548 Capital is purchasing vacant land and redeveloping it into solar farms. While solar energy can drastically reduce utility costs, the political landscape and startup costs may deter most. AJ Patton found a way to earmark solar energy for affordable housing that redevelops communities without gentrifying them. On this episode, he shares why solar energy is important, how he gained political support, and how he drives profits without drastically increasing rents.
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Key Insights
- Started with Duke Realty and went to HSBC
- Took a job for a Hong Kong firm and was there for 10 years
- Worked at a Hong Kong firm on convertible debt, ski resorts, islands, pipe transactions, etc.
- A friend called and requested $10 million to build a solar farm and then sell the energy to a Fortune 500 firm
- Asked friend about creating solar farms and selling to low-income families
- Own and operate the solar and energy into the portfolio
- Building a 9 mega-watt solar infrastructure and earmarking the energy as a discount (malls, municipalities, and buildings) – will power 1,700 units
- Energy sold at a 20% discount to the market
- Creating these farms in the city, converting old steel mill gravesites to purchase and redevelop these spaces
- Power52 is partner, founded by Ray Lewis and Rob Wallace
- Job creation and education make it easier to work with the city
- An environmental consultant put AJ together with Ray Lewis
- The goal is redeveloping communities without gentrification so current residents participate in the ascension of their own neighborhood
- The low 25% census tracts are Opportunity Zones, if you invest in these communities you can get tax deferrals on capital gains from stocks
- Up to 15% can be forgiven on the federal level
- Redeveloping 3,000 units on the South and West side of Chicago
- Doing rooftop solar on these buildings as well
- Cut the utilities by 1/3, lessens the burden to raise
- Using investor capital only, not using LIHTC (low-income housing tax credit) or TIF (tax increment financing)
- Our return profile is competitive and we’re doing the good
- It has to be housing, jobs, and education to invest in a community
- Put together a team featuring Erica Johnson to lead up construction and development and Charles Cole who was a partner on another fund
- Grew up in Section 8 Housing in Unit 548, Erika is from the same projects
Partner: Check out the Northstar Real Estate Conference on Sept. 21 and 22
Bull’s Eye Tips:
Winning Your Market: Community buy-in, let folks know the why
Tracking Market Changes: Be an open-source and be available
Daily Habit: Up at 5 a.m. and read for 50 mins
Resources:
Dude You’re Going to Be a Dad by John Pfeiffer
Best Business Books:
Wall Street Journal
Digital Resources:
G Suite
Tweet This:
“Mission alignment is key”
“The low 25% census tracts are Opportunity Zones, if you invest in these communities you can get tax deferrals on capital gains from stocks”
“We’re not interested in curating a neighborhood”
“It has to be housing, jobs, and education to properly invest in a community”
Places to Grab a Bite:
Ja’ Grill in Hyde Park
RPM Steak
Chicago Cut
Connect with AJ:
Website: 548capital.com
Twitter: @AJPatton10
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