Reminiscing over lunch recently, Marsh Carter, former Chair and CEO of State Street Corporation and a member of my Reinventure Inner Circle, had me laughing. We were telling stories, some with humor and others more seriously. About Boston, families, sources of our greying hair and how we expected things to be different by now. But mostly we talked about the things we had done, together, to make a difference in our own backyard of Boston.
As I looked across the table at him smiling and chatting freely, I could not help but think what an unlikely team we had become and continue to be. A West Point graduate, Marine Corps officer and Vietnam veteran, Marsh had diligently worked his way up through the banking world, retired at the top of his game after transforming State Street into a financial powerhouse, and then gone on to become board chair of the New York Stock Exchange. By comparison, my pioneering efforts to foster prosperity in communities of color, by providing bridges to capital and other business-building resources, paled by comparison in the eyes of most, but not his. In fact, it is what brought us together.
We had met as directors of the Federal Reserve Bank of Boston and we had come to respect each other’s point of view. So during my tenure with the bank, I asked Marsh to co-chair a new business community initiative, yet to be defined or funded, to expand the business that large Boston area corporations did with local entrepreneurs of color. Without hesitating, he agreed and we worked together to create The Business Collaborative, a uniquely designed local business market consisting of over 20 corporations and 35 businesses of color that generated tens of millions of dollars of new business among them.
Yet that is not what most excited us that day. Instead, it was a revelation that occurred as I shared with him the behind-the-scene story of how the current State Street corporate office tower, which now bears its name, had come to be built. At the center of the story was a tale of how disparate groups — from communities of color to city and state government to leading corporations and institutions — produced not only a signature office tower, but more importantly, an extraordinary outcome of wealth-sharing, by finding common ground well beyond the tried and true.
Marsh knew bits of the story, but not all of it. The part that delighted him to learn over lunch that day was how, through the bridge built between our two worlds, he and State Street Corporation had made a critical contribution to the creation and sharing of nearly $90 million of wealth with Boston’s communities of color. That they were part of an extraordinary untold story of collaborative wealth building and wealth sharing benefiting people of color that remains unprecedented in Boston’s history. A story of what is possible when trust, respect and goodwill are allowed to flourish in the interest of really making a difference.
So here is the very short version, seen through my eyes as an impact investor.
As CEO of UNC Ventures, creating positive ripple effects from our investing was always a primary goal. In addition, I always looked for great opportunities to invest in my own backyard. My brand of targeted impact investing sought not only to increase employment opportunities among people of color in Boston, but also to increase their participation in the wealth creation process. In 1988, I encountered an opportunity that could achieve all these aims: an investment in a real estate development company founded by a local coalition of people of color.
It was messy, not fully formed, and the return would take much more than a decade to realize. And if it were successful, the ripple effect of potential benefits to the shareholders and stakeholders alike would be unprecedented. In short, it would be a swing for the bleachers, but so be it.
This investment opportunity resulted from a moment of enlightened leadership on the part of then Boston Mayor Flynn and Massachusetts Governor Dukakis, who acknowledged that the lack of participation in expanding business opportunities in Boston was discriminatory and needed to be addressed affirmatively. Their response was to launch a real estate development “parcel to parcel linkage program” which tied the development of prime office towers downtown to development in Boston neighborhoods. The first phase called for the development of a 36-story, 1 million square foot office tower in Boston’s financial district and a linked development of an office building in Roxbury, Boston’s predominantly African American neighborhood.
If it had stopped there, with a new shiny building in Roxbury, the program would have had little significance and no interest on my part.
But instead, the program went much further and was designed to really make a difference by changing the typical power relationships and therefore the economic and social benefits. It did so by limiting the competition for the primary development rights to only development companies controlled by people of color. By acting affirmatively in this one way, the city of Boston set the stage for a unique partnership between a local development company controlled by people of color and a nationally recognized development company to work together on equal footing.
UNC Ventures joined 16 other investors representing the African American community to capitalize Ruggles Bedford Associates (RBA). Recognizing the importance of this endeavor to the broader African American community, RBA invited eight non-profits serving the Roxbury neighborhood to join the group as both stakeholders and shareholders requiring no cash contribution on their part for the 10% ownership position they received. To strengthen our competitive position and broaden its base still further, RBA joined forces with the Asian American community to form Columbia Plaza Associates.
Winning the development rights was only the beginning of a long, often tortuous, 15-year journey. The plots and subplots of the story that ensued are too numerous to mention. Heroes and villains abounded, enacting dramas you could not make up. Many people stepped up with courageous stances just at the right moment to avert one crisis after another, and through them — as well as dogged persistence and unyielding determination, sustained by goodwill from sources known and unknown — ever-present obstacles eventually gave way.
Yet there came a point where no amount of perseverance was a substitute for tenants — and really good ones at that — to justify construction of a $350 million, 1 million sf, Class A office tower. We needed a breakthrough.
The breakthrough came one day in 1999, as I was having a conversation with Marsh about other matters, when he mentioned to me that negotiations to move State Street’s world headquarters to Boston’s Seaport District had fallen through. I was astonished to receive this information from him: it’s not the way it usually works, I thought. But the bridge between our two worlds had been built, and he had just walked across it. “Marsh, I’m part of RBA and we have a 1 million sf office tower that needs a tenant to be built. The site is located in the financial district and I think it could be perfect for you. Could you have your people check it out?” He did; and it was perfect. State Street leased the entire 1 million square feet.
Thanks to the State Street lease, one year after the office tower was built, it was sold for $700 million. $45 million was distributed by Columbia Plaza Associates to shareholders and stakeholders in both the African American and Asian American communities. Another $43 million went to businesses of color that participated in the construction of the tower.
Unprecedented financial benefit to Boston’s communities of color: nearly $90 million. UNC Ventures’ return after 15 years: 22%. Ripple effect: still rippling.
Marsh never realized how he and State Street were instrumental in creating this success until just the other day at lunch. For him, acting on my request back in 1999 was not a big deal. Now he knows what a big deal it really was.
Thank you, Marsh. Next time lunch is on me.
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At Reinventure, we are committed to creating wealth for shareholders and stakeholders alike. Our aim is to structure and make investments that spread and share wealth, not concentrate it further. Without making concessions on returns to our investors; without ignoring founders who are of color and women capable of building profitable, scalable businesses; without shying away from investments that really make a positive difference for people and planet. All while launching ripple effects that create priceless impacts, bonds and goodwill for years to come.
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