Webcast transcript
WW:Thank you Susan and good afternoon everybody.It is great to be back with the Wednesday Walker Webcast and particularly with my guests today, Bobby Turner and Chris Paul.
A couple things before I turn the discussion over to Bobby and then Chris is going to jump in and join us in a little bit.Over the past couple weeks everybody thought that we were going to see another Cares Act or a Stimulus II.As some of you who joined us two weeks ago know the three industry association heads that I had on the Walker Webcast all predicted that we would have another stimulus bill somewhere between $1.5 trillion and $1.75 trillion done by August 15th.It's very clear that we won't have another stimulus bill done by August 15th today and a lot of people are now kind of scratching their heads sort of saying, okay, the supplemental unemployment benefits have run out, the eviction moratorium has run out and how long can the 20 plus million Americans who are still unemployed get by without another stimulus bill being put out there and approved by Congress.
I would say that things were actually looking quite good until last Thursday.I was getting updates on a pretty continuous basis that were looking like the additional stimulus was going to be $400 per week and potentially higher, that there was going to be the one time check with another $1,200 and that there was actually also going to be a rental assistance component to the bill.
So last Thursday morning things looked quite good and then as everybody knows pencils sort of went down last Friday and subsequently there's been very little either work or negotiations taking place on whatever you want to call it, Cares II, Heroes Act, what have you.Interestingly the NMHC rent tracker that follows the rent payments for the first five days of the month actually is holding up very strong, less than 200 basis points below where it was last month in the high 70%, and I would put a big asterisk on it because given the way that rents are being collected today, the first five days of the month really tells you nothing.But at the same time, it is a data point, and it is showing that people still have money to pay their rent.
But what we have seen since the onset of the pandemic is that rent collections aren't on a typical cycle of the first 15 days of the month.That most people are getting to sort of somewhere in the 75 to 80% range in the first 15 days of the month and then collecting that additional 10 to 15% towards the end of the month getting many multifamily owners up into the 95% of rent collections since the pandemic began.
I think that getting something passed within the next two to three weeks will be extremely important.I'd be hard pressed to think we don't get a bill by the beginning of September and I think that everyone is very understanding that the executive orders that President Trump signed last weekend only go so far as it relates to sustaining this economy.And that while the supplemental unemployment benefits are very much needed, the extension of the eviction moratorium which the President asked HUD and FHFA to study is not an executive order.The extension of the eviction moratorium is right now being looked at by regulatory bodies, but the President did not sign any type of legislation or executive order to mandate that the extension of the eviction moratorium continues to go forward.And I would just reiterate that Walker & Dunlop and other industry members have been very straightforward in saying that the eviction moratorium should not continue forward, particularly if the federal government steps in with some type of increased unemployment benefits as well as some type of rental assistance program.
I mentioned in our earnings call last week that our investment sales pipeline has actually gotten very busy again and I put out to the market that we only did $450 million worth of multifamily investment sales in Q2 and that we currently have about $1,300,000,000 to $1,400,000,00 of deals that are going to close in Q3.I think it is very interesting that the pricing we are seeing on many of the deals that we were marketing pre-COVID on deals that we now have under contract are at or just slightly below pre-COVID pricing.And I think many people that we’re talking to are surprised that the deals are getting done at a 2 or 4% discount off of pre-COVID pricing and I think the big driver there is obviously the cost of debt and the cost of capital.We did a 10-year fixed rate loan last week, 65% LTV at a 213 coupon rate which for a 10-year fixed rate loan full term IO is unbelievably cheap capital and so buyers of properties right now who are getting conviction to move forward at where cap rates were essentially pre-crisis are doing it because they picked up anywhere between 75 and 125 basis points off of pre-COVID pricing on their cost of debt.
Final thing before I turn to my guest Bobby and we dive into Turner Impact.I had thought at the beginning of the crisis that banks were going to get hit generally speaking in Q3, first in consumer credit defaults that would then lead to C&I defaults, that would then lead into commercial real estate defaults and then we would start to see banks pulling back from a liquidity standpoint.I found it to be extremely interesting, and many of you probably saw the article last week in the Wall Street Journal, talking about the fact that outstanding credit card balances in America have not gone up but have actually gone down by $100 billion since the onset of the COVID crisis.American consumers are taking the stimulus money that was given to them by the federal government and they are paying down their credit card debt, they are not increasing it.The question I would say is with no new stimulus bill how long can they continue to do that before they get back to tapping into their credit cards.But I thought by now you would see consumer credit starting to really pinch the banks, and the article in the Wall Street Journal last week would tell you it's actually the opposite, that consumer credit outlook is actually far better today than it has been in quite some time.
So with all that as my preamble on the general markets let me turn to Bobby.Bobby it is a real pleasure to have you here today and I want to thank you personally for bringing Chris on as well.You went to Wharton where you currently sit on the board and I would commend you and the other board members for bringing in Erika James as your new Dean of the Wharton Business School.When you graduated from Wharton you went to work for Drexel Burnham Lambert and then you went to become a partner at Canyon Partners, one of the world's largest alternative investment management companies where you oversaw all of the firm's real estate investments.Yet in spite of all this success I've repeatedly heard you say that for the vast majority of your career you've struggled at being a capitalist, but you’ve also said to me that you struggled at being a philanthropist.Help me understand what's going on inside of your brain Bobby as it relates to this struggle between the capitalist world and the philanthropic world.
