MIAMI—While Alibaba chairman Jack Ma Buys a $193 million property, “poor people” are being forced to use a separate, “poor door” to enter their complexes.
Today, because ultra-wealthy individuals are increasingly purchasing and renting real estate at exorbitant prices, rents are going through the roof displacing folks in the low-income bracket which is causing a major affordability crisis in a number of cities, particularly for the lower to middle income housing market.
GlobeSt.com caught up with Steve Joung, CEO of Pangea Properties, a Chicago-based company that has rehabbed and rebuilt over 11,000 units in the roughest neighborhoods across the US, to get his thoughts on this trend in an exclusive interview. Could this be a trend? Read Joung's thoughts and sound off in the comment box.
GlobeSt.com: Why is Pangea is focusing on the blue collar hourly sector workforce?
Joung: After the housing market crashed, we recognized an opportunity and a void in the real estate industry that no one was interesting in filling—quality, affordable housing for the middle income market. So with that in mind, we established Pangea Properties and in 2009 we purchased the first 1,174 units in Chicago.
Today, Pangea has over 11,000 units across three cities in the US—Chicago, Indianapolis, and Baltimore. On the business side, though, we recognized that this wholly untapped market was ripe for growth and with our tech backgrounds, we were able to create a scalable tech-based real estate company that has seen tremendous growth in a very short time.
GlobeSt.com: Why has Pangea decided to look past the renter's FICO scores and focus, instead, on questions such as “how long have you been at your current job?” and “how long were you in your last apartment”?
Joung: Not having a credit score absolutely impacts your qualify of life. However, we decided to look past FICO scores because we've found that below a certain threshold, credit scores are no longer a great predictor of whether a resident will pay his or her rent.
Instead we considers other factors, such as the time a prospect has been at her current job and address, as well. The biggest challenge in most of the properties we acquire is physical and economic occupancy, and our underwriting has helped us address that.
GlobeSt.com: Why did Pangea decide to get into the workforce housing space?
Joung: Pangea decided to get into the workforce housing space because of the opportunities to improve local communities and improve people's lives. We believe that by investing in individual properties, many of which are board-ups, we can revitalize entire neighborhoods and make them a place that residents are proud to call home.
Many of the buildings we've been able to acquire were in a less-than-desirable condition. In some cases, we've been able to change entire neighborhoods, upgrading a dozen vacant buildings to livable apartments and turn those areas around.
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