Housing Development | Wealth Through Real Estate Investing Podcast with Dwaine Clarke and Guest Scott Choppin

Scott K. Choppin is the Founder of the Urban Pacific Group of Cos.

Scott oversees all operations of the Urban Pacific family of companies, including business development, capital acquisition, and strategic planning.

Prior to forming Urban Pacific, Scott was Director of Land Acquisition for the Multi-Family Development Division of Irvine-based Sares-Regis Group. In that position, he was responsible for all land acquisition activities for the development of luxury, market rate and senior rental communities throughout California, Colorado, and Arizona.

Before joining Sares-Regis, Scott was with Kaufman and Broad Multi-Housing Group. As Senior Project Manager, he was responsible for all activities related to multifamily development, including the acquisition, entitlement, syndication and development of over 1,900 affordable multifamily units throughout the Western United States.

Prior to that, Scott was a project manager with Irvine-based Snyder Langston Real Estate and Construction Services.

Scott holds a degree in Business Administration with a specialization in Finance from California Polytechnic State University (Cal Poly), San Luis Obispo.

For full transcript click here Expand Wealth Creation through Real Estate with Scott Choppin
Introduction (Rob Kochanski): Hey, local listeners. This is your host, Rob Kochanski. Welcome to another episode of Local First Podcast where each week I interview local business owners, entrepreneurs and community leaders. What we do is we share their story of success and challenges and their journey and how we became a community leader. I truly believe that behind every small business is a story that needs to be shared. I want to put a big thank you to my sponsors; Exacta Corporation: Think possibilities. Think Exacta. Rare leaders, connect, collaborate, contribute, where leaders come to thrive and grow. Make sure that you subscribe so you don’t miss an episode, as well as always love your feedback. Enjoy the show.

Rob: Welcome, Scott. How are you doing today?

Scott: I’m doing good. Doing good.

Rob: Awesome. That’s great. So are you located out in California right now?

Scott: Yeah, Southern California. So we’re based in the city of Long Beach, which is at the very south end of L.A. County, right north of Orange County. So really, at the L.A. Orange County borders.

Rob: Are the forest fires affecting you guys at all? You’re just too much in the scene.

Scott: You know, I’m a little bit in the – like air quality standpoint we’re like right on the coast in the city, you know, proper, and most of the fires that are burning in Southern California would be in the hills. So if you think the ring of, you know, mountains and hills that surround the L.A. basin, that’s where it would be predominantly and then, you know, obviously further out.

Rob: That’s good.

Scott: So yeah, but it’s been, gosh, it’s been like wild, crazy and I don’t know how much of it is actually natural and some of it is manmade, right? But, you know, clearly we’re adding very significant forest fires to the earthquake and mudslide story in California.

Rob: [Chuckles] Is that anything — you know, it happens now you guys are getting a lot of rain out there now, aren’t you?

Scott: Well, not yet. Usually it starts coming in October but what happens is, we’ll have the fires, it’ll burn all that tree in the brush, which in a way is the right thing, the natural thing to happen. In fact, you know, the big story in California is like we over managed fire suppression and built up all kinds of fuel. But then it clears the hillsides and then the rain comes and then it turns into mudslides, and then it throws an earthquake at us every once in a while [laughter]. Anyways, so compared to hurricanes and tornadoes, you know, it’s sort of a debate of the Midwest versus the West Coast, and, you know, that kind of thing. We’re okay, so we really appreciate it. Appreciate you asking.

Rob: Before we get into the nuts and bolts about what you do, tell us a little bit about your background – I know you’ve got a kind of an interesting story, how you got involved with all this. I want you to share that with the audience?

Scott: Sure. So, you know, ultimately if I sort of let you know back into history and why did I choose this career, really – my family was in the real estate development business, so that was my Uncle, Mike and my dad, Kerry – were both developers in their own right. So I had a great opportunity to be around that, grow up around that, although I sort of make the joke that as a kid, it was sort of what I didn’t want to do because that’s what my parents did, right? And then I got out of high school and didn’t really have a particular direction I was going to head, didn’t have specific plans to go to college so I ended up working in the construction trades for about two years, let’s say give or take two years. I was working the electrical trades. And that was sort of like a default, right? You know, ‘hey, what are you going to do to get any money’, you know, and this was in the day and age Rob, you probably remember, it’s like, when you turned 18 you actually left home, and like went out on your own and I don’t see – it’s like not right or wrong. That’s just what we did in those days. So it was like lunch [chuckles]. Right?