BT:That's funny Willy, that's exactly the question my therapist started with about 20 years ago.You see earlier in my career I was your typically singularly focused Wall Street capitalist as well as your optimistically naive philanthropist and I struggled with both.As a capitalist, as you mentioned, in the 80’s I worked for Drexel Burnham Lambert where I was a liaison between the derivatives group and the high yield group structuring all sorts of currency and Commodity Index bonds.And after Drexel failed I eventually went on to become a partner at one of the world's largest alternative investment managers, where over time I realized that making money as the primary, in fact the soul metric of my accomplishments, was just not enough for me.
So in a desire to gain some balance, maybe to have a positive impact on other people's lives, I started increasing my focus on philanthropy where I also struggled.As a philanthropist, I supported a myriad of organizations, nonprofits focused on social justice and equality and I quickly came to the conclusion that the vast majority of organizations that I was funding were really only putting band aids on issues; they were reactive not proactive, they weren't accountable either financially or socially, and in many instances I found myself just funding legacies of dependencies.
So nearly 20 years ago I came to the conclusion that if you wanted to treat a problem in society then the government and philanthropy were just fine, but if you wanted to cure, really cure you had to harness market forces to create sustainable, durable and yes profitable solutions and that's when I evolved into what I now call a social impact investor.
WW:So as you evolved into that - I mean what is social impact investing and why is it so important?In other words, it sounds like it's a hybrid between the capitalist world and the nonprofit world.Talk for a moment about social impact investing and why it is so compelling for investors to put money there rather than just continue to give to nonprofits as you say their models might be less than forward-looking and less than solution solving.
BT:It’s a really good question because impact investing is definitely something that's become fashionable to talk about.In fact, my kids tell me it's trending strongly on Twitter and Instagram but not so much on Tik Tok. I also think it's something that's widely misunderstood.So for those who are unfamiliar with the term I think it's easiest to start with what social impact is not.First of all it's not an asset class.As an investor one doesn't have a portfolio of stocks and bonds, private equity real estate, and social impact investing.It is not philanthropy.It is not a new economic system that will replace capitalism and, if done correctly, it does not come at a sacrifice in yield.
At its core, simply put, impact investing is a strategy, a risk filter, based on the premise that making change both financial and social is good for business and businesses that seek to do both Willy will outperform those that don't.Social impact recognizes that doing good and doing well needn’t be exclusive and in fact the interdependencies between profits and purpose can actually drive better risk adjusted returns because it's not based on speculation. But most importantly, to your point here today, social impact is business as a force for good.I think we can all agree that this country is in desperate need of a force for good to address some of the most pervasive social challenges in a sustainable scalable way.And the reality is that our reliance on the government to provide a fundamental social safety net, a clear path to prosperity for millions of families who are living in survival mode, it's actually handicapped our outcome relying upon the government and we need to look at an alternative source of sustainability and that is business as a force for good or social impact investing.
WW:Your first fund was back in 1998 and you partnered with Magic Johnson to get commercial real estate capital going to America's inner cities.First of all you picked a great partner but talk for a moment about - I mean this is 22 years ago and you just outlined how needed this is today in 2020 – and you're talking about 1998 you're going into the American inner cities with Magic Johnson to put money into retail.Talk for a moment about raising the capital around that and really at that time introducing the concept of social impact investing.
BT:It is true that my first initiative was 22 years ago back in 1998 when I launched a series of funds with Magic Johnson called the Canyon-Johnson Urban Funds.Back then I just saw a huge opportunity to invest in densely populated ethnically diverse communities characterized by strong population growth.Huge mismatches in the supply and demand of things like community serving retail, affordable home ownership or rentership and proximate health care and educational infrastructure.Also important was the scarcity of institutional capital because the misperception of the risk associated with investing in urban communities, communities of color and immigrants.Back then, candidly Willy, I wasn't calling it social impact investing, I was just calling it smart investing.
When Magic and I first sat down to discuss a partnership we agreed on almost everything out of the box except for how long it would take to raise the first fund.I actually thought it would take six months based upon the misperception of the opportunity, based upon the compelling fundamentals, based upon our track record, and based upon his notoriety, it would clearly only take us six months.He looked at me and thought it would take two years.He felt that the misperception of the opportunity, possibly even the racism within institutional capital, that it would be a very, very Herculean task to raise money and it would take years.And the fact is, had you bet on both of us you would have been right because it ended up taking us two years and six months to raise our first fund.
So no it was not easy and let's start with the basic premise that most investors do not believe that profits and purpose can play nicely in the sandbox - one must segregate the two.That anytime you superimpose a social return upon a financial investment you're going to sacrifice yield.Well the fact is, now 22 years into it, I'm in a unique position to refute that and for the last 20 years we've actually proven that investments in social change, investing in hope, doesn't come at a sacrifice in yield and in fact, if done correctly, it can actually drive better risk adjusted returns than more traditional strategies because it's just not based on speculation.
We're not trying to create demand, rather we're focused on opportunities where there's an existing demand that's going unmet and it's growing, its large - think education, think housing, healthcare, think access to clean water or air where the demand is less correlated to the broader indices and where opportunities are misperceived or difficult to underwrite and require unique skills and, most importantly, where the traditional investor has been either the government or philanthropy.
