When the City of Chicago unveiled the INVEST South/West Initiative in October 2019, it marked the beginning of an ambitious plan by Mayor Lori Lightfoot to reverse decades of disinvestment in 10 neighborhoods and 12 commercial corridors on the city’s west and south sides.
In a Nutshell
What: A Q&A with A.J. Patton, Founder and CEO of 548 Development, an MBE-certified, full-service development and construction company focused on environmental sustainability and building wealth in communities of color. The conversation focused on Patton’s background, what motivated him to found 548, the challenges he’s faced accessing capital as a Black developer, and how he’s leveraging development projects to create stronger, more sustainable, and more equitable communities.
Location: Chicago, IL
Sectors: Affordable Housing & Community Development
In the time since then, the initiative has catalyzed more than $1.4 billion in public and private investments to support small businesses, improve public infrastructure, create new affordable housing, and more – all of which are designed to spur equitable community development and improve the quality of life for area residents.
Few developers have been as successful in putting together winning proposals as 548 Development, which is involved in four projects in the Humboldt Park, North Lawndale, and South Chicago neighborhoods. Led by Founder and CEO A.J. Patton, MBE-certified 548 Development is a full-service development and construction company focused on environmental sustainability and building wealth in communities of color.
We sat down with Patton recently to discuss his path to the founding of 548 Development, the challenges he’s faced accessing capital as a Black developer, and how he’s leveraging the INVEST South/West projects to create stronger, more sustainable, and more equitable communities.
IFF: Can you tell us about your background and what led to the founding of 548 Development?
Patton: I was born in Terre Haute, IN, where my dad’s family is from, but three or four generations of my mother’s family are South Side Chicagoans. I went to Indiana State University, and, after graduating, got a job with Equities First, which is a Hong Kong-based investment fund with North American headquarters in Schaumburg, IL. That’s what brought me to the Chicago area originally. I started out as an analyst there and worked my way up to become the head of North American investments. I left to start 548 in 2016, but the inspiration for that came much earlier in my life.
In 1999, my mother received a $400 gas bill while she was making $10 per hour. Our gas was subsequently shut off and we had to boil water to take baths. Regardless of what happens to you the rest of your life, an experience like that becomes part of your story forever. When I got my chance to start 548, the thing that was top of mind for me was developing housing that would lower residents’ utility costs so that no one has to boil water to take a bath ever again. I named it 548 because that was the unit number in the projects that I grew up in.
IFF: 548 has gained quite a bit of traction in just six years. What do you attribute that growth to in such a short period of time?
Patton: When 548 was founded, I thought my mission was going to be lowering people’s utility bills by developing energy efficient properties that made use of renewable energy. And at its core, that is who we are. It’s not a gimmick; it’s tied to my personal origin story. But as we were scratching and clawing early on and were starting to do some deals, I had a bit of an epiphany. If we’re the developer and the lead investor, that means we get final say over who’s working on the project, and I realized we could have a sphere of influence there too.
I saw it as a chance to give a Black architect the biggest opportunity of his career, or the general contractor, or even the insurance broker involved in the deals – because it’s not just construction, but professional services too. There were a whole group of folks out in the neighborhoods in Chicago who have been advocating for themselves for decades but still not getting to work on the skyscraper projects downtown, and they do great work. There aren’t a ton of brothers scaling up to do multi-million projects, frankly, and so there hadn’t really been someone carrying the big spear to advocate for them and to create space for them on those types of projects. When I realized I had a chance to do that, that became a focus for 548 too.
I put together a team to do a relatively small project on 79th Street to develop two three-flat apartment buildings, and I knew that same team could do much larger projects together. And that’s when we began applying for the INVEST South/West projects. I told Commissioner Cox (Commissioner of the Department of Planning and Development), the aldermen, and others involved in INVEST South/West that others would sell them on the safest route possible, but that 548 would show that we can do these projects while lifting up members of those same communities.
We don’t need to go to Winnetka to get work done in Auburn Gresham or North Lawndale or Humboldt Park or South Chicago. And no disrespect to the North Shore – we have allies there – but there are businesses right there in those communities that are more than capable of doing the work. All they need is a flag bearer to get a foot in the door, and that’s the role we’ve played. I don’t think I or my business are that impressive, really, but the coalition we’ve built certainly is. And that was a powerful selling point in getting traction with the INVEST South/West projects and helping us to scale up quickly by taking that work on.
