Thinking Outside the Workforce Housing Box with Ed Gormbley
Changing the Paradigm of Affordable Housing
As the founder of Workforce Partners, Edward Gormbley is a savvy real estate professional with a wealth of corporate and entrepreneurial experience. Ed shares how his upbringing fueled his passion for providing people with affordable, quality housing in lower Fairfield County, Connecticut and why giving back is part of his organization’s DNA.
Key Takeaways
There are members of our community who need a more affordable housing price point.
When you’re focused on social impact, you’re able to think creatively about things that a typical real estate developer doesn’t encounter.
Workforce housing assets are being recognized around the country as a fairly robust investment class.
“I wanted to solve the social problem of getting good, safe, affordable housing to folks who needed it.”
Biography
Edward Gormbley is an entrepreneur with big-company skills and a start-up spirit. He started three companies before graduating from college. He then spent a decade in the fertile training ground of General Electric as a corporate finance professional and private equity investor, from which 3i (a FTSE-100 company) recruited him to be the CFO of its North American division. From there he founded Workforce Partners, a vertically integrated real estate company that serves the median income household with apartments under the IVE brand and the boutique hotels The Circle and HiHo. Edward created Workforce Partners to source, acquire, and operate real estate. His value-investing approach is based on fundamental analysis, long-term holds, and vertically-integrated management that delivers recurring returns with low volatility.
Episode Transcription
Eric Bernheim: Welcome to The Real Estate Roundup presented by FLB Law in partnership with The Greater Norwalk Chamber of Commerce. I am your host, Eric Bernheim, managing partner of FLB Law, a full service law firm based in Westport, Connecticut. During this focus series of five podcasts, we'll be discussing current real estate trends in the Greater Norwalk region. Our expert guests will discuss topics including local development projects, workforce housing, and the trends in real estate markets, including industrial, retail, office, single-family and multifamily residential properties. Thank you for listening.
We're here today with Ed Gormbley from Workforce Partners. Welcome to the podcast Ed. Could you first tell us a little bit about your company?
Edward Gormbley: Sure, Eric, thanks for having me today, it's great to be able to tell the story about Workforce Partners. So Workforce Partners started as a Genesis from a business plan I wrote almost a decade ago to align my morals with business. What we did was create a company to do workforce housing in Norwalk, Connecticut. What has happened since then is we started with a single family house with grass growing on the second floor to 40 buildings around Fairfield County, in about a decade. We’re fully vertically integrated from leasing to management, finding assets, disposing of assets, financing, etc.
Eric Bernheim: That sounds great. And how did your upbringing influence the way you run your business?
Edward Gormbley: I grew up in a big family, local to Norwalk relationships matter a lot. I work with a lot of folks even today who I knew when I was a kid. That sort of relationship capital reminds us how important it is to think about our neighbors and who they are. They're not just nameless, faceless people. They are the families that we were when we first came to this country a couple generations ago. They are the folks and the glue of the community who just want clean, safe, affordable housing. And so, my upbringing has a lot to do with how I think of every day. I grew up in some not so nice housing in Norwalk in Bridgeport. And the sad part for me always was it didn't have to be not so nice. There were little tweaks that could have been done along the way to get rid of the mice and the rats or to get rid of the termites or to fix that leaky pipe. And that stuff wasn't done in a lot of the places I lived. In my company and my team, we make sure we do those things.
Eric Bernheim: That's great. So you provide a nicer place to live for those who are maybe a little bit less fortunate than you are today. So that sounds very admirable. Can you tell us about the difference between affordable housing and what you call workforce housing? Is there much of a difference? Are they very similar?
Edward Gormbley: Sure. Affordable housing does get bandied about in many different contexts, in what they call a capital A affordable housing, that tends to be housing that is either subsidized in some form or fashion by a housing authority or it has a deed restriction on it with low income housing tax credit, per se. Typically, those two programs have an income restriction, that is about 60% or less of the area median income. Those folks have been addressed for a long time. And the class A luxury stuff has been addressed for a long time. But the stuff in the middle has been what we focused on where you had working class families who simply couldn't afford to pay the class A rents that were popping up all over the area, and yet wanted to live in a nicer place and maybe made a little bit too much money to qualify for the 60 percenters. But we have found that they are great members of the community, want to be here, want to be participants, they just need a more affordable price point.