WW:So, Bobby, you're now - as you talk about yields and raising funds on the Canyon-Johnson Fund, you've now taken six years to build Turner Impact into a multi-billion-dollar fund manager.It's the world's largest impact investment fund with over 250 employees, 90% of which are diverse and 51% women.Talk for a moment about how you pulled together such a diverse team at Turner Impact and why that diversity is so important as it relates to your analysis of opportunities, your management of assets, and the future growth of Turner Impact.
BT:I think it's important to start off by recognizing that investing in social justice requires more than just the traditional skill sets of an investment manager.Investing in hope doesn't come at a sacrifice in yield but let's be serious it does come with a unique set of skills that are necessary to identify, quantify, and mitigate risk.
When I partnered with Magic over 20 years ago, he told me two words would clearly define investments in underserved communities and that would be arrogance and distrust.Arrogance from providers of capital who because we were smart and had the capital thought we knew how to solve the problems of social injustice, and distrust from the communities that candidly suffered the injustices who believe the capital was there just to make money.
So effectively what I've learned over the last two decades is that the only way to bridge that gap between arrogance and distrust is by building an investment team that is from the community and intimately knowledgeable of the issues.I feel that sympathy is strong, but empathy is a much more powerful underwriting tool.
So with this in mind as you mentioned, in the last six years we built Turner Impact Capital to 257 employees of which we are 90% diverse, meaning non-white men.We are 50% women, meaning I guess non-men and we are 100% fanatical about harnessing market forces.And our diversity doesn't stop at race or gender it also expands to issue expertise. Where in addition to recovering bankers, we also have former public school superintendents, we have primary care physicians and law enforcement agents, we have colleagues who grew up in public housing each possessing unique knowledge that’s critical to quantifying and mitigating the risks of both financial and social investments in underserved communities.
WW:Bobby for a second talk about what I would call the magic to your model in the sense that you're supplying workforce housing.There are many people who have a model as far as workforce housing which is let's go buy a C, turn it into a B and keep the prices somewhat at market rate and I’ve created “workforce housing.”You've gone far further than that as it relates to the amenities you're providing and the team at Turner Impact and the skill sets that they have from law enforcement, from healthcare, from education.Talk for a moment about what you're providing at the property level and why their skills are so important to your model being so successful.
BT:It's a great question.Let's talk about one of today's most daunting challenges because the reality is as a society people are now talking about what our biggest challenge is. And by the way, we have some incredible challenges in this country - over 40 million Americans are living on food stamps, 78% of American families are living paycheck to paycheck, only one out of three students are proficient at grade level in public schools and last year we spent nearly 20% of our GDP on healthcare and, candidly, that's number one in the world but yet our healthcare outcomes in the bottom quartile with infant mortality is rising and life expectancy decreasing.So daunting challenges actually present generational investment opportunities, which is impact investing, and I think one of our biggest challenges is affordable workforce housing.We have a very innovative model as to how we address it with a sustainable market driven solution without driving rents on the very consumer who sees no wage inflation.And if it's okay with you Willy, I’m a visual human being so I thought maybe I could share some pictures to help sort of embellish what the opportunity looks like in the world.
When I'm talking about workforce housing, I'm not talking about low income housing for those who earn below 60% of the average median income, I'm focused rather on those who earn between 60 and 100% of the AMI.These are essential service providers like policemen, teachers, firemen, healthcare workers and municipal workers who candidly make too much money to qualify for subsidized housing but not enough for luxury rental or homeownership.And I think that we can all agree that everybody suffers – communities, household wellbeing, the environment and worker productivity - all suffer when housing, affordable housing is not proximate to employment, education and healthcare resources.
Let's start with the fundamentals.There are 43 million renter households in America today.That will grow by over four million over the next 10 years, primarily immigrants and communities of color.One out of two, nearly 22 million renter households are rent burdened, spending over a third of their income on rent.One out of four, nearly 12 million are severely rent burdened, spending upwards of 60% of their income on rent and Willy that's coming at the expense of food security, health security, retirement security and it's just not sustainable.
So for all of us investors the obvious solution is just to build new affordable workforce housing but unfortunately, as many of us know, the solution is not that simple.Given the cost of land, labor, and hard costs a for-profit developer cannot build new construction, charge an affordable rent of say 30% of the average median income and make a market rate return.In fact, in most major MSA’s those parameters yield less than a 2% return.So the problem is huge, the demand is growing, there's no new supply, and as you mentioned what’s most disheartening to me, and I know for Chris as well, is the fact that our existing supply of workforce housing is shrinking because every time B and C properties or subsidized properties are coming off a compliance period when they come to the market they’re being purchased by opportunistic investors who are either demolishing the properties to build new construction or they're being purchased by opportunistic investors who are improving the properties and increase rents in the very tenant with no wage inflation.
And while I haven't yet figured out how to build new product and generate market rate returns, I have been able to figure out how to buy the existing stock, preserve its affordability and at the same time generating market return for investors.So let's just agree, if we want to generate market returns but don't want to do it by increasing rents than our only option is to do what, and that’s reduce expenses.If I've learned anything over 20-30 years investing in urban communities, it's the biggest expense of workforce housing is turnover.Let's be serious nobody works two jobs a day, comes home to a shoddy apartment in a shoddy neighborhood, spends 60% of their income on rent and screams “God I love living here!”
