Building communities, not just buildings: Gizman Abbas

People don’t live in buildings, they live in communities, says Gizman Abbas, principal at Direct Invest Development. His sustainable real estate development company works to create opportunity in communities by providing services such as job training and early childhood education along with residential space. 

And it does so profitably. “We do really well by our investors, but we also do good in the community,” says Abbas, an Auburn engineering graduate who expanded his business horizons by shifting careers into investment banking and development. 

Transcript

Narrator:

Welcome to the Harvard College of Business podcast with your hosts, Sarah Gascon and Currie Dyess.

Currie Dyess:

Today's guest is Mr. Gizman Abbas. Gizman has led energy related investments in development operations for some of the world's leading institutions such as Morgan Stanley, Goldman Sachs and Apollo Global Management.

Sarah Gascon:

Gizman is a founding principle of Direct Investment Development. An impact focused real estate development company formed to mind value in disinvested, urban communities with a focus on equitable development, impact on the environment and human health and creating opportunity structures within the urban communities.

Currie Dyess:

Gizman, War Eagle and welcome to the show.

Gizman Abbas:

Thank you. War Eagle, right back at you. It's good to be here and good to see you all.

Sarah Gascon:

Yeah. It's great to have you. You have a really awesome journey to Auburn. Tell us how you got here.

Gizman Abbas:

Well, my bio says that I am American by choice just because I was born in Ethiopia, raised there until about the age of 11. I came to the United States while my country was at war as a refugee and lived a couple of years in the North End, Boston before I moved down South to Georgia to go to boarding school. And from there, graduated from high school and then attended Faulkner University in Montgomery, which had a joint program with Auburn University of Montgomery. And I knew I'd always wanted to be an engineer, so I started doing dual classes and eventually transferred to full time to Auburn University of Montgomery. When I completed my pre-engineering studies there, I transferred to finish my degree to main campus. So I arrived at Auburn at the beginning of 1994.

Currie Dyess:

You have an extensive resume. It's really impressive to read about your everything that you've done, everything that you continue to do. One thing is that fascinated us was that you got your undergrad in engineering and then you decided, "Hey, I need to go to business school." Tell us a little bit about that. At what point did you realize after getting an engineering degree that you needed to go to Business School?

Gizman Abbas:

When I graduated at Auburn, I was fully intent on having a full career as an engineer. But I'm a fairly restless soul and I'm always looking around at what I don't know. And I'm always open to learning. And one of the things that I did when I was an engineer, I was an oil and gas field engineer and I was justifying projects, making the business cases for them, despite the fact that I really didn't have a very big business background. So as I was going through that process and not really understanding the business beyond the surface level, I knew there was something missing in my knowledge base. And the company I worked for at the time was Exxon. And while I was there, Exxon purchased Mobil and created what we today know as ExxonMobil. Well, I had no idea why Exxon would buy Mobil.

And I remember the first day it was announced, I showed up to my job and they escorted us into this auditorium where they were making the announcement. And I just had no knowledge of why, I didn't know who did it, whose idea would even be and why would they even think that this makes sense, considering both companies are in the same business. So I realized at that point, the gap of my knowledge base was too wide. And so I decided, okay. I was going to go to business school to fill in the holes on my business knowledge. Which was at that time, in my opinion, especially now in hindsight, was very minimal. So I decided I was going to go to business school. I didn't know where. So I started doing... I took a class to prepare myself to take the GMAT and I didn't have much time because it was so late in the application process. I would literally be one of the last applicants any school would be reviewing which is obviously a much more difficult process to enter into.

So I rushed my studies and I worked probably 30 hours a week to prepare myself for my exam for a month. And then I knew I only had one shot to take it. So I went in and I took it and I did great. And at that point it opened me up to start preparing my applications. Probably the best thing that ever happened to me as far as going to school. I loved my time in Northwestern. The university couldn't have been more helpful to me in helping me graduate and attend the university. I am indebted, my career is indebted to Northwestern for helping me. I had a scholarship to attend that was super helpful because as you can imagine the MBA cost is pretty expensive.

And so I decided to attend. When I attended, I thought I'd be a consultant. My mind was changed for me, let's put it that way, at the career management office, when they saw the test they make you take the aptitude exam, they make you take. And they saw my responses to it. They said, "Look, you really should be thinking about becoming a banker because you want to make a lot of money and you really don't care to have any personal life and free time." Which I didn't care. I just wanted to work and I knew I needed to earn a lot of money to pay back all the loans. My Auburn loans weren't even paid back at that time to begin with. So as a result, they talked to me about becoming a banker and I thought, "Oh, I think I could do that." And I like finance, I like accounting. And so started my journey into the financial world.

Sarah Gascon:

Yeah. And now you are Direct Investment Development. Tell us a little bit about how that all came about.

