They’re not on the Best 200 list and may never get there, but these three immigrants have shown that America is still the land of opportunity.
Conventional wisdom has it that you can’t make money running public housing projects, that ghetto businesses are more headache than they are worth and that small farmers are doomed.
If the three immigrant entrepreneurs whose stories follow thought that way, they wouldn’t have been able to build the thriving businesses that they have. There was something in their experience that enabled them to see opportunity where no one else could. And, of course, there was something in America–opportunity–that was denied them in their homelands.
Take Dilip Barot, a 37-year-old Gujarati Indian who manages 2,000 public housing apartments in four states from Florida to Nevada.
Public housing? Last year Barot’s Palm Beach-based Naimisha Group earned a tidy $10 million on revenues of $50 million, mostly from privatized public housing projects that other private owners had given up on.
Urban planners have long dreamed of privatizing such projects and making them safe facilities. Barot has done it by applying lessons he learned running motels: keep expenses to the minimum, get high occupancy rates and make sure security is good.
Arriving in the U.S. in 1983, Barot originally intended to become a pharmacist, a profession he’d trained for back home. But while waiting to be licensed here, he took a job running a small motel in Hopatcong, N.J. Lucrative? For the owner, a fellow Gujarati, but not for Barot. “I managed 26 rooms for $100 a week,” Barot recalls. “Plus a free place to stay.”
So when a chance came a year later to buy an 18-room motel called the Rock Garden, some 60 miles north of Miami in Riviera Beach, Barot didn’t hesitate. Putting in S8,000 of his own savings, Barot raised the rest $60,000 down payment informally from other Gujaratis, a doctor and an engineer.
Living on the premises, Barot did most of the work himself. He even remodeled the motel himself—for about S50 a room, buying used fixtures from other Indians.
To attract customers, Barot made the rounds of local employers, dropping off handmade brochures targeting workers who couldn’t afford an apartment but would pay $75 to $100 a week for a clean room. He offered discounts on rooms booked for one month or more and to tenants who brought in friends. Filling up the Rock Garden, Barot bought six more motels for $2.1 million, again tapping the informal Guajarati financial market for the $500,000 down payment.
In 1989 Barot spotted a newspaper ad placed by the city of Key West looking for a developer lo rebuild an abandoned housing project. Now here was an opportunity wrapped in a problem. To get rid of the 52-unn Bahama Village, the Housing & Urban
Development Agency made a commitment to subsidize rents at market rates—S5,000 a year for low income tenants. Barot realized that if he could keep expenses below that per unit amount, he had a guaranteed, no risk profit. Even better, as builder, he was entitled to a $500,000 developer’s fee from the city, a 10% profit margin just for starting the project. The price was a hefty S5 million, but by now Barot knew all the angles. Taking advantage of “minority” set-asides, he got a S1 .5 million loan from the state of Florida and wrung another S2.3 million grant out of HUD. For his own contribution he pledged the S500,000 developer’s fee, essentially agreeing to build Bahama Village for nothing. For the rest of the financing, about $500,000, he sold equity-shares to his trusty motel backers.
Now for costs. Barot cut the on-site staff from three to one, hiring a retired Navy officer to manage the facility with the same deal he used in his motels: a free place to live, plus a modest salary. Today many maintenance chores at Bahama Village are done by residents, who receive rent vouchers instead of cash. To deter crime, Barot convinced the Key West police department to put a training facility on the grounds—which meant at times there were 100 police officers on the site.
Barot has repeated the same deal in slightly different form many times since, buying up abandoned projects in three states, financed when needed through the tried and true immigrant network. He plows earnings back into the network, and on occasion goes back to India if he needs backing in a pinch.
He even tackled a housing project in Las Vegas that had once been listed by the General Accounting Office as among the nation’s worst projects. At the Carey Arms project today, tenants help screen new applicants and weed out occupants with known drug or gang ties.
Barot has raised his sights. Miami has over 11,000 public housing units to rehabilitate. Barot hopes to build those units and is planning to bid on new projects in California and Texas. “We didn’t invent this system we just manage properties right,” says Barot. There is unbelievable growth in this business.
Article from: Forbes | November 6, 1995 | Millman, Joel