Faith-based development is having a moment in Southern California, where churches and other religious institutions control underused land in some of the communities most desperate for more housing.
Logos Faith Development is partnering with these institutions rather than buying sites outright, and using those properties to develop mixed-income and affordable housing while returning value to the congregations and communities that own the land.
Logos’ founder and CEO, Pastor Martin Porter, established the firm’s unusually selective model by way of commercial brokerage. After joining a South Los Angeles church, Porter said he saw persistent gaps facing faith-based organizations that wanted to develop their real estate but lacked the expertise.
What began as a calling has grown into a for-profit development company with a roughly $750 million pipeline, 15 signed joint ventures expected to break ground through 2028, and dozens more church-owned sites under review.
Commercial Observer spoke with Porter in August about why faith-owned land can be the key to unlocking difficult affordable housing deals, and how Logos structures returns for both investors and churches.
This interview has been edited for length and clarity.
Commercial Observer: You came to Logos after working in commercial brokerage and entering African Methodist Episcopal ministry. How did those paths come together?
Martin C. Porter: At a time in my life when I really committed myself to service and to serving a higher power and trying to do more than just transactions, I joined a church in South L.A. and entered into ministry.
As part of that process, I saw there was really a knowledge, commitment and financial gap in faith-based development, and I was invited in by churches to help them solve the problem.
So it was sort of kismet. This was not opportunistic from the perspective of, “Well, look, there’s this evident gap.” The gap was pointed out to me, and the question was raised: “Would you help us?”
So this became a calling, a ministry, a vocation and, obviously, a business.
Look, we’re a for-profit, and the only reason we’re a for-profit is that years ago I didn’t know there were nonprofits developing. I didn’t know about Low-Income Housing Tax Credits (LIHTCs). I thought you could only solve real estate development through the for-profit model — that it had to pencil, you had to justify yourself with returns, and it had to work for everybody.
Logos now has a $750 million pipeline with 15 groundbreakings planned through 2028. What allowed the company to scale that quickly?
Oftentimes in faith-based development it’s bifurcated, it’s siloed. There’s one group that will help a church discern what they should develop, and then there’s an architect who is jazzed up and will say, “You could do this or that.” Then there’s a nonprofit that may provide some small grant for them to figure out highest and best use and feasibility.
Not knowing what you’re getting into sometimes is the best thing. We assumed at Logos that we had to solve all those problems.
When churches started approaching us, we would talk with them, walk with them, hold their hand. We would take a mitigated risk in bringing architects in to come up with different versions of feasibility studies. We would go to the evening meetings of the church. We would fly to their regional offices in the Midwest or the West Coast to make pitches to the bishop boards.
What happened with us taking an all-hands-on-deck approach and treating them with the respect of a for-profit business is the market responded. Our churches and denominations responded really en masse.
The result is 15 signed joint ventures that are moving through entitlements with funding behind them, equity behind them, and moving through construction loan funding. Behind that, there are about 40 churches and denominations that have submitted sites that we think might be somewhat feasible.
How differentiated is the model from other developers pursuing faith-owned land?
We’ve been kind of like a sleeping giant. I just assumed everyone was engaging in this, and we’ve realized we’re not esoteric. We’re not doing anything different than any other midsize developer, which is good. We don’t want to claim to be special in what we do.
What we do is we develop. We’re great developers. What is special is, at this tick of the clock, we think we’re the only developer that builds only on church and denominational land.
There are many developers that want to and do. They’re knocking on the church doors all the time. We think we’re the only developer that doesn’t knock on church doors. We
haven’t knocked on one church door. No marketing material, said nothing to a denomination ever, and we wouldn’t.
You don’t solicit churches for development opportunities?
We won’t solicit business. We accept business. We accept the solicitation of business all the time. Church B sends us an address and we’ll review it.
If you go to our website and type an address into our land link, you’ll get a pretty good feasibility study in 30 seconds right now.
What’s happened is a lot of churches have seen it in the newsletter, or the bishop of this church said to the bishop of another church, “You should check this out.”
Having said all that, we’re the opposite of taking a cowboy approach. We say no to even 90 percent of the conversations. Most of these churches’ addresses don’t work. It may be good for them to develop, but they shouldn’t partner with us. They’re not in a good state to do it.
What makes a church-owned property viable for Logos?
Our parameters would be: Can we get 70 units on the site? We won’t do less than 70, so right there you’re weeding out a bunch.
Then, after they’ve filled out the intake form, we ask, “Do we feel they have the capacity to be a good development partner?”
I’m the last developer who will tell you every church should be in the development business. Quite the opposite. Every church should be in the serving-the-people business — make-people’s-lives-better business. And I’m a pastor, so leading-them-closer-to-their-higher-power business. But not necessarily being partners in a development.
How important is the fact that the church already owns the land to making these projects pencil?
Because I set such a high bar at the beginning, this has to work for everybody.
I have to achieve around a minimum 15 percent return for my investors. I have to be able to make the church whole. They have to get paid back the value of the land over the life of the deal, and around a 7 percent annual return. We have to make a reasonable developer fee, and I have to make payroll. There’s the box, man.
Not having to purchase the property upfront is tremendously valuable.