The fact is that there's no pride in rentership which leads to a transiency and an average lease duration of 24 months.So our business model is based on a very simple idea, that if we can create a pride in rentership, by enriching a community with relevant community services and by maintaining costs or rents at an affordable level, our tenants will stay longer and treat the property better, which in turn drives down maintenance costs, insurance costs and economic loss, which enables us to drive profits without increasing rents.So in practice, every time we buy a property we set aside a percentage of our rental units and we subsidize housing for relevant service providers who in return for reduced rents provide essential services that help build a sense of community, services that are essential to upward mobility and hope.
The first thing we do is we focus on education where we recruit teachers, many from the schools that we built in our Turner-Agassi Charter School funds and in return for reduced rent the teachers oversee educational programming tailored to the community makeup.Things like after school tutoring for children and English as a second language for adults. The second thing we do is we recruit law enforcement agents, and law enforcement agent families, and the currency that they'll pay us instead of rent is they'll park their squad car out front of our property which is a real disincentive for a drug dealer to want to sell drugs within our property. They have to live in the building, they have to make their presence known, and they have to organize and oversee community watch programs.And finally, healthcare where we recruit healthcare workers to oversee health fairs, exercise classes, and in this photo you'll see kids excited about getting their annual flu shots.And while our tenants are paying a lot of rent Willy, none of them could afford to pay for additional services, leading to the simple fact that unless our tenants have to move, they don't.
So while enriching a community is interesting in theory to me and to Chris, let me give you a few encouraging metrics.In the last five years, we've purchased 28 properties comprising just over 10,000 units.To date we've enriched our communities with over 80,000 program participant hours of education, safety and health care programming.And to date we've driven tenant satisfaction rates from below 30%, to today they sit at 95%.And in turn this newfound satisfaction of pride in rentership has led to an increase in profits in the way of a 30% increase in lease term, people are staying longer.A 30% reduction in incidences, people are treating their properties better.A 17% drop in economic loss, all leading to a nearly 8% growth in NOI exclusive of taxes and insurance and a 10% forecasted return net to investors all without increasing rents.This is doing good by doing well, what we like to call impact investing.
WW:That’s great, Bobby.So, we saw the picture in there that Chris was in and Chris has now joined us.First of all Chris it's a real honor to have you joining us today and I greatly appreciate you taking the time particularly given that you have a game later on this evening against the Heat, but thanks for being here and for joining us.
I want to broaden the conversation here a little bit and just what brought you to sort of partnering with Bobby and Turner Impact?And clearly there's that picture of you, that's a great photo op, it says a lot about your involvement in it.But what was it that said to you hey Turner Impact is where I want to spend some time and put some money?
CP:First and foremost, Willy, thanks so much for having me, I really appreciate it.I do have a game later – wish us luck, we've been having a lot of guys out with bumps and bruises.But me and Bobby met some years ago and even though he can't shoot a jump shot we did have a lot of things in common.I think one of the biggest things we had in common is that we wanted to see change and just through the discussions that we had and everything that Bobby just talked about.I remember the first time I heard it.I was sitting there, I was a young guy trying to learn, and trying to basically find my footing and find my voice.And I've always said this and I'm blessed and fortunate to have two parents, a mom and a father who always taught me that basketball is an amazing tool but to tell you the truth if I'm remembered as being a great basketball player then I have not done much.With the Impact Fund it is all about impacting others and these communities that I've come from, that I've been around, and trying to make real change, sustainable change and, yeah, I could talk for days.
WW:I know you could.So a couple of quick things here.The Social Change Fund which you and Carmelo Anthony and Dwayne Wade are three of the key investors and protagonists there.The mission is to partner with organizations that work to accelerate social change and sustainably build a fair, equitable society.Given that as the backdrop Chris what kind of organizations are you - I mean the issues of racial justice is so broad.You sit there and you say, okay, we’ve got to focus on education, we’ve got to focus on health care, we’ve got to focus on criminal justice.There are so many different components to making it a more equitable world.Where are you all with the Social Change Fund focused as it relates to moving the needle, if you will?
CP:What we've learned, and we're so lucky to be seasoned basically in the league, so we're a little older than other guys, what we realized is that when you play a team sport you always have coaches that always say if you want to go fast go alone, if you want to go far go together.You have those coaches and they talk to you about if you run into a wall like this, you’ll probably break down but if you come together with a fist, you're a lot stronger.Me, Dway and Melo have been close for a number of years, we've had over a 15 to 20 year relationship and we've done so much as individuals so we were like what if we come together with this Social Change Fund and that way there's not just one of us individually trying to do something.If we come together, we can be that much stronger and we can tackle these different issues, whether it be social justice, whether it be police reform, whether it be education, whether it be housing, whether it be these food deserts.
And that's what happens so much in our leagues, in professional sports, even just as humans, we all have to put our egos aside because it's such a copycat world.It's like I can do this, I can do this, instead of people saying we can do this.So I think that's what I'm so excited about with our Social Change Fund is to see us come together and realize that it's not about any one of us individually, we want other people's input, but like we said we're products of these environments, these communities and we've done the work, we've done the work in the past so we trust and know that all of us have a common goal.