Eric Bernheim: That's great. So what types of jobs would you consider more akin to your workforce housing? What types of folks are you providing housing for?
Edward Gormbley: So that's the beauty of our space in the workforce housing area is it's all types. So we will have folks coming out of college who are going to work at ASML or at FactSet, etcetera, with incomes that are commensurate with a first year out of college type of income. And then we'll also have families who are a mom and dad who are making 25 bucks an hour each, let's say, so that's about 100 grand a year for the household, and we'll have them in our properties.
[00:05:00]
We’ll also have many Section 8. I've got many grandmothers on Section 8 who have been in the properties for years, and in some cases before we even purchased those assets. So it's a real diversity, which is a great part. Frankly, one of the parts that's kind of fun about the portfolio is you can see all sorts of different people.
Eric Bernheim: So do you deed restrict your properties so that would comply with Connecticut general statutes 8-30 G? Or is it really just a business model that you instill where there's no deed restriction, so it's not ‘affordable housing’.
Edward Gormbley: We have done some deed restrictions, I would say that's in the minority, we've been able to get the social goals accomplished, without necessarily deed restricting. Now we do have a couple and we've worked with the state on those. It's not necessarily for every kind of project.
Eric Bernheim: So there's currently a lot of discussion about the need for more affordable housing, yet you've been pushing workforce housing for years. So why was it so important for you to create a company that provides this workforce housing opportunities along the major transportation corridors between New York City and Connecticut, and provides these housing opportunities to the folks that you just mentioned?
Edward Gormbley: Well, Eric for me, it was very personal, think back 10 or 15 years ago, the concepts of impact investing in environmental, social and governance, ESG investing, these things are fairly common today, but 15 years ago, they were not. I wanted to solve the social problem of getting good, safe, affordable housing to folks who needed it. Over time, the rest of the market has also recognized that working class folks, particularly in high priced Fairfield County need a place to live that they can call home and is not necessarily cheap and decrepit, and falling down because it's affordable. It's been a great thing, I think, to watch the rest of our community see the real need of these working class families who need a place to be, who want a place to call home, who wants to be fixtures in the community, and don't want to have to worry about moving from building to building or moving out of the area where their friends and family are because they can't afford it. So these are big social movements. And I'm not a social commentator in this capacity. I can't address all of them, but obviously, there are big things afoot across the state and across the country, frankly.
Eric Bernheim: Yeah, and what's really intriguing to me about your company is that Connecticut with 8-30 G has given developers a kind of a hammer to go into municipalities to essentially propose whatever they think works. And if you comply with the affordable housing requirements of that statute, then it's on the town to say no, and this is why it's unsafe, and they have to turn it down. But you have been doing this in many instances without the hammer of 8-30 G and just proposing it and still getting a good return, presumably for your investors because you keep doing it. I guess we'll get into this a little bit more later. It's impressive to me that you've come up with a business model that allows for that without the hammer and the issues that a lot of municipalities have with the 8-30 G process.
Edward Gormbley: Yeah, 8-30 G has been an interesting tool to watch develop. As we know, it's been around for decades, it used more in recent years, in areas that didn't have as much affordable housing. It's not a tool that we've availed ourselves of, it's obviously a tool that's available out there in the world. I think in some ways, we've been somewhat lucky that we were able to crack the business model to start with, without using it. I think if we had to start today, we would have far fewer options. The market has just changed significantly. The amount of the price you have to pay for an apartment building now compared to what you had to pay 10 years ago is significantly different. We were able to ramp up when we had a lower cost of operations, low cost an investment I should say. But folks today who are trying to get started and trying to solve this niche, I think you're going to have a harder time to do that without using tools like 8-30 G. It's just too expensive. Workforce housing assets are being recognized around the country as a fairly robust investment class and we look at them compared to Class A properties just to start with.
[00:10:00]
They held up better throughout the pandemic, and have tended to be fairly recession proof in prior economic declines.
Eric Bernheim: Yeah, I mean, there's a larger market for them. So they're probably easier to fill and rent out and stabilize a lot easier than some of the higher quality, not in a higher quality, but the more costly units out there. So can you tell us a little bit about some of your successful projects in the area?
