Diverse Thought Yields Better Results

Words by: Katie Gilbert | Philadelphia Citizen

Photo courtesy by AR Spruce

Maleda Berhane understood at a young age how some of the transformations resulting from real estate and infrastructure development projects could be far less tangible than the concrete and rebar used to build them. As a child in Ethiopia, she came to this understanding watching her successful civil engineer father on job sites as he oversaw the construction of roadways and bridges that would provide access to healthcare facilities, food and water to some of the most remote parts of the county.

“Roadways would open and allow for transportation to connect remote areas to life-changing resources,” Berhane says. “At a very young age, I had the privilege of witnessing the impact of what might just seem like moving dirt or putting down paving, and how it could transform not only individual lives, but also communities and villages and entire generations of people.”

Now, as CEO and co-founder of Philadelphia real estate development company AR Spruce, Berhane is still driven by the early-forged realization that decisions made in development, as arcane as they sometimes seem, have direct and tremendous impacts. This realization has yielded a set of questions about real estate development in Philly that Berhane has been asking herself — and, increasingly, others — for over two decades now: Who actually gets to make those decisions, and how can a greater number of traditionally excluded voices participate in doing so?

The real estate and construction industries have long been dominated by White male workers and decision-makers. Though the spaces are starting to inch closer to parity, wide chasms remain: According to a 2023 report from the U.S. Equal Employment Opportunity Commission, women represent just 11 percent of all workers in construction (and this figure includes office and clerical positions), and Black workers make up just 7 percent of the industry (though they comprise 13 percent of the U.S. labor force).

“AR Spruce is willing to hunker down with any owner in trying to get more creative in coming up with strategies that haven’t been tested before, and finding ways to engage folks that normally wouldn’t have a seat at the table.” — Maleda Berhane

As Berhane knows well, in real estate development, the disproportionate lack of representation is even more dire. A 2023 report from the Initiative for a Competitive Inner City and Grove Impact states that Black and Hispanic real estate developers comprise less than 1 percent of the industry.

“New Black and Hispanic real estate developers could potentially help under-resourced communities become more resilient to the pressures of gentrification,” the Grove report’s authors write. “It’s long past time to make real estate development more diverse; we can’t afford not to.”

Berhane, along with her business partners Jackie Buhn and Alan Razak, is endeavoring to do just that at the helm of AR Spruce. In her firm’s partnerships with owners and developers on projects large and small around Philly, Berhane and her partners are seeking out creative ways to bring a wider array of people, perspectives, and backgrounds to building-project teams — and she’s pushing other real estate professionals to work harder to do the same.

“Who gets to decide how this building is built?”

By high school, Berhane and her family were living in Kenya, where they’d fled because of political turmoil at home.She narrowed her college search to schools with architectural engineering programs — she loved art, math and physics enough that she didn’t want to choose just one — and ultimately landed at Drexel University, one of the few institutions offering the major at the time.

Thanks to the Drexel co-op program, by the time Berhane graduated she already had a cumulative year and a half of work experience with an architectural and engineering firm, a geotechnical firm and a public utility company. Based on this array of experiences across the multi-step development process, Berhane had graduated knowing that she wanted to work not in design, but out in the field, where buildings emerged from the ground.

Her first job was in the mid-Atlantic office of international construction management firm Skanska USA. She says she learned a lot in the role, while also nursing a growing curiosity about how decision-making on projects tends to work. “In construction, contractors and construction managers are given a set of construction documents and specifications, and then they have to execute,” Berhane says. “And I was always curious about, who gets to decide how this building is built?”

She learned more about the traditional decision-making processes in her next role, as a development manager at a small real estate advisory services firm in Center City. The job brought her into close contact with a number of high-end, high-profile projects that attracted hefty funding from both private and public sources. She found herself increasingly chafing against many of the building and project-management decisions being made, both big and small — like the “steep project budgets,” as she puts it, devoted to things like interior finishes to enhance aesthetic appeal.

“Then I would drive through North Philadelphia and I would see these abandoned areas of the city, where people lived and families were being raised,” Berhane says. “I kept seeing this disparity, and it reminded me of home. It reminded me of the injustices, the imbalance in how real estate development projects were being managed and run and facilitated. I had this internal struggle for the longest time where I was like, I need to do something.”

Black and Hispanic real estate developers comprise less than 1 percent of the industry.

In 2006, Berhane left the corporate world and started her own real estate development business — thereby anointing herself as a decision-maker with the power to assemble a project team and determine where money would and wouldn’t flow.

“I knew that if I left my job and wanted to act as an owner, I would have to figure out what I wanted to do,” Berhane says. “And the number one thing that came to my mind was, I would rather invest money not in Center City, but in a neighborhood that hasn’t seen as much activity.”

Berhane’s first move at the helm of Spruce was purchasing an 11,000-square-foot former Bell Telephone Company building in the Francisville neighborhood of North Philadelphia – which had been sitting vacant for more than thirty years. She oversaw a complete gut renovation and developed the building into multifamily condominium units.

As the one calling the shots on the Bell Telephone Company building, Berhane finally had the opportunity to start to do things differently. At the outset, she concertedly pulled together a diverse team: Her general contractor was a minority-owned company; her architect was a woman; and her workforce was over 75 percent minority.