We don’t need to go to Winnetka to get work done in Auburn Gresham or North Lawndale or Humboldt Park or South Chicago. And no disrespect to the North Shore – we have allies there – but there are businesses right there in those communities that are more than capable of doing the work. All they need is a flag bearer to get a foot in the door, and that’s the role we’ve played.
IFF: What you’re describing sounds like an important element of equitable community development. Are there other ways 548 is working to increase equity in the communities where it works?
I want to see these small business owners use my deals as their springboard to real growth. I don’t know that the buildings themselves will be a part of 548’s legacy decades from now, but I know increasing the capacity of the people working on them will be.
Patton: I think there are layers, right? It’s who’s working on the projects, like I just talked about, but it’s also the sustainable technologies being incorporated into the projects to drive down costs for the people who use the spaces. It’s advocacy with the lending partners. One of the things that I’ve done with my smaller projects is, once I’ve awarded a contract to a smaller general contractor or subcontractor, then I immediately go to the bank and make an introduction for that contractor by saying, “Hey, they just got a $1.5 million contract. You may have never heard of them, but that’s the size of the contract I just signed with them. Can you open up a line of credit for them for $200,000 or $300,000 so that they can float themselves throughout the project?” If they get that line of credit and knock out the project, then that line of credit is there for them moving forward. They can build capacity that way.
And then, frankly, you have to tell the story. For every deal, I go right to the alderman and say, “You don’t know Darrell Montgomery the electrician, but you need to know him. He just did four projects for me, and he does great work. If there are contractors coming into your ward to do projects, they should know him too.”
I want to see these small business owners use my deals as their springboard to real growth. I don’t know that the buildings themselves will be a part of 548’s legacy decades from now, but I know increasing the capacity of the people working on them will be.
IFF: Going back to something you mentioned earlier, there aren’t a huge number of Black developers operating at this scale. What kinds of challenges have you faced personally in getting to this point?
Patton: Access to capital has been the biggest challenge. It took me two years to raise the first set of equity to go do deals. I raised a million dollars, had a credit score over 700, and a background running a half a billion-dollar investment platform, but I still couldn’t find a bank willing to make a loan. Today, 548 has close to $158 million in the development pipeline, and I still don’t have a banking partner.
That means going out and shopping these deals individually. You would assume that once you show the ability to do these types of development projects, a bank would swoop in and be happy to take the business, but that hasn’t been the case. And that’s why I’ll say on the record that the only lender that has treated me with respect, been fully communicative, and encouraged me along has been IFF.
You would assume that once you show the ability to do these types of development projects, a bank would swoop in and be happy to take the business, but that hasn’t been the case. And that’s why I’ll say on the record that the only lender that has treated me with respect, been fully communicative, and encouraged me along has been IFF.
I had my first call with IFF’s lending team in December 2021, and they were immediately on board with the two INVEST South/West projects (see sidebar at the end of the Q&A for more details). They loved the deals, and we had closed on almost $4 million in financing in only a few months. And it would have happened even faster, but I have a kid and Christmas slowed me down. That stands out in a lending world that has been really cold otherwise.
IFF: What excites you most about the INVEST South/West projects 548 is developing in Humboldt Park and South Chicago?
Patton: There’s a lot to choose from. For one, these will be the first and second largest passive house projects in the City of Chicago’s history. That’s historic in its own right. That will cut down on energy consumption and costs for residents. The units will also be all electric, with no natural gas, and fresh air will be pumped throughout both buildings 24/7, which will positively impact the quality of life for residents. Both developments will also have solar-powered electric vehicle (EV) charging stations, which is really important as gas-powered cars are phased out. We’re going to be flirting with net zero on both projects.
There are all of these sustainability features, there’s quality affordable housing, and the projects are also going to support small businesses and provide meeting places for the communities. Galleria 89 in South Chicago will have a coffee shop, and we’ll be bringing a grocery store and bakery in with the development in Humboldt Park to eliminate a food desert. That’s special.
IFF: What did we not ask you about that’s important to know?
Patton: What’s next. I’m obviously interested in renewable energy and infrastructure, and I’d be lying if I said I don’t have my eyes on installing solar infrastructure. I think that’s where the next great jobs are going to come from, and I’m really passionate about job creation. We’re going to be rolling out a new workforce development program later this year as part of the 548 Energy Institute, which will be a training platform for the installation of solar energy infrastructure and EV charging stations. The institute will also be an incubator for other businesses, because we need to create opportunities for small businesses focused on that work to grow.
Read about additional affordable housing projects in Illinois facilitated by IFF loans