Edward Gormbley: Yes, so one of the earliest projects was on South Main Street. And if you know South Main Street, you know 10 years ago, 20 years ago, there's a bit of a shooting gallery to drive down past the police station and go deep into South Norwalk. I remember in particular a stone wall along that route that had been shot at when I was a kid, maybe my 20s. And those little holes were there for years afterwards. Well, foreseen a few blocks down the road and the first building we bought after this business plan had been created, the first building we bought was a building that had been left for dead. The prior owners hadn't focused on it very much. Literally the drug dealers would congregate there for the neighborhood, there were gang tags all over the building in the back. And within about a year, we had turned that around to the point where instead of finding needles on the ground in the morning, I got a Hallmark card from one of the early residents thanking me for making the hall safe for kids to play again, that was a great project.
That's a project that we continue to own today. It is where some of our longest standing residents are just great members of the community and we want to do more like that. So that's one that always sticks with me and always will stick with me. In addition, that project was where we pioneered some of the environmental improvements that we've been able to implement over the last decade. And these are things like oil to gas conversions. So across the portfolio, by doing oil to gas conversions, we've reduced the combination of acid rain into the atmosphere by about 2000 pounds a year, just by doing that simple conversion from oil to gas across the whole portfolio.
In addition, we've cut our electricity usage more than in half at that particular property. And that's a pretty good benchmark for the rest of the portfolio, simply by putting in LED lights, and by putting lights on timers. So very simple fixes can go a long way, but they have to be done in a focused way, you have to have the capital upfront to do that. You have to have the focus to get in and execute. It has to be done in an integrated way with the rest of the property because we still have to deliver an investment return. These are not just charitable endeavors, they have to have an economic impact and they do.
Eric Bernheim: That's great. So not only are you providing housing that's needed for the middle class, workforce housing, but you're also improving our environment while you're doing it. So that's certainly admirable. Do you ever try to get LEED certification or any of those additional environmental certificates?
Edward Gormbley: That's a great question, we actually looked at LEED pretty hard. And for most of the LEED certifications, you need a new construction to incorporate all that new technology. But we did see a couple of years ago that Stuy Town in New York City had gotten a type of LEED certification. And in case you don't know, Stuy Town is red brick, 15, 20 storey type projects, very similar vintage to the kinds of projects we own. And so we thought, oh, maybe this is something we can pursue. As it turned out that that particular LEED certification didn't wind up working for us. However, along the way, we did find out that there are some measurement tools, where you can benchmark yourself against the main benchmark, which is Energy Star. So we're actually in the process of implementing that, which actually takes a couple of years to do. And what that'll tell us is how our energy consumption per unit, compared to comparable peer buildings? And you can bet I'm going to focus on being the best in class that we can be there. So that's the benchmark we're going to work towards.
Eric Bernheim: That's great. So you mentioned one success story, but based on the properties that you focus on and target, I'm sure you run into a lot of issues that your prototypical developer, apartment builder and such will not have to encounter or deal with.
[00:15:00]
Can you give us some other examples of some stories outside the norm issues based on the markets that you're hitting and the properties that you're providing?
Edward Gormbley: So one that comes to mind is a building we actually did not end up buying. But it gives a prototypical example of how we have to deal with things that maybe a typical developer doesn't. So there was a nonprofit organization that owned a large complex in Fairfield County, they were actually selling a few complexes. There were many issues in that particular transaction. But the one that I'm reminded of when you ask that question is that a key issue for them was to make sure that there would be a shuttle bus to take their residents to the local houses of worship, on Sunday or Saturday, whatever was appropriate for them. I thought to myself, that's something that we can do. It's completely outside the box, but we can make that happen. Now, that deal ends up not happening for a number of different reasons. But that's an example I think of when you're focused on social impact as we are, we're able to do things and think creatively about things that the typical developer probably doesn't have to encounter. And that's okay, right there. They're very good at building new boxes from the ground up. We do a little bit more of the social impact.
