This Offering is to raise $2,200,000 in equity for the Project, which will serve as an anchor on the Ridge Avenue commercial corridor and is the first phase of the redevelopment effort in Sharswood. Located at 2077 Ridge Avenue in Philadelphia’s 19121 zip code, this 230,000 square foot mixed-use project is planned as four condominium commercial units which will include 101 residential units, ranging in size and affordability.
It is hoped that the Project will contribute to significant reduction of blight, as part of a comprehensive neighborhood plan, along with the revitalization of an important commercial corridor. While many projects are already under construction or completed, additional planned community development initiatives include new high quality affordable housing, local job creation, neighborhood-serving retail and commercial services and public green space. To date, the area’s high school has been reopened, 83 affordable homes have been built, Habitat for Humanity is currently constructing an additional 20 homes and PHA is converting a building to create 94 senior housing units.
Job creation ranks high on Mosaic’s and Shift’s community impact list. The co-sponsor, Mosaic Development Partners, is a certified Minority Business Enterprise (MBE) and is committed to meeting the needs of the community. Mosaic has a strong track record for hiring MBE/WBE firms to consult on and construct its development projects. They plan to work with the general contractor to ensure certain hiring goals are met and they expect over 200 construction jobs and over 200 permanent jobs to be generated through the Project. Seventy percent of the permanent jobs created by the Project are expected to be made available to local community residents. To achieve this goal, we expect to engage with local community development entities, PHA and small businesses in the area will post job openings at their offices. We also plan to host job fairs in churches and community centers in the community to inform residents of job opportunities.
Sharswood 1, LLC (the “Project Entity”), an affiliate of the Company expects to borrow funds to complete the Project and enter into a ground lease with PHA. Ground leases generally represent the ownership of land underlying commercial real estate properties, which are leased on a long term basis (often 30 to 99 years) by the land owner acting as the landlord to a tenant that will own the improvements and buildings on top of the land. In this case PHA will be the landlord and the Project Entity will be the tenant. The ground lease will have a term of 99 years and an annual payment of $1.00. The ground lease is not final; however, we expect that the Project Entity will be responsible for taxes, maintenance and insurance as well as all operating costs and capital expenditures. The ground lease is also expected to include a sharing of cash flow and sales profits with PHA once certain internal rates of returns are achieved. Ground leases typically provide that at the end of the lease term or upon a tenant default, the land, building and all improvements revert back to the landlord. Therefore, neither the Project Entity nor any of its affiliates will ever own the Property. PHA will retain ownership of the real estate indefinitely. The ground lease will grant the Project Entity the right to construct and control the activities on the land, subject to compliance with the terms of the ground lease. The Project Entity anticipates having a leasehold interest in the land, which will be used as collateral for a leasehold mortgage. As outlined in the Development Agreement between PHA and Sharswood Developers, LLC, PHA will have an option to acquire the Project based on to be determined terms.
The Project is planned to incorporate multiple commercial condominium units that will be subject to the terms of a declaration of condominium. A declaration of condominium is recorded and outlines the legal description of the condominium property, describes the commercial condominium units and the common areas that will be jointly owned, the percentage interest and voting rights of the commercial condominium units. Each unit will pay its pro rata share of maintenance, repairs and expenses of all common areas, landscaping and other shared amenities. Each unit will have a separate deed, which will be recorded, and be subject to certain restrictive covenants. A condominium association will be formed, a board of directors and officers will be installed to manage the condominium and collect condominium fees. It is anticipated that either PHA or the Project Entity will be the declarant.
Initially, Save-A-Lot Supermarket and Everest Urgent Care are expected to rent the condominium units, with the option to purchase the units after 10 years, as outlined in their leases or following the Project Entity’s sale of its ground lease interest. The Project Entity plans to use a certain portion of its condominium to develop the residential units and to lease other portions to Santander Bank, multiple restaurants or eateries, such as Wing Stop and additional commercial retail tenants. The 101 residential units are planned as 21 studios, 54 one-bedroom and 26 two-bedroom apartments. Eighty percent of the apartments are planned to be rented at market rate (between 80 - 120% of Area Median Income (AMI, a metric calculated by the U.S. Department of Housing and Urban Development (HUD) to determine the income eligibility requirements of federal housing programs) while the remaining 20% as affordable units at Fair Market Rent using Project Based Vouchers from PHA. While PHA is a condominium owner, the costs of construction of the parking garage will not be financed by this Offering.
The Project is expected to cost approximately $38 million to build. A combination of tax credits, grants and debt will be used to support the Project’s construction and development, as a result the financing structure is complicated. See Exhibit A for detailed sources and uses and see Exhibit J for a chart of the Project’s legal structure that includes New Markets Tax Credits (NMTC) and Opportunity Zone equity.
The Project has support from the community and Council President Darrell Clarke for the 5th District. The development team will be working this winter to finalize zoning, construction plans and the final capital stack with an intended closing in the first quarter of 2020. Construction is expected to take 18 months, with completion anticipated to be in the third quarter of 2021.
The development team includes the following specialists, attorneys and consultants:
Developer - Sharswood Partners, LLC
Architect - Wulff Architects
Landscape Architect - Roof Meadows, WBE
Civil Engineer - Rodriguez Consulting, MBE
Geotech Engineer - GeoStructures
Structural Engineer - Larsen & Landis
Tax Credit Consultant - Robert Jacobs Consulting
Tax Credit, Opportunity Zones & Securities Counsel - Dionne Savage, Esq., Savage & Associates Law Group, P.C., WBE
General Counsel - Christopher Booth, Esq., MBE
NMTC Allocatees - Commonwealth Cornerstone Group, Philadelphia Industrial Development Corporation and Capital One, National Association
Tax Credit Investor - Capital One
Leverage Lender - Philadelphia Housing Authority
Source: Small Change
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