Gizman Abbas:

What happened is when I got to Wall Street, I was an advisor. So I was an investment banker doing advisory work. And as an advisor, you advise companies, you advise municipality states, governments of all sorts. And what I learned was, I did not like doing advisory work. Because I really thought in my mind, "You never really know what advice works or not because soon as you give the advice and you get paid, you're gone to the next assignment." So I thought, I want to know if I knew what the hell I was talking about. And I wanted to... The only way you get to practice that is you get to invest the money and you take your own advice. And so I was a Morgan Stanley investment banker doing advisory work, and an opportunity was presented to me to do principal investing at Goldman. I was fortunate enough actually Goldman gave me an opportunity to be both an advisor, an investment banking or a principal investor. And I took the principal investment opportunity.

This is a very much an apprenticeship business to learn at the feet of somebody. That's very biblical in that sense because so-and-so be gets, so-and-so gets, so-and-so. So there's a long line of bankers that are connected in their careers because they've learned at the feet of somebody else. And I had some phenomenal teachers and educators. And my first job investing at Goldman was investing in power plants. And having a power engineering background and having worked in power plants, it really made it easier where I'm concentrating on the financial aspects of the asset as opposed to trying to learn the technical aspects of the asset. So me and a small team sitting on one of Goldman's desk built a 5,000 Megawatt, 30 plant, 1000 employee, little utility. I got to learn every aspect of that business. And that led to other opportunities to invest in different class of assets that eventually led me to become a founding partner of the commodity investment business at Apollo Global Management, which is one of the largest private equity businesses in the world.

So that crowned my achievement of going, working for somebody. After a number of years of doing that, I decided that it's time for me to hang out my own shingles and start my own business. And I started a real estate development my firm in 2009, '10 where I was investing in New York City real estate during rate recession. I've always been a contrarian and I really like making different decisions than the masses. When everybody was running for the hills, when it came to New York real estate, I thought that was a great time to invest. And I started investing and my business did really well.

Now I was investing and building high-end luxury condominiums in Manhattan and in Brooklyn. And there's a shelf life to that, when you're building high-end products, you're not building it for everybody. So about 2014, I started seeing the writing on the wall that the risks of investing in that space were not good because land prices were becoming expensive. And at some point it's a very cyclical business and you're going to end up hitting a down cycle and you have to try to look two to three years out when you're building these condominiums. And I didn't like what I saw in two to three years. Sure enough, I was right. The high-end market peaked by about 2015 and I had sold everything that I had built.

And I decided at that time that I wanted to go back and work with some of my old colleagues from Goldman. We had founded a utility investment business with a focus to buy utilities and turn them green. Our business model had some flaws in it but after about two and a half years of doing that, we sold that business to a large infrastructure investor. And I went back to real estate. That's where I started Direct Invest Development. And Direct Invest is different than what I've originally did in real estate where I was doing exclusive developments for the haves at that time. A very wealthy high-end product, but that has, as I mentioned cyclicality to it.

Well, Direct Invest doesn't have cyclicality to it. Direct Invest is a business that focuses on investing in disinvested in communities, tend to be urban communities. We focus on equitable development and focus on our impact on the environment, on a human health and creating opportunities for those that are living in these inner cities. So as it turns out eventually, these became what are known today from the tax policies that were passed under the last administration as opportunity zones. And so we were early movers and what we've been trying to do. And now we are right in the heart of this ESG world that we're involved in.

Currie Dyess:

How do you have affordable housing and market rate housing in the same building? What does that look like?

Gizman Abbas:

It's so funny. That sounds like a foreign thing to those that don't live in New York. In New York, every building that's built has a mandate to have some affordability baked in. And Currie, you know what it looks like? It looks like any building. It doesn't look any different. I've seen some of the highest-end buildings in New York City that would end up having apartments that have sold in the tens of millions of dollars. Some even in the hundreds that have some affordable components built into it. So from a visual perspective, it doesn't look like it's anything different. From an actual living perspective, it's a great thing to have because you don't end up concentrating poverty. Concentration of poverty is what got us into a lot of projects and broken communities. And I think when you have mixed income communities, I mean, research proves you create more healthy communities.

I think you have people that are living on different means but they associate in common places within that building that allows people to learn from one another for people not to demonize one another from whether it's social economic barriers, racial barriers, sexual orientation barriers. None of those things exist because you're creating a community and people, once they get to know one another, it creates a much healthier existence in our society. And that's our intention in every building that we build. We don't build exclusivity, whether it's for the rich or for the poor. And this is what I think Dr. King referred to as the Beloved Community. And so our business is mind you a business. We're not a nonprofit, we're a fairly profitable business. However, we do have an impact element. And that impact element involves human health, human development, both personally as well as business wise and creating opportunity structures. So that's why we call what we do equitable development. It's a phrase that's thrown around quite a bit, but we are very prescriptive in what we mean by it.

Sarah Gascon:

You've been quoted as saying, "People don't live in buildings, people live in communities." What does the community look like? What businesses are involved with you? I'm assuming, we're assuming that there's a lot of collaboration that occurs within the community. Correct?

