What is the cost of not doing the right thing? In this blog we dive into what got Blue Eyed Capital focused on multifamily real estate and the value we believe we can bring to this space with our spiral compounding value add mindset.
In our first blog we discussed starting Blue Eyed Capital because we know we can do more desire and a desire to have a greater impact. In today’s blog we will expand on that and provide context into why we selected multifamily real estate and what sets us a part.
The notion of leaving the world better than we found is rooted in our values: Transparency, Accountability, Passion, Betterment. Transparency provides learning, accountability forms trust, and passion forms the motivation for betterment.
The immense value creation potential is what attracted us to multifamily real estate. Let us define value creation is to us. Yes it is financial, we are a business that needs to be profitable to be funded and to exist. The value we are really talking about, which all too often is avoided or dismissed because of lack of knowledge and cost is, the environmental impact of not doing the right thing.
Have you heard the terms: Environment and Social Governance (ESG) or Sustainability? These big words are used to market doing the right thing as above average. Think about that for a minute
I’ve spent my career leading engineering design and construction on buildings around the world, and the most common theme from owner/developers when the topic of Healthy, Better, Environmental, or Sustainability came up was, Is this really necessary? And how much will this cost me?
In my opinion the building design and construction industry has done a great job of making “doing the right thing” cost a premium. Why isn’t equality and being human easier? Over complication by professionals of what can be simple explanations has lead to wrong actions or simply in action in all facets of the building design, construction and operations industries.
“Homes and buildings are where we use a lot of our energy. In fact, buildings account for about 40% of all U.S. energy consumption and a similar proportion of greenhouse gas emissions.” 1 Imagine the ripple effect and value creation potential if all building owners implemented small incremental improvements on energy efficiency?
“Most Americans spend about 90 percent of their time indoors, and an estimated two-thirds of that time is spent in the home.”2 That is 54% of a persons time is spent in their home. A person’s home is where they make memories and where they eat dinner at night. It’s where they relax after a hard day at work and sleep to work hard the next day. Who wants to live in a sub par environment with bad lighting, water or air quality.
The value a healthy building can have not just to an individual’s daily well being and their overall health, mindset and happiness, but how that well being is transferable into their life and those they interact, that is compoundable. Are you starting to see why this value creation potential is so enormous?
You’ve heard of the value of compounding interest and its exponential financial growth potential over time. Let me introduce a concept called “spiral compounding add of value.” It’s a concept (we think it is new) that says “When we do the right thing we are adding value and as that impact builds, value compounds exponentially. When your value add is impactful it is more powerful and with the right value add that impact spirals outward, taking on new trajectories.” It’s quite simple and basic.
Here are a few examples to show how this concept works: Ex. 1) Picking the correct color temperature of lights to match the human body’s natural circadian rhythm can be the difference of good and bad sleep, good and bad health, or a happy and angry person (you should be opening another browser tab after and reading this). Ex. 2) A simple, cheap and programmable thermostat can make a space more comfortable while simultaneously reducing energy usage that can improve air quality. These simple, low cost examples are high impact improvements that elevate a property and home and set the bar for the next value add cycle. The is compounding equity gain.
To create compounding value you must influence and to influence you must impact. By directly influencing the lives of our residents and property/deal team they will indirectly impact and influence the lives of those around them who will indirectly impact the people around them and so on. A ripple in the pond is formed and the spiral effect begins!
As the book, Big Shifts Ahead outlines, the demographic landscape within our target renter base is changing. Their wants, needs, and expectations are changing and we feel strongly that the concept of spiral compounding value add will become easier and mainstream.
Our future property buyer at exit is more likely to be of our betterment mindset than not. They will do better than we did and further compound the value and impact.
It is much simpler and less costly to do the right thing than the world makes it out to be. That is what we are here to teach, do and change.
- Jon Weiskopf
- https://www.ase.org/categories/buildings
- https://www.rwjf.org/en/library/research/2011/05/housing-and-health.html