Eric Bernheim: That sounds great. I mean, it reminds me of my practice to where I see myself as a problem solver. And sometimes just because it's a problem for the other side doesn't mean it's a problem for my client. But because it's a problem for the other side, it's my problem, and we have to fix it. So at the end of the day, you're trying to get to the same spot.
Edward Gormbley: That's a great way to put it. It's just problem solving in real estate.
Eric Bernheim: That’s right. I also noticed that you have a few hotels in your portfolio, which seems a little bit out of the norm for the bulk of your assets. What made you branch out into some hospitality holdings?
Edward Gormbley: A little bit of temporary insanity. But seriously, we define social impact broadly. So in our apartments, it was very focused on moderate income housing, and the environment, but there's other sorts of social impact, there's economic impact. And these two hotels in Fairfield had a significant economic impact, which subsequently was recognized by the Connecticut State Legislature, local Chamber of Commerce, etcetera, for what we did. And so what we did there is the hotel Hi-Ho, and the Fairfield Circle Hotel were underinvested hotels that had seen better days. We had all sorts of folks in those buildings that probably should not have been there for a variety of reasons. Some were long term residents at one point, some were cast offs from the Mental Health establishment, a variety of social ills. And we helped address those, all the while creating a vibrant center for the town to go stay in a safe hotel. And you'll have to remember, for those who know the Hi-Ho in particular, that the prior owner passed away in 1986. And when we took over the building in 2014, I asked the caretaker when the last time he changed the mattresses was, and he said, “Let me think about that. 1986.”
It had literally been 30 years, since that hotel had seen new mattresses, we came in, brought a significant amount of capital, created jobs there by folks having to run the hotel, created a better environment for guests of the Barcelona restaurant who wanted to pull up and go to dinner there. So it was a broadly defined social impact strategy. And it was, frankly, learning by doing. A lot of experiential learning in the hotel business, not try to repeat it today, but we're in it, we've done it and we've survived COVID, which not a lot of folks can say.
Eric Bernheim: So you're not looking for any more hotels, we'll keep that in mind.
Edward Gormbley: Not tomorrow.
Eric Bernheim: You fit on this a lot already, but clearly you have a passion for giving back. You've given examples about how you clean up neighborhoods, you provide affordable housing, workforce housing to others who may not be able to afford to live in other areas in Fairfield County. So how else do you use your business as a force for good?
Edward Gormbley: Well, I think the other piece that we do pretty directly is direct philanthropy and so we've set up scholarships at some of the local educational institutions.
[00:20:00]
For example, at Fairfield Prep, we created a scholarship for families to go through and we sponsored three boys to go through that school over the last few years, we'll do more of that in the future. In addition, I'm very involved with the Norwalk Housing Foundation, which also creates scholarships for students who are in housing authority complexes. That's been a wonderful experience, too. Obviously, writing the check is nice. But sitting there and interviewing these up and coming young adults who are eager to break out and make their mark on the world is incredibly fulfilling and exciting to see. So those are two of the ones that popped to mind quickest.
In addition, we've done other things as they come up. So in the midst of COVID, for example, there was a demand for masks and as those of us who may remember, back in May, April of 2020, there was a significant dearth of masks around. And so through my network, I ended up finding a shipment of masks that were coming over from overseas. And I was able to buy those and then get them distributed through the Fairfield Prep Network of boys who have service projects to do. And so in that particular project, the hardest part back then you may recall was actually getting them distributed. And so we found a variety of community service organizations through my network, and others to distribute about 15,000 masks into Bridgeport in Norwalk. So that was a great project. I worked with fellow Fairfield Prep board members, whose wife is epidemiologist at Yale, and worked with the Fairfield Prep administrators who also do community organizations throughout the area. And we just use the networks that we already have. So that's a great project as I kind of step back and think about it, because it leaned on a lot of the resources we had just from being in business, obviously, there was a financial component as well. And then the relationships to actually get it all done and pulled together in a short amount of time.
Eric Bernheim: That's great. And all of this social impact that your company has, do your team members find it fulfilling? Do you have better retainage maybe because of it? How does that play out?