WW:It's interesting on the Social Change Fund and you coming together with other stars who all have their own, in many instances, foundations like you do with the CP3 Foundation.You've been wildly philanthropic well before getting into the Social Change Fund and you focused on Katrina relief, you focused on funding historically black colleges and universities.Talk for a moment about how hard it is to kind of bring everyone together, to your point of you set what CP3 Foundation is going to do, the issues that you focus on are things that are dear to Chris Paul's heart.Now all of a sudden you're coming together and I think of it to some degree - and Bobby I want to bring you in here too – but I think of it a little bit around the giving pledge where all these billionaires sat there and said we all have our own foundations but Bill Gates sort of said well if we kind of put us all together we can actually start to try and eradicate polio across the world.And Warren Buffett sat there and said yeah I can have my own issue but I want to put my billions in with the Gates Foundation so we actually can go really make a difference on some health care issues that are confronting the world.How’s it been sort of combining forces, if you will, and do you think we'll look back on this and see this moment in time as sort of a seminal moment where all these disparate efforts come together to really try and create social and racial change?
CP:Can I say one thing before you talk Bobby, and just to talk about you for a quick second Bobby.It's hard to talk about you with you right here listening but I will say this.Just like most professional athletes when I came into the league I started a foundation, I was refurbishing basketball courts.We've done a lot of amazing work.We went into inner cities and went into Boys and Girls Clubs and put up computer labs and repainted and did different things like that but I'll never forget a conversation that I had with Bobby and he was like that is amazing work but in order to make sustainable change it costs real dollars.You can't just go into certain locations and basically just put band aids on real issues.So that was one of the biggest things that I learned and that has a lot to do with my partnership with Bobby and what I've been able to learn is that you really have to get in there and make change.Like with the housing developments - you can't just go in here and say, hey, we think about this, we think about that.No, people want to know that you're really putting in the work.
WW:Bobby, do you want to jump in.
BT:Well, first of all, I’d like to say that I actually have a pretty decent jump shot, some people would call it a layup, but I’d call that a jump shot for a guy below six feet.
Listen, we have an incredible opportunity.Even before COVID the social commentary in this country was pretty abysmal with regards to the disparity of opportunities and while the country likes to talk about and be divisive in the sense that the biggest challenge we're facing is the disparity of wealth, Chris and I both agree that that's not the problem.Poor people do not hate rich people.Poor people want to become rich people. What poor people hate is when rich people create a society of oppression which forecloses poor people out from a clear path to upward mobility.
So, we have two incredible forces that have collided.We have a civil rights movement that was catalyzed by a series, decades long of injustices.But George Floyd’s murder that corresponded at the same time as a global pandemic allowed this country to sit back and to really assess where we are and what our moral fabric looks like, so we have an incredible opportunity.
On COVID, when you add to the equation COVID it's going to further exacerbate the disparity of opportunities.We do know that this pandemic is going to highlight just how fragile our most vulnerable populations are to economic, political and unforeseen emergencies and as I said before the fact is that there’s just tens and tens of millions of families whose economic, educational and healthcare outcomes are pre-determined by where they’re born.These are families living paycheck to paycheck in survival mode and it's just not sustainable.
And as we all agree, I think, is while we've historically looked to the government to provide a basic social safety net that affords lower income communities a clear path to prosperity, I think we can agree that the government has failed to address key issues like education, housing, and affordable health care, and I think we can all come together as a community and recognize that upward mobility is a three legged stool.Unless we infuse hope into communities, give them a clear path to prosperity through education, housing, and healthcare that three-legged stool will fall over.So while Chris and Carmelo and Dwayne Wade and Willy and myself all have different philanthropic endeavors, I think we can all collaborate together and recognize that three critical issues are essential for us to right this listing ship of social justice in this country - education, housing, and healthcare - and recognizing the interdependency between the three.
WW:Chris, you mentioned coaching and you talked about you can do it yourself or you can come together as a team and go through it.My friend and Walker & Dunlop board member and founder of Management Leadership for Tomorrow, John Rice, has used the analogy of a career in basketball versus a career outside where in the United States if you are a young talented basketball player you are going to get access to the very best coaching, the very best mentoring, the very best facilities to guide you through that development path.And from having gone to West Forsyth High School in North Carolina, to going to Wake Forest, to then getting into the NBA, you clearly lived that path of getting the very, very best coaching and training that you could get and it didn't matter the color of your skin.But if you go outside of the basketball world in the United States that's not the case, and in many instances, it actually works against you.How can we take, if you will, the basketball model and apply it to other parts of our economy and our society?
CP:Well first and foremost you’ve got to try to level the playing field.So even though I went to West Forsyth High School I was just like a lot of other kids to a certain degree.I actually grew up in a two-parent family household.A lot of kids aren't fortunate to have that.I was fortunate to have a dad who was my coach a lot of my childhood growing up.
But it's one of those things, when I talk about leveling the playing field, I went to public schools all growing up and I'll tell you a quick story about my own kids.I'm a parent of two.I have a daughter who will be eight in four days and my son is 11.I missed his birthday because I'm in the Bubble, but I love him to death.
But when my kids were starting school I’ll never forget, me and my wife were taking a tour of the school and I was walking around the school and I was mesmerized.We walked in and they were like this is our smart board, this is the library just for the lower school, and I saw all these iPads and these Macs in the classroom, and I was blown away.I was like, this is for kindergarten?I was blown away.I remember walking around and I tapped my wife and I was like this is blowing my mind.I was like, yes, I feel blessed and fortunate that our children will get this but what about the kids on the other side of town, why aren't they getting this same type of environment?So that day, I'll never forget me and my wife we started putting learning labs and learning centers in underserved communities because how are we expecting these kids to get these different opportunities if they're starting so far behind.So when you say that as far as coaching, I don't know the answer and I'm working to try to figure it out but that's one of the biggest things that I think we're working on is trying to make sure we level the playing field and that's part of why I do so much work with HBCU’s, Historically Black Colleges and Universities.
