Inside a $75M Mall Farm Deal: Nonprofit Structure, Tax Benefits, and 15–19% Cash-on-Cash Returns

Share via:

• Facebook
• X (Twitter)
• LinkedIn
• More

Subscribe via:

Show Summary

In this conversation, Edmund Pilarz discusses innovative approaches to real estate investment, focusing on sustainable food production through hydroponics and community engagement. He highlights the benefits of structuring real estate projects as nonprofits to provide better returns for investors while addressing food security and environmental concerns. The discussion emphasizes the importance of community impact, technology in agriculture, and the need for a shift in how we approach food production and real estate development.

Resources and Links from this show:

• • • Investor Fuel Real Estate Mastermind
    • Investor Machine Real Estate Lead Generation
    • Mike on Facebook
    • Mike on Instagram
    • Mike on LinkedIn
    • Edmund Pilarz’s Website
    • Edmund Pilarz’s Phone Number: (312) 925-4377
    • Edmund Pilarz on LinkedIn

  Listen to the Audio Version of this Episode

  Investor Fuel Show Transcript:

  Edmund Pilarz (00:00)
  We have ⁓ one mall here in northern Illinois. ⁓ One point seven million, three anchors in the entire mall completely empty. We purchased that mall. We have it under contract for 16 million dollars. Our ⁓ setup of our hydroponic system within that mall, which will produce about ⁓ five and a half million pounds of food per year in that location.

  is 175 a foot. We’ve broken everything down into costs and yields and production because I’m a real estate guy and these are real estate deals.

  Kristen (02:10)
  Welcome back to the Real Estate Pros podcast. I’m Kristen and I’m here with Ed Pilarz, who is the owner of Mall Farm. It’s a really great organization. We’re going to get into a lot of adaptive reuse here. So thanks for being here.

  Edmund Pilarz (02:24)
  no problem. Thanks for inviting me.

  Kristen (02:26)
  So how about you give us a little breakdown of what the mall farm is?

  Edmund Pilarz (02:31)
  It is ⁓ using real estate that I know. I spent my life working on the mall business and everyone knows that it’s struggling and it’s actually a dying asset class. So about 10 years ago, I was exposed to hydroponics working on a real estate project. And over the last decade, the technology has become phenomenal. And at the same time, it just came to me that this is the best tenant for

  empty malls across America. It hits every part of our lives from health to affordable food to immigration to security and it appeals to every type of investor. ⁓ Environmental, ⁓ straight up return, project funding, family office. ⁓ When people see what we’re doing and the flexibility

  and the tax benefits and the great returns and at the same time helping really change our country and make it better, then that’s why it’s been so exciting for us. we have some great deals lined up and they’re in communities, ⁓ rich, poor, black, brown, any part of the country this will work. So we’re very excited about what we’re doing, but you know, it’s a…

  Kristen (03:53)
  tonight.

  Edmund Pilarz (03:58)
  combination of real estate, technology, and meeting the needs of what’s important to people.

  Kristen (04:09)
  Yeah, it seems like a win-win-win. It seems like everybody’s kind of in situation. Can you kind of break down what a typical deal looks like for you guys?

  Edmund Pilarz (04:12)
  It really is.

  Yeah, typical deal. come in and buy a mall.

  We have ⁓ one mall here in northern Illinois. ⁓ One point seven million, three anchors in the entire mall completely empty. We purchased that mall. We have it under contract for 16 million dollars. Our ⁓ setup of our hydroponic system within that mall, which will produce about ⁓ five and a half million pounds of food per year in that location.

  is 175 a foot. We’ve broken everything down into costs and yields and production because I’m a real estate guy and these are real estate deals.

  So to make it fit within my industry, you have to put it in a language everybody understands. Every retail, every mall, what’s it do per square foot? What’s it cost per square foot? So you’re looking in that project, for example, all in of a $75 million.

  real estate deal. This operation and income will produce $17.5 million a year in revenue. I’m between a 15 and 19 % cash on cash return. So anyone, ⁓ hedge funds, VCs, family offices, environmental capital, ⁓ we can do better returns than anyone else out there in real estate today. And that’s

  Kristen (06:35)
  now.