Edward Gormbley: That's a good question. I'm not sure if we have better retainage about it. But we do encourage it. And in the offer letters, everybody gets three days, 20 hours a year, paid to go do volunteer activities. We match charitable contributions up to a certain amount. We make it part of the culture. And when you do things like keep track of the various volunteer activities you do, you find people who are doing creative things like we have a woman on the team who does dog walking for an organization in Wilton, we have tutoring that gets done. We have the scholarship interview, as I mentioned, already, we have coaches, we have people who are part of their communities and want to be a positive force. And just by highlighting that and recognizing it, I think people feel encouraged to do more of it, which is really the goal at the end of the day. We’re all on this planet together. And we got to figure out how to work together. So that's, I think, part of the social commitment we all make.
Eric Bernheim: Yeah, that's great. Certainly, we tried to do that as a firm and a family and such. So we find it really important to try to do good and give back whenever we can, whatever that mechanism is. But obviously, making a social impact is very rewarding in and of itself. But in order for you to do what you do, you need to have investors and keep those investors happy. And although some of them may like the fact that they're investing in a company that has a strong give back, very socially impact driven mission, they also want a return on investment. So how do you balance your social impact efforts with your affordable housing, workforce housing and philanthropic efforts, with the need for your investors to get a return on their investment that's satisfactory to them so they keep coming back?
Edward Gormbley: Yeah, it's a great question. I think number one, the proof is in the pudding. We've had roughly 40 buildings and multiple folks have been repeat investors in those buildings over the last decade. So that feels great all by itself. And so that tells you a couple things. One, yes, people like the mission, but number two, it is delivering the financial returns and look, obviously financial return expectations change over time. The return expectations now are a lot lower than they were back then. But we are right there in the sweet spot of the top quartile of investment returns for any real estate company, let alone an impact company. So we feel really good about that.
[00:25:00]
Then the other thing to remember is part of the difficulty here and impact investing, whether it's real estate or environmental, or whatever it might be, the hard part is actually finding the overlap and doing the work ahead of time. So we found the overlap, we do deals that have a good return, we don't do deals just for the social impact, it's got to have both. It’s a lot of work, it's a lot more work in advance, it'd be a lot easier to say, “Oh, I'm going to go buy this piece of property and build a new building there.” That's straightforward to say, “I'm going to build a new building here. But before I do it, I have to figure out a socially responsible way to relocate the 100 families who might be in the existing structures.” That's a different game. And that's the game that we like to play. And that's where I like to spend my time. As I tell my wife, I don't play softball, and I don't go to the bars. So this is my hobby. I get to do my hobby at work all day long. And it takes some long hours and it takes a lot of internal fortitude to get through some of these processes. But I think it's worth it.
Eric Bernheim: Well, I'd have to agree that I think it's worth it. I'm kind of new to the Workforce Partners awareness. But from what I've seen, so far, it's very impressive and commendable. So, is there anything you'd like to add about anything else that we missed that we didn't cover?
Edward Gormbley: I think overall stepping back, it's important to remember that, that that no idea is brand new, and I've stood on the shoulders of giants, and some of those people that have helped me along in the business that come to mind are Clay Fowler Spinnaker, who's got a strong social mission. When you think about the lenders that have worked with us, whether that's John from Darien Rowayton Bank, or Rick at First County Bank, these are guys who get the story and get the values and have been there for me when I have one of those days where I said, “Oh my God, you're not going to believe what happened today.” Those folks have been very helpful, and other folks like them have been very helpful to build this business and get to a place where we can feel really good and proud about it. So I would say that and that I'd also say the investors that have been with me from the beginning, some guys from business school, guys that I used to work with. It's a real crew of folks that I'm glad to work with and feel very honored and indebted to for helping get this business going to the point it is. I just like to say thank you to them and recognize them for all the support.
Eric Bernheim: That's great Ed. Thank you very much for joining us today. I look forward to seeing what Workforce Partners has in its pipeline in the future and following you as you continue on your mission. Thanks very much.
Edward Gormbley: Great. Thanks Eric.
Eric Bernheim: Thank you for listening to the Real Estate Roundup. If you'd like to learn more about FLB Law, please visit our website at flb.law. I invite you to connect with me on LinkedIn to be kept apprised of developing trends in the real estate market both locally and nationally. Thank you again to our expert guests as well as our co-sponsor the Greater Norwalk Chamber of Commerce.