Rob: I remember [unintelligible 00:04:15]
Scott: Packing my stuff up into my car, which my dad had been so kind of by me. It was a Volkswagen bus. And I just — I scooted. In fact, I remember years later, he’s like, ‘yeah, they didn’t call you but you know, you never told me you were leaving just I came home one day and you were gone’. So, never told that story before by the way. It’s like, I worked in the construction trade for about two years and a couple of key events took place in that time period. In the construction trades, you know, good honorable, you know, salt of the earth people and that, but I’ve like realized for me like that wasn’t going to be what I was going to be happy and satisfied with long term. I needed like greater challenges and doing dingbat electrical and new construction and apartments over and over and over again, although the electrical trade is like one of the most sophisticated knowledge and mentally, like, you know, what you need to know to be productive in that space. It was at a higher level, it just wasn’t going to be for me and plus, you know, like I was working with people that were 40 and 50 years old, Rob and they were like beat up right? It was like you could tell like the business was going to take its toll on your body, right?

Rob: Yeah.

Scott: Knees and back and you know. And then while I was working on – and I worked in new construction electrical, so I just did apartment, like, dingbat apartments is what I call it. You know, just [unintelligible 00:05:41 – 00:05:43] this is in the mid-80s. I remember, the developer of those projects, I didn’t work on any projects – I think I worked on one project that was a family project apartment, but you know, I would see other developers and I was like, Ah, this dude, this is who I want to be. And I sort of knew who that person was for my family background, but driving the nice car, it’s to wear the suit, you know, the days when you actually wanted to wear a suit. And, you know, whatever, commanding presence, directing people to do this, do that. And like, because I had the background as like, Okay, this is like, I see this, right, I want to be that guy. And then the other one was, I’ve just been a heavy reader my entire life and at the time I was reading a series of books in the real estate space, sort of in the genre of how to invest on weekends and make a million bucks in real estate, you know, that kind of book, right?

Rob: Yeah [unintelligible 00:06:38].

Scott: And that was key for me because it really opened my eyes about deal making. Right, like I knew what my family did but I didn’t work in the business at that young age. And that really opened my eyes about, okay this is how you produce value and profits and money and the sort of the numbers you could like make in real estate and it was an eye opener for me. And so that was really – those two events really were guiding events for me to go, Okay, I need to be in the real estate development space, I want to be a dealmaker, I didn’t call it being an entrepreneur at the time, that was what I was really meaning, you know, to work for myself. And so it was at that point in time I go, Okay, here’s what I got to do, laid out a plan, I need to go to college and get a degree, ended up getting a finance degree, you know, a business degree, from Cal Poly San Luis Obispo here in California, Southern California, and really just mapped out my career from that standpoint, including, you know, what was going to be my first job which I ended up getting, you know, that job that I aspire to a couple years before I actually left college, but that was to basically work for others in the real estate development domain professionally, people I met through my family but not working for my family in other to get trained in the business, and the knowledge of being a real estate developer.

Rob: Wow. And now here you are! [Chuckles]

Scott: Yeah, right [chuckles].

Rob: I love what you said there – you know, when you said that when you turned 18, I was the same way, pretty much was booted out the house. So it’s a very similar thing. That’s the way it was back then, and —

Scott: Yeah.

Rob: And I appreciate that because that prepared…

Scott: Yeah, right. It was unthinkable but you would stay around, right? It wasn’t even — and, you know, I wanted to stay on. I was living with my dad at the time, my parents were split up. But I didn’t even think that, right? It was like, hey you turn 18 it’s time to go.

Rob: Yeah, it was it then.

Scott: I mean, you might not know what the heck you were going to do to like, make a living. I mean, you went and did what you did. And I appreciate that, right? You probably do, right?