I went to Wake Forest University, unbelievably grateful for it, had an amazing time there, and I'm not where I am without going to that school.But as I've gotten older, I've gotten a lot more educated on the schools that my in-laws went to, everyone in my family went to HBCU’s except for me, so that's why I'm so passionate about it.I just had a conversation with my mom and my dad this morning and didn't know until today that my mom was supposed to go to North Carolina Central University but, somehow, she fell in love with my dad.My dad went to Winston Salem State for two semesters and dropped out of school.It’s history and the more I feel like me, the more I learn about it, the more I think I can help the next generation going forward and making sure my kids understand how important it is.
WW:A couple of weeks ago Chris I had on Dr. Wayne Frederick, the President of Howard University on the webcast and one of the things that I talked to him about during the webcast was that, as you probably know, Makur Maker who is a top 20 high school basketball player is actually going to Howard next year.And obviously the basketball season is TBD so we may not see Makur play in his freshman season.Let's hope we can get a basketball season on the back half of the year for the NCAA.But my comment to him was how amazing that a high schooler has taken the leadership and initiative to try and put HBCU basketball programs on the map as it relates to top basketball programs.Because if you think about the money in top basketball and top football at the collegiate level, if you and other star athletes could endow and help get players like Makur Maker to go to those schools, you could fundamentally change the competitiveness of those schools, get them on to CBS Sports on Sunday afternoon or Saturday afternoon, and change the overall economic outlook for HBCU’s in a very short period of time.And it's interesting that here - first of all, your support of them is fantastic- but then, second, here's this high schooler who sort of took a big leap of faith and turned down Kentucky and UCLA to go to Howard and I'm hopeful that he’s sort of the tipping edge of a real movement to be able to, if you will, keep those economics at those schools or create those economics at those schools.
CP:Willy, I'm telling you, everything happens for a reason, everything happens for a reason.Everyone is, they’re a lot more aware now of everything that's going.Companies are being evaluated to see if there's diversity there.Everything is really being highlighted so when you talk about that when it comes to sports - even just to tell you a quick story.I know you’re Harvard, Bobby is Wharton, I mean all that good stuff.I was so blessed and fortunate to go to an unbelievable class at Harvard Business School with Anita Elberse as the teacher.I went to this class and it was a class on sports, business and education, and it was amazing.I was there, and for me I did the research and I was like why aren’t classes like these offered at HBCU’s.So along with Anita last summer we started that course at North Carolina A&T, an historically black college.So when you talk about Makur or whatnot and his leap of faith and a kid named Mikey Williams who I talk to on a regular, who's thinking about maybe doing the same thing, a lot of this stuff comes down to finance.A lot of these schools aren't properly financed and that's why you have to do the research and the education.There are 107 historically black colleges out there.A lot of them aren't financed properly so a lot of these kids, especially when I was growing up, you didn't feel like you could go to an historically black college because you wouldn't have been seen.But now with the world of social media or whatever it may be, if you're good they will come, they will come.These networks will show up at those schools and these kids need to know that going to an historically black college does not make you any less than anyone, because that is somewhat of the perception, so we have to change that and I want to be a part of that change because it's time, it's time.
And speaking of Howard - I'm sorry, Willy, last thing.Speaking of Howard, Mrs. Kamala Harris, who is now running with Vice President Biden, she went to Howard and I just think that is so special.And I think a lot of times people are like he’s just saying that because she's black.No.It's actually the 100-year anniversary of the 19th Amendment, so how special is it that this is all culminating at the same time.I'm sorry, I had to say something about that.
WW:No, look, I want to turn to Bobby on education but one thing that I would say to you Chris, you were one of the hundred black leaders, black male leaders, who wrote a letter to Vice President Biden saying not just a woman, but an African American woman, and I just want to say congratulations because your letter clearly had some impact and, if you will, you got your wish.But you pointing out that she is a graduate of Howard University - when I introduced Dr. Frederick and was talking about all of the incredible graduates who have come out of Howard University, Senator Harris was on my list of noteworthy Howard graduates.
Bobby, let me turn to you for a second on education because Chris talked about the disparity between, if you will, the public elementary school where Chris went to school and the school where he now has his kids. You've partnered with Andre Agassi and gone out and built 117 charter schools across the country, that are today providing education for 60,000 kids.Talk for a moment about - first of all it's so noteworthy and laudatory what you and Andre have done as far as taking your model and playing it out across the country.Just a moment on why education, why partnering with Andre.And then the other issue that I have for you on a more technical basis is why haven't you partnered with one operator of these charter schools like KIPP because if you look at your portfolio of schools you have distinct operators - I know you have a number with KIPP - but you also have a ton of other operators.Why haven't you sole sourced on one operator rather than going and finding the best in class market by market?But go to the broader question first, if you would.
BT:Well I think, again, if we go back to what's essential to providing clear path to prosperity to communities of color and immigrants, education is the foundation of everybody's opportunity and the fact is that the American public education system has failed underserved and neglected communities for decades.Again, when we look at cities like Baltimore or even Los Angeles when only one in three public school students are proficient at grade level that is a failing grade.