  Edmund Pilarz (06:36)
  Yeah, and that’s been my big struggle. Talking to the big funds in New York, Silicon Valley and Chicago, they’re struggling out there to make six, seven percent now. And I can double that because of my structure. I purposely made the mall farm and marketplace a registered non-for-profit, giving ⁓ the experience of working with non-for-profits the last decade. They operate just like any other

  Kristen (06:47)
  that.

  Yeah.

  Edmund Pilarz (07:06)
  a real estate company or REIT or public C-court. Catholic Church is one of the largest real estate holders in America and they’ve been leasing, selling, renting out property for over a hundred years. That format allows us to be operationally profitable. So it’s a double income for some investors. Say they believe in what we’re doing at that mall.

  They donate $75 million. They get the full $75 million tax credit. Then we give them a portion of the operating company that owns the hydroponics. So not only do they get a tax benefit, they get continuing cash flow as long as it’s operating for probably decades. So that’s just one way to do it. The other way to do it is that $75 million, they loan it to the non-for-profit.

  and they pay them back just like any other developer or owner. But they can pay back at a much higher rate than what everybody is out there beating the bushes right now to do.

  Kristen (08:18)
  Yeah, absolutely. Is setting up a nonprofit a little complicated? I assume there’s a lot of government regulations to actually classify it as all.

  Edmund Pilarz (08:27)
  You know, it’s funny. Actually, it’s not. mean, you start the process, you have your company. Mine’s registered in Illinois. ⁓ And you put in what you’re doing and you write a summary and you send it into the Secretary of State. about it takes longer. know, making an LLC is instant. You know, in Illinois, it’s $25 and everything pops up. It takes about a month and a half to two months.

  And then the Secretary of State came back and approved us. it’s, it’s, there’s rules of engagement. There’s rules within the accounting structure, but we’re no different than ⁓ anyone else in that. ⁓

  You know, we’re not a religious organization. Our main focus is to feed people affordable food. And so healthy, organic, affordable food. So that still meets all the standards of what a non-profit is. Plus, if you go to our website, we’re going to have teen training, a teen arts center, an entrepreneurial fund. We’re giving, when we get the 5 % rent from all the tenants,

  Kristen (09:21)
  Huh?

  Edmund Pilarz (09:43)
  That’s what it goes to, pays the debt, pays the investor, and then we dump the rest of the money right back into that community. It is the perfect real estate structure. I can ⁓ take ⁓ real estate that’s distressed, industrial, empty warehouses, anything, empty office buildings, and come in with limited to hardly any capital and start producing food.

  Kristen (10:47)
  Wow, and can you talk more about the the food areas that you’re creating? Like what do those look like? What is the process to create those?

  Edmund Pilarz (10:55)
  Sure,

  sure. Imagine, and it’s really funny, everything that we’re going to do you can buy in Home Depot. Okay? There are a series of PBC pipes that you can go from 10 feet to 40 feet. And there’s cups that fit in there for the plants. The plants’ roots have been re-engineered the last 10 years that they don’t need soil. So it’s just roots in pure water. We’re going to do fresh fish tanks, tilapia. ⁓

  Kristen (11:02)
  Mm.

  Edmund Pilarz (11:26)
  bass, trout, ⁓ shellfish, that water flows through and that’s the natural nitrogen for the plants. And that’s called aquaponics. the best thing I love about this deal, everybody wants to underwrite, everybody wants to get out there and research. Mine’s already on the web, just Google it. You’ll find it. The technology’s out there. ⁓ The Chinese.

  are growing potatoes above ground. The British are growing cucumbers on the side of office buildings. This is the future. sad to say we’re a decade behind everybody. Saudi Arabia and Israel, they’re growing everything except what you’d find on a tree branch. They’re growing watermelons, cantaloupes.