Rob: Yeah, most definitely. Because you grow up really fast, you know, knowing what you wanted and what you had to do and they program you from a pretty young age from being a teenager going okay, by the time you turn 18 you’re going to be either out of the house or in college.

Scott: Yeah.

Rob: You know, that was pretty much it. I knew I was going to college at that particular time. So, you know, I appreciate that and I did the same thing for my daughter. And she went to college and I told her at first year back for her summer break. And I said, ‘don’t come home without a job’. And I said you’re not sitting down on your ass [unintelligible 00:09:28].

Scott: Yeah. Because after college it’s like post-graduation meaning.

Rob: Yeah. This was her freshman year.
Scott: Oh, I see, for the summer.

Rob: Yeah.

Scott: I gotcha. Which is great. You know, I think that’s missing in today’s environment. And, you know, like my wife and I have – we didn’t anticipate this, we have a 19, 16 and a 13 year old, so we’re in the store – this is in sophomore in college – about like, what do we plan on having this conversation with our kids, which we have and we basically said; look, you’ve got to place but you’ve got to be productive. I didn’t put it succinctly as you did, but, you know, actually my oldest got a job and he’s managing that although we’ve always said, Hey, your studies come first, learning networking in college, you know, like, you’ve got to come out of college with — really, my main point is, expand your network as much as you can. Yes, get the degree, yes, learn what you’re going to learn in college, but in the long run it’s the people you know and meet and you help them and they help you in the long run, scheme of building your career and getting into your business, if that’s what you’re going to choose, that’s way more important than what you’ll actually learn in college.

Rob: Yeah. That’s cool. So let’s get a little bit about what you do down there and there’s a few little things in here and if I’m missing something, feel free to jump in.

Scott: Sure.
Rob: Because you are the expert in this. I love to – I was really excited to have you on the show and, you know, being here, is it that I’ve been in real estate for probably the last 10 years, not at your level me, I’m just flipping houses and wholesaling and you know, wholesaling right now is my little side hustle which I enjoy doing.

Scott: That’s good.

Rob: Yeah, and I enjoy it. I feel like its bringing people together. Explain a little bit about what you do with the workforce, random housing communities, and explain a bit about it. What is that all about and how did you develop that?