Andre and I came together about a decade ago to try to instill some degree of competition into the traditional monopoly of public education with charter schools.And while charter schools aren't the panacea to public education, they're part of the solution creating a portfolio approach to providing quality education particularly in the underserved more neglected communities.As you did mention, we built 117 schools over the last seven years serving 60,000 at-risk kids.The vast majority are minority and qualify for free and or reduced lunch under the Department of Agriculture’s free and reduced lunch program.
It is critical that we provide children the opportunity to thrive and it's criminal when we deprive them of that.We have basically selected a group of high performing, best in class charter schools, and empower them the opportunity to scale.Again, I go back to being a visual human being - these are the kinds of schools that we've been able to build over the last number of years across the country.This one happens to be a KIPP school in San Antonio. These are the kinds of children whose lives you get to change on a daily basis.What I like to say is that this is what an eight and a half percent return looks like on your money, but this is priceless, the number of children's lives that you can change with education.
CP:And that's better than any All-Star game, whatever, I don't care what it is, that right there, that's powerful.
BT:So again, Willy the reason that we haven't just partnered with KIPP and we’ve selected a number, each school has its own particular mission, its own particular criteria, and curriculum and own particular way of advancing education for kids so we want to have like any smart investor a diverse portfolio of high performing charter schools.The business models -obviously we need to make money while changing things at the same time.Our business model is we are a bridge to ownership for these great charter school operators.We build incredible environmentally and learning from these schools for best in class operators.
We enter into actually long-term triple net leases.As Chris and I, as I've always talked about, our job is not to speculate, that's not what impact investing does.We find opportunities where existing demand is unmet. We know that there's a million kids on a waitlist for a charter school today in this country.At $17,000 a school seat, it's a 20-plus billion-dollar investment opportunity for us to go out and make money and at the same time make meaningful, scalable, and sustainable change for these children.
What we do is we build the schools, we enter the long-term leases, but once that school has four or five years of both academic and financial performance, what we do is we empower and enable that operator to purchase a facility from us.So we've got this built in exit strategy but more importantly, we're empowering that school to get away from paying rent and get towards maybe paying a mortgage, maybe a mortgage that we've sourced at Walker & Dunlop, so that rather than paying that rent they’re building enterprise value with amortization of their debt over the subsequent 20 or 30 years.
WW:Bobby you mentioned scale a number of times.So probably about, I don't know, probably 10 years ago, maybe a little less, I was in Washington DC at an event to celebrate two gentlemen, two Princeton grads who started a charter school in Washington called the Seed School.And we were raising a glass to them for all the success that Seed has had, and I want to say that at that time, Seed had had 5,000 kids run through Seed.And you sat there and you saw the pictures that Chris just talked about - a huge accomplishment and feeling like these kids are going to have a shot.And then Arnie Duncan, who at the time was the Secretary of Education, basketball player as well as you know, stood up and said it's great to see what Seed’s done and when I was running the school system in Chicago which has 350,000 kids in it, and then he went on and on, and I sat there and I stopped and I said hold on a second, Seed over a decade has touched 3,000 to 5,000 kids and the public school system in Chicago has 350,000 kids in it, how do you scale this model to have an impact on the Chicago school system?What do you - I mean 117 as I said in the beginning is a huge accomplishment but how do you scale this model?
BT:A lot of it has to do with politics.There is the perception that charter schools are a challenge and or the enemy of the public school districts but the reality is that charter schools are public schools they just operate independently from the school districts and the school unions so a part of this is having a conversation that we’ve got to all agree and again I will not say that charter schools are the solution - they're part of the solution. The reality is the vast majority of charter schools do not out-perform the public school districts, but what we all need to do in public education is recognize that conversations has got to be about children and not about adults.So for us, and when we were talking about what Chris is going to do with his new fund, is we have got to fund advocacy programs to make sure that politicians, that everyone involved in providing a clear path prosperity for children, make sure that the conversation and the dialogue is always about children first and adults second.
WW:So. we've got about 10 minutes left and I know there are a lot of people who are listening today who want to get a sense of what it's like in the Bubble.So Chris just a couple things, and I want to keep this very interactive Bobby so as I turn to Chris and sort of basketball for a moment, please feel free to jump in because the broader issues that we're talking about are so incredibly important.
But Chris one of the reasons - I've read a bunch about the success of your team so far this season and a lot of it people are pinning to you and the leadership that you provided for your team.I'm just curious, is there anything that you've been able to do in the “Bubble” setting with your team that you wouldn't have been able to do if you were on a normal living-travel schedule and moving around the country to kind of provide the leadership and bring your team together in a way that has quite honestly defied all odds as it relates to how well you guys would do in the restart of the season?
CP:That's a great question.We probably went to a couple, we had a team dinner last night, we have a team dinner before the first game.One of the things that you learn about being on any team, whether you work a nine to five job and you always go into the office, there's something to be said about missing each other.So over the course of a season we're around each other more than we're actually with our actual family.So what happens is you see each other, like we'll have a game on a Monday, practice on Tuesday, game on Wednesday, practice on Thursday, then we may have a day off on Friday.So usually during the course of a regular season that Friday you may not see any of your teammates so when you come in on Saturday, you’re like hey man what did you do yesterday, like I missed you.
In this Bubble it’s a little different because you see everybody every day. so we've all sort of had our good days, you have your bad days, but you understand because even on an off day - like we had an off day yesterday but we’ve all still got to go to the meal room, we’ve all still got to get tested, so you’re still seeing each other.
