After graduating from Girls High, Brown University, and Villanova Law School and practicing law for several years, Leslie Smallwood-Lewis was hired at a Philly real estate development company. She was the firm’s first African-American hire.

The year: 2001. Let that sink in.

Over the course of seven years at The Goldenberg Group, the mission-driven development firm with a philanthropic foundation and a commitment to supporting artists, Smallwood-Lewis rose through the ranks to become a senior vice president.

“I’m so thankful for my time there,” she says. “I became a sponge. I worked hard and I learned and I grew in my tenure there.” But she was continually disappointed to see very few people like her in her field. “I noticed very early on—in going to meetings, in consortiums, conferences — there weren’t people who looked like me, across the board, in real estate,” she says.

Greg Reaves, a former pharma exec at Merck and Johnson & Johnson, met Smallwood-Lewis when he started working at Goldenberg in 2004. He recognized the same disparity.

That, the two agree, has had devastating long-term effects on mostly Black neighborhoods and Black people in Philly, and around the country. A lack of diversity is a problem in all fields, but it’s particularly troubling in real estate, as that’s how deep generational wealth has been built.

“These companies have been in existence for decades and hundreds of years for some of them. And it takes that long to really get fully entrenched and established in this industry,” Smallwood-Lewis says. And when Black people are shut out of real estate development at the industry level, Black people are also shut out of real estate opportunities at the individual level.

“I have seen firsthand how development has not been focused in [Black] communities and then when it was, it was developers who didn’t look like us, going into communities that do look like us. That needed to change,” Smallwood-Lewis says.

The two felt a call to do something about it.

In 2008, Smallwood-Lewis and Reaves struck out on their own, founding Mosaic Development Partners (MDP) to create real estate opportunities — from housing to retail to pathways to investment — for people of color who for too many generations have been turned away, shut out.

They even invented a name for what they do, as they shared in a New York Times article last August: “gentrigation” — a ”mixed-income approach that encourages racial and economic integration.”

In the last 12 years, Mosaic Development Partners has invested $100 million in Philadelphia neighborhoods; completed 1-million square feet of redevelopment; and created hundreds of jobs in Fairhill, Strawberry Mansion, Brewerytown, Norris Square, Germantown, Ludlow, West Philadelphia, and many more often overlooked areas. Their projects have housed nearly 500 people, many of them with below-market rate rents. Upcoming projects will create homes for another 350 people.

Philly has a fair share of community-minded development groups, from nonprofits like Jumpstart Germantown and Women’s Community Revitalization Project to for-profits like D3 Developers and Shift Capital, a B Corp. None have the core mission that MDP does: removing the systemic barriers to entry that have kept people of color out of the real estate market.

Since their start in 2008, their company has not shied away from going into communities that others find risky. “The communities that Leslie and I choose are communities that likely feel uncomfortable to typical investors,” Reaves says.

“We had to be very creative.”

That, plus the timing of their launch, against the bleak backdrop of the financial crisis, has forced them to be creative when tackling challenges.

“We didn’t start our company like typical development companies do, where they have capital that’s secured and sitting there beside them to be able to pursue opportunities,” Smallwood-Lewis says.

They put in their 401Ks, and the Reinvestment Fund (TRF)  — founded 35 years ago by the Citizen’s late chairman, Jeremy Nowak — and The Food Trust provided them with a forgivable loan if they agreed to do a supermarket-anchored project as one of their first projects. “That’s what we utilized moving forward. We had to be very creative,” Smallwood-Lewis says.

When, for their first two projects, they began developing in Fairhill and Yorktown, those two communities were among the most dangerous in the city — not the neighborhoods where traditional investors ordinarily look to put their money.

“That’s part of what we see as the systemic racist mindset that is hidden. Because [traditional investors] will invest in Center City at a lower return, but they won’t invest in communities where we are at a higher return because of their comfort,” Reaves says. “It’s not the numbers, because the numbers bear out. It’s their comfort. We’re dealing with that at every level of the system in real estate development, and that’s what we find compelling and hard and troubling at the same time. We have to break down every barrier to move these types of projects forward in a way that includes people.”

In their first project, a student housing development in Fairhill, they included the local community group, Metamorphosis CDC, as an owner; the CDC owns 20 percent of that project.