Scott: Yeah, thank you for – it’s a great question. So fundamentally, we’re a real estate development company. So, you know, for those in your audience, I mean, you know what it is, but just for everybody, we find land opportunities, be it empty, vacant land or maybe underutilized, small old house on a big lot, and we basically design a building in the model that we think is the appropriate, market meeting product, build the building, collect all the team members to manage them. So architects, civil engineers, you know, all the vendors that are necessary to design and facilitate the construction on a new building. And then at the end of the day when we’re done with it, we list it up, right, and we either sell it or more often these days, we’re going to hold it as a rental – income producing rental housing asset.
And that differentiates from buying existing value add where you’re going to go find an existing asset, buy it, maybe upgrade the units or raise the rents. In fact, I described real estate development as the ultimate value add, right? Because we’re taking an empty piece of land and adding value through a new building. But we still are – it’s the same purpose, which is to produce more income than when you started the project, right? For us, it’s going from zero income, because we got empty land to whatever the maximal income that we can produce in it. Work force? So, traditionally, over the year, so I started Home Pacific now 20 years ago, in fact, last this past March was our 20th year of operations. This was 2000, literally year 2000 and I came out of like a couple of very significant companies in Southern California, got great background in the real estate development business, but at the time in 2000 when it was like I decided it was time to go out on my own, it was like, what do you do? Like, what’s the business? Yes it’s real estate development. Yes we find land and we design and build buildings and rent them, that kind of thing. But like I’ve always been naturally somebody who wanted to compete in uncommon ways, right? Like to go do what everybody else doing just seemed to me not that – that didn’t make sense to me, right?
I’ve got to be differentiated, uncommon, maybe call it contrarian, depending. And so at the time, we decided – I decided that we would pursue what we call urban infill, which is basically; you’re in the fabric of an existing city, let’s say LA or Long Beach or Orange County, and you’re going to look for lots that are already in built out neighborhoods but that are empty or underutilized, right, and then build in on those empty lots and basically produce new housing in filling a vacant [unintelligible 00:14:25] in an existing neighborhood. And that’s really been our focus really since day one. And that has taken different forms of course, because it’s not all the same product, meaning how dense is it, how tall is it, what type of unit.
And then about three and a half years ago, really, like late 2016 or early 2017, yeah we were recovering from the recession, you know, still even then, right? You know, from the L.A. recession, and it was at the time that there’s a huge uptick in deal flow and new projects that were in the pipeline to produce new apartment units; like in L.A. and Long Beach, Orange County. And we had done successfully a handful of projects around 2011 to 2016; bought distressed land, delivered units early, did really well, set some pricing benchmarks in the markets that we were building and selling them because the market was still recovering. But in 2016/2017, you could – like observing the market – you could see huge wave of new housing projects coming online, like all the big boys, you know, the [unintelligible 00:15:34 – 00:15:37] and those guys, all the national apartment builders as well, like descending on Southern California. And it was at that point in time we finished some deals, did well and we go, do we want to try to compete in that space with all these big boys that are coming into the marketplace? And my answer, just traditionally and at that point was no. Let’s look for something different.
So one of the companies I work for when I first came into the business was a subsidiary of a company called ‘Kaufman & Broad’ which is a big home building shop people now know as KB home, and I worked for a division of theirs that build affordable new construction apartment buildings using something called the ‘Low Income Housing Tax Credit Program’, basically affordable housing in the truest sense.
And from that time working with those guys, we built a lot of family housing. So it was affordable housing that serve large families and like three and four bedroom units. And when I looked at the totality of all the different projects we built when I was there and that people it served from, you know, singles and couples all the way to these big families, sometimes seniors, to me it always appeared that the family units were always in the highest demand, right? You’d have a four bedroom unit and maybe had five or 10% of your project of 100 units that were this size of units, but they always had massive amounts of applications, right? Which meant to me – like my signal was, that I read was – there’s a lot of families that need this housing.
So in 2016/2017 when we start to look for different products, like I have that in my background, I go, ‘Oh, these families, it’s like they’re an underserved part of the community’, but I also knew from my days doing affordable housing that affordable housing also is a very competitive business, right? Government subsidy dollars are always heavily competed for, they’re finite and they’re always – it’s never enough to serve all the families that need housing with the government subsidy. You run out of the subsidy long before you can produce that enough units to satisfy that under supply. And so I came up with the idea of, let’s look at a middle income or workforce housing model that serves basically working class middle income families so they can pay enough rent, or we can use standard equity and debt but we’re serving a part of the market that needs an attainable housing product, meaning they need something more affordable and more coherent than what they’re getting in the marketplace. And we basically settled on this workforce housing model that we ultimately ended up naming Urban Townhouse or UTH, just making a specific product type, and that’s the five bedroom, four bath townhouse rental product, right?
So we never sell the units, you know, hold them in perpetuity as I said earlier, but it’s serves working class family, and that is specifically family – our family profile is anywhere between four to eight people, usually would be mom and dad, adult kids, grandparents, in-laws, right? And with this five bedroom product we’re able to serve these families coherently. And because they share incomes and expenses naturally in these family groups, usually there’s multiple earners, maybe between two and five earners in a household depending on how big it is, they naturally economic share, right? So they share incomes and expenses across the family group.
So I’ll stop there but basically, the whole point was to basically serve this middle income workforce housing family group with that housing product that was coherent with their lifestyle, was undersupplied, was stable because of multiple earners and ultimately as a developer we have to yield to our investors, right?
We compete in the marketplace for equity to raise capital from investors, what we do consistently and have over time, to have that would be a satisfactory return where people go, ‘Oh, this is a great product’. One, it’s a good, you know, has a social benefit characteristics serving families, but it’s a stable, under supplied space, and it produces yield, right? Our intention was to sort of collect all these benefits in one product type. I didn’t start off all with all those factors but I knew that market was under supplied, could we fulfill a need at it? And this is sort of how we landed on the UTH concept.

Rob: Wow that was a mouthful [laughter].