  ⁓ cucumbers, all of the herbs, all the variety of tomatoes, all the variety of lettuce. You know, we don’t grow any kale and rhubarb or, you know, kale and Swiss chard in Illinois. Everything we eat comes on a diesel from a couple thousand miles away. We eliminate all those trucks, you know, and all that carbon. And what’s really interesting

  You know, we have about a 10,000 year recorded history of mankind. We’re farming the same way we farmed. Back to the time in Egypt. But now finally, we have the technology to out-produce. I can out-produce an acre of land 10 times more than current farming.

  Kristen (12:58)
  Yeah.

  Do you find that it’s maybe challenging to get people on board because maybe our society is a little behind on this?

  Edmund Pilarz (13:24)
  No, you know, in real estate, comes down to your debt and investors. Okay. And I’m outside the model and our fund, you know, the ⁓ merger of real estate and financial institutions. We have big, gigantic, huge organizations. When I started out in this business, we would go to New York and see Lehman Brothers and probably three dozen investment banks to get deals done. Right. Now there’s 10 and they’re

  Kristen (13:28)
  Yeah.

  Edmund Pilarz (13:53)
  20, 30, 40 billion dollar ⁓ organizations in real estate and they want a cookie cutter. They want to go home on time. They want the same real estate deal, you know, over and over and you’re doing multi-family. This much is a square foot. Okay, we’ll get five, six percent return. Next deal, you know. ⁓ There’s, ⁓ I get three major questions from people.

  And ⁓ number one, you’re going to put American farmers. You know, you’re going to ruin it. No, 65 percent, 50 billion this year, 55 billion by 2030, which is just around the corner. You know, ⁓ I would have to do about 4800 locations before I get to the American farmer. You know, the second one is, well, if you paid Americans and.

  the right way, so they go back into the fields? No. White, black, and second generation brown are never going back into the fields.

  I grew up in Kansas. I worked in the fields. I started when I was 12 years old. It is the worst job. People in this country, even if I paid them $25 an hour, are you going to go out in the field and bend over and pick cucumbers for 12 hours? Or pull turnips and carrots by hand?

  Kristen (15:59)
  Yeah.

  Edmund Pilarz (16:04)
  Or pick tomatoes? No. So that’s the problem. People don’t want to do the job. Okay, we can solve that. We have the technology. That’s what technology should be for, is to help us do those jobs that we don’t want to do anymore. And at the same time, it’s okay, guys, that we don’t want to do certain jobs anymore. Isn’t our society supposed to get better every day? You know, we don’t need a hundred thousand coal miners anymore.

  Kristen (16:25)
  Right.

  Edmund Pilarz (16:33)
  risking their lives. We got robotic machines, guys are actually above ground coal mining. That’s exactly what we’re supposed to do. And that’s what we’re doing with this project. And the hardest thing is, is people are trying to figure out my hook or my motivation. Look, ⁓ I’ve been in commercial real estate for 30, almost 35 years. I’ve done what I needed to do. So I’m just trying to take what I know.

  and make the place better and make money for everyone at the same time.

  Kristen (17:08)
  Yeah, absolutely. I mean, I think that’s wonderful. Can you talk about more of the community impact you’ve been having?

  Edmund Pilarz (17:17)
  Yeah, the community, ⁓ the impact that I get, you know, with real estate today in America, okay. ⁓ Let’s take Chicago, for example, in the state of Illinois. All the real estate tax that people pay for at their homes and all their commercial goes to the counties for the school district. Cities only get revenue from sales tax. That’s why states are adding and gaming.

  and gambling, okay, and marijuana and liquor. Basically the sin taxes. In real estate, what’s happening is what’s really where people want to invest is in multifamily, because we need housing in this country badly. Well, the problem with multifamily is it crushes the school systems because you jam a lot of people.