I think the biggest thing is, even aside from my team, because I am the President of the Union of the Players Association, what has been one of the nicest things is there have been a couple times when I had a chance to get a lot of guys together.Usually during the course of a season you just pass guys, hey what's up, good luck, see you all on the next trip, but I've gotten an opportunity to get to know a few guys that I never would have had an opportunity to get to know.So there's been real discussions about what our league looks like going forward.Everything that you guys see, whether it be the anthem, whatever it is, it's always a conversation so trying to continue to get guys together.
I was very blessed and fortunate to do a call a couple weeks ago with Michelle Obama.She got on a call and talked to our players along with the WNBA women just about voting and the importance of voting.We had an opportunity to talk to Tamika Mallory and Brianna Taylor's mom.So everything down here is about how can we play this game that we love but also keep the social injustice issues on everyone's mind.And I know it's funny because I get to talking about our Turner Impact fund and I see how guys get so engaged and that was a huge reason why I wanted to be a part of it too because I was fortunate enough to meet Bobby and to find out all of this information so I want to share that information with other guys.And so if we do a housing fund in a particular location and I know one of my friends, or a guy that I played against or play with is from that area, it’s like hey, look come be a part of this because everybody, I don't care who you are or where you go home is always going to be home so any way that you can find a way to impact people that helped you, who nurtured you, you’ll always want to be a part of it.
WW:On that, you must clearly be missing home and missing your family but probably not missing the travel.Bobby and I talked about this previously where the two of us spend so much time traveling around the country and COVID has made it so that we honestly have been given a huge amount of more time just because we're not going to and from an airport, getting on a plane, what have you.For you this must be, I mean the NBA schedule is grueling as it is and then the amount of travel and time on buses and time on planes and all that stuff, this must give you the opportunity to really focus on some of these issues in a way that you never ever would be able to have if it was a normal season.
CP:It does, it does.This is my 15th year in NBA, so 15 years and I feel like it was a couple years ago that myself, Adam Silver and all these different people were trying to figure out what it was going to look like for us to play.Playing basketball is part of me, I'm unbelievably competitive.I don't care what it is, it can be tic tac toe, it can be checkers, Monopoly, Connect Four, I'm extremely competitive so every time I play, I want to win.So I'm happy to be here and able to express myself in a way that I can playing basketball.But my family, my kids, my wife, this is the longest I've ever been away from my kids and anyone on here that has kids at some point in time FaceTime isn’t enough, they don't want to talk to you.I call when I wake up in the morning and I want to talk.My daughter gives me the driest “hey” you could ever hear in your life.I seriously miss them.As much as I love to play this game, there's nothing like that.Like I said, I'm so privileged to be able to take care of my family, and take care of so many other people, but I know I'm not me without the love of my parents.And at the end of the day your kids know you, they know you.My daughter's birthday is coming up like I said on the 16th and she knows that daddy just sends a gift that somebody else could have done it or whatnot.For me it's all about how I can make it as special as possible because that wasn't my normal growing up.I'm sorry I'm ranting but I miss my kids.
WW:I would only say two things. One, as someone who's been watching sports avidly since the NBA, the NHL and golf came back online, to everybody who is a sports fan we are deeply indebted and thankful to you and your role in getting the NBA back up and going because to those of us who are sports fans it's just wonderful to have you all on television.At the same time, we do understand that it comes with a real sacrifice on your part.
We’re tight on time and one of the things I wanted to - I was talking to a friend of mine Chris the other day and he said this fall we're going to be watching a lot of hockey, a lot of football, and a lot of bowling and I said I can deal with football, golf - I can do a basketball, hockey and golf but not bowling - and then as I'm doing my research on you, I find out that you actually own a professional bowling franchise.Are the numbers off the charts for you as far as volume?Is bowling going back?I mean, they’ve got to be coming to you and saying hey Chris has got the playbook on how we get professional bowlers to get back up and going.
CP:I don't even know if Bobby knew I owned a professional bowling team, but it goes back to like what's in your DNA.Growing up in Winston Salem, North Carolina my dad was in a bowling league so I would be in the bowling alley on Thursday nights, with cigarette smoke, it’s crazy, eating hamburgers and hotdogs watching my dad.When I was a senior in high school, my dad, my parents got me and my brother both bowling balls so it's one of those sports just like golf, you can do it until you’re 70-75 years old so I'm an avid bowler and an avid golfer.
WW:So, Bobby, you think you can take down Chris in the bowling alley or do you think he's going to take you there too?
BT:Well I was a black belt with the duck pins, growing up in Baltimore, Maryland we had the little pins and the little balls.But I will tell you that one of the great things about Chris is while we come from such diverse backgrounds, if nothing else, I think that we both share the recognition of just how large a role that luck has played in both our lives, and that that recognition of the luck that we've been blessed with, the drives, the responsibility to pay the good luck forward, and that's why Chris has been such a great friend and great partner throughout all of this over the last number of years.
WW:Well the only way that I get two people like you onto the Walker Webcast is due to friendship and so I am deeply indebted to both of you for taking an hour out of your day to share your thoughts as it relates toimpact investing, racial Justice and everything that both of you are doing to try and change this world.So I just want to say thank you, thank you, thank you to both of you.Chris, good luck against the Heat later on today, and Bobby I look forward to seeing you soon and thank you very much for all you’re doing.
CP:Thank you guys. This was nice, live and direct from the Bubble.Now it’s nap time!
WW:Thanks, guys. Take care Bobby, thanks Chris.