Scott: [Unintelligible 00:19:57]

Rob: That’s alright though because I’m just taking it all in, you know, that was a lot to go through and when you get started up for this, you know, just like – I’m going to take this like in in two directions here – one on your development side and then the other one on the family side of things, is that when you look at it, you know, what were some of the challenges getting to that point from, okay, you know, I’m going to build this nice house for this family and then, what were the challenges for some of those families actually, you know, realize that this is a good product for me and my family to live into?

Scott: So, you know, many challenges but that’s real estate development.

Rob: Right.

Scott: I mean, real estate development is a complicated business, and, you know, not to oversell or undersell the complexity of it, but that’s just the reality of it, right?

Rob: Right.

Scott: And so as we go into it, you know, one of the things that I – when I came into creating UTH model in this 2016/2017 era, I really brought a lot of lessons from the 2008 recession with me and I, of course, have been utilizing these lessons from 2010/2011 when the market started to recover enough to do development deals. But when we as a company came upon the idea of UTH and thought it was a viable product, we then had to test it. And one of the things I really learned from 2008 was that if you’re going to do something new or different, or something uncommon, untested – in my mind it was going to be a better risk mitigation move to start small or medium size in the number of projects and the size of the projects, such that we could test the model, right? Like, let’s experiment, it is an experiment, right?

Rob: Right.

Scott: It’s a totally untested marketplace. I mean, nobody does five beds and four baths, Rob. I mean, I talked to people, and, you know, they’re like, Wow, that sounds great. Or they’re like, holy cow. That’s the scariest thing I’ve ever seen, right? So what we did, basically, we created what’s called the Demonstration Phase, that’s what I call it, which was for projects that were the beginning of UTH model and they were small, and they’re closed up home, with the logic that if they failed, that it wouldn’t like take us out of play. Like we wouldn’t like kill the company and go out of business, right? I wasn’t willing to risk what we built over those many years on an experiment gone wrong. So we said, hey, look, we bought land really well, like, you know, great discount, we bought it close to home, and really the idea came with the Demonstration Phase, it was to test three things, right? These are the major factors that we didn’t have clear answers to. We had some background research and a lot of historical knowledge of the marketplace and our capabilities as developer, but it basically came down to three things. One is, can we rent the units for what we project, right? Five bedroom and four bath. Like, were there uncomparables in the marketplace, I mean, houses were the closest [unintelligible 00:22:55], right, real houses.
Two is, could we build it for what we projected, right? We’ve always build – well, won’t say I should say ‘always’. We have since 2005 been a builder of our own projects in-house. Like a home builder does, you know, we have staff, superintendents project managers, we go by subcontract, contract work, trade partners, you know, we do have GEC license but we don’t act as a GEC in the traditional capacity. We’re like, I want to build or [unintelligible 00:23:22 – 00:23:23].
Could we – so second question is could we build it for what we projected and feasibly and make money with it? And then the third, which is really to me the most important and anybody who’s in the value add space will recognize this, is what’s the value of the project when it’s completed and leased up? Right? And what is it either we refile, what’s the value under appraisal and refile or when we sell it, is it produced enough profitability, you know, the revenue over cost is a positive number and it’s positive enough for us to make money and produce good yields to investors? And so the Demonstration Phase was for projects to test that. And we went through in a series, you know, like each projects were started and then in a few months later, the next project were started and we learned some lessons from the first one that we carried it to the second one and then so forth, so on and so forth. And we’re actually now complete with that demonstration phase and have really proven the model, like we’ve built systems, we’ve put practices in place, we built a team that’s now a seasoned in house builder, we’ve got project management staff which brought a team lead on property management in-house that will oversee asset management for big projects, third party property managers when we hire those and then small projects will manage in-house. And so that was the whole phase to experiment, to test the model to build the systems, to build the team and get the team that was already with us more seasoned than that specific, like specialized area. And so now today we arrive at – we’re several projects into now what I call the production phase, which is having more projects and bigger projects because small projects are inefficient and they’re getting too small, there’s just not the efficiency of any particular variable that you have in bigger projects and so that’s where we find this today. So I know that answered your first question. Let me make sure I’m taking care of your second question.