  I’ll say 1,500 people on five acres. Well, that’s about another 800 kids. But you’re only getting the revenue from the five acres. If that was single family homes, you’d probably have 100 homes. Half of them would have kids. So there’s only 50 kids to the school system. Well, that way, there, now the city’s in balance, or the town, or the village. So our impact to the community is

  We’re providing jobs and organic food is going to cost 25 % of what you’re paying today. And exposure to solar and green technology. kids today, I read a survey where the top three things they’re worried about is number one, being embarrassed on social media. Number two is their mental health. And number three is the environment.

  So anything that I do or talk about, the young kids in every one of these communities are like energetic. And the idea of helping and seeing plants grow, you know, and I can’t tell you, the family farm is gone, but you know, growing up in Kansas and around farming, there’s just a different thing to make your living feeding people. You know, you used to hear farmers say, my job, I feed America. And…

  We’re going to bring that right back into communities. We’re going to have hydroponic kits for free that you can go home and grow a dozen vegetables in your house without doing anything but plugging it in. our services that we’re going to give ⁓ is critical because everyone with green energy and green technology and save the environment, everything that they’re doing today.

  Everybody has it with the website or with an app. But the real impact is being in the communities and that they see it every day and they touch it every day. And that’s what we’ve lost. And if you really want to change, if you’re political or not, if you’re environmentalist or not, the only way you’re going to get Americans to engage is to be in their neighborhoods every day and do something for them that

  Kristen (20:37)
  Right.

  Edmund Pilarz (20:41)
  that helps their lives. And right now, what we found in real estate, everybody used to say, know, location, location, location. It’s food and gas, food and gas, food and gas. Those prices and availability is how they measure their happiness. And so when they see what we’re ⁓ and that it’s not gonna sit empty, and it’s not gonna be a big apartment complex, or, you know,

  The hot real estate too is data centers. And data centers, they need them to support all the AI. Well, the data centers add no value to your community. And I’m not banging on the data center industry from a real estate standpoint, and it has good returns. But if you want to be in the heart of a community, it’s really a tough sell.

  Kristen (21:12)
  Mmm.

  Right, well it seems, sorry about that, hold on. Get her out of the way. Well this seems like such an impactful organization. It seems like you guys are doing such good work and giving great returns also in the process. Yeah, continue.

  Edmund Pilarz (21:51)
  Right, right.

  No, no, no. And utilizing real estate to know what he wants.

  Kristen (22:00)
  Absolutely,

  yeah. I mean, it’s so necessary and you’re right. I mean, I’m sure people are just expecting apartment complexes or something like that, but this is something that really benefits the community. ⁓ Tell everyone where to find you and how to find Mall Farm and get involved.

  Edmund Pilarz (22:15)
  Yeah, we got a great website, themallfarm.com. It’s real simple, T-H-E-M-A-L-L-F-A-R-M. And you’ll see everything that we’re doing in services in each community. Our contact information is on there directly. The one thing I believe is that with our organization, you’re always going to get a human. You’re always going to get a person. So ⁓ AI will help regulate and grow the plants, but it won’t be the customer service.

  Kristen (22:36)
  Right.

  Edmund Pilarz (22:43)
  or the face to face. ⁓ yeah, we’re looking at every location across the country. We’re looking at every technology. If you’ve got a new technology, anything you want to do, you want to co-brand, you want to help. ⁓ This is just about getting deals done and making an impact as quick as we can everywhere in America.

  Kristen (23:03)
  Well, thank you so much for being here. This has been such a unique ⁓ angle to real estate.

  Edmund Pilarz (23:09)
  Yeah, and like I said, yourself or anyone else, call me. My direct number’s on the website ⁓ any time of the day and I’ll try to help you out.

  Kristen (23:18)
  Incredible. Thank you for being here today.

  Edmund Pilarz (23:21)
  Thank you. Have a very happy Thanksgiving.

  Kristen (23:23)
  You too, and thank you everybody for listening. I hope you learned a lot and like figured out a new facet to the real estate investing community that you can be a part of. Definitely check out Mall Farm and definitely get involved. So thanks for listening and we’ll see you back next time.