way. We’re basically starting over every time we do it and we’re trying to resolve that by getting some more programmatic investors that are aligned with the ideas. But people have been so distracted.
⁓ with federal politics, local politics, inflation, right? I mean, that it has not been an easy time coming out of the pandemic to really create this. But we’re finally getting some momentum and we’re really ⁓ starting to line up some new projects here in Chicago and elsewhere.
Michelle Kesil (21:04)
Awesome. Yeah, that makes sense. So when you finish the development, do you like hand off the project to like a team or what does that like system look like?Michael McLean Jr (21:16)
⁓ So we’re generally not property managers. We can and will when it’s necessary, but we prefer to find the local experts. So we want the local expert leasing team. We want the local expert management team. The people that are on the ground every day with a big staff and great track record who meet the culture that we want to create.We did that with our assisted living that we entitled and developed and we have a great partner Solara Senior Living who is the operator but also a partner who was an AEW who was our institutional equity partner. The three of us aligned to really create the vision for this project and so when I’m done with the construction and development side of it, I can hand it smoothly over to a partner who’s been involved from the beginning. right?
in order to make sure that transaction happens really, really well. ⁓ And that truly Evanston, which is a luxury assisted living in downtown Evanston, one senior housing project of the year in 2023 is going really well and it’s an example of that working really well. Now, Murrell Park, the office project, struggled to keep, we’ve struggled to be satisfied with the property manager. We just didn’t feel
like our tenants were getting enough attention so we actually took it over ourselves and we are now the primary property manager for that office project to ensure the quality that we expect.
Michelle Kesil (22:47)
Awesome. Thank you for sharing all of that. So before we wrap up here, if somebody wants to reach out, connect, learn more, where can people find you and connect with you?Michael McLean Jr (22:56)
LinkedIn is a great asset that I use a lot. I’m happy to connect on LinkedIn. On our website, condorpartners.net, you’ll find my email and I think my phone number. Feel free to reach out either of those ways. And I hope to hear from people. We love meeting new people and expanding our network and seeing what we find out because many times we find new communities by people asking us to come visit them.⁓ So let’s go.
Michelle Kesil (23:25)
Perfect. Appreciate your time and your story. Thanks for being here.Michael McLean Jr (23:29)
Thank you for having me. I really appreciate it.Michelle Kesil (23:32)
Of course. And for the listeners tuning in, if you got value, make sure that you subscribed. We’ve got more conversations with operators like Michael who are building real businesses and we will see you on the next episode.