Rob: Yeah. It was just about, you know, what were the challenges for the family – families at that time, what drew them to this type of a home?

Scott: That’s a great question and thank you for asking it. So, because of that background I described, we knew there was demand for family housing, right? And if you look at the marketplace generally of like most major urban metros today and going back, you know, several years, most of the developers who are in the multifamily construction space are doing studio and one bedroom, units maybe a little bit in two bedroom and they’re serving a specific demographic, which is millennial and Gen Z, depending on where they are in their life cycle, right? Completely appropriate and in fact in 2016, when we finished that group of projects that was the product we did, right? You know, downtown Long Beach, downtown L.A., sexy, studio unit for the [unintelligible 00:26:06], young person, completely appropriate marketplace to serve. But I also saw – because there’s a lot of competition in that space – when the recession came, when a recession came and unemployment was changed, that [00:26:21] in the household was going to be vulnerable, right? They lost their job and to me if you’re a young person and you move to Long Beach to get your first job, and then your job changes, well you’re out of there. And it’s completely right, like you should. That’s the right thing for you to do. Maybe move home, maybe move in with roommates, you’re going to make some move to make it through the recession, to keep your costs down and find a new job and you know, people will take care of themselves [unintelligible 00:26:47] you need to shift your housing situation in the interim, right?

So we started focusing on these families knowing that – because they had these multi-earner household structures – that any one person losing their job wasn’t going to sink the family in their capability to afford to pay the rent and because they economically share income and expenses across family group there’s a more sustainable stable model for the family to maintain, right? In fact if you look at the poverty rates of multi-generational households, that poverty rates are much less and although many people wouldn’t prefer it, right? They go; ‘Oh, I’m 22 years old, I want to move out’ but the economical reality of it compels them in some cases, or they make their own choice to, I’m going to share with my family and it’s not preferable but I’m going to live a better life. The job that I am at is going to pay for more things. Maybe I can get a car, I can be more [unintelligible 00:27:44 – 00:27:45] whatever.
So, having get all that background, what we found is that families that are renters – that are of this avatar that we described, you know large family renters – it’s interesting I always said in the early days of UTH, I told our leasing teams, like I go, look, we compete with houses, and so any family that had their choice, all other things being equal, would always choose the house. Like why wouldn’t they? They have front yard, they have a backyard, white picket fence. It’s the American dream although it’s a rental structure, right? But in [unintelligible 00:28:17] is we’ve leased a lot of these units and we’re actually leased off on some projects now here in Orange County, and soon in LA County, the families who rent, they think of themselves as renters. They don’t consider a house. I mean, it’s not – and I’m generalizing, right? It’s not like, ‘no family ever thinks of a house’, but they really think of themselves – when they approach they go, ‘Hey, I saw your five bedroom unit on Zillow or apartments.com or wherever, I saw the banner. Like we’ve never heard of five bedroom units before, like we didn’t even know that existed. That’s a common narrative that they’re in, right?
And that’s – I’m glad because I know that shows up for them and so what they finally determine is now that there’s a unit available for them where they could have their grandparent move in or their in-laws or kids can move home. Like we’re talking to a family right now at our project in Fullerton, it’s a couple who got married, remarried, and you know, the mom brings two kids and the dad brings two kids and there are two households and so they toured around and they’re like, ‘Wow we didn’t know that we could read this. Like we didn’t again know this existed.’ And so that’s one anecdotal example of it. But I think that when the family see it, I guess to answer your question, they immediately recognize the opportunity. They’re like wow, so five bedrooms, four bathrooms, two car direct access private garage, laundry room in the unit, air conditioning, most of the families that move into our units don’t have a garage, right? If you live in a standard apartment building, you don’t have a garage. I mean, when I rented apartments I never did, like a garage? Like what the heck is that, right? And so we’re providing a value of the size of the unit bedroom count plus bathrooms – so having four bathrooms and then five bedrooms is actually pretty key [unintelligible 00:30:05] if you will. But virtually all the families who move in have never had this, like they didn’t ever had a laundry room in their unit, right? That’s like, cool, right? Great. This is so much better. And of course we have to be coherent with the rental marketplace so if we still use houses at comparable, but we want to be, you know, two, three, four hundred dollars a month below that, you know, the closest comparable house, or if we can find townhouses in the market that rent that may be three or four bedroom, usually that’s the maximum we see in townhouses, we’ll use that as the comparable because we want families to just to show up and go, ‘Wow this is really great’, and the economics makes sense both from a pricing and competition for other units.
But also, you know, these families, they look at it, they go, I’ve got five bedrooms. I’ve got four earners, each earner is paying X-dollars per month per bedroom. I mean, literally when you go through the leasing conversations in the tours that’s the math they’re doing.