With the Bell Telephone Company building project completed, Berhane’s next endeavor was even bolder: a seven-story, new construction building, also in North Philadelphia. Soon after, she began to offer fee-based project-management work, assisting clients such as The African American Museum of Philadelphia, Global Leadership Academy, The Atwater Kent Museum, and Keystone Academy Charter Schools.

In October 2020, Berhane’s company, Spruce Real Estate Partners, merged with AthenianRazak — another mission-driven firm — to form AR Spruce, where Berhane is now CEO. Berhane says the merger has brought even more octane behind her mission: “The synergy between our different initiatives meant we were performing better together than when we were apart,” she says. “I always say that diverse thought yields better results, and that was the case here too.”

The belief that “diverse thought yields better results” has become one of Berhane’s guiding principles in her work. When teaming up with owners on a project, AR Spruce is often the entity responsible for gathering the professional services team — that is, the designers, architects, engineers, contractors, and other vendors or suppliers who will collaborate on making the project a reality. The first step in doing so is compiling a list of bidders in each of these fields, to begin to narrow down who will compete to sign onto the project. And at AR Spruce, Berhane insists that these lists represent a diversity in terms of race and gender.

“We often hear: We can’t find any design firms that are minority- or woman-owned,” Berhane says. “And it is challenging identifying some of them, but they are there. Sometimes it’s not as easy as finding it in a database, and there needs to be a willingness to take the time to look.”

AR Spruce worked alongside the Make the World Better Foundation on the rebuilding of Waterloo Playground in Kensington, which served as an early pilot project for the City of Philadelphia’s Rebuild initiative. As the owner’s representative on the project, AR Spruce acted as a liaison between Make the World Better (the project developer) and various construction partners, which involved leading design and construction meetings, following up on key tasks and milestones with project partners and checking in on progress to ensure work was moving along as specified.

But the tasks for AR Spruce didn’t end there, because a community project like the Waterloo Playground revitalization wasn’t a typical project, emphasizes Claire Laver, Make the World Better’s executive director at the time of the project. The foundation needed to partner with a firm that understood the importance of community engagement and the inclusion of widely diverse perspectives. In designing and building out the new Waterloo Playground (as well as its other revitalization projects), Make the World Better enlisted the cooperation of a Youth Project Team, made up of young people from the community who were involved through the design and construction phases to offer their feedback and hopes for the space.

“On the small, diverse-business side of things, we can do what we can to be seen and noticed. But there needs to be a reciprocal effort on the large corporation side to find us.” — Maleda Berhane

“This was another part of what we tasked Maleda’s team with: making sure that inclusion of the Youth Project Team was centered,” Laver says. “We wanted her team to participate in those because they had a certain level of engagement and information and we wanted that transparency. That’s something we were looking for in terms of a partner, and her team really was able to provide it.”

The firm is also acting as the owner’s rep during the development of Thrive Village, a minority-led project that seeks to address inequities around health and healthcare in the East Parkside neighborhood by situating affordable housing in close proximity to quality healthcare services and healthy food options. In addition, AR Spruce has partnered with the Black Squirrel Collective on the Philly RiSE program, in collaboration with ULI Philadelphia, offering training, mentorship and technical expertise to Black and Brown developers enrolled in a 14-week intensive real estate training program.

“If our mission is aligned, then AR Spruce is willing to hunker down with any owner in trying to get more creative in coming up with strategies that haven’t been tested before, and finding ways to engage folks that normally wouldn’t have a seat at the table.”

Network thinking

After decades spent in Philly’s real estate industry, Berhane has some sharply honed advice for other developers: industry players must continue working harder to diversify building project teams.

“What impact could you have by awarding this contract?” says Berhane. “And is there a benefit to you, as an organization and as an individual, in being willing to lock elbows and take this big risk together? It’s not just a building at that point; it’s hope and aspiration, and the work product will be so much better as a result.”

She emphasizes that various people and groups in Philly are already working to make this type of broader inclusion more possible and accessible, including ULI Philadelphia (the Philadelphia chapter of the Urban Land Institute), NAIOP Philadelphia (the local chapter of the Commercial Real Estate Development Association), PhilaNOMA (the Philadelphia chapter of the National Organization of Minority Architects), and CREW in Philly (Commercial Real Estate Women).

She adds that the City does have its own OEO Registry (run by the Office of Economic Opportunity), to act as a central repository of minority-, women-, and disabled-owned businesses. But Berhane laments that getting included there can be a tedious and expensive process — and in the end, there’s no guarantee that a corporation will come to the registry looking for contracts.

“On the small, diverse-business side of things, we can do what we can to be seen and noticed,” Berhane says, “but there needs to be a reciprocal effort on the large corporation side to find us.”

Berhane has seen a dramatic shift in recent years — especially since the racial reckoning and demonstrations that followed George Floyd’s murder in 2020. But she acknowledges that concerted effort will need to keep that shift in motion.

“The biggest fear I have is that the conversations of 2020 are going to fizzle, and the excitement around change and the willingness to do something difficult is going to fizzle,” Berhane says. “And the biggest question is: How do you keep that momentum going, and how do you get people excited about the benefits of changing the status quo?”