Gizman Abbas:

So for example, three quarters of African American children in America are born to single mothers. Most of the time that these single moms tend to be young. So you have poorly educated young women that are rearing an entire community, all intents and purposes, if they're bearing three quarters of the children of a community. So I think about that single, young, black mother, when I think about, "Okay, what do I want to build? What do we want to end up including in it and how can it impact her? How can she work herself out of affordable housing?" Even though now we're building very nice homes, but we want to graduate people out of that so we can get other folks in, and that could also graduate and keep the cycle going. So with that in mind, if she is not skilled and not earning or she has a child, well, children are 24 hours a day.

So how do you give her enough time to go get skills? Well, how about if we include early childhood education as part of our offerings in our building. So she can take her child and be able to put her child in that early childhood education and gives her free time. Well, with that free time, how about if we introduce job training as part of our offering. Whether it is offering a food incubation business or whether offering tech job training. There are many programs that we can collaborate with, that we will be able to bring into our retail space. So what we do is we curate the retail offerings that we have. So if we are in a community that is a food desert, how about we collaborate and make it somewhat easy for a grocery store to open a location where we are so people can have fresh fruits and vegetables accessible to them?

              So we try to think about all the different things that could end up making a difference and said single mother's life and making a difference. Now, by offering early childhood education obviously to her child, we break the cycle of lack of education by having early intervention, create love of school, love of reading, love of mathematics at an early age, so that child could have a better shot at success than his or her mother did. And then with her, the tech programs that we're talking about are programs that meet people where they're at and train them. Whether it's computer coding, or if somebody has an affinity to be able to start a food business, or we will offer an industrial kitchen, that's sort of like the [WeWork 00:17:33] of kitchen, so people can end up getting part-time usage of the facility.

So we eliminate one of the biggest barriers to entry into the business. We train people. These programs will train people in marketing and running their businesses if that's what they choose to do. So to put it sort of to summarize it, we try to create this community where people live to be conducive for success. But this business that we've created is a great capitalist business model because it does really, really well by our investors, but it does good in the communities that we're in.

Sarah Gascon:

Your for-profit business, Direct Investment sounds a lot like a not for profit. And you seem to have a deep commitment to enriching your community. Why aren't there more capitalists like you?

Gizman Abbas:

Well, there are. You'll be surprised this impact investment was really there. I'm sure there have been people who practiced it like Carleton for years before was called Impact Investment. And the UN ended up putting out some challenges that eventually brought it to the fore. But there are a lot of people that do this. There are a lot of businesses that do this and it doesn't have to be a nonprofit. At the end of the day, there are plenty of businesses that go out and do business as a for-profit enterprise, but are very intentional about what they do in their communities in making a difference. We just happen to do it in the housing sector. We just happen to do it in building communities but there are plenty of businesses that actually end up having an altruistic bend in their offerings while being a fairly profitable and successful business.

But we are just accustomed. And we, as masses are accustomed to hearing nonprofits speak about the things that I'm talking about. But in my opinion, there is nothing more powerful than turning the entrepreneurial spirit onto solving some of society's biggest ills and problems. And really that's what Carlton and I have done is starting this business. If your intention is to get fantastic risk adjusted returns for the capital that you would entrust me with, I'm your guy. If your intention is to take every penny off the table, I'm not your guy. Because you got to leave something behind for you to leave the community better than you found it. For those that are curious enough to want to find out more about what we do. When you go to our website, we have nine principles that we work with that are very imperative to what we do. And through these nine principles, we end up implementing our business.

And the first one that we always talk about is a Southern African term called Ubuntu, which roughly translates to do no harm. Sounds like the Hippocratic Oath that doctors take mean. And the extension of it is, you are because I am, we are interconnected in our humanity. And I love that. I love that because it brings the human element right back to the business. And I love the fact that it's the first thing that we talk about when we bring people on and we try to explain to them, what is the secret sauce and what is it that we're trying to accomplish?

I won't bore you and take you through all nine of them. People can end up going to the website to look at it. But the second one is also important and not say there is no solution without financial human and environmental returns. So at the end of the day, if you declare something is important to you, then you'll do something about it. So as a financial investment business, clearly financial returns are important to us. They're important to our investors. So we can keep doing what we're doing. But in addition to that, we want to end up getting returns on our human capital. We also want to get returns on environmental capital in light of all the climate change issues that we're seeing. So every building that we build is green.

Currie Dyess:

Excuse me. Your story and your journey is... It's truly inspirational. And I know Sarah and I have really enjoyed our time with you, our listeners are going to love your story. How can our listeners follow you, keep up with your journey and contact you?

Gizman Abbas:

People can reach me at my website as directinvestdevelopment.com. I'm not that hard to reach. Usually, people can also find me on LinkedIn under my full name, Gizman Abbas. At the end of the day, I'm always more than happy to lend an ear, to give advice, to learn from some other folks who reach out to collaborate.

Sarah Gascon:

We'll Gizman, it's been a pleasure speaking with you. We are very excited to meet you and to introduce you to the rest of the Auburn community. Thank you for your time and War Eagle.

Currie Dyess:

War Eagle.

Gizman Abbas:

War Eagle, indeed. Thank you all.

Narrator:

Harvard, inspiring business.