Rob: Wow.

Scott: Hands down, we’re the most affordable per bedroom rent in any market that we’re in, right?

Rob: That’s kind of [unintelligible 00:31:12 – 00:31:14], and that’s very interesting. You know, I’m just taking this all in. So are you looking for investors to help out with some of these projects? And explain a little bit too what that looks like.

Scott: Yeah, for sure. So one of the things – you know, historically for our development operations we normally raise capital in the institutional capital world, so, you know, your big private equity funds, institutional investors, The Carlyle groups of the world, you know, Weyerhaeuser, or these would be some names that we’ve dealt. UTH is so differentiated and for all the positives that I’ve talked about, but the product type is not for every investor, like there are some people, particularly institutional investors, they just can’t get their arms around it. It’s too different, it’s too far on the end of the spectrum. And to me, that’s fine, right? I don’t want to compete in the middle of the road where all the institutions want to be because then you’re just beaten – you’re getting beat up in trying to beat everybody else up, right? We want to differentiate.
So that has over the last three years really moved us into a different investor domain which is where we’ve basically been doing a lot of, you know, development work, I don’t mean like actual real estate but developing our digital platform knowledge base, being out the marketplace on the social media, that kind of thing. And that’s to basically get the word out about UTH as a differentiated new construction product, has this under supply characteristics, good long term stable tenant, you know, capability. And so yeah, we’re – a typical investor would be high net worth, family office, and we are always looking for new investors that we can talk to and we can help them understand the way to invest in workforce housing, what the advantages are compared to other product types.
And we compete in the marketplace so we have to do a great job of telling the story about UTH and why it would be a viable structure. So how that’s working, I mean, I think the syndication model is – I think familiar with many investors, but we form a new single asset LLC for each new project, we’d invite investors to come in and purchase membership shares, you know, typically we’re working off of $100,000 minimums per investors typically accredited. I will though share with you actually, we just actually recently made a move to put one of our projects out on a crowdfunding platform called Small Change. And we’re doing that because we think crowdfunding is the future of this business. We believe when millennial and Gen Z investors start to come into that point of their career and their lifestyle when they’re investing, that crowdfunding, online investing is already is existing, real estate sort of catching up in that domain although it’s relatively well developed for most of the big crowdfunding platforms.
But we worked for Small Change for a couple reasons. One is they have a great ethic about our workforce housing model, right? That’s part of their reason for investing and encouraging their investors to invest with us and others. As they go, hey, look, it’s a great project. It’s in Los Angeles County in California – that’s a great story, but also as the social benefit for families, right? We’re helping families live a good life through the unit type and the attainability of the rents.
And then the last great advantage of – this will be [unintelligible 00:34:41] 1491 Atlantic project on the Small Change platform is our first Reg CF raise. so we’re doing what’s called a side by side where the 506(c), you know, part of the capital raise for accredited investors, and then we have a Reg CF part of the offer and side by side where non-accredited investors will get the opportunity to invest in these projects and we’re really excited about that. Because, you know, we recognize that lots of incredible investors out there in the world but there’s a lot of investors who like the social impact story like I’m helping families, you know, it’s a double bottom line. I can help these families and make money, return on my investment. So we’re super excited about that and then we’re going to do a bunch more – Eve Picker and I are working on several projects that we’re going to put up on her crowdfunding platform, Small Change, in the next year or two I expect probably three to five additional projects, plus we’re raising capital on 1491 Atlantic now.
And then the last thing I’ll finish with is actually, we’re really enthusiastic about the tokenization space. So using cryptocurrency and blockchain structures to raise capital via secure token offerings, we’re just getting into that in the last few weeks, we’ve been tracking cryptocurrency and blockchain methodologies for raising capital in real estate projects for probably four years now. But the early ICO market in the crypto space to raise capital on really any asset was really Wild West. I mean, it was overseas, cryptocurrency platforms, you know, nothing wrong with that – that wasn’t our method of raising capital, we want to have more transparent, sanctioned structures. And so with the crowdfunding raise we’re doing with Small Change, those are all SEC-sanctioned capital raises, whether it be Reg CF, or, you know, in this case 506(c) for Atlantic. And so we’re in early discussions with basically tokenization companies or tokenization platforms where we’ll pair up our workforce housing capital raises with platforms that have – basically SEC-sanctioned, you know, say it’s a 506(c) capital raise using tokens, right.
And then what that does is it brings us into early use of the technology, cutting edge and blockchain investment – or investments utilizing the blockchain technology would be the more correct way to say it, and it gives us access to overseas investors that would traditionally be much more difficult to access, right? So, via token offering we can have somebody who’s based in Sweden who wants to buy $500 worth of tokens, can do that, right? And so it sort of has that Reg CF style of capital raise, although Reg CF and tokenization to my knowledge aren’t paired together yet, although they will be eventually. But it broadens the nature of the investment community that we can reach out to and we haven’t actually executed on a deal yet, just for disclosure but we weren’t with the crowdfunding with Small Change for probably three years to finally have the right project at the right time and that could be a fit for the timing that is needed to raise money in these new domains and we’ll do the same thing with the STO structure. And, you know, super excited about that, I mean, this is the future of investment. The future is blockchain based future, you know, we know, like a lot of institutions starting to get into the crypto space; Tudor Paul Jones, JP Morgan, Tim Draper, all those guys are making moves into Bitcoin specifically but I think that this is a signal that the adoption of major institutions is starting, which means that the adoption of these real estate based crypto capillary structures, it’s coming. I mean, it’s already happening but it’s very, very early.