We’re coming from the precept that the church is not specifically only in this to make a buck. They want to continue to leverage the halo effect. A church is a beacon of hope in a community. They want to do more ministry. They want to save and help the lost, the least and the left out, and they want to do it through a full expression of their ministry, which includes using their land.
To you and me, highest and best use means one thing. With the church, highest and best use also includes a component of: How will this help others? Therefore, the deal can be structured differently.
Affordable housing capital stacks are notoriously complicated. How do you finance these projects?
I don’t think our capital stack is less or more complicated. We don’t know simple.
Our capital stack is a typical developer’s capital stack, and, if there are gaps, we’re going to seek foundations and family offices and well-off individuals that want to see churches do well and communities do well to bridge that gap.
That’s in the construct where we’ve already said no to almost every property.
Then what we want to say yes to is abundance. Our proposition isn’t just, “We’re going to develop on that dirt.” We’re going to work with the church to revitalize and transform their ministry by being a good foundational partner in best practice and by linking them to more resources.
Our capital stack is debt, equity, and then what I would say is the kismet, or the miracle element, is when a Disney Foundation, a Butterfield Foundation comes in and says, “Here’s a low-interest forgivable loan,” or “Our equity only requires X amount of return, not 15 percent,” or “Actually, here’s a gift.”
Then you can do more than just build a project. You can build something that will create community transformation.
What does that community investment look like beyond the housing itself?
Our intention is to have really beautiful interior design, artistic elements to the common areas, landscaping, and then to have life-coaching and vocational programs linked to that. That’s the area where we add to the capital stack, or we add to the funding pool — the angel investors and angels that want to serve people.
Churches, the Salvation Army, nonprofits were designed a couple hundred years ago to be the principal vanguard of serving the least, lost and left out. They were particularly effective because they believed they were serving a higher power or a greater mission and purpose.
I’m not talking about the government not helping. But I feel as though some of that has been blunted because there’s just an expectation the government will do the job.
I think it would be good to reaffirm that churches and some of these nonprofits have a really vital role to play in our communities — the most vital role in making transformation happen.
How much have programs such as L.A. Mayor Karen Bass’s Executive Directive 1 (ED 1) changed your ability to get projects approved?
On the pro ledger, you’ve got to give credit where credit’s due. Most of our projects have leveraged ED 1. We joke we’re kind of an ED 1 company at this point. The slate of 15 projects you’re seeing, by and large, fall under the ED 1 rubric in L.A. and, in San Diego, by and large, the Complete Communities program of incentives to build homes near transit. Those were initiatives that have been reasonably effective.
Would I love to get permits in four months or six months? Prior to ED 1, it was almost 24 months. And, if developers say differently, I don’t think they’re necessarily telling you the truth. So, 24 months. We’re down to 12 months. We’ll take it.
Moving forward, which markets present the best opportunities for Logos?
We’re knee-deep in L.A. and we’re knee-deep in San Diego. What we’re beginning to really put our lens on now is Orange County.
Orange County has a lot of churches, a lot of deeply committed people who are spiritual and religious. It’s a faith-based area that has been fruitful for a long time, and we’re now beginning to really turn our attention to there.
We think there are plenty of opportunities for us to double or triple our business and double or triple our impact just in Southern California.
A lot of developers complain about how arduous or over-regulated Southern California has become. Why continue concentrating here?
We believe in having a bucket of water and running toward the fire, as opposed to being firemen who have no fires to put out. Tennessee and a lot of those places have great municipal ordinances and schemes and programs, and all the developers are running there, or many are.
We like being in a really competitive, nose-bleeding environment that allows us to really stand out from the competition. I’m a fireman, Logos is a fire department, so we run toward the fire. We like the L.A. market.
How do you make that work when so many traditional developers are struggling with the economics?
I don’t want to sound Pollyannaish. That’s the last thing. I want to frame it within this: It’s because of our model.
We have no site acquisition. We don’t build outside of whatever the ordinance envelope is. We get an affordable housing covenant on the back end that ensures that we minimize tax issues and maximize tax opportunity, and we work with investors that aren’t just in it for the highest returns; they’re also in it to make an impact.
Even the lenders we work with, we’re working out of their CRA (Community Reinvestment Act) offices, where we are getting substantially beneficial interest rate loans, lower interest rate loans that are very close to the base Secured Overnight Financing Rate.
Our model is just unique. All the elements have to come together. We understand it’s a tough development environment. But, when all the elements come together, then we think Southern California is a great place to do business.
Has partnering directly with churches also changed the way local government responds to your projects?
Relative to many developers saying they beat their head against the wall with the City of L.A., we find that when we engage with the city and the Planning Department, mayor’s office, council offices, we’re getting a lot of positive feedback and cooperation.
When we have the church sometimes lead the communication effort with the city, we get tremendous feedback, reciprocity and follow-up. I think that’s a part of our secret sauce as it relates to competitive timelines.
Our engagement and encounters with the City of L.A. across the departments generally have been pretty good. We don’t have the sob stories or the nightmare stories we’ve heard from other developers.
What’s next for Logos?
We’re really focused on starting the Logos Foundation, which would be the nonprofit arm to Logos Development, to be able to engage more impact in the donor-grant area and make more of a difference for our churches and communities through having a nonprofit arm.
That’s new news.
Greg Cornfield can be reached at gcornfield@commercialobserver.com.
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