Their second project was Edison Square, in the shuttered Edison High School, from which more students who went to Vietnam died than any other high school in the country. Recognizing that African Americans represent about 12 or 13 percent of the nation’s population but are over-represented in military service, particularly during war times, Smallwood-Lewis and Reaves wanted to honor that legacy.

So MDP built a shopping center there that created significant jobs, with the assistance of TRF and PIDC, but they also built a 66-unit veterans’ housing project that had its grand opening in February. Residences are intentionally affordable, ranging from 20- to 60-percent below AMI; several residents receive vouchers that cover the difference between the rent and what they can afford. Most of the residents, Reaves says, are people of color.

While MDP is mission-driven, it is decidedly not a nonprofit organization. “We believe that there are economic solutions to solving problems. And what we found is that when we look to sustain communities and include communities and make them a part of the solution, they don’t distinguish whether we’re making profits or not. They look at really the value of what we’re doing to the neighborhood,” Reaves says.

For example, they did a project in Strawberry Mansion called Eastern Lofts, in a building that had been shuttered for more than three decades. “It was a complete eyesore to the community, and most people wanted to tear it down. But we had a different approach” — they ended up winning a preservation award for it — ”but what was most important to us was how we put the project together,” Reaves says.

Eastern Lofts is a mixed-use commercial building, with part of its mixed-use being to support small minority- and women-owned businesses. They brought in about eight different businesses, all of them women- and minority-owned, because that addressed a real need in the community.

“Minority- and women-owned businesses don’t get the access to capital, they don’t have the access to capacity, they don’t get the benefit of high-profile locations. And so we realized that in our business model, along with our financing, we have to provide a subsidized rent profile that allows people to come in and be able to be successful and limits the burden of cost of them operating in that location,” Reaves says.

A meaningful investment opportunity for residents … 

Part of the Mosaic Development Partners model is addressing ways to provide subsidized rent to businesses so that they have the time to ramp up and be successful and grow and add employees and add a benefit to the community.

Smallwood-Lewis spearheaded the launch of a meaningful investment opportunity for residents as well. “Most real estate development projects require private equity and debt. We typically raise equity from high net worth investors,” she explains.

But since 2009, when the Jobs Act was passed, non-accredited investors can now invest in real estate projects for as little as $500 and will receive the same return on their investment as wealthy investors. Because the non-accredited investor is usually not as knowledgeable about investing, this method of investment is highly regulated and must be done through an approved platform. (MDP uses Small Change, which also requires them to publicly post all information about the project.)

“We all know that wealth has been earned and derived through real estate, and we have hundreds of years that we need to catch up on. And in order to do that, these kinds of programs need to be put into place for us to be able to really be effective in this real estate industry,” she adds.

Neither Smallwood-Lewis nor Reaves want their team to grow too big, but they’re ambitious about the projects they can take on. They’re finalists, in partnership with other development companies, in the RFPs for both the Navy Yard and Penn’s Landing.

They also started Mosaic Brokerage Group, with 15 agents who help them lease their commercial and residential spaces. With projects they have in the pipeline and the extensive work they’re doing at Cheyney University, they’re considering bringing on three or four more full-time people.

And moving forward, they plan to be very focused on affordable workforce housing. “When we go into communities and we bring a shiny new building or a rehabbed building, we know that we can gentrify those neighborhoods,” Reaves says. But they intentionally don’t seek the highest rents in the market because they know that will exclude people of color.

When a young Black college grad gets her first job, she’s not only statistically likely to get paid less than her white counterpart, but to have more debt and a lower credit score, which will of course penalize her when she goes to apply for housing. “We recognize all of that, and that we can’t just make a blanket statement and say you have to meet a 700 credit score, you have to have this kind of income,” he adds.

Which brings us back to the kind of systemic racism that touches every aspect of real estate. Smallwood-Lewis and Reaves say that we can all play a role in changing the narrative. One way, Smallwood-Lewis says, is through early investment in upcoming projects, providing the type of money that is riskier — and therefore typically commands a higher return.

“The one main thing that Greg and I have always come up against is early capital,” she says. “We need to find ways for more companies that look like us to be able to have access to that earlier capital.”

“I would just like the broader community, particularly people who aren’t people of color, to realize how hard it is for communities of color to be able to create wealth,” Reaves says. “And if we’re not given real opportunities to participate at every level of wealth-building, we’re going to see this problem for another 100 years.”