Value Added: Banking On Brookland
Here's Tom Heath's latest column on greater Washington's entrepreneur set:
I was reading Inc. magazine in an airport concourse a few months back when I saw Bo Menkiti's name as one of the nation's up-and-coming "under 30" entrepreneurs. I saved the magazine and last week phoned Menkiti to ask how a guy from Greater Boston became an emerging real estate player in Washington.
Menkiti, 31, has been buying, selling and developing properties since 2004, mostly in the Brookland section of Northeast D.C., home to Catholic University, Trinity College, Washington Hospital Center and Providence Hospital. Brookland is nestled in a triangle bordered by North Capital Street on the west, South Dakota Avenue to the east and New York Avenue to the South.
Menkiti isn't rich - yet. The Menkiti Group will gross around $1.5 million this year, which includes commissions on real estate sales, income from developments and rentals. He wouldn't discuss profits, but he and his wife take a salary and roll what is left into the company.
His business strategy makes sense: Buy property in marginal neighborhoods with good housing stock, then ride the curve upward as those neighborhoods improve. His big bet is on Brookland, where he calls Menkiti Group the "go to" real estate company.
He is targeting the middle market neighborhoods that house teachers, firemen and government workers.
His three businesses include a residential brokerage franchise he operates named Keller Williams Capital Properties, which trains real estate salespeople in the D.C. area. He also has a conventional real estate sales and marketing group of five people that serves first-time homebuyers and a development company with a portfolio of commercial, residential and mixed-use properties along "emerging corridors" in places like Georgia Avenue, H Street and 12th Street.
"You buy and hold commercial real estate on these corridors, and then you sell residential properties in the neighborhoods around it. People get excited, they move in and they get angry because they can't get services. But if you buy and hold the commercial properties, you can rent them out so people can buy goods and services."
The hardest part, aside from persuading banks to lend him money, has been inducing people to get comfortable with the idea of living in places such as Brookland.
"I saw it happen in Columbia Heights, and I saw this other neighborhood called Brookland, that had great assets, was on the Red Line, had character and a commercial strip nearby. It even had leafy streets that look like Chevy Chase and is only seven minutes from downtown."
"Changing people's perceptions is a lot about helping people look differently at places," he said. "We do it buy partnering with local businesses, so when people come to an open house they get a receipt for free coffee from the Cafe Sureia coffee shop. ..... We gave gift certificates to local restaurants or a spa package at Total Relaxation. We are betting people will be comfortable once people put their feet on the ground in the neighborhood."
It helps that Brookland has a couple of Metro stops and good bus service, homes with "good bones" and backyards. It's a short ride to Capitol Hill for the young couple looking to find more space for their growing family.
Menkiti has spearheaded some pioneering in Brookland. He got tired of looking at a burned out former liquor store across the street from a residential property he had purchased in the neighborhood and decided to buy it. A commercial bank wouldn't give his business the $360,000 loan, so he borrowed $100,000 from his father and asked him to co-sign some loans. Menkiti also borrowed against a house he owned in Columbia Heights. Once he bought the old liquor store, he persuaded a bank to give him a line of credit and he refurbished the place. It currently houses the offices of The Menkiti Group.
Menkiti eventually persuaded banks to lend him money by building a track record and creating relationships with lenders like BB&T and City First Bank.
Menkiti said the current housing downturn has been a two-edged sword. The credit crisis has slowed the pace of bank loans needed to fund multi-unit housing projects, forcing Menkiti to work on smaller projects until money loosens up. But the market for first-time homebuyers has remained good because those customers are often driven by family issues such as a first baby, which makes the purchase of a new house less discretionary. His sales staff is doing more work on deals involving rental units and senior housing to shore up the business until the housing market picks up.
"This hasn't been without challenges," Menkiti said, adding that reduced prices for houses that need rehabilitation is also helping draw customers.
Menkiti may have gotten the real estate bug from his father, a native of Nigeria who teaches philosophy at Wellesley College and invests in real estate on the side.
Menkiti grew up in Somerville, Mass., and after graduating from Harvard University with a degree in sociology, he followed a business consultant to Bethesda, where the colleague was starting a consulting firm to corporations and the booming Washington technology industry.
Menkiti bounced around and wound up at D.C.-based College Summit, which helps low-income high school kids navigate the college application process. He helped grow revenues and customers at College Summit as its chief operating officer. In the meantime, he got his real estate license.
"I sold a couple of houses to friends and said to myself, 'I could do this.' I got very interested in how business and community development play off one another."
Menkiti's first investment was a six-bedroom home with a two-bedroom apartment in the basement on Irving Street in Columbia Heights. He had saved money by sharing an apartment with friends and sweeping any bonus money from his corporate jobs into the bank. He put down $40,000 on the $300,000 home in 2001. He estimates he could sell it now for three times that, but why would he? He earns $6,000 a month by renting it out to young professionals. He personally owns four residential properties that generate income.
The empire has grown: Menkiti Group has helped more than 150 first-time homebuyers and has rehabbed over 60,000 square feet of residential and commercial properties. The company has 320 housing units under development, including with partners. It also owns 12 homes and seven commercial/mixed-use properties.
"Real estate is cool because you can do these things to help neighborhoods and better the community, and you can make money from it. You can create value and people will pay you for it right away."
September 9, 2008; 5:20 PM ET
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