Rob: Yeah, no doubt. So how does the listeners go out and find more information about what you’re doing and possibly get involved?

Scott: Yeah, I appreciate that. So I would encourage people to go to our website, it’s www.urbanpacific.com and when you get there do a few things. One, look at our investor education section. I’ve got tons and tons of articles and videos and podcasts really oriented around Investor Education, it’s generally but also specifically to the workforce housing space. Also when you’re there, there’ll be a red button on any page so sign up, click that button, that’ll get you on our Saturday email list and we put out every Saturday emails that are really oriented around market trends, economic tracking data, sharing the tools that we use, sort of our macro-economic tracking that we do really weekly. You know, I practice weekly reviewing several different data sources, websites, economists. So you know, a lot of that shows up in the Saturday e-blasts, like we want to help people sort of track the markets. I mean, we’re doing it and we’re just like sharing with people out on the Saturday email blast.
And then I would encourage people – it’s not up yet but it’s going to be up in the next couple of weeks, we’re adding a project page for open investment projects. In fact, it’ll probably be up in a week or two so Atlantic will be on there and then we’ve got two or three new projects that will be in the capital raising mode here very shortly. Rob: That’s awesome. You know Scott, you’ve got a lot going on there and listen guys; if you want to get involved and you’ve got some really nice investments that are going to be recession resilient and you have some round income up there, make sure that you contact Scott. Go to www.urbanpacific.com, check out his website and reach out to him if you have any more questions. And also in the show notes I’ll make sure and put all social media links, his website down there and all his background so you ‘ll be able to see that down there.
So, I’m out. At the end [unintelligible 00:41:06] is asking if you guys like it, if you don’t like it, either way give me your feedback, it’s always appreciated. Go out there if you like what you hear make sure you share with at least one kind of person and find Local First Podcast on just about any social media platform, just search for Local First Podcast. Scott I really appreciate you coming out and sharing your story and what you do and you’re really doing some awesome stuff out there.

Scott: Hey Rob, it’s so glad to be here and I had a great time talking with you and I appreciate all the really insightful questions.

Rob: Thank you so much, Scott.

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