Real Estate Entrepreneur Raises $50M Fund to Boost Philadelphia Homeownership

September 14, 2023 Steinbridge

Real Estate Entrepreneur Raises $50M Fund to Boost Philadelphia Homeownership

Philadelphia Business JournalAfter stints at Goldman Sachs and with former New York Mayor Michael Bloomberg’s administration, Tawan Davis founded real estate firm Steinbridge Group, making deals on office buildings like the infamous Watergate in Washington, D.C. He got out of that sector prior to the pandemic, before office buildings signified worry for their owners, and began buying up distressed residential properties — many of them in Philadelphia — to create affordable living options for people in gentrifying neighborhoods.

It began as a build-to-rent program, and Davis has since added a focus on boosting homeownership through a partnership with PNC Bank. Now, he’s launching a $50 million fund to build and renovate residential housing, an infusion the company anticipates will ultimately help kickstart some $1.3 billion in development projects.

The funding is part of a joint venture with FrontRange Co-GP Property Fund, an affiliate of Denver-based FrontRange Capital Partners.

The construction will happen across the country, including in Philadelphia, where Davis lives and has the headquarters of Steinbridge, which also has a New York office. Davis says he has a current pipeline of some $480 million of development and redevelopment projects nationwide, a number he says is on track to grow to $1.3 billion in the next two to three years. Locally, at a given time, about 200 units are owned or in the midst of the rehab process, he said.

Steinbridge invests between $50 million to $60 million annually in homebuilding and renovations in neighborhoods like Point Breeze, Brewerytown, West Philadelphia and Port Richmond, Davis said. The new funding will go to building in other cities as well, including Atlanta, Boston, Dallas, New York, Baltimore and Washington, D.C. Davis said that for each dollar a home is purchased for Steinbridge spends between 50 cents to 60 cents in renovations.

He said that Philadelphia is an ideal city to help people cross the threshold from renters to owners. Davis said “the band between homeownership and rentership is relatively small in Philadelphia,” unlike in New York where homeownership is out of reach for a majority of residents. The ultimate goal is to help people “walk the path from rentership to homeownership.” That means developing or renovating homes for people to rent or to buy in places that “people can’t afford the very neighborhoods they grew up in,” Davis said. Steinbridge wants to build in burgeoning communities and to offer residential space at affordable prices before high rises can price people out.

“Our strategy is to build homes for people on the backbone of the economy,” Davis said, noting that 70% of Steinbridge’s customer base are categorized as essential workers. In Philadelphia, 42% of the tenants or buyers are in nursing or the “eds and meds.”

“That is who our target base is and that’s who continues to be largely priced out of the ambitious developments that developers pursue in the current economic cycle,” he said.

A recent partnership in Philadelphia with PNC Bank helped push that mission forward. Steinbridge had the customer base and the property pipeline, and PNC brought a mortgage broker, down payment assistance in the form of $5,000 to $10,000 and other financial support like waiving closing fees and six-month bank deposit requirements, or working with people to secure a Federal Housing Administration loan as low as a 3.5% down payment. It’s Davis’ hope that programs like these, with the affordable homes he already has in the pipeline, can help people in growing communities gather generational wealth.

“We are trying to help people make an independent transition because what we noticed is a lot of people that were renting from us were very close to being homeowners. Minor credit issues were keeping them from homeownership approval,” Davis said. “Cleaning those up and being able to explain their financial situation would be the difference between rentership and homeownership, so we think that is a very impactful way to help these communities and these families make that transition.”

Davis, who grew up in Portland, Oregon, holds degrees from Georgetown University, Oxford University and Harvard University. He worked on Wall Street at Goldman Sachs, then as a real estate private equity investor with Prudential Financial. He went on to become vice president of real estate transactions for New York City Economic Development Corp. He returned to the private sector to found Steinbridge in 2016, executing over $900 million in deals on office buildings. But he saw more opportunity betting on residential real estate long-term, and giving people in middle income brackets and underrepresented communities a path to affording quality housing in urban centers.

Read the full article at Philadelphia Business Journal.